Difficult tour

Around 25 to 35% of the economically active population of such countries as Kyrgyzstan and Tajikistan migrate abroad to earn more money. Money transfers from the migrants to their relatives back home amounts to between 25 and 50% of the GDP of the countries and, for some of them, it exceed the amounts of FDI.

Global context
The number of labor migrants in the world has been increasing in the last decade. Currently this number is about 190 to 200 million people, which is 3% of the world’s population. The amount of money transferred by the migrants is also constantly increasing. According to the World Bank, money transfers to the developing countries through official channels amounted to 126 billion USD in 2004, and in 2005, 233 billion USD. This type of money transfer is ranked second by size after FDI in the economies of developing countries (which was 165 billion USD in 2004) and the transfers exceeded annual international development aid. In 2004 the main beneficiaries of transfers from migrants were India (23 billion USD), Mexico (17 billion USD) and the Philippines (8 billion USD). There are two main types of transfers made by labor migrants; official and unofficial. The specialized international systems of transfers and national transfer systems are usually used as the official type. The most common systems are Western Union, Money Gram, Travelex Worldwide Money Ltd (TWML), VIP Money Transfer (VMT) and some others. Every country also has national money transfer systems in the form of banks and other financial organizations. Unofficial means of money transfer are delivering the money in person, sending it with friends and relatives or conductors and couriers, or sending the money through such unofficial channels as “Hawala”. Hawala is an alternative or parallel remittance system. It exists and operates outside of, or parallel to ‹traditional’ banking or financial channels. It was developed in India, before the introduction of western banking practices, and is currently a major remittance system used around the world. Some of the characteristics of hawala are trust and use of family and regional connections. The money transfer is made using the connections and communications between members of the network or dealers of hawala. (Source: The hawala alternative remittance system and its role in money laundering. Interpol General Secretariat, Lyon, January 2000. http://www.interpol.int/Public/FinancialCrime/MoneyLaundering/hawala) According to the UN, the share of unofficial transfers is 40% of the total transfers by labor migrants. The unofficial systems attracted the attention of global society after the terrorist attacks on 11 September 2001 in the USA, as it can be used as a channel for sending money for sabotage and terrorist actions. According to research by the World Bank, earnings of labor migrants and their money transfers, defined as a share of transfers in the GDP of developing countries, play an important, statistically significant role in decreasing poverty. On average, increasing the share of international transfers in GDP by 10% decreases the population below the poverty line by 1,6%. Increasing by 10% the number of labor migrants (defined as the share of the country’s population living abroad) reduces the population below the poverty line by 1,9%.

Regional scale
The migration processes in Kazakhstan have undergone significant changes in the last 15 years. During the 1990s, Kazakhstan was a country of emigration, while since 2000 the inflow of labor immigrants into Kazakhstan exceeded the outflow. Currently a regional migration system is forming in Central Asia due to unequal economic development, misbalanced regional labor markets, demographic potentials of the countries of the region, liberalization of migration regimes, geographical proximity and other factors. The main factors in making Kazakhstan an attractive destination for immigrants are the improvement in the socio-economic situation, growth in income levels and an increased demand for labor. These factors, along with factors pushing out people from other Central Asian countries – surplus of labor, low income levels, unemployment and poverty – made Kazakhstan the regional center of attraction for labor migrants. The other countries of the region – Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan – are the “supplying” countries. Because Kazakhstan has no visa requirements for people from all of the CIS countries (except Turkmenistan), migrants come legally into the country, but after arriving they start working without labor contracts, thus, becoming illegally employed. Labor migration in Kazakhstan (and Central Asia in general) is generally unregulated. According to assessments of different experts, unregulated labor migration in Kazakhstan in the period 2004 – 2006 was anywhere from 300 000 people to 1 million people every year. The latest assessment was mentioned in Nazarbaev’s speech in September 2004, when he said that about one million illegal labor migrants come to Kazakhstan from its neighboring countries every year. In 2006 the action of legalizing illegal labor migrants from the CIS was held in Kazakhstan, meaning 165 000 people were legalized. According to international experience, about 30% of illegal workers are usually legalized during such actions; thus, the minimum approximation of their true number is 500 000 people, and the medium approximation is about 700 000 people. International labor migrants make up about 25-35% of the economically active population in Kyrgyzstan and Tajikistan, with most of them going to Russia. The number of labor migrants coming to Kazakhstan from Uzbekistan is increasing. The assessment of their number made in the country of origin fluctuated during the last two to three years from 500-700 000 people to between 1 and 2 million.

Migration-dollars of Central Asia
The Russian Federation is the main country of destination for labor migrants from Central Asia, and the largest amount of money transfers comes from Russia. According to the Central Bank of the Russian Federation, in 2004, 3532 billion dollars (64% of total amount of personal transfers) were transferred to the CIS. During the first half of 2005, the total amount of personal transfers was 3054 billion USD. An assessment of money transfers in Kazakhstan was made in 2000. Graph 1 shows the dynamics of volumes of personal transfers in and out of Kazakhstan during the period 2000 – 2004. The quarterly transfers into Kazakhstan changed insignificantly. According to the National Bank of the Republic of Kazakhstan (RK), transfers into the republic were 53,5 million USD in 2004 and 344,5 million USD during 2000 – 2004. In 2000, 74,3 million USD were transferred out of Kazakhstan and this amount grew 1,5 to 2 times annually for the next five years. In 2004, transfers from Kazakhstan amounted to 805,8 million USD, representing an increase of 10,8 times during 2000 – 2004. Money transfers made by the citizens of Kazakhstan are mainly made by parents sending money to their children studying abroad, or by adults sending money to their older parents. For example, according to the National Bank of RK, in 2004, about 500 000 USD were sent from Kazakhstan to Russia to pay for educational and medical services. There are also other types of clients of money transfer systems, who send money for their personal purposes; businessmen, specialists on business leave, tourists and other foreigners. The majority of transfers from Kazakhstan are directed to China, Russia and Germany – 58%. According to the National Bank, part of the transfers to China and Germany may be made as a payment for goods unofficially imported into Kazakhstan, although such currency operations related to investments or entrepreneurship are prohibited. Representative studies on assessing the volumes of money transfers made by foreign specialists in Kazakhstan has not been made yet; however, the annual dynamics of transfers through official channels shows that the significant part of the transfers are made by foreigners. The dynamic of the money transfers has seasonal fluctuations, as they increase in the third quarter and reach the maximum in the fourth quarter (in September - October), when the labor migrants usually finish working; then decrease in the first quarter, when the migrants return to their home countries (graph 1). According to the research on labor migration in Shouther Kazakhstan oblast carried out in 2005, the migrants use different methods of sending money back home. A significant proportion of the migrants (41,2%) bring the money themselves, or send it through their friends (23,9%) or relatives (14,9). Only 17,6% of the migrants periodically send the money using post or the transfer systems. According to the National Bank, in 2005 1,158 billion USD were transferred from Kazakhstan to other countries. In 2006 the amount has grown more than 1,5 times. However, it hasn’t been studied what the shares of the transfers are for personal purposes (like recreation, education and medicine), the share of illegal transfers for entrepreneurship purposes, and the share of transfers made by labor migrants. Taking into account all of the factors above, a careful approximation of annual money transfers from Kazakhstan made by labor migrants during 2004 – 2006 could be 0,5 to 1 billion USD, with a tendency for further growth. In the Kyrgyz Republic, the assessments of the volume of money transfers from the citizens working abroad have been made since 2000. In 2003, they amounted to 120 million USD and increased 3-4 times in 2005. According to the National Bank of RK, 774 000 USD were sent for personal purposes from Kazakhstan to Kyrgyzstan in 2004, and 2,740 million USD in 2005. These figures are small, because, according to the fieldwork of the author of this article, even less qualified workers from Kyrgyzstan earn 0,8 to 1,5 thousand USD on tobacco farms per season. Most of the migrants use unofficial channels to send the money. Based on official data and the assessment of the volumes of unofficial transfers, the amount sent by Kyrgyz workers from Russia and Kazakhstan in 2005 – 2006 is approximately 500 million USD. In comparison with its GDP, which was 2 billion USD in 2005, it represents a share of around a quarter. During recent years, money transfers into Kyrgyzstan have been higher than annual FDI and official international aid for the development of Kyrgyzstan. According to the National Bank of Tajikistan, the amount of official personal transfers into the country was 256 million USD in 2003. This is 23,2% of GDP. In 2004, 260 million USD was sent to Tajikistan. At the same time, the total income from migration, which also includes unofficial transfers of money and the import of consumer goods, was assessed by Tajik experts to be higher. According to the Central Bank of Uzbekistan, the amount of money transfers into the country increased from 225 million USD in 2002 to more than 1 billion USD in 2006. For example, UNIStream, one of money transfer systems, has increased its turnover from 24 to 146 million USD in a 4 year period. Uzbekistan has been a leader among the CIS by the volume of transfers into the country and their growth over the last few years. Taking into account that, according to the UN, the share of unofficial transfers is more than 40%, the actual total income from the migration would be much higher.

Survival means
The results of social studies made in the countries of the region in 2000 show that income from migration plays an important role in increasing living standards. A survey among labor migrants made in 2005 showed that migration-dollars, earned in Kazakhstan, are mainly spent for food – 55,7% – and clothes – 47,2%. 30,3% of the respondents think that the money earned abroad allows them to provide their families with only the basic needs. 22,5% of the respondents said that the earnings let them pay for treatment and buy medication. 25,5% of the respondents support their parents and children. The income earned abroad is used as follows. Poorer households in Uzbekistan and Kyrgyzstan spend the money mainly for their basic needs: food – 56,7% and 63,3%; and clothes – 46,5% and 54,1%, respectively. Migrants from Tajikistan (according to the survey, 71% of these respondents have been working abroad for longer than 5 years) use the money to help their relatives (47,1%), pay for medical treatments (35,3%) and buy consumer goods. In general, labor migration and the transfers of money to Kyrgyzstan, Uzbekistan and Tajikistan have many positive economic and social aspects. Due to migration, these countries partially solve the problem of having a surplus of labor. The families of the migrants increase their standard of living, some migrants accumulate some capital for launching their own business or increasing their qualifications and acquiring new skills, which can be used in their home country. Even small incomes allow households to maintain an acceptable standard of living, thus making some contribution towards improving the socio-political stability in their countries. Labor migration also has negative aspects for both receiving and sending countries. For example, employers in Kazakhstan benefit from using the cheap labor force, because it doesn’t require different additional social costs, but it leads to numerous violations of working conditions of the migrants and of their living conditions. In addition, the state budget of Kazakhstan loses out on taxes, which are not collected from illegally employed immigrants. According to the Ministry of Economy and Budget Planning, even the partial legalization, carried out by the Ministry of Internal Affairs of Kazakhstan in 2006, increased tax revenue in the state budget by 1 billion tenge. The crime rate among the labor migrants stays high, according to some experts, and about 10% of income earned abroad is used for drugs. Using the money transfer systems for financing terrorist activities and money laundering is starting to attract more attention. However, legal regulation of the money movement is required to correctly identify the criminal part of the money transfers out of the total transfers, which become increasingly important for the receiving countries. Migration by highly qualified specialists from the countries of the region is also increasing; this tends to turn into permanent brain drain. Brain drain has always had negative mid-term and long-term consequences for the economies of the sending countries. These countries also experience negative demographic consequences, because male migrants leave the countries for a long time in the search for higher earnings.