Labor migration and remittances in Tajikistan Zafar Burhonov

Presentation structure Why remittances and migration is important for Tajikistan What Tajikistan is trying to do post- crisis? What are the policy options for Tajikistan to make remittances work for development?

Why important? …some hard facts Migration is large while remittances are substantial and growing again in 2010 (after over 30% reduction in 2009) Migration is still mainly driven by: - large wage differentials (more then 10 times on average) - strong growth in Russia (pre-crisis) and demand for labor (demographics) – demand is expected to continue in 2010 with Russia’s economy recovering - lack of employment opportunities in Tajikistan (over 150,000 jobs are created but still lagging behind) As a results – in 2008, Tajikistan topped with world with remittance to GDP at over 50% (37% in 2009) Main source of economic growth and poverty reduction during (TLSS 2007) - average 8 percent growth since poverty fell 72% in 2003 to 53.5% in 2007 Migration will likely continue to be a key cooping mechanisms, especially for the poor in Tajikistan - increase in remittances between is accountable for 50% reduction in poverty (conservatively) – TLSS (2007) Mostly financed consumption boom (boosting aggregate demand) Russia is the main destination country for Tajik migrants (96% of migrants; incl. 55% in construction and 35% in services)

Remittances are large….

… but have been falling since crises and at present below 2008 level but better then 2009

What Tajikistan is trying to do post-crisis Substantial amount of work already done (IOM, WB, ADB) focusing on potential impact of remittances on incomes and poverty with less focus on labor market impact and what how to make migration work for growth in Tajikistan. No real actual actions to make migration work for growth and development but work is ongoing Need to recognize that despite crises, migration will likely remain an important element of Tajik economy (balance of payment, revenues, consumption, poverty effects)

What Tajikistan is trying to do? Develop a national Labor migration strategy and an Action Plan (with World Bank) as well as new Law on Labor migration to have sufficient understanding of the phenomenon, and ensure that emigration, and migration policy in particular, is incorporated in the broad development model Develop and implement explicit and precise policy measures in the area of migration policy, in particular: - Establish an effective labor migration management system with transparency, accountability and the rule of law as key features, and aimed at strengthening of national and international cooperation and coordination. - Develop effective tools and methods for labor migration management based on expanding economic freedoms, respect for human rights, development of bilateral and multilateral international relations. -Improve of labor migrants skills along with improvement of pre-departure training and vocational skills, ensuring social security and increasing contribution of migrants to the national development. -Expand and strengthen public-private partnerships in the area of training, recruitment and protection of rights of migrant workers abroad as well as achieving mutually acceptable relations with entities and employers in labor receiving countries.

What are the policy options for Tajikistan to make remittances work for development? In the short run: Macro policies to deal with drop in remittances, possible depreciation of currency, promotion of exports, etc. Temporary social assistance provided this does not create a disincentive to work in home country. Facilitation of re-entry into domestic labor market. Tapping into the human capital and financial resources that migrant workers bring e.g. by creating a favorable environment for business creation, SMEs etc In the medium run: Do not prevent second round emigration when economic conditions in migrant receiving countries improve. Promote circular migration, by simplifying registration procedures for migrants and better “employment” services and closer contacts with employers in Russia – strengthen bilateral agreements with Russia Develop efferent welfare protection mechanisms by the government Strengthen financial literacy of migrants and financial products for migrants by the bank Improve overall labor migration management and coordination within the country and with the donor community Improve vocational education and training (but this should be broadly targeted, beyond just potential migrants)