1. Meruert Makhmutova, PhD Public Policy Research Center (PPRC)
WORLD BANK International Workshop on the Economic and Social Impact of Migration, Remittances, and Diaspora Migration and Survey of remittance senders in Kazakhstan
Meruert Makhmutova, PhD
Public Policy Research Center (PPRC)
Yerevan, June 24-25, 2010

2. Migration in Kazakhstan
Widening disparities in GDP per capita drive migrants from lower income countries to higher income countries (World Bank, 2006). Kazakhstan is the ninth largest migrant sending and receiving country in the world (Ali Mansoor, Bruce Quilin, 2006). The majority of migrants from Central Asian countries move to Kazakhstan in search of higher earnings.
The largest part of migrants is coming illegally. That’s why it is difficult to determine characteristics of the labour migration, including the origin of migrants. However, it is obvious that huge part of migrants is coming from neighbouring countries. Labour migration is an important link between the economies of Kazakhstan and these countries.

3. Legal Labor Migrants
Kazakhstan’s legislation provides tough rules for those employers who want to hire foreign labor.
Government sets annual quota for all foreign labor to be attracted in Kazakhstan: currently 0.75% to total labor force.
The rules set a procedure for applying for the permission to hire foreign labor: detailed qualification requirements, detailed argumentation why the company needs a foreign employee, the evidence that the company’s announcements for a certain vacancy in local newspaper and other vacancy databases have not been applied for by a qualified local staff, proof that foreign employee has matching skills and knowledge.
Obviously, Kazakhstan is employing much more over this quota – a labor which remains undocumented and brings no fiscal gains to the state budget. Many of small and medium companies find the ways to avoid these rules and continue hiring workers illegally or on a contractual basis, paying them salaries in envelopes (excluding taxes) and providing them with no social net.

4. Illegal Labor Migrants
There are different non-formal estimations of number of illegal migrants in Kazakhstan that differ from 300,000 to 1,
The amnesty of illegal labor migrants from CIS[1] countries was organized in Kazakhstan since August 1 till December 31, 2006 (The Law on Amnesty to the illegal labor migrants)[2]. During the campaign 164,586 migrants were legalized. Most of them (71.1percent) are from Uzbekistan, 14.5percent – from Kyrgyz Republic; 6.5 percent – from Russia, 2.8 percent – from Tajikistan; 4.9 percent – from other countries (Ministry of Internal Affairs, 2007).
The majority of legalized migrants (70 percent) work in construction, 14 percent – in services sector, 8 percent – in agriculture, and 4.5 percent work as home workers in the households.
[1] The citizens of CIS countries, except for Turkmenistan, have a right to stay in Kazakhstan for unlimited time without visa. Therefore, the illegal labor migration is especially easy between CIS countries.
[2] Only those migrants from CIS that arrived in Kazakhstan not more than 60 days prior to the amnesty can use it. Registered migrants and their current employers were not punished for their illegal work. Migrant can be amnestied if he/she has an official labor contract. The decision on the registration of migrants should be made by the local police office during five days after the application was submitted. The copy of the list of registered migrants was submitted to the local administration.

5. Consequences of the Migrants’ Inflow
One of the consequences of the migrants’ inflow is remittances going out of Kazakhstan, since migrants intend to support their families in home countries.
There is lack of research on the tendencies in remittances flow and mechanisms of remittance sending. For the clarifying of these issues a survey of individuals sending remittances to Armenia, Azerbaijan, Kyrgyz Republic, Tajikistan and Uzbekistan was conducted by the Public Policy Research Center in Kazakhstan within the framework of the Asian Development Bank (ADB) study on remittances in Central Asia and South Caucasus.

6. Survey of remittance-senders
The survey was conducted in June -August 2007.
The total sample of the survey in Kazakhstan is 1185 remittance-senders.
This covered five regions of Kazakhstan with highest concentration of migrants according to the data of the Ministry of Internal Affairs of Kazakhstan: Almaty, Almaty oblast, Astana, Karaganda, South Kazakhstan oblast.

7. Remittance-senders Country to which Remittances are Sent Sample Size
Share in Total Sample N %
Total Sample
1185
100
Armenia
113
9,5
Azerbaijan
114
9,6
Kyrgyz Republic
302
25,5
Tajikistan
199
16,8
Uzbekistan
457
38,6

8. Remittance-Senders 80,8 % of labour migrants are male.
70.5% of migrants is between 25 and 44 years old
72% of migrants are married.
50% of migrants have secondary and 47% have tertiary education.
58.9% of migrants are employed in private sector and 2.4% - in public sector.
32.7% is self-employed people. The highest share of self-employed and entrepreneurs are among Armenian (63% and 12.4% respectively) and Azeri (26% and 13%) migrants. The lowest number of entrepreneurs is among Tajik remittance-senders (0.5%).
42.4% of migrants have family members in Kazakhstan
53.6% migrants plan to stay in Kazakhstan in 5 years

9. Type and sector of employment and legal status of remittance-senders
TOTAL
ARM
AZE
KGZ
TAJ
UZB
Seasonal Worker
29,1
3,6
11,4
26,2
17,1
47,7
Commuting Migrant
5,5
0,9
8,9
1,0
7,7
Regular Worker
63,5
93,8
84,2
64,6
78,9 44
Other
0,3
0,6
Agriculture
1,5
2,6 3
1,8
Industry
2,7
4,4
5,3
3,0
Construction
47,2
27,2
41,7
49,2 66
Wholesale and Retail Trade
37,0
41,6 50
48,7
38,7
24,5
Others
10,5
47,8
12,3
6,0 8
5,1
Kazakhstan Citizen
30,1
24,6
10,6
14,6 5
Legal Immigrant
65,3
67,2
68,4
68,2
60,8
64,1
Undocumented/Illegal Immigrant
22,4
7,0
21,2
30,9
Most of the migrants participating in the survey state themselves legal. However, reliability of this data is not strong. Interviewers noticed that legal migrants in general were more willing to participate in the survey, than illegal ones. Moreover, one have to take into account that, according to observations of the interviewers, respondents were not eager to answer this particular question, often changed their answers, and hesitated to acknowledge that they were illegal (undocumented) migrants. Therefore, basing on this survey, we can not make a conclusion that majority of labour migrants in Kazakhstan are legal.

10. Length of stay of remittance-senders in Kazakhstan
6.4% less than 1 year
60% of respondents stay 1-4 years
36.4 % of respondents live in Kazakhstan 1 or 2 years,
23.4 % live for 3 or 4 years.
25% years

11. How often remittance-senders sent remittances?
Total
ARM
AZE
KGZ
TAJ
UZB
Once
25,1
38,1
32,5
16,6
31,2
23,2
2-3 Times
37,7
45,1
42,1
30,8
40,7
4-5 Times
24,6
15,0
21,1
30,5
24,1
6-10 Times
9,6
1,8
2,6
16,9
3,5
11,2
11-12 Times 2
0,9
0,5
3,1
More than 12 times
0,8
2,3
0,4
The most popular option among respondents in 2006 was to send remittances 2 or 3 times (37,7%). Almost equal are groups that sent remittances once and 4-5 times (around quarter each). The differences in country groups are not very large and do not form noticeable patterns.

12. Average income of migrants (excl. taxes, $)
All Remittance-Senders
400,7
Male
428,4
Female
279,4
Not Married
262,3
Married
452,1
Type of Employment
Seasonal Worker
252,7
Commuting Migrant
260,9
Regular Worker
486,8
Other
141,7
Legal Status
Kazakhstan Citizen
611,1
Legal Immigrant
411,9
Undocumented/Illegal Immigrant
248,8
The average income of migrants participating in the survey is about USD 400 per month. This is approximately equal to the average monthly salary in Kazakhstan, compared to the data of National Statistical Agency ( $ 332 in 2006, in first half of 2007 – 50 000 tenge, or approximately $413).
Firstly, there is a huge difference between the average income of mal and female migrants. The average income of men exceeds income of women in 1.5 times. Secondly, the income of married migrants is significantly higher than the income of not married ones. Thirdly, it is obvious that the income is growing with the length of stay in Kazakhstan. The only exceptions are those who live in Kazakhstan for more than 15 years. They probably live in Kazakhstan from Soviet times and have other reasons for work in Kazakhstan than the rest of respondents. Fourthly, the legal status of migrants strongly affects their income. Those labour migrants who already got citizenship of Kazakhstan have the highest income. Registered migrants in average get significantly more money than non-legalized workers do.

13. Average amount of remittances
Average Amount of Remittances per Transaction
Average Cost of Fees/Charges per Transaction
Average Amount of Total Remittances Sent in 2006
All remittance senders
498,8
9,6
1352,3
Armenia
730,6
19,6
1270,0
Azerbaijan
544,6
14,9
1259,2
Kyrgyz Republic
350,8
4,1
1331,7
Tajikistan
462,2
7,1
1094,1
Uzbekistan
543,8
10,5
1521,9
In total 1185 respondents of the survey sent USD 1.6 million in The average amount of remittance sent is around USD 500, average cost of transaction is USD 9,6 (one have to take into account that a lot of respondents did not pay transaction cost because they sent remittances with relatives or friends, or transferred money themselves while visiting home countries).
From the point of view of countries of origin, there are several differences among respondents. Those sending remittances to Armenia have highest transaction costs and highest average amount sent each time. This means that they prefer to make transactions more rarely. Migrants sending remittances to Azerbaijan have second highest cost of transaction. Both Armenian and Azeri migrants in 2006 sent less than average amount of remittances. However, the lowest total amount was sent by Tajik workers, though their average transaction costs are not so high (they probably prefer to use informal transfer channels).

14. Remittance-Receivers
Sample Size
Share in Total Sample
Average Amount Sent N %
USD
Relative/HH of a Relative
1117
94,3
1401,8
Armenia
102
8,6
1339
Azerbaijan
1364
Kyrgyz Republic
279
23,5
1414
Tajikistan
192
16,2
1108
Uzbekistan
442
37,3
1542
Friend/HH of a Friend 68
5,7
356,6 10
0,8
611 12 1
283 23
1,9
170 8
0,7
425 15
1,3
495,2
The persons/ households to which the respondent sends remittances are mainly relatives or HH of relatives (94%). Average amount of annual transfer is $ Uzbek (37.3%) and Kyrgyz (23.5%) citizens send money often than other groups, amount of their transfers are higher than average: $1542 and $1414 respectively.
Rarely migrants send money to friends, just 5.7 % in total sample. Amount of money transferred to friends modest - $356.6 in year. In this case also Uzbek and Kyrgyz migrants more often send money.

15. Reasons for sending remittances
Total
ARM
AZE
KGZ
TAJ
UZB
To cover receiver’s basic expenses
83,6
69,6 79
87,4
85,5 85
To provide luxury items for receiver
46,3
60,7 44
48,7 42
43,8
To cover receiver’s emergency expenses 57
39,3 53
55,6
63,5
To repay receiver’s debts
25,5
25,9 17
15,6 35
30,0
To repay sender’s debts
5,1
5,4 7
4,3
4,4
To invest in a business for the sender 3
0,9
7,6 1
2,0
To invest in a business for the receiver
0,5
1,8
0,2
To buy assets for the sender
3,5
2,7
3,6
4,2
To buy assets for the receiver
3,2
6,2
1,3
5,0
Others
0,3
0,7
Most important reasons for sending money are to cover receiver’s basic expenditure (83.6%). It is looking similar for all countries.
The next important reasons are to provide luxury items for receivers (46.3%), to cover receiver’s emergency expenses (57%) and to repay receiver’s debts (25.5%). To repay sender’s debt noted 5.1 % of respondents - at the same level for each country.
Sending money as a reason to invest in business for the sender more important for Kyrgyz migrants (7.6%), and partly – for Uzbek migrants (2%), and investing in a business for receiver is not reason for money sending. To buy assets for the sender and for the receiver rarely but on equal level noted by senders, 3.5% and 3.2% respectively.

16. Reason for sending remittances

17. Method of Collecting Money In % the sample size for the country where the receiver is located
Paid into Bank Account
Collected from Bank/MTO
Delivered to House
Others
Total Sample 1
24,6
73,8
0,6
Armenia
57,1 42
0,9
Azerbaijan
4,4
37,7
57,9
Kyrgyz Republic
8,9
90,1
Tajikistan
33,5
65,5
Uzbekistan
1,1
19,7
78,6
0,7
Most popular method used by the receiving HH to collect the money is delivering to house (73.8%), it varies from 90.1% in Kyrgyzstan to 42% in Armenia. Next popular method is collecting of money from bank/ MTO. In this case data varies in the reverse order: from 57.1% in Armenia and 8.9% in Kyrgyzstan. It depends on the distance from Kazakhstan to home countries of remittance-senders. Just 4.4% of receivers collected money paid into bank accounts, all of them in Azery.

18. Remittance Transfer Channels
Share of
Respondents
who Used Channel
Average
Amount per
Sender
Average Cost
per Sender
Share in Total
Cash
Remittances Sent %
USD
Bank/MTO 25
1252 54 23
Post office
1,2
1043 87
0,9
Courier service
0,6
1408
Carried by HH migrant 50
1002 37
Carried by friend/relative 47
1494 7 33
Carried by other individuals
7,3
719
28,7 4
Others
0,8
661
0,4
Migrants used formal and informal channels for sending of remittances. For 50% of respondents the most important channel in 2006 was sending money through HH migrants. It is the cheapest way (no costs) through which the respondents sent average $1002 per sender. Share of this channel in total cash remittances sent is 37%.
The highest amount ($1494) senders trust to friend/relative thanks to low average cost per sender - $7. For 47% respondents it is the next important channel. Share of this channel in total cash remittances sent is 33%.
Banks/MTO is used by 25% of respondents; amount per sender is $1252, with average cost per sender in $54. Share of this channel in total cash remittances seny is 23%. Overall, official channels (i.e. banks/MTO, post, courier service) are used by 26.8 % of migrants.
7.3% of senders used also caring by other individuals; average amount per sender is $719, cost per sender is $28.7. Share of this channel in total cash remittances sent is 4%.
Less important channels are post offices, courier services and others (approximately 1%). By courier service average amount per sender is $1408, despite the fact that average cost per sender is also high - $87, but this channel used rarely (less than 1%). Average amount for transfers by post office is $1043, but highest average cost - $87 makes it unpopular (less than 1%).

19. Transfer channels for cash remittances

20. Sender Characteristics and Use of Remittance Transfer Channels
Bank/MTO
Post Office
Courier Service
Carried by HH Migrant
Carried by Friend/ Relative
Carried by Other Individuals
Others
Male
27,7
0,7
0,5
48,1
46,8
7,7
Female
12,8
3,1
0,8
57,7
47,6
5,3
1,3
Country where remittances are sent
Armenia
52,2
3,5
0,9
18,6
27,4
1,8
Azerbaijan
38,6
4,4
30,7
43,0
2,6
Kyrgyz Republic
8,6
0,3
67,5
52,0
8,3
Tajikistan
34,7 1
31,6
52,3
5,0
Uzbekistan
21,0
0,6
58,9
47,0
9,6
There are gender differences in use of particular channels for remittances. Using of official channels by migrants men (28.9%) was higher than by women (16.7%), mainly because they in twice often used bank/MTO. Post office was more preferable for women than for men. Most preferable channels for migrants male were carried by HH migrant (48.1%) and by friend/relative (46.8%). For women sending money by friends was at the same level as for men. But they more often used sending money by HH migrant (57.7). Using of courier service is at the same low level for men and women.
Differences among countries are important. Migrants from Armenia preferred official channels for sending money (56.6%), in first of all bank/MTO (52%). Kyrgyz migrants are the least interested in official channels (9.6%). For them most important channels are carried by HH migrant (67.5%) and by friends (52%). It’s is logically because Kyrgyzstan very close to Kazakhstan and there are a lot of every day “people flow” between countries. Non-official transfers have a low cost and it’s a main reason for migrant’s preferences.
Migrants from Azerbaijan also often use bank/MTO (38.6%) and post office (4.4%). The reason same as for migrants from Armenia, it depends on the distance between our countries. But non official channels: carried by friends/relatives (43%) and by HH migrants (30.7) are also often used by Azery migrants.
Migrants from Tajikistan and Uzbekistan send money through HH migrant (31.6%, 58.9%, respectively), and friend/relative (52.3%, 47%). Tajik migrants often use bank/MTO (34.7%) than migrants from Uzbekistan (21%).
There are differences in use of channels depends on type of employment. Seasonal (29.3%) and regular workers (27.5%) use official channels more than commuting migrants (4.6%). It’s clear because working migrants busy and have a salary. At the same time all of these migrants use HH migrant and friends for sending money.
Legal migrants often use bank transfers than Kazakh citizens and illegal migrants.

21. Advantages and disadvantages of Remittance Transfer Channels
Advantages of remittance transfers by banks/MTO are high speed (fast), secure/reliable, confidential and readily available. But as disadvantages of this channel senders noted that it is expensive and not convenient for receivers.
Post office is secure and confidential channel of money transfer, but expensive, slow and inconvenient for receivers.
Courier service is secure, confidential and convenient channel for remittance receivers, but not always available and expensive.
Sending transfers by HH migrants is secure/reliable, fast and convenient for receiver channel, but not always available and expensive, because there is travel expenditure.
In the opinion of senders advantage of caring by friend is secure/reliable, cheap, fast and convenient for receivers, but not always available and confidentiality not guarantied.
Advantages of sending remittances by other individuals is readily available, low cost, high speed and convenient for remittance receivers, but this channel not secure and confidentiality not guaranteed.

22. Ownership of Bank Account among Remittance-Senders
Sample Size
Share in Total Sample N %
Has bank account 33
2,8
Does not have bank account
1152
97,2
Reasons for not having a bank account
No bank near home or work 36
3,0
Does not trust banks
222
18,7
Procedure for opening an account is
complicated 98
8,3
Does not need bank account
416
35,1
Does not have money to put in bank
account
285
24,1
Has had bad experiences with banks 48
4,1
Does not have requirements/papers
to open an account 42
3,5
Others
0,0

23. Conclusion and recommendations
Main problem faced by the remittances in Kazakhstan is the high level (3/4) of informality of remittance transferring.
This does not allow the state to track the remittance flow, which strengths the hidden economy and increases money laundering.
In addition, the remittances sent through informal channels do not work for development of the financial sector.
Moreover, migrants themselves suffer from this problem, since it makes the remittance sending unreliable and irregular.

24. Conclusion and recommendations
Moving money transfers from informal channels to formal institutions (bank/MTO, post offices, and courier services) will involve these huge cash flows into legal sector of economy, will wide client bases of financial intermediaries.
Formal requirements, such as tax payer’s registration and others, also create additional obstacle that does not allow migrants to use banking services, especially to open accounts.
Easy procedures for taxation of migrants income, for example as for individual entrepreneurs at 2-3% level will allow them to became a part of labour force and to be legalized.
In the other hand, development of bank services for migrants will help them to save money. Currently, using of informal channels has a risk to loss money during customs procedures. Improvement of the legal status of migrant’s remittances will support poor population in neighbouring countries.
It is obvious that the banks need to have clear strategy for the work with migrants who send remittances, since most of them do not have clear idea of the advantages of banking services, including opening of bank accounts.

25. Conclusion and recommendations
In 2007 National Bank has estimated in the BoP 2005 and 2006 the compensation of unregistered foreign labour force. Thus, the compensation to non-residents employees working in Kazakhstan in 2005 was US$ 735 million, in 2006 – 962 million.
The survey shows the migrants monthly average wage estimation in five times higher than in legalization data. Hence, it’s necessary to conduct additional surveys to clarify numbers of illegal migrants, wage estimation, and workers remittances flows.

26. Conclusion and recommendations
To the Government and National Bank:
To stimulate using of formal remittance channels;
To provide labour market and financial services access information to incoming migrants;
To improve data on remittances: introduce new remittance measuring methodology;
To support regular periodic surveys of applied data collection and analysis on migrants and remittances;
To foster approving the anti-money laundering (AML) legislation;
To establish voluntary life insurance/pension scheme for remitters and families to alleviate risks;
To establish transparency requirements and regulations for recruiters of migrants in terms of payments to workers, remittance arrangements;
Comprehensively review financial legislation to amend and enhance for introduction of modern remittance technologies such as mobile banking;
Create more open environment for incoming migrants to Kazakhstan by establishing broader amnesty, setting up seasonal worker programs, and offering blend of taxation and pension, insurance benefits;
Establish easy procedures for taxation of migrants’ income, maybe on the level 2-3percent, that will promote formal remittance channels;
Together with measures above, toughen enforcement with employers of illegal aliens.

27. Conclusion and recommendations
To the banks:
Promote bank services among migrants;
Rise awareness migrants on the official channels of money transfers;
Develop specific products for remitters and their families to encourage financial deepening;
Provide remittance senders with information on the new channels of remittance sending and banking, raise migrants awareness on potential advantages of these channels;
Develop and introduce mobile banking options;
Invest in modern funds transfer platforms, possibly as part of bank consortia.
To the KAZPOST:
To improve transfer procedures/technologies and pricing.

28. Thank you!