Tajikistan’s economy faces mounting troubles. The impoverished country has long been the most remittance-addicted in the world, with cash transfers from migrant laborers totaling the equivalent of almost half of GDP. But with the slowdown in Russia and tightened regulations for foreigners wishing to work there, remittances are now, as predicted, falling.
The national currency, the somoni, is also hurting, and it is unclear if the authorities are realistic about their options.
Last year remittance inflows declined over 8 percent to $3.9 billion according to Tajikistan’s National Bank. This year will be even gloomier. In early March, the International Monetary Fund (IMF) forecast that remittances would drop 30 percent.
Meanwhile, officials in northern Tajikistan have reported a 30 percent drop in out-migration during the first months of 2015 compared to the same period last year. About one million Tajik citizens work abroad, mostly in Russia.
It’s tough to find good economic news coming out of Central Asia these days. But for those yearning for some, a recent report issued by the German financial giant Commerzbank seems to want to turn back the clock to the dreamy days of booming growth and soaring commodity prices.
The bank’s recently released 36-page report, titled Insights: Central Asia and Mongolia, touts numerous investment opportunities in the region.
“We view the trend for the Central Asian region and Mongolia as positive, owing to the diverse opportunities, and will be pleased if our work helps to make a positive mark and send out a positive signal to politics and business,” the report states.
Axel Bommersheim, one of the bank’s regional heads, goes so far as to predict in a press statement that “future economic growth in the region will be considerably higher than the global average.”
Production schedules make it understandable why the report may be a few steps behind in tracking the decline of Central Asian economies. Still, the report seems to gloss over multiple factors that aren’t exactly new, and which are stalling Central Asian economies – including sagging oil prices and the cratering Russian economy. Ultimately, the report comes across as more wishful thinking than forecasting. The projections in the Commerzbank report aren’t in line with forecasts made by the World Bank or EBRD.
Hurting the report’s credibility is a statement that Mongolians achieved their independence in “1991.” The joke may have been that Mongolia was little more than the 16th Soviet republic, but in actuality the country gained independence in the early 20th century.
A street sweeper cleans Moscow’s Tverskaya Ulitsa. Central Asian migrants often do the dirtiest jobs in Russia.
It’s February, so Muscovites are grumbling about their city’s slippery sidewalks. The complaint isn’t unusual in winter, but this year many say they know why everything is covered in ice: The “Tajiks” have left.
Russian media report that the collapse of the ruble and strict new rules for migrant laborers have encouraged an exodus of Central Asians. But preliminary numbers are far smaller than many Muscovites believe. Besides, new government hurdles can be overcome with a bribe.
The startling number often reported and repeated is 70 percent fewer labor migrants than last year. It dates back to January 7, from comments by the head of the Federal Migration Service (FMS), Konstantin Romodanovsky, who cited it as the decrease in arriving migrants year on year. But the comparison is of dubious statistical value, referring only to the first week of 2015, which falls amid Russia’s protracted winter holidays, and also happened to be the first week that the stringent new rules were in place. Nonetheless, even migrants quote the figure when asked for estimates of how many of their compatriots have chosen to leave.
Last week FMS offered more detailed figures. In January, compared with a year earlier, the number of Uzbek citizens in Russia fell 4.3 percent and Tajik citizens by 2.2 percent, according to the RBK business-news website. Yet the number of Kyrgyzstanis had grown by 3.8 percent. (Numbers showing departures in the second half of the year are misleading, as traditionally many migrants leave Russia each winter when seasonal work dries up.)
The International Monetary Fund has revised downward its forecast for growth in Central Asia and the former Soviet Union to account for dramatically lower oil prices and the shriveling Russian economy. The region’s poorest countries can expect sharply higher inflation.
The assessments are part of an economic update released January 21 in Washington.
For energy importers like Kyrgyzstan and Tajikistan, the IMF says, any gains from lower oil prices are overshadowed by weakness in Russia, Central Asia’s largest trade partner and the destination for millions of Central Asian labor migrants. The IMF projects Russia’s economy to shrink 3 percent this year due to “geopolitical tensions” (the Kremlin’s adventure in Ukraine) and sharply lower prices for its chief export, oil.
Already the Central Asian countries are reeling from the 45 percent drop in the value of the ruble against the dollar last year. Kyrgyzstan’s currency, the som, lost 17 percent against the dollar, even as the National Bank spent hundreds of millions of dollars defending it. Oil-exporter Kazakhstan devalued the tenge by 19 percent last February and another downward adjustment appears imminent. Turkmenistan’s manat dropped 19 percent on January 1.
Tajikistan spent over half its hard-currency reserves in 2014 defending the somoni, the Central Bank said this week. Yet the rumpled somoni still fell 11 percent and is bound to plunge further as remittances – which make up the equivalent of half of Tajikistan’s GDP – shrink.
In the corner of a small pizzeria in central Bishkek, an experiment is unfolding. Central Asia’s first and only bitcoin ATM converts dollars into the world’s most popular cryptocurrency. The machine – which looks like one of the city’s ubiquitous electronic pay terminals – offers a way to convert hard currency into a digital medium that is increasingly used in online transactions.
That could impact how Kyrgyzstan’s estimated one million migrant workers transfer their earnings home, says the machine’s owner, Emanuele Costa, an Italian financial analyst. The World Bank estimates that last year migrant remittances totaled the equivalent of 31 percent of Kyrgyzstan’s GDP. Most of that money, several billion dollars, was transferred through expensive, fee-based services like Western Union and Zolotaya Korona. Costa, a former analyst with Goldman Sachs, sees bitcoin as a low-cost, secure and confidential alternative.
Bitcoin, invented by a group of anonymous Internet users in 2009, is the first and most prominent digital cryptocurrency to gain wide circulation. Not controlled by national governments or banks, bitcoin offers a peer-to-peer encrypted payment system that can be readily converted into cash or, increasingly, used in exchange for products or services. Fees, when they exist, are agreed upon by users and are usually nominal. Bitcoin’s value fluctuates based on supply and demand; one bitcoin is currently worth about $642.
Though Costa is a staunch believer in bitcoin’s potential, he admits that it faces some hurdles. Foremost is a lack of understanding.
Led by a flag bearer hoisting an image of Jesus, and six drummer girls in purple satin, about a thousand supporters of various nationalist causes marched for what they called “Russian May Day” in northwestern Moscow on May 1.
Young and old, men and women shouted, “Russia is for Russians,” “Glory to the Russians,” and angrier slogans, such as “get out, black dirt” – a reference to migrants from Central Asia and the Caucasus.
Indeed, it was migration that seemed to unite this broad swath of rightwing Russia.
“Russian citizenship for Russians. No to handing out citizenship,” some chanted. “Who are we? Russians! We are the power here!”
Several of the groups also yelled, “Cancel 282” – that is, Article 282 of the criminal code, which prohibits inciting ethnic hatred. Each of about 10 groups had its own flag, including a black-yellow-and-white-striped banner used briefly by Tsarist Russia in the 19th century. Other banners incorporated white power symbols. (The kolovrat, seen in several images above on a red flag, is sometimes called the Slavic swastika. Adopted by some rightwing groups, others defend it as an ancient pagan symbol for the sun.)
Russia's April 21 offer to turn into Russians anyone who has lived on the territory of the former Soviet Union or Russian Empire and speaks Russian fluently has got the South Caucasus on edge.
The law on simplifying access to citizenship for Russian-speakers across the former Soviet Union is ostensibly meant to replenish the thinning numbers of Russians, who, even at over 142.47 million people ( the world's tenth largest country), apparently just don’t reproduce like they used to. Azerbaijan, and especially Armenia and Georgia, which do not exactly boast high birth rates, are worried that Russia could annex many of their citizens to make up the difference.
Knowledge of Russian may have weakened of late in the South Caucasus, but widespread poverty still makes the region a prime place for creating born-again Russians. Armenia, which lacks Azerbaijan's natural resources and Georgia's status as a regional trade conduit, is particularly vulnerable to a citizenship drain. Russia also tightened its migrant- worker laws, which may prompt many Armenians, who travel to Russia for work, to opt for citizenship.
New statistics show migrant labor remittances are now equivalent to over half Tajikistan's GDP, crossing an important psychological threshold and emphasizing the Central Asian country's vulnerability to external shocks.
The impoverished country has long been the most remittance-dependent in the world, with cash transfers accounting for approximately half of the economy. Migrant transfers totaled more than $4 billion in 2013, the equivalent of 52 percent of GDP, the World Bank said in its most recent migration and development brief. That figure was 45.5 percent in 2010 and 48 percent in 2012. In neighboring Kyrgyzstan, the second-most dependent on remittances globally, remittances stayed level at the equivalent of 31 percent of GDP.
Both formerly Soviet countries are believed to have sent over one million migrants abroad, mostly to Russia and, to a lesser extent, to Kazakhstan. Remittances are also critical in neighboring Uzbekistan, which receives about one-third of all Russian wire transfers sent to former Soviet republics, accounting for the equivalent of about 16 percent of GDP last year.
Officials in Tajikistan do not like to acknowledge migrants’ importance to their economy. Last year the National Bank said it would stop reporting remittance data, claiming the information could be “politicized.” (The World Bank’s numbers come partially from Russia’s Central Bank.) Other officials have downplayed the role and number of migrants, apparently attempting to deny Tajikistan’s utter dependence on Russia.
Stories of women abandoned by migrating husbands are not hard to find in Tajikistan. It seems every family has a story about a young man who left to earn a living in Russia and never returned. The remittances trickle to a stop; the letters cease. Later the family might hear he’s remarried. Or wonder, forever fearing worse.
In conservative Tajikistan, few are eager to discuss these stories. But every month the Tajik migration service gets about 15 pleas for help from women requesting that Russia deport their sons, brothers or husbands, Radio Ozodi reports, citing an official spokesman. The women have also been appealing directly to Russian authorities.
“I heard from my sister-in-law that he [my husband] got married. [He] doesn’t send money to his kids. They should deport him. Maybe this will influence him to come back to his kids,” Mokhru Kholova, who says her husband Olim left her with their three children five years ago and doesn’t write, told Radio Ozodi.
Tochinisso Khoshimova says her brother Zokirjon has been away for eight years and only once sent their mother $50: “We want him to get kicked out of Russia,” said Khoshimova, adding that her family is simply worried about him. “Mother often cries and doubts if he’s alive.”
The million-plus Tajiks working in Russia are basically the only thing keeping Tajikistan’s economy afloat. Last year, they sent home the equivalent of 47 percent of GDP, making Tajikistan the most remittance-dependent country in the world, according to the World Bank.
The prejudice (and sometimes violence) faced by labor migrants from Uzbekistan abroad is well-documented. But the trials and tribulations they face just leaving home is less publicized.
Most migrants heading to Russia first cross the border between Uzbekistan and Kazakhstan at Chernyayevka, near Tashkent.
Thousands of people mass every day at Chernyayevka, which is the old Soviet name for a village now called Gisht-Kuprik on the Uzbek side and Zhibek Zholy in Kazakhstan.
On a recent November afternoon the crowds – travelers visiting relatives and taking trips as well as labor migrants – were waiting several hours just to leave Uzbekistan.
The longest line was to enter the border crossing: Hundreds of people massed outside in a disorderly queue, which patrolling border guards made no attempts to control other than to open the gates and allow around 10 people through every five minutes or so. It’s a survival-of-the-fittest exercise: Every time the gates open, the line surges forward and the strongest push the weakest back in order to fight closer to the front.
Verbal arguments frequently break out among frustrated travelers, and the occasional scuffle too. One woman fainted in the crush, but the patrolling border guard refused to allow her to bypass the line. The guard intervened only once, when, unable to bear the wait any longer, one couple gave up and climbed over the barrier to leave. “What are you doing?” he shouted at them. “Going home,” replied the man. “This is impossible!”