When it comes to finding ways of squeezing money out of people, Tajikistan’s government is second to none in the innovation stakes.
Russian business daily Kommersant reported on February 16 that a plan is in the works for the National Bank of Tajikistan to create a single clearing house for all the remittances being sent home by migrant laborers.
Tajikistan is a major market in the cash-transferring business in Russia and represents the second-largest destination for money wired overseas, according to Kommersant.
The proposal being enacted by the National Bank will require all transfers to go through its system, which will accordingly earn healthy commissions.
The details are hazy so far, but Kommersant’s unnamed sources in the financial sector say that proponents of the new arrangement are toying with the idea of imposing a 1 percent commission on all transfers.
Market leaders at the moment charge between 0.3 percent and 0.6 percent.
It is presumed that wire companies and the banks paying out the cash at the other end will come to some arrangement with the National Bank on how to distribute the earnings.
The model will completely invalidate any avenue for competition since clients will find themselves having to pay that 1 percent (or more) commission come what may. And it should probably be safely assumed that the National Bank will retain a healthy proportion of the fees for itself.
Critics of the government will be quick point out that the deputy head of the National Bank is none other than President Emomali Rahmon’s son-in-law, Jamoliddin Nuraliyev, and that given the opaque nature of Tajikistan’s financial system, there can be no certainty about the ultimate destination of the revenues earned through commissions on transfers.
The World Bank has released yet another dire economic forecast for Tajikistan, predicting that the downturn in Russia and devalued ruble will push down labor migrants’ remittance transfers by 40 percent this year (in dollar terms). Unemployed young men are expected to return home in droves.
Job-poor Tajikistan is the world’s most remittance-dependent state; the migrants’ transfers account for the equivalent of 49 percent of GDP. This year and next are going to be especially hard for the millions of Tajikistanis who have been lifted out of poverty in recent years by their relatives’ transfers from Russia.
Up to half of working-age men, most of them under 30, have sought work abroad, mostly in Russia. Twenty-five percent are expected to return home this year, putting enormous social pressures on one of Central Asia’s most fragile states.
Some key takeaways from the May 25 report:
Declining remittances would significantly reduce disposable incomes in Tajikistan, forcing the poorest and the lower middle class to cut non-priority expenditures, including those on social services, such as education and health. Reintegration of returned migrants will be difficult given the limited jobs available, mismatched skills, and competition from youth entering the labor market. Returnees are likely to lack awareness of employment and business opportunities, and related legislation—employment information and services are both inadequate.
Tajikistan’s National Bank has ordered the immediate closure of private currency exchange offices, a move that suggests Dushanbe is concerned about the somoni’s sharp depreciation. The currency has fallen 14.5 percent against the dollar this year as remittances from Russia slow.
The National Bank cited the need to assure the “stability” of Tajikistan’s currency market and the somoni exchange rate and “the protection of the interests of clients of credit organizations,” in a terse statement issued on April 17 announcing the closures with immediate effect.
The blanket ban on private exchange offices means more than half of the country’s exchange offices – 818 out of a total 1,581 – are being shuttered, leaving 763 operating, according to National Bank figures cited by Dushanbe-based Asia-Plus news agency.
With plenty of currency offices still working, the closures sparked little panic in Dushanbe, an observer in the city told EurasiaNet.org on condition of anonymity.
In dollar terms, remittances sent to Tajikistan from Russia declined by 7.6 percent in 2014 year on year, according to data recently released by Russia’s Central Bank. Remittances are likely to continue to drop this year amid ongoing economic turmoil in Russia.
This is bad news for the world’s most remittance-dependent country. The World Bank estimates remittances total the equivalent of 42 percent of Tajikistan’s GDP. Over a million Tajiks, or roughly half of working-age males, labor in Russia.
A worker from Tajikistan has dropped dead while standing in line to apply for a Russian work permit at a new migrant-processing center near Moscow. His death comes after a barrage of reports about poor conditions at the Multifunctional Migration Center, in Sakharovo.
Komiljon Esanov, 48, had been waiting in line for two days when he became ill, according to Fergana News. By the time an ambulance arrived an hour later he was already dead.
"I think my father died of hunger and thirst while standing in the crowd. We have been queuing for work permits here for several days, and there is no order or system," Esanov’s son Dilshod, who was waiting with his father in line, was quoted as saying by the Dushanbe-based Ozodagon news agency.
The Russian authorities have promised to investigate the cause of death.
When the Sakharovo center opened in January, many migrants viewed it as a positive change. Previously they had to go to at least five different sites to have their fingerprints taken, sit mandatory Russian-language test, purchase health insurance, and collect necessary stamps. Now they can take care of all that paperwork at once.
But the Federal Migration Service’s attempt to streamline the process seems to have failed. With over a million Central Asian migrants working in Moscow alone, the center quickly suffered from overcrowding.
The center can only serve 2,000 people per day, but often up to 5,000 migrants wait in line to get their documents sorted. Many arrive as early as 5 a.m. to start queuing.
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.)