Understanding Moldova's Emigration and Remittances: Factors, Effects, and Dimensions

1. MoldovaMigration and Remittances Colpon-Ata, Kyrgyz Republic September 10-11, 2012

2. Moldova Strategically located at the cross-roads between Eastern and Western Europe Capital: Chisinau 790 thousand people Population 3.56mil. GDP for 2011 – US$ 7,001 mln. GDP per capita –US$ 2,000 Area:34,000 km2 Roughly equal to Belgium

3. Factors Contributing to Emigration • Inadequate reforms: by the late 1990s Moldova’s economy had shrunk to around two-fifths of its late Soviet size, the number of people employed in agriculture halved • Lack of jobs, small wages • Large non-urban population • High population density • Strong economic, cultural, and personal ties with the countries of the former Soviet Union and Romania • Free movement (without visas) within CIS • Language proficiencies

4. Effects ofmigration The inadequate timing of the reforms, the lack of steps to secure social protection, the unavailability of traditional jobs and the lack of a real mechanism for launching private businesses led to a outward economic migration of the population from late of 1990s. The immediate effects of migration and remittances are almost positive, including the reduction in poverty rates and the increase in disposable household income and consumption, as well as the reduction of absolute poverty in Moldova as perceived by the households themselves. Other effects include financial support to the education system, in particular the increased number of higher education institutions and the extensive financing of the banking and construction sectors. The increase in imports contributed to revenues to the state budget and a reduction of unemployment rates.

5. Migration Geography

6. Data Sources on Migration and Remittances • Labor Force Survey • Household Budget Survey • ITRS • Specialized Remittance Surveys • Population Census Each of them has its advantages and disadvantages

7. Labor Force Survey(sample equals 7200 households quarterly) Advantages: • Provides consistent quarterly time series on number of migrants by major destinations • Collects data on “absent” household members working abroad • Better captures seasonal migration as it is conducted quarterly Disadvantages: • No data on remittances received • Limited geographical breakdown

8. Dimensions of migration

9. Labour Force Survey Data 2011 Total economic migrants – 317000 p., of which: to Russia – about 65% of total -205000 p., of which: less than 1 year – 66 %

10. Household Budget Survey(sample equals 810 households per month) Advantages: • Collects data on “absent” household members working abroad - 5 major host countries and residual specified • Collects data on remittances received during the last 12 months • Potentially useful for analyzing the impact of remittances on households’ income and expenditures Disadvantages: • Underestimation of number of households with migrants (locked houses) • Underreporting of remittances received • Limited geographical breakdown

11. Remittances to Households

12. Household Budget Survey Data 2011 • Total household income, received from abroad amounted to US$ 753.85 mln. • Including from Russia – US$ 424.61 mln. • Share of remittances from Russia in total remittances to households equals to 56.3% Remittances play an important role in increasing household incomes, especially in rural areas, where the share of remittances in income is typically twice as high than in urban areas. The value of average wage in Moldova increased slightly in 2011 up to US$ 272.

13. Specialized Remittance Surveys Advantages: • Address special issues on migration and remittances: • Number of migrants • Countries of destination • Value of remittances received/sent • Uses of remittances • Transmission channels • Costs of migration • Ratio of seasonal migrants to total number of migrants • Provide good proxies for estimation of remittances and geographical breakdowns

14. Specialized Remittance Surveys Disadvantages: • Costly - require special financing – difficult to conduct on a regular basis • Collected data on migrants are relevant only for a short period of time giving the changeable character of migration • Different methodology is used • Underreporting of remittances received

15. Specialized Survey Data 2011Vladimir Mukomel (Russia) – CBS–AXA (Moldova) Type of economic activity in Russia: among migrants that stay < 1 year, 68% are engaged in construction; among migrants that stay >1 year, 43% are engaged in sale and 11% - in public utilities & social services

16. International Money Transfer Systems operating in the Republic of Moldova

17. Money Transfers via MTO vis-à-vis New Contracts with MTO

18. ITRS: Money Transfers from Abroad in Favour of Natural Persons,in Monthly Dynamics (US$ mil.)

19. ITRS - 2011 Transfers to natural persons (via NOSTROs) equal US$ 1443.5 mln., of which: via MTO – US$ 1266.2 mln. In 60% of cases the amount of a single transfer to individuals is less than US$ 1000, in 20% of cases it is less or equal to US$ 100. On Cash account was received for the individuals via MTO – US$ 1232.5 mln., on accounts of natural persons from abroad – US$ 134 mln.

20. ITRS – Russia - 2011 Transfers to natural persons (via NOSTROs) equal – US$ 1075.5 mln., of which: via MTO – US$ 943.5 mln. For transfers in US$ - in 70% cases of transfers to individuals the amount of a single transfer is < 1000, and for transfers in EURO – in 57% of cases they are < 1000. On Cash account for the individuals was received via MTO - US$ 876.3 mln., on accounts of natural persons from abroad – US$ 6.0 mln.

21. Population Census Conducted in 2004 Advantages: • Provided information on “absent” household members by duration and purpose of absence • Identifies if a household member was absent because of foreign employment Disadvantages: • Conducted very infrequently • Data relevant for short period of time (changing character of migration)

22. Conclusions • Migration and remittances are country-specific issues, depend on many factors (e.g., geographical location, legal regulation of cross-border movement in host countries, language proficiency, education level of migrants) • Countries should consider available data sources in developing estimation methods • Estimation methods need to be periodically reviewed because of changing character of migration and remittances • An important data source, along with ITRS, should be surveys