Meruert Makhmutova, PhD Public Policy Research Center (PPRC)

1. WORLD BANK International Workshop on the Economic and Social Impact of Migration, Remittances, and DiasporaMigration 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 1,000.000. • 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 Kazakhstanwithin 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

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

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% - 5-8 years

11. How often remittance-senders sent remittances?

12. Average income of migrants (excl. taxes, $)

13. Average amount of remittances

14. Remittance-Receivers

15. Reasons for sending remittances

16. Reason for sending remittances

17. Method of Collecting MoneyIn % the sample size for the country where the receiver is located

18. Remittance Transfer Channels

19. Transfer channels for cash remittances

20. Sender Characteristics and Use of Remittance Transfer Channels

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

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!