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, PhDPublic Policy Research Center (PPRC)
Yerevan, June 24-25, 2010
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.
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.
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.
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.
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.
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
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
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 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 0 0 0 0,6
Agriculture 1,5 0 2,6 0,3 3 1,8
Industry 2,7 4,4 5,3 3,0 0 2,6
Construction 47,2 4,4 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 12,3 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 2,7 7,0 21,2 24,6 30,9
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
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 38,1
4-5 Times 24,6 15,0 21,1 30,5 24,1 24,1
6-10 Times 9,6 1,8 2,6 16,9 3,5 11,2
11-12 Times 2 0 0,9 2,6 0,5 3,1
More than 12 times
0,8 0 0,9 2,3 0 0,4
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
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
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 102 8,6 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
Armenia 10 0,8 611
Azerbaijan 12 1 283
Kyrgyz Republic 23 1,9 170
Tajikistan 8 0,7 425
Uzbekistan 15 1,3 495,2
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 57 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 7 4,4
To invest in a business for the sender
3 0,9 0,9 7,6 1 2,0
To invest in a business for the receiver
0,5 1,8 1,8 0 0,5 0,2
To buy assets for the sender 3,5 2,7 1,8 3,6 3,5 4,2
To buy assets for the receiver 3,2 6,2 1,8 1,3 1 5,0
Others 0,5 0,9 0 0,3 0,5 0,7
Reason for sending remittances
0
20
40
60
80
100
To cover receiver’s basicexpenses
To provide luxury items forreceiver
To cover receiver’s emergencyexpenses
To repay receiver’s debts
To repay sender’s debts
To invest in a business for thesender
To invest in a business for thereceiver
To buy assets for the sender
To buy assets for the receiver
Others
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 0 57,1 42 0,9
Azerbaijan 4,4 37,7 57,9 0
Kyrgyz Republic
0 8,9 90,1 1
Tajikistan 1 33,5 65,5 0
Uzbekistan 1,1 19,7 78,6 0,7
Remittance Transfer Channels
Share ofRespondentswho Used
Channel
AverageAmount perSender
Average Cost per Sender
Share in TotalCashRemittances
Sent
% USD USD %
Bank/MTO 25 1252 54 23
Post office 1,2 1043 87 0,9
Courier service 0,6 1408 54 0,6
Carried by HH migrant
50 1002 0 37
Carried by friend/relative
47 1494 7 33
Carried by other individuals
7,3 719 28,7 4
Others 0,8 661 0 0,4
Transfer channels for cash remittances
Bank/MTO19%Post off ice
1%
Courier service0%
Carried by friend/relative
36%
Carried by other individuals
6%
Others1%
Carried by HH migrant
37%
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 0,7
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 0,9
Azerbaijan 38,6 4,4 0 30,7 43,0 4,4 2,6
Kyrgyz Republic
8,6 0,7 0,3 67,5 52,0 8,3 0,7
Tajikistan 34,7 0 1 31,6 52,3 5,0 0,5
Uzbekistan 21,0 0,6 0,6 58,9 47,0 9,6 0,6
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.
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 0,0
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.
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.
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.
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.
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.
Thank you!
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