Migration and RemittancesEastern Europe and the Former Soviet Union

Bryce QuillinWorld Bank

Europe and Central Asia Region

2

The Presentation

Overview of Migration/Demographics Trends in Europe & Central AsiaCost-Benefit Analysis of MigrationInternational Regulatory FrameworkPolicies to enhance the returns to migration and remittances

3

Key Messages

Migration in ECA is unique, significant, and likely to growRemittances are the second most important source of financing for many and the first for poorestGood economic policies and institutions maximize gains for sending and receiving countries and migrants (“Triple Win”)Current immigration policies, largely bilateral, may not stem large undocumented migrationFurther study and policy experimentation may help overcome the limitations of the existing framework

4

The Presentation

Overview of Migration/Demographics Trends in ECACost-Benefit Analysis of MigrationInternational Regulatory FrameworkPolicies to enhance the returns to migration

5

Migration has followed a biaxial pattern: Eastern to Western Europe and Low Income

CIS to Russia, Kazakhstan, and Ukraine

6

A lot of early migration was driven by civil conflict and war

7

Net migration rates were volatile in Central Asia during the early years of transition

Net Migration Rates 1989-2003 (Per 1000 Population)

-35

-30

-25

-20

-15

-10

-5

0

5

10

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Kyrgyz Rep. Tajikistan Kazakhstan

Note: Calculated from residual method.Source: National Statistical Offices. World Bank Staff Estimates.

8

This volatility is consistent with patterns found in other parts of the

CIS...Net Migration Rates 1989-2003

(Per 1000 Population)

-10

-8

-6

-4

-2

0

2

4

6

8

10

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Moldova Armenia Russia Ukraine Belarus Azerbaijan

Note: Calculated from residual method.Source: National Statistical Offices. World Bank Staff Estimates.

9

…and Central and Eastern Europe during the early 1990s

Net Migration Rates 1989-2003 (Per 1000 Population)

-30

-25

-20

-15

-10

-5

0

5

10

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Latvia Lithuania Estonia Poland Czech Republic Hungary Bulgaria Romania Slovenia

Note: Calculated from residual method.Source: National Statistical Offices. World Bank Staff Estimates.

10

Pool of labor within ECA…Central Asia, Caucasus, Balkans

* Data are from 2000-2003

11

Losing population to emigration and demographics…Baltics, SE Europe, Poland, Ukraine and

Moldova

* Data are from 2000-2003

12

Declining population despite immigration…Central Europe,

Russia and Belarus

* Data are from 2000-2003

13

It is likely that migration will increase for five main reasons

Differentials in expected quality of life increasingDemand for non-traded services from increasingly affluent and large middle class (demand needs to be factored into policy) Much lower transportation costs (esp. low cost airlines) and easier to keep in touchOnly quick way to build savings and human capitalDemographic decline in Europe and parts of the CIS (especially Russia)-now at an interlude

14

Remittances are large as a portion of GDP in many ECA

countries

Tajikistan

Moldova

Armenia

Bosnia and Herzegovina

Serbia and Montenegro

Albania

Kyrgyz Republic

Georgia

Bulgaria

0 5 10 15 20 25 30 35 40

Over 30%Over 20%

Workers Remittances + Compensation of Employees to GDP (2006)

Source: IMF Balance of Payments Statistics

15

Several ECA countries lead the world in remittances receipts

Tajikistan

Moldova

Tonga

Guyana

Lesotho

Lebanon

Haiti

Honduras

Armenia

El Salvador

Jordan

Bosnia and Herzegovina

Jamaica

Serbia and Montenegro

Nepal

Albania

Philippines

Nicaragua

Cape Verde

Kyrgyz Republic

Gambia, The

West Bank and Gaza

Guatemala

Kiribati

0 5 10 15 20 25 30 35 40

Workers Remittances + Compensation of Employees to GDP (2006)

Source: IMF Balance of Payments Statistics.

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The Use of Remittance Transfer Channels Vary…

Use of Remittance Distribution Channels(Pct of Migrants Reporting Use of Channel)

Bank Transfer30%

Post Office7%

Friends/Contacts30%

Informal Transfer Offices

1%

MTOs31%

Debit Card0%

Self Delivery1%

Source: World Bank Surveys.

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Transfer costs can be high

Average Costs and Amounts of Remittance Transfers

0

100

200

300

400

500

600

700

800

Georgia Kyrgyz Republic Bulgaria Bosnia & Herz Romania Tajikistan

US

D

0

1

2

3

4

5

6

7

8

%

AvgRemittanceUSD

Avg Costs(Pct)

Based on Survey Responses of Returned Migrants. Values of bars reflected in USD per the left axis and the value of the line (average costs) reflected in percentages per the right axis.Source: World Bank Surveys.

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The majority of remittances in Central Asia go to fund basic

subsistence

Households' Uses of International Remittances in Georgia, Kyrgyz Rep, and Tajikistan (%)

0

5

10

15

20

25

30

35

40Savings

Investment in Business

Education of children

Food and Clothing

Medical expenses

Education

Buying property

Home repair

Wedding, celebration, funeral

Buying land

Buying a car

Starting a new business

Charity

Other

Source: World Bank Surveys.

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The Presentation

Overview of Migration/Demographics Trends in ECACost-Benefit Analysis of MigrationInternational Regulatory FrameworkPolicies to enhance the returns to migration

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International market for migrant labor has large net benefits…

Sending Countries and MigrantsCan relieve pressures on labor markets when tight Remittances

Migrants remit about 36 percent of their incomesVast majority of Central Asia migrants remit $200 or less at a timeA 10% increase in the share of migrants in a country’s population leads to a 2% reduction in poverty

Human Capital and Savings 26 percent intended to start a business on return70 percent improved job opportunitiesMajority of migrants improved earnings at home after migration

Receiving countries fills labor market shortages and attract new skills

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Yet Migration also generates costs

Costs for receiving countriesNew competition: wages may fall as a result of migrants especially for the lower skills (DeNew/Zimmerman 1994 -0.5% for blue collar from 1 percent increase in migrants)Strain on existing social servicesProblems with integration of foreign workersCriminality

Costs for sending countriesLoss of human capital, especially if migration permanentDisruption to families and communities (may require additional Government services)Criminality

Costs for migrantsHeavy penalty on family life (over half return home due to family related concerns)Costs of leaving familiar and adapting to new culture

22

The Presentation

Overview of Migration/Demographics Trends in ECACost-Benefit Analysis of MigrationInternational Regulatory FrameworkPolicies to enhance the returns to migration

23

Most legal migration facilitated by bilateral agreements

Bilateral migration agreements proliferated rapidly during the early 1990s

Externalities make bilateral agreements superior to MFN, unlike trade

These agreements form a ‘patchwork’ as their designs vary tremendously and there is little coordination

The majority of agreements cover migration between CEECs and EU15 though a few address migration to Russia

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Problems with the Current Regime

Agreements do not address the full size of the demand for migrant laborSometimes legal quotas unfilled due to high transaction costsCreates incentives for illegal migrationThe system is unbalanced as a few countries account for the majority of the agreementsCurrent system does not encourage circular migration and allows adverse selection and criminal activity

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The Presentation

Overview of Migration/Demographics Trends in ECACost-Benefit Analysis of MigrationInternational Regulatory FrameworkPolicies to enhance the returns to migration

26

Features of an Alternative Regime for Labor Migration

More effectively matches the supply with the demand for international laborReduces rents for traffickersEstablishes transparent rules for remuneration, work conditions, and dismissal proceduresProvides incentives for migrants to be complements, not substitutes, to domestic labor Offers employers means to hire legally the workers they needProvides incentives to encourage return home where permanent migration is not desired

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One option—among many—for improving policies could be to encourage circular migration…Circular migration would/could:

Utilize migrants and their acquired skills for economic development in sending country

Reduce brain drain because absence is temporary

Probably address some fears in receiving countries about migrants staying permanently

Provide an alternative to full liberalization for receiving countries

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A lot of migration is illegal…

Undocumented Migrant Stock as a Percentage of Total Migrant Stock

Source: Pew Hispanic Center, IOM, ILO, UK Home Office, ISTAT, Jimenez (2003), COMPAS Oxford, Council of Europe, Ministry of Labor in Finland, Sadovskaya (2002), Jandl (2003).

0

10

20

30

40

50

60

70

Greece Portugal Italy UK Spain Germany Turkey Russia Kazakhstan

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Brain drain may be a concern

Percentage of Expatriates that are Highly Skilled

0

5

10

15

20

25

30

35

40

45

50

Source: Dumont and Lemaître

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Circular migration is consistent with many migrants’ preferences for short periods of time abroad

0 10 20 30 40 50 60 70 80

Percentage Response

Leave temporarily and fairly soon Leave temporarily without plan to return

Leave for a long time and return Leave Permanently

Source: World Bank Surveys (2007)

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Policies to lower remittances costs*

Expand access to the formal financial sector (through legal migration)Improve financial infrastructurePromote competition among transfer providersEnhance market transparency on costs

*Input provided by World Bank (2007) “Remittances in the CIS Countries: A Study of Selected Corridors,” ECA Chief Economist’s Regional Working Paper Series, 2, 2, Washington, DC.

32

Policy experimentation and pilots could be useful

World Bank is working on implementing pilot migration schemes with several EU member-states

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More information and data are available at:

http://www.worldbank.org/eca/migration