Collapsing Guest Worker Transfer Payments Pushing Central Asia Into Perfect Storm

Publication: Eurasia Daily Monitor Volume: 12 Issue: 165

(Source: Vedomosti)

The collapse in the size of transfer payments from Central Asians working in the Russian Federation—they are down more than half from last year—is having a domino effect in the region and pushing Eurasia into what will, more than likely, be a political perfect storm. On the one hand, it is placing burdens on the countries there that their vulnerable, authoritarian governments are incapable of addressing. And on the other, it is creating a rapidly expanding new pool of people—both guest workers forced to return from Russia and their families who, in many cases, have been left without any source of income—from which radical Islamist groups could be able to recruit effectively.

Monetary transfers through Russian banks from Russia to Kyrgyzstan, Tajikistan and Uzbekistan fell 40 percent, 58 percent, and 55 percent, respectively, during the first six months of 2015. And the actual decline was almost certainly larger because guest workers from these countries in Russia, the main source of such transfers, also make use of a variety of informal networks to send their earnings home to their dependents. These informal remittance channels have also seen marked declines, as Russian officials have tried to choke them off; furthermore, instability in Central Asia has made them even less reliable than they have been in the past (, September 10).

But even these percentage declines do not suggest just how serious they are for the countries involved. In 2014, transfer payments from guest workers in Russia to Tajikistan amounted to $3,349,000,000, or about 36.2 percent of that country’s GDP. If the current trend holds, this year, migrant laborers from Tajikistan will send home less than half of that amount. As a result, their country’s GDP will fall directly by 20 percent. And due to the multiplier effect—such payments are spent and move through the economy several times—this small Central Asian republic’s GDP could decline by even as much as half.

The situation is roughly the same in Kyrgyzstan and only slightly less severe in Uzbekistan, whose domestic economy is larger. Uzbekistan’s guest workers in Russia sent home $5.5 billion, in 2014, but are on track to send home less than half that amount this year.

None of these countries has the economic or political capacity to make up for these shortfalls, at least in the near term. Indeed, the reason that so many citizens of Kyrgyzstan, Tajikistan and Uzbekistan went to Russia in the first place was not just that wages are higher in the Russian Federation than in their homelands. It was also due to a lack of any other jobs at home.

The pressure on Bishkek, Dushanbe and Tashkent arises not only from the decrease in the size of transfer payments—as well as the declining tax revenues that these three capitals extracted from the population as a result—but also from the returning guest workers themselves. The exact figures about the number of returnees are a matter of dispute, with some Central Asian governments suggesting higher statistics and others lower ones. But clearly, many tens of thousands of the more than a million guest workers from each of these three countries are now returning home, without their former incomes and with the negative experience of often being mistreated for what Russians often assume was their Islamic nature. These frustrated returnees, moreover, are now placing new demands on their governments to provide services.

None of these governments will likely be able to find jobs or provide sufficient social welfare payments for all returning migrant laborers in order to compensate them for their loss of incomes and, hence, standard of living that these people and their families have come to depend on and expect. Rather, these returnees are almost certain to rejoin the ranks of the large number of poor and impoverished populations from which they emerged to go to the Russian Federation.

But precisely because they had demonstrated initiative in the first place by leaving in order to earn a living for themselves and their families, these returning guest workers are likely to demonstrate initiative in another way now that they have come back: some may now look to radical Islamists, who promise justice and fill the ranks of the Islamic State and Taliban-related groups from Afghanistan. To the extent they do (see EDM, September 9), they and not outsiders from these countries’ southern neighbors or from the Middle East could become a major component of the popular threats to these governments (see EDM, September 9).

And there is another probability as well: At least some of these returning and impoverished guest laborers are likely to be attracted by promises of high salaries from those seeking to recruit them as soldiers for militant extremist units in the Middle East, South Asia and elsewhere—thus filling the ranks of radical Islamist groups far from their homelands. After all, they have shown themselves willing to travel in order to make money in the past.