MIGRATION AND DEPENDENCY STRUCTURES IN THE POST SOVIET REGION
5. Dependency Structures within the post-Soviet Region
To see energy-dependency dynamics in the table below countries above the horizontal axis are dependent on energy import, and at the same time tend to have negative value in their export-imports balance. Countries that supply energy – Azerbaijan, Turkmenistan, Kazakhstan, Russian Federation and Uzbekistan meanwhile have a more positive export-import dynamics, which is much related to the energy export-imports, especially with respect to countries whose economy is less reliant on manufacturing.
Figure 7.
Energy and Export/ Import Dynamics
Source: World Bank data
Figure 8.
Migration, Energy-Supply, Remittances and Trade
Source: own calculations based on WB data 2015
Personal Energy Imports Ratio of Net Agriculture Trade Country Remittances Net % of Migration/ Value Added % Dynamics
Received % Consumption Population of GDP Exp-Imp % of
of GDP 2014 2013 (2007-2012) 2014 GDP 2014
Armenia 17.9 72.0 -0.33 21 -20.8
Azerbaijan 2.5 -327.6 -0.19 6 28.1
Belarus 1.6 85.4 1.26 9 4.6
Estonia 2.1 7.2 -0.88 3 1.0
Georgia 12.0 63.4 -7.26 9 -19.6
Kazakhstan 0.1 -107.3 1.03 5 14.6
Kyrgyz Republic 30.3 55.5 -2.16 17 -50.9
Latvia 5.7 50.7 -3.34 3 -4.5
Lithuania 4.4 76.5 -5.25 3 0.9
Moldova 26.2 90.0 -0.27 15 -40.5
Russian Federation 0.4 -83.4 0.78 4 7.3
Tajikistan 43.0 29.8 -1.65 27 -47.5
Turkmenistan n.a. -191.4 -0.51 15 28.9
Ukraine 5.6 26.0 0.42 12 -8.7
Uzbekistan n.a. -26.1 -0.73 19 -5.2
The darkest shades in the columns identify countries with the largest shares of remittances of GDP, the most reliant on energy imports (negative figures mean export here), with the largest share of population loss due to migration and agriculture in GDP, and most import-reliant countries (negative figures indicate overwhelming import). The table does not reflect change in economic structure.
Looking at the data one would suggest that Azerbaijan and Turkmenistan perform well as energy suppliers (that is also reflected in the favorable trade balance), however these countries face a negative net migration balance. Moldova gets 90% of its energy consumption from external resources, and heavily depends on remittances: more than a quarter of its GDP is due to remittances. Tajikistan and Kyrgyz Republic are topping the remittances-recipient countries in the world. Latvia and Lithuania are dependent on external energy supply, and are facing significant outward migration. At the other end of the spectrum, most important energy suppliers and sources of remittances in the area are Russia and Kazakhstan as high-income countries of the region. Along with Belarus they are the largest emigration countries. Kazakhstan was the 9th sender of remittances in the world with 3.6 billions USD (in 2014, World Bank data). However, recent eco-nomic slowdown has resulted in a decline of remittances from Russia toward the CIS countries.18The lowest cost remittances-sending corridor is from Russia to Azerbaijan in the area.
Remittances in these countries are not invested into the local economy (for e.g.
entrepreneurship: creating, running, investing in local business), but rather serve as a response to state failure: the lack of provision of adequate social services, health care, or education. Remittances are covering shortage in wages, unemployment allowance, construction of the family's house, or the education of the children. In the Kyrgyz Republic remittances are reported to reduce national poverty rate by 6-7%,19 while access to decent education and health services improve for the families receiving remittances.20 Despite that income sent home by migrants contributes to the living conditions of the population, it creates severe dependency for the economy at large, and bears the risk of 'diminishing pressure for reform' to create a better business environment as a moral hazard in the receiving countries21. Consumption induced by external income channeled in from often humiliating and difficult working conditions abroad creates the illusion of sustainable growth.22Growth can be reached by raising income, thus with further members of the family working abroad. Furthermore, remittances reportedly have social costs in the long run: family disintegration, abandoned children, and brain drain.
18Other sources describe the Russian Federation as a significant recipient of remittances in volume, with 7.9 billions of USD in 2015, and Ukraine with 6.2 were in the top 10 of the world.
19MVI 2015
20Kireyev 2006
21ibid. p. 17
22ibid.
Figure 9.
FDI in the post-Soviet countries
(no data on Turkmenistan and Uzbekistan) Source: World Bank data
Countries of the periphery take their role in the international division of labor by supplying their labor force for seasonal and often informal, low-paid jobs abroad as senders, while the core is represented by its capital with large companies that many times have a significant share of ownership by their home state. Russia is leading in FDI investments with the rest of the countries lagging behind (Figure 9). Russian investment (in CIS and Georgia) comes at first place from energy supply (oil and gas sector 40%), communications and IT (14%), ferrous metals (10%), infrastructure networks (8%) and the financial sector (8%).23The leading companies are Gazprom, Lukoil and Vympelkom, which represent 38% of investors, and have their subsidiaries in many republics. The
23MVI 2015
other important core player of the area is Kazakhstan present through FDI in transportation 25%, trade of agricultural goods 22%, tourism 18%, and finance 11%.
Countries with negative values are recipients and dependent on FDI. Russian enterprises are overwhelmingly present in Tajikistan with 54%, which we also know as the largest labor-supplier to Russia and Kazakhstan and most dependent on remittances. Russian enterprises are significant in Armenia with 52%, Belarus 47% and Uzbekistan 42%.24 Countries that are least represented in political alliances of the area, are less tied to Russian investment as well, like Georgia (less than 4%) or Turkmenistan (1%) of the overall FDI.
The share of Russian enterprises is relatively moderate in Kazakhstan, due to mutual investments where 47.6% of mutual FDI renders them leadership in this respect in the area. Russia and Belarus have strong partnership as well (34.5%). A further strong alliance of mutual investments is between Azerbaijan and Georgia.
Ukraine has seen a downturn due to economic and political crisis starting in 2013, when investments from Russia dropped by 8%, from Kazakhstan by 50% and Georgia by 52%. After the eruption of the 2014 events most of the investment projects have been halted and mutual FDI has diminished by 12%.25
Projects under the flagship of cooperation are backed by the EuroAsian Development Bank (EADB) mostly in Kazakhshtan (37.7%), then Russia (33.2%), and Belarus (25.6%).26
As a conclusion it can be said that Russia is the most important investor in the area, partnering with Belarus and Kazakhstan. The EuroAsian integration project driven mostly by these countries is aiming at deepening the cooperation and economic ties within the area. Due to economic crisis, the eruption of political conflict and war has cut Ukraine off investments. Countries sending their labor force as Tajikistan, Uzbekistan toward Russia and Kazakhstan, are also energy-dependent and largely host enterprises from Russia predominantly in the energy and communications sectors, while Kazakhstan is present through transportation, trade and tourism.
24Data from 2014, UNCTAD 2015 report: A10
25MVI 2015
26Source: eabr.org/r/about/status
Figure 10.
Foreign Direct Investments
Source: EuroAsian Development Bank