Analysis of the Current Situation of the Labour Market of...

Technical Assistance to Sector Policy Support Programme in the Social Protection Sector Labour Policy Component (Republic of Tajikistan) EuropeAid/127893/C/SER/TJ

Activity 1 Analysis of the Current Situation of the Labour Market of Tajikistan Input of the Senior Non-Key Short-Term Expert 1 Economist Expert: Acad., Dr. econ. Raita Karnite

April 2010

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Content Introduction.....................................................................................................................3 Part 1. Analytical document on current economic and labour market situation of RT.......5

1.1. Studies and surveys implemented in Tajikistan during the last 5 years ..................6 1.2. Socio-economic and labour market policy and legislation affecting labour market developments ............................................................................................................15 1.3. Current economic (macroeconomic) situation of the Republic of Tajikistan ........23 1.4. Macroeconomic base and the forecasts for economic development to 2020.........63 1.5. Current labour market situation in TR.................................................................68 1.6. Expected labour market trends ............................................................................82

Part 2. Brief analytical document on countries with the same or similar background and development tendencies.................................................................................................92 Part 3. Proposals for improvement ...............................................................................101 References...................................................................................................................103

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Introduction This document is a contribution of the international senior non-key short-term expert - economist to the EC’s funded project Technical Assistance to Sector Policy Support Programme in the Social Protection Sector - Labour Policy Component. The project Technical Assistance to Sector Policy Support Programme in the Social Protection Sector - Labour Policy Component should achieve two results:

1) to enhance the Ministry of Labour and Social Protection of Population (MLSPP) of the Republic of Tajikistan (RT) to prepare a comprehensive analytical document focusing on:

(i) major labour market trends, including informal sector employment and outward labour migration,

(ii) critical assessment of effectiveness and efficiency of existing instruments of labour market policy,

(iii) feasible options for the government’s labour market policy.

2) to enhance the MLSPP to develop a labour market strategy paper and its implementation and financial plan.

For achieving of the above mentioned results the project implementation phase is divided into six activities:

1) analysis of the current situation of the labour market of RT; 2) increasing the MLSPP capacity in policy developments; 3) evaluation of labour market policy instruments and effectiveness; 4) analysis of possible labour market policy alternatives; 5) identification of and recommendations on policy implementation measures to be

supported by the EC SPSP; 6) Labour Market Strategy (LMS) by 2020.

The aim of the Activity 1 is to promote the development of the government’s long term policy documents and adoption of the government’s labour policy based on credible analytical data and results of research with which to promote employment and creation of inclusive labour market. Inclusive labour market means employment possibility and qualified workforce in order to secure individual wellbeing of each individual and the overall welfare in RT.

The task of the international senior short-term expert – economist includes:

1) preparation of an analytical document on current economic and labour market situation in order to form base for drafting the Labour Market Strategy 2010-2020;

2) creation of a macroeconomic base with the forecasts for economic development to 2020 and the labour market trends;

3) preparation of a brief analytical document on at least three countries with the same or similar background and development tendencies;

4) participation in the seminar and presentation of prepared documents, results and conclusions.

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The beneficiaries of the project are the MLSPP of RT and in particular its institutions:

- Department of Labour Relations (including pension issues); - Department of Analysis and Forecasting of Social and Labour Issues; - State Agency on Social Protection, Employment and Migration; - State Agency for Social Insurance and Pensions (former Fund for Social

Protection of the Population).

The report was prepared by acad., Dr. econ. Raita Karnite (assisted by Kriss Karnitis).

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Part 1. Analytical document on current economic and labour market situation of RT The analytical document on current economic and labour market situation of RT should provide:

- results of the investigation of the current macroeconomic situation and data forming macroeconomic basis for drafting the Labour Market Strategy, and

- results of the investigation of the current situation and critical analysis of the existing situation in the area of labour market and labour migration.

These results should be achieved on the basis of analyses of the:

- studies and surveys implemented during the last 5 years at local, regional and national level, related with labour market, reduction of poverty, international labour migration, development of the initial VET, improvement of business environment, development of social protection and services, development of the education system as a whole towards labour market demands,

- government policy documents in force: valid laws, policy planning documents and government decrees and regulations,

- statistical data, related to given issues.

Majority of studies and surveys implemented during the last 5 years were provided by the project team. Statistical data from the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj), National Bank of Tajikistan, analytical reports and projections of international organizations (the World Bank, United Nations organizations, ILO, IMO, Eurostat, World Economic Forum, The World Factbook, Nations Online: Countries of the World and other) and the State Statistical Bureau of the Republic of Latvia were used for forecasting and estimations. Statistical bulletins of the Tajikistan Statistical office (Статистический ежегодник Республики Таджикистан 2009, Демографический ежегодник Республики Таджикистан 2009) were used. Home pages of the Ministry of Finance of RT and the Ministry of Economic Development and Trade of RT were also reviewed.

However, it was sometimes difficult to understand methodology of Tajikistan’s statistics. It should be mentioned that statistical recording of economic activities and labour resources is not comparable with international practice. First, division by types of economic sectors and activities is done according to the Classification of National Economic Sectors of the Former USSR (code level) and the Tajikistan All-Republican Classification of Types of Activity (class level). Occupations are classified according to the International Classification of Occupations (ISCO-88). There is note that the International Classification of Employment Status is applied in analysis (Tajikistan. Labour.., 2010: 14), but this is doubtful.

For this reason I am thankful to the authors of the research papers Tajikistan. Labour Market Research (Tajikistan. Labour…, 2010) the Human Development Report 2008-2009 (Republic…, 2009) who have presented the most comprehensive review of Tajikistan’s economics and labour markets, as well as other researchers contributing to

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the issue. Statistical data and facts analysis from identified reports, as well as other investigations and policy documents were widely used in the current investigation.

The review and analysis of existing situation, policy instruments and labour market performance was carried out with the aim to estimate macroeconomic development and labour market trends in the period to 2020.

1.1. Studies and surveys implemented in Tajikistan during the last 5 years The following studies and reports of investigation were included in ToR for expert and examined during the work (depending on availability):

1) Labour market review in Tajikistan – funded by the European Training Foundation (2009);

2) Estimation of parameters of poverty - the Wold Bank Report (2007) and the World Bank Report (2009);

3) Report on assessment of the labour market needs in some professions and specialisations in Isfara, Sarband, Yava and Tadjikbad districts and in Dushanbe (Отчет по исследованию потребности рынка труда на отдельных специалистов в Исфаринском, Сарбадском, Яванском, Таджикабадском районах и в городе Душанбе) – German Development Cooperation (GTZ) and GOPA (2009);

4) Labour market assessment and vocational education and training (VET) in Tajikistan– International Labour Organisation (ILO) and International Organisation of Migration (IOM) (2009);

5) Report on employment in informal sector of economy – Scientific Research Institute of Labour and Social Protection of Population of the MLSPP (2005);

6) Influence of the global financial crisis on labour migrants from Tajikistan: opinion of migrants (Влияние мирового финансового кризиса на трудовых мигрантов из Таджикистана: мнение мигрантов) – International Organization of Migration (IOM) and Information and Research Centre „SocService” (2009);

7) The system of professional and technical education and training in Tajikistan: the current status and development perspectives (Система профессионально-технического образования н обучения Таджикистана: состояние и перспектива развития) – International Labour Organization (ILO) and International Organization of Migration (IOM), Фонд Поддержки профессионального образования и обучения Таджикистана (2008);

as well as: 8) Tajikistan Migration Survey. DCI 08-18. Labour Market Review and Migration

Survey. Draft working document. ETF/EU, IRC SocService (August 2009);

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9) Tajikistan. Living Standards Measurement Survey 2007. Basic Document. (Обследование уровня жизни в Таджикистане, 2007. Базовый документ.) DFID (Department for International Development), The World Bank, FAO, UNICEF (Project, July 2007);

10) Aide Memoire on monitoring of Public Sector Reform Project (PSRP, H245) and Public Financial Management Modernization (PFMMP, H463, PPA#Q6550), Identification of Programmic Development Policy Operation (PDP04). The World Bank (9-16 November 2009);

11) Republic of Tajikistan. National Human Development Report 2008 – 2009. Employment in the context of human development. (Республика Талжикистан. Национальный отчет по человеческому развитию 2008 – 2009. Занятость в контексте человеческого рaзвития.) UNDP, Dushanbe (2009);

12) Анализ рынка труда. Labour market analysis. Author: G. G. Salomonova;

13) Rethinking Poverty. Report on the World Social Situation 2010. United Nations. Department of Economic and Social Affairs (2009);

14) Оценка нужд и потребностей женщин трудящичся – мигрантов. Центральная Азия и Россия. UN Development Fund for Women, UNIFEM, MOT (2009);

15) Recommendations for introduction of a new salary system in the civil service and options for special scheme to attract and retain highly-qualified staff. Public Sector Reform Project (P096861). World Bank (2009);

16) Tajikistan. Labour Market Review. ETF, IRC SocService. February (2010), 17) Components of the Income Aggregate: “Living Standards Survey, Tajikistan

2003”. Prepared for the Rural Income Generating Activities (RIGA) Project of the Agricultural Development Economics Division, Food and Agriculture Organization, December (2008).

Tajikistan Labour Market Review (funded by the European Training Foundation (ETF) (2009)).

The project team provided for examination more recent report of the same source - Tajikistan. Labour Market Review. RTF. IRC SocService. February (2010).

The report was produced in response to the special request from the Ministry of Labour and Social Protection of Population of Tajikistan who requested the European Training Foundation (ETF) a joint study of Tajik labour market and migration trends. The Ministry needed evidence-based information to adapt employment policies and labour market measures into socio-economic needs of country and design adult training programs for the needs of general population and emigrants in particular. The report is based on a research project for a labour market review and migration survey that was implemented by ETF in 2008 - 2009 in close cooperation with the Tajik Ministry of Labour and Social Protection of Population. A detailed literature survey was carried out and a thematic outline was developed to collect information and analyze selected labour market and related human capital issues resulting in this country report.

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A Tajik company, SocService Information and Research Centre, was contracted to work together with the ETF on the project. A draft report was prepared by Jamshed Kuddusov, SocService director and labour market and migration expert, and it was commented on by ETF experts and peer reviewed by external experts and the ETF Editorial Board.

The report on the labour market is the first product of this project which combined a desk-based labour market review with a field survey of migration and skills in Tajikistan. It provides critical and detailed analysis of Tajikistan’s labour market, education system, and economic situation by sectors, privatization, tax system, business environment, and migration, as well as comprehensive statistical data on discussed issues.

According with the press release1 and conference announcement2 available in the internet, the report of the European Training Foundation’s (ETF) is deemed as a key step toward developing a coordinated national employment strategy on the Central Asian country’s labour market. First findings of the project were presented in Dushanbe 2 June 2009, together with the ILO project Community Development through Employment Creation and Improved Migration Management in Tajikistan. “The ILO project Community development through employment creation and improved migrant management in Tajikistan funded by the UN Trust Fund for Human Security aims to empower Tajik migrant workers through vocational and pre-migration training, as well as to increase the capacity of the Government and social partners to protect Tajik workers from human rights abuses. Within the framework of the project, ILO has been working on finalizing a report on the latest labour situation of Tajik migrant workers in the global financial crisis, which is based on the research initiated by Ministry of Labour and Social Protection of Population”.3

Also the document titled as Tajikistan Migration Survey. DCI 08-18. Labour Market Review and Migration Survey. Draft working document. ETF/EU, IRC SocService (August 2009) was received from the project team and analysed.

Apparently, the report is the second product from the labour market research and migration survey funded by ETF. The report indicates typical stages of migration:

- early 1990-s – repatriation of ethnic groups and forced migration caused by the civil conflict mostly from larger and industrialized cities;

- since 1994 - external non-return labour migration with the change of permanent residence mostly from larger and industrialized cities due to political instability, civil war and economic crisis;

- the non-return migration decreased in 1997 – 2006;

- in 2006 and particularly in 2007 non-return migration increased due the fact that the main destination country for Tajik migrants, Russia, announced inception of

1 http://www.etf.europa.eu/web.nsf/0/F0C00837894ACDE2C12575CC004BB89A?OpenDocument&LAN=EN 2 http://www.ilo.org/wcmsp5/groups/public/---ed_norm/---declaration/documents/event/wcms_106541.pdf 3 Cited from http://www.ilo.org/sapfl/Events/ILOevents/lang--en/docName--WCMS_106541/index.htm on 26.04.2010.

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its Public Program to assist voluntary relocation to Russia of fellow countrymen living abroad (several thousand families);

- after 2007 – prevailing labour migration.

The research is based on a survey (1000 potential migrants and 1000 returned migrants) that seeks answers to questions: what are key drivers of migration; interaction between poverty and migration; effects on the domestic labour market; education and skills features of migrant groups? Who are the most mobile workers and what are the routes of population movements? Are there other non-economic push factors (i.e. conflicts)? The role that remittances play for households and for the national economy to cope with poverty as well as productive use of remittances (what investments, business start-ups, education) were also reviewed.

The survey gives summary of findings about the scale of migration, and valuable fact based conclusions regarding positive and negative aspects of migration. It is evident from the report, that labour migration in Tajikistan is not always unique (except its scale, monolithic direction to Russia and state support). While apparently beneficial in the short run, it leads to traditional negative consequences of emigration - destroyed families and changing social structure of population, tension in local labour market, lack of workforce for economic development, high social costs and difficulties in the social systems, in the long run. The report shows that positive expectations regarding investment and application of skills obtained in emigration are not always fulfilled.

The report analyses implementation of the state migration policy that started in 2000, and indicates reasons (financial and management capacity) that have caused low performance of envisaged measures.

Besides, the survey explicitly indicates the problems that migrants encounter after return and reasons, why they do not stay in Tajikistan after being emigrants for shorter or longer period. The same problems have occurred in many other countries of the world. The process that has started in Tajikistan may lead to undesirable results – lack of workforce or underdevelopment of a country.

Despite indicated difficulties, the report encourages to promote further labour emigration. “In the current socio-economic situation in the country and impossibility of creating sufficient number of jobs in nearest future, Tajikistan has to review its employment strategy, not in part of organization and regulation of labour migration but in part of export of labour force. That is, the state from the role of a by-stander regulator should move to the category of the active participant, investing finance in the sphere of labour emigration. The examples of such active policies can be Philippines, Pakistan, and Turkey.” At the same time the report concludes that “The number of migrants, wishing to leave the country for ever, keeps growing” (Tajikistan Migration …, 2009: 36).

It follows from the reports that international organisations support the position of the Tajik government - shortages on the local labour market caused by poor economic development may be solved at least partly by outward migration, if social rights of migrants are protected and the state takes care that their skills and working capacity are prepared for labour market in the migration destination country.

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Republic of Tajikistan. National Human Development Report 2008 – 2009. Employment in the context of human development (Республика Талжикистан. Национальный отчет по человеческому развитию 2008 – 2009. Занятость в контексте человеческого розвития.) UNDP, Dushanbe (2009).

The report provides analysis of Tajikistan’s labour resources and employment in many aspects: growth rates, vacancies and new jobs, internal migration, external migration, informal employment, employment and ecology, education and quality of workforce, human potential index. It also provides analysis of Tajikistan’s economic system and impact of the world financial crisis. The report includes estimations of labour force and employment to 2015.

The report informs that Tajikistan occupies 124th place according to the World Human Development Index (HDI) which belongs to the group of average size of HDI, but the situation is going worse. Currently better position is ensured by high education level and life expectancy figures. Population income level is very low in Tajikistan. The report gives comparison that in South Africa average income per capita is 9 thsd. USD while in Tajikistan – slightly more than 1 thsd. USD, calculated in purchasing power standards.

In this report, first in the history of National reports, the national HDI was de-aggregated by regions, in order to find out regional features of all HDI components – education, population income and life expectancy.

The report was the most comprehensive labour market and migration investigation available in Tajikistan up to 2009.

Estimation of parameters of poverty. The Wold Bank Report (2007) and the World Bank Report (2009).

The World Bank has published poverty assessments for Tajikistan in 2000 and 2004. Latest World Bank poverty estimations were found in the report Rethinking Poverty. Report on the World Social Situation 2010. United Nations. Department of Economic and Social Affairs (2009).

The report uses the World Bank methodology for division of countries according with their development level, as well as estimation of poverty. Tajikistan is included in the group indicated as Eastern Europe and Central Asia, which includes the following countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, Poland, Romania, Serbia, Slovakia, the former Yugoslav Republic of Macedonia and the successor countries of the former Union of Soviet Socialist Republics, comprising the Baltic republics and the member countries of the Commonwealth of Independent States. These countries are also referred to as transition economies in this report. Tajikistan also belongs to the group of Landlocked developing countries, including: Afghanistan, Armenia, Azerbaijan, Bhutan, Bolivia, Botswana, Burkina Faso, Burundi, Central African Republic, Chad, Ethiopia, Kazakhstan, Kyrgyzstan, Lao People’s Democratic Republic, Lesotho, Malawi, Mali, Mongolia, Nepal, Niger, Paraguay, Republic of Moldova, Rwanda, Swaziland, Tajikistan, the former Yugoslav Republic of Macedonia, Turkmenistan, Uganda, Uzbekistan, Zambia and Zimbabwe.

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According to the UN and the World Bank, poverty is not simply a lack of adequate income. It is a multidimensional phenomenon that extends beyond the economic arena to encompass factors such as the inability to participate in social and political life. In short, poverty is the deprivation of one’s ability to live as a free and dignified human being with the full potential to achieve one’s desired goals in life.

The report shows improvement in the global situation. According to the World Bank’s much cited dollar-a-day international poverty line (revised in 2008 to USD 1.25 a day in 2005 prices), there are still 1.4 billion people living in poverty. This represents a decline from the 1.9 billion in 1981, yet his figure is higher than the 2004 estimate of 984 million made with the old measure of 1 USD-a-day. Besides, the World Bank assessments refer to the period before crisis.

The dramatic drop in poverty levels has been attributed to improved rates of economic performance and higher wages, as well as the provision of social protection systems.

The World Bank estimations show, that poverty level in Tajikistan has increased.

Report on assessment of the labour market needs in some professions and specialisations in Isfara, Sarband, Yava and Tadjikbad districts and in Dushanbe (Отчет по исследованию потребности рынка труда на отдельных специалистов в Исфаринском, Сарбадском, Яванском, Таджикабадском районах и в городе Душанбе) – German Development Cooperation (DTZ) and GOPA (2009).

The report was not available for examination during the research.

Labour market assessment and vocational education and training (VET) in Tajikistan– International Labour Organisation (ILO) and International Organisation of Migration (IOM) (2009).

The study was composed of outcomes of two researches: one was conducted to collect information on employment trends and opportunities in the pilot region, and another was conducted to produce a comprehensive overview of current status of VET in order to develop an improved VET system which is capable of providing migrants with relevant technical skills. These researches and report itself is the result of a collaborative effort between the International Labour Organisation and the International Organisation of Migration. It was funded by the UN Trust Fund for Human Security and the EU.

The report focuses on the statement that creation on more jobs depends on the ability of the labour force to undertake the work, in other words, on the quality of the human resources available. The Tajikistan’s VET system needs to be responsive to the needs of the labour market, and to be sufficiently flexible to meet those needs in a rapidly changing economy. The report refers to the current situation in Tajikistan with an excess of labour, acute unemployment and massive labour migration where the majority of labour migrants are untrained, they are forced to take unskilled, poor paid and sometimes dangerous work abroad.

While referring to two researches, larger part of the report is devoted to labour market analysis in selected locations. The research findings are similar with other reports: majority of vacancies and newly created posts are in agriculture and pubic sector (health care and education) were also are the lowest wages, and excess labour resources and

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unemployment co-exists with a lack of appropriate labour in some sectors. The report provides some recommendations for the reform of VET system.

Report on employment in informal sector of economy – Scientific Research Institute of Labour and Social Protection of Population of the MLSPP (Научный отчет Занятость в неформальном секторе экономики в Таджикистане. МТСЗ РТ, НИИ Труда и социальной защиты населения) (2005).

In this report informal employment is subdivided into urban, and rural; by demographic groups (women, men, young people); by primary informal employment (primary employment); by secondary employment (second and third additional legally unregistered employment).

Identification of people employed in the informal sector is done on the basis of combined answers to several questions the main of which concerns the location of employment: (1) at an enterprise, agency, and organization (if the employee is not registered and has no ID); (2) in a dekhkan farm (if the employee is not registered and has no ID); (3) entrepreneurship activity without the status of a legal person; (4) on an individual basis; (5) hired by individual citizens.

The report states, that GDP of RT has high share of shadow economy in it – around 25%, however it does not specify if the shadow economy and the informal economy is used in the same notion. The report identifies several reasons for the informal work: (1) low pay in the formal sector; (2) low income in the informal sector as well as an impressive list of various taxes that stay in the way of legalizing the incomes of both the employer and the employee; (3) lack of investment in the development of economy and agriculture that results in shortage of jobs and pushes many unemployed into the informal employment sector, (4) differing economic development levels that are caused by differences in the living standard and the level of consumption of the population by country regions.

Author of this report is sure that growing scale of informal employment is the result of the 1990-s developments. Poverty alleviation as well as the elimination of its roots and causes (high level of unemployment, decreased living standard, informal employment, social vulnerability, etc.) can be achieved only through a gradual practical implementation of economic growth and social programs. That is why it is important to elaborate a set of measures aimed at stimulating the economic development of industrial enterprises, small and medium business, dekhkan farms, and creation of jobs.

Influence of the global financial crisis on labour migrants from Tajikistan: opinion of migrants (Влияние мирового финансового кризиса на трудовых мигрантов из Таджикистана: мнение мигрантов) – International Organization of Migration (IOM) and Information and Research Centre „SocService” (2009).

The report was not available during this stage of work.

The system of professional and technical education and training in Tajikistan: the current status and development perspectives (Система профессионально-технического образования н обучения Таджикистана: состояние и перспектива развития) – International Labour Organization (ILO) and International

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Organization of Migration (IOM), Фонд Поддержки профессионально образования и обучения Таджикистана (2008).

The report was not available during this stage of work.

Tajikistan. Living Standards Measurement survey 2007. Basic Document. (Обследование уровня жизни в Таджикистане, 2007. Базовый документ.) DFID (Department for International Development), the World Bank, FAO, UNICEF (Project, July 2007) Before this survey (code TLSM07) there have been two living standards measurement surveys done in Tajikistan - in 1999 and 2003, and Multiple Indicator Cluster Study (MICS05) was conducted by UNICEF in 2005. The current survey embraced 4,860 households in the first step and 4,490 households in the second step. Compared with previous surveys, this survey included questions regarding migration. Data were collected on three types of migration: internal migration that includes last two moves within the country, international migration for those household members currently residing in the household and international migration for those who would be members of the household if residing in the household. Labour market module was made more detailed in order to better investigate informal employment.

The final result of the survey is construction of comparable indicator – consumption aggregate in order to assess the economic well-being of the population. As an index of welfare, consumption is generally preferred to income since the former provides a more adequate picture of actual well-being, especially in low or middle-income households. The consumption aggregate as created from the TLSS07 combines actual consumption of food with expenditures on non-food. The 2007 TLSS collected the necessary information to calculate all the main components of the consumption aggregate: food consumption (both purchased and non-purchased), non food expenses (clothing, household articles etc.), utilities (water, gas, telephone, electricity, etc), education, health, durables, agricultural production, and housing.

Unfortunately, results of the survey were not available during this stage of work.

Components of the Income Aggregate: “Living Standards Survey, Tajikistan 2003”. Prepared for the Rural Income Generating Activities (RIGA) Project of the Agricultural Development Economics Division, Food and Agriculture Organization (December, 2008).4

This document was found in the internet. It provides the survey-specific details associated with the income aggregate construction. The investigation was carried out within the RIGA project. The RIGA Project is collaboration between FAO, the World Bank and American University in Washington, D.C, on the basis of the World Bank data. The investigation explores original data from the World Bank’s Living Standards Measurement Study (http://www.worldbank.org/lsms). For additional detail regarding the overall RIGA income aggregate construction approach, one is invited to refer to Carletto,

4 http://www.fao.org/es/ESA/riga/pdf/Tajikistan2003_Components_of_the_Income_Aggregate.pdf, viewed on 21.05.2010.

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et al (2007) Rural Income Generating Activities Study: Methodological note on the construction of income aggregates that can be found on the RIGA website.

Aide Memoire on monitoring of Public Sector Reform Project (PSRP, H245) and Public Financial Management Modernization (PFMMP, H463, PPA#Q6550), Identification of Programmic Development Policy Operation (PDP04). The World Bank (9-16 November 2009).

The Aide Memoire is focussed on results of general reforms in the state management system, including civil servants pay system. However, it also indicates urgent need to improve management of the administration system of agriculture, in order to improve productivity and efficiency of agriculture. The PSIR team has proposed to prepare paper that identifies inefficiencies in agriculture administration on the state and local levels (institutional, financial and other aspects).

Labour market analysis. Author: G. G. Salomonova.

The author provides basic statistical data, characterising development of labour market in period from 1991 to 2008 (population growth, population structure regarding employment (labour force, economically active population, employed, unemployed, gender aspect), changes of employment structure in sector and ownership aspects, the role of emigration). In conclusion the author stresses the role of state in improving labour market trends, and indicates that reforms of industrial relations may promote economic development. Unfortunately, the author does not explain specific problems of Tajik labour market, for instance – the reason for low share of economically active population.

Оценка нужд и потребностей женщин трудящичся – мигрантов. Центральная Азия и Россия. UN Development Fund for Women, UNIFEM, IOM (2009).

This publication represents summarisation of five national reports which identify regional (central Asia and Russia) as well as country specific trends in the state of working women – migrants. It contains recommendations for international organisations and national governments that were produced during the international conference organized by the UN Development Fund for Women and Eurasian Economic Community (ЕврАзЭC) in May 2009.

Women become active participants of migration processes in Asian countries. While previously men have dominated in migration, nowadays also women leave their countries seeking for better job, or, in many cases, for any job. In Asian countries women behaviour is often restricted within the patriarchal traditions in these countries, abstaining women from active participation in work not only abroad, but also in their own countries. Nowadays women migrate even from locations in Central and Eastern Asia where patriarchal and religious restrictions are especially drastic regarding women’s rights to take independent decisions and to travel without assistance of a man. In many cases women – migrant become the main source of income for a whole family.

In order to investigate status of women- migrant, a research was conducted in two groups of countries – migration origin countries (Kyrgyzstan, Tajikistan and Uzbekistan) and destination countries (Kazakhstan and Russia). The report describes status of women in both groups of countries (causes of migration, motivation, status at home, when returning

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after migration, in the destination country) and recommendations. The NGO Panorama was a local partner in this project.

Recommendations for introduction of a new salary system in the civil service and options for special scheme to attract and retain highly-qualified staff. Public Sector Reform Project (P096861). World Bank (2009).

The report discusses the proposal of the Working Group on pay reform to introduce a new salary system based on grid of vertical categories (grades) and horizontal steps from 2010 on a pilot basis in selected civil service organizations. The World Bank (PSRP Task Team) has previously suggested such an approach as an option for the implementation of salary reform in previous Aides Memoire to the Government of Tajikistan.

Current salary levels in the civil service of Tajikistan are not sufficiently high to attract and retain highly qualified candidates, especially for entry level and other technical, non-managerial positions. This is evidenced by the very low ratio of applicants per vacant post in most civil service organizations (1:1.4 on average in 2008) and the high percentage of unfilled positions (19.2 percent in 2008) according to CSD data. The low participation in recruitment processes means that the pool of candidates for most civil service positions is extremely limited, which undermines the purpose of competitive recruitment and is likely to result in lower quality of civil service recruits. The negative impact of these problems is likely to be especially detrimental to civil service organizations that exercise major policy and regulatory functions or implement policy reforms, which require high levels of professional expertise. Possible solutions are suggested in the paper.

1.2. Socio-economic and labour market policy and legislation affecting labour market developments According to the Constitution Republic of Tajikistan is a social state where:

- minimum pension should equal the minimum subsistence level, - free social services are a universal right, - the right to a job is a universal right.

These principles are strictly observed in the socio-economic and labour market policy of RT.

Labour market policy is directed on:

- creation of jobs in Tajikistan, - internal migration from less favourable locations to villages with better job

provision, - outward labour migration or export of workforce (a term widely used in official

rhetoric (Концепция.., 2001, Программа.., 2009 and other)).

External labour migration is deemed useful for providing with jobs unemployed population of Tajikistan, increasing welfare of those working abroad and their families in Tajikistan, increasing productive investment and economic activity in Tajikistan,

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improving qualitative features of its economy and qualification of workforce by using skills obtained outside Tajikistan, and elimination of illegal labour migration.

Emigration for seasonal or short term work abroad is an important constituent of the Tajikistan’s employment policy since 2000. It is developed in three major directions:

- seeking for jobs abroad (in Russia and neighbouring countries), - protecting migrants’ social rights abroad, - training population in Tajikistan for working abroad.

Legislation regarding economic development and social security Two strategic documents (adopted in 2007) are related to the development issues: the National Development Strategy of the Republic of Tajikistan up to 2015 (NDS) and Poverty Reduction Strategy paper for 2007 - 2009 (PRSP).

The NDS determines the national long-term development priorities, among them governance reform, private sector development, investment attraction and human potential development.

The PRSP is the medium term implementation plan.

Both documents define 12 sectors of economic reform grouped into three main blocks promoting strong and sustainable economic growth and fighting poverty. The Functional Block – overall institutional environment; includes the following sectors: public administration reform; macroeconomic development; improvement of the investment climate; development of the private sector and entrepreneurship; regional cooperation and integration in the global economy. The Production Block – physical infrastructure; includes: food security and development of the agricultural sector, and the development of infrastructure, energy and industry; The Social Block – broader access to social services; includes: development of the health care system; development of the education system and science; expansion of access to water supply, sanitation and housing and municipal services; improvement of social welfare; promotion of gender equality, and environmental sustainability. The National Development Strategy of the Republic of Tajikistan up to 2015 (NDS) defines three macroeconomic development scenarios (Национальный отчет.., 2009). The first scenario – “low potential scenario” envisages annual GDP growth decreasing from 9.4% in 2001 - 2005 and 7% in 2006 to 5% for the planning period. Real GDP growth will be 66% in 2006 - 2015. Moderate productivity will provide GDP per capita in amount approximately 1735 somoni in 2015 (at constant prices of 2006) compared with 1311.3 somoni in 2006.

The second (most feasible, basic) scenario envisages faster GDP growth - on average by 7-7.5% annually during the whole planning period with real GDP growth by 97.8% in 2006 - 2015. GDP per capita is planned in amount approximately 2066 somoni in 2015 (at constant prices of 2006) compared with 1311.3 in 2006.

17

The second scenario envisages GDP growing by 9% and more annually. Real GDP might increase 2.3 times during the period 2006 - 2015. GDP per capita in 2015 (at constant prices of 2006) is expected to be approximately 2427 somoni.

Better quality of economics is desirable in all scenarios, and this may be achieved on the basis of investment and export activities. The PRSP serve as a medium-range program for implementation of the National Development Strategy of the Republic of Tajikistan up to 2015 and will determine the major socio-economic development of the country during this period, taking into account the impact of the global economic and financial crisis, available resources and additional needs. The Strategy outline concrete actions on implementation of institutional and economic reforms that will promote strong and sustainable economic growth; and on improvement in the scope and quality of social services aimed at mitigating the burden of poverty in the country. The Poverty Reduction Strategy paper for the next planning period 2010 - 2011 (PRSP) was in the process of elaboration during this stage of the work. There are also two sector documents which elaborate sector-specific policies: Concept of Social Protection for the Population of the Republic of Tajikistan (approved by the Government Decree No. 783 of 29 December 2006) and the Strategy for a Modern Social Services System in Tajikistan (approved by MLSSP).

Key government policies in the area of social protection are summarised in the ToR for the SPSP project as follows:

- institutional reforms in the sector; - pension system and social insurance; - labour market and migration; - targeted social assistance; - social services to vulnerable groups of the population.

Six main laws defining social protection system in Tajikistan, numerous normative acts and strategic programmes all together define national policy in the social protection area. The normative framework of the social protection system (laws and normative acts) can be divided into four main elements: pensions, social benefits, social services and labour market policy.

Labour market legislation Of the system of laws defining social protection system in Tajikistan labour market policy is concerned with the Law of RT On promoting employment among the population (2003).

Large number of other normative acts is created for regulation of labour market and migration. Since 2000, the government efforts are particularly focussed on implementation of regulated outward labour migration. On 9 June 2001 the government of RT adopted Conception on labour migration of citizens of the Republic of Tajikistan abroad (government’s Regulation Nr 242). The aim of the Conception is to organize and to introduce the state regulation in the field of

18

outward labour migration of population of Tajikistan and to provide social and legal protection to population of Tajikistan who have emigrated for work abroad. The necessity of outward labour migration is motivated by the constitutional right of population of Tajikistan to be employed and inadequate supply of jobs within the country.

The Conception is based on the assumption that important natural growth of population and lack of financial resources to provide adequate growth of jobs has caused situation that there are no legal sources for increase of income, reasonable conditions for economic development and sufficient job opportunities in Tajikistan. For this reason about 30% of unemployed (of which 60% are young people) are expected to use challenge to obtain skills and legal protection for working abroad. Labour migration is expected to lower social tension caused by unemployment.

On other hand, export of labour (the term used through all relevant legislation) is seen as a means of improving economic development of RT. Legal status of the process would help elimination of illegal activities of recruitment organisations and intermediates and to get taxes from their economic activities. Migrants’ remittances were expected to contribute to welfare of their families left in RT. The process would encourage economic activity around it in state institutions, labour offices, recruitment companies, education etc. Work and studies abroad would help to improve qualification of Tajik people and quality of workforce in RT in general in case if they return. Since earnings are higher abroad, Tajik people would have more savings and bring home, thus improving investment resources of the RT.

Social protection is earmarked in the way that there will be transfer of capitals from the destination countries of Tajik labour migrants which will be used for reproduction of labour force and in the social sphere.

Some measures were planned in countries receiving migrants from RT. It was expected that in the beginning of the organised labour migration process mainly low skilled workers will be exported, therefore social protection included:

- multilateral and bilateral agreements, establishing coordinated migration systems with destination countries;

- measures stimulating migrants to improve their education and qualification level; - improving of the living standards, culture and communication of migrants; - programs supporting employment of migrants who return home.

It was also expected that the emigration policy will help to provide that better qualified workforce is exported in order to get more benefits from the export of manpower. At the same time sufficient manpower potential within the country should also be ensured.

Russia was deemed as a main location of exported manpower from RT, but location within Russia must be diversified (by regions). Other destination countries are Ukraine, Byelorussia, Kazakhstan, Kyrgyzstan, Germany, Austria, Kuwait, Egypt, the United Arab Emirates, Philippines, Malaysia, Canada and other.

Main instruments of the state regulation are:

- adoption and implementation of legal normative acts and monitoring;

- state program on labour migration (middle term and long- term);

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- monitoring and control of migration and operation of recruiting companies (the State Migration Service with MLSPP);

- tax deductions for international recruitment companies and intermediates and other stimulus facilitating creation of private international recruitment business and NGOs in this field;

- fond for support families of migrants on the basis of international recruitment companies and intermediates;

- assistance in education, training and re-training and improving of qualification of potential migrants (including goal oriented training for particular company in the destination country) on the basis of public resources of the RT;

- support in information and consultation;

- legal protection through diplomatic services;

- introducing of standardised system of planning and recording of labour migrants;

- introducing of system for motivation of Tajik population to work abroad;

- rules of recognition of recruitment companies (repeated license may be awarded if company has recruited abroad not less than 30 people per year);

- establishing of banks in places of intensive location of migrants in order to facilitate remittances;

- less customs duties for migrants transfers of valuables and durable goods; - stimulating investment activity of migrants in RT (higher interest rates and lower

service fees for migrants).

Reviewed reports show that these goals were not achieved. On 4 February 2002 the government adopted Instruction on internal migration in Tajik Republic (government’s Regulation Nr 30).

Under this regulation, the government adopted Regulation Nr 193 On voluntary displacing of population from landless mountains to valleys for 2003 – 2007 (on 10 May 2003). The purpose of the regulation was to eliminate unemployment and to provide better use of fertile land in valleys. 4110 families were expected to move from mountains to valleys. Moving families could receive 5-year preference loan in amount of 1500 somoni each, where 50% of the loan is covered from the state budget. The process was presented as voluntary, though it was planned for the entire time horizon. On 8 December 2003 the President of the Republic of Tajikistan signed a law Nr 494 On state forecasts, conceptions, strategies and programs for socio-economic development of the Republic of Tajikistan. The law (version of 26 March 2009) regulates purpose and content of before mentioned documents. The law establishes a system of planning documents which is based on the socio-economic forecasts. It sets three time horizons for national forecasts: long term (15 years, revisions every five years), middle term (5 years or 3 years, brake down by year, revisions every year), and short-term forecasts (one year extracted from the 3-year middle term forecast). Short term forecast forms basis for the State budget.

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On 4 March 2005 the Tajik government adopted Regulation Nr 99 that determines financial and organisational support to displacing of population from locations that are exposed to unfavourable exogenous processes (landslips, avalanches, floods). The program is in operation from 2005 to 2010. More than 7200 households should be moved from dangerous living places to more secure location, and these people will contribute to regional resources of labour force in more favourable locations.

On 2 May 2008 the government adopted Plan for voluntary migration of workable people from high populated and landless regions in mountains to valleys for the period of 2008 – 2009 (Regulation Nr 200). Again, the process is presented as voluntary internal migration of people to places with better living conditions although it is strictly planed for the entire time horizon (non-planed migration should be avoided). Migration is connected with building of new communications and villages for internal migrants. Migrants may receive preferential loans from Amontbank. The plan envisages migration of 1640 families within 2008 - 2009.

Several surveys carried out in 2009 and 2010 draw attention on the increasing internal migration where people migrate in order to find better job or from cities to countryside. There were also some comments of the ecological aspects of overpopulation in some locations and migration caused by this circumstance. However assessment of the impact of organised internal migration was not found in reviewed documents.

On 16 October 2004 the Republic of Tajikistan and Russian Federation signed mutual cooperation agreement on the topic of labour migration from one country to other.

The MLSPP together with other ministries was mandated to elaborate the State Program on labour migration of population of the RT abroad for work. On 31 January 2006 the government approved Program for external labour migration of citizens of Tajikistan Republic for 2006 – 2010 (Regulation Nr 61).

The program is elaborated in compliance with the law of the Republic of Tajikistan On migration.

The program repeats main postulates of the Regulation Nr 242 of the Tajik government adopted on 9 June 2001. Some statements are developed more explicitly. For instance, the purpose of the program is “to develop state guarantee for creation and implementation of valuable treatment of currency received in the Tajikistan”. More attention is paid to development of the institutional capacity of migration process, including local government institutions, and professional training of personnel employed in state and local governments’ migration institutions.

Almost all state and local governments’ institutions should be involved in organisation of the migration process, according to the Programme 2006 - 2010. The Program also sets list of indicators that should be included in the monitoring system. It provides detailed action plan including list of measures for implementation of the monitoring and migration management system (Automatic management system, ASU), and awareness building measures promoting migration. In compliance with the action plan, majority of work should be done in 2006.

The program distinguishes export of labour from the human traffic and envisages measures for control of migration processes from this aspect.

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On 2 May 2007, the government approved amendments to the Law On assistance in employment to population (Regulation Nr 224).

On 30 December 2007 the government approved Program for assistance in employment to population of the Republic of Tajikistan for 2008 – 2009 (Regulation Nr 632). The main goal of the program is to increase living standard of poor Tajik population, of which majority are unemployed. The program should contribute to better employment and the state regulation of labour market and employment. It is based on several national planning documents:

- Article 13 of the Law On assistance in employment to population,

- National plan for implementation of Conception on the state policy for assistance in employment to the population of the Republic of Tajikistan for 2006 – 2012,

- Strategy for elimination of poverty in the Republic of Tajikistan for 2007 – 2009,

- National development strategy of the Republic of Tajikistan up to 2015.

In compliance with the program, the main direction of activities for providing jobs to unemployed people is creation of more jobs on the basis of local budgets, enterprises (private and state owned), sponsors, internal and external investors, NGOs.

Through activity of the State Agency for Social Protection, Employment and Migration, employment promoting measures should be harmonised with the demand of the labour market. These measures include: professional training and retraining of unemployed, including adults, establishing of paid public work, promotion of entrepreneurship, financial assistance to people who wish to start entrepreneurship.

The Program sets explicit targets for increasing employment.

On 2 April 2009 the government approved Order of establishing quotas for hiring particular groups of population (Regulation Nr 181). In compliance with this order, quota is a section of jobs in enterprises regardless their ownership that should be provided for particular groups of population who need social assistance because these people are not able to compete on labour market on equal grounds. The quota equals 5% of the total listed number of employees and may be applied to companies, where total number of employees is not less than 20. On 2 April 2009 the government approved Order in which employers should inform state institutions about vacancies (regulation Nr 205). On the basis of collected information the state employment institutions will establish and maintain data-basis of vacancies. On other hand, employers will be enabled to hire workers without help of state employment services. The state employment institution should be provided with information about vacancy within 10 days, and about closing of vacancy within 3 days. On 29 April 2009, the government approved Program of implementation of the Conception of the state personnel policy of the Republic of Tajikistan for 2009 – 2016 (Regulation Nr 252).

On 30 December 2009 the government approved Program for assistance in employment to population of the Republic of Tajikistan for 2010 – 2011 Regulation Nr 692) Like its precursors, the program sets detailed targets in increasing employment. Description of the

22

existing situation shows employment trends that are similar to that at the outset of the process in 2000, what leads to the conclusion, that implementation of previous programs was not successful.

Institutions responsible for labour policy development and implementation Currently RT is engaged in the large-scale Public Sector Reform Project (PSRP) and Public Financial Management Modernisation project (PFMMP) under support and monitoring of the World Bank. Some changes have already been made and other is foreseen. The government is discussing option for restructuring of the Executive Office of the President. The law on the system of Public Administration is being drafted and a new civil service pay system is being prepared for implementation in 2010. The overall focus is on the improvement of public administration and reforms.

The MLSPP is responsible organisation for social protection. After recent restructuring the ministry’s activity and institutions is divided into two groups:

1) six departments responsible for policy development, namely:

- Department of Labour Relations (including pension issues); - Department of Social Protection; - Department of Analysis and Forecasting of Social and Labour Issues.

2) three policy implementing institution:

- State Agency on Social Protection, Employment and Migration; - State Control service in the sphere of Labour, Employment and Social Protection; - State Agency for Social Insurance and Pensions (former Fund for social

protection of the population).

Vocational training is transferred from responsibility of the MLSPP to responsibility of the Ministry of Education. Local authorities are city and rayon khakumats. There are 5 large local units – Dushanbe and four regions: GBAO, Sughd, Khatlon regions and Republic subordination districts. The ministry’s agencies have local units – employment services offices in the regions of the country.

Also NGOs are involved in promotion of employment. For instance, the Chamber of the Trade and Industry of the Republic of Tajikistan has organised Economic forum in cooperation with the Chamber of the Trade and Industry of the Russian Federation. One of round tables, namely Legal issues of labour migration, discussed how to provide Tajik labour migrants with job vacancies in Russia. After this forum the Chamber received large number of applications about vacancies in several regions in Russia.

In 2005, Chairman of the Chamber of the Trade and Industry of the Republic of Tajikistan Shariph Said approached through the special address leaders of similar Chambers in Russia and North Kazakhstan where he invited to assist Tajik labour migrants in providing jobs for them and solving their social problems.

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Also Tajikistan’s Trade Houses in Russia are used for providing jobs for Tajik labour migrants (for instance Trade House of Tajikistan in Penza (RF) was opened in 2006 following invitation of RF). The state unitary enterprise Tadjikvneshtrud deals with labour migration issues.

On 29 February 2009 the government approved Statement on Coordination Committee for assistance in employment to population (Regulation Nr 129). The Committee is established in compliance with Article 11 of the Law On assistance in employment to population. The Committee is established in order to elaborate harmonised decisions, proposals and recommendations, to improve social dialogue in elaboration and implementation of employment policy in the Republic of Tajikistan in the framework of social partnership. The Regulation also envisages establishing of local coordination committees. National and local level organisations are built on the principles of tripartite social dialogue institution.

1.3. Current economic (macroeconomic) situation of the Republic of Tajikistan

Geographic and historical background Republic of Tajikistan is a landlocked Asian country, where mountains cover 93% of the territory (Статистический.., 2009:7). Some populated locations in mountains only in summer are accessible without difficulties (Tajikistan. Living…, 2007).

Tajikistan was the poorest Soviet Republic in the Soviet Union. The first calls for increasing independence were announced by Tajik nationalists in the late 1980-ies, but real disturbances did not occur until 1990. Tajikistan declared its independence in 1991.

After independence Tajikistan lost previous secure markets and sources of energy resources. Many enterprises were closed and many of Russian qualified specialists who were employed in these enterprises left the country (Republic…, 2009).

The country suffered from the civil war that lasted from 1992 to 1997. The civil war severely damaged the economic infrastructure and caused a sharp decline in industrial and agricultural production.

There have been no security incidents in recent years. Attention by the international community since the beginning of the NATO intervention in Afghanistan has brought increased economic development and security assistance. The country is location of foreign military bases. Impact of these measures on the employment and economic development is not so evident, but they secure stability in the long run. Tajikistan is in the early stages of seeking World Trade Organization membership and has joined NATO's Partnership for Peace (The World Factbook…., 2010).

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Main features of economic development Natural resources

Main resources are land, arable land, mineral resources and hydropower.

Land resources have become scarce due to fast growing population and increasing population density. In accordance with experts estimations the land resources were 0,21 ha per capita in 1965, while currently the figure is 0,08 ha and may be 0,05 hа in 2030 (Tajikistan. Labour..., 2010). Experts use these figures for motivation of external migration. Deficiency of land resources may impact not only food security of the country, but also provision with living space and agriculture resources and create overpopulation.

Tajikistan is rich in natural resources. Mineral wealth includes quicksilver, gold, uranium, mercury, tungsten, aluminum, brown coal, coal, oil, natural gas, some petroleum, iron, lead, zinc, antimony, tin, boron, salt, carbonates, fluorites, precious and semi-precious stones. Natural resources also include hydropower.

Population

Number of population has steady grown by 2.1% annually during the period 1998 – 2008 and by 25.5% during the entire period 1998 – 2008 (Figure 1, 2). There were 7373.8 people living in Tajikistan in end of 2008 (Демографический.., 2009: 21).

0

1000

2000

3000

4000

5000

6000

7000

8000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Tajikistan GBAO Sughd region Khatlon region Dushanbe Republic subordination districts Figure 1. Territorial division of population, thsd. people

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Source: the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj)

According to the statistics 11.7% children were not registered in the state population registers within the time period 0-59 months after they were born. The share was higher – 25.4% of children in 2000. High costs of registration are named as main reason of this phenomenon (Демографический.., 2009: 82).

Territorial allocation of population is uneven (Figure 1). Due to differing geographic (landscape) conditions larger territories are not always ones with the largest number of population. Also the share of capital city in the total number of population is not high (Figure 7). In the reviewed reports experts mention existing of an important voluntary internal migration, when people move from cities to rural areas. This can be seen in regional trends, where share of some regions decline while others increase (Figure 1). Figure 3 depicts population growth rates in regions. The lowest population growth per 1000 population is fixed in GBAO region (in mountains). In other regions population growth trends converge. Population growth in Dushanbe city demonstrates fluctuating dynamics.

0

50

100

150

200

250

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Born Died NaturaL increase Figure 2. Population natural increase, thsd. people


26

0

5

10

15

20

25

30

35

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Tajikistan GBAO Sughd region Khatlon region Dushanbe Republic subordination districts Figure 3. Population growth, people per 1000 population in year


Regional changes are result of several interconnected factors – differing natural increase (Figure 3, 4), voluntary internal migration. Apparently, the government’s dislocation policy also has influenced population regional trends.

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Tajikistan GBAO Sughd region Khatlon region Dushanbe Republic subordination districts Figure 4. Born per 1000 population, people


27

0.0

1000.0

2000.0

3000.0

4000.0

5000.0

6000.0

7000.0

8000.0

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Permanent population Urban Rural Figure 5. Rural and urban population, thsd. people, at end of year


Urbanisation level is low – only 26.3% of population live in urban areas (Figure 5) (Демографический.., 2009: 21). Population density increases, but it is not critical on the first sight (Figure 6). Yet, the biggest population growth in 2008 compared to 1998 has been in Dushanbe (Table 7).

0

20

40

60

80

100

120

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080

1000

2000

3000

4000

5000

6000

7000

8000

Tajikistan GBAO Sughd region Khatlon region Republic subordination districts Dushanbe Figure 6. Population density, people/km2


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Figure 7 shows some comparable demographic indicators in beginning of 2008.

143.1

64.2

25.4 24.8

0.1

28.622.9

7.5

17.925.8 29.1

25.1

100

22.39.4

35.829.4

3.00

20

40

60

80

100

120

140

160

Tajikistan GBAO Sughd region Khatlon region Dushanbe Republicsubordination

districts

Territory (thsd. km2) Population growth, 2008 compared to 1998, % Proportion of total, % Figure 7. Regional demographic indicators in beginning of 2008


Tajik population is very young - average age of population was 25.07 in January 1, 2009 , median age 22.17 years (Статистический..., 2009: 31), but both figures increase compared with 2008 (Анализ.., : 3). Of all population, 35.6% are under working age (decreasing share), 59.3% are in working age (increasing share) and 5,1% are over working age (increasing share) (Статистический..., 2009: 26). In the EU 27 the relevant figures were 15.8 (age group 0 – 14 years old) and 16.9 (age group 65+) in 2007 (Key..., 2009: 49).

Life expectancy at birth is high – 72.2 years in rural areas and 74.3 years in Dushanbe (increasing) (Демографический.., 2009: 84).

The government has made attempts to slow down population growth, but with moderate success. Population dynamic indicators show, that the number of born per 1000 population has stabilized since 2000 at a comparatively high level and absolute population growth figures also have stabilized. However, it is also evident that in economically better time periods population growth increase (2007, 2008).

External and internal migration

According to the official statistics in the after-war period annually about 1 – 1.8 thousand people arrived in Tajikistan and about 7 - 14 thousand people moved away from Tajikistan within the international migration (Figure 8.1.). However, real migration figures are likely to be higher.

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Internal migration shows increasing trends. In 2008 23 thousand people arrived in destination place and 27.2 thousand people moved from their previous place of residence within the internal migration (Figure 8.2.) (Демографический.., 2009: 156-157).

0

20000

40000

60000

80000

100000

120000

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Total - imigration Total - emigration

Urban - imigration Urban - emigration

Rural - imigration Rural - emigration Figure 8.1. International migration in Tajikistan, people

Source: (Демографический.., 2009: 156-157)

0

10000

20000

30000

40000

50000

60000

70000

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Total - imigration Total - emigrationUrban - imigration Urban - emigrationRural - imigration Rural - emigration

Figure 8.2. Internal migration in Tajikistan, people

Source: (Демографический.., 2009: 156-157)

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External migration is seen as a long term solution for the discrepancy between growing population, low economic development and constitutional rights to have work. External migration estimations differ both regarding the basis of reference (flow or accumulated stock, permanent of seasonal etc.) and amount, as can be seen from the examples in table 1. However, all estimations show that external migration increases at a high speed.

Table 1. Migration estimations in different sources and time periods Source Year Amount, thsd. people Share Tajikistan Living Standard Survey

1997 - 1999 1999 (increased)

1,5% of households

Census 2000* January 2000 200 Scientific Centre “Sharq”

From 2000 to February 2003

632 (travelled looking for job)

Scientific Centre “Sharq”

2002 - 2003 26.4% of households have one or more

migrants LFS* July 2004 317.9 13% of employed,

8.5% of population in working age

Ministry of Labour 2004 - 2005

2006

420 (travel abroad in search of

work every year (by migration cards))

460

11% of economically active population

The World Bank 2009 797 11.8% of total population

Human Development Report, 2009 (p. 8)

Internal External

130 420 – 1500

Household survey of MLSP*

1 July 2008 430

Migration Service of the Ministry of Internal Affairs of the Republic of Tajikistan*

2008 852.1 (registered as migrants in the Russian Federation)

* as reported in the Tajikistan’s Migration Survey

Monitoring of external migration (as envisaged in Conception…, 2001) was not introduced until 2006. In 2006 a survey was conducted in order to find the scale of migration. Results were used in elaboration of the migration policy for the next period (Program…, 2007).

More comprehensive information about migration was found in the Human development Report 2008 - 2009 and Tajikistan Migration Survey (Tajikistan…, 2009).

The Tajikistan Migration Survey reports about disadvantages of the previously conducted surveys regarding migration. The household survey conducted by the Ministry of Labour

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and Social Protection was conducted through all regions by the staff of the State Agency for Social Protection, Employment of Population and Migration. Agency developed a questionnaire in order to determine the number of labor migrants, sex, age, reasons for migration, and countries for migration. Staff members of the agency in rural areas jointly with local Jamoats identified families having migrants. In rural areas the methodology of conducting the survey was not clear. It happened that local authorities interfered with the process of summarizing the findings of the survey by making the number of migrants lower. That is why the outcomes of this survey one can not consider being acceptable for rural areas. Analysis has shown that the methodology applied in that survey was far from perfect also regarding the number of emigrants from urban areas. In fact, the number of emigrants may be higher. The Survey shows that many goals set in the first Conception on labour migration of citizens of the Republic of Tajikistan abroad (Conception…, 2001) were not achieved. Table 2 displays summary on available information about destination of migration. It can be seen that migration offices and recruiting companies have played insignificant role in assisting migrants. Majority of migrants have found jobs individually.

Table 2. Estimations of migration destination, people Total Russian

Federation Kyrgyzstan Kazakhstan Ukraine Other

CIS countries

Other countries

Source

2001 3343* Program 2006:5

2002 12182* Program 2006:5

2003 347556 (2696*)

336754 4870 2382 630 2448 472 Program 2006:4

2004 420622 (2349*)

Program 2006:5

2005 412123 (1681*)

404470 2134 2089 3430 Program 2006:5

* official transfers through recruiting companies.

In general, it can be noted that the system of registration of migrants in Tajikistan des not exist. The exact number of labour emigrants is not known (Tajikistan…, 2009: 7, 8). Despite poor recording, the World Bank estimates the number of labour emigrant from Tajikistan reaches 797 thousand people which make 11.8% of population. More than 84% of labour emigrant from Tajikistan leave seeking for jobs in Russia. Majority of migrants are males (93.4%, but the share of females increases), young people (15 - 29 years old account for about 53% of migrants). 31.7% of migrants have professional training. More than 57% of emigrants have complete secondary education. In recent 2 - 3 years more people stay abroad for longer time.

The important target of labour emigration policy is creation of the system of money transfers, which has improved after removal of the 30% of state duty on money transfers in 2001. The Tajikistan Migration Survey reports that in 2001, the money transfers of

32

emigrants made slightly over USD 300 thsd., in 2003 the amount exceeded USD 256 mln., which was equal to 20% of GDP. The Survey further explains that by the information of the National Bank of Republic of Tajikistan, in 2006 the money transfers by labour migrants exceeded USD 1,127 billion, which is equal to 25% of GDP. In 2007, money remittances from private persons (of whom migrants constitute an overwhelming majority) amounted to USD 1,774 billion which is 47.6% of the country's GDP. Over 64% of migrants use the bank system of money transfers. According to the data of the World Bank, in 2008 the volume of money transfers of labour emigrants exceeded USD 2.5 billion which made more than 56% of GDP.

Deeper investigation revealed that while data about the amount of remittances is comparable in different sources, there is some variation in estimations of the proportion of remittances to the GDP. Table 3 shows available data about remittances and proportion of estimated amounts of remittances to the official statistical amount of nominal GDP. The difference may be due to the methodology – in Table 3 constant exchange rate is taken for all years, while in reality it has changed.

Table 3. The amount of emigrants’ remittances Source 2001 2003 2006 2007 2008 2009 (Jan. -

Sept) Remittances, mln. USD

0.3 256 1127.8 1774.1 2670.5 1303.8

Change, Y/Y +57.3 +50.5 -36 Nominal GDP, mln. USD*

2115.97 2916.4 4018.55 3297.85 (Jan. - Sept)

Share of GDP 20 53.3 60.8 66.4 39.5 Nominal GDP change, Y/Y, %

37.8 37.8 16.8

* Estimated: 1 USD = 4,382 TLS for all years. Source: Анализ..., HDR … 2009: 30, the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj)

Emigrants’ remittances are important income fraction for families, and they contribute to the countries economy. Table 3 shows that amounts of remittances have constantly grown since 2001, and was high in 2008, but declined in 2009 due to crisis in Russia. In 2008, the per capita amount of remittances was USD 370.6 in year (USD 30.8 in month) while population income from the Tajikistan’s economy was just USD 376 per capita according to official statistical data and USD 535 per capita according to household survey data (HDR... 2009: 30).

In January –June 2009, the amount of remittances was 696.6 million USD – by 34% less than in the same period of 2008. As Table 3 shows, the decline increased in next quarter of 2009, giving 36% decline in the period January – September 2009.

The Tajikistan Migration Survey reports that labour emigrant remittances had not become an important source of investment in the economy. “Less than 2% of emigrants started

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their business or invested in enterprises.5 Even though the National Bank of Republic of Tajikistan (in its semi-annual surveys) notes growth of savings of labour emigrants, the emigrant revenues are mainly spent on consumption and living expenses of population. Therefore, the state has yet to work out the measures for stimulating investment activity of labour emigrants.” The report indicates that returned migrants would like to start farming or their own business.

Economic structure

After the war the regained political stability and international aid promoted economic growth. GDP in constant prices was on the decrease in the war period till 1996, but it has demonstrated positive growth since 1997. GDP has grown by 6-11% annually since 2000. Exports of commodities mainly cotton and aluminium wires have helped to develop country’s economy. Great part of the GDP is formed from migrants’ remittances. The GDP growth depends on the emigrants’ remittances (Table 3).

Nominal GDP per capita has grown 14 times since 1998 and 5.2 times since 2002, but inflation has also been remarkable during this period (Figure 21). Real GDP has increased by 10 - 8% annually since 2000 (Table 4). According to international sources, GDP real growth rate was lower in 2009 – just 3.4% (est.), still it was high compared with other world countries. The GDP growth was as high as 7.9% in 2008 (est.) and 7.8% in 2007 (est.) (The World Factbook, 2010).

In 2002-2004, soon after the war, economic growth reached 10.3-11%, but dropped below 8% in 2005-2008. Decline is explained by effects of higher oil prices and impacts if the international financial crisis - lower prices for key export commodities and lower remittances from Tajiks working abroad. In 2009 GDP growth dropped to 3.4% as a result of the world recession, according to Tajikistan’s statistics.

Table 4. Changes in nominal and real GDP and population

Nominal GDP, mln.TJS

Real GDP index

1995=100

Real GDP

increase, %

Population, thsd. people

Nominal GDP per capita, TJS

Population increase, %

GDP per capita increase, %

1992 64.5 1993 707.1 1994 1 786.5 1995 69.8 100.0 -12.5 1996 308.5 83.3 -16.7 1997 518.4 84.7 1.7 1998 1 025.2 89.2 5.3 6001.3 170.8 1999 1 345.0 92.5 3.7 6126.7 219.5 102.1 128.5 2000 1 786.7 100.2 8.3 6250 285.9 102.0 130.2 2001 2 563.8 109.8 9.6 6375.5 402.1 102.0 140.7

5 Consolidated Reply: Tajikistan/Research on the economic impact of migrant labour remittances. Prepared by Craig Fagan, Sarah Renner, Hana Schmitt and Sharmila Kurukulasuriya. Cross-posted on PRNetwork, HDRNet and SEMFINet, 23 February 2005, cited from the Tajikistan Migration Survey.

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2002 3 375.3 121.7 10.8 6506.5 518.8 102.1 129.0 2003 4 761.4 135.0 11.0 6640 717.1 102.1 138.2 2004 6167.2 149.0 10.3 6780.4 909.6 102.1 126.8 2005 7206.6 158.9 6.7 6920.3 1041.4 102.1 114.5 2006 9335.2 170.1 7.0 7063.8 1321.6 102.1 126.9 2007 12804.4 183.3 7.8 7215.7 1774.5 102.2 134.3 2008 17706.9 197.8 7.9 7373.8 2401.3 102.2 135.3

Source: The State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj)

Figure 9 depicts the GDP growth by main sectors and investment growth. The agriculture growth is especially high, but this may be due to incomplete data for 2000 – 2002. It is important that in general GDP increases faster than increases capital investment. Dynamics of production sectors since 2007 controverts GDP trends what raises question about reliability or changing methodology of statistical data, or non-productive implementation of investment.

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Figure 9. GDP by sectors, mln. TJS Source: The State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj)

Figures 10 and 11 depict structural dynamics of Tajikistan’s GDP according to statistical data from the Tajikistan’s Statistical office. The share of taxes has increased from 9.9% of GDP in 2002 to 12.6% in 2008, but even then it is not large. The production of goods is on the decrease whereas the production of services is rising (Figure 10). Production of goods contributed by high 57.4% of GDP in 2002, but 44.1% in 2008, services contributed by 32.7% in 2002, but 43.3% in 2008. In 2008 agriculture provided 18.9% of GDP and industry 14.2% of GDP (Figure 11) (Статистически..., 2009: 207).

35

There are reasons for experts’ worries about the process of deindustrialisation of the country (Tajikistan, Labour…, 2010).

According to international sources estimated GDP composition by sector in 2009 could be as follows – agriculture contributes by 18.9%, industry by 21.9% and services by 59.2% (The World Factbook, 2010). Of total about 2 million employed people 49.8% could be employed in agriculture, 12.8% in industry and 37.4% services (The World Factbook, 2010).

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Source: Table 27. GDP contribution by economic branch in Tajikistan 1991-2007 in Tajikistan. Labour Market Research, 2010.

36

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Financial mediation

Public institutions

Governance

Finance/credit/insurance

Science/scientific servicing

Education/culture/art

Health/social welfare/physical culture

Housing/utilities infrastructure

Geology/exploration

Transportation/communications

Trade и catering

Other

Construction

Agriculture/forestry

Industry

Figure 11. GDP structure by sectors (striped – production)

Source: Table 27. GDP contribution by economic branch in Tajikistan 1991-2007 in Tajikistan. Labour Market Research, 2010.

Among services, the largest sectors are trade (20.2% of GDP) and transportation (10.1% of GDP in 2008) (Статистически..., 2009: 210, 211). The share of public sector (the education, health care, public institutions) is not large. Some indicators, such as mortality of newborn, as well as facts that wages in public service sector are among the lowest, lead to conclusion, that public sector is under-financed. Industry

57.2% of industry is state owned sector and 42.8% is non- state owned sector. Of all industry 61.2% is so called “heavy” industry (biggest sectors are metallurgy - 39% of total industry and energy sector – 11.5% of total industry). 38.8% is production of consuming goods, where so called “light” industry forms 1.2% of total industry and 27% of total industry is food production. (Статистический..., 2009: 251). Main industrial branches are ore mining, aluminium plant, hydropower engineering, textile and needle work and food processing. Industry produces aluminium, zinc, lead, chemicals and fertilizers, cement, metal-cutting machine tools, refrigerators and freezers, textiles, vegetable oil and other food products More data on industry were found in the Tajikistan. Labour Market Review (Tajikistan. Labour…, 2010: Table 31. Key indicators for industry in Tajikistan 1991-2007). This data is visualized in Figure 12.

37

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Number of enterprises Average annual number of employees, thsd. WorkersProductivity as output per worker, thsd. TJS Industrial production volume, m TJS Consumer commodities output, m TJS

Figure 12. Main characteristics of industrial production

Source: (Tajikistan. Labour…, 2010: Table 31. Key indicators for industry in Tajikistan 1991-2007)

Number of enterprises have decreased from 2,308 in 1991 to 1,094 in 2006 and then increased in 2007. Industrial production volume have reduced in the period of war from TJS 5,832 million in 1991 to 2,117 million in 1998, but have steady increased since 1998. Industrial production rate as % of 1990 was 96.4 in 1998, 34.9 in 2000, 40.6 in 2005, 70.7 in 2006 and 77.0 in 2007. Industrial production rate as % of 2001 has been high - 151.4 in 2005, 159.7 in 2006 and 175.5 in 2007. In 2009 estimated industrial production growth rate is –(minus) 6.3% (estimation from The World Factbook, 2010).

Average annual number of employees in industry has decreased from 215.4 thsd. people in 1991 to 80.4 thsd. people in 2007. Consequently productivity of industry calculated as production volume per employee has increased from TJS 27 thsd. in 1991 to TJS 69 thsd. in 2007. Of all employed 87.4% were workers in 1991 and 77.2% in 2007.

Industrial development was not homogenous since 1991. As described in the Labour Market Research, traditional branches of the economy that dominated before 1991 have lost ground, especially light industry. Non-ferrous metallurgy increased its share almost 5 times; stable growth was observed in construction materials production and in the foods and flour-milling industry. The energy sector increased its share 1.5 times.

Consumer commodities output has decreased from TJS 2,310 million in 1991 to TJS 554.7 million in 1998, and then increased to TJS 1,430 million in 2006. This makes up 62% of the level of 1991. These figures point out three aspects. First, despite the growing population and consequently physical size of internal market, its purchasing power does not adequately increase. Secondly, competitiveness of Tajik industry also may be

38

questioned. Third, there is clear tendency to move from production of final product to primary processing of country’s own natural resources or imported raw materials. For country that has mineral resources such trend is not the most effective strategy of economic development.

The share of light industry has reduced 3 times. If 11.6% of fibre cotton was processed in 1991, then by 2007 the processed volume was about 10%. During this period the production of fibre-cotton fell 1.6 times, from 245.5 thsd. tonnes to 150.4 thsd. tonnes.

The level of processing of agricultural produce is also very low. For the period 1991 -1998 the volume of food production fell 55 times. From 1998 growth was evident in the production of sausages (10 times), dairy products (4.2 times), ice-cream (75 times), canned fruit (2 times) and confectionery (8.9 times).

Agriculture

Of the total land area (14255.4 thsd. ha) just 26.5% or 3780.5 thsd. ha is agriculture land. Of this 2930.4 thsd. ha or 77.5% is pasture. Arable land constitutes 699.8 thsd. ha that equals to or 18.5% of agriculture land and 4.9% of total land area (Статистический..., 2009: 283). Despite scarce land resources agriculture contributes by 18.9% of GDP and approximately 30% of total employment. Comparison of the share in GDP and employment figures shows that productivity is not high in agriculture.

Production entities in agriculture are kolkhozes, sovkhozes, interfarm enterprises and dehkan farms (definitions from Tajikistan. Labour…, 2010: 53).

Kolkhoze (collective farm) is a cooperative association of peasants based on common means of production and collective labour. It is a legal entity. The land does not belong to the state.

Sovkhoze (state farm) is a state owned agricultural enterprise, based on state ownership of the land and other means of production. Property of the state farm belongs to the state, but it is fixed after the state farm. It is a legal entity. Interfarm enterprise is a state owned agricultural enterprise which usually specialises in elite pedigree cattle breeding, cultivation of planting stock for fruit and decorative trees, issues of water supply, material and technical provision of collective farms, state farms and farms. Interfarm enterprise is a legal entity. Dehkan farm is a form of private entrepreneurial independent economic entity (legal entity or not) set up by a family or individual citizen. It produces, processes, stores and sells agricultural products and uses land and other means of production which are its own property - for life-long inherited use or leased. It is likely that dehkan farms may have and may not have the status of legal entities (i.e. as registered entities).

Agriculture produces cotton, grain, fruits, grapes, vegetables, silk, tobacco, cattle, sheep, and goats. Cotton is the most important crop, but this sector is burdened with debt and obsolete infrastructure. In total, crop farming makes 72% of agriculture GDP, and cattle breeding gives 27%. This proportion has not changed since 2002 (Статистический..., 2009: 282).

39

Table 32. Key indicators for agriculture in Tajikistan 1991-2007 provide features of agriculture in Tajikistan. These are visualized in Figures 13 and 14.

The first observation concerns remarkable changes in structure and work organization (Figure 13).

0

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1991 1998 2000 2005 2006 20070

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Kolkhozes (collective farms) Sovkhozes (Soviet farms) Interfarm enterprises Dehkan farms Total Figure 13. Agriculture structure by type of enterprises

Source: (Tajikistan. Labour…, 2010: Table 31. Key indicators for industry in Tajikistan 1991-2007)

Number of productive units in agriculture has increased, while units have become smaller. The process of dividing continues. The same amount of land resources and other natural resources used in agriculture (or even less because part of land is not anymore usable) was operated 587 units in 1991, while there are 26,550 units in total in 2007. In 1991, there were no dekhan farms, while in 2007 there are no interfarms. Closing of interfarms means that not only selection work in agriculture and other farming has been destroyed, but also maintenance of agriculture supporting systems may be difficult for small farms. Without investment and maintenance these systems loose productive value and reduce resources for agriculture production. This observation gives conclusion that organization of agriculture production may be improved by creating larger production units, for instance, in the way of co-operation.

Figure 14 shows main economic indicators in agriculture. Number of employed refers to employment in kolkhozes and sovkhozes. Employment in dekhan farms is not available. Consequently not only calculation of productivity is not possible but also output figures may be questioned.

40

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Figure 14. Main agriculture economic indicators Source: (Tajikistan. Labour…, 2010: Table 31. Key indicators for industry in Tajikistan 1991-2007)

Tajikistan. Labour market Report (2010) indicates that there is low productivity and 1991 levels of production are still not attained for three main reasons: (1) a lack of experience in independent farming, (2) a lack of sufficient knowledge about farming and other necessary professional knowledge, what is compounded by permanent and seasonal (yearly) migration processes, and (3) dissatisfaction with wages, particularly in the cotton-growing sector, and inequality in distribution of income between workers, farmers and intermediates.

Experts point the fact that the availability of agricultural machinery has decreased over twofold. The decreases in machine availability are largely due to the aging and wear out of old machinery and unwillingness to purchase new units, probably due to an inability to recover the cost. An increase is only observable in the number of grain harvesters. There is understanding that under the current land use conditions, farmers need updated, modern, small-sized, high performance machines concentrated in an agricultural support organization because it is not cost-effective for an individual farm to own and maintain its own machinery. Since 2007 the state has started a process of establishing maintenance centres in each district and providing them with new machinery (Tajikistan. Labour …, 2010) Service sector

Service sector is composed of (Figure 11): - Trade and catering;

41

- Transportation/communications; - Geology/exploration; - Housing/utilities infrastructure; - Health/social welfare/physical culture; - Education/culture/art; - Science/scientific servicing; - Finance/credit/insurance; - Governance; - Public institutions; - Financial mediation.

Tajikistan statistics distinguishes public services (science and innovation, education, health care, culture, media, communal services) as separate sectors in the section of social sphere and trade transport and communication and so called “paid services to population” in the section of economics (Статистический..., 2009).

Financial sector

According to recent data, published by the National Bank of the Republic of Tajikistan6, 13 banks, 6 credit societies, 1 non-banking financial institution and 116 microfinancing institutions operated in Tajikistan as of 1 March 2010. Compared to 1 January 2009, number of banks has increased by one unit, number of credit societies has decreased by one unit due to transformation of JSC CS Kafolat into JSC Kafolatbonk, number of non-banking financial institutions has not changed and number of micro-financing institutions has increased by 24 units.

Assets of credit institutions made TJS 7.81 billion (USD 1.78 billon) as of the end of January, 2010 (increased by 23.4 % compared with the similar period of 2009) of which assets of banks and credit societies were TJS 5.0 billion, non-banking financial institutions – TJS 2.36 billion and assets of microfinancing institutions – TJS 0.46 billion.

The equity (balance) capital of all credit institutions made TJS 1.24 billion (USD 283 million) for the end of January 2010 and has increased by 28.0% in comparison with the similar period of last year, of which equity capital of banks and credit societies was TJS 1.08 billion, non-bank financial institutions – TJS 0,005 billion and capital of microfinancing institutions – TJS 0.16 billion.

The share of financial sector in GDP is not large. Finance/credit/insurance sector gave 1.26% of GDP and financial mediation sector – 1.26% of GDP. However, it has grown from 0.6% of total share in 1998. The share of financial sector increased 1.7 times since 2005. Foreign credits played role in development of financial sector, as did emigrants remittances.

Compared with the size of Tajik economy and purchasing power of population, number of microcrediting institutions (still growing) seems large.

The amount of deposits made by population in banks has grown from TJS 18.3 mln. in 2002 to TJS 724.3 mln. in 2008. The growth has been very rapid since 2005, when the amount of deposits of natural persons jumped from TJS 157.7 mln. to TJS 724 mln. The

6 Press-Center NBT, 12.03.2010

42

scale of financial activity per se is not yet threatening because the relation of deposits to GDP is not high. However, the high speed of growth creates potential for macroeconomic imbalances. Foreign trade

Foreign trade activity is very high. The foreign trade turnover is around 70% of GDP. Dynamics and structure of exports as reported in Tajikistan’s statistics are shown in figures 15-19.

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Total exports, FOB (thsd USD) Aluminium (primary) Cotton - fibre Electrical energy Other

Figure 15. Exports in Tajikistan, mln USD Source: the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj)

International estimations show that exports have reduced from USD 1.575 billion in 2008 to USD 1 billion in 2009, but this happened after the fast growth in 2007 and 2008, when exports were fuelled by high demand in importing countries. Main export commodities are aluminium, electricity, cotton, fruits, vegetable oil, textiles. Export partners were Netherlands 36.7%, Turkey 26.5%, Russia 8.6%, Iran 6.6%, China 5.7%, Uzbekistan 5.1% in 2008 (The World Factbook, 2010). Other source - Nation worldwide reports, that export partners in 2006 were Norway 13.9%, Russia 13%, Turkey 12.2%, Uzbekistan 9.4%, USA 6.4%, Italy 5.3%, Iran 5.2%, Greece 4.2%. Statistical Yearbook of Tajikistan (Статистический..., 2009: 330) shows different figures and trends regarding amount of exports (USD 1468.1 mln. in 2007 and USD 1408.7 mln. in 2008), but the composition of partners is about the same. In 2007 - exports of products from Tajikistan were mainly destined for such countries as the Netherlands (38.9%), Turkey (32.5%), Russia (6.6%), Uzbekistan (5.9%), Iran (5.1%) and Switzerland (1.7%) (Tajikistan. Labour.., 2010, Statistical.., 2010).

43

Figure 16. Exports in Tajikistan in natural units


Imports activity also gas grown, but it have decreased from USD 3.699 billion in 2008 to USD 2.908 billion in 2009. Main imported commodities are electricity, petroleum products, aluminum oxide, machinery and equipment, foodstuffs. Imports came from Russia 32.3%, China 11.9%, Kazakhstan 8.8%, Uzbekistan 4.7% in 2008 (The World Factbook, 2010). Nation worldwide reports, that in 2006 imports partners were Russia 21.2%, China 17.2%, Kazakhstan 10.6%, Uzbekistan 9.6%, Azerbaijan 7.3%, Ukraine 5.2%, Turkey 4%. In compliance with Tajikistan’s statistics, in 2007 imported goods come mainly from Russia (31.9%), Kazakhstan (13.1%), China (10.8%), Uzbekistan (8.4%), Romania (2.9%), Ukraine (2.1%) and Turkmenistan (1.5%) (Tajikistan. Labour.., 2010, Statistical.., 2010). Again, Statistical Yearbook of the Republic of Tajikistan shows different figures on amount of imports ((Статистический..., 2009: 330).

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Alumina Natural gas Oil products Electricity Wheat Flour Total imports, CIF (thsd USD)* Other Figure 17. Imports in Tajikistan, mln USD


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Figure 18. Imports in Tajikistan in natural units Source: the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj)

45

Export and import dynamic trends differ in monetary (Figures 15, 17) and natural (Figures 16, 18) units but without additional data it is difficult to understand whether differences are due to price of monetary (exchange rate) reasons.

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Trade balance Exports (FOB) Imports (FOB) Figure 19. Foreign trade balance, Tajikistan

Source: the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj) The volume of exports has increased 2.5 times since 1998, whereas the volume of imports has increased 3.5 times. Exports – imports relation has deteriorated (Figure 19). The significant growth in exports over imports has been since 2003. It has been observed that Tajikistan’s markets are flooded with cheap Chinese goods although, according to official statistics, China supplies just 10.8% of the total amount of goods imported by Tajikistan (Tajikistan. Labour.., 2010).

The share of aluminium exports have remarkable increased after 1998. In 2007, basic metals (mainly aluminium) accounted for 75.5% of exports. Experts consider that the share of aluminium exports in total exports will continue to grow (Tajikistan. Labour.., 2010).

Cotton fibre and processed cotton products made up 11.9% of total exports in 2007. Cotton production in Tajikistan has contracted – in the 1980s it was between 850 thsd. to 1 million tonnes annually, but at present it is half of this. Less than 5% of total exports are mineral products (ore concentrates).

High levels of imports are regarded to specific internal needs of Tajikistan – energy resources, investment goods, row materials for industry and food, as well as low

46

competitive capacity of goods produced in Tajikistan. It may be advised that high import volumes are not a deficiency, if export volume is sufficiently high. Imports facilitate healthy international cooperation, when countries use their competitive preferences, as well as freedom of choice for consumers.

Experts suggest that Tajikistan could increase mutual trade with the CIS countries and with Eurasian Economic Community (EurAsEC) member states7. Among barriers in implementation of these opportunities experts mention transportation difficulties via Uzbekistan, high border-crossing duties, excise taxes, corruption in transportation and border-crossing services. Customs duties and charges for customs clearance amount to 35 - 45% of the customs value of goods.

The government of Tajikistan has plans to develop the above sectors and also the hydropower industry, which will lay the foundation for the development of other branches of the economy and provide opportunities for exports of electricity. However, translating these intentions into practice will require investment (Tajikistan. Labour…, 2010). Transport and communication infrastructure8

Transport and communication infrastructure is moderate developed in Tajikistan.

In communication network, 360,000 main telephones lines were in use in 2008, what ranges Tajikistan 106th among the world countries. The domestic telecommunications network has historically been underfunded and poorly maintained. Main line availability has not changed significantly since 1998. Foreign investment in the telephone system has resulted in improvements.

Mobile cellular lines are better provided (a result of increasing competition among multiple operators) - there were 3.5 million lines in 2009. Mobile cellular use has expanded rapidly; coverage now extends to all major cities and towns. There are 12 mobile communication providers, established with the involvement of foreign investors. By early 2009 every second resident of Tajikistan had a mobile phone.

Tajikistan’s communication network is linked by cable and microwave radio relay to other CIS republics and by leased connections to the Moscow international gateway switch; Dushanbe linked by Intelsat to international gateway switch in Ankara (Turkey); satellite earth stations - 3 (2 Intelsat and 1 Orbita) (2008).

There are 16 radio broadcast systems (licensed stations of which only about 10 are broadcasting) and 24 TV stations (number of licensed stations with only about 15 active) in 2009.

There were 987 internet hosts in 2009 and 600 thsd. internet users in 2008 (about 8% of total population). Internet systems are still underdeveloped. Features of information society are weak, computarisation of the state management system and electronic assess to public services is at a beginning stage.

7 Russia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan. Uzbekistan suspended membership in 2008 8 Data from The World Factbook, 2010; Tajikistan. Labour Market Research. 2010.

47

Transport infrastructure includes air, pipeline transport, road, rail and water transport.

In 2009, 26 airports operated in Tajikistan, of which 18 were provided with paved runways and 8 with unpaved runways.

Of the total length of 680 km, gas pipelines were 549 km; oil pipelines - 38 km (2009).

Railways are broad gauge (680 km) and 1.520-m gauge (2008). Total length of roads was 27,767 km in 2000, waterways - 200 km (along Vakhsh River) (2008).

Transport and communications sector (includes private sector transportation and carriage and state sector aviation and railroad transportation) has increased activity in last years. Number of employed in the sector has increased. Aviation and railroads as well as private sector automobile transportation, particularly passenger transportation, mainly provide services to labour migrants.

In communications the increase in workplaces is determined by the rapid development of mobile communications and the relatively liberal policy of the state in this area.

Production infrastructure

In some reviewed reports (Tajikistan. Labour …, 2010; Republic…, 2009) experts mention poor status of production infrastructure both in industry and agriculture, and consider that enterprises may be closed if infrastructure became fully unusable. Investments in infrastructure have been scarce during last 10 years (Figure 20). Privatisation has facilitated creation of large number of small poor owners who are not able to maintain large infrastructure objects. Shrinking markets and reduction of production have contributed to poor use of capacity of infrastructure facilities in large production units. The productive capacities of industrial enterprises in 2007 were, on average, only 30% utilised (in 1991 - 68%) (Tajikistan. Labour…, 2010: 52)

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48

In this way, not only renovation but also effective use of important production infrastructure objects has become uncertain, loosing their productive value. Experts assure that within the near future many infrastructure objects will fall in into disuse, and this will cause more lost jobs.

These arguments may be considered reasonable. Modernisation of production infrastructure and proper maintenance of infrastructure systems is important. However, this aspect should not be overestimated.

Production infrastructure issue is very important in agriculture, due to disunite production structure and small production units. The problem may be solved by co-operation of dekhan farms in infrastructure use and trade with agriculture products.

Investment (gross fixed)

According to international sources, gross fixed investment consists 5% of GDP (2009 est.) (The World Factbook, 2010). Stock of direct foreign investment at home increased from USD 102 billion as on 31 December 2008 (est.) to USD 112.4 billion as on 31 December 2009 (est.). Stock of direct foreign investment abroad also increased from USD 10.86 billion as on 31 December 2008 (est.) to USD 12.71 billion as on 31 December 2009 (est.).

According to the Tajikistan’s statistics, in beginning of 2008, the foreign investment stock was USD 1753.1 mln., of which 56.4% was foreign direct investment and 43.6% was other investment. Compared to the FDI stock figure, the amount of annual flow in general, as well as in both sections, is very high (Статистический..., 2009: 251). The reason may be methodological peculiarities of intensive annual outflow of FDI. As described in (Tajikistan. Labour market .., 2010: Table 28) investment has increased by 6.4 times since 1998. Until 2007, particularly significant growth was observed in the amount of non-direct investment in the economy (increased 3 times during 2007), with a share in the total investment of 55% in 2007. In 2008 the proportion changed (Статистический..., 2009: 237).

More than 19.2% of investment is in the generation, collection and distribution of electricity, 18.2% in financial intermediation, 4.6% in developing the communications system, 4.6% in providing various services, 4.8% in central bank activities, 1.1% in the mining of precious metals and rare metal ores and 11.6% in housing construction; the remaining 35.9% is distributed between other economic branches.

More than a half of the investment is from non-CIS countries, mainly China, Germany, Cyprus and the USA. Of the CIS countries, Kazakhstan is the largest investor (Tajikistan. Labour…, 2010: Table 29).

Investments are largely in the form of joint ventures. An example of large investment is the construction of power plants: Sangtuda-1 jointly with Russia, Sangtuda-2 jointly with Iran. Iran and China have invested in the construction of tunnels and roads. Lately China has also been investing funds in the construction of hydropower plants and energy transmission lines. Iran has started investing in the construction of housing. A large investment project with the Great Britain is a joint venture for gold mining (Tajikistan. Labour…, 2010).

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Foreign investors began to invest their capital in the construction of hotels, business centres, hydro-stations and roads. Macroeconomic indicators

According to international sources, Tajikistan’s GDP in purchasing power parity estimation was USD 13.8 billion in 2009 (est.). It was USD 13.35 billion in 2008 (est.) and USD 12.37 billion in 2007 (est.) (in 2009 USD). GDP by official exchange rate was USD 4.741 billion in 2009 (est.).

GDP per capita in PPP estimation is very low – USD 1,800 in 2009 (est.) – one of the lowest among world countries. Despite fast growth of economy, GDP per capita in PPP estimation does not increase – it was USD 1,900 in 2008 (est.) and USD 1,700 in 2007 (est.) (in 2009 USD).

Inflation rate (consumer prices) was 6.4% in 2009 (est.), but 20.5% in 2008 (est.) (all data from The Wold Factbook, 2010).

Table 5 shows comparison of consumers and producers price indexes, and figure 21 shows dynamics of inflation.

Table 5. Consumers’ prices index and producers’ prices index CPI (Y/Y) PPI 2002 110.2 109.3 2003 117.1 115.0 2004 106.8 117.1 2005 107.8 99.0 2006 111.9 122.0 2007 121,5 118.4 2008 120.4 120.6

Source: Статистический..., 2009: 143, 144.

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30.1

60.6

13.7

19.7

11.8

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7.15.7

14.512.5

0.0

10.0

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Figure 21. Inflation, Y/Y basis


The level of openness of the Tajikistan’s economy is high (Table 6), but it does not have significant weight at the global markets. Tajikistan contributes by less than 4% to the world cotton production and less than 5% to the world aluminium production, and attracts less than 0.02% of the world FDI (Republic…, 2009). This means that the countries economy is vulnerable against the global world. Economic dependence increases if the Government implements export oriented labour policy measures which are widely earmarked in Tajikistan’s strategic documents.

Table 6. Openness of the economy of TR 2000 2001 2002 2003 2004 2005 2006 2007 2008 External trade turnover, mln. USD

1459,3 1339,1 1457,5 1677,9 2106,2 2238,8 3124,4 4015,3 4681,3

External turnover - services, mln. USD

119,3 117,8 145,1 128,7 193,1 163,3 287,3 432,1 504,2

FDI, mln. USD 23,1 8,1 36,1 31,6 22,4 54,5 385,2 388,4 425,6 GDP, mln. USD 991 1056 1212 1309 2073,2 2315,5 2809,7 3715,0 5134,0 Openness (%) 80,8 69,3 67,6 70,2 60 53 67,6 65,0 54,6 Source: HDR 2009: 24: Таблица 1.4. Степень открытости экономики Республики Таджикистан Other estimated macroeconomic indicators from the international source – The World Factbook, are as follows. Current account balance has become negative in 2009 (minus) USD 288 million. It was positive USD 47.6 million in 2008. Figure 19 does not support this statement.

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International sources report that budget revenues were USD 1.22 billion, and expenditures USD 1.2 billion in 2009. The state budget consists of national level budget and local level budget. According with the Tajikistan’s statistics, the budget revenues were TJS 5231.4 mln. and expenditures were TJS 4823.8 mln. in 2008, but this includes all sources of financing. In 2008 the budget revenues were 27% of GDP, but this proportion does not show the real budget capacity of Tajikistan’s economy. In 2006, when there was no indication regarding “all sources of financing” the budget revenues were 19% of GDP, and the figure was 19.5% in 2005. Since 2002, the total state budget and both its constituents have provided surplus (0.2 – 2.3% of GDP) (Статистический..., 2009: 12, 14, 401).

Stock of money was USD 329.2 million as on 31 December 2007. Stock of quasi money made up USD 544 million on 31 December 2008 and USD 350.3 million on 31 December 2007 (The World Factbook).

Stock of domestic credit was USD 889 million on 31 December 2008. Reserves of foreign exchange and gold increased from USD 195 million as on 31 December 2008 (est.) to USD 214 million as on 31 December 2009 (est.) (The World Factbook).

Tajikistan’s statistics reports, that banks have delivered loans in amount of TJS 4608,2 mln., of which TJS 3857.0 mln. or 84% are short term loans. Of the total amount of short term loans 52% are delivered to agriculture, and agriculture has also received 54.3% of long-term loans (Статистический..., 2009: 445). In the light of this data, the debt structure of Tajikistan’s economics seems rather unfavourable. Payment balance of the Republic of Tajikistan has deteriorated. The Human Development Report 2008 - 2009 reports, that in the first half of 2009 internal expenditures exceeded GDP by 27.1%. The figure was 26.6% in 2008, in 2007 it was 18.4, in 2006 – 4.6%, in 2005 – 13.8%, in 2004 – 11.9%. The coverage of imports by exports that was 102% in 2002 has reduced to 43% in 2008 and 35.4% in the first half of 2009. The coverage of imports by exports was 130% for non-CIS partners but less than 14% for closer neighbours (CIS) who are main foreign trade partners (Republic…, 2009: 26).

External debt increased from USD 1.503 billion as on 31 December 2008 (est.) to USD 1.691 billion as on 31 December 2009 (est.) (The World Factbook, 2010). It was USD 1.5 billion as on 1 July 2009 (25.4% of GDP) Experts admit positive tendency in exploration of the external debt resources – a shift from the consumption to investment (energy sector, roads). International loans are long-term – 25-40 years (Republic..., 2009).

Using international aid, Tajikistan has began several large infrastructure objects: hydropower stations Sangtuda 2, Rogun and Zarafshon, tunnel Shahristan, repairing works on Dushanbe-Xudzand-Buston-Chanak road and Nurobod-Nimich road, hotels, apartments, villages for people who have moved from less favourable locations within the government’s internal migration program.

These measures are expected not only to improve physical infrastructure and to provide energy resources for industry and population, but also to encourage wider economic activity around in connected industries, and more jobs.

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Figure 22 depicts allocation of loans in sectors. Financial sector is the largest beneficiary from the loans, characterised by rapid loan accumulation, but loans have also allocated in transport and communication and manufacturing.

0

500

1000

1500

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01.01.2006 01.01.2007 01.01.2008 01.01.2009 Total in period

Mining and quarrying Construction Manufacturing Agriculture Financial intermediation Transport and communication Other Figure 22. Indebtness by economic sectors (mln. USD)

Source: Отчет…, 2009

External debt development also raises fears about macroeconomic stability. Private non-guarantied debt has increased 3.25 times during two years: from 298.8 mln. USD on 1 January 2006 to 969.9 mln USD on 1 January 2008 and then reduced to 898.7 mln. USD, on 1 January 2009 of which main debt constitutes 98%. The government debt together with the debt under the state guaranties constitutes 1351.1 million USD. Thus total external debt was 2249.8 million USD on 1 January 2009 and equals to 44.1% of GDP. The share of the government debt increased in structure of external debt from 53.2% before to 60.1% in end of 2008. Government multilateral debt equals to 32% of the total external debt, bilateral – 26.7% and governments guaranties – 1.2% of the total external debt (Отчет…, 2009: 5-6). 93% of private loans are based on bilateral contracts, and 7% on multilateral contracts (Отчет..., 2009: 8). .

Structure of external debt has changed significantly compared with 2008, when government multilateral debt formed just 7.8% of the total external debt, bilateral – 30.53% and private non-guarantied debt – 61.7% of the total external debt (Отчет..., 2009: 7).

90% of the private non-guarantied debt is terminated for more than one year (assumed as “long-term debt”) and 10% is short-term debt (less than one year).

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Division by sectors is as follows: 28.7% are in communication and transport, 25.5% in financial intermediation, 20.7% in building industry, 11.6% in manufacturing and 13.5% in mining and quarrying, agriculture and other industries. Figure 22 shows that division of loans in sectors has remarkable changed during the last years. Financial intermediation alone has attracted 46% in 2006 (compared to just 17% in 2005), 42% in 2007, and 34.4% of the total debt during the whole period. It is evident that allocation of loans in construction and transport has increased along with the increase in financial intermediation, while in industry (except mining and quarrying) and agriculture has declined (Отчет …, 2009: 8). It is important that only 3.1% of the portfolio investments are allocated in financial intermediation sector, and 96.9% are allocated in industrial sectors and other services (Отчет …, 2009:11).

The country has received financial resources from more than 30 countries. Bigger creditors are Russia, Cyprus, China, South Korea, and Great Britain. 73.9% of loans are provided by non-CIS, called as far foreign countries.

Central bank discount rate was 15% as on 31 December 2007 commercial banks’ prime lending rate was 23.1% as on 31 December 2008. Both rates are high for credit activity in private producing sectors, and therefore credit accessibility for private sector may be considered low.

High interest rates spread indicates still high risk level of Tajikistan’s economy. On other hand, deficit external balance puts pressure on the national currency. National currency – Tajikistan Somoni (TJS) was introduced in October, 2000. Exchange rate of Tajikistani somoni per US dollar increases - 4.3813 (2009), 3.4563 (2008), 3.4418 (2007), 3.3 (2006), 3.1166 (2005)9.

Experts consider that country’s economic situation remains fragile due to uneven implementation of structural reforms, corruption, weak governance, widespread unemployment, seasonal power shortages, and the external debt burden.

External financial resources After the civil war Tajikistan has received extensive external support from several international donors.

A debt restructuring agreement was reached with Russia in December 2002, including a USD 250 million write-off of Tajikistan's USD 300 million debts. Tajikistan has also received substantial infrastructure development loans from the Chinese government to improve roads and an electricity transmission network. To help increase north-south trade, the US funded a USD 36 million bridge which opened in August 2007 and links Tajikistan and Afghanistan.

Other examples of external aid are externally financed Public Investment Programme, China loans and special funds.

External public debt increased during 2007 from USD 866 million to USD 1120 million, of which:

9 Data and estimations from The World Factbook, 2010.

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- USD 640 million – outstanding debt to multilateral organisations (WB, ADB, IDB);

- USD 386 million – bilateral creditors, including Exim Bank of China (USD 216 million).

Currently Tajikistan has asked international aid in order to overcome consequences of the world financial crisis and to achieve goals of the National Development Strategy up to 2015. The estimated amount of finances is USD 13 billion, of which only 30% is available from the national budget (Republic…, 2009: 6).

Part of the international aid has been transferred to the social protection sector development. Key source of this aid is the EC:

- Food Security Program (before 2007) - Sector Policy Support Programme 2007-2009 (SPSP)

The purpose of the external aid is to assist the government in implementation of NDP and PRSP, to strengthen public finance management and accountability.

The institutional reforms are specified in Programmatic Policy Reform Matrix (PPRM).

The financial background is formed of Sector Budget Support (SBS) (EUR 17.5 million over the period 2007 – 2010) accompanied by Technical Assistance projects and NGO grants.

Starting from 2007, the World Bank has been supporting development of the statistical system by large technical assistance project (household budgets, poverty, labour force use and labour migration).

Other donors – ADB, USAID are not active in social area.

Several international agencies and NGO implement small projects in social protection sectors, mainly in development of social services, provision of prosthetic appliance, development of inclusive education, vocational training development (all connected with SPSP).

Social development

Despite steady high GDP growth rates since 1997 and the fact that Tajikistan has almost recovered production looses during a short post-war period, Tajikistan has one of the lowest per capita GDP worldwide and in CIS. 60% of the 7.3 million people live in poverty.

Labor force makes up approximately 2.1 million people (2009) Unemployment rate is low 2.2% in 2009 (est.) and 2.3% in 2008 (est.), however it is widely known that actual unemployment is higher than official rates.

Poverty assessments were made for Tajikistan in 2000 and 2004. The latest poverty assessment shows that 3.3% of households are in the lowest consumption income decile and 25.6% are in the highest income decile (in 2007). Gini index is high and increasing in last years – it was 32.6 in 2006 and 34.7 in 1998 (The World Factbook…, 2010).

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In 2007, total poverty level was 17%, and 53.5% were under the poverty line.10 According to other sources, poverty level is assessed as 58 - 60% that is comparable with the situation in 2003 when it was 64%.11 ( Republic…, 2009: 5).

The last Tajikistan Living Standard Measurement Survey (TLSMS) was made in September – November 2007, published in July 2008. The next survey will be in 2011. The Human Development Report 2008 - 2009 informs after remarkable reduction due to the war the human development index has not reached the level of 1990 - it was 0.709 in 1990 and 0.642 in 1995. The index is on the growth trend since 1995. It was 0.648 in 2006, rating Tajikistan 124th among 179 world countries. However, the components are not equally developed. Tajikistan stands 143rd in the world regarding income per capita (less than 2000 USD per capita), 116th regarding life expectation indicator (65 – 70 years) and 107 regarding education (80% coverage), but it is 9th in the world regarding literacy rates (97.2 – 99.3) (Republic…, 2009: 19).

The Human Development Report 2008 - 2009 provides also the national human development index that was calculated on the basis of real estimations. The index is slightly lower – 0.582, but it differs in regional aspect. The highest index was found in Dushanbe (0.648). Regional indexes are lower national average - GBAO - 0.581, Republic subordination districts – 0.557, Sughd region – 0.55, Khatlon region – 0.539.

Summary Currently Tajikistan’s economy is characterised by the following features:

- after the civil war - high real GDP growth (9,6% over the period 2000 – 2004 (the WB data), 7.9% in 2008 (Статистический..., 2009: 205);

- growth fuelled by a surge in construction activity and strong remittance-financed demand for retail services (remittance formed more than half of the GDP in 2008),

- also real sectors have grown, but there is shift from the production of final goods to primary processing of own or imported raw materials,

- low but increasing GDP per capita - USD 404.8 at current exchange rate in 2006 but USD 707.9 in 2008 (Статистический..., 2009: 12),

- comparative low price level that makes GDP per capita higher - USD 1,356 at PPP (in 2005);

- high and increasing share of GDP is formed from emigrants remittances – 38% in 2007 and 46% in 2008, 17% of disposable final income of population (Анализ... 2010: 8,9), yet remittances have declined due to crisis in Russia by 30%;

- other primary sources of income in Tajikistan are aluminium production and cotton production,

10 Tajikistan. Living Standards Measurement Survey 2007. Dushanbe 2009. 24 p. 11 Таджикистан: Обследование Уровня Жизни. Душанбе, 2004.

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- open economy, exporting row aluminum and cotton, importing consumption goods, dependent on oil and gas imports;

- trade deficit has reached 35% of GDP, mainly due to lower world prices on aluminium and cotton (Republic..., 2009:26);

- remittances serve as a main source of imports financing, the other sources being official loans and grants;

- high inflation (19.7% in 2007, 11.8 in 2008 ((Статистический..., 2009: 145)) fuelled by loose monetary policy (broad money grew by 60% in 2006 and 78% in 2007) and remittance related demand pressure;

- high but declining poverty rate (89% in 1999, 64% in 2004 and 53% un 2007), mainly due to economic growth and remittances (Анализ... 2010: 9), poverty more widespread in rural areas and cotton growing areas;

- high food share in consumer basket (68%);

- in 2007 – budget surplus of about 1% of GDP, but growing fiscal deficit (6.4% of GDP), growing external public debt (31% of GDP at the end of 2006, 30,2% at the end of 2007, decline due to depreciation of TJS against USD), debt may deteriorate should planned economic growth not materialise;

- unfavourable internal debt structure - short term loans in agriculture dominate (Статистический..., 2009);

- strong real appreciation of TJS against USD;

- good medium-term growth prospects, but with risks: remittances may diminish, investments, infrastructure projects for development of construction may not occur without external financing;

- economy highly vulnerable to external and political development, including the world financial crisis, political turbulence or strong protection policies in neighbouring countries (Kyrgyzstan, closed Uzbekistan, Russia),

Competitive advantages of the Tajik economy Availability of natural resources

The use of mineral resources was not analysed at this stage of work, but no doubts, natural resources give the country competition preferences.

Population structure

Tajikistan has one of youngest population in the world, but this may not continue forever. Currently, population structure gives competition preferences, compared to developed economies:

- social costs (pensions, health care) are low because the share of old population is low,

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- demographic burden is comparable with Western economies, but its structure is more progressive (larger share of population over working age) and less demanding in financial terms.

Sufficient share of production sectors in economic structure

The current financial crisis shows that countries that have more production sectors are less vulnerable to financial shocks. Production sectors are real economic stabilizers, and also are useful for increasing economic independency of a particular country. Availability of cheap labour resources

The opinion prevail that growing population is disadvantage of Tajik economy, while many other countries attract immigrants in order to provide economic growth. Excess workforce impacts labour market positively through increased competition and perfect wage regulation.

Competitive disadvantages of the Tajik economy National Development strategy of the Republic of Tajikistan up to 2015 (NDS) has indicated several negative factors hampering further development:

- lack of direct access to sea (ports), - distance from developed markets, - lack of own accessible oils and gas deposits, - natural, geographic fragmentation of the country in regions, - small capacity of internal market, - political instability in neighbouring countries, - high transaction costs, related to liquidation of consequences of cataclysms ,

fighting drug traffics and terrorism. Some of these negative factors are not avoidable and therefore should be taken as a condition for development. Some others, like better energy supply, may be improved. The third group, like capacity of internal market is a result of successful implementing of the development strategies.

Still there are some critical aspects of Tajikistan’s economy. Macroeconomic instability

There are several incremental instability factors.

Despite positive budget balance, is obvious that the government needs more financial resources than is public finance income. One reason is large share of the government competence in the economy, including production sector. The other is existence of just partly taxed shadow economy.

Keeping high level of responsibility, the state at the same time appears being not able to fulfil its responsibilities. Almost all regions are insolvent – they depend on subsidies and other payments from the state budget. On other hand there is increasing number of cases when wages are not paid in a proper time or amount, and this happens also in the public sector.

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Discrepancy between growing population and industrial needs and large share of non- taxed shadow economy raises difficulties in public finances.

Financial sector is the biggest beneficiary of foreign loans (Figure 22). Combined with the fact that construction sector has showed fast development, housing prices rise, big private investments in housing occur, number of small credit institutions increase and dominating foreign trade direction changes from exports to imports, as well as the fact that in the debt structure short term loans (less than one year) in agriculture form the dominating fraction of loans, there is potential for overheating of Tajik economy. The share of the government debt is high, vulnerability to external shocks has increased during last years, and external situation has deteriorated compared with some years before. This may make meeting international obligations difficult.

Growing real sector and high interest rates in Tajik banks may stabilize economy, but on other hand, high interest rates are not favourable for development of private sector. Scarcity in energy resources

Insufficient energy availability is related to resources of electrical power and natural gas. Table 7 shows the energy balance of the Republic of Tajikistan and Figure 23 characterizes electricity balance.

Table 7. Balance of energy resources of Tajikistan Production Consumption Exports Imports Proved reserves

(1 January 2009 est.) Electricity, billion kWh (2009 est.)*

16.1

17.0 5.5 6.4

Oil, bbl/day (2008 est.) 238 36,000 349 10,100 12 million bbl

Natural gas, million cu m (2009 est.)

16.1 266.1 250 5.663 billion cu m

Source: The World Factbook, 2010, * Статистический..., 2009: 265 in 2008

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Electricity production mln. KWh Imports mln. KWh Exports mln. KWh Imports mln. USD Exports mln. USD

Figure 23. Production, imports and exports of electrical energy in Tajikistan


In the Soviet period Tajikistan’s electrical energy system was divided into two independent parts: North working with deficit and South working with surplus. Deficit of electric power was 4 - 4.5 billion KWH in year (Republic..., 2009).

The energy balance was provided in cooperation with Uzbekistan and Kazakhstan, gas was supplied from Russia. Nowadays Uzbekistan has become closed independent country; cooperation between two countries that has never had explicit economic background has become unsteady for Tajikistan. Energy supplies have decreased dramatically and the Tajik government has to introduce restrictions on power consumption during autumn and winter periods (8 months) every year. As a result of an accrued debt, natural gas supplies are also being cut down (Tajikistan. Labour…, 2010). The country faced energy crisis during the severe winter period of 2007 - 2008 when an overwhelming majority of population (except for some areas within Dushanbe) had to live virtually without electricity. All industrial production was stopped for two months (January-February 2008) with the exception of the Aluminum Smelter and several other vital facilities. Industry consumes 46% of electricity and agriculture 18% (Статистический..., 2009: 265). Experts consider that energy is among the most impressive restrictions for the development of industry.

On other hand scarcity in energy resources is not absolute. Tajikistan ranges 8th in the world regarding hydropower resources. Te country owns approximately 4% of the

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economically effective hydropower potential of the world. The country’s resources of hydropower exceed 527 billion kWh. Potential coal, oil and gas deposits are correspondingly 4452 mln. ton, 117.6 mln. ton, 8517 billion m2, while extraction is 97 thsd. ton, 21 thsd. ton and 30 mln.m2. Internal demand for these resources is covered by internal production by 16%, 4.7% and 5.4% correspondingly (Republic..., 2009: 27).

There are expectations that completion of the Sangtuda 1 hydropower dam - finished in 2009 with Russian investment - and the Sangtuda 2 and Rogun dams will add substantially to electricity output. Roghun might be the world's tallest dam. There is also voice, that a lack of necessary investment impedes completion of the Rogun hydropower plant, where the readiness condition is high. Putting this energy jumbo into operation would boost power generation at the Vahsh cascade, particularly Nurek hydropower plant (Tajikistan. Labour…, 2010: 53).

The government has started a program promoting operation of small electric power stations. 189 small electric power stations (with unit capacity 103,181 kWh) are expected to contribute by 641,645.9 thsd. kWh in year since 2020 (Republic..., 2009). .

Location and communication

Experts consider that access to resources and markets is a significant issue, on account of high transportation prices and the country's geographical position as a landlocked state. Rail is the only means of importing and exporting goods. To enter international markets Tajik exporters and importers have to cross Uzbekistan, Kazakhstan, Kyrgyzstan (from the northern part of the country) and Russia. Complicated border-crossing procedures pose significant barriers for exports and imports, and this leads to high costs, compounded by corruption (Tajikistan. Labour…, 2010: 51). However examples of landlocked European countries (Switzerland, Czech Republic, Hungary and others) show that this factor per se is not an obstacle for economic development.

Availability of markets

Availability of markets is decisive for economic development and employment. Moreover, market availability impacts economic structure. It may happen that market conditions promote undesirable shift from production of final goods to low value added sectors - exactly this can be observed in Tajikistan’s economy. Location increases the role of local market, while consumption level on the local market is low.

It is likely that efforts in expanding markets are not sufficient. Industrial structure

In is evident that Tajik industry changes towards low value added sectors and move away from its own resources. The growth in the non-ferrous metallurgy sector was the result of the restoration of the production capacities of Tajik aluminium plants. However, the volume of processing of primary aluminium remains minimal and practically all primary aluminium is exported. The same situation is observed in the cotton industry. The share of the primary processing industries in the total volume is 90.5%, and these sectors determine industry growth (Tajikisytan. Labour…, 2010). .

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Tajikistan owns natural resources which are not used by the nation. At the same time, the country is dependent on supply of important commodities, including row materials for its industry.

Productivity

Productivity is discussed more in details further in this investigation. Comparison of GDP and employment figures gives conclusion that productivity in agriculture - the very important sector of Tajikistan’s economy, is very low. On other hand export structure also show export of production from the low value added sectors. This fact is mentioned by experts in reviewed reports. Export from primary production stages is indicated first and foremost in two bigger export sectors – aluminium and cotton production. In the studied documents, there were no indications about innovative production solutions, as well as considerations regarding adjustment of production structure to specific market, transportation and communication circumstances that was mentioned before in this report.

Low social development level Experts admit difficulties in transportation and organization of foreign trade, what emphasizes meaning of internal trade. Internal trade is the most secure growth engine in any country, but especially in countries which face difficult relations in neighbours on the trade traffic. This situation is characteristic for many Asian landlocked countries. Local market depends on the social development which is low in Tajikistan. In this way the key issue is to focus available resources, including external help on increasing internal market. Migration

Motivation on behalf on external migration is much stronger than on behalf of other solutions. For instance, organizational failures in agriculture production, lack of land caused by humans activity is translated as a factors that played a catalytic role in non-return emigration of Tajikistan's population. On other hand, experience of other countries show that exports of workforce is a risky strategy for economic development.

Other solutions for solving the problem that underpins emigration strategies may be found in two directions. First, it is possible to regulate in a civilized way population growth, for instance, by wider involvement of population in active working and social life (inclusive labour market, better access to education, NGO with social orientation). Second, better use of human resources would provide more satisfaction and better life, what may improve economic results. Education

As HDI shows, the education level is comparable with the worlds developed countries. Education level of working population is especially high in Dushanbe were 43% of population have higher education (Table 8). Currently education development gives Tajikistan competition preferences compared with countries with similar economic development level.

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Table 8. Education level of working population – regional aspect, % of total in the territory

Tajikistan Dushanbe Sughd region

Khatlon region

Republic subordination

districts

GBAO

Higher and unfinished higher education

12 43 13 9 8 13

General professional education

8 10 8 8 7 11

General education 51 33 61 43 50 58 Unfinished general education

17 3 9 25 21 11

Basic education 4 1 3 6 6 1 Source: Human Development Report 2008-2009: 51: Таблица 2.9. Образовательный уровень занятого населения регионов Республики Таджикистан

However the financing of education is low, salaries are low, education is one of rare sectors which offer vacancies and these are not completed. In 2002 - 2005 education contributed to GDP by low 3.5%. At the same time military expenditures were 3.9% of GDP (The World …, 2010, est. in 2005).

Funding of education as percent of GDP has increased from 2.3% in 2000 to 4.1% in 2008. Nevertheless education financing per capita is very low – 70.8 somoni (16 USD) in year in 2007 and 93 somoni (21 USD) in 2009. There is no doubt that this is not adequate education financing for country where youth dominates population structure. Improvements were achieved during last four years in connection with the reforms in the education system, but there should be also radical structural changes in public expenditures towards better financing of education.

Education is primarily funded from the state budget. In 2007 the budget funding covered 85% of the total education funding, and the share increased to 90.1% in 2008 (Republic…, 2009). In studied reports there were no suggestions regarding private funding and private entrepreneurship in all levels of education, however it is possible on non-discriminatory basis when cooperation is based on the public–private partnership principles.

The very comprehensive analysis given in several reviewed reports, for example, in the Human Development Report 2008-2009 ((Republic…, 2009: Диаграмма 2.16, 2.17, 2.18, 2.19, 2.20, 2.21) and other papers show the most critical aspects of education.

First. General education is dominating sector in education. It explores about 77% of public expenditures on education and educates about 87% of students. Employment statistics show that majority of unemployed have general education, on part, because it is dominating education level but also because general education never gives sufficient professional skills.

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Second. General education dominates in both genders (even more for women). More women are at the education level that is lower than general education. More men have higher education and general professional education. This means that women are even less prepared to labour market.

Third. General education dominates in production sectors, what indicates low technological development level of Tajikistan’s industrial sectors and agriculture. In service sectors higher education levels dominate, yet the share of service sectors is not large in Tajikistan’s economy.

Fourth. Professional and higher education institutions are concentrated in big cities. This promotes internal migration. People who have arrived in cities for education do not return home and this is assumed as disadvantage. Looking from the efficiency point of view this opinion should be critically assessed. Concentration of educated human potential in economic development centres is rather advantage than disadvantage, which helps to achieve preferences given by the economy of scale.

The problem is even more important because de-urbanisation has increased during the last years. Proportion of urban and rural population is low – 26.4% against 73.6%.

Analysis of Tajikistan’s education system indicates that there is need to specify education. Reforms are on the way, and it is very important to secure high professional level in natural sciences in higher education in order to provide skilled labour for growing industry based economy. In the analysed reports authors mention that education in natural sciences is not popular among population. Restriction of education in natural sciences is mistake that has been made in many countries. It is easy to close technical education institution, but it is not easy to open it again.

In studied reports experts have pointed out insignificant differences in gender aspect however opinions of authors differ in question about participation of women in education. In the Human Development Report 2008 - 2009 one may learn, that women participation decline in lower levels of professional education (from 31% in 2003 to 18% in 2008) and it is low in higher education (28%), but these changes are not due to discrimination of women. Besides, the share of women in education increases, using so called “presidential quota” (Republic…, 2009). In other source (Tajikistan. Labour…, 2010) there is opinion that traditions reduce somehow access to education for women.

1.4. Macroeconomic base and the forecasts for economic development to 2020 Due to poor availability of statistical data at this stage of work, it is almost impossible to produce quantitative forecasts for economic development to 2020. However, it was possible to make qualitative projections regarding the main features of macroeconomic development, based on assessment of competition advantages and disadvantages and the government’s economic policy.

As it came out from studied reports and investigations, the government’s commitment for future development includes the following aspects:

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- to reduce inflation to an average of 6%,

- to achieve GDP growth 8% a year,

- to ensure new investment in infrastructure and the energy sector plus commissioning of the Sangunda hydroelectric project of which construction and services sector may benefit increasing demand,

- agriculture will benefit from strong internal demand;

- Government’s efforts to stimulate private investment and diversify Tajikistan export are required.

It is evident that labour market will not restrict economic development till 2020. Contrary, the economic development should help to better employ all people in working age.

Two scenarios are designed on the basis of historical development of RT and examples of other countries. Inertia scenario

In the inertia scenario, the situation in Tajikistan depends on the external conditions – demand for basic metals, labour force and capacity of external financial institutions. It is assumed that external situation improve, demand for basic metals recover, and international financial markets return their financial capacity.

If the country continues development as before:

- foreign debt administration will impose extra expenditures for public finances and reduce government spending for other purposes, including public investment,

- increasing external debt will reduce availability of new external debt and thus eliminate previously important growth engine (if not suggestion regarding security aspects due to drug traffic and terrorism),

- internal market will contract due to reduced government procurements, as will population income,

- the government will be forced to reduce social expenditures including education and health care,

- education level of population will deteriorate, - industrial structure will further move towards low value added sectors,

- production of goods further reduce,

- imports exceed exports, current account balance deteriorates, pressure on local currency increase,

- labour market reduces, non- return emigration increases, shadow economy increases because people try to survive on their own resources,

- capacity of private sector in production and taxes will not be fully explored,

- depending on capacity of external financial institutions pressure in internal financial markets may increase, creating risks for overuse of external credits.

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- economic development is threatened in the long term period.

Calculations on the basis of the assumptions of the first scenario show that even after remarkable corrections of some most boosted industries, such as construction, the current development path is not sustainable:

- if current development trends remain and are slightly modified downwards, then nominal GDP would increase 32 times over the period 2008 – 2010,

- up to now high nominal GDP rates were connected with high inflation – if this is avoided nominal GDP growth rate should decline,

- availability of large external financial resources that are needed to support construction growth are doubtful

- if such resources are available, construction become dominating in the economy, and vulnerability increases,

- the share of industry declines to insignificant,

- current agriculture growth also is not sustainable.

Consequently, the nominal GDP growth, the construction growth, and the agriculture growth will fall dramatically within the forecasting period. The economic structure should be changed. Structural reform scenario

Structural reforms should be implemented in economics, education, and public sectors. In economics, structural changes should ensure effective use of mineral resources, expand production of final goods, encourage employment and ensure income from market rather than from international aid. The economic structure should be focused on better employment by developing labour-intensive production, including export oriented services. Transportation difficulties may be eased by developing internet based information services. Education system should not only follow the existing labour market trends but rather encourage structural reforms in economy.

Structural policy should focus on employment aspects more seriously than in existing documents.

If this happens, results will not be achieved in the first year of the forecasting period. However positive effects will appear soon after introduction of reforms.

Reforms of education system will encourage more young people from the pool of currently unemployed to be involved in motivated education for internal employment for export;

Investment in communication infrastructure will encourage development of elements of information society that facilitate activity in wide spectrum of IT sector – telecommunications, computer industry and computer services, information services, education – all are high paid labour intensive sectors. Market oriented service sector has high employment potential (foreign investment).

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Agriculture policies should be changed to rural development policies thus rising productivity from agriculture products. That means legalisation of economic activities currently representing informal economy. In the reform scenario the main assumptions are:

- two new branches – tourism and commercial services are introduced,

- the share of ICT is gradually increased,

- growth rates of construction and agriculture are made realistic, and the share of construction and agriculture sectors have declined,

- growth rates of industry are increased (increasing demand on external markets on row materials),

- the ration of the state budget to GDP is 20% (as in 2007).

Some results of macroeconomic forecast (Structural reform scenario) are presented in table 9.

Table 9. Selected results of macroeconomic forecast

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Inertia scenario (moderated growth in agriculture and construction, still unrealistic) GDP, current prices, mln.TJS 12804 17703 22291 28418 36656 47822 63070 84043 113085 153555 210285 290250 403550 564866Industry, mln.TJS 2349 2516 2694 2885 3089 3308 3542 3793 4062 4349 4657 4987 5341 5719Agriculture, mln.TJS 2489 3518 4221 5066 6079 7295 8754 10504 12605 15126 18152 21782 26138 31366Total production, mln.TJS 5902 7901 9706 12124 15413 19952 26299 35276 48103 66593 93440 132662 190253 275168Total services, mln.TJS 5460 7740 9904 12780 16619 21759 28665 37972 50553 67610 90802 122428 165679 225004State budget - revenues, mln.TJS 3766 5231 4385 5590 7210 9407 12406 16532 22245 30205 41365 57094 79381 111113State budget - expenditures, mln.TJS 3495 4824 4248 5415 6985 9112 12018 16014 21548 29260 40069 55306 76895 107634Government budget - revenues, mln.TJS 2444 3077 3923 5060 6601 8706 11601 15611 21197 29028 40067 55707 77975Government budget - expenditures, mln.TJS 2226 2802 3572 4608 6011 7928 10564 14214 19301 26432 36483 50725 71002Productivity growth, % Y/Y 1.10 1.10 1.15 1.15 1.15 1.20 1.20 1.25 1.25 1.30 1.40 1.50Average productivity, thsd.TJS/worker 5.9 8.0 8.8 9.7 11.1 12.8 14.7 17.7 21.2 26.5 33.1 43.1 60.3 90.4Number of employed, thsd.people 2170 2213 2533 2936 3293 3736 4284 4757 5334 5795 6348 6740 6694 6246Reform scenario (structural economic reforms started) GDP, current prices, mln.TJS 12804 17707 23216 28621 33334 37937 43284 49509 56773 65272 75240 86960 100780 117121Industry, mln.TJS 2349 2516 2767 3072 3440 3888 4432 5097 5912 6917 8162 9713 11656 14104Agriculture, mln.TJS 2489 3518 4925 5910 6501 7151 7866 8653 9518 10470 11517 12669 13936 15329Total production, mln.TJS 5902 7901 10476 12865 14979 17077 19537 22430 25839 29871 34653 40343 47138 55282Total services, mln.TJS 5460 7168 9847 12146 14127 16036 18237 20777 23716 27122 31075 35673 41029 47280State budget - revenues, mln.TJS 3766 5231 4643 5724 6667 7587 8657 9902 11355 13054 15048 17392 20156 23424State budget - expenditures, mln.TJS 3495 4824 4411 5438 6333 7208 8224 9407 10787 12402 14296 16522 19148 22253Government budget - revenues, mln.TJS 2444 3250 4007 4667 5311 6060 6931 7948 9138 10534 12174 14109 16397Government budget - expenditures, mln.TJS 2226 3018 3721 4333 4932 5627 6436 7381 8485 9781 11305 13101 15226Productivity growth, % Y/Y 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10Average productivity, thsd.TJS./worker 5.9 8.2 9.0 9.9 10.9 11.9 13.1 14.5 15.9 17.5 19.2 21.2 23.3 25.6Number of employed, thsd.people 2170 2170 2586 2899 3069 3175 3294 3425 3570 3732 3910 4109 4329 4573

Source: the macroeconomic forecast.

1.5. Current labour market situation in TR There are several comprehensive labour market investigations done before this investigation, of which the best examples are the Human Development Report 2008 - 2009 and Labour Market Research 2010. In this report we highlight only main characteristics of Tajikistan’s labour market. Research findings and statistical products from both mentioned reports were widely used. Employment structure

In reporting employment, officials and researchers in Tajikistan use several categories:

- permanent population (7,3 mln. people); - workforce (about 4 mln. people); - economically active people (about 2 mln. people); - working people (about the same figure); - listed workers (about 1 mln. people); - people working on the basis of employment contracts (about 600 thsd. people)

(Programm, 2009).

The terms “labour resources”, “listed (hired) workers” compared with “workers”, “officially unemployed” are not usual and are not used in international statistics. It is not clear whether “labour resources” include all population who apply for work regardless age, or in working age groups (from 12, 14 or 15 years age) before pension age (58 years age for women and 62 years age for men) or people able to work (without some categories of disabled people in working age groups). If not otherwise mentioned, in this research it is assumed that “labour resources” are people in working age (15 - 58 years for women and 15 - 62 years for men), which theoretically include also people who may never apply to labour market (some categories of disabled people in working age). “Listed (hired) workers” are individuals who are employed on the basis of institutional involvement (hired by legal entity, in most cases – state undertaking). Only about half of “listed workers” is employed on the basis of the work contract. Human Development Report 2008 - 2009 also recognises that official statistics do not record labour statistics properly. „Unemployed” are persons who have applied for job and are registered in labour market institutions (labour exchanges), but this is not the whole pool of unemployed because (1) labour exchanges are not properly developed and have not became true labour market institution, (2) because of low wages it is not possible to register in labour exchange, (3) low level of unemployment benefit dos not facilitate registration.

In the Human Development Report 2008 - 2009 (page 84) the following definitions may be found.

Economically non-active person is one aged 12 - 75 years old, not considered to be economically active or unemployed in the period under consideration. The economically non-active population meets the criterion of seeking and being ready to start a job. They are grouped as follows:

- persons who have expressed their willingness to work in a paid job and who were seeking a job in the considered period, but who were not ready to start working;

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- persons who expressed their willingness to have a paid job but who were not seeking a job in the considered period because they despaired of finding a job;

- persons younger than the working age (i.e. 12 - 14 years) who expressed their willingness to have a paid job, were seeking a job in the considered period and were ready to start working;

- persons older than the working age (women 58 - 75 years and men 63 - 75 years), who expressed their willingness to have a paid job, were seeking a job in the considered period and were ready to start working;

- persons who expressed no willingness to have a paid job; - a production unit in the informal sector, irrespective of their status and whether

this job was their source of primary or additional employment.

The term “informal sector” is also often used in Tajikistan. The criterion of a lack of state registration as a legal entity was adopted as the criterion for defining informal sector units. Informal sector enterprises are considered to be household or non-corporative enterprises, carrying out the production of goods and services for sale in the market and without legal status. The population involved in the informal sector includes the following:

- persons involved in an entrepreneurial activity on an individual basis or without legal status, irrespective of whether or not they are registered with the state as individual entrepreneurs;

- person working on dehkan farms not registered as legal entities;

- persons hired by physical persons or individual entrepreneurs;

- persons involved in household and personal subsidiary plot production of goods and services, including agriculture, forestry, hunting and fishing produce if produced for sale in the market;

- persons helping family members, working on rented lands and producing agricultural products.

In this way, “informal” economy includes great part of people working in entities that are not prohibited by law and are registered in some way (for instance, land ownership of dehkan farm), but are not registered as legal (production?) entities (as explicitly described in Tajik. Labour…, 2010). According with this approach Dehkan farms do not have the status of legal entities (i.e. as registered entities), but they may produce for market and thus become “informal”. All working-age employment on such farms cannot be registered by the authorities as employment in the real economy and this leads to a distortion of the real employment indicators. The Human Development report 2008-2009 publishes distribution of population regarding their employment status (Table 10). Figures were calculated on the basis of survey data on employment in informal sector.

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Table 10. Employment in informal sector, thsd. people 2004 2005 2006 2007 2008 Total number of working population 2089.5 2111.7 2137 2149.7 2168.0 Total number of labour resources (people who are able to work)

3739.6 3842.2 3984.5 4121.3 4254.1

Economically active population 2132 2154 2185 2201 2216.7 Economically non-active population 1654 1739 1862 2009 2093.1 Listed (hired) workers 1056.3 1065.5 1082.9 1065.7 1053.9 Non-listed (hired) workers 1033.2 1046.2 1054.1 1084.0 1114.1 Unemployed 42 42 48 51 43.6 Informal sector workers 1308.3 966.5 981.8 1013.3 1029.2 Informal sector of total labour resources, % 53.3 45.7 45.9 47.1 47.4 Source: Republic..., 2009: Таблица 2.18. Доля занятых в неформальном секторе к общему количеству населения, трудоспособного и экономически активного населения (тыс.чел.), compiled on the basis of experts estimations.

The characteristic feature of Tajikistan’s employment situation is comparatively high level of economically active people among man in working age (58.1% on average, variation from 31.8% to 82.4% in age groups) and low among women (31.1% on average, variation from 21.7% to 47.8 in age groups) (in 2007). The highest level of economically active people is in age 35 – 54 both for men and women. In younger age groups the difference is less and participation rate is low - 31.8% for men and 22.8% for women. In age group 25 - 34 years old proportionally larger share of men wants to join labour market than women – 75.3% of men and 32.9% of women, and the same is true for older age group ( Republic…, 2009: Диаграмма 2.15).

Of economically non-active people (2093 thsd. people in 2008) 524 thsd. people attend education institutions (18% of people in age 15 - 34 old, 23% of people in age 18 - 34 old) (Статистический..., 2009: 88). From these relations it may be concluded that education is not a reason for low economic activity in early age groups. Education situation is explicitly described in previous investigations (ex. Republic…, 2009: Диаграмма 2.16, 2.17, 2.18, 2.19, 2.20, 2.21) and shortly characterised above in this report (See: disadvantages of Tajikistan’s economy).

Employment by sectors Employment by sectors is characterized on the basis of table from the Human Development Report.

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Table 11. Employment by (annual average, thsd. people) 2000 2001 2002 2003 2004 2005 2006 2007

Listed workers (main job) 1015,8 1083,0 1066,2 1071,9 1070,6 1075,0 1082,9 1065,7 Of which in percent 100 100 100 100 100 100 100 100 Material production 68,5 70,7 69,8 70,1 69,9 69,9 69,7 67,9 - industry 11,3 10,8 10,9 10,1 10,2 9,8 9,4 9,2 - agriculture 47,1 50,7 49,8 51,2 51,0 51,6 51,6 50,0 - forestry 0,2 0,2 0,2 0,2 0,2 0,2 0,2 0,2 - fishing 0,02 0,02 0,02 0,02 0,02 0,02 0,02 0,02 - transport 2,8 2,6 2,5 2,2 2,2 2,1 2,0 2,1 - communication 0,8 0,8 0,8 0,8 0,8 0,8 0,8 0,9 - construction 3,4 3,1 2,9 2,8 2,7 2,7 2,9 2,9 - trade and public cattering 2,1 1,8 1,8 1,8 1,8 1,8 1,8 1,8 - information and computer services 0,05 0,04 0,04 0,04 0,03 0,03 0,04 0,04 - real estate and commercial activities 0,01 0,01 0,01 0,02 0,02 0,02 0,03 0,03 - mining and quarrying 0,2 0,2 0,2 0,2 0,2 0,2 0,2 0,2

- other material production 0,6 0,5 0,7 0,7 0,6 0,6 0,6 0,6 Non-material production 31,5 29,3 30,2 29,9 30,1 30,1 30,3 32,1 - communal services 2,0 2,0 2,0 2,0 2,1 2,1 2,1 2,2 - health care, sports and social care 8,1 7,3 7,2 7,3 7,3 6,6 6,7 7,0 - education 16,4 15,6 16,3 16,0 15,7 16,2 15,9 16,3 - culture 1,0 0,9 1,0 0,9 1,0 1,0 1,0 1,1 - arts 0,1 0,1 0,1 0,1 0,1 0,1 0,1 0,1 - R&D 0,5 0,4 0,4 0,4 0,4 0,4 0,4 0,4 - credit institutions and insurance 0,7 0,6 0,7 0,7 0,7 0,8 0,9 1,0 - state management 2,6 2,4 2,5 2,5 2,7 2,9 3,2 3,1 Source: Republic..., 2009: Таблица 2.14.Распределение численности работников, выполняющих работы по найму по отраслям экономики (в среднем за год, тыс. человек)

The report admits that current employment trends demonstrate shift from more skilled to low qualification work (Republic..., 2009: 68). Children work is also an issue in Tajikistan. According to available data 3% of men and 7% of women of age groups 12-14 years old apply as economically active people (Republic…, 2009: Диаграмма 2.15.)

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Employment by ownership forms Figure 21 depicts employment by sectors, as compiled from (Tajikistan. Labour…, 2010: Table 8). Private sector employed 51.8% of employed (without combined businesses) in 2007, but the share of private sector constantly increases – it has reached 53.6% of employed in 2008 (Статистический..., 2009: 89). Due to methodological peculiarities, the level of representation of private sector in employment figures it is not clear.

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Unemployment Table 12 shows dynamics of main employment indicators, as reported in the Human Development Report 2008 – 2009. The table shows methodological deficiency of this data, since number of so called official workers (which is used for calculation of unemployment figure) is far from the number of actually working population and even more far from the number of economically active people.

Table 12. Unemployment level according with the official statistics

2002 2003 2004 2005 2006 2007 2008 Permanent population in beginning of year, thsd.people 6375,5 6506,5 6640,0 6780,4 6920,3 7063,8 7215,7

Average number of working people, thsd.people 1829 1857 1885 2090 2112 2137 2150 Number of people who had registered with the official employment institutions, thsd. people 43 47 43 39 44 47 52 Unemployment, % 2,3 2,5 2,4 2,0 2,0 2,2 2,3 Source: Republic..., 2009: Таблица 3.1. Уровень безработицы по данным официальной статистики

In this way, actual unemployment level is not known. Experts consider that it may be approximately 30% of economically active population. The Human Development Report 2008-2009 using data of TLFS 2004, reports that hidden unemployment was 10.6 % of economically active population – 10.2 % for men and 11.3% for women. Hidden unemployment was 20.5 % in urban areas and 7.2 % in rural areas.12 (Republic…, 2009 :8).

The unemployment level would be about 9% if calculated in compliance with the international methodology of ILO. Local experts have calculated that emigration reduces unemployment threefold and increases employment by at least 15%13. In this way, the unemployment would be 24 - 27% without emigration. This coincides with expert’s estimations in 2005 when estimated unemployment was 35 - 40% of economically active population (Republic…, 2009: 30). Labour productivity

Calculation of work productivity is very conditional because both labour and product is underreported and the proportion of non-reported amounts to both totals is not known. Still the attempt is made to compare GDP per worker in sectors.

12 Обследование рабочей силы. Душанбе. 2004 13 Куддусов Д. Таджикские трудовые мигранты в глобальном финансовом кризисе: мнение мигрантов / Рабочая версия документа - ИИЦ «Соцсервис», Май 2009 года

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Figure 30. Labour productivity in sectors, thsd. TJS Source: Tajikistan.Labour…, 2010: Table 37: Distribution of employment by economic branch in Tajikistan 1991-2007 Work remuneration The Human Development Report provides essential work remuneration data. The share of work remuneration in GDP has reduced from 58.8% in 1991 to 10.9% in 2005 and 12.6% in 2007. It is likely that work numeration includes only wages and salaries of listed workers.

In general, salaries are low in Tajikistan. In November 2007 average monthly salary was TJS 184 (53.3 USD), in November 2008 – TJS 263 (77.4 USD). The lowest salaries are in agriculture – TJS 60.

Higher salaries are in new sectors – financial intermediation, information technologies, but the share of these sectors in the countries economy and employment structure is low. Salaries of working at the government institutions and in transport and communication sector are high. Salaries in other public sectors (education, health care) are low.

Minimum salary exists in Tajikistan. It was increased in three steps in 2008 to TJS 60 (USD 17.5). Population income tax is calculated as 13% of payroll over non-taxable minimum – TJS 25.

In regional aspect, the highest and growing salary level is in Dushanbe. Three regions - Sughd region, Khatlon region and GBAO are comparable in the lowest wage levels and wage level has not changed since 2000. In Republic subordination districts salary level is on decline. Thus the wage level diverges between the capital city and other territory

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(Republic…, 2009: Диаграмма 4.11. Среднемесячная заработная плата по регионам республики, в % к среднереспубликанскому уровню).

It is expected that reforms in the public sector will help to raise wage level in economy. However, the wage dynamics should be harmonised with productivity dynamics.

The value of the minimum subsistence basket was about TJS 300 in 2007 per adult. This year wages and salaries of 82.2% of listed workers were less than TJS 300 (Republic..., 2009). Complementary, there are often cases when pay is delayed. Every adult has about 2 dependents and rare families may get ends together working at one job without other additional means of subsistence (more often - farming and subsidiary husbandry).

However, due to large share of informal sector salaries only can not be used as characteristic of work income of Tajikistan’s population.

Research on the informal economy concludes that if the salary rate in the formal sector is high enough, there are no vacancies. These sectors include very few areas – banks, transport, and communication. The current minimal salary is 14.5% of an average nominal salary. In 1995, an average monthly salary was USD 8.8; in 2000 – ESD 8.5; in 2005 – USD 26.8. In 2005, compared with 2000, the salary rate increased by 3.2 times. Compared with 1995, the real salary, with the consideration of price index change, increased in 2005 by 314.4%.14 The higher the educational level, the lower the share of informal employment (Report…, 2005).

Gender structure

There may be cases of gender discrimination on the Tajikistan’s labour market.

Remarkable gap is observed between work remuneration for men and women. In 2006, women salary was just 55.6% of that of men. There is also difference in education level of men and women which determines employment. Migrants’ employment

Migrants are more often involved in seasonal works. 70 - 80% of them leave Tajikistan in spring or summer and come back for winter. In compliance with migrants surveys (Tajikistan Migration…, 2009), emigrants are employed in construction (55.8%), trade (16.5%), transport (4.3%) and household maintenance (6.2). The work is poor paid. Emigrants usually work in difficult conditions (Republic..., 2009). Labour market imbalances In reviewed reports experts concentrate on labour market imbalance between demand and supply. Labour market is analyzed mainly from this point of view and mainly in historical aspects. For instance, Labour market Report (Tajikistan. Labour…, 2010: Tables 36, 37, 38) provides comprehensive analysis of lost and created jobs in historical aspect in period 1991 – 2007. The author of the report admits that in the labour market demand is expressed in the form of workplaces. However, in Tajikistan the term ‘workplace’ is not legally defined.

14 Statistical Yearbook “Tajikistan: 15 Years of State Independence”, Dushanbe, 2006, p. 131

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Some reports make attempt to calculate labour supply, but the purpose of such attempts is to show that local market is not able to satisfy labour supply and emigration is a solution. This analysis refer to those entering working age, fired from closed enterprises, graduated schools or applying to labour market from other sources. In situation when only half of population in working age are economically active such estimations seem very conditional, because large portion of population is not included into account, but potentially may apply to labour market. Still estimations of labour market balance in past and near future help to understand dynamics of labour market. There has been a considerable change in the structure of employment - increase in the private sector and a decrease of workplaces in the state sector (Tajikistan. Labour…, 2009: Table 36). In the private sector the growth of workplaces surpassed twofold the reduction in workplaces in the state sector. Yet again, it may be questioned what is included in the number of employed in private sector. The number of the working age population increased by 1.22 million people (Tajikistan. Labour…, 2009: Table 37).

In industry, trade and public healthcare there was a steady reduction in workplaces. Since 1998 there has been an increase in workplaces in the agricultural sector, construction sector, transportation and communication, housing and utilities infrastructure, education. Administrative bodies have increased by 21 thsd. units. In the industrial sector jobs were cut in large industrial enterprises and the growth in small enterprises failed to compensate for the losses (Tajikistan. Labour…, 2009: Table 38).

Economic environment

According to international experts, economic environment is not favourable for entrepreneurship in Tajikistan in majority of aspects (The Global…, 2009). Similar conclusions in relation to tax regime, bureaucracy and corruption were found in reviewed reports and investigations.

Improvements would contribute to better employment. Complementary, this points even more to the urgent need to better coordination of economic and labour policy creation and implementation. Labour relations

It is likely, that labour relations are not at the top of agenda in Tajikistan. In the Labour Market Review (Tajikistan. Labour …, 2010) there are notes that labour regulation is rigid in Tajikistan, tax regime is not favourable, bureaucracy is high, and corruption is widespread, and this prevents private sector investors from investing in legal business and legal employment.

Labour relations are no developed, new forms of employment and flexibility features are not taken into account and security principles are not strictly observed. For this reason workers also do not wish to enter official employment. Thus neither employers nor employees are in favour of official employment that makes unofficial employment high. But on other hand this situation also promotes poverty because people are not protected in case of unemployment in old age (pensions).

Labour relations have fully deteriorated in the countryside where more than 70% of population live. The lack of proper regulation of labour relations (labour agreements) has

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placed hundreds of thousands of dehkan farm workers outside the public social insurance system. More than 30% of dehkan farm workers work solely on the basis of a land certificates without legal status (informal workers) (Tajikistan. Labour…, 2010). However, these are entities that are not prohibited by the law, therefore they are legal in terms of legislation, and should be involved in the social security systems.

It is proved that labour relations count for development. The study on job creation has showed that rigid regulations do not contribute to the economic development. Making regulations more flexible would lead to an average net increase of 2.1% of total employment (Kaplan, 2009).

Social dialogue is just forming in Tajikistan. According to ILO, social dialogue is defined as referring to all types of negotiation, consultations or simply exchange of information, usually between the representatives of government, employers and workers, on issues of common interest relating to economic and social policy. Seen in this way, social dialogue covers the traditional area of industrial relations, including bipartite collective bargaining at enterprise or industry level, and encompassing consultation in tripartite and tripartite-plus institutions at national or sector level. These processes may take place in a formal institutional framework or in informal or ad hoc consultations (Fashoyin, 2003: b).

Conclusions Typical features of current Tajik labour market are:

- strongly regulated labour market:

a) policy for assistance in employment (in compliance with constitutional right of population to work),

b) internal dislocation policy and regular actions - voluntary, but planned in details (locations, numbers, measures, timing, financing),

c) organised external migration (export of labour force),

d) the state interfere undertakings’ personnel policy (in state companies), - at the same time, monitoring and statistical reporting of labour market is at a low

level, requirements for providing information, monitoring of labour market etc are only recently introduced, balance of labour market is not clear and only part of labour market is subjected to state labour market policies;

- labour relations are no developed, new forms of employment and flexibility features are not taken into account, security principles are not strictly observed;

- constantly growing scale of labour market – number of population has increased from 5505.6 thsd. people on 1 January 1991 to 7373.8 thsd. people in 1 January 2009 (by 33.9%) (Анализ.., :2), annual population growth 2% in 2006-2007 (Program.., 2007);

- natural increase tends to decline, the number of population in age 1 - 14 years old decline due to lower birth rates in nineties;

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- number of people in working age (15 – 64 years old) has increased by 32,1% in 2000-2007 (Анализ..., :3), annual growth by 3.9% in period 2001 – 2008 and in 2010-2011 (Program…, 2009);

- relation of people in working age to total number of population is high (estimations differ from 60% (Анализ..,) to 56.83% (in 2007);

- low and declining level of economically active population (56% in 2000, estimations differ from 52.3% (Анализ..., ) to 50.6% (of total number of people in working age in 2007);

- number of population in working age grow faster than number of economically active population, and about 3.5 times faster than number of employed persons;

- high and increasing level of economically inactive population (43% of population in working age in 2000, 47,7% in 2007, increase by 69.8% in period 1998 - 2007 (Анализ..., );

- low (but increasing) share of employed population in total number of population on working age, but high compared with number of economically active population (92.6 on average);

- low share of employed population in number of economically active population in Dushanbe – 76,79%, high in other regions – Sughd region – 95.52, Khatlon region – 93.53, Republic subordination districts - 93,92, GBAO – 83.80);

- more women are employed – 88,16% of economically active population, compared with men - 82.15% of economically active population, especially in mountains’ region GBAO – 95,0 for women compared with 40.48% for men (Анализ..., :7);

- in 2007, 66.5% of total number of employed were employed in agriculture, number of employed in industry and construction decline;

- employment is relatively stable in public sphere sectors – health care, sports, social services, culture and arts, research;

- low wages and salaries, delay in pay,

- high level of non-wage income (income from subsidiary plots, commercial activities, sale of real estate and property, emigrants remittances);

- in 2008 – 53,4% of the total number of employed were employed in private sector, 20,4% in state sector, 25% in collective sector, 0.9% in mixed ownership companies with foreign capital and 0,006% in mixed ownership companies without foreign ownership (Анализ.., : 8);

- of all economically active population 47% are so called listed (hired) employees, others are self-employed, individual entrepreneurs of farmers, legal persons without registration (all considered as informal sector);

- Income of informal sector is not known, individual entrepreneurs and farmers pay fixed monthly payment as an income tax (Republic…, 2009: 61);

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- low official unemployment (16.8% of economically active population in 2000 (Conception…, 2001), 2% recently (Program, 2007));

- slightly larger share of unemployed females (54.3%) in official unemployment;

- high share (51.9%) of people in age 15-29 in the number of unemployed, but less in the number of jobseekers (25%);

- high share of long-term unemployed people without profession among unemployed (62.4%);

- high share (70,4%) of people with general or partly finished general education;

- high expert estimates on excess labour resources (30%);

- in 2000 - more than 60% of free labour force are young people under 30 years age (Conception… , 2001);

- large employment in informal sector – estimated number of working on conditions of informal sector was 1029,2 thsd. people or 47,4% of economically active population in 2008 (Republic.., 2009: 14);

- informal business is allocated in private small enterprises in trade, other services and building industry;

- internal migration, including due to ecological reasons (dependence on availability and productivity of nature resources due to growing poverty, dangerous living conditions due to ecological circumstances (earthquake, landslip, avalanche);

- stimulated external labour migration, in result massive labour migration to Russia and some other neighbouring countries (at least 500 thsd. people);

- unemployment benefits – only 2.1 thsd. unemployed out of 47 thsd. registered unemployed received in 2008, average benefit amounted 391 TJS per month in September 2008;

- minimum wage - 60 TJS per month (increased from 20 to 60 TJS in 2008) is remarkable below the subsistence minimum.

Main labour policy measures are:

- job-placement service - public works – limited financial resources for active labour measures, - vocational training establishments

More effective tools influencing labour market outcomes outside social protection system are tax policy (payroll tax is heavy burden for enterprises in formal economy) and salary policy for government employees (benchmark for private sector).

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1.6. Expected labour market trends

Policy aspects The Human Development Report 2008 - 2009 (page 6,8) formulates main labour market problems:

- imbalance between fast increase of working population and inadequate speed of job creation,

- discrepancy between increasing number of graduates from higher education institutes and insufficient supply of graduates from vocational education,

- high share of informal work and low wages in formal sector,

- gender imbalances and increasing children employment, - underdeveloped labour relations, rigid labour legislation, lack of flexibility in

labour regulations,

- imbalances between education, skills and demand of labour market;

- other problems, such as unemployment, hidden unemployment, second work, forced work, internal and external labour migration, poverty.

The most critical aspect of Tajik labour policy is export of labour. As stated in Migration report, “Tajiks, who are traditionally sedentary people with a relatively low degree of migratory mobility, generally need very potent reasons to decide to move abroad together with their families for permanent residence.” (Tajikistan Migration … 2009: 4)

Protection of social rights of emigrants is problematic. In the Program 2006 it is stated that main partner – the Russian Federation, is not responsible in the field of legal labour migration, and Tajik international recruiting companies and other involved parties are no allowed to conclude direct contracts with employers in Russia. This leaves space for illegal migration, as demonstrated in table 2. The Migration Survey reports in 2009, that out of 30 international labour migration intermediate firms – holders of licenses of MIA in fact only 5 or 8 are working, that managed to employ only 1,600 persons last year. This number makes only 0.3% of the total number of labour emigrants. Indicators for 2007-2008 are the same.

Problems may arise in social care (pensions) for migrants who return back after working age. There should be clear account on costs and benefits of migration in longer run. In other words, not only benefits of remittances paid to-day to families should be taken into account, but also costs of education, health care and social insurance provided by taxpayers in Tajikistan should not be forgotten.

Provision of education for migrants and their social rights after return (pensions, health care) may be excessive burden for people living in Tajikistan after some time.

Other critical aspect is low professional qualification of work force in general and of people in younger age groups in particular. Official documents show that already in 2001 professional qualification of economically active people was low; many of them were

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individuals without professional skills. At the same time absolute majority high professional individuals from industrial sectors have had left country in the period before 2001 (Conception…, 2001: 4).

The third critical aspect is impact of labour export policy. It is expected that in the beginning of the organised labour migration process mainly low skilled workers are exported, but the prospective goal is to export qualified workforce. The country takes responsibility for education and training workforce for needs of employers in receiving countries. Russia was seen as main location of manpower from TR, but location must be diversified. However, costs and benefits of these measures are not assessed. Both the Human Development Report (page 31) and Migration Survey show, that remittances do not impact job creation and employment in Tajikistan. Experts think that there is no proper mechanism for absorption emigrants’ remittances; however there are no examples when countries could establish such a mechanism. Emigrants use to return in their country when the economic situation is at least as good as in the emigration destination country.

The government intends to monitor the process and assure that sufficient manpower potential is provided within country. Yet, there are no proposals for economic development. For instance, the Program for assistance in employment of population of the Republic of Tajikistan for 2008 – 2009 envisages measures aimed at creation more jobs, but in public sector or in small business and start-ups. Such measures are essential for any economy, but they provide jobs in high risk sectors, generally providing only limited welfare. The scope and location of public works depend on the welfare of the state budget. Small businesses are effective if they have secure market through involvement in co-operation networks with large enterprises. Start-ups are risky zone per se, especially if business education level is low.

The same policy is repeated in the next planning period – in the Program for 2010 – 2011.

Future trends Labour market demand

As described below, labour market demand in a longer period (till 2020) will depend on the government’s economic policy.

According to the local demographic forecasts every year 100 – 150 thousand people will enter labour market. There may be job cuts in the economy in future due to obsolete equipment.

Inertia scenario In the National Development Strategy there are no indications about the number of jobs to be created as a result of the development of specific economic branches, the employment level to be achieved in these branches or the labour remuneration increase to aim for. Another major failing is that it is not clear what the need of the economy in specialists is expected to be and how and by whom they will be trained so as to suitably meet the needs of the developing branches of the economy.

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In the case of inertia scenario labour market demand may increase if internal financing through banks increase. If this happens, economic activity may surge in construction sector, building materials and food industry, financial services, trade. This development raises threats of overheating.

Increasing economic activity in export destination countries may raise demand for basic metals thus expanding production of these products. Higher demand may not increase employment in these sectors, but may increase employment in transportation, trade and final goods production sectors due to growing population income and growing internal consumption.

Public investment in energy and road sector will create jobs in construction and trade.

Reform scenario If the reform scenario takes place, new jobs may be provided in nearest future. Together with developing of industry, energy sector and agriculture as basic sectors of the economy, the economic policy should be expanded towards promoting of job-intensive export oriented service sectors. Examples of such sectors are:

- IT based international services – media services, data basis, commercial services, etc,

- health care international services – diagnostics, recreation services,

- tourism – all kinds have high potential, - education and science,

- international transport.

All kinds of export will benefit to employment, public finances and investment, as well as increase capacity of internal market.

Tajik experts recognise that telecommunication sector has developed in Tajikistan, providing high-yield workplaces to 13 thsd. people. The communications and networks sector has good prospects for growth in the future.

Labour market supply

There are some long term projections of demographic situation and labour supply. Labour market will continue growing due to high birth rates in 2000 - 2007. It is expected that birth rates will decline, number of children and their share in population structure will reduce and number and share of people in age 65+ will increase. Forecast from the Concept of creation and preservation of workplaces in the Republic of Tajikistan in 2008 – 2015 adopted by Regulation Nr 74 of the government on 5 March 2008, is provided in Table 13.

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Table 13. Dynamics of demographic and labour resources (thsd. population) (forecast from the Concept of creation and preservation of workplaces in the Republic of

Tajikistan in 2008 – 2015) 1995 2000 2001 2002 2003 2004 2005 2006 2010 f 2015 f

Permanent population 5701 6250 6376 6507 6640 6780 6920 7064 7694 8662

Labour resources 2811 3186 3301 3463 3644 3777 3893 4047 3970 4490

Source: Republic..., 2009:10

Expert’s opinion based on statistical data of 2000 - 2009 differs from the government’s forecast. It is also provided in Table 14.

Table 14. Dynamics of demographic and labour resources (thsd. population) (experts assessment)

2000 г.

2002 г.

2006 г.

2007 г.

2008 г.

2009 г.

2010 г.

2011 г.

2012 г.

2013 г.

2014 г.

2015 г. Permanent

population 6250

6506,5

6920,3

7063,8

7345,1

7364,8 7516,9

7672,2

7830,7

7992,5

8157,6

8326,2

Labour resources 3186

3463 3893 4210 4320 4336,1 4501,2

4620,5

4728,6

4838,2

4951,1

5057,1

Source: Republic..., 2009:10, 11

Population estimates of respectable international organisations are also available:

- United Nation’s Population Division estimates (World… 2010) (the most respectable population forecasts), as published in

- Forecasts of the U.S. Census Bureau, International Data base, as published in

- United Nation forecasts published in World Population Ageing 1950 – 2050.

- The World Bank forecasts, as published in the World Development Indicators 2007.

These sources provide population estimations in larger age groups and aggregated time periods. For estimation of labour market trends in the Republic of Tajikistan, more detailed estimations are needed. Therefore, population estimations were calculated for need of this project. The fundamental basis for calculations is the “high level” version of projections produced by the United Nation Population Division. Latest UN Population Divisions estimations are provided in four versions: medium level (fertility) (8446 thsd. people in 2020), high level (fertility) (8660 thsd. people in 2020), low level (fertility) (8233 thsd. people in 2020), and constant fertility (8752 thsd. people in 2020).

Of these versions the “high level” version was selected for benchmarking of our projections, because historical trends do not justify remarkable decline in the indicators of

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natural growth. On the basis of the high level version it may be expected that labour market will continue growth.

Expert’s estimations give higher population figures compared with UN projections and the Wold Bank forecasts, but they are made on more realistic assumptions. For instance, the World bank projections (2007 World Development indicators) show that there will be 7.6 million people in Tajikistan in 2015, of which 39% will be in age group 0-14 years old, 57.2% - 15-64 years old, and 3,9% more than 65 years old. Dependence ratio15 will be low – 0.7 for young people and 0.1% for old people. Crude death rate will be 7, and crude birth rate 28, thus natural increase of population will be 21. Average annual population growth rate in period 2005-2015 will be 1.4% per year.

Latest available Tajik official statistical data show that number of population was 7373 thousand people in 2008. Since 1998 Tajik population has constantly grown by 2.1% annually. If this continues, the estimated number of population in 2010 would be 7686 thousand people. Thus the World Bank estimate seems undercounted.

Complementary, population trends in Tajikistan do not confirm remarkable decrease in natural growth figures and birth rate figures per 1000 population ant these figures are still high. Thus there is no reason to expect substantial decrease in population growth in nearest future.

U.S. Census Bureau has provided projections of Tajikistan’s population pyramids for 1988, 1995, 2000, 2003, 2005, 2010, 2012 and 2050. These estimates show changes in the population structure – not only the number of population in young age groups will increase but also the size of working age groups and groups over 64 years old will increase. These projections are reliable if there are no reasons causing high death rates among working age groups (wars, accidents, and professional diseases). In compliance with U.S Census Bureau estimations, the total number of population in Tajikistan will be 8044 thousand people in 2010 and 9985 thousand people in 2020. In 2010, 36.7% of population will be under working age, 55.7 will be in working age and 7.6% over working age. In 2020 the relevant figures will be 35.7%, 54.2% and 10.2%. These estimations are over counted for 2010 and the same may be true for 2020. Previous estimations of the United Nation Population Division estimate that in 2025 there will be 8.1 million people in the Republic of Tajikistan (World Population Ageing 1950 – 2050). It is important that the UN Population Division forecasts less population in early age groups. The fertility rate is expected to lower from 2.9 in 2000-2005 to 2.1 in period 2025 – 2030. Percentage of people in age group 65+ will increase to 6.5% in 2025 and high 14.3 in 2050. The share of people in age group 1-14 will decline to 25.5% in 2015.

Population estimations for this project is based on demographic data in 2006 and 2008 as provided in Демографический ежегодник Республики Таджикистан, 2009. TAJSTAT, 2009 and labour market data as provided in Статистический ежегодник Республики Таджикистан 2009, TAJSTAT, 2009.

Main assumptions of the population projections are:

15 Dependency ratio is dependents – people younger than 15 or older than 64 - as proportion of working age population (15064 years old). (2007 World Development Indicators, The World Bank publication).

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- fertility rates will slightly decrease;

- newborn mortality is reduced (affects group of population on 0 group);

- children mortality is reduced by 25%;

- the youngest mother’s age is 14 years old;

- of all newborn 60 % are males and 40% are females;

- working age is 15 - 58 (including) for women and 15 - 62 (including) for men (children work is not included);

- disability is not counted:

- economically active population is calculated from age groups 15 - 64 both for men and women, activity rates are calculated on the basis of Human Development Report - Figure 2.15;

- women participation in the labour market (share of economically active in total population in relevant age group) is increased;

- informal economy is not identified.

Retrospective checking of projection tool is made against statistical data of 2008 – the last available demographic data. The tool is due to every improvement in part of assumptions if better statistical data become available, as well as to any expending of forecasting period.

The results of the projections are presented in figures 31 - 37.

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Table 15. Changes in labour market supply in 2010 - 2020 Increase 2020 to 2008 by, % Population growth 30.9 Males 37.6 Females 24.2 Births 28.5 Deaths 48.4 Economically active population 46.2 Of which - males 43.8 Females 50.6 Population in working age 32.6 Of which - males 34.8 Females 30.5 Source: the population forecast

0.0

2000.0

4000.0

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12000.0

1991

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Under working age Working age Over working age Figure 31. Population projection, thsd. people Source: the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj), authors’ projection

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Born Died Natural increase Figure 32. Natural increase of population, thsd. people

Source: the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj), authors’ projection

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Born Died Natural increase

Figure 33. Natural increase per 1000 population, people Source: the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj), authors’ projection

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0.0

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Figure 34. Population structure, % and demographic burden Source: the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj), authors’ projection

0 500 1000 1500 2000 2500 3000 3500

2008

2009

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Males, thsd people Females, thsd people Total, thsd people

Figure 35. Labour force supply – economically active people, thsd. people

Source: the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj), authors’ projection

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30

35

40

45

50

55

60

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70

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Male Females Total Figure 36. Labour force supply: economically active in percent of population in

relevant age groups Source: the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj), authors’ projection

0

500

1000

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020600

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Working age males, thsd people Working age females, thsd people Over working age males, thsd people

Over working age females, thsd people Demographic burden Figure 37. Population over and under working age, thsd. people: gender aspect and

demographic burden Source: the State Committee of Statistics under the President of the Republic of Tajikistan (www.stat.tj), authors’ projection

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Part 2. Brief analytical document on countries with the same or similar background and development tendencies The same or similar economic situation and labour market situation means:

- low employment (50%); - high labour outward migration (statement is not supported by statistical data), - high self-employment level, - informal employment, - small number of taxpayers.

Ten countries that receive most income from migration are Rumania (USD 6.8 billion), Poland (USD 5 billion), Serbia and Montenegro (USD 4.9 billion), Russia (USD 4 billion), Bosnia and Hercogovina (USD 1.9 billion), Bulgaria (USD 1.9 billion), Croatia (USD 1.8 billion), Albania (USD 1.5 billion), Armenia (USD 1.3 Billion), Tajikistan (USD 2.6 billion) (Republic…, 2009: 30).

Three countries were chosen for deeper research:

- Republic of Philippines - Asian region, high development, market economy,

- Portugal – West-European EU country,

- El Salvador – Central America, similar emigration policy. USA is used as an example of internal State-to-state migration. It is advised to study experience of Uzbekistan (Asian region, better economic development, former Soviet country, currently CIS country), and Croatia – Central European region, transition country. The beneficiary also will have opportunity to obtain experience of new EU member state Latvia.

The main criterion for selection was size of country and growing labour market due to high natural increase of population that results in excess workforce.

Table 16 depicts comparison of selected countries by poverty dynamics.

Table 16. Poverty estimations of selected countries Proportion

of living less than USD 1.25 a day

1981 1990 2005

Target 2015

Annual rate of change 1990 - 2005

Change needed to achieve target 2005-2015

Annual rate of change needed to achieve target 2005 - 2015

Philippines 31.4 29.7 22.6 14.8 –1.8 –7.8 –4.2 El Salvador

14.8 15.9 13.5 8.0 –1.1 –5.6 –5.3

Tajikistan 1.4 1.5 21.5 0.8 17.8 –20.8 –33.6 Source: World Bank, Development Research Group (2009), as in Rethinking …, 2009:

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Republic of the Philippines Source for facts – The World Factbook at https://www.cia.gov/library/publications/the-world-factbook/geos/po.html, viewed on 28.04.2010.

Comparable features: - excess labour force, - emigration, - low participation rate in labour market; - informal economy.

Differing features:

- size (78 million population); - sea country; - worse economic development, - higher poverty, but improving.

The Philippine Islands became a Spanish colony during the 16th century; they were ceded to the US in 1898 following the Spanish-American War. In 1935 the Philippines became a self-governing commonwealth. Manuel Quezon was elected president and was tasked with preparing the country for independence after a 10-year transition. In 1942 the islands fell under Japanese occupation during World War II, and US forces and Filipinos fought together during 1944- 1945 to regain control. On 4 July 1946 the Republic of the Philippines attained its independence. The 20-year rule of Ferdinand Marcos ended in 1986, when a "people power" movement in Manila ("EDSA 1") forced him into exile and installed Corazon Aquino as president. Her presidency was hampered by several coup attempts, which prevented a return to full political stability and economic development. Fidel Ramos was elected president in 1992 and his administration was marked by greater stability and progress on economic reforms. In 1992, the US closed its last military bases on the islands. Joseph Estrada was elected president in 1998, but was succeeded by his vice-president, Gloria Macapagal-Arroyo, in January 2001 after Estrada's stormy impeachment trial on corruption charges broke down and another "people power" movement ("EDSA 2") demanded his resignation. Macapagal-Arroyo was elected to a six-year term as president in May 2004. The Philippine Government faces threats from three terrorist groups on the US Government's Foreign Terrorist Organization list, but in 2006 and 2007 scored some major successes in capturing or killing key wanted terrorists. Decades of Muslim insurgency in the southern Philippines have led to a peace accord with one group and on-again/off-again peace talks with another (The Factbook, 2010).

By 2009, the Philippines has become the world's 12th most populous nation, with a population of over 92 million. Population growth rate between 1995 and 2000 was 3.21% but has decreased to an estimated 1.95% for the 2005 to 2010 period. There are about 11 million Filipinos outside the Philippines (in US, Canada) (Wikipedia).

Philippine GDP grew barely 1% in 2009 but the economy weathered the 2008-2009 global recession better than its regional peers due to minimal exposure to securities issued by troubled global financial institutions; lower dependence on exports; relatively resilient domestic consumption, supported by large remittances from four-to five-million overseas Filipino workers; and a growing business process outsourcing industry. Economic growth

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in the Philippines has averaged 4.5% per year since 2001, when President Macapagal-Arroyo took office. Despite this growth, poverty worsened during the term of Macapagal-Arroyo, because of a high population growth rate and inequitable distribution of income. GDP per capita is 3300 USD in Philippines (World Factbook, 2020).

Macapagal-Arroyo averted a fiscal crisis by pushing for new revenue measures and, until recently, tightening expenditures to address the government's yawning budget deficit and to reduce high debt and debt service ratios. But the government abandoned its 2008 balanced-budget goal in order to help the economy weather the global financial and economic storm. The economy faces several long term challenges. The Philippines must maintain the reform momentum in order to catch up with regional competitors, boost trade, alleviate poverty, and improve employment opportunities and infrastructure. Inadequate tax revenues could limit the government's ability to address these issues.

Three groups of workers are commonly identified in the labour market in the Philippines ( Fashoyin, 2003:1-2). The first is the wage and salary-earning group - 14.438 million people in 2001, representing nearly half of the total employed workers. Of this, about 10.74 million workers (or 36.1%) were employed in private establishments in January 2002, and another 2.39 million (or 8.03%) in government and government corporations. They were, in the main, covered by labour law and industrial relations processes.

The second group comprises “own account” workers, accounting for about 11.27 million (or 37.92%) of the total employment in January 2002. The larger proportion of this group, i.e. 9.66 million (or 32.52%) was self-employed, while 1.60 million (or 5.39%) were categorized as employers. The third group is the “unpaid family worker” category, accounting for 4.03 million workers (or 13.56%) of total employed in the same year. This gives a combined total of about 15.30 million (or 51.48%) workers. Most of the workers in both groups are probably operating in the informal economy.

Thus the labour market in Philippines has similar features.

Fashoyin makes three observations in respect of increasing employment in Philippines. First. Much of the gain in employment has been due to expansion in casual employment, such as part-time work, particularly in agriculture and trade (part-time employment accounted for 87.7 per cent of total employment growth in 2001, the growth in full-time employment was a mere 0.3 per cent).

Second, it is very likely that official statistics do not capture the full scale of formal employment.

Third, despite the huge size of the informal economy, the legal provisions on the protection of employment rights, such as the constitutional provisions on “social justice and human rights”, as well as the provisions of the Labour Code, are basically in favour of the wage employment sector, and particularly organized labour.

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Portugal Source for facts – The World Factbook at https://www.cia.gov/library/publications/the-world-factbook/geos/po.html, viewed on 13.04.2010. Comparable features:

- size, population trends - growing population (10.6 mln. people in 2009) - emigration in past.

Differing features:

- better economic development;

- sea (ports) country;

- landscape;

- lower poverty rate, improving.

Portugal was a global maritime power during the 15th and 16th centuries, but lost much of its wealth and status with the destruction of Lisbon in a 1755 earthquake, occupation during the Napoleonic Wars, and the independence of its wealthiest colony of Brazil in 1822. A 1910 revolution deposed the monarchy; for most of the next six decades, repressive governments ran the country. In 1974, a left-wing military coup installed broad democratic reforms. The following year, Portugal granted independence to all of its African colonies. Portugal is a founding member of NATO, OECD country and entered the EC (now the EU) in 1986.

Portugal has become a diversified and increasingly service-based economy since joining the European Community in 1986. Nowadays the strategic goal is to increase export oriented service production. Over the past two decades, governments have privatized many state-controlled firms and liberalized key areas of the economy, including the financial and telecommunications sectors. The country qualified for the European Monetary Union (EMU) in 1998 and began circulating the euro on 1 January 2002. Economic growth had been above the EU average for much of the 1990s, but fell back in 2001-08, and shrank 3.3% in 2009. GDP per capita stands at roughly two-thirds of the EU-27 average. 9% of total population gets less than 40% of the median income, less than 50% of the median income is about 21%, less than 60 % - about 21-42% (estimations according to OECD poverty indicators).

A poor educational system, in particular, has been an obstacle to greater productivity and growth. Portugal has been increasingly overshadowed by lower-cost producers in Central Europe and Asia as a target for foreign direct investment. The budget deficit surged to an all-time high of 6% of GDP in 2005, but the government reduced the deficit to 2.6% in 2007 - a year ahead of Portugal's targeted schedule. Portugal's financial sector has been relatively insulated from the global financial crisis and the government has not spent much on shoring up banks. Nonetheless, the government faces tough choices in its attempts to stimulate the economy, while trying to keep the budget deficit within the euro-zone 3%-of-GDP ceiling. In 2009, the deficit reached 6.8% of GDP.

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Currently Portugal faces heavy impact of the global economic crisis. Main labour market policies and instruments are being revised.

The Portuguese labour market policy follows EU guidelines. The Portuguese National Action Plan for Employment (NAP) is the main instrument for the labour market policy. It was adopted in 1998. The NAP transposes to the Portuguese reality the contents of such guidelines, with the adequate adjustments required by the national specificities, establishing objectives, quantified targets and action deadlines, as well as defining new programmes and measures. The objectives of the labour market policy were focusing on the promotion of an adequate transition of the youngsters in active life, on the promotion of social and professional insertion and fight against long term unemployment and exclusion, on the improvement of basic and professional qualification of the working population in a perspective of lifelong training, namely as a way to prevent unemployment phenomena, and on the preventive management and follow-up of sectoral restructuring processes.

Labour policy is an important constituent of EU social policy. Labour market developments are monitored and designed in annual National Action Plan for Employment. In many countries employment policy, as well as elaboration of Action plan is responsibility of the Ministry of Economics. In 2005, the European Union countries spent 2.1 percent of their GDP on interventions to support the labour market integration of the unemployed and other disadvantaged groups. The statistics shown are based on Eurostat’s Labour Market Policy (LMP) database. LMP expenditure includes the costs of services for jobseekers provided by the public employment services (LMP services – category 1), the cost of “active” interventions (LMP measures – categories 2–7: training, job rotation/jobsharing, employment incentives, supported employment and rehabilitation, direct job creation and start-up incentives) as well as “passive” supports, which mostly refer to unemployment benefits (LMP supports – categories 8–9: out-of-work income maintenance and support and early retirement). Of the total expenditure on Labour Market Policies,11 percent (0.2 percent of GDP) was spent on LMP services for jobseekers (mostly the costs of running the public employment services), 25 percent (0.5 percent of GDP) on LMP measures such as training and employment incentives, and the remaining 64 percent(1.4 percent of GDP) on LMP supports (mainly unemployment benefits). Portugal spends nearly 2% of GDP on implementation of its labour market policy.16.

The specific focus in recent labour market policy statements in EU is implementation of the flexicurity principle.

16 http://www.ifo.de/pls/guestci/download/CESifo%20DICE%20Report%202008/CESifo%20DICE%20Report%203/2008%20/dicereport308-db3.pdf

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El Salvador Source for facts:

- The World Factbook at https://www.cia.gov/library/publications/the-world-factbook/geos/po.html, viewed on 13.04.2010,

- the World Bank (http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/ELSALVADOREXTN/0,,contentMDK:22289972~pagePK:1497618~piPK:217854~theSitePK:295244,00.html).

Comparable features:

- size, history and demographic developments (high birth rates, low, age structure); - economic developments; - labour market developments - labour market policy – supported emigration and high level of remittances in

GDP.

Differing features:

- location – Central America, Caribbean, sea country, - climate, - the share of agriculture land is higher, - no mineral resources, - economic development is better, - land of volcanoes, - high urbanization rate.

The country achieved independence from Spain in 1821 and from the Central American Federation in 1839. A 12-year civil war, which cost about 75,000 lives, was brought to a close in 1992 when the government and leftist rebels signed a treaty that provided for military and political reforms.

El Salvador is the smallest country in Central America; it has the third largest economy. GDP per capita in PPP is 7100 USD (est. in 2009).

Up until 2007 El Salvador enjoyed sustained economic growth that lead to important socio-economic progress and substantial reduction of poverty. Between 2000 and 2005 the growth rate was 2.5 percent on average, and accelerated to 4.5% between 2006 and 2007. The rural-urban poverty gap reduced from about 16 percentage points to negligible difference in 2006. Many of socio-economic gains went to worst-off sectors, rural settlements and the poorest.

Nonetheless the growth has been insufficient in absorbing a large contingent of new entrants into the labour market, keeping unemployment high among youth. Overall unemployment rates were around 7%, youth unemployment was higher – around 12 percent. El Salvador accounts for about 30 thsd., new entrants into labour market. Of them, around 4 thsd. people would not be able to find jobs, and many of these who find job end in the informal sector.

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Recently the food, fuel and international financial crisis has hit households. Unemployment figures further deteriorate.

There are three main impacts:

1) GDP deceleration (still positive growth),

2) exports shrunk by 16% in the first five months of 2009,

3) remittances representing nearly 18% of GDP in 2005-2008 are expected to decline at least by 10%;

4) fiscal revenues declined.

In result, the poverty headcount ratio17 increased 6.1 and 9.8 percent points in urban and rural areas respectively. It is important that the cost of urban consumption basket increased more than rural (urban 17%, rural 15.6%) while poverty increased more in rural areas.

Government strategies in poverty reduction include:

- sufficient public expenditures in the social sectors, expanding of coverage of basic health and education;

- conditional Cash Transfer (CCT) Program for rural areas (introduced in 2005) (Red Solidaria) – cash benefit to program participants in exchange for a child’s school enrolment and regular health checkups, the program covers 100 poorest municipalities by 2009;

- coordinated actions of many institutional actors – the Social Fund, The Ministry of Health and Education etc and municipalities, as well as international aid via implementation of Red Solidaria;

- high capacity of the Social fund in use of several instruments for social program management (poverty maps for targeting, participant registers, transparent and auditable administrative and financial systems);

- after change of the state administration, the new government immediately launched a comprehensive Anti-Crisis Plan (ACP) to offset the impacts of the economic slowdown, which includes short- and medium term interventions in the following areas: (1) an income protection and employment generation program to protect vulnerable population impacted by either job losses or lower remittances; (2) the creation of a comprehensive and universal social protection system; (3) the strengthening of public finances, including actions targeting revenue and expenditures to create fiscal space for priority spending; (4) the implementation of a comprehensive consultative and participatory process underlying the preparation of a National Development Plan (NDP) and Sector Policy Strategies;

- the government has started to develop the Universal System of Social Protection (SPSU) – minimum social services and economic opportunities top all people;

17 In this example poverty is defined as the percent of population living under the poverty line. Official statistics report poverty as a percent of households under the poverty line.

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- the Communidates Soplidarias program which continues experience of Red Solidaria, is active in four areas: (1) human capital development; (2) provision of basic public services; (3) income generation and productive development;, (4) local governance,

- the government has launched a first pilot of Communidates Soplidarias Urban focused on basic social infrastructure and housing improvements, public safety and income support;

- the income support program is defined as an immediate policy priority within the CS Urban;

- the government has defined strategy for strengthening labour market intermediation, information and occupational training systems to provide better economic opportunities for the poor (Renacempleo strategy);

- The government has restructured the Presidential Office in order to help coordinate social policies, and design and launch the SPSU.

State to State migration flows in USA (source: “State…, 2003) An interesting migration example is state-to-state migration in USA. This may take interest of labour market policy makers in Tajikistan because it is a kind of migration between connected states. Tajikistan and Russia are two independent states yet they are members of the Community of Independent States and are in the status of close cooperation.

The report discovers that every US state has gained population during 1990s. It distinguishes two typical types of migration – retiree migration and labour force migration. The typical model was migration from cities to the suburbs, from California to Nevada, to adjacent or nearby neighbours, outflow from cold wealthy Northern states and Florida and back.

Among all migration flows two patterns of labour migration were found – from states that typically are destination of overseas immigration to other States; and from Southern States to economically better Northern states.

This finding is useful to understand motives of migration and propensity of migrants to return home. As a rule increasing globalisation, better communication and population trends in developed countries will attract people for less developed countries for non-return migration.

Lessons to learn from examples:

- external labour migration have not improved country’s economic development;

- external migration makes country vulnerable even if the share of remittances to GDP is 16% (about 50% in Tajikistan),

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- deficiencies of external labour migration expose during crisis, when making conditions worse;

- in remittance based economy rural population suffer more

- increasing globalisation, better communication and population trends in developed countries will attract people for less developed countries for non-return migration;

- return emigration is a norm only if countries economic situation improves; - social policies matter in poverty reduction and income generation;

- labour market intermediation, information and occupational training systems is important measure to provide better economic opportunities for the poor;

- industrial relations matter in providing better employment (Philippines);

- high operational capacity of responsible state institutions is very important (El Salvador, Philippines).

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Part 3. Proposals for improvement These proposals were elaborated on the basis of the results of investigation of current macroeconomic and labour market developments, macroeconomic projections and expected labour market trends (Part 1 of the current research), and analysis of situation in other countries with similar socio-economic conditions (Part 2 of the current research)

The particular proposals concentrate on items indicated in expert’s ToR. Opportunities to build a comprehensive balance between the labour force demands in internal and international labour market and availability of appropriate labour force

The first and foremost goal is to improve recording and monitoring of internal labour market, to legalise all kinds of acceptable private activities and thus to increase the level of inclusion into labour market. We suggest introducing international standards in classification of labour market indicators in order to use experience of comprehensive, harmonised and internationally comparable statistical recording. This would help to understand better labour market situation in Tajikistan in national and international aspects, and assess more precise the mismatch between the demand and availability of labour force.

According to the currently available information, there are important discrepancies between the labour demand and labour supply, work input and work remuneration, and unfavourable structural changes in the Tajik economy - from production of final goods to primary levels of production. There is also insufficient provision of vocational and higher professional education. This means that in the nearest future opportunities to build a comprehensive balance between the labour force demands in internal and international labour market and availability of appropriate labour force will be poor. Using terms of Tajik political terminology, neither quantitative nor qualitative balance is possible without substantial reforms in economic structural policy, labour market policy, and education; and, not excluded, the state management system. The background issue there is effective economic policy that is focussed on effective use of natural, financial and labour resources. Effective use of labour resources means first and foremost education and employment of people in their own country.

Typical feature of Tajik labour market is low involvement in local market. In compliance with strategic documents, low involvement is due to weak economic development. As far as right to work is among the constitutional rights of Tajik population, employment is provided through organised migration of labour force. The government assists labour migrants in finding jobs outside the country, education and protection of migrants’ social rights outside Tajikistan.

We consider export of labour force as a critical aspect of both economic and labour market development and suggest employing more people in Tajikistan instead of promoting export of labour force.

Following are the most urgent tasks in socio-economic and labour market policy:

- to concentrate on internal economic development and structural reforms in economics as a basis for better employment,

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- to increase role of private sector in economic and social activities, to avoid any discrimination or neglecting the role of private sector in economic development plans, structural policy and legislation,

- to introduce principle of subsidiarity in allocation of economic and social activities between private and public sector and between national and local levels of the public sector,

- to legalise all kinds of private activities in order to eliminate informal economy and illegal activities, improve tax collection,

- to increase role of private sector in traditional public spheres – education, health care, social assistance, creation and maintenance of social and physical infrastructure, to introduce public-private partnership for co-operation in accumulation of financial resources,

- to improve co-ordination of employment policy with other state policies, primarily with the economic development policies,

- to increase share of economically active and employed population by better organisation of employment process (creation of inclusive market) by:

1) better accounting of national features (settlement), preferences and natural resources in economic development and structural reform policies,

2) expanding involvement in education in rural locations, 3) improvement of infrastructure and communication in remote locations;

4) including natural farming, crafts and other economic activities performed by individual workers or self-employed into general economic system;

5) complementing economic activities in remote villages by nature based business – tourism, industrial production, health care products from agriculture in small and medium size enterprises.

In education the vocational and higher professional education (VET system) should be promoted in order to increase employability of workforce in a modern industry based competitive economy.

Evaluation of the proportions between registered and unregistered unemployed population

The share of working people could be increased with help of several measures:

- to improve registration of labour;

- to increase share of people employed on the basis of working contract by improving social dialogue;

- implementing flexicurity principles and continuing education in industrial relation issues - reforms in working time, minimum wage, social security for free lancers, self-employed and SMEs;

- measures to improve youth employment, etc.

Gender aspects and the most vulnerable groups – children, disabled groups

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It is advised to assess positive and negative impacts of employment quotas for the state enterprises.

Children work should be more strictly regulated.

Women participation is questioned.

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