KYRGYZ DOWNPLAY EXPECTED IMPACT OF NEW RUSSIAN

C O N F I D E N T I A L SECTION 01 OF 03 BISHKEK 000210

SIPDIS

SIPDIS

DEPT FOR SCA/CEN

E.O. 12958: DECL: 02/28/2017
TAGS: PREL PGOV ECON SOCI KG
SUBJECT: KYRGYZ DOWNPLAY EXPECTED IMPACT OF NEW RUSSIAN
RESTRICTIONS ON FOREIGN LABOR

REF: A. MOSCOW 654


B. BISHKEK 037

C. 06 BISHKEK 1022

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Classified By: DCM Lee Litzenberger, Reason 1.4 (b) and (d).


1. (C) Summary: With an estimated 500,000 Kyrgyz working in
Russia, sending back an estimated half billion dollars a year
in remittances, Russia's new restrictions on foreign labor
and outdoor markets (Ref A) have prompted concern here about
a possible sudden return of labor migrants and reduction in
remittances. President Bakiyev has reportedly asked Russia
for a quota of 500,000 places for Kyrgyz workers, and
Kyrgyzstan has passed a similar decree that aims to restrict
foreign -- mostly Chinese -- workers in outdoor bazaars and
markets. The Chair of Kyrgyzstan's State Committee on
Migration and Employment downplayed the impact of the Russian
laws, estimating that no more than 10,000-20,000 citizens
would return to Kyrgyzstan; others think the impact will be
greater. In any event, with the official unemployment rate
at 17.7%, the Kyrgyz economy has little capacity to absorb
any returning workers. End Summary.

MASSES WORKING ABROAD PROP KYRGYZ ECONOMY AT HOME
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2. (C) An estimated 500,000-800,000 Kyrgyz citizens currently
work abroad in mostly low-paying, unskilled bazaar and
construction jobs. With the entire labor force estimated at
2.2 million people, approximately 35-40% of the working-age
citizens are toiling outside of Kyrgyzstan. While labor
migrant destinations include Kazakhstan and Turkey, the bulk
of the migrants travel to Russia in search of employment. As
a result, remittances are estimated to be infusing as much as
half a billion dollars into Kyrgyzstan's economy. Precise
data on labor migrants are not available, and some estimates
put the number of migrants at one million and their
remittances at one billion dollars. One silver lining is the
abundance of job opportunities in neighboring countries,
which relieves the fragile economy from having to support the
otherwise unemployed masses in Kyrgyzstan.


3. (C) The flow of remittances is another positive result to
the loss of hundreds of thousands of working-age Kyrgyz
citizens who have left the country for better opportunities.
Labor migrants send remittances through official firms, such
as Western Union and Unistream, and unofficial channels like
bus and truck drivers and other individuals traveling back to
Kyrgyzstan. To emphasize the impact, journalists and
politicians note that the estimated remittances for 2006 of
roughly 500 million USD are approximately equal to
Kyrgyzstan's state budget for the same year. With a GDP of
2.24 billion USD last year, remittances play a vital role in
boosting the Kyrgyz economy and supporting a significant
portion of the population.

WILL RUSSIAN LABOR LAW WRECK KYRGYZ ECONOMY?
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4. (C) The Russian Federation recently introduced a law
limiting foreign traders to 40 percent of total vendors in
open-air markets by April 1, with the goal of eliminating all
non-Russian citizens trading in these bazaars by year's end
(Ref A). The law leaves Kyrgyz and other foreign traders
with few options: return to their home country to seek work
in a feeble job market, leave the bazaars for a new
profession in the construction or production industry, or
become a Russian citizen to ensure protection from the

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government at the cost of a portion of their salaries to
taxes. Those currently in country illegally may be forced to
return to Kyrgyzstan and re-enter Russia only after applying
for legal status. The law threatens to disrupt Kyrgyzstan's
fledgling economy, should a sudden influx of returning labor
migrants flood the already sparse job market. A second
scenario is the possibility that Kyrgyz become Russian
citizens en masse and resettle their families in Russia,
significantly reducing the amount of remittances flowing back
into the country and depleting the overall population.
Kyrgyz officials report that over 80,000 Kyrgyz have received
Russian citizenship in the last two years but anticipate that
these numbers could rise sharply.

KYRGYZ INTRODUCE COPYCAT RESTRICTIONS ON FOREIGN LABOR
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5. (C) The Kyrgyz government has raised concerns about the
possible impact of the Russian laws. President Bakiyev has
reportedly requested a registration quota of 500,000 Kyrgyz
labor migrants from the Russian government. Also in response
to the Russian law, Kyrgyzstan has adopted a similar decree,
scheduled to take effect April 1, that bans all foreign
traders in open markets and limits to ten percent the number
of non-Kyrgyz retailers. Most affected would be Chinese
citizens, who make up a large portion of foreign traders in
southern bazaars and retailers in the north. Chair of the
State Committee for Migration and Employment Issues (SCME),
Aigul Ryskulova, told us that she hoped the new Kyrgyz
regulation would open up jobs to offset the influx of traders
returning from Russia (Ref B),optimistically theorizing that
Kyrgyz traders forced to leave Russian markets could replace
Chinese traders in Kyrgyzstan's open markets.


6. (C) The new Kyrgyz labor regulations have already sparked
controversy. Inom Abdurasulov, a member of parliament from
Osh who supports the Kyrgyz restrictions on foreign traders,
told Poloff he expected the new regulation would be changed,
because "the Chinese are much too powerful in the south and
the government wants to avoid more civil strife."
Abdurasulov thought that the government would amend the
decree to allow foreigners to continue trading for a fee
because "all they want is the money, they don't care about
patriotism." Deputy Foreign Minister Kadyrbek Sarbayev
complained to DCM that the law was already causing huge
headaches for him in dealing with the Chinese. Tensions are
reportedly high in the southern bazaars. In early February,
Kyrgyz traders from Kara Su, the largest market in southern
Kyrgyzstan, held demonstrations in support of the decree and
against Chinese labor migrants, accusing them of "impeding
their commercial activities" and even threatening violence
"if necessary." Demonstrations in support of the Chinese
traders, backed by Kyrgyz businessmen keen to the economic
benefits of their link to trade with China, were also
reported.

KYRGYZ MIGRATION OFFICIAL NOT WORRIED BY RUSSIAN LAW
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7. (C) SCME Chair Ryskulova downplayed the possible impact in
Kyrgyzstan of the Russian law. During a recent meeting with
the DCM, she quoted more moderate estimates of 253,000 Kyrgyz
citizens working in Russia, approximately 80,000 of which
have already officially registered as migrant workers with
the Russian government. She felt that the implementation of
strict migrant labor laws would push the remaining illegal
workers to follow suit and register. Ryskulova predicted
that only a small number -- perhaps 10,000-20,000 citizens --

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would be forced to return to Kyrgyzstan. (Note: In earlier
statements to the press, Ryskulova had suggested that the new
Russian law would leave 100,000 Kyrgyz traders jobless. End
note.) She also believed that some Kyrgyz citizens would
benefit from the Russian program to help foreigners with
specific job skills take up citizenship, with the added
incentive of pre-determined employment, housing, and
stipends. She confirmed that the program's quota for 2007
was 50,000 foreigners to be offered the incentive package,
with the quota increasing by 50,000 each year through 2009.
It was unclear whether these workers would be required to
return to their home country to apply. (Note: These figures
are minute in comparison to the estimated 11 million labor
migrants currently working in Russia. End note.) Ryskulova
believed that many migrant workers in Russia have already
received Russian citizenship or are awaiting approval of
their application.

RUSSIAN EMBASSY: NO APOLOGIES
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8. (C) At a recent meeting of OSCE representatives, Russian
Ambassador Vlasov said that illegal immigration in Russia was
"uncontrolled;" President Putin had no choice but to take
matters in hand and enforce order. He noted that foreign
workers forced to leave Russia could apply to return legally,
and said that Russia was allowing 50,000 in 2007, 100,000 in
2008, and 150,000 in 2009. This was a generous policy, and
it would also improve the living conditions of foreign
workers in Russia, he claimed. (Note: This version clearly
contradicts Ryskulova's understanding that the program would
offer citizenship, rather than provide a registration quota
for foreign workers. End note.)

COMMENT
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9. (C) It is not clear what impact the new Russian
regulations, which come into effect on April 1, will have on
Kyrgyz migrant workers. The Kyrgyz government's lead
official on the issue seems to believe in the best case
scenario, suggesting that only 10,000-20,000 will return to
Kyrgyzstan, and many of them will come with money earned
abroad to start new businesses here. In any event, the
government has done little to prepare for the possible
negative impacts, and with official unemployment at 17.7%,
the Kyrgyz economy has little capacity to take in an influx
of returning workers. Thus, as is unfortunately the all too
predictable pattern here, whatever the consequences of the
Russian legislation, the government will be ill-prepared to
address them, and the individual Kyrgyz citizens who suffer
the consequences will be left on their own to cope. END
COMMENT.
YOVANOVITCH