The research analyzes the impact of global economic crisis threat on remittances, towards the economy and internal stability of Tajikistan. The study will help in examining how the economic slowdown has led to reduced remittances to the country and how this in turn, is a threat to the internal stability of Tajikistan. The research question of the paper focuses on analyzing the viscous chain that ultimately leads to a threat for the internal constancy. The research utilizes the information obtained from secondary sources in the form of literature review. The ‘Literature Review’ methodology has helped in analyzing the research question in detail and has provided with an in- depth discussion on the concerned topic. For the Literature Review, a number of online articles have been analyzed to find out the facts related to the global crisis, reducing remittances and threat to internal stability of Tajikistan.
Important conclusions have been gained from the research and it has been found that increasing economic crisis has resulted in reduction of remittances to Tajikistan, which has further weakened its economic situation. This might result in shattering of the economy and has increased the social tensions in the country. This has further increased the intimidation to internal stability and will lead to collapse of the political set up of the country. This will create tensions in the whole Central Asian reason.
The research paper will make the people aware of the problems that the country is facing. It will motivate world organizations to work in this direction. Though, already many programs have been implemented by international organizations for the development of Tajikistan.
Chapter 1: Introduction and Background
The economic crisis of United States of America has made its way to the economies of the Central Asian nations. The global economic crisis is showing its impact upon the economy of Tajikistan. This global crisis is threatening not only the economy of the country; but also its internal stability. This current downturn seems to have crippled the entire state of the country. The country history doesn’t boast of much of internal stability, as it has plunged into civil war that had destroyed the very economy of the state. Through this paper, the threat of the global economic crisis on remittances towards the economy would be studied. In addition, the impact of this crisis over the internal stability of Tajikistan would also be analyzed.
At this crucial point, the country faces an uphill task of lifting itself from falling into the deep trenches of this global economic crisis. The country has various challenges to overcome, in order to successfully combat the current crisis. The various challenges to this economy include weak infrastructure in the country, the inadequate, insufficient and ailing health and education systems and failing institutions like the financial system and the civil service. These are not only the cause of concern for this nation, the country’s geography and demography, as well as, the internal stability make the matter worse for it. The country already had host of problems and this economic crisis has just added to its misery.
The country has to address a number of challenges and needs; but it does not have adequate resources to combat them. The state of current condition of the country can be judged from the fact that the proposed plan of Government has various modest goals set too in their planning. Due to the various resource and capacity constraints, the Government doesn’t have enough on its platter to help the failing economy. The global catastrophe seems to have come at a very wrong point for this nation.
Various problems have only aggravated the situation of this country. The country still has not been able to lift itself from the energy crisis, which originated in late 2008 and early 2009. Its relations with the Russia have just added to the woes, as this has raised the graph of social and economic problems, which the country had been facing since its fall out from the former Soviet Union. The global economic disaster had acted as the last nail in the coffin of the ailing country. All these factors have resulted in creating a deep impact on the nations’ internal political matters. These problems are now threatening the political stability of the country.
According to various Analysts, these prevailing conditions would ultimately result in the total failure of the state. The rising monetary problems and the continued failure of the Government in combating them would bring the whole country to a standstill. The country at this point, would be unsuccessful to perform its basic functions. This situation would result in threatening the steadiness of the nation’s neighboring country and the whole region would plunge into a series of hostilities against each other. This crisis would be so deep that it might have dangerous impacts on the stabilization operation of NATO (North Atlantic Treaty Organization) in Afghanistan.
Some Analysts even point out that in coming months, this situation might result in eruption of hostilities due to the rising dissatisfaction in people. There might be possibilities of overthrowing the current regime, if this happens, then, this would pull the country in more chaos and internal conflict. The country might have detached from Soviet Union years back, but still its economy is deeply affected by the development in the Russia. Therefore, the developments in the neighboring Russian Federation would affect the developments in this realm.
Tajikistan is considered to be having the worst economy of the various nations that were carved out of the former USSR. The country’s GDP in 2007 accounted for US$3.2 billion, while the per capita income was estimated to be only US$578. The inflation rate has shown a continuous increase in recent years with the inflation rate in 2008 recorded at 19.8%. The balance of trade turnover in 2008 was recorded in negative, reflecting the imbalances in the exports and imports.
In 2008, the average salary was estimated to be US$68. It would be unfair to compare the nations with other break ups of Soviet Union, if the flagging condition of its economy is seen. On those bases it would more better to compare it with poor nations of Africa or Asia. The development of Tajikistan has faced several hurdles in the past. These hurdles are of varied nature, as it includes various geographic and historical factors, as well as, economic and political factors. The economic factors include the poor development of the industry, weak infrastructure, lack of communication networks and foreign investments.
There were various political factors that affected its economy badly. These political factors came in picture right after its break up with USSR. This civil war in particular had a major role to play in devastating the economy of this nation. The civil war although ended in a settlement, but it failed to bring any benefit to the country. The post of country’s president has been held since 1994 by Emomali Rahmon. He hasn’t gained from any of the settlement reached either in civil war or the interest of West due to Afghanistan’s related war on Terror. He hasn’t made much effort to change the state of the country he rules.
The present political system of the country suffers from many problems major among them include country’s internal problems like corruption, clan system, favoritism, bureaucracy, the participation of Government’s machinery and structures in smuggling of drugs in this region. In order to understand this crisis, the background of country’s current political and economical state is essential. Further in the passage, the economy of the country, as well as, the history of political stability has been elaborated upon.
Economy of the Country
The country became the poorest nation in the Central Asia after coming out of the clutches of civil war in 1991. Its foreign exchange mainly comes from the cotton and aluminum exports. Due to this, the sensitivity of the state to external imbalances has increased. The deteriorating health of the economy can be noticed from the fact that in the year 2000, the country’s rehabilitation program was entirely dependent upon the international aid. This rehabilitation program brought back the combatants of civil war into the mainstream, which assisted the country in making peace at both ends.
The international aid was required to assist the country in combating the food crisis it had encountered due to severe drought. After the civil war, there was some recovery in the economy, as it grew considerably. According to the data rendered by World Bank In the time period of 2000 -2004, the GDP of the country grew at the rate 9.6%. This growth in GDP led to improvement of the country’s position among other Central Asian countries like Turkmenistan and Uzbekistan. But since then this disastrous phase the economy of the country has fallen on the wrong side of progress. According to the figures available nearly 57% of the population of this country lives below poverty line.
The country is stricken with widespread poverty. The exchange rate of dollar is estimated to be 0.82 Somoni. The wages of the country are too low amounting to nearly $2-3 per day in 2007. The civil war which lasted for six years has resulted in inflicting innumerable problems for the country like straining relationship with Russia. The estranged relationship with Russia has resulted in loss of subsidies and more importantly the loss of its products market. The country has to look for assistance from Russia and Uzbekistan and other international humanitarian bodies to fulfill the country’s basic needs.
In addition to this, the country faces the uphill task of bringing back the refugees and combatants of civil war in the country’s mainstream. The stability of the nation and pace of peace progress has important part to play in attracting the foreign investment, as well as, on determining the country’s future. In the 1990’s, the GDP per capita of the country felt by 67%. In the financial year 2000, the Government of Tajikistan went into reform mode and took steps towards promoting macroeconomic stabilization and certain institutional reforms even though it faced end number of protests.
The Government also pursued privatization in small enterprise; with this, it also increased the privatization of medium-sized and large-owned enterprises. The Government budget in 2001 was in balance. Till 2005 the growth rate of the financial system was in good shape, as the annual growth rate was above 6 percent. The main industries of the country consist of the following:
· Mining and Minerals
· Industry and Manufacturing
The country’s economy is highly dependent on agriculture and livestock breeding. The reason behind this dependence on agriculture is due to the economic downturn it faced with crumbling of Soviet rule and the civil war that plagued the country. Nearly two third of the country is employed in subsistence agriculture. Nearly 900,000 of the total workforce of the country are employed in Russia or other countries. Poverty is major problem plaguing the country, as nearly two third of the population is in poverty. The official corruption is one major issue that is posing problems for the country.
The lowlands of the country specialize in the production of cotton, wheat, barley, fruit, vegetables and mulberry trees. A significant portion of the population of the nation is also engaged in breeding of sheep, dairy cattle, goats and yaks. The country also boasts of deposits of silver, gold, uranium, tungsten, zinc, lead, coal, antimony, salt and mercury. But due inadequate mining and raw-materials processing facilities, the country has not been able to take benefit of it. There is also significant amount of petroleum found in the economy.
The country’s hydro- electric resources are abundant, but the poor management of these resources has resulted in power shortages. Other industries which have suffered due to its separation from the Soviet Union include ginning cotton, spinning of silk, winemaking, carpet weaving, metals processing and textiles manufacturing. The major exports of the country include aluminum, electricity, cotton, fruits, vegetable oil and textiles. The major imports include petroleum products, electricity, aluminum oxide, machinery and equipment. The country’s trade is primarily with Netherlands, Uzbekistan, Russia and Turkey.
Inflation is the major crisis faced by the country and it has been a major obstacle affecting the economy’s growth. From 2001 to 2003, the inflation rate of the country swung from 33 percent to16.3 percent. In 2004, there was drastic cut in inflation rate, as it reached the mark of 6.8 percent; but again it increased to 710 percent in 2006.
Political Scenario of the Country
The country has witnessed a series of up and downs, as far as the political scenario of the country is concerned. The country got its independence after the fall out of Soviet Union in 1991. But this independence was short lived because the country soon fell into a civil war, which continued for six years. This internal turmoil was a result of tensions between the ruling elites and disenfranchised regions, democratic and liberal reformists and Islamists, who were under United Tajik Opposition. There were also other combatants and armed bands, which were not a part of any party and neither showed any kind of inclination for them.
This civil chaos reached its peak during the time period of 1992-93. In 1997, there was a settlement reached between the United Tajik Opposition and the ruling Kulyabi-led Tajik Government. This peace accord was implemented in 2000. After this peace accord, the Government is slowly building this nation. There is presence of Russian military in the country to guard its border with Afghanistan. The Russian 201st Motorized Rifle Division, which mostly consists of local Tajik officers and soldiers never left the country and continued to be there.
The credentials of Parliamentary and Presidential Elections held in years 1999-2000 were doubtful, as they were labeled unfair by many, however, these elections were considered peaceful. The Government made strong secular image by including Islamist in the administration. There were problems in the country due to insurgency in Afghanistan prior to throwing of Taliban in 2001. These forces posed major threat to the peace prevailing through the accord. In 2004, there were threats to the peace when the tensions between President Emomali Rakhmonov and former warlords had increased creating ripples in the politics of the state.
Even though the life in general has turned peaceful; but still the country continues to fight the prevailing conditions. There is abundant poverty and more than half of the population is dependent on the international assistance. The economy is still burdened with aftermath of the Soviet past. There is too much of intervention by the State Government, which does not reflect a healthy democracy. There is too much corruption, as the state structures are involved in promoting it. This has resulted in driving away the foreign investors from the country.
The current situation and the global recession have just added to the country’s problem. There is tension everywhere, for, the country is battling too many hostilities with inadequate resources.
Chapter 2: Aims & Objectives
Aims & Objectives
The aim of this research is to explore the impact of global economic crisis on the economy as well the political scenario in the Tajikistan. The paper would look at the impact that this global phenomenon on the current state of this nation which was marred by civil war since its inception. The objective of the paper is to look at the devastating impact of the current recession on the economy of the country. The internal stability of Tajikistan has been on stake due to this current crisis. In this research the different aspects of this crisis on the political scene in the country would also be studied.
Statement of Research
The research statement for this particular research which studies the impact of the global recession on economy and the internal stability of Tajikistan is given below:
“The current global economy crisis is a potential threat to remittance to the economy and internal stability of the nation of Tajikistan.”
Chapter 3: Literature Review
Tajikistan is an underdeveloped country and its economy is very poor. Moreover, the economic slump all over the world has led its economy into a more miserable plight. The recession has not only affected its economy; but is also likely to affect its political stability. This section will be a review of the already available facts and figures related to the research question. It will help in arriving at some meaningful conclusion and in analyzing the research question.
According to the information obtained from the US Department of State, Tajikistan faces great corruption in its political field and the economy is continuously going down. It is analyzed from the information that power is concentrated with only a few individuals. The country is also involved in the opium and heroin trafficking and this is a great threat to the political stability of Tajikistan. The crimes in the country have been increasing continuously due to lack of resources available to the people and disease like HIV/AIDS is also rising at a rapid rate. This clearly shows that there is lack of awareness among the people. The only source of foreign revenue for the country is the exports of cotton and aluminum. The information also states that the external happenings all over the world also affect the economy and stability of the country to a great extent. This signifies that the economic recession has greatly affected the financial system and political stability (Background Note: Tajikistan 2009).
From the presentation on “ECA region and the global economic crisis” it can be analyzed that the GDP growth of the countries has been affected to a great extent in Russia and Tajikistan is one of them. The remittances to the country have also reduced and are affected greatly. This directly creates a bad impact for the economy of Tajikistan and also the political stability of the country. The ECA region is heavily impacted by the financial catastrophe. From the figure on growth of migrant remittances, it can be clearly seen that the global, as well as, ECA remittances have been continuously falling in 2008 and 2009, as a result of the economic downturn. Unemployment has been rising along with rise in imports and a fall in exports. This has badly affected the economic condition of Tajikistan. The country should focus on attaining long term productivity and social stability (Rohland 2009).
From the Country Programme Document for Tajikistan, it can be analyzed that the country faces a number of challenges relating to its economy, administration and resources. The country needs to work for the economic prosperity of its people and should put its efforts for reducing the poverty in the country. The remittances in the country comprise about 37 percent of the GDP coming to the country. But now there has been inflation in the country and the energy and food prices have raised to considerable levels. Due to the economic recession, the country is acing fiscal disaster, which has reduced the economic growth and the exports and remittances coming to the country. The foreign capital inflows have reduced and the condition of the nation is continuously deteriorating (Draft country programme document for Tajikistan: 2010 – 2015 2009).
It can also be identified from the report that the Government is corrupt as a result; the public finance is not managed in a proper manner. Everything remains centralized and the implementation of reforms is also very slow. Though, the country has launched various programs for reducing poverty, creating effective decision making, overcoming disasters and controlling the spread of diseases, but they have not been implemented in a proper manner. The programs have also achieved certain results, yet they are not so helpful in improving the condition of the country. Moreover, the economic downturn has worsened the situation and has affected the country in a great way. It is increasing the instability in the country and making it economically dependent on other countries. The UNDP program needs to work in the right direction to achieve the pre -decided goals for the country.
In the news article on Tajikistan ‘On the Road to Failure,’ looking at all the conditions the International Crisis Group has forecasted that Tajikistan is on the verge to decline. It has no efficient leadership and also lacks infrastructure. Most of the people have migrated to other lands and the money which these migrants sent at home is the main economic lifeline for the country. But as a result of economic slowdown, these remittances have highly reduced and the country is in a bad state. The cities that were earlier prosperous are also declining now and poverty is incessantly increasing over there. From the news article, it can be clearly analyzed that the country needs to reform its system and if economic downturn in the world will continue, then, this will create political, as well as, economic instability in the country (Tajikistan ‘On the Road to Failure,’ Think Tank Concludes 2009).
As per the article on “Government under Pressure”, it has been explained that due to global depression, the people are losing their jobs and there are huge price cuts. This crisis has created a social, as well as, a political impact. It has led to political instability in the developing, developed and underdeveloped countries. The social unrest due to unemployment and other factors is mainly responsible for political instability. The demand is reducing day by day and there are chances of financial crisis.
The social unrest can take the form of violent acts and can adversely harm the administrative settings of the countries. The political stability index has been formulated, which is based on indicators of susceptibility and economic suffering. They help in finding out the level of political instability in a specific country. The strong and the weak both types of democracies are likely to threaten and face political insecurity. Tajikistan is also a country that is under serious threat of facing unsteadiness and collapse of the Government. The income of the country is greatly affected by the remittances that have reduced as a result of great economic suffering in the world (Governments under pressure 2009).
In the report by Joshua Kucera, it has been clearly elucidated that Tajikistan is dominated by weak political, low economic development and lack of adequate resources. The fall in the oil prices has led to social unrest and the economic downfall in the countries like Russia and Kazakhstan, which has affected the flow of remittances in the country of Tajikistan. This has reduced the revenue sources of the country and led to rising pressure for its internal stability. The banking sector of Kazakhstan has weakened due to the economic break down.
There is a need for reforming the democratic system of the countries, to end up corruption. The economic issues need to be handled in an effective manner. There is great political pressure and economic down turn in the central Asian countries, which is a hazard to their internal stability. All the economies are undergoing a critical stage and moreover, the financial system of Tajikistan is in a very bad state, which is about to collapse. The administrative settings should be improved and reformed in the country (Kucera, 2009).
In the article by Falkowski, it has been identified that the economy of Tajikistan is dependent on Russia. The increasing energy crisis has led to tensions in relation to Russia. Tajikistan has now been considered as a failing state because its political and economic situation is in a awful condition. The dissatisfaction among the people has been rising and it might result in conflicts within the nation. This might also create a menace for the neighboring countries and worsen the situation of the country day by day (Falkowski 2009).
The political system is collapsing and the economy is also on the verge of decline due to reduction in remittances and exports. This will definitely bring internal volatility in the country and will create confusion in Tajikistan. In all, it can be identified that the nation is in a very miserable state and is very deeply affected by the economic depression.
From the information obtained by International Labor Organization, it can be identified that the people working outside Tajikistan, are the significant source of revenue for the country. The labors or the workers going to other countries should be given economic, as well as, social security. They have to face various difficulties, when they go for working in foreign countries. The economic crisis will result in unemployment of these people who are working outside, which will affect the remittances coming to the country. So, this in turn, will also affect the national income and GDP of the country.
The country is very much affected by the activities in the outside world. The ILO (International Labor Organization) has begun with a program known as ‘Start and Improve Your Business’, which is aimed at helping the unemployed people as a result of world recession. It is also assisting people in Tajikistan. It helps in providing good employment opportunities to them (Migrants in times of economic crisis: ILO/UNDP joins forces to make Tajik migration safe 2009).
In the report on “Migrant Worker Remittances Support Development in Tajikistan”, it has been identified that IOM (International Organization for Migrants) has been working effectively to provide help to the migrant workers from Tajikistan. It helps in generating employment for the people, who return back as a result of increasing economic slowdown. Remittances have a great impact on the development of the country. It aimed at fully supporting the migrants and analyzing the benefits that Tajikistan gains from the remittances earned through these migrants. Several programs and conferences have been organized for the supporting the migrant labors and analyzing their conditions (Migrant Worker Remittances Support Development in Tajikistan, 2006).
In the report on “Impact of Global Economic Crisis on Migrants and Migration”, it has been stated that the migrant workers form most of the major economic activities in a country and contribute maximum to the income of Tajikistan. If the immigrants are restricted to work in the foreign countries; this would worsen the situation of economic break down. The migrant workers are in the category that has the major threat as a result of the economic downturn, so efforts should be focused on their development. The report presented by IOM analyzes that financial crisis has imposed various restriction on the migrant workers in the foreign countries (The Impact of the Global Economic Crisis on Migrants and Migration 2009).
The working condition has been affected by the growing unemployment. In the year 2008, the remittances have reduced and in 2009, they are expected to reduce more, which is a serious threat for countries like Tajikistan. Moreover, the migrants are also not able to send money, as the trust in the banking authorities have reduced because of the increasing economic downturn. The IOM aims at protecting the rights of migrants and helps in avoiding discrimination. If proper and timely assistance is not provided, this might result in increasing internal instability due to various social tensions in the countries, which are largely dependent on remittances. Thus, the policy of IOM aims at removing all these defects.
In the report on “Central Asian countries”, it has been stated that the economy of Tajikistan remains much weaker in spite of increasing efforts of various authorities like IOM, UNDP, and ILO etc. The Corrupt Governmental set- up has worsened the conditions in the country. The country requires various social reforms that can help in improving the condition of the people. The European Commission has helped the nation in overcoming the problem of poverty and for managing public finance in an efficient manner. The EC aims at making developments in the field of energy, transport, education, border management etc. This has helped Tajikistan in a great way in overcoming its miserable situation. But more efforts need to be taken to avoid internal stability in the country as a result of recession (Central Asia Indicative Programme: 2007 – 2010 2009).
In the book, “Towards social stability and democratic governance in Central Eurasia: challenges to regional security”, the author has explained that the international capital inflows reduce as a result of the economic depressions. The economic and political environment of the developed countries influences the flow of money to the developing, as well as, underdeveloped countries. The weak global economic situation has affected the people working outside their original countries and this has finally resulted into slow economic growth all over the world. Tajikistan is also affected in this manner as the remittances to the country have reduces as a result of the economic slowdown. Labor migration has become an important source of earning in this country, which has affected its social stability (Morozova 2005).
The article from the economist intelligence unit about the country outlook provides a brief overview of Tajikistan. It also throws light on the prevailing situation in the country. According to this article, the state is on the verge of political instability. The forecast for various economic indicators points towards a declining economy. The growth of Real GDP is estimated to be just 2.5% in 2009. Inflation rate is expected to be high, as well as, the prices of international commodity would further go down. The current-account deficit is expected to grow further (Tajikistan 2008).
The domestic political scenario is expected to grow even worse as the threat of instability looms over it. Although, the country has come a long way from the civil war but still, there is rise in public dissatisfaction due to failure of the Government to provide solutions to various social and economic problems. The return of migrant people from various countries is expected to pull the nation in state of unrest. The Government would have to go in for crisis management to tackle various problems. The prices of the products exported are likely to come down.
According to the World Bank report on remittances forecast for 2009-10., these remittance are expected to go down. Many developing countries like Tajikistan are heavily dependant on these remittances, as these constitutes the money which their workers sent to their home countries. According to this report, the migrant workers are facing a lot of problems like job losses, anti-migrant sentiment and in some cases; even instances of violence have been reported. These are the results of the financial crisis that is troubling the global financial system at this time. According to the World Bank reports, these remittances are expected to fall $290 billion in 2009. The only positive thing that this report indicates is that these remittances would still outdo the private capital flows and official assistance given to these countries (World Bank Lowers Remittances Forecast for 2009 as Financial Crisis Deepens 2009).
According to the report “Tajikistan: Dushanbe Braces for Shock, As Remittances Set to fall off Cliff “by Konstantin Parshin, the downslide of the economy of Russia is having a significant impact on the country of Tajikistan. The Russian Government in order to pull their country from this crisis is hitting out at the migrants workers by reducing the number of workers working in these countries. These efforts by the Government in Russia are having a negative impact on the economy of Tajikistan. The country is a lot dependant on these remittances; it receives through the migrant work forces (Parshin 2008).
According to the top officials in Russia, these crackdowns on migratory workers quotas are important to ameliorate the conditions of the economy. This news has come as a shock to the migratory population, as it is expected to cut the jobs by half. Nearly 1 million Tajik nationals work in Russia. If this number is reduced, then, it would have an important impact on the Tajikistan’s economy, as these workers sent 98 percent of their income home.
In US congressional report “Annual Threat Assessment of the Intelligence Community for the Senate Select Committee on Intelligence”, the emerging challenges due to this global recession in Russia and Eurasia have been discussed. The five nations in this region, which includes Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and Turkmenistan, would be severely hit by the global recession. This situation might result in political instability in this region. This region according to this report is not at all prepared for dealing with violent extremism, economic crisis and other problem linked with distribution of water, energy and food (Blair 2009).
The worst affected country in this region would be Tajikistan, which has too much dependence on remittance by migrant worker. This economic loss would result in threatening the political stability in this region. This threat to political stability in this region can disrupt US and NATO’s lines of communication. In a report by Johannes F. Linn, titled “Tajikistan: Progress and Problems at the Heart of Central Asia”, the overview of this nation, as well as, the importance of the country stability in promoting the peace in the Central Asia has been talked about.
This report throws light on how the country has transformed from a war torn nation. The report talks about the importance of this country dealing with the current crisis to the peace process in Central Asia. The report talks about various crises facing the country. The first crisis is the economic downturn that the country is facing. This economic slow down has threatened not only the economic stability of the nation, but also the political stability (Linn, 2008). Secondly, the instability of the political leadership is a major cause of concern. This political volatility is an offset of this current economic problem. There is impending crisis from the external perception about the country, as it has always being portrayed in a negative light by the Western media.
According to this report, the Government should take proper steps to handle this problem. The Government should also view this crisis as a challenge and take necessary steps to bring in the reforms, which are urgently needed by the country. This crisis means that the country should call in for international assistance, so that this can help it to combat the situation more effectively.
According to the world report on Tajikistan, the country has done well after the settlement after peace negotiations. After the signing of the peace accord, the country transformed quickly from the state of civil war to internal stability. The nation also achieved political stability and a functional Governmental structure. The country’ has experienced certain economic success in this aspect also. For the period lasting till 2004, the inflation went down drastically and was under control. The exchange rate in this time period stabilized and also the external debt of the country reduced. However, the country even then, remained the weakest country of this region (Tajikistan: Country Partnership Strategy FY2006-09 2006)
In the report “Tajikistan: On the Road to Failure” the current state of the country has been discussed. It is being looked as a state, which is suffering the consequences of a weak leadership. The energy infrastructure situation in the country has gone for total change from bad to worse. The remittance from the workers who are in the neighboring countries also face the danger of cut down due to recession effect in the countries, they are working. These remittances are one of the major sources of income, which contributes to a big chunk of country’s income (Tajikistan: On the Road to Failure 2009).
The political scenario according to these reports is also going from bad to worse. The Tajik president Emomali Rakhmon is facing one of the biggest crises of his political career. The Government is facing a very severe economic crisis, which has resulted in soaring of country’s problem graph. This condition according to the report would result in civil outbreak due to their dissatisfaction with the current economic situation and Government’s inability to deal with them. Although, there are certain positive signs from the Government, which want to do something about this impending crisis.
In the article “Tajik Audit Reveals Huge National Bank Shortfalls” by Farangis Najibullah, the problem of corruption with the state structures in the country. In this report, the Author reveals how a current audit in the National Bank of Tajikistan has reported that nearly $1 billion of its fund are missing. The destination of these funds seems to be in a private investment firm and certain state program, which is targeted to bring out the sick agricultural sector from its current state (Najibullah 2009).
This audit is done by Ernst & Young, which is an independent financial-service and is available in the website of national bank. These reports show that a sum amounting to nearly $856 million went missing from the Bank’s funds into a private company known as ‘Credit Invest’. This company’s credit invest has directed the funds into a number of ventures. The interesting part is that these ventures were mostly run by some old head of bank or their relatives. According to this report, the bank officials are clueless, where the $220 million directed for the cotton’s industry’s development have gone missing. The state enterprise cannot provide important information to indicate that the missing money has been given to relevant projects.
In the report “Will the Economic Crisis Destabilize Tajikistan?” by Ilan Greenberg, the current political crisis of the country has been discussed. The current global crisis has shown negative impacts on the current political scenario. It has amplified with the effects of deep energy crisis in late 2008 and early 2009 and the problem with Russian Government, which has actually worsened the condition. The country has been suffering a lot since its break up with the Soviet Union.
As a result of this prevailing economic crisis and the gradual decomposition of this state, the country has been pulled into a place, where it can be categorized into a “failing state”. This signifies a condition, where the country cannot execute its basic role. This state of the country is not only a matter of concern for itself; but also the stability of the neighboring nations is under threat. Not only this, this state of Tajikistan is also a major problem for creating problem for NATO’s stabilization activities in Afghanistan (Greenberg, 2009).
It is expected that within few months an outbreak would be seen, which would be due to satisfaction among the public against the Government. There might be possible attempts to bring down the Central Government. If this happens, then, the whole country would be pulled into a state of chaos and conflicts. The development in the Russian economy would play a major part in this whole situation, as much of its fate depends upon the progress in this country. Nearly 98 percent of the remittance of the country comes from the Russia. Any problem with this state’s economy means possible economic loss to Tajikistan.
In the report “Tajikistan: Remittance Economy Leaving Long-Term Social Impact” by Rob Cavese, the Long-Term Social Impact of dependence the economy on remittance has been described. According to the report, the most important export of the country is its manual labor. Due to the economic crisis, the value of the commodity is decreasing. This decrease in value has formed social pressure on the poor economies of the world, which are heavily dependant on this remittance. Tajikistan is one such country, which is dependant on the money sent by its workers. According to certain reports by World Bank, nearly one half of the money in this nation comes from this remittance from the workers who are working abroad. This is one of the highest in the world (Cavese 2009).
Around ninety percent of this remittance comes from Russia. This system worked well from the country in the past as it benefited from the economic boom in Russia. But now, the impact of global economic crisis on this nation is putting pressure on the country. The too much dependence on the remittance is affecting the country’s economic health.
Claire Adamsick in her report “Tajikistan’s Hidden Economy” throws some more light on the excessive dependence of the country on money sent by its migrant workers. The country has one of the highest remittance rates in this world. The country is overtly dependent on the economy of Russia, as most of the migratory population of the country lives there. The global recession has sent the whole economy of Russia in a huge problem. In order to control it, the country has started cutting on its most of the migratory workforce, majority of them being from Tajikistan (Adamsick 2009).
There is a rise in ‘anti sentiments’ for them, which have even led to violent disruptions. This cut down of the money from the Russian economy has lefts more poverty in the nation of Tajikistan. According to Eurasia Net Reports, this remittance has dropped more than 50 percent between the period of September and November of 2009.
In the report by “Tajikistan’s Politics: Confrontation or Consolidation?” by World Crisis management shows that the country’s peace is at stake. Only once has a serious problem like this occurred after the civil war in 2004, when there were some problems between former Warlords and the President. Although, the problem has died down, but now again the peace of the nation is under threat from the growing dissatisfaction against the Government. There is poverty everywhere and the Government has failed to contain it. The growing corruption in the country has further aggravated the situation. There is intense pressure on the administration to pursue a reform strategy to put the Governmental Economy on the right track (Tajikistan’s Politics: Confrontation or Consolidation? 2004).
In a report in New York Times “Cash Flow from Tajik Migrants Stalls” by Sabrina Tavernise, the ill- effects of the dependence on this remittance by the poor countries of the world are shown. The financial crisis has reached its peak in the developing nations; and has started to show its effects on these poor nations of the world. The Writer has highlighted the case of Tajikistan (Tavernise, 2008). The remittance to these countries has started decreasing which is affecting the growth of their economies. This decrease rate is expected to be around 5 percent in 2009. This loss of money to these economies is expected to create chaos as they are highly dependent on them.
Chapter 4: Methodology
Methodology Chosen for the Research
In this research of effect of global recession on the remittance and internal stability of Tajikistan, the secondary data analysis has been used. In order to proceed with the research, firstly the research statement was prepared. The research statement for this research was “The current global economy crisis is a potential threat to remittance to the economy and internal stability of the nation of Tajikistan.” Due to the limitation of time and money, primary data could not be collected. Hence, secondary data was used. In order to utilize data, three steps were followed. These are
· Locating the data for collection
· Evaluating the data collected
· Verifying the data
Secondary data collection
Secondary data is the data which has been collected by the agencies or individuals in some other research for some other purpose. Secondary data analysis helps to get a clear understanding of the subject of the research. This analysis of secondary data helps to clearly understand the goals and design of the research (Marczyk, DeMatteo & Festinger 2005). The secondary data collection process involves scanning and skimming of the available data on the subject. The various sources of secondary data are listed below:
· Paper based Sources:
The paper based sources used for the research are books, periodicals, journals, abstracts, indexes, research reports, directories, conference papers, market reports, annual reports, books, journals, periodicals, abstracts, indexes, directories, research reports, conference papers, market reports, annual reports, organizations’ records, newspapers and magazines.
· Electronic Sources
The electronic sources used for this research are online databases and Internet sources.
· Official or government sources
· Various business sources or unofficial sources
Analyzing the secondary data
The analysis of secondary data involves a literature review of the available literature on this subject. Literature survey involves scanning scholarly articles, books, journals and other sources related to a particular issue or area of research. Literature review gives a succinct description of the article or a summary and then critically evaluates the source used. The main aim of the literature review is to provide an overview of important and relevant literature present on the subject.
The various components of the literature research are discussed below:
· Problem formulation: Problem formulation involves examination of the particular area of interest.
· Literature search: It involves searching of material or publication related to the subject.
· Data evaluation: Data evaluation is evaluating the available literature to find which of them is more relevant to contribute in understanding of the subject.
· Analysis and interpretation: It involves analyzing and interpreting the findings and conclusions of the selected material.
Justification of the Chosen Methodology
The secondary data analysis is appropriate in this research study as it is the most suitable to this kind of study. Using secondary data helps to provide an outline of the final design of the research product with inclusion of all kinds of data. There were many limitation like time and money due to which primary sources could not be used in this research. Hence, secondary sources were used for this purpose of research. The various advantages of the chosen methodology are given below:
· The utilization of this methodology helps in assessing the social process which would not be possible in inaccessible settings.
· This analysis is less expensive as it is more costly to collect primary data.
· This analysis helps to save considerable time which would be wasted in collecting primary data.
· The various problems involved in data collection can be avoided with the use of this methodology (Gill & Johnson 2002).
· Using such analysis helps the researchers to compare various data present on the subject. As a result of this comparison, the researcher has a combination of multiple sets of data.
· It helps in making the available sample more diverse.
· This process helps the researchers to avoid problems like obtaining informed consent, restrictions in various areas, etc. Hence, this whole methodology adopted for this particular research is completely suitable to the subject.
Chapter 5: Analysis I Impact of Global Crisis on Remittance to the Economy
The economy of Tajikistan is highly dependent on the remittance. The country has one of the highest remittance rates across the globe. Remittance is the flow of money that is supplied to the country by the migratory population. Due to the global recession, this figure is coming down drastically. This situation would prove to be devastating for the economy.
The countries, after the breakup from Soviet Union, became financially and economically weaker as soon after its independence, it was plunged into civil war. The civil war left the country with varied financial losses. The economy of the country tried to step on its feet after the peace negotiations. For few years it was successful. But with the onset of global recession there is again trouble brewing up for the economy which strengthens to put the economy of the country into chaos. One major source of income from the economy of Tajikistan comes from remittance from the workers abroad. According to the data, more than half of the output of the company comes through these sources.
Most of the workforce of the economy has migrated outside works in Russia. This percentage amounts to nearly 98 percent. The major reason for economic stability in the country during 2000-2004 was due the boom in the Russian economy. The economy of Tajikistan gained a lot due to this economic boom as the migratory population was sending more remittance. But now, after the impact of global recession touched the Russian shores, the tremors felt by the Tajik economy. The economy of Russia is by far the most important contributor to the Tajikistan’s income. But due to the recent economic meltdown, it has proposed stringent rules on the migratory population.
(Source: Ratha & Mohapatra 2009)
According to the reports, the remittance received by Tajikistan fell by more than 50 percent. This immediately showed itself in the fall of the national GDP for which it accounted for nearly 50 percent. The migratory workforce of Tajikistan amounts to nearly 1 million. The Russian government ordered crackdown on this migratory workforce. The country itself wants to come out of this global meltdown and the first step towards it is reducing the amount of money that goes away from its economy. The government of Russia has proposed a cut down of these migratory flocks to half.
This cut down if happens would result in devastating the economy. The money transferred into the country to official banking systems by the Tajik nationals were around $1.8 billion. This figure is twice as big as the national budget of the country. According to unofficial estimates, this figure is much higher. According to it, nearly two-thirds of the country’s GDP is dependant on these remittances. With this meltdown, the decrease in remittance could be much higher. According to the reports by World Bank, the remittance is expected to fall by $ 15 billion.
The country which is already facing a lot of problems due to this crisis would make it suffer even more. According to the analyst, the decreasing remittance would put huge economic pressure on the population of Tajikistan. The transfer to bank in Tajikistan figures in November 2008 showed a drop between 15 to 25 percent as compared to October 2008. Even the top officials in the government as well as government institution are well aware of the crisis which already stepped into the economy. The officials at Tajik National Bank, even officially have stated that the economy is up for a major shock and that too in the coming years. Such statement by top officials reflects the intensity of this problem.
If the Russian government goes ahead with its plan then the economy of Tajikistan should brace up for the consequences. It would face the question of unemployed millions of migratory population. The economy of this country which is already in such a bad shape won’t be able to absorb the returning workers. More than half of the population i.e. nearly 70 percent of Tajikistan lives in rural areas. The unemployment rate in these areas is the highest. Due to this the majority of population of these areas has no options but to move abroad in search for job. There lack of opportunities in the country is another reason for migration population (World Bank Lowers Remittances Forecast for 2009 as Financial Crisis Deepens 2009).
The movement of these migratory labors back to the country has the power create problem for the country as they can add to the social tension. The government on their part has not taken enough measures to tackle the situation. The government has failed to provide employment opportunities to these migrant workers. The analyst have predicted that thus situation can lead to worsening of the social as well as political tension like increase crime rates and decrease in living standards of the people. The poor economic situation and lack of economic structure has caused a brain drain in the country.
Most of the professionals in the country have now joined the league of migratory labors. This is due to the fact that their skill has found no takers in their home country. These professionals are always in demand therefore they use the labor quotas to migrate to better place. Certain analysts are more optimistic to this situation. According to them the migratory people were mostly engaged in menial jobs which the people in Russia won’t be too interested to fill in these jobs. But even with these statements the mass layoffs are happening and this means troubles up for the economy.
The too much dependence on the remittance by the developing countries has resulted in transference of this global meltdown which was widespread in the developed to these poor economic and apparently these economies have no role to play in this phenomenon. The country’s policy to encourage the migration of people is costing them dearly. This was perhaps the easiest way out at that time but now this policy has fallen back into them (Blair 2009).
The government in these economies didn’t make enough steps to grow opportunities for these workers in their home countries. They didn’t take measures to create jobs at home, pursue poverty reductions program, and reform the agriculture sector or ameliorating the basic services etc. This has now resulted in a situation where the government has no idea what to do with these migratory populations once they come back.
Migrant population has done a lot to keep support the economy of Tajikistan. An increase in these remittances helped the government to increase their foreign reserves, and then led to projection of an increased economic growth. But this whole prediction failed as this problem of global recession came into picture. This situation has lead to the government looking for other options to settle this population. Decline in the remittance is expected to have serious consequences for the economy of Tajikistan as they have to settle the migratory population in addition to bear the loss of decrease of biggest contributor to the economy.
(Source: Ratha & Mohapatra 2009)
Chapter 6: Analysis II Impact of Global Crisis on Internal Stability
The section will analyze the impact of global crisis on internal stability of Tajikistan in detail. The section will help in examining the facts related to the topic of study and in developing various conclusions and findings. This section will bring the reality behind the economic recession and will focus on the areas that are in need of development in Tajikistan.
There is a great threat to the internal stability of the country as a result of the increasing economic downturn in the world. The global crisis has made the condition of the country very miserable and the level of poverty is continuously increasing. The condition of the families living in the country is very sad. They are struggling hard for food and their other requirements. The mothers in the family are in a painful condition as the income of their migrant husbands in Russia and other parts has totally lost. There is lack of monetary resources for them and they are struggling hard to survive.
The remittances from the migrant workers have either reduced to a very low level or have stopped totally. Remittances form about 36 percent of the national income of Tajikistan and the reduction in it is adversely affecting the economic as well social condition of the whole country. This has created social unrest and tensions among the people. This might result in increasing conflicts and crimes in the country which is a serious and direct threat to its internal stability. This also creates problems for its neighboring countries and spoils their relations. The children in many areas of Tajikistan suffer from malnutrition. The growth in the remittances reduced to just 1 percent this year. Many of the migrant workers in Russia were thrown out of jobs. Among them most people were from Tajikistan and Uzbekistan (Parshin 2008).
The females in Tajikistan are not so educated and there are few that have attained higher education. There is lack of professionals in the country and most of the people migrate to Russia and other countries for work. The women hold the responsibilities of the household and take care of the children. The support of the families, the male migrant workers, has lost their jobs due to the recession situation and this broken the lifeline of the country as well as their families in Tajikistan.
This has created great unrest in the country and people are suffering from many problems. Already the country was so short of energy and other important and the situation of global crisis has worsened it. The number of people below the poverty line in the country has considerably increased. There is lack of resource availability to support the population of the country. Moreover, the political set up has added to the economic crisis for the country. There is lack of lack of leadership and the government is corrupt. It does not look after the interest of the people and makes wrong use of the public finance. The proper management of public finance is very essential in a country like Tajikistan (Najibullah 2009).
The internal stability of the country is greatly affected by the financial crisis that has occurred in the world. The country is also facing tension with Russia which has worsened the already miserable plight of Tajikistan since the collapse of the Soviet Union. The security system of the country is very weak and it is always involved in Civil Wars, it is also struggling with energy crisis, the healthcare, gas and electricity. The development of the country is very low and slow and this has put its economy into a bad state. The remittances that are reducing have resulted in an increasing social pressure on the country.
There have been continuous challenges to the social security of the country since its formation and economic depression has further increased it. The satisfaction among the people has reduced and they are starving of food and hunger. All three aspects i.e. global crisis, reducing remittances and threat to internal stability are interrelated. This is a continuous chain that is carried one after the other. The global crisis has resulted into reduction in remittances or in other words the capital inflows to the country and this in turn results in a disturbed situation in Tajikistan. The people are facing many problems due to reduced money flows. The political system is also very bad and weak. All this creates a great threat to the internal stability of the country. The power is concentrated in a few hands so it should be decentralized. This will result in proper flow of capital in the country as well as will lead to development of the country.
The weak economy of Tajikistan is unable to give support to the returning migrant workers. Already the country faces so much of unemployment and the returning of these workers will worsen the condition. This sudden returning of the migrant workers has increased the social tension in the country. The living standards of the people have fallen and there is acute poverty in the country. The problems that are faced by the economy of Russia are directly affecting the economic situation of the country. As many migrants from Tajikistan in Russia have lost their jobs due to economic slow down in Russia. This has reduced the remittances and in turn has affected the internal stability of the country by multiplying the problems the country is already facing.
Chapter 7: Conclusion
The research on this subject reveals that the economy and internal stability of the country is indeed at a risk. The current global recession has proved to be curse for both the remittance and political stability of the country. The country is heavily dependent on the remittance provided by the migratory forces working abroad. This remittance is one of the biggest contributors to their GDP. But this global recession is causing problems as the countries where these migratory populations have gone are cutting down this workforce. The economy as it is under several constraints and this has enhanced the problems of the country by many folds. This situation is threatening the political stability of the country.
The aim of this research was to find the impact of global economic crisis on the remittance towards economy and internal stability of Tajikistan. The research looked over a number of sources to find this impact of global meltdown. The main findings of this research are discussed below:
· Remittance contributes to more than half of the country’s GDP.
· Remittance to the country sent by the migratory populations has helped the country in past to register economic growth.
· Nearly 98 percent of this remittance is supplied by the migratory population working in Russia
· The remittance across the globe is decreasing due to global meltdown.
· The country itself has seen decrease in supply of remittance.
· It is expected that this decrease in remittance would shatter the economy of the country.
· This situation would have a strong impact on the internal stability of the country.
· There might be attempts to overthrow the government and this situation can lead to tensions in the Central Asian region.
The various recommendations by this research are given below:
· The internal assistance to this country should be significantly increased.
· The internal community should help the country to come out of this situation.
· The international community should provide support to the current leadership as lack of internal stability can lead to problems.
· The government should take immediate steps to create enough employment opportunities in their own land.
· The government of the country should take necessary steps to mitigate the crisis that is looming over their head.
Overall, the government of Tajikistan should take necessary steps to combat the current problem of global economic crisis. It should strengthen its own infrastructure so that it does not depend too much on remittance. The internal stability should also be a cause of concern as the loss of it would result in trouble in central Asian region.
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