Academy of Economic Studies of Moldova, Chişinău, Republic of Moldova
The paper was prepared in the framework of the independent investigation “Migration and Macroeconomic Policies”, which conducted in the Center of Macroeconomic Policies of the Academy of Economic Studies of Moldova, Department of General Economics and Law. The tasks of the work are: to analyses of the reasons, costs and benefits of migration in Moldova and to propose recommendations to the government.
One of the most important characteristics in the Moldova’s labour market consists in the huge level of migration. The Labour Force Survey identifies that in 2004 year about 345,000 persons left abroad looking for work, which are 55,000 persons more than in 2003. Unofficial sources estimate the number of those who left Moldova looking for a work abroad at between 600 000 and one million persons. This shows a market tendency in increase of migration from Moldova’s labour market
The main reasons of migration Moldova’s labour market are: low level of economic development and low level of salaries, lack of possibilities at national level to use the available labour force, lack of investment and, as a result, a lack of the creation of new productive jobs.
Costs and benefits from migration
International labour migration as an objective phenomenon has had both positive and negative impacts on Moldova.
Benefits from migration
According to estimates, in 2005 as a result of international labour migration, the country received through both official and unofficial sources about one billion US dollars. In 2005 money incomes from abroad (remittances) represent more that 27% of GDP. It is the second place in the world after Tonga. To large extent remittances fuel consumption which have been an important element in the economic recovery and may continue to be so for few more years. In conditions of deep economic recession with minimum employment opportunities, low incomes and almost no possibilities to overcome this situation, migration is seen as an essential source to solve the problem of ensuring a decent way of life for a larger part of country’s population. The money coming into Moldova, as a result of the external migration, substantially increases the well-being of a great part of the population. The short–run term migration causes to increase incomes and to reduce poverty.
Costs from migration
In the long–term the growth of migration rate general adverse social effects because incomes from migrants (and often does) cause imports to surge without a commensurate increase in exports. This can cause a widening of trade deficits in the balance of payments
and a worsening of external debt. The fact, the trade balance deficit reached more one US$ billion in 2005. The question is show is this deficit going to be financed? It is expected that Moldovan working abroad will continue sending large amounts of money at home at least to the next 4-5 years. However this will be possible if in conditions continue to improve and these remittances will be invested in the real economy: in industry, construction, small businesses and service-related activity. In this case over the long term Moldova could reduce external debt, to improve the trade balance and to achieve the sustainable economic growth.
Recommendations
Moldova, like many other former communist-block countries, is lucky to have a well educated and capable workforce. But this competitive advantage can be used inside in the country, not only abroad. The availability to cheap and well trained labour in Moldova pre- determines the ability to compete internationally on the basis of labour-intensive manufactures.
Many scientists, academics and engineers have not (yet) left the country and are looking to use their knowledge and skills should the opportunity arise. Moreover, the remains of the former Soviet defence and electronics industries can be used as base for building new high-tech industries.
Thus, ideally, Moldova could have a comparative advantage in knowledge-intense products, like semiconductors. It could become a European base for cheap production of high-quality high-tech goods. It would then benefit from the transfer of knowledge and technology from the developed countries. Foreign investors in their turn would also benefit enjoying higher returns. It is necessary to create joint research and educational centres as well as small enterprises manufacturing high-tech goods and creating the base for the establishment of large scale enterprises, where population of the country will be involved into the production of high-value goods. Creation of the united national infrastructure which includes the education-research-technology transfer must be one of the national priorities and the strategic goal for Moldova’s integration into European and world science and technology, as well as integration of research and higher education inside the country. This policy will also increase the competitiveness of the Moldova’s exports, encourage local producers, transfer of know-how and foreign direct investments and reduce brain drain, immigration and outflow of labour resources.
Keywords: migration, costs, benefits, economic growth
References
The Economist (2005), January
Pyshkina T.V. (2002a): “Macroeconomics. Essential Aspects of the transition and market economy”, Chisinau, Evrica Publ House, p.208
Pyshkina T.V. (2002b): “Economic Consequences of Migration of Labour from the Republic of Moldova”, UNU/WIDER International Conference, Helsinki, Finland, 2002
TACIS, Economic Trends, 2001-2005, Statistic Yearbook of Moldova, Moldova World Bank Statistics 2000-2005 http://web.worldbank.org