article by Yuliya Samayeva, ZN.UA Economics Editor
The longer our refugees live abroad, the greater the risk that they will not return home. Instead, the Ukrainian economy will need workers more than ever after the war. And the restoration of Ukraine without a sufficient number of workers, even with the availability of money, is impossible. Recently, we spoke with Andriy Gaidutsky, one of the most respected experts in the field of migration policy, about how threaten is the current wave of migration and how to bring Ukrainians home. So far, in the conversation with Mr. Gaidutsky, ZN.UA has focused on how Ukraine's migration policy should be balanced and whether we should attract immigrants from other countries.
— Mr. Gaidutsky, what is the situation with the return of Ukrainians for the fifth month of the war with Russia?
— The situation with the return of Ukrainians leaves much to be desired. Those leaving still outnumber those returning, although the net departure rate is slowing down. According to UN data, if in March 2022 there were 3.2 million human border crossings outside Ukraine and 0.4 million crossings into Ukraine, then in June only 1.5 million human crossings were made abroad, and into Ukraine — 0.8 million human crossings. The war is only a trigger that continues to force Ukrainians to go abroad and they would return to their homeland, but some host countries have been preparing for their arrival for years... After that everything will depend on the "magnet programs" in Ukraine, which will be offered by the central and local authorities as well as financial institutions in Ukraine for Ukrainians living abroad.
— For example, here in Ukraine, there are calls for the European Union to stimulate the return of Ukrainian refugees to Ukraine, also by providing them with financial support already in Ukraine, which will also allow the governments of the host countries to significantly reduce the support of Ukrainians there.
— Purely from an economic point of view, the governments of the host countries have already invested in them. And do you think now they would just give back the Ukrainian migrants? In time of demographic crisis in the developed world? Of course not. These governments understand that migrants are about money, about job creation and about economic growth. What are subsidies for the maintenance of Ukrainians for those governments? In language of business, this is simply a "marketing expenses" that will quickly pay off. In 2021, Poland's GDP grew by 5.9% and approximately 15% of this growth occurred thanks to the two million Ukrainians in this country. In nominal terms, each Ukrainian in Poland additionally created almost 5.8 thousand dollars of GDP, while a Pole - only about 1.9 thousand dollars of GDP. When the Polish government announced in March 2022 the allocation of $1.7 billion to support 1.2 million Ukrainian refugees, it deliberately went to such costs to "hook" them in Poland, because they understand the additional income each Ukrainian will bring to the Polish economy.
However, the small Ireland of five million people is most impressive. It is among the leaders in attracting Ukrainians per inhabitant and has attracted almost seven times more Ukrainians than neighboring Great Britain. It feels like the Irish government has taken a calculator and calculated the effectiveness of attracting Ukrainians to its economy and now provides them with the largest monthly aid - 800 euros per adult (Great Britain - 405 euros, Germany - 400 euros, Poland - 150 euros). And their actions are understandable. After all, Ireland annually attracts many more foreign migrants than the UK— as a result, Irish GDP growth rate over the past 20 years is 2.6 times higher than the UK’s GDP. For 2023, Ireland has already budgeted almost 3 billion euros to support new Ukrainians, whose arrival they expect. It means, some countries not only spend money to support the Ukrainians, but are also ready to significantly increase these expenditures.
— In Ukraine, there have also been proposals to introduce an unconditional/universal basic income (UBI) program for those who are ready to return. How rational are these steps?
— From a social point of view, I understand such proposals, but from an economic point of view, the consequences of such actions must also be assessed. It's like listening to a person on a bicycle who sees a car and suggests that the government should buy it for everyone: it's more comfortable, faster and safer. But immediately there are problems with road infrastructure, parking, repairs, insurance, etc. The same is with UBI: in Ukrainian realities it carries huge risks due to two problems.
The first problem is the high level of the shadow economy. Imagine, the authorities transferred 1,000 hryvnias for fuel to your card. You are driving to refuel, but it turns out that you can buy fuel only for cash. Thus it is either a “gray” import, or confiscated fuel, or counterfeit. As a result, due to the multiplier effect, the government will receive taxes and fees back to the budget much less and much later than it was planned when developing such a program.
The second problem is the undeveloped stock market as a tool for absorbing additional household income. Since the beginning of the war, the economy has contracted because demand has decreased. But then suddenly the state, through the population, injects a significant amount of money into a compressed economy. As a result, the population and businesses have a surplus of funds that they will try to invest somewhere, as they understand that the money in the form of cash or in the banking account will be eaten by inflation. If we had a developed stock market, this surplus of funds would go exactly there, which would contribute to the development of the economy (after all, this is exactly what happened during the Covid-19 in 2020-2021, when the governments of developed countries distributed "helicopter" money to the population). But we do not actually have such a mechanism, so where will the funds go? That's right, for buying dollars and euros. That is, in fact, means that Ukrainians will support other economies. Therefore, to summarize: only countries with a developed infrastructure of the stock market can experiment with basic income, the profitability of which, as a rule, is always higher than if you simply keep savings in foreign currency.
— What incentives for the return of Ukrainians from abroad are appropriate? And in general, is there any point in using them?
— Incentives are needed, but mostly non-financial, as there are actually no funds in the state budget for financial incentives. Considering that business is already restoring activities in the country, it is important to speed up these processes and facilitate them so that entrepreneurs begin to more actively return hired personnel, from abroad as well.
In this regard, business safety insurance (by creating an appropriate insurance fund) can be the first effective mechanism. It could be just as same as the government of Ukraine allocated more than 16 billion hryvnia in early February 2022 to guarantee the safety of flights over the territory of Ukraine. At that time this step convinced the airlines of the possibility of flights and thus the risk of the lessors losing their aircraft was leveled. Similarly, businesses now need to be convinced of the safety of their activities, and any new damage caused by airstrikes etc will be promptly compensated from such a fund.
The second effective step could be a large-scale transfer of state and municipal property to the concession. As of now the state has infrastructure and no funds, while business, on the contrary, has funds, but everyone is afraid to make capital investments. Back in 2019, the president signed a law on concessions allowing the state, municipalities, and state-owned companies to lease their property, including property-by-object, into a concession for 20–50 years. The law meets the international level, but due to bureaucracy, less than 0.1% of all state and municipal property has been transferred to concession. In the coming years, the state will not have funds for these projects, especially in the field of housing and municipal services, education, healthcare, sports, rail and air transportation, etc. It is logical to hold concession tenders for the management of this infrastructure. This will allow the authorities to use private funds for infrastructure development, while remaining the owner of strategic assets.
— Wouldn't it be easier and more efficient to expand the horizon of attracting human capital and focus on the Ukrainian diaspora or migrants from third countries?
— You are absolutely correct in saying that it is necessary to expand the focus. The authorities do not need to focus on refugees and remind that they will return them soon – it looks so populistic… like the elections would be in a month. Most of emigrants left the country for 2-15 years, because that is how long the migration cycle lasts on average. The only thing that the authorities can do for them now is through diplomatic channels to facilitate the receipt of financial assistance in the host countries. Unfortunately, until now in dozens of countries, including the European Union, there are delays in starting the payment of assistance to Ukrainians. In parallel, for these people, it is already necessary to develop programs to attract part of their foreign income to Ukraine, which they will soon begin to receive there (since the governments of the host countries are already actively working on the employment of Ukrainians). 30% of those who left after February 24 are already working in Poland. It is a stable and long-term transfer of money to their homeland that is the key to the return of these people to Ukraine. It is also necessary to expand the focus on about 5 million Ukrainians who left back in 1990-2010 (after all, this is already a wealthy group), as well as on the Ukrainian diaspora - in the amount of 10 million people (this is the richest group). A separate group is foreign migrants, for whom Ukraine is generally a “clean state”, about which they heard as country of freedom and democracy.
— If we are talking about attracting foreign migrants, are there possible rejection or non-acceptance of these people in our society, is our monocultural country ready to accept people of other religions and customs?
— In the world for almost a century, the most successful countries are those that actively attract immigrants. The task of the authorities is to convince the society that migration brings at least four benefits. First, it is the consumer of your goods and services. Secondly, it is an employee for your business or an employer for you. Third, it is the taxpayer to maintain your security. Fourthly, it is a generator of ideas for attracting investments and developing foreign trade of your goods and services.
At the same time, we still see the wrong approach regarding attraction of the Ukrainian migrants: the lack of programs for their return, the constant calling them “poor migrant workers”, even from the tribune of parliament. As a result, Ukrainian migrants annually transfer to their homeland only 12–14 billion dollars, but they could additional transfer 20–30 billion dollars. Due to such disrespect and indifference towards Ukrainian migrants, significant amounts of their savings continue to accumulate abroad. What can we say about foreign migrants then?
— One of the reasons for the negative attitude towards immigrants is also related to the possible increase in the level of crime and their illegal stay. Can this be avoided?
— Of course, international experience proves that the level of illegal migrants can be reduced to almost zero. To this end, it is necessary to (i) launch the sponsor institution scheme and (ii) set up a system of deportation from the country. A sponsor is a person or legal entity responsible for the arrival and adaptation of an immigrant for a period until full assimilation (for example, until citizenship is obtained). As you know, an immigrant does not arrive in another country without a purpose. As a rule, his arrival in the country is preceded by his contact with a resident in Ukraine. His goal is usually work, education, treatment etc. The host party, i.e. a sponsor, will be required to place a certain amount of funds (for example, the equivalent of 500 US dollars) in a special bank account in Ukraine to cover the costs associated with cases of deportation or insurance of damage caused by an immigrant. Thus, the budget of the country (or the society as a "shareholder" of the country) is insured that they have the funds to cover any expenses caused by the illegal behavior of a foreigner.
On the other hand, a system of deportation must transparently operate. Deportation must be unconditional and include both voluntary and forced deportation. For example, a migrant caused harm, admitted guilt and paid a fine (including appearing at the migration service during the campaign for an amnesty for illegal migrants) – in this case he will be deported with the right to return. Otherwise, when he is discovered and arrested, he will be deported with a ban on entering the country for 5-10 years. Deportation teaches immigrants to order and obey the law. It is the regularity and scale of deportation that make it possible to maintain a high level of security in the country and a low level of illegal migration. Let me give you an example from the USA and the UAE. In the United States, the share of illegal migrants is 23% (all migrants make up 14% of the country's population), in the United Arab Emirates, "illegal immigrants" account for only 0.7% (all migrants make up 89% of the total population). This is the result of efforts to deport illegal migrants: in some periods, 200-300 people are deported from the UAE every day. As a result, the UAE is a leader in the ranking of the safest countries in the world.
— Against the backdrop of authoritarian regimes in most post-Soviet countries, would a program to attract people who do not want to live in dictatorships, in particular, in Belarus and Russia, be effective? How would Ukrainian society perceive such a program?
— Someone can dream a lot about what kind of migrants we would like to see in Ukraine: prosperous and English-speaking. But the reality is quite different. On the one hand, Ukrainian society is not ready for this (the level of knowledge of a foreign language among the population in Ukraine is very low), on the other hand, there is a need for inexpensive labor and micro-entrepreneurs who will create jobs for Ukrainians. Therefore, in our realities, we really need to focus on attracting migrants from post-Soviet countries, where the level of authoritarianism is only increasing, and also from Turkey, which is also experiencing similar problems. Back in 2021, the number of people wishing to leave Russia rose to its highest level. According to the “Levada Center”, almost 32 million Russians wanted to leave their country in 2021, and among young people this level is about 40%. I think that the data are approximately the same in Belarus, Kazakhstan, Azerbaijan. The program for attracting foreign migrants should be based on two components.
The first is the positioning of Ukraine as a country of freedoms (free expression of opinion, free development of business, free movement).
The second component is a simplified and motivated migration policy to attract foreigners.
As for the first component. Freedom is the only thing we can really give now. But this is exactly what millions of immigrants from post-Soviet countries need. If we talk about the second component, then it is necessary to significantly simplify the relevant regulatory framework. Unfortunately, the migration legislation in Ukraine got stuck somewhere in the early 90s of the XX century, when it was believed that a migrant is a danger. As a result, the relevant authorities are interested in the smallest possible number of migrants in Ukraine. Now the world has already proven that a migrant is a source of economic growth. Therefore, immigration laws need to be simplified.
Today, in order to officially accept a foreigner to work in Ukraine, one must provide an "infinite" number of certificates. Because of this, our country actually failed the test for large-scale involvement of Belarusians when we got such a chance after the “bloody” Lukashenko elections in August 2020. Over the next 12 months, almost 180,000 Belarusians left for Poland, about 30,000 for Lithuania, and only 3,500 for Ukraine. It's a shame how we missed this chance. Therefore, it is necessary to change the positioning and expand the focus.
— Which authorities should be responsible for attracting foreign labor?
— Migrants are about three key components. The first is the growth of consumer demand, employment and investment (the Ministry of Economy is responsible for this).
The second component is the formation of foreign exchange income, savings and transfers of hard currency to Ukraine (the National Bank is responsible for this).
The third is security (the Ministry of the Interior is responsible for this).
However, organizational changes must take place among these authorities in order for immigration to become attractive and productive for the Ukrainian economy.
The Ministry of Economy, as the body responsible for economic development, should begin to play a key role in developing migration policy and updating legislation. Therefore, the State Migration Service should be reassigned to the Ministry of Economy and begin to carry out a service function, including communication with immigrants. The Ministry of Internal Affairs should be left only with the function of security for the actual registration of immigrants without the right to communicate with them. Remember how in the 1990s the consulates of foreign countries themselves issued visas? Then it was boring and accompanied by huge queues, which caused discontent among the Ukrainians. Countries realized that in this way they lose their attractiveness for Ukrainians, so visa centers appeared - these are private intermediary companies endowed with a service function, and the client no longer communicates with a consular representative. The immigration policy in Ukraine should be transformed in a similar way.
In the future, the State Migration Service may be transformed into a separate ministry in order to better focus on the development of programs to attract immigrants, programs for the return of Ukrainian emigrants and the diaspora. By the way, until 2030, Ukrainian emigrants remittances will remain the largest source of net foreign exchange inflow into Ukraine (after export). In the same time the share of immigrants in the population structure should increase at least tenfold in order to meet the demand of the business and increase the birthrate and population growth.