How will the mass influx of migrants affect Azerbaijan's economy?

The migration process has swept through the world amid the ongoing political and military conflicts. By some global estimates, last year there were nearly 272 million international migrants globally, with labor migrants making up the two thirds. While the figure is rising year-on-year, today migrants constitute only 3.5% of the global population. Some countries use the migration processes in their interests, but it is yet quite evident that the flow of migrants creates a considerable risk for the country's economy. How will the unexpected migrant influx affect our country?

Economic expert Samir Aliyev told Report that the mass influx of migrants in Azerbaijan might speed up the outflow of foreign currency abroad:

"The issue of migrants is acute in both the United States and the European countries, having both positive and negative sides. The population in the United States and Europe is rapidly aging, prompting an acute need for labor power. This is a positive component of the migratory processes. The harm has to do with the fact that migrants oust locals from the market since they agree to lower wages.

"The migrants arriving in Azerbaijan can be conditionally divided into two categories. The first category, namely the elite layer, includes English-speaking migrants from Indonesia, Malaysia, and European countries. They are not frequent guests in our country. The second category comprises migrants from Turkey, Georgia, and Middle Asia. Their number is quite high, but still, our problem of migrants is not so acute as in other countries, for example, neighboring Russia.

Azerbaijan's economy does not face such a strong need for the workforce, as in other countries. With the development of small and middle entrepreneurship, our country does not have many vacant workplaces, and the unexpected influx of migrants may cause a further decrease in their number. All the same, an influx of migrants may lead to a growth in crime rates.

Though migrants arrive in the country with money in their pockets, they come to earn a living rather than to start a business. Therefore, the migrant influx will hardly promote the inflow of currency. Just the other way round, it will lead to the outflow of money, since migrants will exchange their earnings for dollars and export them abroad, which means that their influx will only accelerate the flow of currency. The mass influx of migrants may also drive the construction market and lead to a price hike, particularly on low-cost housing.

Azerbaijani currency does not face any severe threats related to migrants influx. But if the current level of immigration crawls up, our country will be at particular risk. We are not ready to accept a mass influx of migrants, either territorially or economically, like, for example, Turkey and Russia do.

The oil sector is what mostly shapes our economy. The development of tourism and the nonoil industry may create a need for migrants. But if the migrants flow to our country due to conflicts in other regions, it will be a heavy burden for our economy, creating a massive problem in terms of growth in state spending.

Migrants in Europe get scarce allowances since they don't pass official registration or pay taxes. In any case, many people in Azerbaijan evade taxes, despite the apparent tendencies toward the 'whitening' of the economy. Initially, the influx of migrants will not create serious problems, but in the long run, it may cause a reduction in revenues from tax payments and social receipts. In the case of migrants influx, the state will have to assume the costs for their treatment and other expenses. The state will have to trace their social behavior to prevent conflicts on the ethnic ground. Today there is no such threat in Azerbaijan."

Economist Parviz Heydarov believes that whether the country's economy would suffer from the migratory influx will depend on the form of migration processes:

"The mass influx of refugees will harm the economy. Hosting refugees and their accommodation will create additional hindrances for the government. Primarily because over the years, Azerbaijan has been trying to address the problem of its refugees. And these problems were mostly resolved through oil revenues. But despite the availability of financial resources, it is still impossible to eradicate this problem. Against this backdrop, the mass influx of refugees caused by the unstable situation in the region is undesirable for our country. Such developments would cause a price hike in the real estate market.

In contrast, the currency market will witness a significant increase in offer, creating conditions for consolidation of the national currency, which is not desirable so far. The country has the necessary conditions for strengthening the national currency. Oil revenues exceed the volume of currency outflows from the state. In current circumstances, manat shows a tendency to grow. However, the government does not allow it, since the consolidation of the national currency will limit the export potential of the country and ensure a dramatic inflow of foreign products to the local market. This situation is contrary to the current goals of our country. The government is determined to develop the nonoil sector and increase export opportunities in this sphere.

I want to repeat once again that Azerbaijan itself is facing the problem of accommodating its refugees, which is why the influx of migrants is utterly undesirable for us. We can accept quite a limited number of migrants. Even with sufficient financial means, the country's economy will not cope with an additional problem with migrants. Therefore, in this context, Azerbaijan should not be compared to Turkey and European countries.

"Influx of migrants will have no impact on social benefits paid to citizens or tax levies by the state. The assets of the State Fund of Social Protection are oriented towards the country's citizens. It means that the government will not cut them from their citizens to direct them to maintain migrants. This is unacceptable either abroad or in Azerbaijan. Such a scenario prompts the need for the state to be ready to force majeure. Azerbaijan has vast financial potential among the South Caucasus state, which is why, in any force majeure, migrants will likely rush not to Armenia and Georgia, but Azerbaijan. Our country's location is also attractive geographically. Despite this, I think the expectation of a mass influx of migrants in Azerbaijan does not correspond to reality. Labor migrants constitute the most significant proportion of those arriving in Azerbaijan. As the Ministry of Labor and Social Protection told Report, the quota for labor migration is defined not by countries, but by spheres of economic activity:

"Under the law, a foreigner or a stateless person, willing to get employed in the Republic of Azerbaijan, must obtain a work permit from their employers. To get a work permit, they need to apply to the State Migration Service of Azerbaijan. Based on the information from the State Migration Service, the Ministry of Labor and Social Protection will issue a judgment about whether or not it is possible to meet the demand through the local staff potential. The appeals from the citizens of Turkey, Great Britain, India, Iran, and Russia prevail among all applications for work permits in Azerbaijan.

The labor migration quota is determined by the "Rules for determining the labor migration quota". The approved allowance for labor migration can be increased or decreased under fluctuations in the labor market. The labor migration quota has been in force since 2010, and only once during this period was expanded in 2011. The quota is applied to protect the local labor market, regulate the participation of foreigners, and the effective use of local human resources. As already noted, the labor migration quota is set in line with "Rules for determining the labor migration quota." In this regard, a commission was formed, which included officials of the Ministry of Labor and Social Protection of the Population, the Ministry of Economy, the Ministry of Foreign Affairs, the Ministry of Education, the State Migration Service, and the State Oil Company (SOCAR). Each year, the commission submits to the government the proposals for a labor migration quota for the coming year. The Cabinet approves the quota.

When determining the quota following the requirements of these Rules, proposals are developed, taking into account the analysis of the state of the labor market, local staff potential, employers' demand for foreign labor, trends in the country's economic development, and macroeconomic indicators. The quota approved for labor migration in 2020 reached 6,740 people."