VZCZCXRO0168
RR RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK
RUEHKW RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSL RUEHSR RUEHVK RUEHYG
DE RUEHNT #0154/01 0280951
ZNR UUUUU ZZH
R 280948Z JAN 10
FM AMEMBASSY TASHKENT
TO RUEHC/SECSTATE WASHDC 1795
INFO ALL SOUTH AND CENTRAL ASIA COLLECTIVE
EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 03 TASHKENT 000154 
 
SENSITIVE 
SIPDIS 
SIPDIS 
DEPARTMENT FOR SCA/CEN 
EEB/IFN/OMA 
EEB/EPPD 
 
E.O. 12958: N/A 
TAGS: ECON EFIN SOCI UZ
SUBJECT: UZBEKISTAN: REMITTANCES DOWN, BUT NOT AS MUCH AS EXPECTED 
 
REF: 08 Tashkent 951; 09 Tashkent 67; 09 Tashkent 441 
09 Tashkent 1029 
 
¶1.       (SBU) SUMMARY. Initial estimates from Western Union and 
other sources indicate that the picture surrounding remittances to 
Uzbekistan from citizens working abroad in 2009 remains mixed. 
Official remittances to Uzbekistan (e.g., remittances processed 
through the formal banking system) weakened from their 2008 levels, 
but the drop is not as catastrophic as predicted earlier in the 
year.  Anecdotal evidence, however, suggests that informal 
remittances (e.g., remittances processed outside formal channels) 
have dropped more significantly, resulting in increased hardships 
for poorer Uzbek families, particular in rural areas. END SUMMARY. 
 
 
 
REMITTANCES - IMPORTANT SOURCE OF EXTERNAL FINANCING 
 
--------------------------------------------- --------------- 
 
 
 
¶2.       (SBU)  Remittances are an important source of external 
financing for the Uzbek economy, accounting for more than 10 
percent of national Gross Domestic Product (GDP).  (See refs A, B, 
C and D) Over the past 10 years, Uzbekistan has benefited 
significantly from the boom in the Kazakh and Russian economies, 
especially in the construction industry, through remittances from 
its labor migrants. Estimates of the number of Uzbek migrant 
workers abroad vary widely from 500,000 to five million, although 
most observers believe the figure is likely around 2 million. As 
the financial crisis pressures the Russian and Kazakh markets, 
Uzbek migrants are now losing their jobs or finding their salaries 
reduced.  Some workers wish to return home but discover they do not 
have the money to travel. One bright spot is the continuing 
construction of the 2014 Olympic complex in Sochi, Russia, which 
continues to employ a large number of CIS migrant workers.  (Note: 
In the wake of the crisis, Kazakhstan and Russia cut their 
immigration quotas by half by the end of 2008. Contrary to this, 
reports from both countries of destination claim that Uzbek migrant 
workers can still find work, because they are often willing to work 
for less money than the locals, and they also work informally.) 
 
 
 
FORMAL REMITTANCES BETTER-THAN-EXPECTED 
 
--------------------------------------------- --------------- 
 
 
 
¶3.       (SBU)  Concrete figures on the value of remittances from 
migrant workers are difficult to pinpoint as this number is not 
released in Uzbekistan.  The period from 2004 to 2007 showed steady 
growth in remittances to Uzbekistan with 2006 and 2007 remittances 
reaching USD 1.6 and 1.9 billion, respectively (Asian Development 
Bank estimates).  2008 saw a drastic uptick in remittances both 
world-wide and to Uzbekistan, in part due to a capital amnesty 
period enacted by the GOU to bolster confidence in the banking 
system and to grow domestic deposits. New estimates from the 
Central Bank of Russia and Western Union indicate remittances to 
Uzbekistan will shrink between 20-40 percent in value for the 12 
month period ending December 2009. 
 
 
 
¶4.       (SBU) According to the Central Bank of Russia, money 
remittances from Russia to Uzbekistan approximated USD 703 million 
for the nine month period ending September 2009 - 40 percent less 
than the prior year.  Uzbekistan was the largest recipient of 
remittances in the CIS from Russia, accounting for 23 percent of 
all remittances from the country, followed by Tajikistan with USD 
573 million (down from USD 925 million for the same period in 
2008). Remittances to Uzbekistan have a seasonal character, with 
peak money transfer taking place between March-July (the most 
active parts of the agricultural and construction seasons) and 
December (when workers return home for the winter); thus, fourth 
quarter remittances are expected push this nine-month figure number 
higher.  Exact figures from the Central Bank of Russia (including 
average dollar amount, number of transactions, etc.) will be made 
available in late February 2010. 
 
TASHKENT 00000154  002 OF 003 
 
 
¶5.       (SBU)  Western Union, the largest money transfer agent in 
the Uzbek market, estimates that, based on numbers seen to date, 
its value of remittances will be down between 20-30 percent for all 
of 2009 (e.g., 12 month period). Western Union Country Director Mr. 
Djalil Haydarov told Embassy representatives that that the average 
dollar value of transactions processed by his company fell from USD 
550 per transaction in 2008 to only USD 385 per transaction this 
year.  Mr. Haydarov attributes the drop to both a decrease in 
overall employment abroad, real wages, and the devaluation of the 
Russian ruble over the last twelve months.  (Note: The ruble lost 
25 percent of its value against the US dollar in the first half of 
2009 compared to its average value in the same period the previous 
year).  Mr. Haydarov noted that Western Union recently decreased 
the fee for a money transfer by 35 percent to encourage senders. 
This dollar value decline places increasing pressure on Uzbeks, 
especially retired individuals, who rely upon remittances from 
younger family members to meet monthly expenses.  In particular, 
the Uzbek government abolished some pension allowances for teachers 
and certain classes of nurses in December 2009, and this segment 
will likely face increased economic hardships this winter.  In 
addition, the Tashkent utilities authorities recently announced a 
20 percent increase for citizens' hot and cold water and central 
heating costs. 
 
 
 
INFORMAL REMITTANCES DROP MORE SIGNFICANTLY 
 
--------------------------------------------- --------------- 
 
¶6.       (SBU) More than half of all remittances go through illegal 
or undocumented channels, such as "hawala" brokers or family 
members transporting cash.  Mr. Haydarov estimates that formal 
transfer agents initiated about 300,000 transactions year to date 
to Uzbekistan.  Based upon an estimated migrant workforce of almost 
2 million, it is clear that significant sums of money are 
unaccounted for in official statistics.  It is likely that the 
informal remittances dropped as much as formal ones. 
 
 
 
¶7.       (SBU) The Embassy has received reports from credible human 
rights activists that the situation in the regions is more dire 
than the official numbers indicate. One activist from Khorezm 
reported that remittances in that area have dropped almost 75 
percent in value (based on banking deposits).  These sources also 
report that many Uzbek migrants returning from abroad have found 
little work and often have trouble reintegrating to their families 
after their prolonged absence. 
 
 
 
WESTERN UNION - Increasing Competition from Russian Banks 
 
--------------------------------------------- --------------- 
 
¶8.       (SBU)  Western Union currently controls approximately 25 
percent of the Uzbek money transfer market, down slightly from 
around 30 percent of market share last year.   Mr. Haydarov 
believes that this decline in market share is attributable 
partially to increased competition from Russian banks, which 
recently have expanded operations in the Uzbek market.  As of the 
end of 2008, Western Union estimates only eight Russian banks 
offered money transfer services to Uzbekistan - now the number is 
fifteen. Mr. Haydarov declined to name the competitors but 
mentioned that Western Union has struggled against Russian 
competitors, which sometimes have "unsporting" advantages operating 
in Russia. 
 
 
 
¶9.       (SBU) Despite increasing competition, Mr. Haydarov is 
bullish about the company's prospects in the region.  Western Union 
recently launched a targeted marketing campaign - the "Leaving Home 
Initiative" at the "Vokzal" train station in Tashkent and the 
Tashkent International Airport.  Twenty Western Union promoters 
routinely distribute glossy, printer brochures to outbound 
travelers headed to Russia at these locations.  The brochures 
contain information about Western Union's money transfer services, 
telephone and addresses for Western Union locations in Russia, and 
 
TASHKENT 00000154  003 OF 003 
 
 
a map of the Moscow metro station.  There is also a campaign 
targeting Uzbek workers travelling to South Korea, which is a 
growing destination country for individuals seeking seasonal 
employment. 
 
 
 
Comment 
 
 
 
¶10.   (SBU) The year has undoubtedly been difficult for Central 
Asian workers abroad and their dependents at home.  With jobs more 
scarce and real dollar wages declining, many Uzbeks who already 
straddle the poverty line may find it difficult to make ends meet. 
Despite officials denials, the return of migrant laborers to their 
homeland has in fact placed additional strains on the country's 
social infrastructure. However, despite dire predictions early last 
year, social upheaval is not evident. 
NORLAND