Chapter 1. Overview and policy recommendations in Armenia

Armenia is missing opportunities to harness the development potential of its high rates of emigration. The Interrelations between Public Policies, Migration and Development (IPPMD) project was conducted in Armenia between 2014 and 2017 to explore through both quantitative and qualitative analysis the two-way relationship between migration and public policies in four key sectors – the labour market, agriculture, education, and investment and financial services. This chapter provides an overview of the project’s findings, highlighting the potential for migration in many of its dimensions (emigration, remittances and return migration) to boost development, and analysing the sectoral policies in Armenia that will allow this to happen.

  

International migration has been an important determinant of development in Armenia. The country experienced its largest outflows after independence in 1991, driven by changes in the economic regime and high unemployment. Today Armenia still has one of the highest emigration rates in the world, with about 30% of the population living outside the country. This phenomenon has both positive and negative effects on the country. The key question now is how to create a favourable policy environment, across all relevant sectors, to make the most of migration for development in Armenia.

This report details the Armenia findings of a ten-country study on the interrelations between public policies, migration and development (IPPMD; Box 1.1). It aims to provide policy makers with empirical evidence of the role played by migration in policy areas that matter for development. It also explores the influence on migration of public policies not specifically targeted at migration. This chapter provides an overview of the findings and policy recommendations.

Box 1.1. What is the IPPMD project?

In January 2013, the OECD Development Centre launched a project, co-funded by the EU Thematic Programme on Migration and Asylum, on the Interrelations between public policies, migration and development: case studies and policy recommendations (IPPMD). This project – carried out in ten low and middle-income countries between 2013 and 2017 – sought to provide policy makers with evidence of the importance of integrating migration into development strategies and fostering coherence across sectoral policies. A balanced mix of developing countries was chosen to participate in the project: Armenia, Burkina Faso, Cambodia, Costa Rica, Côte d’Ivoire, the Dominican Republic, Georgia, Haiti, Morocco and the Philippines.

While evidence abounds of the impacts – both positive and negative – of migration on development, the reasons why policy makers should integrate migration into development planning still lack empirical foundations. The IPPMD project aimed to fill this knowledge gap by providing reliable evidence not only for the contribution of migration to development, but also for how this contribution can be reinforced through policies in a range of sectors. To do so, the OECD designed a conceptual framework that explores the links between four dimensions of migration (emigration, remittances, return migration and immigration) and five key policy sectors: the labour market, agriculture, education, investment and financial services and social protection and health (Figure 1.1). The conceptual framework also linked these five sectoral policies to a variety of migration outcomes (Table 1.1).

Figure 1.1. Migration and sectoral development policies: a two-way relationship
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Table 1.1. Migration dimensions and migration outcomes in the IPPMD study

Migration dimensions

Migration outcomes

Emigration

Emigration happens when people live outside of their countries of origin for at least three consecutive months.a

The decision to emigrate is an important outcome for the countries of origin, not only because it may lead to actual outflows of people in the short term, but also because it may increase the number of emigrants living abroad in the long term.

Remittances

Remittances are international transfers, mostly financial, that emigrants send to those left behind.b

The sending and receiving of remittances includes the amount of remittances received and channels used to transfer money, which in turn affect the ability to make long-term investments.

The use of remittances is often considered as a priority for policy makers, who would like to orientate remittances towards productive investment.

Return migration

Return migration occurs when international migrants decide to go back to and settle in, temporarily or permanently, their countries of origin.

The decision to return is influenced by various factors including personal preferences towards home countries or circumstances in host countries. Return migration, either temporary or permanent, can be beneficial for countries of origin, especially when it involves highly skilled people.

The sustainability of return measures the success of return migration, whether voluntary or forced, for the migrants and their families, but also for the home country.

Immigration

Immigration occurs when individuals born in another country – regardless of their citizenship – stay in a country for at least three months.

The integration of immigrants implies that they have better living conditions and contribute more to the development of their host and, by extension, home countries.

a. Due to the lack of data, the role of diasporas – which often make an active contribution to hometown associations or professional or interest networks – is not analysed in this report.

b. Besides financial transfers, remittances also include social remittances, i.e. the ideas, values and social capital transferred by migrants. Even though social remittances represent an important aspect of the migration-development nexus, they go beyond the scope of this project and are therefore not discussed in this report.

The methodological framework developed by the OECD Development Centre and the data collected by its local research partners together offer an opportunity to fill significant knowledge gaps in the migration and development nexus. Several aspects in particular make the IPPMD approach unique and important for shedding light on how the two-way relationship between migration and public policies affects development:

  • The same survey tools were used in all countries over the same time period (2014-15), allowing for comparisons across countries.

  • The surveys covered a variety of migration dimensions and outcomes (Table 1.1), thus providing a comprehensive overview of the migration cycle.

  • The project examined a wide set of policy programmes across countries covering the five key sectors.

  • Quantitative and qualitative tools were combined to collect a large new body of primary data on the ten partner countries:

    1. A household survey covered on average around 2 000 households in each country, both migrant and non-migrant households. Overall, more than 20 500 households, representing about 100 000 individuals, were interviewed for the project.

    2. A community survey reached a total of 590 local authorities and community leaders in the communities where the household questionnaire was administered.

    3. Qualitative in-depth stakeholder interviews were held with key stakeholders representing national and local authorities, academia, international organisations, civil society and the private sector. In total, 375 interviews were carried out across the ten countries.

  • The data were analysed using both descriptive and regression techniques. The former identifies broad patterns and correlations between key variables concerning migration and public policies, while the latter deepens the empirical understanding of these interrelations by also controlling for other factors.

In October 2016, the OECD Development Centre and European Commission hosted a dialogue in Paris on tapping the benefits of migration for development through more coherent policies. The event served as a platform for policy dialogue between policy makers from partner countries, academic experts, civil society and multilateral organisations. It discussed the findings and concrete policies that can help enhance the contribution of migration to the development of both countries of origin and destination. A cross-country comparative report and the ten country reports will be published in 2017.

Why was Armenia included in the IPPMD project?

Armenia has one of the highest emigration rates in the world. Data from the United Nations indicate that there were an estimated 937 000 Armenian migrants in 2015, equivalent to 31.1% of the country’s total population (Figure 1.2). This is the highest share among all the IPPMD partner countries. Russia is the most common destination country, receiving 45% of Armenia’s emigrants. Among the IPPMD sample, 87% of men and 68% of women emigrants reside in Russia (Chapter 3).

Figure 1.2. Armenia has the highest share of emigrants among the IPPMD countries
Emigrant and immigrant stocks as a percentage of the population (2015)
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Note: Data come from national censuses, labour force surveys, and population registers.

Source: UN DESA (2015), International Migration Stock: The 2015 Revision (database), www.un.org/en/development/desa/population/migration/data/estimates2/estimates15.shtml.

Remittances sent home by emigrants constitute an important source of income for many households in Armenia. They have the potential to improve the well-being of migrant households and spur economic and social development. In 2015, the inflow of remittances to Armenia reached USD 1 491 million, constituting 14% of national income (World Bank, 2016). Across the IPPMD countries, the average share was 8.3% (Figure 1.3). The volumes and modes of sending remittances depend on multiple factors, including the characteristics of the migrants and the sending and receiving costs.

Figure 1.3. The contribution of remittances to Armenia’s gross domestic product is significant
Remittances as a share of GDP (%), 2015
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Source: Word Bank, Annual Remittances Data (inflows), World Bank Migration and Remittance data, /www.worldbank.org/en/topic/migrationremittancesdiasporaissues/brief/migration-remittances-data.

How did the IPPMD project operate in Armenia?

In Armenia, the IPPMD project team worked with the State Migration Service (SMS) under the Ministry of Territorial Administration and Development as the government focal point. The SMS provided information about country priorities, data and policies and assisted in the organisation of country workshops and bilateral meetings. The IPPMD team also worked with the Caucasus Research Resource Center (CRRC-Armenia) to ensure the smooth running of the project. CRRC-Armenia helped organise country-level events, contributed to the design of the research strategy in Armenia, conducted the fieldwork and co-drafted the country report.

The IPPMD project team organised several local workshops and meetings with support from the Delegation of the European Union to Armenia. The various stakeholders who participated in these workshops and meetings, and who were interviewed during the missions to Armenia, also played a role in strengthening the network of project partners and setting the research priorities in the country.

A kick-off workshop, held in October 2014 in Yerevan, launched the project in Armenia (Figure 1.4). The workshop served as a platform to discuss the focus of the project in the country with national and local policy makers, and representatives of international organisations, employer and employee organisations, civil society organisations and academics. Following lively and wide-ranging discussions, the IPPMD project team decided to focus the analysis on four sectors: 1) the labour market; 2) agriculture; 3) education; and 4) investment and financial services.

Figure 1.4. IPPMD project timeline in Armenia
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Following a training workshop and pilot tests conducted by the IPPMD project team, CRRC-Armenia collected quantitative data from 2 000 households and 79 communities and conducted 47 qualitative stakeholder interviews (Chapter 3). A consultation meeting to present the preliminary findings to relevant stakeholders, including policy makers, academic researchers and civil society organisations, was organised in September 2015. The meeting discussed the various views and interpretations of the preliminary results to feed into further analysis at the country level. The project will conclude with a policy dialogue to share the policy recommendations from the findings and discuss with relevant stakeholders concrete actions to make the most of migration in Armenia.

What does the report tell us about the links between migration and development?

The findings of this report suggest that the development potential embodied in migration is not being fully exploited in Armenia. Taking migration into account in a range of policy areas can allow this potential to be tapped. The report demonstrates the two-way relationship between migration and public policies by analysing how migration affects key sectors – the labour market, agriculture, education, and investment and financial services (Chapter 4) – and how it is influenced by policies in these sectors (Chapter 5). Some of the key findings are highlighted below.

Labour market policies can curb emigration

Many Armenians leave for better employment opportunities and higher wages in destination countries. The IPPMD survey confirms that almost all Armenian emigrants are of working age, and the majority have left the lowest skilled jobs in agriculture and the construction sectors.

Other aspects of migration have an impact on the labour market. The research found that receiving remittances has a negative influence on households’ labour force participation. Households receiving remittances tend to have a lower share of working members than households not receiving remittances (Figure 1.5). On the other hand, remittances encourage self-employment by women in rural areas. Similarly, return migration tends to boost self-employment in rural areas for both men and women.

Figure 1.5. Households receiving remittances have fewer working members
Share of household members aged 15-64 who are working (%)
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Note: The sample excludes households with return migrants only and immigrants only.

Source: Authors’ own work based on IPPMD data.

How are Armenia’s labour market policies affecting migration? The Armenian government is increasing its attention to vocational education and training (VET) to improve skills. Can VET enable people to find a (better) job in Armenia and reduce the need to emigrate? The IPPMD survey found that people – and especially men – who had completed vocational training were less likely to plan to emigrate. Given that the propensity to emigrate is higher among the lowest skilled occupational groups, vocational training programmes could be promoting upward labour mobility and reducing incentives to look for jobs abroad. This pattern differs from that found among the other IPPMD partner countries, whereby vocational training programmes appear to be helping would-be migrants to be more employable overseas.

The IPPMD research also finds that government employment agencies can curb emigration by providing people with better information on the Armenian labour market. The share of people with plans to emigrate is much lower among the beneficiaries of government employment agencies than non-beneficiaries. However, the share of people in the sample finding work through these agencies is very low – at 2%. Public employment programmes (PEPs) do not seem to have a link with migration, most probably because of the low take-up ratio (less than 1%).

Agricultural subsidies influence households’ migration decisions

Agriculture plays an important role in Armenia’s economy, contributing 19% of the country’s GDP (World Bank, 2017) and employing 36% of the work force (FAO, 2016). According to the IPPMD data and analysis, agricultural households in Armenia are more likely to be receiving remittances than non-agricultural households, and this additional income is often spent on agricultural assets, which is an encouraging finding. However, the amounts invested are seemingly not high enough to revitalise the agricultural sector, or the rural sector in general. For instance, there is very little evidence of diversification into various agricultural activities or non-agricultural business. This may be linked to the fact that it is mainly the poor who emigrate; although their investment capacity may be increased through remittances and return migration, the amounts invested may remain low.

The IPPMD analysis also finds that agricultural policies may in fact be discouraging emigration by members of farming households and encouraging current emigrants to return. People in households benefiting from agricultural subsidies are less likely to emigrate or be planning to emigrate (Figure 1.6). Figure 1.6 also shows that households receiving agricultural subsidies were more likely to have a return migrant. By providing households with the means to relieve the financial constraints which may have driven a member to leave, subsidies may be providing an incentive for emigrants to return home.

Figure 1.6. Agricultural subsidies decrease emigration and increase return migration
Share of households by migration dimension and whether it benefited from an agricultural subsidy (%)
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Note: Statistical significance calculated using a chi-squared test is indicated as follows: ***: 99%, **: 95%, *: 90%.

Source: Authors’ own work based on IPPMD data.

Remittances encourage investments in education

Existing research shows that an important reason for emigrating from Armenia is to earn enough to pay for children’s education (Makaryan and Galstyan, 2013). The IPPMD data confirm that households receiving remittances are spending a larger share of their budget on education than households without remittances (Figure 1.7). These expenses may include extra tutoring or education fees. The pattern is reverse for return migration, however. Households with return migrants spend less on education. Moreover, return migration and emigration seem to be negatively associated with school attendance, by girls in particular. In emigrant households, girls’ rates of school attendance (in the age group 15 to 22) are lower than in non-emigrant households. This suggests that even though remittances can stimulate more investments in education, migration may have disruptive effects on youth schooling, especially for girls.

Figure 1.7. Households receiving remittances spend a larger share of their budget on education
Share of total budget spent on education (%), by migration status
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Note: The sample only includes households with children in school age (aged 6-20 years).

Source: Authors’ own work based on IPPMD data.

Education policies and programmes that help with school expenses can therefore discourage emigration. The Government of Armenia has implemented multiple programmes to improve and strengthen the education sector in the past two decades. Most of the education programmes from which IPPMD surveyed households benefit are in-kind distribution programmes, such as free textbooks and school meals, which may have little impact on households’ budgets. Financial support programmes, such as scholarships, may have a greater influence on migration decisions, but these programmes are of fairly limited coverage in Armenia and the analysis finds they have little influence on people’s decisions to emigrate.

Investment is not being boosted by migration

Despite a healthy and open investment climate and a supportive environment for business start-ups, the level of entrepreneurship in Armenia is low. This is confirmed by the IPPMD survey, which found that only 4% of households own a business. Migration and remittances also do not seem to promote productive investment (other than in education). For instance, the link between receiving remittances and business ownership is negative, indicating that remittance-receiving households are less likely to run a business.

What could explain this pattern? Potential reasons could be the low level of financial inclusion by the population and the rather underdeveloped financial markets, especially in rural areas. Financial institutions – including microcredit organisations, money transfer operators and banks – are much more common in urban areas than in rural areas. For instance, 96% of urban communities have a bank compared to only 2% of rural communities. Furthermore, participation in financial training programmes is very low among migrant and non-migrant households alike: less than 1% of surveyed households benefited from a financial training programme. There is scope to expand the coverage of financial training programmes and household participation in such courses in order to encourage and enable households to make long-term remittance investments.

A more coherent policy agenda can unlock the development potential of migration

The report suggests that migration, through the dimensions analysed in the IPPMD study – emigration, remittances and return migration – can contribute to Armenia’s economic and social development. However, this development potential does not seem to be being fully realised.

To harness the development impact of migration, the country requires a more coherent policy framework. Armenia has recently begun to move in this direction. For instance, the Strategic Program of Perspective Development for 2014-2025 highlights the creation of local jobs and economic growth as key policy priorities for overcoming migration-related challenges. Despite recent progress in incorporating migration into certain policy areas, there still remains much scope for relevant line ministries to include migration in their policy designs.

The following sections provide policy recommendations for each sector studied in the IPPMD project in Armenia. Policy recommendations across different sectors and different dimensions of migration stemming from the ten-country study are also specified in the IPPMD comparative report (OECD, 2017).

Integrate migration and development into labour market policies

The Armenian labour market is tightly linked with migration. While to some extent the impact of migration is positive (as remittances can take the pressure off the labour market and boost self-employment), better employment opportunities and higher wages are still attracting many people abroad, especially the lowest skilled. Vocational training programmes seem to be curbing this flow to a certain extent, but more needs to be done:

  • Vocational training programmes need to better target and match demand with supply. Mapping labour shortages and strengthening co-ordination mechanisms with the private sector would be important steps. Training programmes can also be targeted at return migrants, to help them reintegrate into the labour market.

  • Employment agencies need to widen their activities to reach out both to current emigrants abroad and migrants who have returned to ensure they have information on and access to formal waged jobs. Building closer connections between the employment agencies and the private sector will be important for achieving this.

Leverage migration for agricultural development

Agriculture remains a sector of high importance in Armenia. Given its substantial role, it is paramount that the country ensures that migration helps, rather than harms, the sector. Yet the IPPMD data show that migration has little positive effect on the sector in Armenia. Remittances seem to be channelled into agricultural asset expenditures but at low levels, and they are not being used to diversify into different farming activities or non-agricultural businesses. On the other hand, government policies, particularly those related to agricultural subsidies, seem to be discouraging emigration and encouraging return migration. Recommendations for policy include the following:

  • Make it easier for remittances to be channelled towards productive investment, by ensuring money transfer operators are present and affordable in rural areas, providing households with sufficient training in investment and financial skills and putting in place adequate infrastructure that make it attractive to invest in rural areas. Bottlenecks that limit investments in the agricultural sector are a lost opportunity to harness the potential of remittances and return migration for development in the sector.

  • Ensure that agricultural subsidies are channelled into investment and diversification of activities and conditional on subsequent yields, so that they can continue to help households remain productive. This should avoid stimulating emigration due to lack of opportunities in the home country.

Enhance the links between migration and investment in education

Education plays a crucial role in individual and national development. Although households use their remittances to finance the education of their children, emigration still seems to have a negative effect on school attendance, especially among young women. The type of education programmes analysed in this study do not seem to have much effect on household migration decisions, possibly because they are largely based on in-kind support and of fairly limited coverage. This raises two policy implications:

  • Increase investments in education infrastructure to ensure quality and access to meet the growing demand for education driven by remittances.

  • Expand cash and in-kind distribution programmes in areas with high emigration rates to make sure that young people, and especially girls, have the means to complete secondary education.

Strengthen the links between migration, investment, financial services and development

The IPPMD research finds an insignificant or sometimes even negative relationship between remittances, return migration and investments. The results indicate that there are barriers to investments in Armenia, particularly pronounced in rural areas. Key actions are needed to remove these barriers, which include the low coverage of financial service institutions and financial training programmes in rural areas:

  • Expand financial service provision, especially in rural areas, by increasing competition among service providers and adapting the regulatory framework.

  • Invest in financial training programmes, especially targeted at return migrants and households with emigrants.

  • Facilitate business start-up, for example by providing business management courses and access to credit to encourage remittance investments in new businesses.

Roadmap of the report

The next chapter discusses how migration has evolved in Armenia and reviews the existing research on the links between migration and development. It also briefly describes the current policy context and institutional frameworks related to migration. Chapter 3 explains the implementation of fieldwork and the analytical approaches used for the empirical research. It also summarises the broad findings of the IPPMD survey in terms of general emigration, remittances and return migration patterns. Chapter 4 discusses how the three dimensions of migration affect four key sectors in Armenia: the labour market, agriculture, education, and investment and financial services, while Chapter 5 explores how the policies in these sectors can influence migration outcomes.

References

FAO (2016), “Employment distribution, agriculture”, FAOSTAT (database), www.fao.org/faostat/en/#data/OE (accessed 1 October 2016).

Makaryan, G. and M. Galstyan (2013), “Costs and benefits of labour mobility between the EU and the Eastern Partnership Partner Countries: Armenia Country report”, CASE-Center for Social and Economic Research No. 461/2013, Warsaw.

OECD (2017), Interrelations between Public Policies, Migration and Development, OECD Publishing, http://dx.doi.org/10.1787/9789264265615-en.

UN DESA (2015), International Migration Stock: The 2015 Revision (database), United Nations Department of Economic and Social Affairs, New York, www.un.org/en/development/desa/population/migration/data/estimates2/estimates15.shtml.

World Bank (2017), “Agricultural, value added (% of GDP)”, World Development Indicators (database), World Bank, Washington, DC, http://data.worldbank.org/indicator/NV.AGR.TOTL.ZS (accessed 1 February 2017).

World Bank (2016), “Annual Remittances Data (inflows)”, World Bank Migration and Remittance data (database), World Bank, Washington, DC, www.worldbank.org/en/topic/migrationremittancesdiasporaissues/brief/migration-remittances-data (accessed 12 January 2017).