SEATTLE, Washington — Out of the dissolution of the USSR in 1991, 15 states emerged. This insurgence of independence had states scrambling to cobble together an efficient and reliable infrastructure for their new nations. The economic decline that followed was comparatively more intense than the 27% drop during the Great Depression in the U.S. There was a total drop of 40% in GDP between the years of 1990 and 1995. This left the region riddled with political conflicts. Subsequently, former Soviet states struggled to establish key infrastructural needs such as healthcare and a sustainable economy.
As of 2007, 10 of 15 former Soviet states have recovered the sharp decline from 1991. Today, Ukraine, Moldova, Georgia, Kyrgyzstan and Tajikistan remain economically stunted. A large number of workers and the limited number of jobs only perpetuates the situation. In fact, many people seek work elsewhere as Russia’s presence continues to influence the flow of people and the tides of trade.
Despite being flush with resources, Ukraine remains one of the poorest of former Soviet states. Many believe Ukraine’s economic structure following 1991 is culpable for the country’s shortcomings. For example, politics-independent central banks tend to lead to a higher GDP and are better at resisting inflation. However, Ukraine didn’t have one for its first 23 years.
In Moldova, the transition from a government-controlled command economy to a competition-driven market economy has left the country more vulnerable than what economists initially predicted. Similar to Ukraine, much of Moldova’s weak economy stems from how it grappled to restructure after leaving the Soviet Union.
In 1994, the Moldovan government decided to privatize small to medium businesses as well as land suited for agriculture, which held Moldova’s primary share of the labor force for a while. The government encouraged the population to utilize privatized businesses and land to help transition the economy with the promise of loans. The nation ended up accruing a lot of debt, which continues to be one of the factors plaguing its unstable economy.
The Russian Migrant Workforce
Russia’s migrant workforce is comparable to that of the U.S. It has about 14 million migrant workers, 80% of which come from former Soviet states. In recent years, outmigration from former Soviet states has raised concerns among politicians and state authorities. As their intellectual resources and labor forces leave in pursuit of jobs where their labor is more marketable, their economies face further strain.
This leak in the workforce is taking the hopes of stimulating each country’s own economy and stagnating an already deficient system. Out of the 42 million people that live in Ukraine, nine million people work abroad at least some part of the year. At least 3.2 million people work internationally full-time. While Ukraine’s conflict with Russia pushes people out, migration policies and open labor markets are pulling people in, primarily in Poland and Russia.
At the same time, Moldova finds itself in a similar position, having become reliant on remittances amounting to the equivalent of $2 billion, which is nearly a quarter of its GDP. Reliance on remittances has made government officials in both countries reluctant to invest money in the education and public health sectors as they assume families will use their remittances on private services.
Trapped Between Russia and a Poor Place
With a massive influx of migrant workers, Russia had already begun to more carefully monitor the process in which workers arrived. It had set more stringent deadlines to register for work permits and cracked down on those working illegally. However, with the current global health crisis, conditions for migrant workers have worsened. As many illegal workers have lost their jobs entirely, many legal workers have been put on unpaid leave. Meanwhile, bills and fees remain unflinchingly consistent, including labor license fees, registration fees and the costs of meeting daily needs.
Russia’s influence on former Soviet states continues to live on as it drains of countries with struggling economies of their workforce. Already dependent on remittances, outmigration of the labor force is common in former Soviet states. However, stringent bureaucratic processes only make it more difficult to work legally without actually deterring the influx of laborers.
The Eastern Partnership (EaP)
To aid the struggling former Soviet states, the EU has partnered with six eastern European nations to form the Eastern Partnership. This partnership eases its partner countries toward the EU to allow them to forge ties that will catalyze political, economic and cultural growth. In 2008, the European Commission proposed the EaP to encourage “regional cooperation.” When conflict in Georgia threatened regional stability that same year, the need for a cohesive network in eastern Europe became more desperate, and so the initiative was expedited.
The Commission formally launched the EaP in 2009. It consists of the EU, Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine. Designed with the intent of stabilizing the eastern European region by making efforts to promote free travel, the EaP makes it easier for countries within the partnership to form alliances. When more engaged with each other, countries can pass cohesive economic policies and engage in free trade agreements. All of these would equip the former Soviet states with the support they need to begin to distance themselves politically and economically from Russia.
The EaP Improving Trade
Thanks to policies the EaP has implemented, the number of companies exporting from free trade between the EU and Georgia, Ukraine and Moldova has increased by 35%, 26% and 40% respectively since 2015. The EU has also contributed more than 125,000 small-to-medium enterprise loans in EaP partner countries. More than half of these loans were in the local currency to stimulate the economy of the countries. The EaP has also provided improved access to the internet to more than 700 educational and research institutions in the EaP nations.
While not a fix-all solution by any means, the Eastern Partnership shows that opening borders and extending a helping hand can open doors to new opportunities rather than closes them. Through these doors lies a path forward for these former Soviet states.
– Catherine Lin