Visa Liberalization: A Threat to Macedonia?
Sam Vaknin Ph.D.
July 13, 2009
An Executive Summary of a Research Report Dated 07/06/2009
The client authorized the publication of the Executive Summary only.
Macedonian citizens will enjoy visa-free travel to most destinations in Europe starting in early 2010. The liberalization of the visa regime is welcomed in the tiny, landlocked and claustrophobic country: it will provide its long-suffering denizens with access to higher education and jobs in a common market with 300 million people and a GDP to equal the United States.
But, the change in the visa regime also presents multiple threats to the fragile polity. To start with, it could encourage an exodus of ethnic Macedonians from the country and alter to their disfavor the demographic balance with their Albanian nemeses.
This is a realistic scenario: Macedonia's membership in NATO was vetoed by an irate Greece last year when the two parties failed to reach a compromise regarding the "name Issue" (Greece's insistence that Macedonia change its name). Similarly, Macedonia was not given a date to commence its accession talks with the European Union. Economic and Euro-Atlantic integration prospects look dim and youngsters are elders alike are frantically looking for a way out. Rumblings of a renewed ethnic conflict have recently escalated.
Based on experience from other countries in Central and Eastern Europe - such as Poland and Bulgaria - and on experience from other regions (for instance: Israel and Vietnam), we conclude:
Macedonia is likely to lose 3-5% of its population over the next 5 years (assuming that Europe undergoes a mild economic recovery starting in 2012). Most of these are expected to take advantage of the visa liberalization regime and leave Macedonia for good (emigrate). Another 3-5% are likely to try to find temporary jobs as Gastarbeiter. Consequently, Macedonia will plunge into negative population growth.
At least 40% of these emigrants are likely to be students, white-collar workers, academics, and skilled laborers. This massive brain drain will create labor shortages in crucial sectors (healthcare, education, academe, research and development, banking and finance, hi-tech industries and manufacturing). As Macedonia's economy recovers and improves, the brain drain will increase, not decrease!
Barry Chiswick and Timothy Hatton demonstrated ("International Migration and the Integration of Labour Markets", published by the NBER in its "Globalisation in Historical Perspective") that, as the economies of poor countries improve, emigration increases because people become sufficiently wealthy to finance the trip.
Remittances are likely to recover as emigrants and Gastarbeiter send money back home and, thus, replenish the country's foreign exchange reserves by an extra 200-300 million euros a year. By 2013, remittances will exceed the record level of 2007 and foster a new wave of consumption, construction, and GDP growth. Levels of unemployment inside Macedonia will drop and unemployment of the well-educated and skilled will be all but eliminated.
Quotes from the report:
"Macedonia invests an average of $50,000 of its painfully scarce resources in every university graduate, only to witness tens of thousands of them emigrate to richer places. Macedonia ends up subsidizing the rich countries by exporting to them its human capital, the prospective members of its dwindling elites, and the taxes they would have paid had they stayed put. The formation of its middle class is often irreversibly hindered by an all-pervasive brain drain. The kleptocracies that run Macedonia may actually welcome the brain drain as it also drains the country of potential political adversaries." (p. 6)
"Emigration also tends to decrease competitiveness. It increase salaries at home by reducing supply in the labour market (and reduces salaries at the receiving end, especially for unskilled workers) ... The countries of origin, whose intellectual elites are depleted by the brain drain, are often forced to resort to hiring (expensive) foreigners." (p. 18)
How can Macedonia take advantage of the communities of expats (expatriates) that are likely to form after the visa regime has been liberalized?
"Countries - from Mexico to Israel, and from China to Guatemala - are trying to tap into the considerable wealth of their diasporas by issuing remittance-bonds, by offering tax holidays, one-stop-shop facilities, business incubators, and direct access to decision makers - as well as matching investment funds.
Migrant associations are sprouting all over the Western world, often at the behest of municipal authorities back home. The UNDP, the International Organization of Migration (IOM), as well as many governments (e.g., Israel, China, Venezuela, Uruguay, Ethiopia), encourage expatriates to share their skills with their counterparts in their country of origin. The thriving hi-tech industries in Israel, India, Ireland, Taiwan, and South Korea were founded by returning migrants who brought with them not only capital to invest and contacts - but also entrepreneurial skills and cutting edge technologies.
Thailand established in 1997, within the National Science and Technology Development Agency, a 2.2 billion baht project called "Reverse the Brain Drain". Its aim is to 'use the 'brain' and 'connections' of Thai professionals living overseas to help in the Development of Thailand, particularly in science and technology.'
The OECD ("International Mobility of the Highly Skilled") believes that:
More and more highly skilled workers are moving abroad for jobs, encouraging innovation to circulate and helping to boost economic growth around the globe.'
But it admits that a "greater co-operation between sending and receiving countries is needed to ensure a fair distribution of benefits".
The OECD noted, in its "Annual Trends in International Migration, 2001" that (to quote its press release):
Migration involving qualified and highly qualified workers rose sharply between 1999 and 2000, helped by better employment prospects and the easing of entry conditions. Instead of granting initial temporary work permits only for one year, as in the past, some OECD countries, particularly in Europe, have been issuing them for up to five years and generally making them renewable. Countries such as Australia and Canada, where migration policies were mainly aimed at permanent settlers, are also now favoring temporary work permits valid for between three and six years ... In addition to a general increase in economic prosperity, one of the main factors behind the recent increase in worker migration has been the development of information technology, a sector where in 2000 there was a shortage of around 850,000 technicians in the US and nearly 2 million in Europe...'
But the OECD underplays the importance of brain drain:
Fears of a "brain drain" from developing to technologically advanced countries may be exaggerated, given that many professionals do eventually return to their country of origin. To avoid the loss of highly qualified workers, however, developing countries need to build their own innovation and research facilities ... China, for example, has recently launched a program aimed at developing 100 selected universities into world-class research centers. Another way to ensure return ... could be to encourage students to study abroad while making study grants conditional on the student's return home.' " (p.23-6)
The client authorized the publication of the Executive Summary only.
Macedonian citizens will enjoy visa-free travel to most destinations in Europe starting in early 2010. The liberalization of the visa regime is welcomed in the tiny, landlocked and claustrophobic country: it will provide its long-suffering denizens with access to higher education and jobs in a common market with 300 million people and a GDP to equal the United States.
But, the change in the visa regime also presents multiple threats to the fragile polity. To start with, it could encourage an exodus of ethnic Macedonians from the country and alter to their disfavor the demographic balance with their Albanian nemeses.
This is a realistic scenario: Macedonia's membership in NATO was vetoed by an irate Greece last year when the two parties failed to reach a compromise regarding the "name Issue" (Greece's insistence that Macedonia change its name). Similarly, Macedonia was not given a date to commence its accession talks with the European Union. Economic and Euro-Atlantic integration prospects look dim and youngsters are elders alike are frantically looking for a way out. Rumblings of a renewed ethnic conflict have recently escalated.
Based on experience from other countries in Central and Eastern Europe - such as Poland and Bulgaria - and on experience from other regions (for instance: Israel and Vietnam), we conclude:
Macedonia is likely to lose 3-5% of its population over the next 5 years (assuming that Europe undergoes a mild economic recovery starting in 2012). Most of these are expected to take advantage of the visa liberalization regime and leave Macedonia for good (emigrate). Another 3-5% are likely to try to find temporary jobs as Gastarbeiter. Consequently, Macedonia will plunge into negative population growth.
At least 40% of these emigrants are likely to be students, white-collar workers, academics, and skilled laborers. This massive brain drain will create labor shortages in crucial sectors (healthcare, education, academe, research and development, banking and finance, hi-tech industries and manufacturing). As Macedonia's economy recovers and improves, the brain drain will increase, not decrease!
Barry Chiswick and Timothy Hatton demonstrated ("International Migration and the Integration of Labour Markets", published by the NBER in its "Globalisation in Historical Perspective") that, as the economies of poor countries improve, emigration increases because people become sufficiently wealthy to finance the trip.
Remittances are likely to recover as emigrants and Gastarbeiter send money back home and, thus, replenish the country's foreign exchange reserves by an extra 200-300 million euros a year. By 2013, remittances will exceed the record level of 2007 and foster a new wave of consumption, construction, and GDP growth. Levels of unemployment inside Macedonia will drop and unemployment of the well-educated and skilled will be all but eliminated.
Quotes from the report:
"Macedonia invests an average of $50,000 of its painfully scarce resources in every university graduate, only to witness tens of thousands of them emigrate to richer places. Macedonia ends up subsidizing the rich countries by exporting to them its human capital, the prospective members of its dwindling elites, and the taxes they would have paid had they stayed put. The formation of its middle class is often irreversibly hindered by an all-pervasive brain drain. The kleptocracies that run Macedonia may actually welcome the brain drain as it also drains the country of potential political adversaries." (p. 6)
"Emigration also tends to decrease competitiveness. It increase salaries at home by reducing supply in the labour market (and reduces salaries at the receiving end, especially for unskilled workers) ... The countries of origin, whose intellectual elites are depleted by the brain drain, are often forced to resort to hiring (expensive) foreigners." (p. 18)
How can Macedonia take advantage of the communities of expats (expatriates) that are likely to form after the visa regime has been liberalized?
"Countries - from Mexico to Israel, and from China to Guatemala - are trying to tap into the considerable wealth of their diasporas by issuing remittance-bonds, by offering tax holidays, one-stop-shop facilities, business incubators, and direct access to decision makers - as well as matching investment funds.
Migrant associations are sprouting all over the Western world, often at the behest of municipal authorities back home. The UNDP, the International Organization of Migration (IOM), as well as many governments (e.g., Israel, China, Venezuela, Uruguay, Ethiopia), encourage expatriates to share their skills with their counterparts in their country of origin. The thriving hi-tech industries in Israel, India, Ireland, Taiwan, and South Korea were founded by returning migrants who brought with them not only capital to invest and contacts - but also entrepreneurial skills and cutting edge technologies.
Thailand established in 1997, within the National Science and Technology Development Agency, a 2.2 billion baht project called "Reverse the Brain Drain". Its aim is to 'use the 'brain' and 'connections' of Thai professionals living overseas to help in the Development of Thailand, particularly in science and technology.'
The OECD ("International Mobility of the Highly Skilled") believes that:
More and more highly skilled workers are moving abroad for jobs, encouraging innovation to circulate and helping to boost economic growth around the globe.'
But it admits that a "greater co-operation between sending and receiving countries is needed to ensure a fair distribution of benefits".
The OECD noted, in its "Annual Trends in International Migration, 2001" that (to quote its press release):
Migration involving qualified and highly qualified workers rose sharply between 1999 and 2000, helped by better employment prospects and the easing of entry conditions. Instead of granting initial temporary work permits only for one year, as in the past, some OECD countries, particularly in Europe, have been issuing them for up to five years and generally making them renewable. Countries such as Australia and Canada, where migration policies were mainly aimed at permanent settlers, are also now favoring temporary work permits valid for between three and six years ... In addition to a general increase in economic prosperity, one of the main factors behind the recent increase in worker migration has been the development of information technology, a sector where in 2000 there was a shortage of around 850,000 technicians in the US and nearly 2 million in Europe...'
But the OECD underplays the importance of brain drain:
Fears of a "brain drain" from developing to technologically advanced countries may be exaggerated, given that many professionals do eventually return to their country of origin. To avoid the loss of highly qualified workers, however, developing countries need to build their own innovation and research facilities ... China, for example, has recently launched a program aimed at developing 100 selected universities into world-class research centers. Another way to ensure return ... could be to encourage students to study abroad while making study grants conditional on the student's return home.' " (p.23-6)
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