ISET

ISET Economist Blog

A blog about economics in the South Caucasus.

Progress Through Immigration

Georgia has one of the most liberal immigration policies worldwide. Everybody can enter Georgia with an airport visa that is valid for one year. Permanent residency status is granted as soon as one has found employment. Yet compared to other capitals, one encounters rather few foreigners when walking through Tbilisi’s streets. How can Georgia sustain its liberal policy without being overrun by immigrants?

There are two rather trivial reasons. Firstly, there is no incentive to “immigrate into the welfare state”, simply because Georgia does not have one. A good deal of the immigration to Western Europe is induced through the generous welfare payments available there. The second reason is that there are so few economic opportunities for foreigners in Georgia that most potential immigrants would not see much of an advantage to move from their own poor countries to another poor country. What can the Georgian economy offer to immigrants, given its failure to provide even its own population with sufficient employment and income?

While these explanations are not really flattering, they put Georgia in the pleasant situation that the country can enjoy the advantages of a liberal immigration regime without having to struggle with its negative consequences. And indeed, immigration can yield huge economic gains if facilitated in the right way.


A LOOK AT OTHER COUNTRIES

Many countries were highly successful in utilizing on the positive effects of immigration. The economies of Canada, Australia, and New Zealand belong to this category, but the most prominent example is of course the United States of America. Since centuries, North America is a primary destination for emigrants – persecuted European Protestants in the 17th and 18th centuries, Irish and Italian Catholics in the 19th century, Jews and Armenians in the 20th century, and Asians in the 21st century, to name just a few significant immigration waves. When the Nazis began to terrorize the Jews of Europe, thousands of the most brilliant minds left for the USA, among them almost the entire group of scientists that built the first nuclear bomb.

But also today, the USA attract the brightest, most energetic, and most diligent people of the world. The Ph.D. programs of the best US universities are populated with foreigners, and while the USA can boast to have received most of the Nobel Prizes awarded since the end of the Second World War, many of the laureates were in fact born in other countries. As young researchers, they found employment at US universities and decided to stay. The USA did extremely well with this policy, leading to a substantial technological edge over the rest of the world and generating the highest per capita income among all big countries.

There are other examples. While nowadays the native French population is almost entirely Catholic, that was not always the case. Some centuries ago, there were hundreds of thousands of Protestants residing in France, commonly known under the name Huguenots. The Huguenots were horribly persecuted by their Catholic compatriots, culminating in the infamous St. Bartholomew's Day Massacre of 1572, when up to 30,000 Huguenots were murdered in the streets of Paris on one single day. The violent hostility the French Protestants experienced in their home country led virtually all of them to emigrate to the USA, England, South Africa, and particularly Germany. This exodus may legitimately be considered to have been the first “brain drain” in history. The Huguenots had already been an elite group in France, and wherever they went, they brought their remarkable protestant work ethics with them. Their immigration yielded invaluable economic impulses to the absorbing countries. In Berlin, the arriving Huguenots founded two new quarters of the city, and by 1700, about 20% of the city’s inhabitants were native French speakers. Still today, families of Huguenot ancestry represent an elite group in Germany, as shown by the many French surnames among politicians, scientists, and artists.

Other successful immigration societies are Canada, Indonesia, and Australia. These countries are blessed with considerable Chinese communities that do economically extremely well. Although in 1995, just 3% of the Indonesians were ethnic Chinese, 73% of the stocks traded at the Jakarta Stock Exchange (in terms of market capitalization) were owned by Chinese Indonesians (who also owned 68% of the 300 biggest companies and 9 of the 10 major conglomerates). Unfortunately, the Chinese became scapegoats under the rule of the infamous Indonesian dictator Suharto. He nurtured malevolence and envy among the economically less potent Indonesian majority, causing ugly anti-Chinese pogroms in the late 90ies.

The Chinese are the most dynamic immigrants one can think of. It needed communism to keep this powerful people down; without Mao, already the 20th century would have been a Chinese century, not just the 21st. Once exposed to capitalistic competition, the inventors of gunpowder, the compass, and porcelain unleash their enormous economic potential. From an economic viewpoint, you simply can never have enough Chinese in your country. The same is true for other Asian peoples, like the Vietnamese, the only nation in history that militarily defeated the USA.


AND GEORGIA?

History teaches a clear lesson. If a country wants to utilize on immigration, it is important to attract the right groups. In the past, Georgia did pretty well in this respect. The Armenian Diaspora in Tbilisi was successful in trade and science and cradled the 9th World Chess Champion Tigran Petrosian. The Jewish community, allegedly dating back to 538 BC, played a significant role in Georgian economy and culture, but has unfortunately largely left the country.

Through the liberalization of immigration laws carried out by the previous government, Georgia again became interesting for immigrants and temporary foreign residents. Among the students admitted to ISET in 2011 and 2012, there were not only Azeris and Armenians, but also Israelis, Iranians, Ukrainians, and Latvians. In addition, ISET received applications from the whole world, ranging from China to Africa and Eastern Europe. Also many Indians are appreciating the good medical education they can receive in Tbilisi for reasonable prices. And Georgia is one of the few countries in the world Iranians can enter without visa problems, and a lot of Iranian business is now going on in Tbilisi.

The liberal immigration policy is one of the few competitive strengths of Georgia. Easy entry, low levels of corruption, minimal bureaucracy, transparent and efficient services convince foreigners to offer their human or financial capital to the Georgian economy, or to start their own businesses. Georgia may also try to fight for economically strong groups that are not welcome anymore in their home countries and look for a refuge.

In a smart act, the former government invited the Boers from South Africa to settle in Georgia. The Boers are renowned for their outstanding agricultural expertise and, given that they do not feel comfortable in post-apartheid South Africa, their arrival could have been a boost for the pathetic Georgian agricultural sector. The graph shows that the number of South African visitors quadrupled since 2010, which may be related to the Boers. Yet unfortunately, though some Boers did settle in Georgia, the large scale immigration that was hoped for did not take place.

Other people currently driven out of their home country are the Coptic Christians from Egypt. Since the “Arab Spring” allowed Islamists to take over in Egypt, the Coptic Christian minority suffers from intolerance and persecution. The word about Georgia’s liberal immigration policy seems to have spread to Egypt, as the number of Egyptians entering Georgia in February 2013 is 10 times higher than it was in February 2012. With money brought from Egypt, many of these refugees try to establish new businesses in Georgia. As an owner of a Tbilisi printing house told us: “Now I have many Egyptian customers. All of them are Christians. They order billboards for their restaurants, cafes, hotels, and shops.”

Another group of foreigners that could be beneficial to Georgia, in particular for its agriculture, are Punjabi farmers from India. According to some sources, Punjabis purchased considerable amounts of arable land in Georgia, which has a superior soil quality and allegedly is much cheaper than in India. As can be seen on the chart, the number of Indian visitors to Georgia is very high in absolute terms and the trend is still positive.

The absence of corruption and bureaucratic obstacles are important factors for the decision of foreigners to get engaged in the Georgian economy. Georgia’s overall economic situation is depressing, but immigration is one of the few positive signs on the horizon.

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Guest - Simon Appleby on Saturday, 13 April 2013 14:21

A very interesting and well researched article. It is good to hear some arguments in favour of migration from Georgian academics.

The expulsion of the Sephardic Jews from Spain precedes the "brain drain' of the Huguenots from France by quite some time. The Arabs and Ottomans were the primary beneficiaries of this influx of talented people, as was Georgia; there are many successful Sephardic Jewish businessmen here.

The Chinese were so successful in Indonesia that by the time the Dutch began their colonial conquest, over half the population of Java, the most densely populated island with half the archipelago's population, was Chinese. Entire regencies and provinces, such as Palembang in Sumatra, were almost exclusive Chinese enclaves. The high birth rate amongst Muslim families has resulted in the Chinese population in Indonesia being diluted down to 3%, with mixed-race families seeking to expunge their Warga Negara Indonesia Keturunan ("Citizens with a certain descent") status from government files. Until recently Indonesian citizens of Chinese descent were prohibited from military service, working in the civil service or attending a State university.

In addition to Copts, I have met a number of Syrian Christians in Tbilisi considering migrating here; some are Arabs, some of Greek descent and some are Armenians. The situation for their people in Syria is quite grave, and Georgians generally treat them very well. Most come from small business and professional backgrounds, and speak several languages.

An example of a developing economy that successfully tapped the resource of migrants was Hong Kong in the aftermath of the Second World War. The Territory had been devastated by the Japanese occupation, and then inundated with millions of refugees from Chinese Communist oppression after 1949. The descendants of those refugees now make up more than two thirds of the population.

In parallel with this, the colonial administration had a very liberal foreign immigration policy; citizens of most Commonwealth countries could freely travel there and start work without any work permit. Hong Kong attracted a huge number of talented migrants from Singapore and Malaysia, India and Pakistan, as well as British, Australian, New Zealand, Canadian and South African migrants. Many of the most successful financial houses and service companies in Hong Kong were founded by such people who came as backpackers or small traders with a few hundred dollars in capital and stayed on. Hong Kong's position as a major trading hub has been enhanced by using the resources of its non-indigenous residents.

Georgia has a similar immigration policy. It has certainly attracted many Asian small entrepreneurs by doing so, as well as many CIS entrepreneurs, but the number of western entrepreneurs attracted here is relatively small to date, despite relatively liberal regulations. The reasons for this could form the basis of a whole academic paper.

A very interesting and well researched article. It is good to hear some arguments in favour of migration from Georgian academics. The expulsion of the Sephardic Jews from Spain precedes the "brain drain' of the Huguenots from France by quite some time. The Arabs and Ottomans were the primary beneficiaries of this influx of talented people, as was Georgia; there are many successful Sephardic Jewish businessmen here. The Chinese were so successful in Indonesia that by the time the Dutch began their colonial conquest, over half the population of Java, the most densely populated island with half the archipelago's population, was Chinese. Entire regencies and provinces, such as Palembang in Sumatra, were almost exclusive Chinese enclaves. The high birth rate amongst Muslim families has resulted in the Chinese population in Indonesia being diluted down to 3%, with mixed-race families seeking to expunge their Warga Negara Indonesia Keturunan ("Citizens with a certain descent") status from government files. Until recently Indonesian citizens of Chinese descent were prohibited from military service, working in the civil service or attending a State university. In addition to Copts, I have met a number of Syrian Christians in Tbilisi considering migrating here; some are Arabs, some of Greek descent and some are Armenians. The situation for their people in Syria is quite grave, and Georgians generally treat them very well. Most come from small business and professional backgrounds, and speak several languages. An example of a developing economy that successfully tapped the resource of migrants was Hong Kong in the aftermath of the Second World War. The Territory had been devastated by the Japanese occupation, and then inundated with millions of refugees from Chinese Communist oppression after 1949. The descendants of those refugees now make up more than two thirds of the population. In parallel with this, the colonial administration had a very liberal foreign immigration policy; citizens of most Commonwealth countries could freely travel there and start work without any work permit. Hong Kong attracted a huge number of talented migrants from Singapore and Malaysia, India and Pakistan, as well as British, Australian, New Zealand, Canadian and South African migrants. Many of the most successful financial houses and service companies in Hong Kong were founded by such people who came as backpackers or small traders with a few hundred dollars in capital and stayed on. Hong Kong's position as a major trading hub has been enhanced by using the resources of its non-indigenous residents. Georgia has a similar immigration policy. It has certainly attracted many Asian small entrepreneurs by doing so, as well as many CIS entrepreneurs, but the number of western entrepreneurs attracted here is relatively small to date, despite relatively liberal regulations. The reasons for this could form the basis of a whole academic paper.
Guest - Florian on Saturday, 13 April 2013 22:11

You added highly interesting facts. Indeed, when Isabella and Ferdinand expelled the Jews of Spain, this qualifies as the first brain drain of history, though it was smaller in scale than the exodus of the Huguenots (200.000 Jews left Spain and 500.000 Huguenots left France).

It is a huge problem that despite Georgia's liberal and business-friendly policies, rather few Western entrepreneurs are coming, and rather little investment takes place. One could indeed write a complete academic paper on that. Obvious reasons are political uncertainties, aggravated through the 2008 war, and the worldwide economic depression that now prevails for many years. There may be other factors though -- it is an important question, and possibly ISET-PI will do some research on this issue in future.

As you may have noticed, we wanted to get a message across, and so we did not mention the examples of those many countries that face severe problems resulting from immigration, notably in Europe. Fortunately, at the moment Georgia does not have to deal with these problems due to the reasons mentioned in the article.

You added highly interesting facts. Indeed, when Isabella and Ferdinand expelled the Jews of Spain, this qualifies as the first brain drain of history, though it was smaller in scale than the exodus of the Huguenots (200.000 Jews left Spain and 500.000 Huguenots left France). It is a huge problem that despite Georgia's liberal and business-friendly policies, rather few Western entrepreneurs are coming, and rather little investment takes place. One could indeed write a complete academic paper on that. Obvious reasons are political uncertainties, aggravated through the 2008 war, and the worldwide economic depression that now prevails for many years. There may be other factors though -- it is an important question, and possibly ISET-PI will do some research on this issue in future. As you may have noticed, we wanted to get a message across, and so we did not mention the examples of those many countries that face severe problems resulting from immigration, notably in Europe. Fortunately, at the moment Georgia does not have to deal with these problems due to the reasons mentioned in the article.
Guest - Eric on Sunday, 14 April 2013 02:02

As I wrote in Georgian Driving Manners and Economic Competitiveness, "there may be something about the country and its people that would attract investors despite a lack an immediate economic advantage. The innate decency of Georgian people (see Florian Biermann’s post), their warmth and hospitality to foreigners (“stumari”), beautiful landscapes and great food, are some of the factors that come to mind. After all, other things being financially equal (or even slightly unequal) it makes sense to develop a long term relationship with a country you like…"

As I wrote in Georgian Driving Manners and Economic Competitiveness, "there may be something about the country and its people that would attract investors despite a lack an immediate economic advantage. The innate decency of Georgian people (see Florian Biermann’s post), their warmth and hospitality to foreigners (“stumari”), beautiful landscapes and great food, are some of the factors that come to mind. After all, other things being financially equal (or even slightly unequal) it makes sense to develop a long term relationship with a country you like…"
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