Andrii Haidutskyi: "A conversation with Ukrainian migrants is 90% about money and projects and only 10% about patriotism"

Ukraine needs people, without them it doesn't matter how much money our allies give us for reconstruction, because without people, no one will be able to use and increase these funds. If we really dream of a trillion-dollar GDP, we should start with the migration issue. Precisely because of this, ZN.UA journalists talked about the biggest post-war problem of Ukraine with one of the most reputable experts in the field of migration policy, Andrii Haidutskyi, not for the first time. At one time, he studied the world's best experience of the Philippines, India, Pakistan, Sri Lanka and Bangladesh in the development of return programs for emigrants, and also advised the International Organization for Migration and the National Bank of Moldova on the development of programs to stimulate the attraction of remittances and the return of migrants themselves.

— Mr. Andrii, in June, a Conference on the Restoration of Ukraine was held in London, at which new outlines of accelerated economic growth were announced. Subsequently, both the President and the Prime Minister of Ukraine set a very ambitious goal of raising it to $1 trillion over ten years. How realistic are these ambitions?

— Such ambitions are quite realistic. However, for this, it is necessary to significantly increase the population, in particular, its economically active part. And in Ukraine, according to the Ukrainian Institute for the Future, in 2023, out of 29 million people, only 12 million are economically active, of which only 9.5 million work. For example, in Poland, where the GDP in 2022 reached almost 0.7 trillion dollars, out of 37 million people population, 17.3 million are economically active, but 16.8 million of them work, that is, almost twice as many as here. Last year, per capita GDP in Poland was 18.3 thousand dollars against 4.5 thousand dollars in Ukraine. If we take the Polish data on GDP per capita as a basis, then in order to reach a GDP of one trillion dollars in Ukraine, the population must be almost 55 million people. The increase in the population, primarily of working age, plays a key role in the growth of the economy. After all, about 70% in the GDP structure falls on the consumer component (the other two components are gross investments and net exports). However, there has been no natural population growth in Ukraine for a long time, as in most European countries. Therefore, practically the only way to achieve GDP growth to 1 trillion dollars is to attract the working population from abroad. If we want GDP growth to a trillion dollars within ten years, then we need to attract 2.6 million new people from abroad every year, if within 20 years – 1.3 million.

— Is it at least theoretically possible to return or attract so many people every year? And most importantly, where to get them from?

— Theoretically, this is possible to fulfil this plan in ten years, practically – in 20. For example, Israel almost doubled its population in the 1980s and 1990s, and Ireland increased its population by almost 1.5 times in the 1990s and 2000s. They did it precisely thanks to an active immigration policy. And we theoretically have someone to return. Back in 2019, in his inaugural speech, the President said that there are 65 million Ukrainians in the world and called on them to return. That is, his speechwriters calculated that at that time there were 28 million people abroad, the basis of which was the Ukrainian diaspora. To be honest, I'm surprised that no programs for their return have been implemented as a result of his speech. In addition, there are still millions of foreigners who are interested in Ukraine. Recently, the world in general has become more flexible and comfortable. In 2021, Gallup conducted a survey and found that more than 900 million people in the world want to migrate to another country. I think that Ukraine is interesting primarily to people from other CIS countries. It is especially necessary to take into account that the "iron curtain" is closing in Russia, and millions of foreigners who worked there, in particular from Central Asia and the Caucasus, will look for another country to work. According to Gallup, 21% of the population would like to leave this region.

— You mentioned such countries as Israel and Ireland. Did the GDP there really increase significantly after attracting millions of migrants?

— Yes, in Israel in the 1990s, nominal GDP practically doubled, and in Ireland in the 2000s, it grew 2.2 times. To a large extent, this happened thanks to the programs of attracting diaspora and foreign migrants. But there will always be a so-called time lag. Conditionally, "today" we see attraction of migrants and the diaspora, "tomorrow" internal and external investments will come for the new workforce and consumers, and "the day after tomorrow" GDP will increase. To increase GDP, a foundation is needed, the basis of which is the population, the majority of which must be of productive age with incomes to create a consumer effect. That is, an entrepreneur (investor) has produced something, and someone must consume his product or service. And if there is no consumer or his income is minimal, then the entrepreneur will close his cafe or production business tomorrow and move to where there is the consumer.

— Is it possible to grow the economy at the expense of internal resources and reserves, because, for example, the EU promised us to allocate more than 50 billion euros for recovery?

— At such high rates, it is impossible. On the one hand, we have an insufficient number of people of the working age, and on the other hand, the population has an insufficient level of savings to create a significant consumer effect. And there are no financial reserves in the budget: according to the Center for Economic Strategy, every year until 2027 we have to give 15-20 billion dollars to repay the debts taken, that is, the lion's share of the received money will be immediately returned to creditors for previously received loans. To sum up, Ukraine needs to be "filled" with people, and then they will "fill" the economy with money. Not vice versa. Take for example any country that we want to be like in the dreams of our politicians or businessmen: UAE, Singapore or even Poland. It all started with an active immigration policy, mainly with the attraction of migrant entrepreneurs and specialists in labor professions and the service sector, i.e. "blue collars". Then significant internal and external investments began to arrive, which were used by the labor force, including those recruited from abroad. That is, first we should see the trend of inflow of people, and then the trend of inflow of investments.

— Are there already programs in Ukraine for the return of Ukrainian migrants and the diaspora and attraction of foreigners?

— No, at least I haven't heard of their existence. Theoretically, you can say about any program that it is for them. However, the income level of migrants and the diaspora is on average 3-10 times higher than in Ukraine, so this requires a special approach to them. When developing programs for the return of Ukrainians and attraction of foreigners, different approaches should be used, since these groups of people have different goals for migration to Ukraine.

— What should the return programs of Ukrainian migrants and the diaspora be fundamentally based on?

— They should be based on money and investments. The focus should always be on monetization and self-realization. A conversation with Ukrainian migrants and the diaspora is 90% about money and projects and only 10% about patriotism. At the conference in London, it was said that Ukraine would contribute to the return of the diaspora. It's actually pretty cool. After all, the diaspora mostly brings with it capital, connections and new knowledge. There are successful cases of how the diaspora revived their economies. These are Israel, Turkey, South Korea and Ireland. As you know, Ukraine has the largest diaspora in Canada. Let's imagine that we want to invite a Canadian diaspora to Ukraine. In front of us sits a person with a calculator who has an average annual income of $60,000. He has an average of 120,000 dollars in his bank account. In addition, there are more than 100 thousand dollar millionaires of Ukrainian origin in Canada. Here you are telling this Ukrainian something, offering something... and he looks at you and knows that in Ukraine the credit rating (counterparty credit rating) is "CCC", that the real interest rates on loans are 25-30% per annum, and there is also war, corruption, bureaucracy... It is clear that with our "local" vision, we will not be able to offer anything interesting to him, a man with money, until we hear from him the conditions on which he is ready to come here and invest. The diaspora is generally a large number of wealthy, rich and ultra-rich people who need a completely different approach. In total, there are 15 types of rich people: from affluent (with assets from $100,000) to ultra-rich (from $1 billion). Each type has its own marketing approaches. With some types, it doesn't even make sense to talk directly – only through investment bankers.

— What needs to be done in order for such a diaspora to come to Ukraine?

— It is necessary to implement three groups of measures. First of all, it is necessary to go to them and hear what aspects of Ukraine could be interesting for them. What are their conditions of arrival and investment in our economy? After learning their conditions, it is possible to structure several offers and programs for them. This is exactly what Ireland did in the 1990s. The country's government formed a "special force" of 300-400 people who monotonously traveled all over North America in search of immigrants from Ireland, listened to them, did research on programs to attract them, launched such programs, then this "special force" went to America again... It is worth noting that only later did the country see the results of that painstaking work.

Secondly, it is necessary to start insuring business against war risks. Moreover, all businesses, both Ukrainian and foreign, that are ready to start or expand their activities, conditionally, from September 1, 2023, must be insured. Then the insurance policy is much cheaper for one insured object. That is, the principle is the same that when you buy a train or plane ticket, it means that you are already automatically insured. Insurance should cover both property damage and lost profits due to downtime. This is the principle of insurance that has been operating in Israel since 1948 under the Terrorism Risk Insurance Program. At the same time, it is necessary to tell that our country has purchased ten Patriot systems, the level of protection against missile attacks is 99.5%, your business is even safer than in Israel, and so on. After all, there is regular shelling there, too. In 2021, the enemy fired about 4,000 rockets at Israel.

And, thirdly, it is necessary to significantly liberalize the immigration legislation. After all, the move of a person with money to Ukraine implies that his entourage (relatives, partners, staff) or foreign workforce will move with him, who will launch the projects of this person in Ukraine. Today, it is quite difficult for a foreigner to come and get a job in a Ukrainian company. According to the legislation, the employer must pay him ten minimum wages, that is, a much higher wage than a Ukrainian. This is nonsense, because the level of remuneration should be agreed between the employer and the employee. And unfortunately, because of this current norm, many companies do not come to Ukraine, because they cannot bring or hire personnel for an adequate amount of money.

— Who should launch programs for migrants and the diaspora?

— On the one hand, the financial and banking sector. After all, as I said, a conversation with them is a conversation about financial motivation. On the other hand, local authorities should offer appropriate programs. After all, migrants and the diaspora should come to cities, towns and amalgamated territorial communities, not to Bankova Street or Hrushevskoho Street. The central government's role should be only to encourage local authorities to offer different kinds of programs to migrants. The central government can even offer some funding to those communities that are most "longing" to attract more Ukrainians from abroad. There should be competition for these people and their financial resources between municipalities, regions, and an amalgamated territorial communities. Only in this case will interesting and viable programs appear.

— When should programs for migrants and diaspora be launched? Should they be performed now, or only after the victory?

— Migrant and diaspora return programs should be launched now. After all, the population continues to decrease. According to the UN, in just six months of 2023, about a million people left Ukraine additionally. With such rates of population departure, the economy simply cannot wait for victory. In total, more than a million people are currently serving in the security agencies. They need to be paid high salaries so that they have the motivation to protect us and liberate the territory. I believe that people in the Armed Forces of Ukraine actually think differently: "You must continue to work and develop business, be patriots and pay taxes so that we can receive salaries and protect you." Therefore, everyone should do his job.

— If the emigration of Ukrainians continues, is there already a shortage of qualified labor in Ukraine? What challenges still await us in the domestic labor market?

— Businesses on the labor market already face two challenges, and there will be a third one. The first one is a significant reduction in the labor supply due to the emigration of one part of the population and the military mobilization of another part of it. And we cannot do anything in this situation, because safety comes first. The second, and this is the biggest, challenge is the need to significantly increase labor costs in order to retain an existing employee or find a new one. According to the estimates of the National Bank of Ukraine (NBU), in 2023 nominal salaries will increase by as much as 32.8%. However, this problem remained from the pre-war period. For example, in 2021, salaries increased by almost 21%. What should be the profitability of business in Ukraine to be able to raise salaries like this? And this is not the desire of the business but a forced action, because it is increasingly difficult to find working personnel. Unfortunately, each of us then feels such increases through the increase in prices for goods and services. For our neighbors, such an abnormal increase in labor costs would end in massive business closures and relocation to other countries. For example, according to the Organisation for Economic Co-operation and Development (OECD), in the Czech Republic in 2021 the average annual salary increased by only 4.9%, in Poland – by 4.8%, and in Germany – by 3.1%. Such a huge difference in salary increases in Ukraine and the EU is largely due to the unattractive immigration policy in Ukraine compared to EU countries, because not every business can afford to raise staff salaries by 20-30% every year. Thus, in Poland, the authorities understand that if the country does not attract foreign labor, then tomorrow or the day after tomorrow it will be more difficult for businesses to find an employee, and its cost will immediately increase. This can make the business unprofitable and lead to its closure or relocation to another country. What are the consequences for the authorities? First of all, a decrease in tax revenues, a decrease in the number of taxpayers. Therefore, the government's task is to significantly liberalize the labor market so that, if necessary, businesses can attract foreign labor for reasonable money. I think your readers will agree with me that if there were German salaries in Poland, wouldn't German companies invest almost 40 billion dollars in the country. What would be the point in that?

— But in Ukraine at the beginning of 2023, according to the National Bank of Ukraine (NBU), about 20% of the population was unemployed. Is it not possible to employ them and thereby reduce the tension in the labor market?

— Labor supply and demand are like the two circles on the MasterCard logo: they only partially overlap. And the unemployed can only partially compensate for the business's demand for labor. The world is changing fast. On the one hand, new competencies are constantly needed, which the unemployed do not have. On the other hand, the business is ready to pay a much lower salary to the unemployed, but this does not suit the latter. In addition, businesses are not ready to wait for the unemployed to undergo retraining. That is, the demand is very dynamic, and the supply is very inert and not ready to quickly adapt to the demand. Therefore, the second circle (offer) constantly follows the first (demand), but will never catch up with it. As a result, the business switches to finding foreign labor for adequate money or moves production abroad. Probably, this problem is best illustrated by the dialogue between Barack Obama and Steve Jobs in early 2011. Obama asked: "What needs to be done so that iPhones are assembled in the United States of America?". Jobs answered him: "These working places will no longer return to the country. We don't have to create working places, we have to create the best products for our consumers." At one time, Apple estimated that 8,700 engineers were needed to oversee the assembly of 200,000 phones. In the United States of America, it would take nine months to search for that many people, but in China it would take only 15 days. I can only continue to talk about Jobs' point of view on this problem: business should make money and pay taxes, not find workers or employ the unemployed. So if a business wants to work in Ukraine, but cannot quickly find workers for adequate money, then the state should provide a free opportunity for business to invite them from abroad. If this is not done, then the business itself will move to the places of dislocation of the labor force.

— According to the results of a survey conducted by Razumkov Centre on behalf of ZN.UA, more than 25% of respondents currently want to work abroad, about a quarter of them are already learning foreign languages and saving money in preparation for moving to another country. This is a rather threatening trend. How will it be affected by the acceleration of Ukraine's integration into the EU?

— This will lead to the emigration of another two to three million Ukrainians by 2030. This is the essence of any integration processes: the creation of the North American Free Trade Agreement (NAFTA) in North America in 1992–1994, the expansion of the EU in 2004–2007, the visa liberalization of Ukraine and the EU in 2017 – all this led to population migration. On the one hand, this is caused by a large imbalance in the wages of the integrating countries, and on the other hand, by the growing demand for labor. Demand for Ukrainians in Bulgaria and Romania will increase in the coming year. After all, in the second half of 2023, these countries can be admitted to the Schengen area. This will move some of their labor force further west. Probably, these countries, like Poland, will also become a "registration hub" for the work of Ukrainians in other EU countries. For example, the Romanian government agreed on an annual plan to attract 100,000 foreigners for 2023. This is almost five times more than in 2020. And other countries are not lagging behind in this matter. Germany is launching a new Opportunity card program with the opportunity for a foreigner to first get a job, and only then to start legalization in the country. The German authorities feel that business needs it. According to the German public international broadcaster Deutsche Welle, in 2023, almost 2 million vacancies remain unfilled on time, causing businesses to miss out on nearly 100 billion euros in revenue. And such programs will appear regularly. The authorities in Ukraine should monitor all this and launch their own programs to legalize and simplify the employment of foreigners. We need to do it now, not "after the victory", as they started saying recently. After all, Ukraine still has an archaic immigration policy. It must be significantly liberalized if we want to remain attractive for doing business in the country. Simply put, we need to try to make a quantum leap in a short period of time and "transfer from the horse to the Tesla car" before the business that still operates here leaves the country. It may take one or two years only to simplify legislation and liberalize immigration processes. After all, it is necessary to legally and mentally readjust the work of more than 100,000 people in ten bodies of central and local government, as well as to prepare society for this. In addition, work should be carried out on the preparation of the infrastructure for language and cultural training of foreigners. This is a non-business function and should be undertaken by central and local governments. In many countries, it took dozens of years, but we don't have the time for it.

— Is the population census a priority task for the authorities after the end of the war? Will we be horrified by the numbers we will see after it is held?

— I think that everyone was horrified back in 2019, when they heard the results of the electronic population census conducted by the Cabinet of Ministers of Ukraine. At that time, the country population totalled 37.3 million people. In 2020-2021, the population decreased by another 0.5 million people, and in 2022 and the first half of 2023, it further decreased by another 9-10 million...

I believe that in the conditions of the current increased mobility of the population, the electronic census should be conducted once every six months, because the business needs to understand how many people, that is, consumers, live in each region. Business, in particular retail and mass market, somehow has to be guided by the number of consumers in the country, because it needs to make plans for sales and business development. The authorities should regularly update such data with the help of mobile operators and make them public.

— Do programs to support and stimulate the birth of children make any sense given the scale of our demographic problems?

— The birth rate is influenced by two components: the level of education of society and the level of family wealth. The higher the level of education is, the deeper is the understanding of all the risks of maintaining a large family. The higher the level of family prosperity is, the lower is the birth rate, paradoxically. That is, the more the government spends on fertility stimulation, the less is incentive to give birth... because "they have already given me preferential housing and a preferential loan." The example of the UAE is illustrative here: an interest-free loan of $20,000 is given upon marriage, another $50,000 upon the birth of a boy, and another $100,000 upon his coming of age. But in 20 years, the birth rate there decreased from 2.5 to 1.5 children per woman.

Why did people give birth more in the past? In order to insure oneself that in old age and children will help ensure their decent financial support... Now the need for this has disappeared, because the state has begun to take care of the elderly in many ways. This is how the countries got themselves into a trap. All motivation to give birth to two or three children is "killed" by financial or quasi-financial assistance. Thus financial incentives do not work. The most revealing example is South Korea: over 16 years, the government spent 200 billion dollars to stimulate the birth rate. During this time, the birth rate of children per woman decreased from 1.1 to 0.8 with a reproduction rate of 2.1 children. If we are talking about Ukraine, then the authorities should deal with more systemic problems: the fight against inflation and the reduction of market credit rates for mortgages and the development of entrepreneurship, etc. Then it will be easier for people to plan their lives and think about increasing their family.

Read this article in russian and Ukrainian.