Catalog

Shuttle Traders' Woes
ADB Review [ October 2005 ]

The easing of restrictions on international travel in the 1990s saw the emergence of “shuttle traders” who went to the People’s Republic of China and Turkey to bring back goods for resale. Now, recently introduced trade and border-crossing restrictions, including high taxes, are making this important trade more difficult

By Ian Gill, (igill@adb.org)
Principal External Relations Specialist

BUKHARA, UZBEKISTAN

FINDING A NICHE Shuttle trader Dilorom Gaibullaeva and her daughter Iroda (above) embroider ceremonial clothes at home; tough local competition drives Ms. Gaibullaeva abroad to trade (below)

On a recent business trip to neighboring Kyrgyz Republic, Uzbek shuttle trader Dilorom Gaibullaeva had a disillusioning experience. The 43-year-old single mother spent one million Uzbek sum (about $1,000) buying products, such as baby clothes, mainly from the People’s Republic of China (PRC), to resell in her native town of Bukhara. But on her way home, parts of her goods were confiscated twice because she had exceeded import quotas, customs officials said.

The final blow was when she was fined in an Uzbek court after failing to produce receipts for her goods. “I had my goods in a small van, and I lost practically all of them,” she says, crestfallen at the memory.

Shuttle traders like Dilorom emerged in Central Asia after the easing of international travel restrictions, following the dismantling of the Soviet Union. Typically, individual traders would travel to the PRC, Turkey, and the Gulf states to bring back consumer goods for resale in domestic bazaars.

Such activity became a lifeline for newly impoverished families as Central Asia’s freshly independent countries saw export markets tumble, factories shut down, and millions thrown out of work. As well as reducing poverty, shuttle trading engendered a spirit of entrepreneurship as the republics moved toward market economies.

Such trade also became a bigger slice of the macroeconomic pie—official estimates in Kazakhstan show that shuttle trade accounted for a quarter of total imports in 1995, a third in 1996, and over four fifths by 1997.

In Central Asia, bazaars at Bishkek and Karasu (near Osh) in the Kyrgyz Republic and at Shymkent in Kazakhstan became magnets for shuttle traders from Uzbekistan who often brought fruit and vegetables from the fertile Ferghana Valley to trade for consumer goods.

Most shuttle traders are women because men are often tied to jobs; women also tend to receive more lenient treatment from customs officials and border guards. Shuttle traders are deterred from registering officially because of high taxes. They also tend to underinvoice or smuggle imports and often bribe officials to turn a blind eye.

An imposing woman with a headscarf and loose black-and-white dress, Dilorom says she was raising two children alone on a kindergarten teacher’s salary when a neighbor showed her how to do embroidery. The work involves sewing gold trimmings for ceremonial clothes used for weddings and special anniversaries.

At first, she continued to teach by day and did embroidery in the evenings. Then, she decided to go into sewing as a full-time business. She taught her daughter Iroda, now 15, and also hired two trainees.

She found local competition intense, however, and decided to take her wares further afield. She traveled to Kazakhstan and later Russia and the Kyrgyz Republic—not only to sell her products but also to buy consumer goods to resell at home.

It was not easy work—a round trip to the Kyrgyz Republic might take 2 weeks, including 4 or 5 days of hard travel, mainly by bus.

“I would worry about leaving my children at home but I had few ways to earn money for the family,” she says.

Once, the returns made it worthwhile. But the profits are far less these days.

A LONG TRIP Many shuttle traders start their arduous journey from this Bukhara bus terminal to neighboring countries

Though international travel became easier, new borders in the former Soviet Union made crossing borders more difficult. On top of this, taxes and other charges, often imposed by corrupt border officials, have slashed incomes for informal traders.

“Some governments want to restrict shuttle trading with the view that it is not good for the economy. They want to reduce demand for foreign exchange and protect their markets from being flooded by cheap Chinese goods imported by shuttle traders,” says Sean O’Sullivan, ADB’s country director for Uzbekistan. “The Government in Uzbekistan, for example, has moved to formalize such trade.”

Noting that shuttle trading helped many poor survive after independence and also developed entrepreneurial skills, Mr. O’Sullivan believes shuttle traders should “enjoy a level playing field and not be disadvantaged compared with other importers.”

Despite the challenges, Dilorom says she will continue making the long trip to the Kyrgyz Republic—because she has little choice.

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