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The main objective of social protection in the early stages of Uzbekistan’s transition period was to protect vulnerable groups by providing guaranteed minimum incomes. In the difficult period of structural reforms, social protection helped to mitigate some of their undesirable impacts on the population, to maintain social stability and guarantee basic social rights. Social protection policies were successful in preventing a large share of the vulnerable from falling into poverty. Moreover, Uzbekistan managed to preserve the access of children from low-income families to free health care and education and to maintain its pre-reform levels of literacy. Economic growth has been strong for almost a decade and the country has graduated to middle-income status. But this is bringing new challenges in transforming the economy and society. These transformations will have a significant effect on the well-being of people, their available choices and social rights. Demand for social services, in terms of both type and quality, will also change. The current social protection model will also have to be revised in line with these new demands and transformations. The parameters of the social protection model in this new stage of development will be determined by the targets and objectives of Uzbekistan’s overall development policy in the medium- and long term.
Citation preview
Effective Social Protection for a Transforming Economy and
Society of Uzbekistan
Center for Economic Research Tashkent, 2014
Social Protection model of Uzbekistan: Different from any other foreign models
Two polar models:
Option 1: focus on safety
net functions; generous
social system
redistribution and fiscal
burden
Option 2: reduced social
spending, incentives for
private sector; relieved
tax wedge;
Various models applied
at various stages
Neither of the foreign
models fully fit into a
transforming Uzbekistan
economy
Uzbekistan needs to
select its own path and
develop its own model
34,4
41,7 43,9 49,7 47,9
56,0 56,4 58,1 52,7
11,5
19,1 21,6
32,7
0
10
20
30
40
50
60
70
Taxes and Social Payments, % of GDP
0
10
20
30
40
50
60
Social protection Education HealthcarePublic services National defence National security
32,09
3,69
1,482,3
1,3
5,6
0,67
3,73
10,4
8,5
0
2
4
6
8
10
12
0
10000
20000
30000
40000
50000
60000
GDP per capita PPP, USD Economic growth rate, %
GDP per capita & Economic Growth rate
Government Budget Expenditures, % of GDP
0,380,34
0,290,300,26 0,250,260,250,26
0,45
0,31
0,47
0,33
0,410,44
0,30
0,490,51
0,480,50
0,47
0,420,43
0,41
0,47
0,34
0,45
0,460,470,44
0
10000
20000
30000
40000
50000
60000
70000
0,0
0,1
0,2
0,3
0,4
0,5
0,6
Level of development, redistribution and inequality
Gini 1 (excluding taxes and transfers)
GDP per capita PPP
Gini 2 (before taxes and transfers)
US A
Gre
a t B
rita
in
Fra n
ceG
e rm
any
Au
s tri
a
De n
mar
kSw
ede
nN
o rw
ayFi
n la n
d
Chin
aK
ore
aSi
nga
pore
Jap
anT
u rke
yM
ala y
sia
Uzb
ek i
s tan
GDP per capita & Economic Growth rate
Level of development, redistribution and inequality
Period Phases of transformation Policy instruments
Early 1990-s
Main task – to mitigate major transitory adverse effects of a sharp drop in revenues in early years of transition
Universal social support
- Subsidized prices,
- Allowances and compensation to all families
Mid 1990-s – Early 2000-s
- Introduction of targeted financial assistance for the vulnerable + measures on improving well-being of the population
- Policies in education and public healthcare actively developed and implemented.
- Expansion and promotion of entrepreneurship, development of private form of ownership, incentives to stimulate economic activity of the population
- Reduction and elimination of price subsidies,
- Introduction of targeted financial assistance to low-income families (1994-1996),
- Introduction of targeted support for families with children (1996-2002).
- Annual investments to education at 7,6 % of GDP; public health declared as a priority sector (particularly maternal and children's health);
Early 2000-s –Present
Further transition to targeted social protection policies + Further investment into education and healthcare programs
- Replacement of specific preferences for the population with cash payments,
- Further transition to targeted social assistance for low-income families
- Decentralization of allocation and payment of allowances to low income families - given authorities transferred to local communities - makhallas
Uzbekistan in Transition: Evolution of SP policies and schemes
Uzbekistan in Transition: The SP model contributed to attainment of the development goals
44
15,0
0
5
10
15
20
25
30
35
40
45
50
0
50
100
150
200
250
Welfare improvement and Poverty rate
GDP per capita(2000=100)
34,6 26
18,9 14,2 10,9 10,6
65,3
32,2 33,1 29,2
21 21,4
0
10
20
30
40
50
60
70
1990 1995 2000 2005 2010 2012
Infant mortality (per 1000 live births))
Maternal mortality (per 100 000 live births)
Maternal and infant mortality (1990-2012)
0
50
100
150
200
250
1990 2012
Consumption of basic foods 1990 VS 2012 (kg/ year)
71,25 71,2 71,6 71,4 71,85
72,55 72,65 72,8 72,9 72,9 72,9
5,3
5,4
5,3
5
5,4
5,3
5,1 5,1
4,8 4,8
4,9
70
70,5
71
71,5
72
72,5
73
73,5
4,4
4,5
4,6
4,7
4,8
4,9
5
5,1
5,2
5,3
5,4
5,5
2001 2003 2005 2007 2009 2011
Expected longevity (right) Mortality rate
Expected longevity and mortality rate High efficiency of the SP system during the difficult period of the reformation;
• large-scale decline in living standards and impoverishment prevented;
• access to food maintained; • access to free public health care and
education maintained high literacy rate sustained, expected longevity increased, maternal and infant mortality dropped;
The SP system was in line and contributed to attainment of development goals and priorities.
98
98,5
99
99,5
100
100,5
101
2000 y 2005 y 2010 y 2012 y
Uzbekistan Rural areas Urban areas
Literacy rate, 15-24 Literacy rate, 15-24
Uzbekistan graduating from Transition: New development goals and economic transformation
Economic Transformations: Development goals for the future:
• Ensure sustainable economic growth rate at 7-8%;
• Transformation of GDP structure by increasing the share of processing industry from 9% in 2012 to 22% in 2030;
• Reformation of the agricultural sector model: focus on efficiency and multiplying effects rather than providing guaranteed source of income for large groups of the population;
• Transition to production of services of higher sophistication, that will allow to increase the proportion of the service sector in GDP from 45,1 % in 2012 to 55 % in 2030.
9,1 9 17 22 14,1
26,4 19,4 15
28 19,5 10,5 8
48,9 45,1 52 55
0%
20%
40%
60%
80%
100%
2005 2012 2020 2030
Processing industry Mining industry Agriculture Services
Uzbekistan: Transformation of GDP structure to 2030, %
13 21,5
27 9
60 69,5
0%
20%
40%
60%
80%
100%
2012 2030
Industry Agriculture Services
Transformation of employment structure: 2012 VS 2030
Uzbekistan graduating from Transition: New development goals and social transformation
Main characteristics of society
1-st stage 2-nd stage
Demographic features Birth and death rates decrease (b. r. = 20%, d. r. = 6-8%)
Birth and death rates level out (b.r. = 8-10%, d.r. = 8-10%)
Family type Average family size = 5-7 Average household size =5-6 Families poly-nuclear, integrated into the community, children are obedient.
Average family size = 3.17 Average household size = 2.4 Families mononuclear, socially isolated, child needs to develop independence, egalitarian families.
Education Share of higher education = 10% Vocational education is important Education based on schools – formalization, empirical knowledge
Share of higher education = 20-50% Professional education in technical specialization and natural science becomes important Education is a main factor of social mobility Education in the information society– computerization, creative component
Employment Primary and (partially) secondary sector Skilled and semi-skilled workers Share of informal employment is above 20%
Secondary, tertiary and quaternary sector Professional and technical work (engineers, mathematicians etc., Education becomes strongly linked to employment Share of informal employment = 10-20% The need to adapt and change the specialization throughout the lives. -> education for adults becomes important
Population settlement pattern
Share of urban population is below 50% Large differences between urban and rural areas
Share of urban population is above 50% New cities + developed rural areas The difference between urban and rural areas decrease
Values , stereotypes (1) Survival values Self-expression values
Values, stereotypes (2) Low interpersonal trust, intolerance towards out-groups
High interpersonal trust, tolerance towards out-groups
Values, stereotypes (3) Dominance of gender inequality stereotypes Gender equality stereotypes
Values, stereotypes (4) Dominance of collectivism Dominance of individualism
Values, stereotypes (5) Large informal sector Dominance of rule of law
Uzbekistan graduating from transition: New development goals and Role of SP policies
• Objectives of the economic and social transformations to 2030 are fundamentally different from the development goals of the transition period.
• Being a part of the overall development framework, social protection and social policy system should be revised:
– In the transition period: SP system was aimed at eliminating the negative consequences of structural reforms;
– After graduating from transition: social protection should also become a tool for the implementation of the transformation processes in the economy and society.
• Key problem: The current SP model replicates some elements of existing economic and social system which need to be transformed at the future stages of development.
The current SP model replicates some elements of existing economic and social system which need to be transformed in future: Labor market policies
• Labor market policies contribute to generation of relatively low productive employment in industries with low level of technological sophistication;
• In transition period, when the main focus of structural reforms was on development of capital-intensive basic industries, this model of employment was justified;
• In transition period this model allowed to partially compensate negative consequences of structural reforms and ensure employment and source of income for all the social groups;
• In future the model of employment generation needs to be reformed in line with the economic and social transformations.
60%
40%
informalemployment
formalemployment
69,1
39,6
0
20
40
60
80
Employment rate amongmen
Employment rate amongwomen
Results of the sociological survey: Employment rate among men and women
Results of the sociological survey: Informal VS Formal employment
The current SP model replicates some elements of existing economic and social system which need to be transformed in future: Social Assistance
• Social allowances effectively serve a protective function: proportion of allowances in the structure of income of recipients is considerable (11 - 22% for various recipients);
• However, social assistance does not sufficiently contribute to pulling out recipients from poverty: if allowances are not provided, per capita incomes decline by 1.4%, the share of poor households will remain the same Transformative function is not fully implemented;
• Demotivating and de-transformative effect of social assistance due to the effect on values and behavioral stereotypes.
82,59%
58,36%
0,0%
30,0%
60,0%
90,0%
got allowance didn't get allowance
Those who think that women need education only to take care of the family
60,62%
50,61%
44,0%
48,0%
52,0%
56,0%
60,0%
64,0%
got allowance didn't get allowance
Those who think that women should not work and focus on taking care of their family
40,15%
27,06%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
get allowance didn't get allowance
Those who think that there is no need to study since there is no opportunity to find a
The current SP model replicates some elements of existing economic and social system which need to be transformed in future: Education
• Education system also replicates the existing structure of employment and the quality of human capital;
• In the structure of higher education pedagogical specialization dominates However, expected economic transformations will expand the demand for specialists in processing industries (e.g engineers, chemists).
• The low degree of integration of education with labor market requirements (only 48 % of the employed graduates work on a specialty) also reproduces current model of employment and incomes.
12,0
28,5
6,3 22,4
10,5
6,1
14,2
Distribution of students of higher educational institutions by sectoral specialization in Korea (%)
Human sciences
Social sciences
Education
Technical sciences
Natural sciences
Public health andpharmacologyArts
14,5
1 6,1
6,4
7,6
7,9
52,9
3,6
Distribution of students of higher educational institutions by sectoral specialization in
Uzbekistan (%) Industry
Construction
Agriculture
Transportation andcommunicationsEconomics
Public health
Education
Other
• Sustaining the current economy structure domination of employment, that is low-paid, informal and low-skilled
• Small formal sector Small contributions to government budget • Constraints to the expansion of government budget revenues; • Limitations to income growth; • Expanding demand for social allowances;
• Increase in the share of social protection in government budget
Constraints to the fiscal space; • Deficit of the Pension Fund due to ageing population on the one
hand and large informal sector not providing contributions to the Fund on the other hand
• To provide fiscal space for Social policies and Social protection transformations are important
27%
13% 60%
Agriculture Industry Services
Structure of employment by sectors
40%
60%
Formal Informal
Formal VS Informal employment in 2030
5,7% 7,0%
977
1221
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
0
200
400
600
800
1000
1200
1400
2012 2030Share of social allowances in government budget, %(right)Number of social allowance recipients, thous HH
Demand for Social allowances: 2012 VS 2030
If the model is replicated and Transformations are not implemented, Sustainability of the SP system will be an issue!
Uzbekistan in 2030: Inertial development model
0
5000
10000
15000
20000
25000
30000
2012 2030
Revenues Expenditures
Revenues and Expenditures of Pension Fund: 2013 VS 2030
Revenue
Expenditures
Deficit
Transformations are essential to ensure sustainability of the SP system! Expected results of transformations by 2030
9,1 9 17 22 14,1
26,4 19,4 15
28 19,5 10,5 8
48,9 45,1 52 55
0%
20%
40%
60%
80%
100%
2005 2012 2020 2030
Processing industry Mining industry
Agriculture Services
Uzbekistan: Transformation of GDP structure to 2030, %
30,8%
20,0%
0%
5%
10%
15%
20%
25%
30%
35%
2012 2030
Rate of contributions to the Pension Fund: 2012 VS 2030
0
20000
40000
60000
80000
100000
120000
2012 2030
Expenditures of Pension Fund and Distribution of Revenues from 30,8% contributions: 2013 VS 2030
Revenues
Expenditures
Fiscal Space for health insurance and labor policies
Structural transformation Steep rise of formal employment and wages Income growth Lower demand for social allowances Decrease in share of SP in budget More space for maneuver
Growth of formal employment Rise in contributions to Pension fund Opportunity to decrease the rate of contributions from 30,8% to 20% 10,8% is fiscal space to be used for health insurance (5%) and labor market programs (5,8%)
66,0% 79,0%
39,6%
68,5%
0
100
200
300
400
500
600
0%
20%
40%
60%
80%
100%
2012 2030
Transformation of employment structure and wage growth, 2012 VS
2030
Employed (as% of labor force)
Share of formal employment,%
Average wage (2012=100%)
977 709
15,0%
8,0%
0%
4%
8%
12%
16%
20%
0
200
400
600
800
1000
1200
2012 2030Number of allowance recipients, th. families
Poverty rate, %
Poverty reduction and demand for social allowances: 2012 VS 2030
Transformative Social Protection to implement the transformations
• Transformations are essential to ensure sustainability of the SP system!
• The new SP model should provide incentives for and be in line with economic and social transformations
• The SP system in the new conditions should move away from extensive measures aimed at providing the guaranteed social assistance to a large groups of the population to the intensive measures that could have significant multiplier effect in the terms of stimulating transformative processes.
• Conventional approach to SP should be broadened by:
– Involving not only protective and preventive, but also promotive and transformative functions;
– Integrating and consolidating fragmented policies in various sectors (labor market policies, promotion of entrepreneurship, governance reformation).
Transformative Social Protection: Holistic approach is in line with the global discussions
• Global initiative of Social Protection Floor. According to this concept, minimum measures of social protection include:
– Creating guarantees and real opportunities for the provision of basic social rights and social allowances to provide a socially acceptable income for all;
– Ensuring access for all groups of population to social services such as health, water and sanitation, education, food, housing etc.;
– Social protection should contribute to economic growth by increasing labor productivity, providing social stability and poverty reduction.
• Discussions on Post-2015 agenda. New global goals should be designed on a broader basis: the ultimate goal of social protection is not protection in itself, but resilience, transformative development with social justice and sustained social progress.
• UNRISD “Social Policy in a Development Context Initiative”. Rethinking social policy away from its conception as a residual category of “safety nets”. Social policy as a key instrument that works in tandem with economic policy to ensure equitable and socially sustainable development.
• Research initiative of IDS “Transformative Social Protection”. Social protection needs to empower marginalized people and be socially “transformative”.
Key element of the transformative social policy is the effective employment policy
• An important factor for developing a sustainable model of social protection for the long term is to build effective employment policies;
• Based on the priorities of economic and social transformations, it is important to create jobs not in low-skilled industries, but generate productive employment in industries with considerable multiplier effects.
• For Uzbekistan these industries are: transport, chemical, gas & oil processing, machine building, construction.
• Expected expansion of employment in these sectors will imply the need to introduce retraining programs to comply available skills with labor market requirements: (annually 100 thous people involved, 104 bln soum a year)
Social protection policies and measures need to be revised in line with the new pattern of employment and income
and provide incentives to accelerate the transformations
Allowances Pensions
Social programs
Education Healthcare
Social infrastructure
The pattern of social protection and social policies by 2030: Social allowances and Pensions
Size of allowances need to be increased to
implement transformative effect + Number
of families receiving allowances will
decrease in future due to employment &
income growth
Number of pensioners increased + amount of
pensions increased due to the growth of
wages and employment + number of
working pensioners increased due to the
employment generation and transformative
social policies
100% 100% 100%
405% 392% 402%
0%
100%
200%
300%
400%
500%
Average agepension
Average socialallowance
Average pensionfor the disabled
2012 2030
Average social allowances and pensions (2012 = 100%)
66,0%
79,0%
0
100
200
300
400
500
600
55%
60%
65%
70%
75%
80%
2012 2030
Employed (as% of labor force)
Average wage (2012=100%)
Employment and wage growth: 2012 VS 2030
0
50
100
150
200
250
300
2012 2030
Number of pensioners: 2012 =100%
6% 30%
0%
20%
40%
60%
80%
100%
2012 2030
Working pensioners
Non-working pensioners
Share of working pensioners, pensioners total =100%
977 709
15,0%
8,0%
0%
4%
8%
12%
16%
20%
0
200
400
600
800
1000
1200
2012 2030Number of allowance recipients, th. families
Poverty rate, %
Poverty reduction and demand for social allowances: 2012 VS 2030
The pattern of social protection and social policies by 2030: Education and Healthcare
100% 100% 100%
336%
490%
360%
0%
100%
200%
300%
400%
500%
600%
Generalprimary and
secondary
Vocational Higher
2012 2030
Per capita expenditures on education (2012 = 100%)
33,9
29,9
36,2
Governmentbudget
Mandatorymedicalinsurance
Voluntaryinsurance andpaid services ofPrivate clinics
Breakdown of financing of healthcare services 2030
499 518,8
36,4 60,9
575,3
462
163 160
0
100
200
300
400
500
600
700
Primary &general
secondary
Professionalcolleges
Academiclyceums
Highereducation
2012 2030
Number of students: 2012 – 2030 (thous)
• Improvement in living standards + change in the demographic and social structure of society
• transformation of the lifestyle and behavioral stereotypes
• expanding demand for the high quality social services
• Per capita expenditures on education and healthcare need to be expanded
• This will imply the model of financing of education and healthcare to be reformed
90
55
22
10
45
78
0%
20%
40%
60%
80%
100%
Primary &general
secondary
Vocational Highereducation
Government Non-government, private
Breakdown of financing in
100
475
050
100150200250300350400450500
Uzbekistan
2012 2030
Per capita health expenditures (2012=100%)
Main findings: What is transformative social protection for a transforming Uzbekistan?
– Transformation of the social protection system in line with economic, social and institutional transformations;
– Acceleration of the transformative processes in the economy and society to ensure sustainability of the Social protection system;
– Transformation of people to empower the poor and vulnerable to make use of opportunities available to them for improving their livelihoods in a sustainable manner:
– addressing power imbalances, that create social exclusion;
– developing new skills for decent employment and economic activity (retraining, discounted loans for education);
– developing socially positive way of thinking (e.g. social rehabilitation courses) and thus, stimulating social and behavioral changes.
Questions for discussion
• Are there any dimensions, critical issues which were omitted, should get considered in more detail?
• What approaches, methods and indicators need to be revised?
• What’s next? How can we jump to formulating the detailed Action Plan and Road Map? Suggested formats and models.
• Are there windows for synergies?
Thank you!
Resources in English: http://www.cer.uz http://transformation.cer.uz/ https://www.facebook.com/CER.Uzbekistan