Uzbekistan: context and development trends

Structural reforms

Social structure of society

34.8

21.4

81.6 66.9

0

20

40

60

80

100

0

5

10

15

20

25

30

35

40

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Demographic situation

Birth rate, right scale

The ratio of employed population to the working-age population (%)

27.9 22.6 21.9 21.9

29

21.5 21.6 21.5

42.5 56.5

59 58.1

0

10

20

30

40

50

60

70

2000 2005 2010 2011

Fiscal space

State budget revenues, % of GDP

State budget expenditures, % of GDP

Proportion of spending on the social sector and social protection(in % of state budget expenditures)

104.2 108.4 112.9

121.3 129.8

139.5

152.7

166.5

180.0

195.3

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

28.0

30.0

100.0

120.0

140.0

160.0

180.0

200.0

220.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

GDP(2000=100) Poverty level, right scale

Social protection profile

Social insurance:

• pension benefits (basic part and savings part);

• social support for the unemployed;

• sickness and disability care.

Targeted social support for socially vulnerable population categories:

• targeted support measures for specific population categories, based on verification of need;

• social payments and benefits for specific population categories regardless of need;

• social service for the public.

Phases of the transformation of the state social support system

1991-1994

Social support for broad strata of the population

Subsidized prices, payment of allowances and compensation to all families

1994-1996

Introduction of targeted financial assistance for low-income families

Limitation of subsidized prices and rates, targeted payment of financial assistance to families in need, continuation of universal support for families with children

1996 -2002

Introduction of targeted social assistance for families in need with children

Cancellation of subsidies for prices and rates, pullback from universal social support for families

2002 –present

Full transition to targeted social assistance for socially vulnerable population groups

Replacement of specific preferences for the population with cash payments, full transition to targeted social assistance for low-income families

Sequencing : the evolution of social protection policies and schemes

Cost efficiency of social protections programs

Spending on education and health care: International experience

Lack of methodological base to evaluate the efficiency of social protection programs.

The reasons are the following:

• Budget process is not result, but

expenditures based.

• Evaluation and monitoring

mechanisms need to be

improved .

• Quality of statistics.

• Lack of qualitative indicators.

Spending on the social sector and social protection, including targeted protection

49.0 48.5 49.0 49.3 49.9

56.5 58.5 59.4 60.2 61.2 58.2

1.7 1.5

1.5 1.4 1.3 1.3 1.3

1.3

1.7 1.8

1.7

0.0

0.5

1.0

1.5

2.0

40

45

50

55

60

65

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Share of spending on the social sector and social protection (in % of the nationalbudget)Spending on allowances for low-income families (% of GDP)), right scale

17.1

5.4

8.8 9.9 12.8 12.7

15.2 15.5 14.0

33.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

High income Lower middleincome

Middle income Upper middleincome

Uzbekistan

Health expenditure, public (% of government expenditure)

Public spending on education, total (% of government expenditure)

Financing and fiscal sustainability: future challenges

Economic, social and institutional conditions are placing new demands on the social-protection system. The challenges are as follows:

Despite the government’s growing expenditures on the social sector and social protection, the importance of social allowances has gradually diminished.

Reduction of formal sector in total employment accompanied by increase of the share of pensioners will raise burden per one employed.

Pensions are small and not related to previous salaries. This increases the risk of falling into the poverty after getting the retirement age.

Social allowances as % to average wage

Key lessons learned and recommendations

The model of social protection developed in the 1990-s proved its validity

by preventing a sharp drop in living standards and ensuring that social support was targeted the most needed.

As the processes of transformation and modernization of the economy, society and institutions have sped up in the recent years, it is time to take a new look at the future of the social-protection system.

The focus should be on promotive and transformative functions of social protection.

The social protection policies should be implemented in complex with economic and institutional reforms .

In order to minimize risks and costs of transformation of the system the preparatory stage should be implemented by creating effective instruments, piloting a new initiatives and institutes, developing mechanisms of monitoring and assessment etc.

Further Steps:

Formation of the New SP Model

Formation of the New Model for Uzbekistan: To what extent foreign models could be applied?

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 the new specific model

34,4

41,7 43,949,747,9

56,056,458,152,7

11,5

19,121,6

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

Government Budget Expenditures, % of GDP

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

Formation of a New SP Model in Uzbekistan: Developing the overall framework

• 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).

• The new SP model should provide incentives for and be in line with structural and social transformation and needs to:

– Provide assistance to adapt to structural transformations and get ready for the changes beforehand;

– Create social lifts and incentives for social mobility

Project on Transformative Social Protection: Scope of the Research

Allowances

Labor market policies

Pensions

Rural infrastructure

Education

Institutions

Healthcare

Food Security

Central question: How to assess the promotive and transformative effects?

Policies & Measures

Questions

Allowances

What is the effect of allowances on consumption, poverty reduction and welfare improvement? What is optimum amount of allowances, that will improve the welfare and not contribute to parasitism?

Does the income and social status of recipients of allowances change as time passes? Which social programs contribute to such changes?

Pensions

How pensions affect the welfare of people? Do pensions prevent from poverty?

How pension expectations affect the employment of people at the working age?

Central question: How to assess the promotive and transformative effects?

Policies & Measures Questions

Labor market programs

1) Generation of jobs;

2) Providing favorable business-climate, credits.;

3)Improving education and trainings;

4) Expansion and creation of new industries and enterprises

Which of the programs is the most effective in the terms of welfare improvement and poverty reduction?

Which of the programs is the most effective in the terms of social mobility?

Which of the programs are the most effective in the terms of changing values, transforming behavioral stereotypes?

Programs on construction of rural housing and improving

living conditions

What is the transformative impact on the quality of life, behavioral stereotypes, consumption pattern?

Central question: How to assess the promotive and transformative effects?

Policies & Measures Questions

Education and Healthcare

What is the effect on the quality and access to education and healthcare? What is the impact on enthusiasm, values and stereotypes? What is the impact on the quality of human capital?

Quality of institutions

Does the design of the system fit in the new requirements?

Do the principles of work of the system conform with the new requirements?

Do the existing mechanisms of monitoring and assessment conform with the new requirements?

What are the costs and benefits of introduction of the new institutions?

Issues to be discussed:

• Are we on the right path?

• Are the research questions posed properly?

• Will we succeed employing these strategies?

• What approaches, methods and indicators need to

be revised?

• What dimensions are omitted?

Please, advise!