Social protection in Central Asia 2011


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In preparation for the Central Asia Regional Risk Assessment meeting held in Almaty 14-15 April 2011, UNICEF sponsored a background paper to provide an overview of the social and economic vulnerabilities of families and assess the ability of national social protection systems to address these in the five Central Asian countries of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. The paper contributes to the discussion on social policy effectiveness particularly in terms of mitigating the impact of high food and energy prices on vulnerable households.

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Social protection in Central Asia 2011

  1. 1. Social Protection Elena Gaia, Sitora Rashidova, UNICEFin Central Asia © UNICEF/NYHQ2006-2921/Giacomo PirozziOverview In preparation for the Central Asia Regional Risk Assessment meeting held in Almaty14-15 April 2011, UNICEF sponsored a background paper to provide an overview of thesocial and economic vulnerabilities of families and assess the ability of national socialprotection systems to address these in the five Central Asian countries of Kazakhstan,Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. The paper contributes to thediscussion on social policy effectiveness particularly in terms of mitigating the impact of highfood and energy prices on vulnerable households. The key messages of this policy brief are:  More effective social protection mechanisms can help combat structural vulnerabilities and poverty. They are more easily scaled up. They can temporarily channel resources to the most vulnerable during times of volatile commodity, food and energy prices, in the aftermath of a crisis or in the recovery from natural or man-made disasters.  The most recent economic crisis represents opportunities for governments to transform social protection schemes, improve design and implementation of social assistance, introduce new programmes and equalize spending for social protection with other social policies such as health and education.1
  2. 2. The findings of this research are meant to support the CARRA process by identifyingpriority areas for future coordinated action in the field of social protection and riskmitigation.Family well-being and vulnerability to crises Over the last decade, poverty rates have declined significantly and living standardsimproved in Central Asia due to real growth in income and consumption, though disparitieswithin and among countries have persisted. The recent global financial crisis, however,considerably reduced those positive gains and increased the vulnerabilities of manyhouseholds and children. Table 1: Absolute Poverty in Central Asia (%) HH with Poor as % ABSOLUTE Year Total Urban Rural children of HH with POVERTY % total children Tajikistan 2009 47% 42% 49% 53% 62% Kazakhstan 2008 16% 12% 21% 7% 15% Uzbekistan 2007 24% 18% 27% 30% 44% Kyrgyzstan 2008 32% 23% 37% 27% 62%Source: Gassmann/UNICEF (2011) The most vulnerable in Central Asia are working adults with low incomes, householdswith many children, single parent homes, families with disabled children, and migrantfamilies. Lack of adequate social safety nets and access to employment opportunities isprevalent across this region and contributes to increased poverty risk and vulnerability. Thoseliving in rural areas, as well as at higher altitudes in the mountainous regions of Kyrgyzstanand Tajikistan, face even higher risks of poverty (Table 1). The region’s susceptibility tonatural hazards such as earthquakes, landslides, floods and extreme cold contribute tohousehold vulnerabilities. For example, hydropower shortages during the 2007-2008 winterin Tajikistan led to reduced access to education, social services and winter heating whilecosting millions of dollars to the country’s economy. The region has experienced two waves of food price inflation, and even though globalfood prices dropped sharply after mid-2008, no similar decline was apparent in food prices inKyrgyzstan and Tajikistan. In general terms, food prices across the region are much highertoday than they were in 2007. This has reduced purchasing power of already vulnerablefamilies, leaving them with difficult choices to make. Families must adopt various coping2
  3. 3. strategies such as adjusting their consumption to deal with high food prices. Higher food (andenergy) costs may mean that less nutritious food is being purchased. For poor householdssuch choices are much more limited; less is spent on essentials as well as health andeducation, with detrimental effects on human capital. The effects on the wellbeing ofindividuals can take the form not only of chronic poverty, but also of the transmission ofpoverty across generations.Current social protection systems Current social protection systems in the region vary by country, but remain ineffectiveand weak. The impact of existing social cash transfers on poverty is limited. Social assistanceschemes are not always a priority for governments in the region and they receive limitedfunding, even in countries running fiscal surpluses. The available budgets for theseprogrammes are low, with countries spending between 0.4 and 1.4 percent of their GDP onsocial assistance programmes. Existing social assistance systems in Central Asia are not able to reach those in needand the amounts are too low to reduce poverty levels. For example, in Kyrgyzstan, coveragefrom the Monthly Benefit (MB) targeted at poor families, reaches only 18 percent of thepoorest consumption quintile. In these households, the MB accounts for just 7 percent of totalconsumption. In Tajikistan, social assistance benefits made up less than 3 percent of totalhousehold consumption per capita for beneficiaries in the poorest 20 percent of thepopulation. Administrative barriers also prevent many eligible households from accessing socialassistance. In some countries, local administrators have little incentives to allocate andadminister social transfers, due to high caseloads and low salaries. Local administrators mayalso show favouritism for certain beneficiaries. Some of the poor may be consideredundeserving due to their behavior or status in the community. In Uzbekistan, community-based targeting is used for distributing assistance. However, local differences in welfarelevels are not taken into account and the danger of bias in the selection of beneficiaries exists. Instead, pensions and remittances play a greater role in ensuring the living standard offamilies. In Tajikistan with 24 percent of households having at least one migrant in 2007, 60percent of the country’s consumption was financed by remittances. Remittances have had asignificant effect on poverty reduction in the region.1 However, they do not reach allhouseholds and are volatile. Remittances, as well as pensions, are not adequate for addressingincome shocks from temporary loss of employment, variable incomes such as those fromfarming, or changes in family composition. Even more importantly for risk-prone CentralAsia, they cannot be immediately mobilized as safety nets in the event of macro-economicshocks or natural disasters.1 In Tajikistan, migration and related remittances are estimated to have accounted for about 50% of the decreasein poverty between 2003 and 2007 (World Bank 2009a).3
  4. 4. © UNICEF/NYHQ2008-1795/Giacomo PirozziSocial protection responses to the financial crisis From the onset of the food and fuel price crises in late 2007, countries in the regionwere faced with the challenge of using social protection measures to mitigate the impacts ofthe crises. Kazakhstan was the first country in Central Asia to adopt such measures. Thegovernment there responded with expansionary monetary and fiscal policy in order tostimulate economic growth and protect employment. The response programme focused onemployment and created 252,277 new jobs. Public sector wages were also increased (Chart1).4
  5. 5. Chart 1: Fiscal balance as percent of GDP, 2006-20111 15 10 5 2006 percent of GDP 2007 2008 0 2009 2010 2011 -5 -10 -15 Kazakhstan Turkmenistan Uzbekistan Kyrgyzstan Tajikistan1Projections for 2010 and 2011Source: IMF (2010a) New energy tariffs implemented in Kyrgyzstan and Tajikistan were not counter-balanced with adequate social protection measures for those who could not afford them. Withhelp from the World Bank, the European Commission and the IMF, the government ofKyrgyzstan increased the amount of the Monthly Benefit in 2008, though coverage of theprogramme continued to be low. The government also increased pensions and other cashallowances, though these failed to compensate for the effects of higher food and fuel prices. The situation was especially critical in Tajikistan due to the absence of effective andreliable social assistance programmes. Donors were unable to find avenues to transfer fundsto the most vulnerable households using existing transfer schemes. Instead, food provided bythe WFP remained the only major crisis response. Clearly, current social transfer schemes in Central Asia are not designed, funded, oradministered so as to effectively protect and improve the living standards of poor andvulnerable households. As the case of Tajikistan demonstrates, this is a missed opportunity:improved and more effective social protection mechanisms not only help to combat structuralvulnerabilities and poverty; they can also more easily be scaled up and used as vehicles fortemporarily channelling more resources to the most vulnerable in times of volatilecommodity, food and energy prices, in the aftermath of a crisis or in the recovery fromdisastrous events.5
  6. 6. The way forward Social protection programmes play an important role in the protection of vulnerablehouseholds during crises. Because they help households maintain consumption and access tofood and other necessities, governments need to equalize spending for social protection withother social policies such as health and education. To encourage governments in Central Asiato better use social protection instruments for poverty reduction and crisis mitigation, severalpotential avenues for reforms aimed at improving the protection of vulnerable families andchildren are proposed. The most recent economic crisis gives the region an opportunity totransform social protection schemes or to introduce new programmes. However, if suchprogrammes are poorly designed or hastily implemented, governments may not be able towithdraw them later, and they may fail to respond to future crises. Opportunities for suchreforms are more limited in the region’s poorest countries, Kyrgyzstan and Tajikistan, but arefeasible for the energy-exporting economies. Thus, improved design and implementation ofsocial assistance schemes are vital in a region that is routinely exposed to natural hazards andeconomic shocks. In order to achieve this goal, the paper makes the followingrecommendations: Financing:  Eliminate programmes, subsidies and other privileges that benefit richer groups of the population to generate savings for measures that benefit the poor. Various programmes could be unified into one benefit that would better reach families and children in most need, raising and extending coverage. However, such reforms would require a political strategy against protests from the non-poor who would be losing their benefits and entitlements.  Spending on social protection measures should be prioritized as a centralized item in government budgets to ensure sustained and predictable funding. Inequalities are especially likely when benefits are dependent on local budgets, as poorer districts are not able raise as much funding as others. Thus, decentralized budgets may create a paradox where poor localities that are most in need receive the least financial support. Reorganization of existing social protection measures:  Replace benefits that do not necessarily target the needy with transfers directed at poor and vulnerable households.  Unify different benefits schemes into a single cash transfer benefit using one eligibility methodology and a consolidated registry of beneficiaries to prevent duplication of recipients.  Create an integrated and comprehensive safety net system to tackle different types of vulnerabilities, including: - Social pensions, especially for elderly and disabled without other pension entitlements based on employment contributions. Pensions have been6
  7. 7. shown to be effective in reducing poverty for all members of the household, especially in multigenerational households. - Family allowances, to help meet the higher consumption needs in the presence of children and in the case of falling incomes. - Last resort cash transfers, for households below a certain threshold or not covered by other transfers. Identification of beneficiaries:  Extend the coverage of existing programmes, by proactively reaching out to poor households and carrying out informational campaigns. Application procedures and documentation requirements should also be simplified.  Change income- or consumption-based formulas for calculating who is eligible for the benefits to include factors that are strongly correlated with poverty and easier to ascertain; these could be: number of children in the household, children or adults with disabilities, place of living and level of exposure to natural hazards.  Targeting measures based on categories, such as geography or a disability, can be a better and cheaper alternative where income and needs based targeting methods fail. Such problems are likely to occur in highly informal economies where it is difficult to establish household incomes. Administration, monitoring, and evaluation:  Introduce systematic monitoring and evaluation at both the local and central government levels. Household budget surveys should also be conducted on a regular basis to help with policy evaluation. Potential Responses to specific crises:  Food price crisis: provide social cash transfers, cash for income support and food stamps or food subsidies to increase food consumption.  Energy price crisis: provide direct income transfers. Tariff-based subsidies are an effective alternative only where connection of the poor to the energy infrastructure is high, and appropriate billing and metering systems are in place.  Employment crisis: prioritize labour-intensive investments in infrastructure, such as rural road projects, reforestation, dikes or irrigation system rehabilitation. Public works programmes can mitigate the negative effects of a crisis while investing in the country’s future. However, they should offer low wages so that only those in need participate. They should also be supported with affordable childcare services to ensure women’s participation, and be complemented with other interventions for those who cannot work.7