Download Countries of Central Asia and Caucasus: neither developed nor developing?

Countries of Central Asia and Caucasus:
neither developed nor developing?
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Governance models in developed and developing countries imply explicit balances between public and private In countries of the region these balances are different due to the soviet legacy and peculiarities of transition period
Comparatively high social burden (social infrastructure, social protection) has to be combined with formation of favorable conditions for development of private sector and acceleration of growth (low taxes).
Spending on social sectors increase with growth of economy, that partly demonstrate end of transition period and start of more sustainable development Periods of shock therapy and quick reforms did not lead to harp declining of living standards
Governments have resources both to address the issues of growth and to make investments to sustain and improve living standards
• Resource rent and indirect taxes form considerable part of
state budget revenues.
Resource payments and money transfers:
limitations and volatility
Limited natural resources and infrastructure
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Limited and uneven distribution of land and water resources in Central Asia makes it impossible to develop agriculture by extensive means
Intensification of agricultures leads to a reduction of employment opportunities in rural areas
Development of industry processing oriented on export is limited to geographical peculiarities and vague development of transport infrastructure
The impact of climate change on provision of water resources
Reduction of water flow by 2070­2100 гг.
By 2030 the majority of population will consist of those in working age, and they would need jobs and a new quality of life
Population (thousands)
Population aged 15‐59 (thousands)
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Urban (thousands)
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1‐5 mln. 22,23 %
0,5‐1 mln.
14,71 %
Less than 0,5 mln.
63,05 %
By 2030 approximately 60 million people will be at the employable age (55‐65% of all population). The share of urban population will range from 30.7% (Tajikistan) to 67.4% (Armenia). The bulk of the urban population will be living in small towns.
It is necessary to stimulate the processes of urbanization to improve the conditions for provision of social services and improve the quality of life.
The aging of the population in the region will be faced after 2030
In a longer run, the countries of the region will need alternative pension systems and systems of social security
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The growing number of people of working age ‐
challenge and opportunity. On the one hand, the decline in the dependency creates new possibilities for reforming pension and welfare systems.
On the other, it is necessary to expand the opportunities for transforming an informal employment into formal sector.
Changes in the system of social security, whereas social policy as a whole must be synchronized with the progress of structural reforms in the economy.
Why do we need transformation(s)?
Uzbekistan in 2030: Inertial development model
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Sustaining the current economy structure  domination of employment, that is low‐paid, informal and low‐skilled
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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;
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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
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To provide fiscal space transformations are important
Uzbekistan in 2030: Expected results of transformations
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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
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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 that could be used for financing of health insurance and labor market programs
How to achieve the transformations: Focus on sectors with large multiplier effects
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To accelerate the transformations it is important to invest into industries generating large multiplier effects throughout the economy.
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For Uzbekistan these industries are: transport, chemical, gas and oil processing, machine building, construction and automotive.
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Case of the automotive industry. Automotive industry could contribute more to structural transformations if transition from 1‐st to 2‐nd level multiplier effects is implemented. Transformations not only generating opportunities but also posing new challenges
Uzbekistan: Transformation of society structure
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Expected economic and social transformations  more fiscal space for maneuver  more opportunities
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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  new challenges for fiscal policy
Institutional transformation as a base for sustained growth and development in a long term perspective
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Even with the low quality of institutions and under the conditions of constant transformations, the countries in the region are experiencing high growth rates.
Huge reserves of economic growth and development are included in the informal sector. It is important to improve the quality of institutions for their engagement One cannot blindfoldedly pursue certain model . It is crucial to make a conscious choice which will take into account the peculiarities of a current stage of development and meet the vision of the future
Concluding Remarks
To find optimal balances
•By state and “non‐state” actors
•Government organizations and private companies
•Major enterprises and small/medium businesses
•In the structure of income and spending
•Amid investment “now” and investment “tomorrow
•etc.
These balances are not static, but rather dynamic
There are not common recipes
There is a need for multi­optional scenarios and estimations
Strategies of a long term development (Country Visions)
Strategy of regional development (a Vision for the Region)
Thank you!
Resources in English: http://www.cer.uz
http://transformation.cer.uz/
https://www.facebook.com/CER.Uzbekistan