First time ever, President of the Republic of Uzbekistan Shavkat Mirziyoyev pointedly raised the issue of necessity to alleviate poverty in the country. Recognition of very problem should be viewed as a manifestation of the strong political will by Uzbekistan’s leader and the right start for its targeted solution. Hence, President proposed to develop a Poverty Alleviation Strategy together with the World Bank and the United Nations Development Program, while simultaneously considering the possibility of developing a new methodology for identifying and assessing the poverty based on studies of world standards. Shavkat Mirziyoyev identified the support and promotion of entrepreneurship among the population as one of the key drivers of poverty alleviation in the country.
According to the statistics, every tenth resident of Uzbekistan lives below the poverty line. Slightly more than one fifth of the employed male population and one sixth of the employed female population earn less than $ 1.90 a day, which is the international poverty line. These statistics confirm that the problem of poverty is really significant for Uzbekistan and it needs effective solution methods. A particularly high level of poverty is observed in the following regions of Uzbekistan: Samarkand, Surkhandarya, Syrdarya, Andijan regions and the Republic of Karakalpakstan.
The results of a research by the Center for Economic Studies of Uzbekistan allows to identify the following profile of low-income households in Uzbekistan. Representatively, such a family consists of 7 people, where the head of the family does not have a higher education degree (93% of cases) and his average age is over 50. In 24% of cases the head of the family completed a secondary education and in 11% he is unemployed. Moreover, 11% of low-income households are unemployed, and in 43% of cases they do not have a permanent job. When it comes to ensuring basic needs, 93% of such households have no access to the central heating system, 96% do not have access to the central sewage system, and 66% are not connected to the central water supply.
Based on this, the Government of Uzbekistan has taken active measures to fight poverty. In the meantime, the approach chosen to overcome this acute problem embodies a synthesis of state support and free market economy. The coronavirus pandemic significantly complicated the initial plans and led to the growth of unemployment rate and poverty in the country in 2020. However, it is noteworthy that the Government of Uzbekistan took the brunt worthily and on time. Relevant measures to alleviate poverty are already being actively pursued to prevent these rates from further growing.
One of the distinct features of Uzbekistan’s effort to alleviate poverty has become the mobilization of all state and non-state agencies to implement targeted practical measures. To effectively fight poverty, on March 26, 2020, Shavkat Mirziyoyev issued a Decree on Organizing the work of the Ministry of Economic Development and Poverty Reduction of the Republic of Uzbekistan, as well as its subordinate structures. This Ministry and its regional units were created specifically to fight poverty in the country. Along with this, the structures of the Institute for Forecasting and Macroeconomic Research and the Center for Research on Sectoral Markets and Labor Productivity in Manufacturing under the Ministry of Economic Development and Poverty Reduction of the Republic of Uzbekistan were approved. To attract qualified personnel into these research institutions, sets of incentives have been offered – wages, medical care, transportation and social protection at the same level as for the employees of the central office of the Ministry. Moreover, the employees receive such benefits as seniority allowances that provides additional motivation to work at the Institute for a longer period of time.
In the Resolution President Shavkat Mirziyoyev prioritizes state-run initiatives to fight poverty and the development of research centers in Uzbekistan specializing in the permanent monitoring of the situation.
The next step in this direction was the creation in 2020 of a Working Group on the introduction of a new mechanism to alleviate poverty, support the poor and needy segments of the population. This poverty alleviation mechanism is based on the methodology of the 2019 Nobel laureates Abhijit Banerjee, Esther Duflo and Michael Kremer. According to the new methodology, the poverty level will be determined separately for each region and each family based on the multitude of factors including, but not limited to, the accessibility of education, food, income level, transport infrastructure. The combination of applicable factors is unique for each region. Oversight over such a large amount of detailed data is performed by the Ministry for Support of Mahalla and Family, also created in 2020.
The new approach is based on such priorities as social money transfers without unnecessary bureaucratic procedures of receiving, ensuring affordable medicine (including medical services, preferential provision of medicines, vaccination of children, etc.), improving the quality and accessibility of education and offering microloans for additional skills among the population. The discussion is ongoing over an important detail of introducing microloans: how to make sure that citizens use these services for educational purposes, not in order to pay back rollover debts? Indeed, the experience of some countries shows that microloans can exacerbate the problem of poverty, because many financially illiterate people do not pay back microloans on time, and the interest in this service sector is much higher than that of traditional consumer loans. Due to this, people can find themselves in microloan “debt trap”.
A pilot project on the new methodology was implemented in two districts of Tashkent region – Buka and Chinaz. As a result, peculiarities and shortcomings of a social policy in this region were identified. For instance, in the field of social care, study identified 20-30% of households that do not belong to the category of poor in terms of income, and it also found a number of key points that are not taken into account when calculating social benefits, due to which the poor do not receive adequate support. A low level of preschool education coverage of children from low-income families along with staff shortage at schools were identified. In addition, there are shortage of doctors of certain qualifications in regions and registration problems cause delays in treatment. Moreover, despite concessional loans, the share of low-income families in the state-run program “Every family – an Entrepreneur” does not tend to increase including due to the lack of necessary skills or land.
Nevertheless, the job creation policy introduced by Uzbekistan opens up new opportunities for increasing incomes for all segments of the population. It is noteworthy that Uzbekistan plans to introduce minimum wages in the near future and reduce the share of those employed in the shadow economy. These measures will help reduce inequality among the population and lessen labor exploitation. In addition, to mitigate the economic effects of the pandemic to the country and prevent poverty from growing a system of threefold increase in the amount of temporary unemployment benefits to be introduced.
While national poverty is diminishing, the income gap between urban and rural populations is widening. This trend indicates that problem of popular poverty must be considered along with the issue of inequality. One of the key solutions is introduction of market mechanisms in the agriculture while reducing state’s control. Employment in this sector might have the greatest impact on poverty alleviation and inequality in a country. About 80% of the poor in Uzbekistan live in rural areas and earn their income working in the agricultural sector. In addition, it is important to take into account that as a consequence of the pandemic country will see an increase in poverty for the first time after a 20-year decline trend.
World experience shows that it is possible to reduce poverty two–threefold via development of agriculture, and its efficiency surpasses all other sectors of the economy. Moreover, many of the new jobs could be taken by women from rural areas and small and medium-sized cities of Uzbekistan. That could be the only employment opportunity for many of them.
Poverty alleviation goes hand in hand with raising the level of education, skills and abilities of the people of Uzbekistan. On July 28, 2020, the Government of the Republic of Uzbekistan in cooperation with UNESCO launched an extensive educational project “Development of Employment Skills in Rural Areas of Uzbekistan”, funded by the European Union in the amount of 9.6 million EUROs and implemented by UNESCO. Within four years, the project will improve the system of advanced training in the agricultural and irrigation sectors in four regions of Uzbekistan – Karakalpakstan, Khorezm, Bukhara and Surkhandarya regions. Improving and reforming the system of vocational education and training in agriculture is an important aspect, and here the experience and technical assistance of international organizations are useful. The joint project with UNESCO meets the priority areas of the Development Strategy of Uzbekistan for 2017-2021 in terms of skills development, as well as the Sustainable Development Goals such as quality education, achieving gender equality, empowering all women and girls, ensuring competitive jobs and economic growth.
It should be noted that newly created Ministry for Support of Mahalla and Family plays a significant role in the efforts to alleviate poverty in the country. The purpose of establishing such an agency is to support vulnerable and low-income families, to effectively involve the population in entrepreneurship, to protect the rights of women and their legitimate interests, to ensure gender equality, to increase employment levels and improve working conditions among women, to develop a system of citizens’ self-government bodies, to protect their rights and legal interests, to provide relevant assistance to the population in matters of social support, etc.
The ministry is also responsible for the implementation of the system “Comfortable and Safe Mahalla”, social support for women, coordination of the activities of the elderly and veterans and employment, improvement, strengthening the material and technical base of the citizens in the mahalla. The work of this Ministry significantly contributes to fighting poverty and addressing inequality in the society, ensures effective targeted support to those in need and at the same time does not lose control over the situation in mahallas, as the Ministry serves as a link between the people and the government.
Hence, to reduce the level of poverty in Uzbekistan, a new methodology for identifying and targeted support of low-income families is being tested, state-run programs of financial and non-financial support of citizens from poor popular strata are being introduced, and entrepreneurship is being actively promoted among the population, while concessional loans are already available for citizens and the state plans to develop market economy in the agricultural sector, moving away from more centralized resource management.
Thus, the Government of Uzbekistan is actively introducing new mechanisms to support the poor people and it is noteworthy that the multilateral assessment of the problem inspires trust and the expectation of a speedy decline in poverty rates in the country, taking into account the necessary adjustments caused by the consequences of the pandemic.
Authors: MBA Maria Mikhailova, Dr. paed. Nina Linde
Institute of Economics of the Latvian Academy of Sciences