The year of demonstrating the capabilities of the Uzbek model of combating poverty
Uzbekistan has a strong social policy. As it was noted in the President’s Address to the Oliy Majlis and the people of Uzbekistan on December 20 last year, the goal was set to build a New Uzbekistan based on the principle of a "social state", to create equal opportunities for people to realize their potential and the necessary conditions for a decent life and poverty reduction – writes Obid Khakimov, Director of the Center for Economic Research and Reforms
Therefore, the country’s expenditures on social policy in Uzbekistan are increasing from year to year, for example, in 2018 they amounted to 35 trillion sums, in 2019 – 61.3 trillion sums, in 2020 – 74.2 trillion sums, in 2021 – 85.3 trillion sums, and expenditures of 105.5 trillion sums are planned for 2022.
A special place in the social policy of Uzbekistan is occupied by solving the problem of poverty, an active fight against which began in 2020 when Uzbekistan openly recognized the problem of poverty. Databases of socially vulnerable groups of the population were formed in order to support them more targeted, a mechanism for accounting for the low-income by joining them into the information system "Unified Register of Social Protection" was introduced in 2021. The creation of a system for more complete accounting of those in need of assistance led to the fact that if in 2017 — 500 thousand low-income families received social assistance, now there are more than 2.2 million. The volume of allocated funds increased 7 times and reached 11 trillion sums per year.
Against the background of the insufficiently favorable global situation in the field of poverty reduction, Uzbekistan’s actions taken in this direction last year are quite successful. As the President noted at a meeting on January 25 this year, the poverty rate decreased from 17 to 14% last year. Special attention was paid to the creation of new jobs. Over the past year, about 200 thousand economic entities were created, the activities of 10 thousand were expanded and the production capacity of 11 thousand enterprises was restored. Thanks to the implementation of state programs, professional training of people, assistance in establishing entrepreneurship directly in the makhallas, 1 million people were brought out of poverty.
Dynamics of the poverty level in 2022
According to the survey conducted by the end of 2022, the poverty level in Uzbekistan decreased by about 3% compared to the previous year and amounted to 14.1% (in 2021 it was 17%). The greatest reduction in the level of poverty over the year was achieved in the Tashkent, Kashkadarya and Jizzakh regions. But at the same time, the level of poverty has increased in the Fergana, Navoi, Surkhandarya regions and the city of Tashkent.
The so-called Gini coefficient or income inequality index in 2022 as a whole decreased in Uzbekistan to 0.327 compared to 0.329 in 2021, which indicates that property stratification with deepening market relations is also inherent in Uzbekistan as well as in the whole world, but it is quite moderate, which indicates inclusive approaches in government policy.Advertisement
The structure of income of the population has also changed during the year. The share of wages was 63.3%, income from old-age pensions — 13.3%, social assistance — 3.4%, income from small businesses — 2.1%, income from remittances from outside — 2.6%.
At the same time, the share of wages increased in the Tashkent, Navoi, Syrdarya and Ferghana regions and mainly accounted for the middle class, while a high share of income from small businesses is noted in the low-income group, which increased to 2.9% compared to 0.6% in 2021.
In the structure of income of the population, there is an increase in pensions and social benefits relative to wages, which indicates a significant increase in social support in difficult economic conditions last year. In addition, there is a significant increase in the share of income from small businesses, provided by active state support for this sector through concessional loans and subsidies. Thus, in order to further stimulate family entrepreneurship, about 12 trillion sums of concessional loans were allocated in 2022.
The share of household income from agriculture also increased significantly, reaching 10.4%, while in 2021 it was 3.4%. The largest growth was achieved in the Syrdarya (up to 9.8% vs. 0.1% in 2021), Tashkent (6.6% vs. 1.6%), Samarkand (10.5% vs. 1.9%), Jizzakh (13.1% vs. 2.9%) regions and in the Republic of Karakalpakstan (10.3% vs. 1.7%).
Fighting poverty in 2022
Consequently, in the difficult conditions of last year, with strong inflationary pressure, Uzbekistan managed not only to prevent an increase in the poverty level, but also to achieve a sufficiently significant reduction in it. This was achieved through a consistent policy of strengthening social protection and measures aimed at reducing poverty.
On December 3, 2021, the Presidential Decree "On priority directions of state policy for the development of entrepreneurship, employment and poverty reduction in the makhalla" was issued, according to which, from January 2022, the position of assistant to the district (city) khokim for the development of entrepreneurship, employment and poverty reduction in each town, village, aul was introduced, as well as in each makhalla. To coordinate the activities of the new institutions with government structures, a Republican commission has been established to organize the activities of assistants to the khokims. Namely, last year, in a short time, an integral system of a new mechanism for combating poverty and economic development of regions and rural areas was formed, reaching every locality, every makhalla.
During the year, this "makhallabay" system has shown its effectiveness and efficiency. The state allocated 12.5 trillion sums ($1 billion) of financial resources to solve the identified problems on the ground, strengthen social protection, ensure employment and support business initiatives within the framework of this system. Due to the use of these funds, 1.2 million residents were employed for permanent work, 997 thousand people were able to become self-employed, 101 thousand people (together with employees) were registered as individual entrepreneurs, 158 thousand people were involved in paid public works, 418 thousand citizens were allocated land on a rental basis.
For the first time in the country’s history, pensions and social benefits were increased to a level not lower than minimum consumer spending in 2022. If 500 thousand low-income families received social assistance in 2017, so by the end of 2022 there are already more than 2 million. The volume of allocated funds increased 7 times over the same period and reached 11 trillion sums per year.
The Presidential Decree "On measures to implement administrative reforms of the New Uzbekistan" adopted at the end of last year is also important for further improving the effectiveness of measures to reduce poverty. As part of the ongoing administrative reform, 5 departments responsible for poverty reduction have been transformed into a single system of the Ministry of Employment and Poverty Reduction of the Republic of Uzbekistan, which has been provided with all organizational capabilities and financial resources. The concentration of issues of a mutually overlapping nature like keeping records of labor resources and unemployment, employment support and entrepreneurship development in makhallas, within one ministry will undoubtedly contribute to their more effective and comprehensive solution in the future.
Consequently, last year, a comprehensive, holistic and integrated organizational system was formed aimed at reducing poverty in Uzbekistan, which managed to show its high efficiency in just one year.
The trajectory of poverty reduction this year
In the Presidential Address to the Oliy Majlis and the people of Uzbekistan on December 20, 2022, the priorities of the poverty reduction policy in 2023 were also outlined.
So, efforts will continue to be made to improve living conditions and overcome poverty at the makhalla level, in particular, all state investment programs will be formed in the context of makhallas. To increase the independence of makhallas in financial terms, as part of the implementation of the "Makhalla Budget" system, from January 1 of this year, part of the proceeds from property tax and land tax will remain in the makhalla itself. In 2023, almost 3 times more funds, or 8 trillion sums, will be allocated for the implementation of projects initiated by the population.
At the same time, the President of Uzbekistan clarified and specified measures aimed at reducing poverty in 2023. The task was set to more thoroughly develop and approve employment programs for 2023 in the context of districts.
At the first stage, the "iron notebook", "youth notebook" and "women’s notebook" will be combined into a single system, and a single digital passport will be developed for each family. At the second stage, individual programs for getting out of poverty will be prepared for each family. At the third stage, vocational training and entrepreneurship projects will be implemented. For these purposes, the creation of 300 microcenters has been started in makhallas. The Ministry of Poverty Reduction and Employment has been instructed, together with the Chamber of Commerce and Industry, to develop a business development program for each district.
The President also indicated the directions that need to be paid special attention to. First of all, in order to further stimulate family entrepreneurship, the scale of financial support will be expanded. This year, 12 trillion sums will be allocated for the family business program, and the maximum amount of such loans will increase. In particular, on January 25, the Presidential Decree "On additional measures to support family entrepreneurship development programs" was issued, according to which in 2023 funds in the equivalent of $300 million will be allocated to finance projects within the framework of family entrepreneurship development programs, Agrobank, Mikrokreditbank and Halq Bank at a rate of 10 percent for a period of 7 years with a 3-year grace period.
Another area is agriculture, which is an important source of employment. The President instructed to allocate plots in places convenient for the population and establish the cultivation of products in demand by the market in them. “By effectively using these lands, it is possible to produce products worth $1 billion," he noted.
If in most countries of the world the fight against poverty is carried out on the basis of ready-made recipes according to the recommendations of international organizations formed on the basis of accumulated international experience, then in Uzbekistan an original organizational model of poverty reduction was formed in a short time, which was introduced last year and has already shown very good positive results.
It cannot be said that foreign experience was not used in the Uzbek model, because during its development the experience of the USA of the 60s was deeply studied and comprehended, which made it possible to equalize the standard of living of developed and depressed states, residents of cities and villages; the experience of South Korea of the 70s on the deployment of the "Movement for a new village"; as well as the nationwide nature of actions in the fight against poverty in China in recent decades. But nevertheless, the “makhallabay” system today is a unique organizational structure both in terms of sources of funding, and in terms of population coverage and efficiency. That is, it is a national product of Uzbekistan, which has no analogues in the world so far.
Foreign experts have already become seriously interested in the Uzbek “makhallabay” system. Namely, representatives of the world’s leading institute for combating poverty J-PAL, Cillian Nolan and Karla Petersen, who visited Uzbekistan, noted that the institute of assistants to the khokims is a very interesting area for research where it is best to focus efforts on ensuring social protection of vulnerable segments of the population, since local authorities always have a lot of information on these issues.
And the successful and effective operation of this system last year makes it possible to be sure that the goals set in the "Strategy for the Development of New Uzbekistan for 2022-2026" in the field of poverty reduction, namely, to eradicate extreme poverty and to halve the level of relative poverty will be successfully fulfilled.
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