Eastern Europe and Central Asia: The frontier of change

14 Mar 2013

Leading countries of the developing world are  together reshaping global power dynamics    a new era of  human development progress, says “The Rise of the South: Human Progress in a Diverse World,” the 2013 Human Development Report, launched by the United Nations Development Programme (UNDP) here today. 

“The rise of the South is unprecedented in its speed and scale. Never in history have the living conditions and prospects of so many people changed so dramatically and so fast,” says the Report. “The South as a whole is driving global economic growth and societal change for the first time in centuries.”

Nations in Eastern Europe and Central Asia are on the frontier of that change: “Connecting the North and the rising South is the transforming East,” the Report says, referring to the region.

Dozens of developing countries worldwide have achieved impressive growth and dramatically improved peoples’ lives with pragmatic policies that typically combine strong government leadership, open markets and imaginative social programs, the Report says. 

“The 2013 Report makes a significant contribution to development thinking by describing specific drivers of development transformation and by suggesting future policy priorities that could help sustain such momentum,” writes UNDP administrator Helen Clark in the Report’s foreword.

Some of the largest countries have made rapid advances, notably Brazil, China, India, Indonesia, South Africa and Turkey. But there has also been substantial progress in smaller economies, such as Bangladesh, Chile, Ghana, Mauritius, Rwanda, Thailand and Tunisia.

The experience of many states in Eastern Europe and Central Asia in managing a rapid transition from centrally planned to market economies holds useful lessons for developing countries elsewhere, says the Report.  The first phase of the transformation began with a sharp drop in living standards and human development. While each country managed a subsequent recovery, the overall experience underscores the importance of social inclusion and a responsible role for the state.

A major lesson from two decades of transition is that the state has a critical role in creating an environment for inclusive growth and societies. “Abruptly abandoning areas of responsibility by the state or insisting on rapid privatization of all state-owned companies may prove very costly for societies in the long run,” the Report says. But reforms to strengthen national institutions’ transparency and accountability and to limit corruption are necessary to improve governance, the Report stresses.

The Report underlines the role of imaginative and effective social policy in countries that have advanced notably in human development. Turkish Minister of Development Cevdet Yılmaz writes in the Report about  how Turkey strengthened health, education and social support programs as a strategy to reduce  poverty. “Key policy changes include systematic strengthening of social assistance programmes, conditional cash transfers, social security reforms and an ambitious transformation of the national public health system,” he writes.

“Under the conditional cash transfer programme alone, launched in 2003, more than 1 million children have received health care support, and about 2.2 million have benefited from education aid. School children have received more than 1.3 billion textbooks since 2003 under a new free schoolbook programme, and nearly 1 million now get free transportation to school.

As a result of these and other initiatives, the share of the population living on less than $4.30 a day fell sharply, to 3.7% in 2010, and the share of GDP devoted to poverty assistance and related social services nearly tripled, to 1.2%.

“Throughout the country, parents and children alike can now look forward to healthier, more secure, more fulfilling lives—the underlying goal and core principle of human development.”

And Turkey has also managed the way it has engaged with global markets to improve performance. The state created favourable economic conditions that encouraged construction and the manufacture of furniture, textiles, food and automobiles—all industries with a high capacity to absorb labour. Turkey’s exports have since moved towards products that involve more processing, higher technology content and skilled labour. In 2011, the top exports—automobiles, iron and steel, and household appliances and consumer electronics—were all from industries that had grown under trade protection.

But the South faces shared challenges – aging, the environment, political pressures and inequality – and countries will need new domestic policy initiatives as well as international action to continue human development momentum.

Many countries of   the region -  such as  Croatia, Kazakhstan, the Russian Federation and Turkey - have become increasingly important aid donors, with disbursements exceeding $4 billion in 2011. These emerging donors are also active in bilateral or trilateral exchange of knowledge with countries with common heritage or beyond. In recent years Romania has shared its experience conducting elections with Egypt and Tunisia, Poland has helped Iraq with small and medium-size enterprise development, the Czech Republic has cooperated with Azerbaijan on environmental impact assessments and Slovakia has assisted Moldova and Montenegro in public finance management.

The Report argues that the emergence of a new South is shaking up existing global institutions, creating new ones, and showing new ways that countries and regions can work together. The Report argues that the South needs greater representation, but in reformed and reimagined global institutions. The emergence of the Group of 20 is an important step in this direction, but the countries of the South also need more equitable representation in the Bretton Woods institutions, the United Nations and other international bodies.

The rise of the South should be seen as beneficial for all countries and regions, the Report concludes: Human Development is not a zero-sum game.

“The South needs the North, and increasingly the North needs the South,” the Report says. “The world is getting more connected, not less.”

HDI HIGHLIGHTS

There are 11 countries in the region (Slovenia, Czech Republic, Cyprus, Malta, Estonia, Slovakia, Hungary, Poland, Lithuania, Latvia and Croatia) in the very high human development group and 15 (Belarus, Montenegro, Russian Federation, Romania, Bulgaria, Serbia, Kazakhstan, Albania, Georgia, Ukraine, The former Yugoslav Republic of Macedonia, Azerbaijan, Bosnia and Herzegovina, Armenia and Turkey) in the high human development group and the remaining 5 (Turkmenistan, Republic of Moldova, Uzbekistan, Kyrgyzstan and Tajikistan)  in the medium human development group.

The average HDI value for the region of 0.771 is above all other regions average and above the world average of 0.694. 
Between 2000 and 2012, the region registered annual growth of 0.70% in HDI value, placing it fifth. 

The region does well in all the HDI components indicators, leading other regions on mean years of schooling, expected years of schooling and GNI per capita. Its average life expectancy at birth of 71.5 years places it in the third position on this indicator.  The region’s average mean years of schooling of 10.4 years, is nearly 3 years above the world average of 7.5 years. The average gross national income per capita of $12,423  is nearly 20% above the world average of $10,184 

Relative to other regions, inequality in distribution of HDI achievement appears minimal in Europe and Central Asia Region.

The overall loss when the HDI is adjusted for inequalities is 12.9%, about half the world average loss of 23.3%. The income component is where the loss due to inequality is highest in the region followed by health. The biggest loss due to inequalities is suffered by Turkey.

The average Gender Inequality Index value for the region is 0.280 making it the best performer relative to other regions. In terms of components, the region outperforms other regions on maternal deaths and proportion of females with at least secondary education. However, it does not do so well when it comes to female share of parliamentary seats.

Multi-dimensional poverty is relatively minimal in this region. In absolute numbers, Turkey has the largest number of people suffering overlapping deprivation (4.4 million people).

The value of the region’s total merchandise exports is $1.2 trillion. The Russian Federation leads other countries  in the region, exporting goods to the tune of $400.1 billion, followed by Poland with $157.1 billion in 2010.

The region has one of the lowest employment-to-population ratios (58.4%) only above Arab States average of 52.6% which is the lowest. Youth unemployment also ranges from a low 5% in Kazakhstan to 60% in Bosnia and Herzegovina.

The average overall life satisfaction based on the Gallup World Poll for the region is at 5.3 (on the scale from 0 to 10), which is the same as the world average.