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Latvia – 20 Years After its Independence (or a trade-off?)

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Following famous words of my professor Anis Bajrektarevic that: “the Atlantic Europe is a political power-house (with the two of three European nuclear powers and two of five permanent members of the UN Security Council, P-5), Central Europe is an economic power-house, Russophone Europe is an energy power-house, Scandinavian Europe is all of that a bit, and Eastern Europe is none of it.”

, I wanted to examine the standing of my own place of origin in the ‘new European constellations’. What happens to a country which suddenly is free to govern its own territory and people? What is the biggest fear? Is it the inability to satisfy its population or a threat from the former conqueror? Should a country opt for the ‘shock therapy’ or experience gradual changes? How to deal with the privatization of state-owned institutions? The following lines objectively question how the well-being of the East-European nation has changed in 20 years since the collapse of the Soviet Union, and in the course of the country’s integration into the EU. The authoress also answers whether a small country like Latvia can actually preserve both its political and economic sovereignty. On a bigger scale, the findings suggest that the well-being in the Latvian SSR was better than it is today, while others strongly disagree. Furthermore, the authoress concludes that Latvia had to sacrifice its economical sovereignty in order to preserve its political independence. Is any other choice conceivable, now or in future?

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The Republic of Latvia is a small country situated on the Baltic coast, in Eastern Europe. The estimated population of 2012 slightly exceeds 2 million. 60% of the population is ethnic Latvians, while a significant part, i.e. 27.3%, is Russian, demonstrating the legacy of the past. (Eurostat, 2012)

Just slightly over 20 years ago Latvia was under the Soviet rule and Communists were the ones who had the power to make decisions. The government of Latvia was not recognized by the international community. The nation itself experienced the Soviet economic and political system. In other words, during the time of occupation, Soviet Union introduced the Russian language into all aspects of everyday life. The intelligence was deported and a 5-year economy plan led to empty store shelves and starving people. Even though the productivity of the agricultural sector was high, all harvest was transported to other Soviet territories. Nevertheless, industrial capacity was significantly improved, employment was high, education was for free, and most of the basic needs of the nation, such as housing, were satisfied.

Latvia’s de facto sovereignty was recognized in 1991, and the first years of independence were spent developing a functioning state. The most difficult tasks facing the government were the creation of administrative bodies, reforms in the health and education sector and also a much needed shift from a planned economy to a market economy. When a political stability was reached and reforms initiated, the nation became increasingly concerned about the preservation of its statehood, so in 1995 the Latvian authorities adopted a statement defining foreign policy goals. They argued that the sovereignty can be strengthened through early integration into the European and world-wide security and political and economic structures. Latvia became a member state of the UNO in 1991, and joined the EU and NATO in 2004. (Jundzis, 2010)

However, clear existence goals for the country were absent for the first decade of independence. While political sovereignty was at the top of the agenda, the majority of the society believed that the continuous increase of average human well-being and a long-term conservation of cultural heritage and Latvian language should be the goals. Even though the initiated reforms strived for improved living standards, similar to those of many Western countries, and increased individual freedom and protected rights, many question whether these reforms and integration into the EU have supported the achievement of one of the main goals – improved human well-being in Latvia. (Pabriks & Purs, 2001)

The Human Development Index, published by UNDP, assesses the long-term progress of human development regarding a long and healthy life, access to knowledge and a decent standard of living. The overall human development value in Latvia has been positive as the HDI value has risen from 0.693 (1990) to 0.805 (2011). Hence, the statistics rank Latvia among other high human development countries. (UNDP, 2011)

The majority of indicators, compared from 1990 to 2010, have followed a positive trend. Very often the development was slow during the first years of independence when the reforms were launched. Years later, in the 21st century, especially after Latvia’s accession to the EU, human well-being improved more rapidly until the crisis in 2008 which resulted in its decrease. Nevertheless, improved absolute numbers should not be overestimated.

The previously centralized health sector has experienced notable reforms in the last 20 years; thus, the health condition of the inhabitants of Latvia has improved. The system was decentralized; hence, it entitled the foundation of private health care institutions; thereby, the health care became more accessible and more qualitative, as displayed in Figure 1. Furthermore, as the health expenditure of the state’s budget has increased and the money from European funds can also be received, new technologies have been implemented. At the same time, more and more people are unable to afford the health care services due to the growing prices.

One can say that in the Soviet Latvia general care was easily accessible, but, when it came to a very specific treatment, it was challenging to find a proper physician. On the plus side, nowadays there are various physicians specialized in their fields; however, sick people might have to pay for treatment out of their own pockets in order to receive help without waiting. Consequently, many people are unsatisfied with prices of medical care in Latvia. On the bright side, the quality of care provided has definitely improved over the past 20 years.

Despite advancements and reforms in the health care system, demographics are in recession, which is a serious threat to the country’s succession. A natural decrease of population due to lower fertility rates and a considerable migration outflow (especially within the first years of the collapse of USSR and after Latvia’s accession to the EU) has contributed to the fact that the population has decreased from 2.67 million in 1990 to 2.24 million in 2010. As a consequence of smaller number of new-borns and rising life expectancy, the population is aging, which imposes an increasing burden to the economically active part of the population to finance the retired people.

Unfortunately, not only is financing the retired people a serious issue, but also a complete burden to costs of primary goods which have increased. Thus, paying for one’s own needs is becoming harder. The results of surveying 130 people suggest that in the Latvian SSR more than 60 per cent of the representative sample had funds to pay for all basic needs, such as food, housing, health care, education. Currently, less than 40 per cent of respondents have means to pay for all these needs. The proportion of people who can finance their needs just partially has risen from 29 to 47 per cent.

Even though the absolute income has increased, the amount of people earning less than the subsistence minimum is rising, especially in the rural areas. It has to be mentioned that the content of Latvia’s subsistence basket has not been revised since the first year of renewed statehood; thus, in reality, it does not contain all goods and services required for living decently. Furthermore, since the accession to the EU, prices have risen rapidly. For instance, total housing costs have increased significantly – in the USSR the rent and public utilities were highly subsidized by the government, whereas in 2005 the average housing costs amounted to 80 US dollars and 170 dollars in 2009. (Central Statistical Bureau of Latvia, 2011) These costs are borne by the private sector and the burden is becoming heavier due to lower income compared to the costs themselves. The situation is even worse, considering the fact that the proportion of overcrowded households is one of the highest within the EU. If people lived in and paid for apartments so that they were not characterized as overcrowded, the housing costs would be even higher compared to their income. Many people agree that they enjoyed much better housing conditions when they were a part of the communism country.

Similarly, the respondents of the survey mentioned that the Soviet Times guaranteed a certain security regarding employment. The majority of the economically active population was employed in the Latvian SSR compared to the 16 per cent unemployment level in 2009. (Central Statistical Bureau of Latvia, 2011) Even though the absolute remuneration was considerably lower in the Soviet times, it had more purchasing power. On the other hand, the labor market is becoming more knowledge intensive, and the workers – more educated and better specialized in their professions. Working conditions have also improved significantly, partly because of the regulations of the ILO.

Transformation to knowledge-based economy has been supported by the development of the education system which is highly recognized by international surveys. High literacy and enrollment ratios are requirements for the nation to educate people who can efficiently participate in such natural resource-scarce economy. Smart people are one of Latvia’s major assets. Nevertheless, the state has to further advance its education system, as remarks from the Soviet system are still present (books, teaching concepts, teachers etc.). Furthermore, the government has to understand the role of education expenditure. Ongoing budget cuts on education sector deteriorates the quality, as teachers and professors lose their motivation and pupils and students become more motivated to enroll in universities abroad.

The EU has provided significant advantages to the Latvian population, especially the youth which now is eligible to study permanently or temporarily at foreign universities, enjoying the same terms and conditions. Also, to the people who are entrepreneurial, open-minded and have a certain understanding of how to take an advantage of new business opportunities. The EU has also contributed to the modernization of hospitals, schools and the infrastructure. Furthermore, the EU sets standards as well as observes the development of human well-being; therefore, Latvia is motivated and under a pressure to demonstrate continuous advancement. As a result, the nation believes that the health and education systems have been improved and provide higher quality and accessibility. Nevertheless, given their income level, they are discontent with the prices of the tertiary education and specialized health care services. On the other hand, the Soviet government paid for housing, education and health care thus more resources were available for food items, leisure time, clothing, and also the employment ratio in the Latvian SSR was close to 100 per cent. Therefore, there are people who believe that the communism times ensured better well-being. In addition, the equality within the population was much higher. However, as very often respondents mentioned, everybody was equally poor. Nowadays, the income polarization is a significant issue.

To complete the picture about human development trends in Latvia, which have followed different directions, it is worth referring to the final question of the conducted survey. It asked the respondents when, in their opinion, the well-being was the highest: in Soviet Latvia, in Latvia before joining the EU or in Latvia which is a member state of the EU. As the graph illustrates, the opinions vary – approximately every third of the respondent pool shares a different view, which simply further proves the finding that there are indicators which have improved along the movement towards Europe and there are aspects which so far the sovereign Latvia has not been able to offer its people as it was done by the USSR.

In order to succeed and reach the well-being benchmark set by the Union, first of all, a sustainable economic growth is needed, resulting in means which could shift into a social system. Additionally, the political powers have to cooperate with the society ‒ finding a common ground, establishing goals that are seen as important and beneficial to the state itself and its population. It is of utmost importance to assure that the population lives decently, meaning, their basic needs, such as food, housing and health care, are satisfied. It should be the main goal of the government, thereby increasing the satisfaction and loyalty of the population to the state. Hence, the society would be willing to contribute to the development process, also by properly paying taxes.

Furthermore, lessons from the past should be learned. One of the main arguments for Latvia entering the EU was the economic advancement. As tariff and non-tariff barriers would be abolished, the trade between the EU and Latvia, especially the export originating from Latvia, would further increase. Productivity would be increased when people started working into more productive sectors. Furthermore, fixed and human capital investments were expected to be attracted via low labor costs, the adoption of EU legislations and additional privatizations. Investments would initiate an upward growth spiral. Nonetheless, skeptics argued that not every person residing in Latvia would benefit. Citizens who benefited the most would be young people, as they would enter better paid jobs, whereas the pensions of retired people would not increase as rapidly as the prices of goods and services. Latvian farms would face serious hardship due to a surplus in the market resulting from foreign competitors that are subsidized by their own governments. (Memo, 2000) They were right. The EU has suppressed the Latvian economy as a result of shutting down industrial plants, uncontrolled FDI inflows, enabling cheap credits, a significant inflation and price increase, and foreign companies creating a competition which small Latvian companies and farmers cannot defeat. The smaller economy led to an increasing budget deficit, external borrowing and, finally, budget cuts demanded by the IMF and the EU, which have harmed the population as their adjusted income is not as high as living costs. One can say that Latvia traded a part of its economic sovereignty in order to ensure its political independence and the population is paying the price.

However, the people living in Latvia have been willing to pay this price for the sake of Latvia’s sovereignty. In a survey, carried out by the national news portal TVNET, it was asked what the biggest threat to Latvia’s sovereignty is. 53 per cent of the 5311 respondents indicated Russia and unknown money influx as the biggest danger. Contrary, just seven per cent perceive integration into the EU and NATO as imminent danger to Latvia’s independence. (LETA, 2004) On one hand, if Latvia had not joined the EU, the threat imposed by a money influx would have been limited, but political independence would have been significantly less insured, suggesting that preservation of economic and political sovereignty is impossible for a small country like Latvia. In words of my former professor: ‘difference between a dialectic and cyclical history is a distance between success and fall.’ (Bajrektarevic, 2012)

If Latvia had not joined the EU in 2004, it could have taken its time to develop the industries which correspond to the society’s interests, not to the EU regulations. In addition, the migration outflow would have been smaller; therefore, people who are desperately needed in Latvia to cultivate the economy would have been available. Hence, the money influx into an economically stronger country would not have resulted in such a crisis. In this case Latvia would have experienced a slow and stable economic and social welfare growth. However, at some point in time, say 10 years later than the original accession date, Latvia should have joined the EU, as it is too small to be acting alone on the global stage. Latvia does not have significant raw materials or highly developed industries; thus, it lacks international power. Its needs and ideas are heard and pushed forward only in cases when stronger partners share the same interests. The EU is a platform where Latvia can find like-minded countries; therefore, it can find “allies” and together strive for developments and economic and political stability.

As for the Latvia’s situation in the EU, in 2014, Latvia is expected to join the Eurozone if it fulfils the requirements. At the moment, it is believed that Latvia will succeed and be allowed to join, but opinions whether the country really needs to adapt the Euro vary. In September 2012, the public opinion on the Euro adaptation was record low, as only 13% of Latvians support the idea. Being a member of Eurozone would further disable Latvia to control its monetary policy and raise the prices which would not correspond to the income earned by a less productive workforce and industries compared to the ones in other EU states. Therefore, many experts believe that Latvia should postpone its adoption of the Euro until the future of the Eurozone is clearer and Latvia recovers from the economic recession and advances its production regarding productivity and value added.

Once Latvia substitutes its Latvian Lats for the Euro, it will be economically even more dependent from the EU and its regulations, but it would also present new trade opportunities for Latvian companies and therefore cultivate the economy and increase human well-being. The state would also become more creditworthy to foreign investors. Nevertheless, one should not forget how the FDI affected the economy three years ago. Swedish banks, which acquired Latvian banks, issued loans excessively and irresponsibly during the pre-crisis period; thus, fuelling unsustainable and imaginary private consumption and property prices in the country. Sweden’s position, demanding severe budget cuts that affected education and the health sector, was indicative of their fear of losses in case the loans issued decrease in value due to devaluation. Latvia has to be well prepared before welcoming Euro as a replacement for its Lats, which was only reintroduced in1993.

 
References

Bajrektarevic, A. (2013), Of 9/11 and 11/9 – How did Europe become itself? Taylor & Francis, UK

Bajrektarevic, A. (2012), Future of Europe Europe’s World, Brussels

Central Statistical Bureau of Latvia (2011), Materiālā nenodrošinātība Latvijā. Riga: 2011.

Jundzis, T. (2010), Latvijas Valsts Atjaunošanas Parlamentārais Ceļš, 1989-1993. Rīga: Latvijas Zinātņu akadēmijas Baltijas stratēgisko pētijumu centrs.

LETA (2010. gada 11. 3), Ielādēts 2010. gada 19. 5 no KAS JAUNS: http://www.kasjauns.lv/lv/news/sia-vares-dibinat-ar-viena-lata-pamatkapitalu&news_id=18184

LETA (2004, November 14), Muciņš skaidro izmaksu pieaugumu veselības aprūpē. Retrieved April 9, 2012, from TVnet:

http://www.tvnet.lv/zinas/latvija/204012-mucins_skaidro_izmaksu_pieaugumu_veselibas_aprupe

Memo, M. (2000, July 13), “Will Joining EU and NATO Benefit Latvia?” Retrieved March 12, 2012, from The Baltic Times:

http://www.baltictimes.com/news/articles/35/

Pabriks, A., and Purs, A. (2001), Latvia: The Challenges of Change. London: Routledge.

Paiders, J. (2002), Nē Eiropai! Vai Latvijai ir nākotne ārpus Eiropas Savienības? Rīga: JPA.

Rajevska, F. (2005), Social Policy in Latvia. Oslo: Fafo.

Tragakes, E., Brigis, G., Karaskevica, J., Rurane, A., Stuburs, A., and Zusmane, E. (2008), Latvia: Health System Review. Retrieved February 17, 2012, from European Observatory of Health Systems and Policies:

http://www.euro.who.int/__data/assets/pdf_file/0003/95124/E91375.pdf

UNDP (2011). Human Development Report 2011: Latvia. Retrieved March 12, 2012, from HDR: http://hdrstats.undp.org/images/explanations/LVA.pdf

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Eastern Europe

The phenomenon of the Islamic world- Ilham Aliyev

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At the end of the twentieth century – at the beginning of the 21st century, world politics differ by its complexity and diversity. It is too important that Azerbaijan, which proclaimed independence twice during the twentieth century, maintained its this independence during the period full of globalization, international integration and social contradictions. Under such complicated historical circumstances, the prominent politician and statesman, the well-known and respected person in the world – Ilham Aliyev’s commitment and successful realization of this responsibility can be characterized as the golden age of modern Azerbaijan history. Conduction of successful foreign policy during his term as head of state has had a significant impact on the future life of Azerbaijan.

The Republic of Azerbaijan, established normal international relations with all the countries of the world after gaining independence, and in the frame of good relations with the Muslim countries, it also protects the interests and interests of the Islamic world within the Organization of Islamic Cooperation and continues to cooperate with these countries in accordance with the requirements of international law. In this regard, strengthening of Islamic solidarity in the world is one of the priority issues in the foreign policy of Azerbaijan. Namely from this point of view, declaration of 2017 year as “Islamic Solidarity Year” by decree of the  President Ilham Aliyev dated January 10, 2017, is an indicator of  humanistness of our state leader and at the same time it is a positive example of our country’s sensitive attitude to the Islamic Countries Union. Islamic solidarity does not only mean the solidarity of Islamic countries. This is a kind of challenge, regardless of religion, to the world’s people to live in friendship, brotherhood and multiculturalism conditions.

It is well known that sectarian wars, civil wars in the Middle East and as a result, emerged certain socio-political tensions indicate that Muslim countries are in great need of moral solidarity. The controversial political processes happening in the world, the emergence and increasingly widespread of warlike states in different countries, the strengthening of religious confrontation, and the deepening of the prejudiced attitude towards Muslims emphasize the necessity level for solidarity among people, nations and states. It can be said that one of the main reasons for exacerbating the myth of Islamic terrorism, the threat of Islamophobia, and strengthening the oppression of Islamic countries should be sought in the absence of unity and solidarity among these countries. Faith differences, contradictions in interests and positions and etc. leads to serious disagreements, and sometimes severe confrontations. Islamic religion, its sacred values, are insulted by the Islamophobia and those who are exposed to the poisonous propaganda against Islam. The bloody events that took place in the Islamic countries during last years, especially in Iraq, Bahrain, Yemen, and Syria are confirmation of our opinions. Cradles of ancient Eastern culture such as Baghdad, Damascus, Aleppo, Kirkuk, Basra and other cities are subject to serious destruction as a result of wars in Iraq and Syria and constant clashes, monuments of Islamic culture in these cities are destroyed. Caricatures of the Prophet Muhammad are given in the Western media, mosques, the holy book-Koran is burnt. The Western world’s official structures do not just condemn the acts of vandalism, but on the contrary, they protect, honor, and appreciate the performers of those acts.

The main purpose of the “Islamic Solidarity Year” is to strengthen the unity of the Muslim world and to show that Islam is a religion of peace and culture, and to achieve this goal, as President of the Republic of Azerbaijan Ilham Aliyev said, first of all, reconciliation between different sects that have historically damaged Islam should be established. The announcement of the year 2017 as the “Year of Islamic Solidarity” in Azerbaijan is a challenge to the West, which is strengthening its attacks on the Islamic world annually and promoting a new “crusades” in the 21st century. This is also a call for Islamic countries to be vigilant against the crafty intentions of the West, to demonstrate unity and solidarity. Ilham Aliyev made this important step and expressed the his own position and the position of the state of Azerbaijan. As Azerbaijan has distinguished from other states with its multicultural and tolerant values throughout its history. Islamic solidarity is also a part of this context, and this shows that President Ilham Aliyev gives great importance to the solidarity of the Islamic world. As political scientists point out, some initiatives have been made to call Muslim countries to get unified around religion. For the first time in history, the head of our state has sent a political message to the Islamic world, pointing to the importance of acting from unified position, to achieve unity and at the same time integrate into the world. It should be noted that the Order of the President of the Republic of Azerbaijan on the declaration of 2017 year as“Year of Islamic Solidarity” states: “The Republic of Azerbaijan has established mutually beneficial relations with the Islamic world by being selected as a member of the Organization of Islamic Cooperation, ISESCO and other respected organizations joining muslim countries and has been an organizer of a number of important cultural forums of global importance. Azerbaijan has made a great contribution to the founding of tolerance environment, multiculturalism, intercultural and intercivilizational dialogue, and the promotion of Islamic values in the world. The prestige gained by Azerbaijan in the Islamic world got its expression in this results that Baku and Nakhchivan cities declared as a capital of Islamic culture in 2009 and 2018 respectively. And the decision to hold the IV Islam Solidarity Games in Baku in 2017  create favorable conditions for our country to take the next practical steps in strengthening the Islamic solidarity. ”

Only state leader of the country like Azerbaijan,  where multiculturalism and solidarity are established, and citizens of different nationalities, religions and sects live in peace, has a moral right to give such a decree. The promotion of the Islamic Solidarity initiative is related to the challenges of the present and controversial processes that take place because of various reasons in the Islamic world. As it is seen here, the importance of Azerbaijan’s reputation in the Islamic world, as well as the need to strengthen the solidarity of Islamic countries, as well as the actuality of holding the Islamic Solidarity Games in Baku, the capital of the Republic of Azerbaijan in 2017, have been extensively and logically expressed in this decree. With Islamic solidarity policy, Azerbaijan, as unifying facility of the Islamic world, confirms that these religious values are indeed, humanistic, moral values and reinforces belief to being of these ideas are an effective means of creating a shared living and stability environment not only in the Islamic geography but also in the entire world. Azerbaijan, which has created a partnership of cultures and ideas between East and West, fulfills the function of a of solidarity bridge, thus demonstrates its commitment to universal values, as well as its commitment to the highest values of the Islamic religion, which had a special place in the past and continuing to keep its value today. Thus, Azerbaijan uses all the means to establish steady stability in a globalizing world and propagates the peacekeeping, reconciliatory position in a unique way that is essential for today.

We suppose that this humanist initiative of the President of Azerbaijan, Mr. Ilham Aliyev, will promote the expansion of cooperation relationship between Muslim countries in the world and further strengthening of the Islamic solidarity. The strengthening of Islamic solidarity, in its turn, will play an important role in ensuring tranquility and peace in the Middle East and other regions.

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Economic Growth of Ukraine Depends on Completing Pending Reforms Quickly

MD Staff

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Ukraine’s economy grew by 2.5 percent in 2017, the second year of modest growth, according to the World Bank’s latest Ukraine Economic Update.  Growth in manufacturing, services, and construction was robust, but weaknesses in the agriculture and mining sectors, together with delays in key reforms to further strengthen investor confidence contributed to the modest overall growth performance.

“Faster growth is needed to improve living standards for the people of Ukraine who continue to hurt from the economic crisis of 2014-2015,” said Satu Kahkonen, World Bank Country Director for Belarus, Moldova and Ukraine. “This will require decisive measures in the next few months to complete pending reforms to bolster investor confidence and safeguard macroeconomic stability.”

Economic growth is projected at 3.5 percent in 2018 if pending reforms in anticorruption, land markets, state-owned banks, and privatization can be advanced in the next few months. This would provide an important signal to investors. If reforms are delayed, growth could drop below current levels in an uncertain macroeconomic environment as financing risks rapidly increase.

Ukraine faces major financing needs to repay public debt and fiscal pressures from higher public sector wages and social benefits in 2018 and 2019. Mobilizing adequate international financing by completing pending reforms in the months ahead will be important to maintain macroeconomic stability.

Meeting the fiscal deficit target of 2.5 percent of GDP in 2018 will require improving targeting of housing utility subsidies, making further wage increases contingent on measures to optimize the school and hospital network and public-sector staffing, and identifying affordable options to update public sector pensions.

Fiscal Pressures and Reform Options …

According to the World Bank’s Special Focus Note on fiscal pressures and reform options, Ukraine has made progress in reducing its large public spending since 2014. However, sustaining these gains while also improving the effectiveness of public services will require implementation of reforms in education, health, public administration, pensions, and social assistance in a fiscally affordable manner.

Public expenditures increased significantly in 2017, by 11.7 percent in real terms, reaching 41.5 percent of GDP, due to the doubling of the minimum wage and over 40 percent increase in wages of teachers and doctors. Spending on social programs also increased.

The recently adopted reforms in education, health, and public administration seek to improve compensation for teachers, doctors, and public servants to strengthen incentives and attract quality personnel. Achieving this in a fiscally affordable manner will require coordinating further increases in salaries with time-bound measures to optimize staffing and the school and hospital network.

The social assistance package in Ukraine is not only fiscally costly—costing 5 percent of GDP in 2017, but is also poorly targeted—with only 30 percent of assistance going to the bottom 20 percent of the population. Fixing this will require improved targeting of the large HUS program.

The recently adopted pension reform helped improve adequacy of benefits and stabilize fiscal costs. Additional initiatives going forward should avoid undermining these core objectives of the pension system. The timeline to create a funded pillar system by January 2019 needs to be reconsidered since this will undermine contributions to the pay-as-you-go system, create contingent fiscal liabilities, and face inadequate availability financial instruments.

Background

Since May 2014, the World Bank Group has provided a total of more than US$5 billion to Ukraine (including 4 development policy loans, 7 investment operations and 1 guarantee) from the International Bank for Reconstruction and Development (IBRD).

The World Bank’s current investment project portfolio in Ukraine amounts to US$2.5 billion.  Investments support improving basic public services that directly benefit ordinary people in areas such as water supply, sanitation, heating, power, roads, social protection and healthcare, as well as private sector development. Since Ukraine joined the World Bank in 1992, the Bank’s commitments to the country have totaled over US$12 billion in about 70 projects and programs.

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Eastern Europe

Baltic States: Missed opportunities in global politics

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We are living in the world where the facts “who makes” and “where it is made” are much more important than “what for” issue. Nowadays the world political scene is divided between superpowers supported by their allies. In order to punish each other for having opposite views the sides criticize any step made by the opponent.

Unfortunately, this happens even in case of evident necessity. It is not the secret that the modern system of international security is unable to perform all demanded functions any more. It needs to be reformed. Another question is who and where will decide.

The most likely political platforms for this are the United Nation Organization and OSCE. But the preparatory stage for any new decision should become different forums and conferences, such as the Munich Security Conference and the Moscow International Conference on Security.

This year the Munich Security Conference took place on February 16-18. More than 30 heads of state and government and over 100 cabinet ministers from across the globe came together at the forum for discussions on major international security challenges. As far as the Baltic States concerns, President of Estonia, as well as Lithuanian and Latvian ministers of defence did not miss the event because it was of great importance for the future of their countries and all Europe.

Just another situation developed in March. In Moscow an annual International Conference on Security was held on April 4-5. The fight against terrorism and other pressing security challenges were one the agenda. There is not a single person who is not affected by the discussed topics.

Many European countries considered it unnecessary to visit the event. It makes no sense to blame them for this choice. They have a strong and common view on what is happening in the world. But if abstract from the current geopolitical situation and confrontation between Russia and the West, politicians should see such kind of forums as a chance to find even weak possibilities to make the world safer. Probably the main reason for not attending the event is in the fact that politicians forgot how to listen to each other. They forgot that only discussing controversial issues makes possible to reach a consensus.
Another issue that deserves attention is the list of participants, which is of great interest to the analysts. According to the Russia’s Defense Ministry, representatives from at least 95 countries, three deputy prime ministers, 30 defense ministers, 15 chiefs of staff, 10 international organizations and military delegations have come to participate in the International Conference on Security. They include defense ministers of India, South Africa, Iran, Iraq, Pakistan, Vietnam, Azerbaijan, Belarus, China, Armenia, Mozambique, Serbia, and Israel. Thus, almost half of the UN member-states (total number is 193) sent representatives to the Conference.

It becomes evident that Russia really has powerful partners and allies that are ready to discuss even difficult questions and find mutually beneficial solutions. Those who came do not necessarily agree with Moscow and support its foreign policy but they clearly understand that unfortunately without Russia it is impossible to improve the International Security system.

This fact admitted Thomas Greminger, secretary-general for the Organization for Security and Co-operation in Europe. He stressed that Russia is a key partner in issues of the European security. But the Baltic States blinded by hatred to Russia ignore ignored the event thus putting political ambitions higher than common sense.

It is obvious that Russia is not satisfied with NATO’s actions near its borders. NATO in its turn disputes the lawfulness of Russia’s behavior. Every day confrontation becomes harder and leads to the arms race. The only way out is to discuss things and find the way out. The Baltic States as usual lost the possibility to express their position on key international security issues and be the active actors in global politics.

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