For the first time since the late 1990s Kazakhstan’s economy is expected to contract by projected 3 percent in 2020 with a moderate recovery by 2.5 percent in 2021, according to the World Bank’s latest Kazakhstan Economic Update (Summer 2020) – Navigating the Crisis report.
Although Kazakhstan’s GDP showed mild growth at 2.3 percent in the first quarter, economic activities weakened in the following months as commodity prices dropped, trade declined, and COVID-19 preventive measures slowed economic activity. Consumer demand showed moderate growth at at 1.2 percent, reflecting growing concerns over COVID-19 and the restriction measures. Investment is expected to ease to 1.0 percent annually, supported mostly by the on-going foreign direct investments into the oil and gas industry and residential construction. Supply disruptions and currency depreciation pushed up inflation to above the upper bound of the National Bank target range.
“The authorities acted early to contain the COVID-19 pandemic, and the accumulated fiscal buffers allow the government to introduce a relief package to mitigate the impacts of COVID-19 on the economy,” said Sjamsu Rahardja, Senior Country Economist, World Bank in Kazakhstan. “Weak demand and oil prices, as well as the protacted pandemic expose significant risks to the economic outlook. Authorities may want to consider using the available resources to provide relief to the poor and vulnerable, protect productive assets, and introduce reforms to sustain economic recovery.”
A prolonged crisis is likely to increase poverty and can increase inequality in Kazakhstan. Preliminary estimates suggest that poverty rate may rise in 2020 from a projected 8.3 to 12.7 percent – equating to more than 800 thousand additional people living in poverty. The shock to the labor market in Kazakhstan due to both the pandemic and the mitigation measures, is expected to have severe implications for jobs, particularly in sectors that employ low-skilled workers.
The report also argues that COVID-19 has a negative impact on human capital development in Kazakhstan. Unequal access to quality education, especially during lockdown, can negatively impact human capital development for the poor. School closures could result in learning loss of more than one-third of a school year and the impact could mean a decline in the Program for International Student Assessement (PISA) points. As most students in the country currently perform around the threshold for functional literacy and assuming some will lose more than others, the estimates suggest that the percentage of students performing below functional literacy will increase by 3 percentage points (from 64 to 67 percent).
“The impact of COVID-19 on education and learning losses will have a decades-long impact on the economy by an estimated 2.9 percent, amounting to an overall economic loss of up to $1.9 billion every year”, says Jean-Francois Marteau, World Bank Country Manager for Kazakhstan. “A focus on improving access to quality education, including distance learning, would be important to prevent a decline in the quality of human capital, especially among Kazakhstan’s low-income population.”
The report concludes that under the risk of a prolonged slump in the global oil market, Kazakhstan’s pathway for a resilient recovery may focus on strengthening the effectiveness of public administration and services, including the use of e-platforms to deliver key public services, better tax administration, and a mechanism to review and redeploy fiscal resources toward better state programs. A renewed emphasis on reforms in the logistics, digital telecommunications, and financial sectors could help the overall private sector explore new opportunities.
Innovative finance mechanism to support Uruguay’s energy transition
A joint UN proposal in Uruguay, with the United Nations Industrial Development Organization (UNIDO) acting as lead agency, seconded by UNDP and UN Women, has been approved by the United Nations Joint Sustainable Development Goal (SDG) Fund. This was announced today as part of a Joint SDG Fund US$41m portfolio to catalyze strategic financing to accelerate the Sustainable Development Goals.
Uruguay is one of four countries, and the only one in Latin America, to be selected for funding. The UNIDO-led proposal for Uruguay, along with ones from Fiji, Indonesia and Malawi, was selected from 155 proposals from over 100 country applicants across the globe.
The programme will establish a Renewable Energy Innovation Fund (REIF) to support Uruguay´s second energy transition, with the objectives of decarbonizing the economy and boosting competitiveness. The REIF will combat climate change by helping transition Uruguay’s transportation and industry sectors to green energy and by providing affordable access to innovative clean technologies.
The Joint SDG Fund will provide a grant of US$10m, leveraging around US$70m of co-financing from regional development banks and private commercial banks. The REIF will support cleantech financing in energy storage, smart grid, green hydrogen, electro-mobility and waste management/treatment technologies.
Manuel Albaladejo, UNIDO Representative and the UN team leader designing the Uruguay proposal, stated, “This programme sets a precedent on how UNIDO should approach development cooperation in middle-income countries. Besides UNIDO´s well-known technical expertise, understanding and deploying innovative financing mechanisms to leverage co-funding from development finance institutions and even commercial banks will be key to UNIDO´s work. Indeed, the UN reform and the multilateral funds such as GEF and GCF emphasize the need to shift to impact investments that tap into private sector financing.”
Mireia Villar Forner, United Nations Resident Coordinator in Uruguay, said, “Thanks to the support of the Joint SDG Fund, the UN team is better equipped to support the alignment of private investments to the SDGs through the establishment of a national ecosystem for impact investment. Without a doubt, it changes the way we work.”
Omar Paganini, Uruguay’s Minister of Industry, Energy and Mining, said, “On behalf of the Ministry, we are very enthusiastic about the support received from the SDG Fund, which will be a great contribution to promote Uruguay´s second energy transition. The REIF is an innovative instrument that powers and deepens the impact of our public policies. We believe it will boost Uruguay´s efforts to achieve the SDGs.”
The Joint Sustainable Development Goals (SDG) Fund is an innovative instrument to incentivize transformative policy shifts and stimulate the strategic investments required to get the world back on track to meet the SDGs. The UN Secretary-General sees the Joint SDG Fund as a key part of the reform of the UN’s development work by providing the “muscle” for a new generation of Resident Coordinators (RCs) and UN Country Teams (UNCTs) to really accelerate SDG implementation.
Estonia provides good support to jobseekers, but does not reach everybody
The Estonian labour market has outperformed most EU countries after the global financial crisis. The employment rate of people in working age stood at 73% in the third quarter of 2020, up from 61.3% in 2010 and above the OECD average of 66.7%. Estonia provides comprehensive and targeted support to jobseekers, workers and employers. The Public Employment Service provides effective policies addressing the individual needs of the clients and cooperates pro-actively with a wide range of stakeholders. However, many people still lack stable jobs and incomes and are not in touch with the Public Employment Service to get the support they need, according to a new OECD report.
Connecting people with jobs: Improving the provision of active labour market policies in Estonia says that despite good labour market outcomes, about one quarter (26%) of the working age population could achieve better labour market outcomes through targeted support. Many of them face challenges related to their skills (68%) and family-related challenges (64%), such as care obligations. In many cases, they face several obstacles simultaneously and require an integrated approach.
Estonia’s active labour market policies (ALMPs) are responsive to labour market needs. However, ALMPs reach only 39% of people who are weakly attached to the labour market, and only 33% of people who are out of employment for more than one year.
“Reinforcing outreach to vulnerable groups far from the labour market is crucial to ensure that more people in Estonia get the support they need,” said Stefano Scarpetta, OECD Director for Employment, Labour and Social Affairs.
Improved cooperation between the Public Employment Service and other relevant institutions providing social, health and education services would help reduce gaps in support to vulnerable groups. Notably, municipalities should be the “first respondents”, supporting vulnerable groups with social welfare services, and cooperating with other institutions when needed.
Further improvements in the provision of ALMPs could be supported by a leaner regulatory framework. The current legal regulations support flexible and effective policy responses but are complex, which leads to administrative inefficiencies. A leaner regulatory framework would enable Estonia to support flexibility in policy design while maintaining the capacity to respond to labour market changes.
UNIDO works to scale up the ICT start-up ecosystem in Iran
Together with its national counterparts from the Information Technology Organization of Iran’s Ministry of Information and Communication Technologies and in partnership with the Erasmus Centre for Entrepreneurship, the United Nations Industrial Development Organization (UNIDO) is taking the next step to implement the project, “Promoting and upscaling innovative SMEs in the Islamic Republic of Iran”.
The project aims to nurture the entrepreneurial ecosystem for ICT start-ups and scale-ups through international exposure and fostering technology and know-how exchange. In this context, a comprehensive dialogue between governmental institutions and leaders in the private sector has been launched, thereby providing a mechanism for Iranian startups to connect with institutional actors and successfully start scaling up.
An ICT ecosystem mapping exercise has revealed that Iran already possesses extensive scientific, technological, financial and highly qualified human capital to boost its SME sector. However, it is currently not living up to its potential and there is a need to provide a mechanism for establishing linkages with key stakeholders, including access to finance and relevant advisory support. This way the project builds competitiveness and supports the development of innovative enterprises.
Amir Nazemi, Deputy Minister at Iran’s Ministry of Communication and Information Technology, said, “Aiming to diversify its economy and attract foreign investment, Iran has made a considerable effort to develop a dynamic national innovation system and is moving steadily towards a knowledge- and innovation-based economy. As a result, our human capital is now comprises highly educated and motivated workforce, including scientists, entrepreneurs and business people. Knowledge-based entrepreneurship is a key tool in Iran for employment generation, providing new opportunities for labour market integration of young professionals and serving as a powerful impetus for knowledge-based development of the country’s economy as a whole.”
Based on the findings regarding the existing constraints and opportunities of the ICT sector, the UNIDO project team has proposed a roadmap that envisages short-, medium- and long-term interventions in both public and private sectors, addressing several problem areas, such as knowledge generation and transfer; access to finance; nurturing of entrepreneurial talent and skills, as well as stimulating interaction and collaboration within the ICT ecosystem.
“The level of engagement from prominent public and private sector representatives related to the ICT sector has demonstrated the importance such initiatives have in making the ecosystem for ICT startups more vibrant and sustainable,” said Maryam Javan Shahraki, UNIDO representative in Iran.
She added, “UNIDO looks forward to further extending our support to the government of Iran in its efforts to promote internationalization of ICT-related entrepreneurs through the virtual entrepreneurship hub that will become a major platform for knowledge exchange and support services for ICT startups, as well as facilitating partnerships with domestic and foreign partners and inter-institutional networking.”
As part of the public-private initiative, in cooperation with its national and international partners, UNIDO conducted a two-day workshop for major ICT sector stakeholders, including government entities, entrepreneurs and other key players, to present key findings of the initial phase of the project and the forthcoming action plan, while also providing an opportunity for a thorough exchange on how to reduce the existing development gaps between science and industry thereby raising Iran’s profile as a knowledge-driven economy.
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