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Armenia: Human Capital Investments are the Key to Resilient Growth in the Era of COVID-19

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Photo Credit: World Bank Office Yerevan

Following the launch of the Human Capital Project in 2018, the government of Armenia and the World Bank undertook a systematic diagnosis of the constraints to human capital development. We report our findings in Survive, Learn, Thrive: Strategic Human Capital Investments Toward a More Prosperous and Inclusive Armenia, which identifies catalytic investments that can help Armenia’s children and youth compete in the global marketplace of tomorrow.

Fadia M. Saadah, World Bank Human Development Regional Director for Europe and Central Asia, reflects on the opportunity to build back better in the era of COVID-19 through human capital formation and activation in Armenia.

Q. What do you see as the main challenges facing human capital formation and activation in Armenia?

In many ways, Armenia has made significant improvementsin ensuring health and learning through access to services. Enrollment in primary and middle school is above 90 percent, 100 percent of childbirths are attended by a skilled health care provider, and improvements in targeting of social transfers have helped reduce poverty and increased access to education and health care in low-income households. Between 1990 and 2017, life expectancy increased from 73.3 years to 78.7 years for women and from 66.7 years to 72.4 years for men.

There is still room for improvement, however. Armenia’s Human Capital Index is 0.58, meaning that a child born today in Armenia would be 58 percent as productive as she could have been as an adult if she had enjoyed full health and had benefited from a complete education. Learning outcomes also vary widely by gender and income, high out-of-pocket payments reduce access to health care services, and labor market programs that are necessary to activate human capital are few and small-scale.

The gains of the past two decades are at risk because of the COVID-19 pandemic, which is projected to lead to a contraction of real gross domestic product of 6.3 percent in 2020. Poverty rates are projected to rise and competing needs for public spending will reduce fiscal space for health and education.

Q. What strategic investments do you recommend in the short and medium term for Armenia to confront the challenge of recovering from the COVID-19 pandemic while investing in human capital development?

The report highlights the importance of human capital investments for economic growth in Armenia. Given the COVID-19 pandemic, the objective of reforming health, education, social protection, and jobs systems is linked to the urgent task of increasing resilience to future shocks.

In the health sector, doing so will involve establishing comprehensive surveillance systems, investing in quality primary health care, and reforming health financing to ensure that people have access to services through a financing scheme that provides incentives to reduce out-of-pocket payments and improve health. COVID also revealed the important role for technology in the social sectors. Telemedicine and other digital tools, for example, offer opportunities to close gaps in physical access to care during and after the pandemic.

The COVID pandemic created challenge for and risks to learning outcomes, which will have long-term impact on human capital. There is an urgent need to recover the losses in learning. Health protocols that prevent the spread of infections will need to be implemented so that schools can reopen safely.

At the same time, Armenia will need to support teachers with training and other tools to provide high-quality distance learning. Counselling, academic remediation, and financial incentives can help keep children and young people enrolled in schools and improve learning outcomes.

To ensure that no families are left behind, Armenia can build on the successes of the social protection system through the integrated social case manager program, which links poor and vulnerable households with social services. Jobs are another vehicle for activating human capital. Continued efforts to equip the workforce with skills that match evolving labor demand and job-matching interventions are important. A range of mechanisms, including web-based jobs portals, can link job seekers to employers in high-productivity sectors.

The report follows the narrative of a hypothetical family, the Harutyunyan’s, whose health, learning, and employment outcomes significantly improve with the implementation of catalytic human capital investments. It shows that if Armenia ensured complete education and healthcare, long-run per capita gross domestic product could be 1.75 times higher than it is today. Armenia is an early adopter of the Human Capital Project, an indication of the strong political commitment to rise to the challenge.

Q. The World Bank has partnered with Armenia on landmark reforms since independence. How do you see the engagement evolving over the next few years?

The report provides a starting point for developing, planning, and financing an intersectoral agenda to harness human capital. The World Bank Group remains committed to providing technical and financial support for operationalizing and implementing this ambitious strategy. We highlight important areas of engagement in education, health, social protection, and jobs below.

Education: The ongoing Education Improvement Project (EIP) is supporting the government’s efforts to create a network of stakeholders for accelerating knowledge creation and innovation; teach students job-relevant skills; and remove barriers to labor market participation, through increased access to early childhood education and care in rural areas to support working mothers.

A project funded by the European Union (EU4Innovation Project) that is being implemented with World Bank support contributes to the government’s efforts to develop and pilot modern teaching approaches, with the potential to be scaled up where successful. The project will also help identify cost-efficient interventions to address bottlenecks that prevent students from enrolling and performing well in STEM (science, technology, engineering, and math) subjects.

Health: World Bank Group engagement in health dates to 1997, with the Health Financing and Primary Health Care Development Project. The ongoing Disease Prevention and Control Project (DPCP) supports the government’s efforts to strengthen the prevention, early detection, and management of selected noncommunicable diseases at the primary health care level and increase the efficiency and quality of selected hospitals.

The DPCP also facilitates the emergency procurement of equipment and supplies for case management, as part of the COVID-19 response. Officials at the highest levels of government in Armenia recognize the urgent need for investments in health services to improve quality and ensure that every citizen has access to essential health care.

Toward that end, the World Bank Group has worked closely with counterparts to engage on policy issues and provide technical support in areas such as reforms to improve purchasing decisions and public financial management, strengthen primary healthcare, ensure integration between primary and specialist care, and inform efforts to expand fiscal space for health. This support can inform the next generation of reforms in Armenia, a country that is considered an innovator in health reforms among the former Soviet republics.

Social Protection and Labor: The ongoing Social Protection and Administration Project (SPAP II) supports the government’s efforts to create integrated service centers; develop monitoring and evaluation systems to administer social protection programs; and establish a unified information system to facilitate program management, monitoring, and evidence-based policy and decision making.

Through the Japan Social Development Fund, the World Bank Group is working with the government to upgrade Armenia’s social case management methodology and operational procedures. It is also providing small business grants to poor and vulnerable individuals to facilitate their graduation from public support and self-sufficiency.

Ongoing technical assistance and policy dialogue will continue to support better targeting of social assistance; the digitalization of social protection payment systems; and policies to support the integration into the labor market of returning migrants, women, and other vulnerable groups. 

World Bank

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Eastern Europe

Latvia developed new tasks for NATO soldiers

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Member of the Latvian Saemas’ national association “Everything for Latvia!” and Freedom”/LNNK Jānis Dombrava stated the need to attract NATO troops to resolve the migration crisis. This is reported by la.lv.  In his opinion, illegal migration from the Middle East to Europe may acquire the feature of an invasion. He believes that under the guise of refugees, foreign military and intelligence officers can enter the country. To his mind, in this case, the involvement of the alliance forces is more reasonable and effective than the actions of the European border agencies. Dombrava also noted that in the face of an increase in the flow of refugees, the government may even neglect the observance of human rights.

The Canadian-led battlegroup in Latvia at Camp Ādaži consists of approximately 1512 soldiers, as well as military equipment, including tanks and armoured fighting vehicles.

Though the main task of the battlegroup in Latvia is country’s defence in case of military aggression, Latvian officials unilaterally invented new tasks for NATO soldiers So, it is absolutely clear, that Latvian politicians are ready to allow NATO troops to resolve any problem even without legal basis. Such deification and complete trust could lead to the full substitution of NATO’s real tasks in Latvia.

It should be noted that NATO troops are very far from being ideal soldiers. Their inappropriate behaviour is very often in a centre of scandals. The recent incidents prove the existing problems within NATO contingents in the Baltic States.

They are not always ready to fulfill their tasks during military exercises and training. And in this situation Latvian politicians call to use them as border guards! It is nonsense! It seems as if it is time to narrow their tasks rather than to widen them. They are just guests for some time in the territory of the Baltic States. It could happen that they would decide who will enter Latvia and who will be forbidden to cross the border!

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Eastern Europe

Changes are Possible: Which Reforms does Ukraine Need Now?

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Photo: Robert Anasch/Unsplash

The past 16 months have tested our resilience to sudden, unexpected, and prolonged shocks. As for an individual, resilience for a country or economy is reflected in how well it has prepared for an uncertain future.

A look around the globe reveals how resilient countries have been to the COVID-19 pandemic. Some have done well, others less so. The costs of having done less well are almost always borne by the poor. It is for this reason the World Bank and the international community more broadly urge—and provide support to—countries to undertake economic and structural reforms, not just for today’s challenges but tomorrow’s.

One country where the dialogue on reform has been longstanding and intense is Ukraine. This is particularly true since the economic crisis of 2014-2015 in the wake of the Maidan Revolution, when the economy collapsed, and poverty skyrocketed. Many feared the COVID pandemic would have similar effects on the country.

The good news is that thanks to a sustained, even if often difficult, movement on reforms, Ukraine is better positioned to emerge from the pandemic than many expected. Our initial projection in the World Bank, for example, was that the economy would contract by nearly 8 percent in 2020; the actual decline was half that. Gross international reserves at end-2020 were US$10 billion higher than projected. Most important, there are far fewer poor than anticipated.

Let’s consider three reform areas which have contributed to these outcomes.

First, no area of the economy contributed more to the economic crisis of 2014-2015 than the banking sector. Powerful interests captured the largest banks, distorted the flow of capital, and strangled economic activity. Fortunately, Ukraine developed a framework to resolve and recapitalize banks and strengthen supervision. Privatbank was nationalized and is now earning profits. It is now being prepared for privatization.

Second, COVID halted and threatened to reverse a five-year trend in poverty reduction. Thanks to reforms of the social safety net, Ukraine is avoiding this reversal. A few years back, the government was spending some 4.7 percent of GDP on social programs with limited poverty impact. Nearly half these resources went to an energy subsidy that expanded to cover one-in-two of the country’s households.

Since 2018, the Government has been restructuring the system by reducing broad subsidies and targeting resources to the poor. This is working. Transfers going to the poorest one-fifth of the population are rising significantly—from just 37 percent in 2019 to 50 percent this year and are projected to reach 55 percent in 2023.

Third, the health system itself. Ukrainians live a decade less than their EU neighbors. Basic epidemiological vulnerabilities are exacerbated by a health delivery system centered around outdated hospitals and an excessive reliance on out-of-pocket spending. In 2017, Ukraine passed a landmark health financing law defining a package of primary care for all Ukrainians, free-of-charge. The law is transforming Ukraine’s constitutional commitment to free health care from an aspiration into specific critical services that are actually being delivered.

The performance of these sectors, which were on the “front line” during COVID, demonstrate the payoff of reforms. The job now is to tackle the outstanding challenges.

The first is to reduce the reach of the public sector in the economy. Ukraine has some 3,500 companies owned by the state—most of them loss-making—in sectors from machine building to hotels. Ukraine needs far fewer SOEs. Those that remain must be better managed.

Ukraine has demonstrated that progress can be made in this area. The first round of corporate governance reforms has been successfully implemented at state-owned banks. Naftogaz was unbundled in 2020. The electricity sector too is being gradually liberalized. Tariffs have increased and reforms are expected to support investment in aging electricity-producing and transmitting infrastructure. Investments in renewable energy are also surging.

But there are developments of concern, including a recent removal of the CEO of an SOE which raised concerns among Ukraine’s friends eager to see management independence of these enterprises. Management functions of SOE supervisory boards and their members need to remain free of interference.

The second challenge is to strengthen the rule of law. Over recent years, the country has established—and has committed to protect—new institutions to combat corruption. These need to be allowed to function professionally and independently. And they need to be supported by a judicial system defined by integrity and transparency. The move to re-establish an independent High Qualification Council is a welcome step in this direction.

Finally, we know change is possible because after nearly twenty years, Ukraine on July first opened its agricultural land market. Farmers are now free to sell their land which will help unleash the country’s greatest potential source of economic growth and employment.

Ukraine has demonstrated its ability to undertake tough reforms and, thanks to the COVID-19 pandemic, has seen the real-life benefits of these reforms. The World Bank looks forward to providing continued assistance as the country takes on new challenges on the way to closer European integration.

This article was first published in European Pravda via World Bank

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Eastern Europe

Liberal Development at Stake as LGBT+ Flags Burn in Georgia

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Photo: Protesters hold a banner depicting U.S. Ambassador to Georgia Kelly Degnan during a rally against Pride Week in Tbilisi, Georgia July 1, 2021. Credit: REUTERS/Irakli Gedenidze

Protests against Georgia’s LGBT+ Pride parade turned ugly in Tbilisi on July 5 when members of the community were hunted down and attacked, around 50 journalists beaten up and the offices of various organizations vandalized. Tensions continued the following day, despite a heavy police presence.

On the face of it, the Georgian state condemned the violence. President Salome Zourabichvili was among the first with a clear statement supporting freedom of expression, members of parliament did likewise and the Ministry of Internal Affairs condemned any form of violence.

But behind the scenes, another less tolerant message had been spread before the attacks. Anxiety about this year’s events had been rising as a result of statements by the government and clergy. Prime Minister Irakli Garibashvili suggested the march “poses a threat of civil strife.” The Georgian Orthodox Church meanwhile condemned the event, saying it, “contains signs of provocation, conflicts with socially recognized moral norms and aims to legalize grave sin.”

For many, these statements signified tacit approval for the abuse of peaceful demonstrators. Meanwhile, the near-complete absence of security at the outset of the five-day event was all too obvious in Tbilisi’s streets and caused a public outcry. Many alleged the government was less focused on public safety than on upcoming elections where will need support from socially conservative voters and the powerful clergy, in a country where more than 80% of the population is tied to the Georgian Orthodox Church.

The violence brought a joint statement of condemnation from Western embassies. “Violence is simply unacceptable and cannot be excused,” it said. The Pride event was not the first and had previously been used by anti-gay groups. Violence was widespread in 2013 — and the reality of attacks against sexual minorities in Georgia remains ever-present.

In a socially conservative country such as Georgia, antagonism to all things liberal can run deep. Resistance to non-traditional sexual and religious mores divides society. This in turn causes political tension and polarization and can drown out discussion of other problems the country is marred in. It very obviously damages the country’s reputation abroad, where the treatment of minorities is considered a key marker of democratic progress and readiness for further involvement in European institutions.

That is why this violence should also be seen from a broader perspective. It is a challenge to liberal ideas and ultimately to the liberal world order.

A country can be democratic, have a multiplicity of parties, active election campaigns, and other features characteristic of rule by popular consent. But democracies can also be ruled by illiberal methods, used for the preservation of political power, the denigration of opposing political forces, and most of all the use of religious and nationalist sentiments to raise or lower tensions.

It happens across Eurasia, and Georgia is no exception. These are hybrid democracies with nominally democratic rule. Armenia, Georgia, Kyrgyzstan, and others have increasingly more in common, despite geographic distance and cultural differences.

Hungary too has been treading this path. Its recent law banning the supposed propagation of LGBT+ materials in schools must be repealed, European Commission President Ursula von der Leyen said on July 7. “This legislation uses the protection of children . . . to discriminate against people because of their sexual orientation . . . It is a disgrace,” she said.

One of the defining features of illiberalism is agility in appropriating ideas on state governance and molding them to the illiberal agenda.

It is true that a mere 30 years since the collapse of the Soviet Union is not enough to have built a truly liberal democratic state. Generations born and raised in the Soviet period or in the troubled 1990s still dominate the political landscape. This means that a different worldview still prevails. It favors democratic development but is also violently nationalistic in opposing liberal state-building.

Georgia’s growing illiberalism has to be understood in the context of the Russian gravitational pull. Blaming all the internal problems of Russia’s neighbors has become mainstream thinking among opposition politicians, NGOs, and sometimes even government figures. Exaggeration is commonplace, but when looking at the illiberal challenge from a long-term perspective, it becomes clear where Russia has succeeded in its illiberal goals. It is determined to stop Georgia from joining NATO and the EU. Partly as a result, the process drags on and this causes friction across society. Belief in the ultimate success of the liberal agenda is meanwhile undermined and alternatives are sought. Hybrid illiberal governments are the most plausible development. The next stage could well be a total abandonment of Euro-Atlantic aspirations.

Indeed what seemed irrevocable now seems probable, if not real. Pushback against Georgia’s Euro-Atlantic choice is growing stronger. Protesters in front of the parliament in central Tbilisi violently brought tore the EU flag. Twice.

The message of anti-liberal groups has also been evolving. There has been significant growth in their messaging. The anti-pride sentiment is evolving into a wider resistance to the Western way of life and Georgia’s Western foreign policy path, perhaps because it is easily attacked and misrepresented.

To deal with this, Western support is important, but much depends on Georgian governments and the population at large. A pushback against radicalism and anti-liberalism should come in the guise of time and resources for the development of stronger and currently faltering institutions. Urgency in addressing these problems has never been higher — internal and foreign challenges converge and present a fundamental challenge to what Georgia has been pursuing since the days of Eduard Shevardnadze – the Western path to development.

Author’s note: first published at cepa

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