In Azerbaijan, Human Capital Investments are the Key to Resilient Growth in the era of COVID-19
By limiting access to health, education, social protection, and jobs, the COVID-19 pandemic threatens to reverse human capital gains in Azerbaijan. In a recently published report, Survive, Learn, Thrive: Strategic Human Capital Investments to Accelerate Azerbaijan’s Growth, the government of Azerbaijan and the World Bank identify the main challenges to building and activating human capital and put a spotlight on high-impact interventions that respond to constraints.
Fadia M. Saadah, World Bank Human Development Regional Director for Europe and Central Asia, reflects on the success and challenges of the past, and opportunities for the World Bank Group to partner with the government of Azerbaijan in ensuring resilient growth, powered by human capital investments.
Q. What do you see as the main challenges facing human capital formation and activation in Azerbaijan?
The government of Azerbaijan has achieved a great deal in terms of human capital development. Over the last five years, enrollment in higher education rose 21 percent. The introduction of mandatory health insurance supported an increase in the use of essential primary care level and improvements in efficiency. Contributory pensions and poverty-targeted social transfers raised the incomes of the bottom 40 percent substantially, facilitating household-level investments in health and education.
Despite this progress, gaps in human capital investments persist. On standardized tests, students from wealthier families score the equivalent of three years of schooling above students from poor families, an indication of wide inequalities in learning outcomes. Out-of-pocket payments remain high, despite the launch of mandatory health insurance, reducing access to services needed to control the rise of noncommunicable diseases. Only one in five households in the poorest quintile benefits from the targeted social assistance program, and labor force participation remains low, especially among women.
Azerbaijan’s Human Capital Index is 0.58, meaning that a child born today in Azerbaijan 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. The COVID-19 pandemic has reduced access to social services and is projected to lead to an economic contraction of 4.2 percent in 2020. The government has risen to the challenge of recovering the gains in health and learning outcomes and ensuring that human capital development remains central to the political agenda.
Q. Azerbaijan faces the dual challenge of recovering from the COVID-19 pandemic and strengthening health, education, learning, and employment services to facilitate growth. What strategic investments do you recommend for the human development sector in the short and medium term?
The government aims to balance the medium-to-long term objective of reforming social systems with the ongoing COVID-19 pandemic response. Hence, in the health sector, we recommend the digitalization and interoperability of health information systems to support comprehensive surveillance and facilitate continuity of care in the treatment of noncommunicable diseases. Reforming health financing to increase public health spending and protect households from out-of-pocket costs will be important to increase health care access.
As schools reopen, Azerbaijan is investing in remediating learning losses. Doing so may involve ensuring that schools follow health protocols to reduce their risks of becoming the source of group infections, providing students with financial and nonfinancial incentives not to drop out of school, and equipping schools and training teachers to better manage in-person and distance learning. We also recommend establishing a fund to support innovation in higher education.
Social assistance will be essential to ensuring that the most vulnerable households are able to access social services. Improving the coverage of the targeted social assistance program and increasing public financing for these transfers will further improve households’ resilience to consumption shocks. Including employers in the design and implementation of active labor market programs will help link people to jobs.
The potential for human capital investments to drive growth and resilience in Azerbaijan is significant. An analysis by the World Bank, The Changing Wealth of Nations 2018, reports that human capital comprises 64 percent of global wealth. If Azerbaijan ensured complete education and healthcare among children and adults, its long-run per capita gross domestic product could be 1.67 times higher than it is today.
Q. The World Bank has partnered with Azerbaijan on landmark reforms since independence. How do you see the engagement evolving over the next few years?
The next phase of the human capital policy dialogue in Azerbaijan can benefit from a focus on putting this agenda into practice through investments in 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 World Bank Group has long supported the government in the development of the education system, including reforms in general education and formulation of the country’s education sector development strategy. The government has introduced per capita financing in tertiary education and a remuneration and quality assurance system in secondary education.
The Second Education Sector Development Project, which closed in 2016, focused on improving the quality of teaching and learning in general education. Through ongoing policy dialogue, the World Bank Group will continue to support education reforms, especially to increase access to early childhood education and spur innovation in tertiary education.
Health: The World Bank Group has engaged in the health sector over the past few years through policy dialogue and provision of technical expertise to support health financing reforms. At the request of the government, it is facilitating knowledge exchanges that may inform the implementation of mandatory health insurance, drawing on the experiences of Kazakhstan, the Republic of Korea, and Costa Rica.
With funding from the Japan Policy and Human Resources Development Fund, the World Bank Group is supporting efforts to improve the governance of digital data and leverage claims data to strengthen provider payment mechanisms within the mandatory health insurance system. Over the next few years, the World Bank Group will continue to engage in policy dialogue on priority issues, including health insurance, e-health and telemedicine, and the development of an integrated claims management system.
Social Protection and Labor: In the past few years, the World Bank Group has supported efforts by the government to raise the most vulnerable people in Azerbaijan out of poverty, by investing in the implementation of the National Employment Strategy and critical social assistance and disability reforms.
A recently approved Employment Support Project aims to improve vulnerable people’s access to employment by enhancing the scope and effectiveness of the government’s Self-Employment Program, enhancing employment services and programs, and building public sector capacity.
The Internally Displaced Person Living Standards and Livelihoods Project and Additional Financing, which closed in 2019, helped improve the living conditions and increase the economic self-reliance of internally displaced persons. The World Bank Group will continue to support Azerbaijan through ongoing policy dialogue to strengthen the social protection system as a platform to improve human capital outcomes and households’ resilience to shocks.
Untouchable U.S. troops in Lithuania
This month the Pentagon has been accused of blocking the sharing of U.S. intelligence with the international criminal court (ICC).
Located in The Hague, Netherlands, and created by a treaty called the Rome Statute first brought before the United Nations, the International Criminal Court operates independently.
Most countries on Earth – 123 of them – are parties to the treaty, but there are very large and notable exceptions, including Russia and the U.S.
It is interesting, that the Biden White House and State Department have been a proponent of cooperation with the Hague-based ICC, as a means of holding Russian forces accountable for war crimes, but the Defense Department is firmly opposed on the grounds that the precedent could eventually be turned against U.S. soldiers.
U.S. opponents of the court argued that it could be used to prosecute U.S. soldiers fighting in foreign wars, despite safeguards written into the statute stating that the international court would only have jurisdiction if the courts in a suspect’s home country were unwilling or unable to prosecute.
Anyone accused of a crime in the jurisdiction of the court, which includes countries that are members of the ICC, can be tried. Though the court tries people, not countries, and focuses on those who hold the most responsibility: leaders and officials.
And the Pentagon has really something to fear.
The U.S. has sent some 20,000 additional troops to Europe as part of an effort to bolster NATO’s defenses, assist Ukraine’s war efforts and deter Russia. This includes additional deployments to Poland, the Baltic countries and to Romania, bringing current total to more than 100,000 service members across Europe.
According to David Vine, professor at the American University in Washington, DC, the U.S. had around 750 bases in at least 80 countries as of July 2021. The actual number may be even higher as not all data is published by the Pentagon.
The U.S. government attracts people to the Armed Forces by introducing a large number of various benefits and preferences to military personnel.
Since the support for military is very popular in the United States, congressmen and senators, gaining political benefits, actively vote for further expanding the aid package and legal guarantees.
According to the U.S. Department of Defense, “We recognize the service and sacrifice of our military and their families, and dedicate resources, services, policies and programs to support the more than 2 million uniformed service members and 2.6 million family members across the globe.”
Thus, the law on civil assistance for military personnel protects them from prosecution during military service and for a year after its completion, as a result of which a soldier cannot be evicted from his home or bankrupt. The law also limits the interest rate for the military – its size when buying a home, a car or using a credit card cannot exceed 6%.
The authorities also provide tax incentives to organizations that employ the wives of military personnel, and oblige them to provide them with a 30-day free vacation once a year. In addition, for family members of military personnel there is a discount in grocery stores, as well as preferential travel on public transport, on trains and on airplanes. In addition, active military personnel and veterans are entitled to lifelong medical insurance, through which they can pay for any medical care.
As for those U.S. troops who serve abroad, there are agreement on status of U.S. troops and their families. Such documents make American soldiers just untouchable. Thus, Lithuania and the U.S. signed agreement on status of US troops and their families in 2017. The agreement gives the U.S. jurisdiction over crimes committed by its military personnel. The document also gives the U.S. the right to use certain military facilities.
Though all these deployments raise separate questions about the nature of the various missions. American troops are often accused of serious human rights abuses.
These cases very often are hidden from the society and known only among those who are close to the Armed Forces. Nobody in the U.S. cares of Baltic States’ local population which expresses dissatisfaction or even scared of foreign soldiers in their territories. The U.S. authorities made their best to protect its military personnel. The Lithuanian authorities in their turn do nothing to protect population from foreign soldiers’ criminal behaviour.
The Ukraine War and Great Power Competition
The term Great Power competition (GPC) can be used as a framework to analyze interstate relations, such as those between the United States and the Russian Federation. GPC eras existed prior to World War II, during the Cold War, and in the post-Soviet period. They feature multiple powerful states competing for relative status, position, power, and influence. The primary rivalry during the Cold War was between the U.S. and the Soviet Union. After the collapse of the USSR, there was nearly a 20-year period where the United States was arguably the only super power. Since the 2010’s, however, both the Russian Federation and China have emerged as great powers pursuing interests conflicting with those of the United States. At least since 2018, the United States National Defense Strategy has identified China and Russia as the primary threats to U.S. prosperity.
Great Power Competition is said to exist when powerful nations compete for the authority to shape global security architectures, drawing other countries into their orbit. The competitors also vie for the ability to set the norms and practices of economics, trade, and investment. Additionally, GPC involves countries competing to control the flow of information, as well as the development and regulation of new technology. Competition does not have to mean conflict, however. The U.S. competes with its partners in the E.U., particularly with Germany, as well as with Japan, but this is healthy competition which in the end, improves the competitive environment of the global economy. True global power competition is more of a zero-sum game, whereby the winner will be more powerful and the looser less powerful. GPC often results in war between two great powers, but war, including proxy wars and limited wars, even between actors other than the most powerful nations, can be the symptom of a great power competition.
The Ukraine war, has the markings of great power competition between the U.S.-led western bloc and the Russian-led bloc. The U.S. side includes NATO, the E.U. the rest of Europe, and close U.S. allies in Asia, such as Japan. On the other side are Russia and its allies, Belarus, Iran, North Korea, Syria, Serbia, and China.
Destabilization from Europe to Asia
Russia’s invasion of Ukraine, for the second time in less than ten years, is clearly an act of power projection and an attempt to change the world order. The Russian annexation of the Crimea, in 2014, was an attempt at destabilizing Ukraine while creating problems and challenges for the broader European community and the United States. The fact that Russia did not suffer any significant repercussions for its actions in 2014, emboldened Putin to invade Ukraine in 2022. Both the 2014 and 2022 incursions in Ukraine can be seen as extensions of the Cold War and both were attempts by Russia to disrupt the international order.
The Ukraine War is taking place during a period of intense competition between the United States and China. Beijing has refused to condemn the invasion at the UN Security Council or the G-20 meetings. China does not participate in western sanctions. In fact, China is helping Russia circumvent sanctions. As a result, this conflict involves the world’s three largest military powers, threatening the global order from Europe all the way to Asia.
The intensified strategic rivalry between the United States and China carries severe implications for security in the South China Sea and the Asia-Pacific region. Russia and China are collaborating to support the military junta which seized control of Myanmar. China provides money, while Russia provides weapons and oil. The western-led democracies have condemned the coup, but the Russia-China bloc are supporting it, drawing Myanmar into the axis opposing the U.S. and the West. Similarly, both Russia and China are supporting the Taliban-led government in Afghanistan.
Propaganda and Information War
Wars are not only fought in military terms but also across a wide array of domains, including information. Both the Ukraine and Russia have created a narrative. Ukraine has broadcast the message that they are defending their homeland, a sovereign nation, suffering a foreign invasion. Russia claims to be annexing a historically Russian piece of land. Putin has stated that he is reuniting Ukrainians and Russians which have always been one people. He also maintains that his fight is necessary for the preservation of Russia, as he accused the west of wanting to erase Russia from the map. The west has portrayed the war as a battle against authoritarianism and for the preservation of democracy. The White House issued a statement in February, reconfirming the U.S. support for Ukraine, citing territorial integrity, democracy, dignity, human rights, and “the UN Charter that unites the whole world.”
In its attempt to control the narrative, the Kremlin has shut down newspapers and other media, killed or intimidated journalists, and jailed or otherwise silenced critics and protesters. However, these information warfare efforts have failed, as the U.S. and western allies have managed to present the world with a different picture, painting Russia in a worse light.
Reporters Without Borders (RSF) working together with their Ukrainian partner, the Institute of Mass Information (IMI), have determined that since the war began, 12,000 Ukrainian and foreign journalists have been accredited to cover the war, exposing frequent Russian bombardment of and deliberate targeting of civilians and journalists. So far, eight journalists have been killed. Twenty-six have been specifically targeted, and 19 have been injured. Russian forces have targeted 16 TV towers, and committed 42 cyber-crimes against media, while shutting down 217 media.
Despite Russian efforts to the contrary, Reporters Without Borders has managed to continue supporting journalists. They have supplied 750 journalists with protective equipment, 91 media with power sources, 28 media with funding, 288 journalists with training, and 129 with financial assistance.
In addition to the official press, social media has also played a tremendous role in this war. Ukrainians have uploaded images of their suffering and published photos and videos of Russian failures. These social media efforts have attracted western support for Kyiv, while encouraging Ukrainians to keep fighting. In the blurred world between cyber and real life, U.S. companies, such as Microsoft, have been able to nullify some of Russia’s advantages in space and telecommunications. Russian entities were kicked off many internet platforms and social media, further detracting from Moscow’s ability to control the story. Furthermore, the largest, most widely read media are owned by the Americans and the Brits. And so, they were able to tailor the message coming out of the war.
Sanctions as Weapons
Although there are two combatants in the Ukraine war, many more countries are involved politically, diplomatically, and economically. Some are providing weapons and training. Others help with intelligence, allowing Ukraine to use their satellite guidance systems. Additionally, the U.S. and its allies are waging economic war against Russia by bringing sanctions.
Not only governments, but also private businesses have joined in the fight by organizing their own boycotts and bans on commerce with Russia. McDonalds and other corporations have pulled out of Russia. Visa, Master Card, and Paypal have suspended service in Russia, making it difficult for Russian entities to conduct international business or to send or receive payments.
The official sanctions, naming high ranking government officials as well as specific companies, are meant to disrupt Moscow’s ability to finance the war. To this end, the foreign currency reserves and other assets of the Russian government and oligarchs have been frozen in foreign banks. Specific sectors of the economy have been completely cutoff from trade with allied nations. The most damaging blow to the Russian economy has been a price-cap imposed on the export of Russian oil. Allied nations have prohibited their ships and insurers from engaging in trade of Russian oil which exceeds the cap price of $60 per barrel. Together, these sanctions limit Moscow’s access to hard currency in a world where the ruble is effectively useless in international trade.
On the opposing side, Moscow’s allies, as well as officially unaligned countries, Turkey, India, and Vietnam, continue to trade with Russia. The non-convertibility of the ruble and the inability to use major international payment systems, however, has complicated this trade. Furthermore, in order to convince countries to violate sanctions, Russia has to offer oil at below market prices. Shipping to India adds about $11 per barrel to the cost, nullifying Russia’s additional profits when the world price of oil dips below $70 per barrel.
Rewriting the International Security Architecture
The Ukraine War has caused the realignment of the world’s nations into three categories: the U.S. camp, the Russian camp, and those who refuse to take sides, remaining non-aligned. NATO and the U.S. sided against Russia immediately. This was to be expected, given the U.S. leadership of NATO and that NATO was formed to prevent the expansion of the USSR. However, European nations who were not NATO members also joined the western bloc. The UN General Assembly overwhelmingly voted in favor of a resolution condemning the invasion. Among the Asian countries that voted with the western bloc were Singapore, South Korea, and Japan.
Thirty-five countries, however, abstained from a vote of condemnation, three of which were British Commonwealth states South Africa, Pakistan, and India. All the BRICS countries abstained from the vote, including Brazil, Russia, India, China, and South Africa.
Western countries, along with western aligned allies in Asia and elsewhere, feel that the west is maintaining a global, rules-based order. Finland and Sweden have asked to join NATO, while the Balkan States have shifted even more towards the western orbit. Many Asian and African countries, however, found it better to remain unaligned, so they could continue to trade with Russia. These nations are not, however, rallying with overt support for the Russian side.
With its chip bans and other restrictions on the sale of technology to Russia, the U.S. is rewriting the rules on Russia’s use of technology and most likely impacting Russia’s future technological development. Drones have played a significant role in the war so far and now it seems that Russia has deployed hypersonic missiles. The chips and other technological inputs needed to manufacture and maintain these technologies are all covered by the U.S. sanctions. At the same time satellites are proving critical as they are being used for imaging and directing fire. Moscow has threatened to attack U.S. satellites aiding Ukraine. Meanwhile, the EU has officially ended its cooperation with the Russian Space Agency. These and other sanctions are expected to cripple the long-term development of Russia’s space program.
Great Power Competition
What started out as a simple conflict between two states over the control of territory, became a great power competition between the U.S.-led west and the Russian Federation. Without firing a shot at one another, the two actors are battling for hearts and minds, to control the narrative, to win-over new supporters, and to establish which is the greater power. Even more, both sides believe that losing would mean a permanent loss of power.
Applying the definition of great power competition: The Ukraine war involves two large nations, the U.S. and Russia, competing for the authority to shape the global security architecture. The U.S. has built a coalition, including NATO, the EU, and far away allies, rewriting the existing global security architecture. In great power competition, two powerful nations compete to set the norms and practices of trade and investment. By organizing a coalition and bringing sanctions, the U.S. has is now dictating the norms and practices of trade with Russia and controlling Russia’s trade with most of the world.
Another aspect of GFC is competition for the development and regulation of new technology. The Russian Spacey Agency has been banned from cooperation with Europe, and Moscow’s access to chips has bas been restricted. Effectively, the U.S. is controlling the development and regulation of Russia’s technology. Therefore, it can be concluded that the Ukraine War is a great power competition which will most likely set the tone for all future conflicts.
Lithuania is on a slippery slope hosting NATO troops
As Lithuania not only calls on NATO partners to increase military presence on its territory, the authorities also allocate large sum of money to develop national military infrastructure.
Thus, the Ministry of National Defence is implementing an infrastructure development project in preparation for hosting the NATO Very High Readiness Joint Task Force. The contract was signed by the NATO Support and Procurement Agency as the project coordinator and Merko Statyba UAB.
As a result, 10 buildings will be constructed to house barracks, mess-hall, vehicle repair facility, helipads, multipurpose facility, etc. The work is planned to be completed by 2026. The assessed worth of the contract is over EUR 110 million.
According to Minister of National Defence Arvydas Anušauskas, Lithuania is developing infrastructure to strengthen deterrence and defence.
But this large-scale project does not look like a defensive one. Completion of the project will make the Pabradė Training Area capable of hosting up to 3 thousand military personnel and one of the most developed military ranges in the Baltics! It will ensure good conditions for training activities and resting, as well as logistical and technical support.
It is just one of the several Lithuanian Armed Forces modernization projects the Ministry of National Defence is implementing with coordination by the NATO Support and Procurement Agency.
The question arises if Lithuania considers the Ukrainian crisis lasts for 3 more years or authorities try to hide the real purpose of the modernization efforts.
In fact such plans will not help Lithuania to defend itself in near future because the project to be finished only by 2026.
The more so, at the end of February Lithuanian Foreign Minister Gabrielius Landsbergis confirmed that there is no direct military threat at Lithuania’s border.
It could be concluded that Lithuania or its NATO partners considers Lithuania’s military infrastructure as a starting point for any offensive operations, which could jeopardize complex relationships with neigbours.
It is well known that most interstate wars are fought or begin between neighbors. These steps will make it harder for Lithuania to improve relations and even could re-start an arms race and threaten seriously the stability of the region. It is quite evident that ordinary residents do not need such consequences of political decisions. On the other hand, authorities insist on further militarization of Lithuania and thus complicate the prospects for normalizing relations with neighbors bring the war closer.
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