The Rise of the South:Regional Compendium to the Global Human Development Report 2013

The Rise of the South: Regional Compendium to the Global Human Development Report 2013

UNDP, Europe and the CISBratislava Regional CentreGrosslingova 35811 09 BratislavaSlovak Republic

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Table of Contents | 3

TABLE OF CONTENTS

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

The “Rise of the South” and post-communist Europe and Central Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The state of human development – Europe and Central Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Europe and Central Asia: Where North meets South . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Europe and Central Asia: a new generation of south-south cooperation initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27


International development cooperation,and global governance, are undergoing tec-tonic shifts. Many of these result from therebalancing of the global economy: thecombined output of Brazil, Russia, India,and China is now projected to equal thecombined GDP of the United States, Ger-many, UK, France, Italy, and Canada by 2020.However, UNDP’s 2013 Human Develop-ment Report reminds us that economicgrowth does not automatically translateinto human progress. Pro-poor policies andsignificant investments in people’s capabil-ities–through support for education, em-ployment, nutrition and health–can expandaccess to decent work and provide for sus-tained progress.

The Rise of the South: Human Progress ina Diverse World identifies four specific focusareas for sustaining development momen-tum: enhancing equity (including the gen-der dimension); enabling greater voice andparticipation by citizens and youth; manag-ing demographic change; and ensuring en-vironmental sustainability. It argues that, asglobal development challenges becomemore complex and trans-boundary in na-ture, coordinated responses to these chal-lenges become ever more essential. The Re-port therefore calls for changes in globalgovernance systems, in order to bring abouta fairer, more equal world. It likewise high-lights the role of global civil society in pro-tecting the welfare of those most directlyaffected by global challenges–who are oftenthe poorest and most vulnerable people inour world.

Despite the on-going climate, financial,energy and food crises, many developing

countries–including some in Europe andCentral Asia–continue to benefit from rapideconomic growth. The innovative social andeconomic policies that have been devel-oped in the “South”, the rapid growth inSouth-South trade, investment, migration,and remittance flows, and the growing im-portance of development cooperationamong “Southern” partners, therefore needto be better understood, and where appro-priate scaled up, and replicated. The Rise ofthe South therefore calls for new institutionsto facilitate regional integration and South-South cooperation.

At first blush, development issues inKazakhstan, other former Soviet republics,and in the Balkan transition economies maynot seem strongly connected with these is-sues. The “rise of the south” evokes a north-south OECD/G-77 paradigm that most ofthese countries have not fully bought into.It is telling that, at present, only Tajikistan,Turkmenistan, and Bosnia and Herzegov-ina are members of the G77. Prevailing de-velopment narratives by and large continueto be Euro- or Russo-centric (both figura-tively and literally). In contrast to other de-veloping countries, most of these govern-ments have not sought to use climatechange negotiations and other global forato “get a better deal from the north”. Em-phasis has instead been on resetting theirrelationships with one another–most re-cently via the Eurasian Economic Commu-nity’s customs union (of Kazakhstan, Russia,and Belarus); vis-à-vis the European Unionand other representatives of the “traditionalnorth” (e.g., the United States)–as well aswith an ascending China.

4 | THE RISE OF THE SOUTH: REGIONAL COMPENDIUM TO THE GLOBAL HUMAN DEVELOPMENT REPORT 2013

INTRODUCTION

The Rise of the South: Regional Compendium


However, arguments that the “globalsouth” paradigm is irrelevant for transitionand developing Europe and Central Asia arein important respects wide of the mark.There are a number of ways in which thisparadigm is already quite relevant–and itsrelevance could grow with time. This is ap-parent along four key dimensions:

• The regional impact of on-goingglobal political and economic rebal-ancings;

• Emerging new regional centres of in-fluence, like Kazakhstan and Turkey;

• Common challenges for many Cen-

tral Asian and European developingand transition economies, as well asfor developing economies from otherregions–such as the “middle-incomecountry trap”; and

• Development successes from the“South” that could be replicated in thetransition and developing economiesof Central Asia and Europe.

In the subsequent pages, the reader willfind the further elaboration of these (andother) links between the “South” and thetransition and developing economies ofCentral Asia and Europe.

Introduction | 5


Ben SlayTeam leader, poverty reduction practiceUNDP Regional Bureau for Europe and CIS

Ships passing in the night?

At first blush, the “rise of the south” and de-velopment issues in the post-communist for-mer Soviet republics and the Balkans seemlargely unconnected. The “rise of the south”evokes a north-south OECD/G-77 paradigmthat most governments of these regionshave not fully (or even largely) bought into.Development narratives are instead Euro- orRusso-centric, both figuratively and literally.In contrast to other developing countries,most governments in these regions have notsought to use climate change negotiationsand other global fora to “get a better dealfrom the north”. Emphasis has instead beenon resetting their relationships with the Eu-ropean Union (in either an accession orneighbourhood context), or on striking theright balance between Russia, representa-tives of the “traditional north” (e.g., the UnitedStates, European Union)–which were largelyabsent in these regions before 1990–and insome cases an ascending China.

Countries with European world viewsin these regions have often sought to(re)join the north–as is apparent in the ex-pansion of the European Union, NATO, andthe OECD during the past two decades. Butgovernments from these regions for whichthis option is unavailable or unappealing(e.g., Russia, Belarus, Central Asia) have notadopted traditional “southern” views. It istelling that, at present, only Tajikistan, Turk-menistan, and Bosnia and Herzegovina aremembers of the G77.

However, arguments that the “globalsouth” paradigm is irrelevant for transitionand developing Europe and Central Asiamay in important respects be wide of themark. There are a number of ways in whichthis paradigm is already quite relevant–andthis relevance could grow with time. This isapparent along at least three dimensions:

• Dynamics along the “north-south-east” triangle;

• Common challenges for Europeanand Central Asian developing andtransition economies, and for devel-oping economies from other regions,such as the “middle-income trap”;and

• Ways in which post-communist coun-tries could replicate developmentsuccesses from the south.

“North”, “south”, and “east”

“Rise of the south” narratives often take1990 as a benchmark. However, the start ofthe post-communist transition is often alsoascribed to 1990–the year of German(re)unification, in which radical markettransformation programmes were intro-duced in Poland and (then) Czechoslova-kia. It was also a year in which the centrifu-gal forces of nationalism and collapse thatled to the subsequent dissolution of the So-viet Union and the Warsaw Pact, as well asthe socialist federation of Yugoslavia, un-derwent noticeable intensification.

This collapse of what used to be (pa-tronizingly) referred to as the “secondworld” in turn underpinned “dominantnorth” narratives, which argued that the“end of history” had proven the superiority


The “Rise of the South” and post-communist Europe and Central Asia


and inevitability of “first world” North At-lantic market democracies. By implication,the “third world” faced few options: “thirdroads” had proven illusory; the developingworld had no choice but to “get with theprogramme”. Resisting the inevitable meantmissing out on the market access, invest-ment flows, and technology transferneeded to make development happen. Theperceived dominance of the “northern firstworld” vis-à-vis the “southern third world”was thus reinforced by the collapse of the“eastern second world”.

What a difference two decades makes.The US and European economies are todaystruggling to recover from the effects of theglobal financial crisis–the Eurozone dimen-sions of which seem likely to keep much ofEurope in the throes of economic stagna-tion (or worse) for years to come. Ratherthan being a beacon of developmentprogress and inevitability, the “north” hasbecome a source of global economic insta-bility. Fortunately, growing numbers of de-veloping economies are benefitting fromcontinued rapid growth in “emerging mar-kets” like Brazil, China, India, and Russia–particularly in terms of new sources of ex-port demand and capital inflows. Thegrowth momentum generated by emerg-ing economies like China and India helpedlimit the impact of the global financial crisisin 2009–particularly for developing coun-tries in Asia and Africa–even as the “north”fell into recession (see Chart 1).

These trends, should they continue,could have profound effects on the erst-while “second world”. Geography, econom-ics, finance, politics, and culture seem tohave driven the countries that joined the EUin 2004 and 2007 irrevocably into “Europe”.Short of a total collapse of the Europeanproject, it is difficult to imagine these coun-tries’ geopolitical reorientation or renunci-

ation of the “north” that they have managedto re-enter. The same is probably true ofthe Western Balkan governments that arecurrently negotiating EU membership.1 Onthe other hand, the soft power of EU marketaccess and “European values” had provedwanting in Central Asia, Russia, and Belaruseven before the advent of the global andthen European financial crises. The “north’s”influence in Central Asia has likewise beenweakened by the expansion of China’s po-litical and commercial weight–after decadesof arguing with Washington and Brussels,landlocked, low-income Tajikistan and Kyr-gyzstan are increasingly turning to China,Russia, Iran, and the Asian DevelopmentBank for the technology and financingneeded for large transport and hydropowerprojects.

While these erstwhile “second world”countries may not be on course to join the

The “Rise of the South” and post-communist Europe and Central Asia | 7

Source: IMF World Economic Outlook database.* Former Soviet republics.** Southeast European economies, new EU member states.

CHART 1Regional GDP growth rates before and after the global financial crisis

9.0%

2.4% 2.9%

5.5%

2.7%

5.7% 6.2%

1.8%2.8%

7.2%

11.4%

7.2%

-6.4% -6.3%

-4.1% -3.6% -3.4%-1.7%

Average regionalGDP growth rates

2007 2009

Euroz

one

Japan

FSU*

SEE/M

MS*

USA

Latin

Ameri

ca

Midd

le Ea

st

Africa

Deve

loping

Asia

1 For more on this, see Dimitar Bechev, “The Periphery of the Periphery: The Western Balkans and the Euro Crisis”, European Council on For-eign Relations policy brief, August 2012.


G77, they are increasingly benefitting fromcooperation with erstwhile “third world”countries. If this cooperation continues todeepen, how long will it be before “north-ern” and post-Soviet development narra-tives and strategies are replaced by “south-ern” institutions and characteristics?

The attraction to the “north” (chiefly Eu-rope and the EU, but also NATO) is stronger inmost of the rest of the former Soviet re-publics, which are covered by the EuropeanNeighbourhood Policy. However, interest inadapting European standards now seems tobe weakening in some of the ENP countrieswhere it had been strongest. This is apparentin recent elections in Georgia–where pro-NATO President Mikheil Saakashvili’s Move-ment for a United Georgia lost the October2012 parliamentary elections–and inUkraine–where the parties and leaders asso-ciated with the pro-Western “orange” revolu-tion of 2005 have undergone a succession ofelectoral defeats. The European anchor hasnot been particularly strong in other formerSoviet republics, like Azerbaijan and Belarus.Perhaps most importantly, Russia continuesto offer a competing development narrativefor its post-Soviet neighbours that is both of,and beyond, Europe and the “north”.

These countries are unlikely to becomecard-carrying members of the G77 anytimesoon, of course. But in addition to reflectinga waning of Northern/European influences,these developments are also helping todeepen the heterogeneity in the develop-ing world, in which old labels and camps aregiving way to new constellations and newforms of cooperation. This new pragmatismis perhaps best exemplified by Kazakhstan,whose “green bridge” sustainable develop-ment initiative seems to be finding tractionoutside (as well as within) the region.

The “European middle-incometrap”

According to the World Bank’s taxonomy,108 countries are currently classified as“middle-income”, as opposed to only 36low-income (and 70 high-income) countries.The majority of those individuals living inpoverty (as measured by the $2/day stan-dard, in purchasing-power-parity terms) areliving in middle-income countries.2

Prospects for further progress in poverty re-duction therefore depend on middle-in-come countries’ abilities to continue to enjoyeconomic growth, without more inequalityin the distribution of income. This is partic-ularly the case for the developing and tran-sition economies in Europe and CentralAsia–most of which fall into the “middle-in-come” category (see Table 1).

While more and more “southern”economies are attaining middle-incomelevels, many have remained in this class fordecades, as GDP has not grown much fasterthan population. Economists have increas-ingly focused on theories of “middle-in-come traps” to explain such outcomes.3 Atissue is an economy’s ability to move fromgrowth that is resource-based and reliesheavily on low wages and unskilled labor, toa model that is based on rapid productivitygrowth, innovation, and increasing exportcompetitiveness. Economies mired in mid-dle-income traps typically suffer from undi-versified, uncompetitive industrial struc-tures and poor labor market conditions.They are also characterized by wage growthwhich exceeds growth in labour productiv-ity, making their exports less competitiveand reducing the benefits of participating inthe global division of labour.


2 For more on the new geography of poverty, see Andy Sumner, “Where Will the World’s Poor Live? An Update on Global Poverty and the NewBottom Billion”, Centre for Global Development, Washington, 2012; and Homi Kharas and Andrew Rogerson, “Horizon 2025: Creative De-struction in the Aid Industry”, Overseas Development Institute, London, 2012.

3 See, for example, Homi Kharas and Harinder Kohli, “What Is the Middle Income Trap, Why do Countries Fall into It, and How Can It Be Avoided?”,Global Journal of Emerging Market Economies, September 2011 3: 281-289.


Middle-income traps are a “southern” is-sue that could now become increasingly rel-evant for the transition and developingeconomies of Europe and Central Asia–manyof which are resource-based, have undiver-sified industrial sectors, and enjoyed rapidwage growth during their recoveries fromthe “transition recessions” of the 1990s. More-over, as Chart 2 shows, many European mid-dle-income countries have failed to recoverfrom the global financial crisis after 2008.

Many of these economies also rely heav-ily on exports to the EU’s single market andon finance from European banks. Since

growth in exports to the EU and externallending from European banks seems likely tobe modest in the years to come, the imme-diate prospects for escaping the “Europeanmiddle-income trap” do not seem particu-larly bright. And while recent internationallycomparable income poverty data have notyet been released, it is clear that, four yearslater, household income and employmentlevels in many of these economies continueto remain below their 2008 levels. The “Euro-pean middle-income trap” could precludefurther progress in reducing poverty and so-cial exclusion for the foreseeable future.


Table 1–Current income-level classifications in Europe and Central Asia (World Bank taxonomy)

Low-income economies

Middle-income economies High-income economiesLower middle-income Upper middle-income

Kyrgyzstan Albania Azerbaijan Croatia

Tajikistan Armenia Belarus Cyprus

Georgia Bosnia and Herzegovina Czech Republic

Kosovo* Bulgaria Estonia

Moldova Kazakhstan Greece

Ukraine Latvia Hungary

Uzbekistan Lithuania Italy

Macedonia** Poland

Montenegro Portugal

Romania Slovakia

Russia Slovenia

Serbia Spain

Turkey

Turkmenistan

* As per UNSC resolution 1244 (1999).** Former Yugoslav Republic of Macedonia.


Lessons from the south

Until recently, policy narratives in transitionand developing Europe and Central Asiahad not focused on “middle-income trap” is-sues. The emphasis had instead been oncyclical recovery from the recessions of the1990s, trade liberalization and integration(to allow these countries to benefit fromexport-led growth), and structural reforms,to strengthen market mechanisms and mar-ket-friendly state institutions. This approachhas reflected the belief that closer economicand financial integration–particularly withEurope–would be a major driver of growthand development.

This assumption now seems unlikely tohold during the years ahead; socio-eco-nomic and political tensions could increase.Fortunately, developing countries fromother regions have experienced importantsuccesses in laying the basis for sustainableeconomic growth and development. As“one-size-fits-all” universally relevant devel-opment prescriptions are few and far be-tween, arguments for replicating “southern”solutions in the transition and developingeconomies of Europe and Central Asia need

to be handled with care. Still, some possi-bilities to explore include the following:

Increasing fiscal space. Countries withsignificant fiscal space (e.g., in the form ofstabilization or reserve funds) can offsetlosses in budget revenues during macro-economic downturns and engage in signif-icant countercyclical spending to mitigatetheir socio-economic impact. For example,some $4 billion from Chile’s Copper Stabi-lization Fund was used to support publicworks projects following the advent of theglobal financial crisis in 2008. Likewise, Rus-sia, Kazakhstan, Azerbaijan, and Uzbekistantapped their stabilization/reserve funds tofinance public works projects in response tothe crisis, particularly in 2009-2010.

Unfortunately, many transition and de-veloping economies in Europe and CentralAsia do not have the conditions in place (e.g.,budget surpluses, low public and externaldebts, deep domestic financial systems) toextend their fiscal space. Fiscal tensions andausterity, driven by the need to roll over rel-atively large public and external debts, arethe more common case. But attempting todevelop this space–for example, by tax re-forms to expand the tax base and reduceadministrative burdens on tax authorities,could be pursued, even in the short term.

Reducing dependence on volatile ex-ports, by promoting:

• industrial and investment policies todevelop new areas of comparativeadvantage, reflecting inter alia WorldBank Chief Economist Justin Lin’s“new structural economics”, whichemphasizes the government’s role inproactively upgrading a country’s hu-man capital and infrastructure en-dowments in order to create dynamiccomparative advantages and boostcompetitiveness;

• trade facilitation (including fair trade)initiatives, as well as measures to im-prove access to trade finance; and

• integration into global value chains–particularly for small businesses.


Source: IMF World Economic Outlook database.

CHART 2Selected European middle-income countries and the impact of the global financial crisis

2008 2009 2010 2011

100

95

90

85

80

Armenia

Bulgaria

Croatia

Latvia

Romania

Ukraine

2008 GDP = 100


Reducing the volatility of private cap-ital flows, by:

• Changing financial regulations tofavour equity rather than debt in-flows (the former tend to be lessvolatile than the latter, and do notcontribute to external indebtedness),inter alia via governance reforms toincrease transparency and accounta-bility (in both the state and privatesectors), in order to improve domes-tic investment and business climates;

• Improved monitoring of private cap-ital flows, to strengthen early warningand response systems in anticipationof capital-flow related shocks; and

• Diversifying capital supplies awayfrom the “northern” countries thathave been the sources of global fi-nancial contagion since 2007. Recentresearch indicates that south-southinvestment flows have grown morerapidly and are less volatile thannorth-south flows.

Increasing the development impact ofprivate capital flows, via pragmatic use oflocal content requirements when attract-ing foreign direct investment; efforts to pro-mote corporate social responsibility (in-cluding via the UN Global Compact); andmeasures to attract foreign investment tounderdeveloped regions.

Investing in capacity development formacroeconomic and social policy institu-tions and policy makers, via measures to at-tract and retain skilled national talent, in-vestments in merit-based civil services, andin systems to anticipate, analyze, and re-spond to socio-economic crises.

Global migration issues. Seveneconomies in the former Soviet Union andin Southeast Europe reported remittance

inflows in 2010 that were in excess of 10% ofGDP. While they provide critical incomesources for low-income families, these re-mittances also reflect the social trauma andtransformation that come with large-scalemigration. These economies therefore sharewith many other developing countries anintense interest in reforming global frame-works for regulating migration. They canalso learn from the experience of other de-veloping countries–like the Philippines–thathave made progress in defending the wel-fare of their migrant workers abroad, and inharnessing remittances for broader devel-opment purposes.

Reducing fossil fuel subsidies. Recentresearch indicates that fossil fuel subsidiesare a considerable burden for many transi-tion and developing economies in Europeand Central Asia.4 Some developing coun-tries (like Costa Rica) have virtually abol-ished these subsidies–and have used part ofthe savings to increase social assistance forenergy-poor households.

Social policy reform. Many developingcountries (particularly in Latin America)have introduced important innovations insocial policy during the past two decades.They have reconceptualized social protec-tion by combining the expanded use ofconditional cash transfers with program-ming for food security, employment gener-ation, disaster risk reduction, environmentalprotection, and the extension of basic serv-ices. For example:

• Under Brazil’s Bolsa Família pro-gramme, 13 million vulnerable house-holds (representing nearly 30% of thepopulation) receive targeted social as-sistance at a cost of less than 1% ofGDP. Recipient households are re-quired to have their children in school


4 UNDP’s Energy Subsidies in the Arab World regional human development report estimated (on the basis of the price gap methodology) fos-sil fuel subsidies in Turkmenistan to be above 60%; in Uzbekistan to be above 50%; and in Kazakhstan at above close to 30%. This level wasassessed at above 20% for Russian and Ukraine. UNDP’s report on Fossil Fuel Subsidies in the Western Balkans found that fossil fuels as a shareof GDP ranged from 5% in Croatia to 35% in Kosovo.


and to ensure they receive regularmedical attention. Rural developmentis reconciled with protecting thecountry’s natural capital via the BolsaVerde programme, which by 2014 willoffer conditional cash transfers to73,000 smallholder and indigenoushouseholds living in environmentallysensitive areas, who pursue ecologi-cally sustainable livelihoods.

• Since its inception in 1995, SouthAfrica’s Working for Water pro-gramme has cleared more than onemillion hectares of water-intensivealien plant species, releasing 50 mil-lion cubic meters of additional waterper annum for irrigated agriculturethat reduces local food insecurity.Working for Water also provides jobsand training for some 20,000 peopleannually, many of which come frommarginalized groups.

• The 106,000 small hydropower sta-tions installed under Sri Lanka’s Re-newable Energy for Rural EconomicDevelopment programme createdabout 477,000 person-days of em-ployment. Each mini-hydro facility con-structed under this programme em-ployed 8-11 local people duringconstruction (lasting up to 18 months),providing an additional 3,600 to 4,950person-days of local employment. Italso employed three to four people formaintenance, generating another 90to 120 person-days of employment permonth. Combined with the income-generating effects of rural electrifica-tion, this employment creation helpedreduce rural poverty while also pro-moting environmentally sustainablesolutions to national energy securitychallenges.

From economic development to sustainable development

During the previous two decades, policies inmany transition and developing economiesin Europe and Central Asia focused primarilyon promoting economic growth; some havealso focused on capturing the benefits ofEuropean integration. Less attention hasbeen paid to social development and envi-ronmental protection. In the aftermath ofthe large declines in GDP that were recordedin the 1990s (and of Turkey’s economic crisisduring 1999-2001), this emphasis was un-derstandable. However, growth prospectsfor many of these economies seem likely tobe more modest during the coming years.While high world market prices for energyand metals may boost growth in others,these export gains need not automaticallytranslate into broad improvements in livingstandards, especially for vulnerable house-holds. They could also complicate the re-sponse to the water, land, and other envi-ronmental management challenges thesecountries are facing.

These circumstances place a premiumon the adoption of genuinely integrated na-tional (and sub-national) policy frameworks,which can promote economic growth whilealso building social cohesion and resilienceto natural disasters, and without putting theenvironment at risk. Notwithstanding theimpact of the global financial crisis, somecountries from the “south” (e.g., Brazil) havein recent years succeeded in acceleratingeconomic growth while reducing incomeinequality and strengthening environmentalprotection.5 Such examples could be in-tensely relevant for the transition and de-veloping economies of Europe and CentralAsia.


5 For more on this, see UNDP’s Triple Wins for Sustainable Development, especially pp. 30-37.


Milorad Kovacevic, UNDP HDROMihail Peleah, UNDP BRC

Since the first Human Development Reportin 1990, there has been substantial globalprogress: many developing economiescontinue to grow and raise standards ofhuman development. This is generally truefor the ECA region despite the turbulenceof the 1990s (see Figure 1). The rise of theSouth is a feature of a rapidly changingworld. The South (as defined in the GHDR2013) now accounts for almost a third ofworld output and consumption. Withoutrobust growth in these economies, led by

China and India, the global economic re-cession of 2008-2009 would have beendeeper. Nevertheless, there are signs ofcontagion, with real concern that in an in-terconnected world the crisis in the Northmay slow developing countries’ progress.

Latvia was hardest hit by crisis, withGDP contracting by 17.7% in 2009. Turk-menistan had highest growth rate in thesame period, increasing GDP by 6.1%.Overall, GDP growth in 2009 in Central andEastern Europe was -3.1%; in the Com-monwealth of Independent States it was -5.4%.

In many countries, with some notableexceptions, governments are introducing

The state of human development – Europe and Central Asia | 13

The state of human development – Europe and Central Asia1

Source: International Monetary Fund, World Economic Outlook Database, October 2012

Caucasus Central Asia OECDNew Member State Western Balkans Western CIS

Turkmenistan Major advanced economics (G7)Latvia Central and eastern Europe

Commonwealth of Independent States

30.0

20.0

10.0

0.0

-10.0

-20.0

-30.0

-40.0

20

15

10

5

0

-5

-10

-15

-20

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2005

2006

2007

2008

2009

2010

2011

FIGURE 1. GDP annual growth in the Region

1 Based on the 2013 Human Development Report. The authors acknowledge inputs and comments from Amie Gaye (HDRO) and Andrey Ivanov (BRC)


harsh austerity measures that reduce thegovernment’s welfare role and cut back onspending and public services (Figure 2),leading to hardship and exacerbating eco-nomic contractions.

Governments are imposing austerityprogrammes because of a legitimate con-cern about the sustainability of sovereigndebt. But there is a risk that short-termmeasures will cause long-term damage,eroding the human development and so-cial welfare foundations that enableeconomies to grow. Estimations done inthe wake of the crisis suggest that the hu-man development cost of the crisis couldbe quite significant, and that negative ef-fects will linger on2. Figure 3 shows the evo-lution of total debt service in the regionover the period (2005-2010). Total debtservice is a sum of principal repayments, in-terest, and repayments (repurchases andcharges) actually paid to the InternationalMonetary Fund, expressed as percentage ofgross national income. The graph presentsthe average for the region and two coun-tries–with the highest and the lowest levelsof debt service (as a share of GNI).

There is also evidence that deployingdrastic austerity programmes too quicklycan deepen and prolong recessions–thusweakening economic conditions and in-creasing unemployment.

The region has one of the lowest em-ployment-to-population ratios (58.4%)–only the Arab States’ average (52.6%) is be-low this. Employment ratios vary frombelow 37.2% in Bosnia and Herzegovina tonearly 71% in Azerbaijan. (See Figure 4).

Youth unemployment is a particularconcern throughout the region. It is definedas the percentage of the population aged15 to 24 that is not in paid employment orself-employed, but is available for work and


2 Balázs Horváth, Andrey Ivanov and Mihail Peleah. 2012. “The Global Crisis and Human Development: A Study on Central and Eastern Europeand the CIS Region”. Journal of Human Development and Capabilities, 2012, vol. 13, issue 2, pages 197-225. http://hdl.handle.net/10.1080/19452829.2011.645531

Source: World Bank (2012)Note: General government final consumption expenditure includes all government current expenditures for purchases of goods andservices expressed as percentage of GDP

FIGURE 2.General government final consumption expenditure

2005 2006 2007 2008 2009 2010 2011

25.0

23.0

21.0

19.0

17.0

15.0

13.0

11.0

9.0

7.0

5.0

Europe and Central Asia

West Balkans

West CIS

Caucasus

Central Asia

New Member States

EU27

OECD

World

Gen

eral

gov

. fin

al co

nsum

ptio

n ex

pend

iture

(%of

GD

P)

Source: World Bank (2012)

FIGURE 3.Total debt service in the Region

2005 2006 2007 2008 2009 2010

50

45

40

35

30

25

20

15

10

5

0

Europe & Central Asia (developing only)

Latvia

Turkmenistan

Tota

l deb

t ser

vice

(% G

IN)


is actively seeking jobs. The current crisis hityouth hardest (as Figure 5 shows). Whilethe general unemployment increasedslowly, young people were first to be fired.In the Former Yugoslav Republic of Mace-donia between 2007 and 2012 youth un-employment jumped up by dramatic 47percentage points, so that now more thanhalf of the youth are unemployed (roughlytwice the national average).

The crisis affects youth lives in a varietyof ways. For instance, youth end up livinglonger at their parents’ homes, not beingable to establish a household of their own.Lack of prospects augments emigrationpush-factors, and increases the risk of drop-ping out of education, exposure to crimi-nality, affiliation with extremist movementsor simply becoming indifferent to demo-cratic processes. It is no surprise that manyobservers see the lack of opportunities foryouth as a driver of radical and sometimesviolent transformations–the Arab Spring,the 2011 England riots, the 2010 unrest inSouthern Kyrgyzstan,3 and elsewhere.

While countries have different degreesof freedom to adjust their spending priori-ties, for many there is ample scope for repri-oritization. Even where fiscal consolidationis necessary, it need not involve cuts in wel-fare services.

For instance, military spending world-wide exceeded $1.4 trillion in 2010, morethan GDP of the world’s 50 poorest countriescombined. The world average militaryspending in 2010 is at 2.6% while the Regionis slightly above this average (2.7%). Not allcountries have the preconditions for com-plete demilitarization, but most have scopefor substantial slowing in military spendingand free some of these resources to invest ininfrastructure and human development.


3 The Kyrgyzstan NHDR published just a few months before the riots was devoted to youth. The foreword to the report states “As a ‘young’state, both historically and demographically, Kyrgyzstan faces serious challenges: this Report demonstrates the potential to transform these chal-lenges into real opportunities through focused efforts to tackle youth’s human development problems.” Unfortunately, the challenges outlinedin the analysis transformed into a crisis.

Source: Own calculations based on ILO KILM 7th Network version, http://kilm.ilo.org/kilmnet/

FIGURE 5.Changes in unemployment rates, in percentage, 2007-2012 (or closest)

15.013.011.0

9.07.05.03.01.0

-1.0-3.0-5.0


FIGURE 4.Employment to population ratio (25 +)

2005 2006 2007 2008 2009 2010 2011

70

65

60

55

50

45

40


West Balkans

West CIS

Caucasus

Central Asia

New Member States

EU27

OECD

World

Empl

oym

ent t

o po

pula

tion

ratio

Alban

iaBo

snia a

nd He

rzego

vina

Croati

a

Koso

vo

Maced

onia,

FY

ROM

Monte

negro

Serbi

a

Turke

y

Europ

ean U

nion

Total Youth

7.18.5

-1.2

2.9

5.7

12.1

47.1

3.01.8


Human development rogress in the region

Every Human Development Report has mon-itored human progress, notably through thehuman development index (HDI), a com-posite measure that includes indicators forlongevity, educational attainment, and com-mand over the resources needed for a de-cent living. Other indices delve into inequal-ity, poverty, and gender inequality. HDIs in2012 reveal much progress (Figure 7). Overthe past decades countries across the worldhave been converging towards higher levelsof human development. In 2012, the globalaverage HDI value was 0.694; sub-SaharanAfrica had the lowest HDI (0.475), followed bySouth Asia (0.558). Among developing re-gions, Europe and Central Asia had the high-est HDI (0.771), followed by Latin Americaand the Caribbean (0.741). However, regionalaverages hide important differences be-tween sub-regions and individual countries.The highest level of human development isachieved in the EU/Western Europe states(0.893), followed by the New Member States(0.820), the countries of the Western CIS(0.775), the Western Balkans (0.765), Cauca-sus (0.736), and Central Asia4 (0.701). But theintra-regional differences are even more pro-nounced: for instance, in Central Asia humandevelopment index ranges between 0.754for Kazakhstan (ranked 69) and 0.622 for Kyr-gyzstan and Tajikistan (which shared 125th

place). The pace of human development

progress reflected in HDI trends over pasttwo decades in Europe and Central Asia hasbeen uneven. It has been fastest in coun-tries in the low and medium human devel-opment categories and steady in EU/West-ern Europe states and New Member States.This is good news. Yet progress requiresmore than average improvement in the HDI.



FIGURE 6.Military spending (% GDP)

2005 2006 2007 2008 2009 2010

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0


West Balkans

West CIS

Caucasus

New Member States

EU27

OECD

Mili

tary

spen

ding

(%CD

P)

Source: 2013 Human Development Report, UNDP, own calculationsRegional averages are population-weighted for countries

FIGURE 7.HDIs for the sub-regions of Europe and Central Asia

0.900

0.850

0.800

0.750

0.700

0.650

0.600

0.550

0.500

0.450

0.400

4 For classification simplicity reasons we included Turkey in Central Asia region.

Caucasus

EU/ Western Europe

Western Balkans

OECD Average

Central Asia

New Member States

Western CIS

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012


It will be neither desirable nor sustainable ifincreases in the HDI are accompanied byrising inequalities in income, unsustainablepatterns of consumption, high militaryspending and low social cohesion.

Prior to 2008 the New Member Statesmanaged to pass through transition with-out significant human development losses:growth resumed and investments in hu-man capital continued. While on averageprogress in Central Asia was fastest, in real-ity only Turkey managed to have continu-ous progress. Other countries faced painfultransition, often coupled with internal con-flicts, and paid high human costs. Tajikistansuffered most and managed to recover itspre-transition HDI level only in 2011; Kyr-gyzstan did it around 2007. Similar picturesare apparent in other countries of region,where transition was also painful. It was ar-gued5, that one possible explanation of hu-man development trends in the region isthe human development approach–coun-tries with established agency showed bet-ter progress, while the countries where highlevels of human development wereachieved though basic needs approach ofcogwheel society faced additional transi-tion challenge–emerging of agency.

There are large differences across theregion in the components of HDI–life ex-pectancy, expected years of schooling,mean years of schooling, and income.

The region shows large variability in allfour component-indicators of the HDI.

Almost all countries in the region reportaverage life expectancy data that are be-low OECD averages. The mean years ofschooling among adults over 25 is spreadover a relatively narrow range (8 to 12.5years); however, expected years of school-ing, which better reflects changing educa-tion opportunities in developing countries,


Source: 2013 Human Development Report, UNDP

FIGURE 9.The average annual growth rates of HDI for the period 2000-2012

1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00

5 Ivanov, Andrey and Mihail Peleah. 2010 „From centrally planned development to human development“. Human Development Research Pa-per 2010/38. http://hdr.undp.org/en/reports/global/hdr2010/papers/HDRP_2010_38.pdf

Source: 2013 Human Development Report, UNDP, own calculationsRegional averages are population-weighted for countries

FIGURE 8.HDIs for the Central Asia sub-region

0.800

0.750

0.700

0.650

0.600

0.550

0.500

Kazakhstan

Turkey

Turkmenistan

Uzbekistan

Kyrgyzstan

Tajikistan

Central Asia average

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Aver

age

annu

al g

row

th (%

) Europe and Central Asia(all income levels)

Cyprus

Tajikistan

OECD members


is spread over a wider interval (11 to 17years). Average gross national income (GNI)per capita varies over a very wide range–GNI per capita in Slovenia is more than 10times higher than in Kyrgyzstan.

Between 2000 and 2012 average life ex-pectancy increased for 3.3 years, so it seemsthat the region is making up for the stag-nation and slow increases recorded in the1990s (see Figure 11). Again, regional aver-


FIGURE 10.Large variations in values of indicator components across countries in the region

85.0

83.0

81.0

79.0

77.0

75.0

73.0

71.0

69.0

67.0

65.0

13.0

12.0

11.0

10.0

9.0

8.0

7.0

6.0

20,000

2,000

19.0

18.0

17.0

16.0

15.0

14.0

13.0

12.0

11.0

10.0

Life

exp

ecta

ncy

at b

irth

, yea

rs

Gro

ss n

atio

nal i

ncom

e (G

NI)

per c

apita

,20

05 P

PP $

Mea

n ye

ars o

f sch

oolin

g, y

ears

1.000

0.950

0.900

0.850

0.800

0.750

0.700

0.650

0.600

Non

inco

me

HD

I

Expe

cted

yea

rs o

f sch

oolin

g, y

ears

EU/ Western Europe

New Member States

Western Balkans

Western CIS

Caucasus

Central Asia

EU/ Western Europe

New Member States

Western Balkans

Western CIS

Caucasus

Central Asia

EU/ Western Europe

New Member States

Western Balkans

Western CIS

Caucasus

Central Asia

EU/ Western Europe

New Member States

Western Balkans

Western CIS

Caucasus

Central Asia

EU/ Western Europe

New Member States

Western Balkans

Western CIS

Caucasus

Central Asia

0.600 0.700 0.800 0.900 1.000

0.600 0.700 0.800 0.900 1.000

0.600 0.700 0.800 0.900 1.000

0.600 0.700 0.800 0.900 1.000

0.600 0.700 0.800 0.900 1.000


age hides some important country details.Life expectancy increased steadily in theNew Member States, but fell in a number ofcountries of region, especially between1990 and 1995. This decrease in life ex-pectancy has been driven by a number offactors, including a number of armed con-flicts, but also by general societal instability,manifested in higher rates of suicide (espe-cially for teen males), homicide, crime, al-cohol abuse and related mortality.

Well-educated adult populations re-main an important comparative advantagefor the region (see Figure 12).

In order to improve current HDI levelsand make these improvements sustainable,it seems that having children in schoolswhere education is of reasonably high qual-ity is must. Table 13 represents the evolutionof expected years of schooling since 1980.

Another essential component of humandevelopment and the HDI is command overresources, as measured by income percapita. Between 2000 and 2012 income percapita rose in all countries in the region,though in varying degrees (Figure 14).

The highest average annual growth inincome per capita was recorded in Azerbai-jan and Turkmenistan both over 20%. Even16 countries surpassed 5% growth.

As most Human Development Reportshave underscored, what matters is not onlythe level of income, but also how that in-come is used. A society can spend its in-come on education or on weapons of war.Individuals can spend their income on es-sential foods or on narcotics. For both soci-eties and individuals, what is decisive is notthe process of wealth maximization, buthow income is converted into human de-velopment. Table 2 in the Statistical Annexof the 2013 Human Development Reportshows country successes in this respect, asmeasured by the largest positive differencebetween GNI per capita and HDI ranks.Georgia tops the list for the region with adifference of 37 positions, followed by Mon-tenegro and Kyrgyzstan (with differences


Source: 2013 Human Development Report Office Database, UNDP

FIGURE 11.Evolution of life expectancy since 1980

85

80

75

70

65

60

55

1980

1985

1990

1995

2000

2005

2010

2011

2012

Europe & Central Asia(all income levels)

OECD members

Cyprus

Turkmenistan

Russian Federation

Life

Exp

ecta

ncy

Source: 2013 Human Development Report Office Database, UNDP

FIGURE 12.Mean years of education shows a steady increase over the last 30 years

14

12

10

8

6

4

2

1980

1985

1990

1995

2000

2005

2010


OECD members

Turkey

Czech Republic

Russian Federation

Mea

n ye

ars o

f sch

oolin

g

Source: Human Development Report Office

TABLE 13.Expected years of schooling

17

16

15

14

13

12

11

10

9

8

1980

1985

1990

1995

2000

2005

2010

2011

2012


OECD members

Albania

EstoniaExpe

cted

yea

rs o

f sch

oolin

g


of 24 ranks). On the other hand, for Turkeyand Turkmenistan this difference is nega-tive–meaning that these countries have tofind a way of converting income gains intogains in human development.

PovertyOne of the world’s main priorities is to erad-icate poverty and hunger. This is the first ofthe eight Millennium Development Goals,for which the target for 2015 was to halvethe proportion of people living on less than$1.25 a day relative to 1990. This goal wasachieved three years before that targetdate, primarily because of the success ofsome populous countries: Brazil, China andIndia.

Poverty, however, is not just lack of in-come–this is why monetary poverty esti-mates do not reveal the full picture.Poverty has multiple dimensions, pertain-ing to health and education, for example.This is why multidimensional povertymonitoring accounting for other dimen-sions can better reflect the human devel-opment paradigm. The MultidimensionalPoverty Index (MPI), which looks at over-lapping deprivations in health, educationand standard of living, is the product ofthe multidimensional poverty headcount(the share of people who are multidimen-sionally poor) and the average number ofdeprivations that each multidimension-ally poor household experiences (the in-tensity of their poverty). Focusing on theintensity of poverty enables the MPI toprovide a more complete picture ofpoverty within a country or a communitythan is available from headcount meas-ures alone (see Figure 5).

The MPI has been calculated for 24out of the 31 countries in the region. Itshows that multi-dimensional poverty isrelatively low in this region. The MPI val-ues for the countries of the region aresmall but its components reveal an inter-esting picture. Deprivation in educationcontributes 42.3% to Turkey’s MPI andeven 84.2% to Russian Federation’s MPI;while deprivation in health accounts for45% MPI in Tajikistan and 91.1 % inUkraine.

Social exclusion is an important issue inthe region; the recently published Regional


FIGURE 14.Income per capita is rising to varying degrees across the region

35000

30000

25000

20000

15000

10000

5000

0

2000

2005

2010

2011

2012


OECD members

Turkmenistan

Malta

Azerbaijan

GN

I pc

FIGURE 15.Breadth and intensity of multidimensional poverty in the region

44.0

42.0

40.0

38.0

36.0

34.0

32.0

30.0

New Member States

West Balkans

West CIS

Caucasus

Turkey

Tajikistan

Estonia

Hungary

Czech Republic

0.0 5.0 10.0 15.0 20.0 25.0

Inte

nsity

of d

epri

vatio

n,%

Population in multidimensional poverty, %


Human Development Report6 analysed itin detail. Following the MPI methodology,the reports calls for adopting region-spe-cific metrics of social exclusion that wouldgo beyond traditional monetary povertyestimates and would be comprised of in-dicators that are highly relevant for the re-gion.

InequalityAn essential part of human developmentis equality. Every person has the right tolive a fulfilling life according to his or herown values and aspirations. No one shouldbe doomed to a short life or a miserableone because he or she happens to be fromthe “wrong” class or country, the “wrong”ethnic group or race or the “wrong” sex.

Inequality can slow the pace of im-provements in human development, andin some cases may prevent it entirely. Thisis most marked for inequality in health andeducation and less so for inequality in in-come, where the effects are more sub-stantial in high and very high HDI coun-tries. An analysis of 132 developed anddeveloping countries for this Report findsan inverse relationship between inequalityand human development reinforcing theconclusions of several studies of devel-oped countries.

The effects of inequality on human de-velopment can be captured by the in-equality-adjusted Human Development In-dex (IHDI), which examines the averagelevel of human development and its distri-bution along the dimensions of life ex-pectancy, educational attainment, andcommand over resources. Where there isno inequality, the IHDI equals the HDI. Arelative difference between the two de-notes inequality; the greater the difference,the greater the inequality.

The IHDI has been calculated for 29 outof the 31 countries in the region. (It has notbeen calculated for the Russian Federationand Turkmenistan, due to missing distribu-tion data on education for both countries,and in the case of Turkmenistan for incomeas well). Inequality in life expectancy at birthis calculated for all 31 countries, in educa-tion for 29 countries, and in income for 30.

Relative to other regions, inequality inthe distribution of HDI achievement ap-pears minimal in Europe and Central Asia(Figure 16). The overall loss when the HDI isadjusted for inequalities is 12.9%, about halfthe world average loss of 23.3%. The in-come component is where the loss due toinequality is highest in the region (16.3%)followed by health (11.7%). Looking at in-dividual countries, the biggest HDI loss dueto inequalities is suffered by Turkey (22.5%)followed by Tajikistan (18.4%). The countrysuffering the least loss is Czech Republic(5.4%).

In terms of the components, the biggestloss in life expectancy at birth is suffered byTajikistan 27.2%), followed by Turkmenistan(26.7%). The country suffering the least losson this component is the Czech Republic(3.9%). On the education component,Turkey suffers the biggest loss (27.4%) andthe least 1.3%, also by Czech Republic. Thebiggest loss due to inequality in the incomecomponent is suffered by Croatia (27.8%)and the least by Azerbaijan (4.5%).

Globally, there have been much greaterreductions in inequality in health and edu-cation in the last two decades than in in-come. This is partly because of the measuresused–life expectancy and mean years ofschooling–have upper bounds to which allcountries eventually converge. But for in-come there is no upper limit, so the scopefor inequalities is greater.


6 Regional Human Development Report 2011. Beyond Transition: Towards Inclusive Societies. http://europeandcis.undp.org/ourwork/poverty/show/3D67787C-F203-1EE9-B865429091EC6355


Gender equality is both a core concernand an essential part of human develop-ment. All too often, women are discrimi-nated against in health, education and thelabour market, which restricts their free-doms. The extent of discrimination can bemeasured through the Gender InequalityIndex (GII), which captures the loss ofachievement due to gender inequality inthree dimensions: reproductive health, em-powerment and labour market participa-tion. The higher the GII value, the greaterthe discrimination.

The GII is calculated for 25 out of the 31countries in Europe and Central Asia. (It isnot calculated for Belarus, Bosnia and Herze-govina, Turkmenistan and Uzbekistan dueto missing data for the education compo-

nent; and for Montenegro and Serbia due tomissing labour force data.) The average GIIvalue for the region is 0.280 making it thebest performer relative to other regions. Interms of components, the region outper-forms other regions on maternal death andthe share of females with at least secondaryeducation. However, it does not do so wellwhen it comes to women’s share of parlia-mentary seats. The region’s average of 16.7%is 3.6 percentage points below the world av-erage of 20.3% and only slightly better thanthe Arab States’ regional average of 13%.

Slovenia leads the region with a GIIvalue of 0.080, followed by Czech Republicwith a value of 0.122. Georgia has the worstGII value in the region (0.438), followed byTurkey with a value of 0.366.


FIGURE 16.Total and marginal inequality in distribution of the HDI

25.0

20.0

15.0

10.0

5.0

0.0

Tota

l ine

qual

ity (%

)

HDI

0.6000.500 0.700 0.800 0.900 1.000

30.0

25.0

20.0

15.0

10.0

5.0

0.0

Ineq

ualit

y in

hea

lth (%

)

HDI

0.6000.500 0.700 0.800 0.900 1.000

30.0

25.0

20.0

15.0

10.0

5.0

0.0

Ineq

ualit

y in

edu

catio

n (%

)

HDI

0.6000.500 0.700 0.800 0.900 1.000

30.0

25.0

20.0

15.0

10.0

5.0

0.0

Ineq

ualit

y in

inco

me

(%)

HDI

0.6000.500 0.700 0.800 0.900 1.000


International trade flows of goodsand services

In light of the theme of this year’s report:“The rise of the global south: Humanprogress in a diverse world” we have intro-duced indicators on trade in goods andservices to reflect on the extent to whichcountries are integrated into the globaleconomy. These indicators are placed intable 10 of the Statistical Annex to theGlobal Human Development Report.

The value of the region’s total merchan-dise goods exports is $1.2 trillion, repre-senting 9% of the world’s $13.6 trillion. TheRussian Federation leads the region in ex-porting goods, to the tune of $400.1 billion,followed by Poland with $157.1 billion in2010, representing 29.5% and 34.9%% ofthe two countries’ respective GDPs. Cyprus,Armenia, and the Republic of Moldova ex-ported the smallest amount of merchandisegoods during this year ($0.8 billion, $0.9 and$0.9 billion respectively).

Manufactured goods account for 54.9%of the region’s exports. Manufactured goodsas a share of the merchandise exports ofcountries in the very high human develop-ment group from the region range from50.2% in Cyprus to 86.4% in the Czech Re-public. However, for the Russian Federation,the leading exporter of merchandise goodsin the region, manufactured goods com-prised only 14.1% of total merchandise ex-ports.

Merchandise imports follow a similarpattern: The Russian Federation was the re-gion’s largest importer (to the tune of$248.7 billion) followed by Turkey andPoland (with imports of $185.5 billion and$174.1 billion, respectively).

Merchandise exports and imports rep-resent, on average about one-third of theregion’s GDP. The total value of the region’smerchandise exports and imports is $1.2trillion each.

The value of service exports is low incomparison with goods exports. The Russ-

ian Federation leads the region to the tuneof $44.3 billion, followed by Turkey (with$34.4 billion). The total value of the region’sservice exports was $251.7 billion consti-tuting 7.3% of the world total of $3.4 trillion.The region’s import of services amounted to$232.3 billion, constituting 7.1% of theworld total of $3.3 trillion.

Social integration is another impor-tant area addressed by the 2012 HDR. Table9 (with 13 indicators grouped in four di-mensions) indicates whether a society is in-clusive and integrated. In particular, we lookat the extent of equal rights and opportu-nities for employment, overall inequality,human safety, and trust and communitysatisfaction. Complementary objective in-dicators and perception-based indicatorsallow for a more nuanced picture of socialintegration. Life, freedom, and job satisfac-tion focus on individuals’ views of their per-sonal conditions, while trust in people andgovernment, along with community satis-faction, give insight into people’s satisfac-tion with broader society.

Estimates for child labour are availablefor only 16 countries, ranging from just 1%


FIGURE 17.Regional shares of population and exports of merchandise goods and services

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

OECD

Sub-Saharan Africa

South Asia

Latin America andthe Caribbean


East Asia and the Pacific

Arab States

Export of Goods Export of Services Population


in Romania to 18% of children of ages 5 to14 years being economically active inGeorgia.

The average overall life satisfactionbased on the Gallup World Poll data for theregion is at 5.3 (on the scale from 0 to 10),which is the same as the world average.Cyprus shows the highest overall life satis-faction of 6.7 followed by Czech Republic(6.3) and Malta (6.2). At the bottom is Bul-garia (3.9).

Satisfaction with freedom of choice ismeasured by the share of people that re-sponded affirmatively to the question ofwhether they are satisfied with the freedomto choose what they do with their lives. With58.9% responding “yes”, the region is theleast satisfied when it comes to freedom tochoose. (This average was 15.4 percentagepoints below the world average.) Sloveniaand Uzbekistan with 90% of respondentssatisfied were at the top, while Bosnia andHerzegovina was at the bottom with only33% satisfied with the freedom of choice.

On the other hand, 71% responded thatthey are satisfied with their jobs, eventhough only 76.5% were satisfied with eco-nomic conditions in their communities.Only 43.9% responded that they have trustin their governments, which was the lowestvalue among regions.

Perceptions of safety (53.5% respondedthat they feel safe) were better than in LatinAmerica and the Caribbean (42%). The av-erage homicide rate of 5.5 per 100,000 peo-

ple was below the world average of 6.9 per100,000, However, only 21.5% respondedthat they have trust in others.

The average suicide rate for men (35.4per 100,000) was almost twice the averagefor the OECD countries (19.4 per 100,000),while the averages for women were similar(6.9 for the region and 6.2 for women OECDcountries). The highest male suicide rateswere recorded in Lithuania (61.3), the Russ-ian Federation (53.9), and Belarus (48.7),while the lowest were in Azerbaijan (1), Ar-menia (2.8) and Tajikistan (2.9). The highestfemale suicide rates were in Hungary (10.6),Lithuania (10.4) and Serbia (10).

Looking forward

The evident growth of human developmentas measured by the HDI trends in the regioncan be further improved by consolidatingthe economic strength of the countries, andby the full commitment of national gov-ernments to human development. Suc-cessful performance in trade, investmentand international production also dependson rising levels of human development. Ed-ucation and job creation are key for mostcountries in the region to tackle imbalancesdue to aging for some; and for others tobenefit from the demographic bonus. Main-tain and improve connections within theregion and with other parts of the world –the world is more connected than ever.



Andrey IvanovRegional human development advisorUNDP Regional Bureau for Europe and CIS

Between the rising “South” and the rela-tively declining “North” is the “transformingEast” (Eastern Europe and Central Asia) thatcombines features of both. In 2009 the ECAregion accounted for 7% of the GlobalSouth’s (as defined in the GHDR 2013) pop-ulation, 32% of its territory and 15% of itsGDP in PPP$ (with population and GDPdown, compared to 1990, from 9% and37%, respectively). But its experience couldbe relevant disproportionately to its size. Inthe last two decades, this region experi-enced a set of remarkable political and eco-nomic transformations, which hold lessonsfor those countries in the South that are un-dergoing through similar processes.

Take the obvious common challenges–departures from centrally planned state-controlled economies, rising inequality, re-definition of the role of the state and itsrelations with mainstream society. The ‘for-mer socialist bloc’ experienced all these,and different countries tested different pol-icy approaches to tackle them. Each ap-proach can yield valuable lessons–includingon pitfalls, which can help prevent a repeti-tion of mistakes at a grander scale else-where. The region has a vivid memory of thedecline of a global superpower, of restoringsovereignty to nation states, and of sharplyfalling living standards and human devel-opment levels in the first stages of trans-formation. It also recalls the subsequent re-definition of basic social structures and the

recovery in human development levels. Thevarious models of growth amid varyingshades of democracy, diverse geopoliticalorientations with different aggregate hu-man development outcomes–all these canprove highly relevant for the rising South.

The most recent Regional Human De-velopment report (“Beyond Transition, To-wards Inclusive Societies“, published in2011) on social inclusion in the ECA regionprovides some important insights for therising South.

First, it shows that social inclusion is in-trinsically linked to human development.Countries with high HDI values have lowervalues of the social exclusion index (devel-oped and tested in the framework of the re-port). This is not surprising, given the factthat both concepts are human-centeredand strongly complement each other.

The report also finds still pervasive so-cial exclusion in the Europe and Central Asiaregion–with one out of every three personssocially excluded–despite many years of re-covery and growth after the first ‘transitionshock’ of the early 1990s. Importantly, theeconomic dimension (poverty, unemploy-ment) accounts for barely a third of the ex-clusion risks facing individuals. Social ex-clusion’s two non-economic dimensions–exclusion from social services and exclu-sion from participation in civic and social lifeand networks–are no less important. A per-son may be highly educated, economicallywell off, may have his or her rights re-spected and face no obstacles to individualfreedom, but if s/he does not have a com-munity to identify with and be included in,s/he might still be socially excluded.

Europe and Central Asia: Where North meets South | 25

Europe and Central Asia: Where North meets South1

1 Based on Beyond Transition: Towards Inclusive Societies, UNDP Regional Human Development Report, 2011.


The analysis of the social exclusion in-dex and its relationship to other variablessuggests important clues on policies thatcan help build inclusive societies–in the ECAregion but also in the rising South. Social ex-clusion is positively correlated with laborinformality, the number of procedures nec-essary to start a business, and tolerance ofcorruption at the local level. It is negativelycorrelated with operational and accessiblelabour market institutions–owing both tothe positive impact of employment on so-cial inclusion, and to the fact that soundgovernance institutions strengthen marketmechanisms.

A major lesson learnt from two decadesof transition is that the state has a criticalrole in creating an environment for inclusivegrowth and inclusive societies. Govern-ments have a clear responsibility for defin-ing and enforcing equitable ‘rules of thegame’, for preventing market failures, andfor maintaining affordable social servicesand effective, accessible social safety nets.Rather than being a burdensome obliga-tion for state budgets, these are long-terminvestments in human capital and compet-itiveness.

Abruptly abandoning areas of state re-sponsibility or ideological insistance onrapid privatization of each and every state-owned company may prove very costly forsocieties in the long run. But retaining someresponsibilities does not mean keeping ear-lier state structures intact. On the contrary,reforms to strengthen national institutions’transparency and accountability, and limitthe scope of corruption are needed to im-prove the quality of governance and effi-ciency of governments.

Even the best-crafted policies do notattain much if they do not resonate withthe expectations of responsive and sup-portive constituencies. Social inclusion–sim-ilarly to human development–requires ac-tive and empowered citizens. To have alasting positive effect, policies need to becommunicated to the public, and the pub-lic needs to accept them as legitimate andbeing in society’s interest. Seen from thatperspective, changing mindsets towardsuniversally accepted values has immediatepolicy relevance. The importance of delib-erate efforts to change mindsets and in-crease tolerance of diversity is another les-son learnt from the ECA region.



Dmitry Mariyasin New Development Partnerships CoordinatorUNDP Regional Bureau for Europe and CIS

The emerging economies of Europe andCentral Asia–while mostly belonging to theNorth in terms of geography and develop-ment levels–share many of the South’s chal-lenges. At the same time, the region’s coun-tries can offer valuable lessons in politicaland economic transformation, which in turnhave given birth to a new generation ofsouth-south cooperation initiatives.

The EU-12 countries, as well as Azer-baijan, Croatia, Kazakhstan, the RussianFederation, and Turkey, are “emerging” or“re-emerging” donors. They represent agrowing force in development coopera-tion and can play a unique role in theglobal quest for policies and responsespromoting sustainable human develop-ment. The total development assistancefrom the region’s emerging donors stoodat over $3 billion in 2011, and while this fig-ure receded slightly in the new EU memberstates, it has been on a steady rise in Rus-sia and Turkey–reflecting these economies’growing size and clout. This has firmly putthe region on the global map of develop-ment cooperation.

Russia is an active member of severalglobal groupings, including the G20 (whichit chairs in 2013) and the G8 (which it chairsin 2014). Russia has committed significantresources to several global developmentinitiatives, such as the Muskoka Initiative(for maternal, child, and newborn health),and the Global Fund for AIDS, Tuberculosis,and Malaria. In the same vein, Kazakhstan’shumanitarian and development assistance,

especially to Afghanistan and Central Asia,is on the rise, as the country increasingly as-sumes the role of a regional leader. Turkey,the region’s largest donor, increased its as-sistance in 2011 by over 35%, making it thefastest growing OECD donor country in thatyear. This is especially important givenTurkey’s emphasis on the needs of the leastdeveloped countries.

However, the growing significance ofEurope and Central Asia in international de-velopment cooperation is about more thanfinancial flows: recent, hard-won transitionexperience is also a key asset. Very oftenwith relatively modest funding, theseemerging donors are helping to create anew generation of south-south (or east-east) partnership linkages, with neighbour-ing countries and beyond. Examples in-clude knowledge- and experience-sharingprojects in Kyrgyzstan, Tajikistan, Georgia,and elsewhere, funded by the UNDP-sup-ported Slovak, Czech, and Hungarian TrustFunds; Slovakia’s Public Finance Manage-ment Programme benefiting Montenegroand Moldova; Romania’s work to share ex-perience on elections with Egypt andTunisia; Poland’s support for developingsmall and medium-sized enterprises in Iraq;and Croatia’s recently launched efforts toshare EU-accession preparation experiencewith its neighbours. When appropriately ap-plied, this knowledge allows the region’snew or re-emerging donors to achievemore with less.

This new generation of south-southlinkages is unique for a number of reasons.

• They represent new, blended, modelsof development cooperation underwhich modest financial flows facili-tate the transfer of knowledge and

Europe and Central Asia: a new generation of south-south cooperation initiatives | 27

Europe and Central Asia: a new generation of south-south cooperation initiatives


experience. This is both aid andsouth-south cooperation at the sametime. The knowledge being trans-ferred is “hot off the press”, and is of-ten delivered by specialists who havethemselves been personally involvedin making transitions happen. Thisknowledge can carry a profoundsense of reality and appreciation forthe problems and challenges of de-veloping countries. It can also comewith openness about the mistakesand failures as much as about thesuccesses of reforms.

• This assistance is often based oncommon language, cultural, andother ties, and is geographically morecompact, compared to other (moretraditional) forms of south-south co-operation. Commonality of cultureand language is most evident in thegrowing development cooperationbetween Russia and many any for-mer Soviet republics; between Turkeyand Central Asia; and in the Balkans.This cooperation is helping to restoreand transform networks of scientists,artists, and businesses that were sev-ered or distorted by the collapse ofthe Soviet bloc.

• Some of this expertise is being sharedbefore the underlying developmentprocesses have fully run their course.For example, Kazakhstan’s “GreenBridge” Partnership Programmeserves as a platform for sharing greentechnology, know-how, and innova-tion with other countries–even asKazakhstan itself is designing and im-plementing an ambitious greeneconomy strategy. So this is not just

recent but real-life experience beingshared–one could call it “develop-ment by collaborative design”.

• Sub-regional integration has alsobeen an important driving force inthis development cooperation. Ex-amples include the Eurasian Eco-nomic Space (the formation of whichis being led by the customs unionformed by Russia, Kazakhstan, andBelarus), and the Black Sea EconomicCooperation (in which Greece, Ro-mania, Bulgaria, Turkey and othercountries participate), as well as EUaccession processes in the WesternBalkans.

Thus, the flexible nature of knowledge-driven assistance respecting and respond-ing to the aspirations of partner countriescreates space for mutually beneficial learn-ing, which contributes to solving some ofthe most acute policy problems in the re-gion’s developing countries. The emergingdonors can also use the knowledge ex-change for completing their own (still) un-finished development agenda. The in-creased tolerance and peace amongcountries is another positive externality ofsuch cooperation–a particularly valuableone, given these countries’ shared but com-plex history.

For these and other reasons, the role ofEurope and Central Asia as a source of smart,realistic development solutions for the restof the world seems likely to increase in theyears to come. In this region, where Northmeets South, new approaches to develop-ment cooperation are appearing that tran-scend the North-South divide and directlycontribute to sustainable human develop-ment, both in the region and globally.




UNDP, Europe and the CISBratislava Regional CentreGrosslingova 35811 09 BratislavaSlovak Republic

Tel.: (421-2)59337-111Fax.: (421-2)59337-450http://europeandcis.undp.org

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Documents

The Rise of the South:Regional Compendium to the Global Human Development Report 2013