Report No. 20285-TJ Republic of Tajikistan Poverty Assessment June 29, 2000 Human Development Sector Unit Europe and Central Asia Region Document of the World Bank Republic of Tajikistan POVERTY ASSESSMENT Acronyms ABA American Bar Association ADB Asian Development Bank AKDN Aga Khan Development Network CCP Cash Compensation Program EPI Expanded Program of Immunization ESAF Enhanced Structural Adjustment Facility FAP Feldscher Accuscherske Punkt FPSP Farm Privatization and Support P'roject FSU Former Soviet Union GAA German Agro-Action GAI State Automobile Inspectorate GBAO Gorno-Badakhshan Autonomous Oblast GDP Gross Domestic Product GNP Gross National Product IDPs Internally Displaced People ILO International Labor Organization IMF International Monetary Fund LDFA Leninsky District Farner's Association ME Ministry of Education MF Ministry of Finance MH Ministry of Health MSP Ministry of Social Protection MVD Ministry of Intemal Affairs NGO Non-Government Organization ORA Orphans, Refugees and Aid PPP Purchasing Power Parity. PTA Parent-Teacher Association RRS Regions of Republican Subordination SAC Structural Adjustment Credit SCF/US Save The Children (US) SSA State Statistical Agency SPF Social Protection Fund SVA Rural Outpatient Clinic TASIF Tajikistan Social Investment Fund TLSS Tajikistan Living Standards Sunrey TR Tajikistan Ruble UNDP United Nations Development Program WFP World Food Program Vice President: Johannes Linn Country Director: Kiyoshi Kodera Sector Manager: Michal Rutkowski -Task Manager: Michael Mills Republic of Tajikistan POVERTY ASSESSMENT Contents Preface .....................................................1 Summary and Conclusion .....................................................2 Introduction .................................................... 14 Chapter 1: A Profile of Poverty .................................................... 16 A. Measuring Poverty in Tajikistan .................................................... 16 B. The Level and Depth of Poverty .................................................... 17 C. Identifying the Poorest .................................................... 20 D. Coping Strategies .................................................... 31 E. Food Security .................................................... 31 F. The Development of a Pro-Poor Country Development Strategy ............................... 33 Chapter II. Employment and Poverty .................................................... 35 A. The Main Features of the Labor Market in Tajikistan ................................................. 35 B. Changes in the Labor Market 1991-1998 .................................................... 42 C. Labor, Wages and Poverty .................................................... 44 D. The Main Labor Market Issues .................................................... 47 E. The Development of a Pro-Poor Employment Strategy .............................................. 47 Chapter III. Agriculture and Poverty .................................................... 52 A. The Main Features of Agriculture in Tajikistan .................................................... 52 B. The Profile of Rural Poverty .................................................... 54 C. Land Reform .................................................... 58 D. Cotton .................................................... 63 E. Irrigation .................................................... 64 F. Finance and Credit .................................................... 67 G. The Development of a Pro-Poor Agricultural Strategy ............................................... 68 Chapter IV: Education and Poverty .................................................... 72 A. The Main Features of the Education Sector .................................................... 72 B. Public and Private Spending on Education .................................................... 74 C. School Enrolments and Poverty .................................................... 79 D. Poverty and Reasons for Absence at School .................................................... 83 E. Technical and Higher Education .................................................... 85 F. The Development of a Pro-Poor Education Strategy ................................................... 87 Chapter V: Health and Poverty .................................................... 91 A. Health and Nutritional Status .................................................... 91 B. Main Features of the Health Sector .................................................... 95 C. Financing of Health Care .................................................... 96 D. Access to Health Care .................................................... 99 E. Utilisation of Health Care Services .................................................... 100 - i - F. The Restructuring of the Health Services ................................................................ 102 G. The Development of a Pro-Poor Health Strategy ...................................................... 103 Chapter VI: Social Protection and Poverty ................................................................ 106 A. The Main Features of the Social Protection System .................................................. 106 B. The Current Systems of Cash Benefits ................................................................ 108 C. An Assessment of the Current Cash Benefit Systems ............................................... 110 D. Options for the Reforn of Social Assistance ............................................................. 114 E. The Development of a Reforrned System of Social Protection ................................. 118 Chapter VII: Governance and Poverty .............................................. 121 A. The Political and Economic Context to Governance ................................................. 121 B. The Impact of Improper Governance on Poverty ...................................................... 122 C. Ongoing Efforts to Improve Governance ................................................................ 126 D. "Top-Down" Measures to Address Outstanding Problems ....................................... 128 E. "Bottom-Up" Measures to Address Outstanding Problems ....................................... 130 F. The Development of an Improved Governance Strategy ........................................... 133 Chapter VIII: Looking Forward ................................................................ 135 Appendix 1: The Tajikistan Living Starmdards Survey Methodology ................................... 141 Appendix 2: The Sensitivity of the Poverty Profile to Alternative Assumptions of Equivalence Scales ................................................................ 147 List of Tables and Figures Summary Table: Poverty Measures in Tajikistan ................................................................. 3 Table 1: Poverty and Human Development in USSR (1989) .................................................. 14 Table 2: Summary Macro-Economic Indicators, 1991-1999 .................................................. 15 Table 3: Poverty Measures in Tajikistan ................................................................ 18 Table 4: Distribution of Income and Expenditure in Selected Countries ................................ 19 Table 5: Poverty Incidence amongst Individuals by Location ................................................ 20 Table 6: Composition of the Poorest and Richest Quintiles by Location ............................... 21 Table 7: Poverty Incidence amongst Individuals by Demographic Group ............................. 23 Table 8: Poverty Incidence by Education and Labor Market Status . ..................................... 28 Table 9: Structure of Total Household Income by Quintile Group . ...................................... 28 Table 10: Correlates of Household Poverty ................................................................ 30 Table 11: Proportion of Households Reporting Engaging in Selected Coping Strategies ...... 32 in the Last 6 Months ................................................................. 32 Table 12: Household Food Security and Coping Strategies by Quintile ................................ 33 Table 13: The Utilization of Labor Resources ................................................................ 36 Table 14: Labor Force Participation Rates by Age Group and Gender .................................. 37 Table 15: Labor Force Participation Rates by Settlement and Age Group ............................. 37 Table 16: Reasons for Non-Participation by Age Group and Settlement ............................... 38 Table 17: Labor Force Status by Educational Level ................................. .............................. 38 Table 18: Employment by Sector ................................................................ 39 Table 19: Employment by Occupation ................................................................ 39 - ii - Table 20: Private Undertakings and Informal Trading by Economic Sector .......................... 40 Table 21: Labor Force Participation Ratios 1991-1998 (Registered) by Gender ................... 42 Table 22: Registered Unemployment 1992-1998 ............................................................ 43 Table 23: Reasons for Changing Jobs and/or Labor Force Status 1997-1999 ........................ 43 Table 24: Average Monthly Wage per Household by Settlement .......................................... 44 Table 25: Share of the Employed Affected by Wage Arrears by Quintile ............................. 45 Table 26: Ownership of Benefits in Kind ............................................................. 46 Table 27: Average Nominal Wage, Minimum Wage and Subsistence Minimum ................. 46 in Tajik Rubles and US dollars, 1992-1998 ............................................................ 46 Table 28: Trends in Crop Area, Yield and Production since 1991 ......................................... 53 Table 29: Agricultural Sector Reforms under the ESAF, 1999-2000 ..................................... 54 Table 30: Rural-Urban Distribution of Households by Regions ............................................ 54 Table 31: Distribution of Individuals in Households by Rural and Urban ............................. 55 Table 32: The Age Composition of Population by Rural and Urban ..................................... 55 Table 33: Educational Status by Rural and Urban ............................................................ 55 Table 34: Participation Rates and Land Available for Rural Households .............................. 56 Table 35: Contribution of Own Farn ing to Household Income ............................................. 56 Table 36: Ownership of Livestock and Other Assets ............................................................ 57 Table 37: Land Availability per Capita by Quintile for Rural Households ............................ 57 Table 38: Numbers of Farms and Estimated Arable Areas (June 1999) ............................... 62 Table 39: Educational Facilities and Students, 1998 ............................................................ 73 Table 40: Actual Education Spending by the State Budget, 1992-1999 ................................. 75 Table 41: Education Budget Plan and Execution, 1998-2000 ................................................ 75 Table 42: Actual Education Expenditure by Item (% of total), 1997 ..................................... 76 Table 43: Actual Education Expenditures (as % of Plan), 1994-1998 ................................... 76 Table 44: Planned Education Expenditures, 1997-1998 ......................................................... 77 Table 45: Local Education Expenditure Per Capita, 1994-1999 ............................................ 77 Table 46: Net Enrollment Rates in Basic Education by Quintile ........................................... 80 Table 47: Net Enrollment in Basic Education by Region and Quintile .................................. 81 Table 48: Net Enrollment in Basic Education by Settlement and Region .............................. 83 Table 49: Reasons for Students' Absence in Basic Education by Region .............................. 84 Table 50: Reasons for Students' Absence in Basic Education by Quintile ............................ 84 Table 51: Attendance Rates for Post-Basic Education by Level of Education ....................... 85 for Heads of Household ............................................................ 85 Table 52: Net Enrollment in Basic Education by Education of Household Head ................... 87 Table 53: Official Health Indicators ............................................................ 91 Table 54: Infectious Disease Incidence per 100,000 ............................................................ 92 Table 55: Tuberculosis Cases ............................................................ 92 Table 56: Condition for which Medical Assistance was Sought by Age and Gender ............ 93 Table 57: The Prevalence of Breast Feeding ............................................................ 93 Table 58: The Prevalence of Acute and Chronic Malnutrition ............................................... 94 In Children under 5 Years ............................................................ 94 Table 59: Primary Health Care Facilities ............................................................ 95 Table 60: Health Personnel per 10,000 Population ............................................................ 95 Table 61: Health Personnel Salaries ............................................................ 96 Table 62: Actual Health Spending by the State Budget, 1992-1999 . . 96 Table 63: Health Budget Plan and Execution, 1998-2000 ...................................................... 97 Table 64: Planned Health Expenditure by Item (% of total) .................................................. 97 - ijI - Table 65: Planned Local Health Expenditure by Institution (% of total), 1994-1998 ....... .... 97 Table 66: Local Health Expenditure Per Capita, 1994-1999 .................................................. 98 Table 67: Self Reported Morbidity by Quintile of Per Capita Househol,d Expenditure ......... 99 Table 68: Reasons Why People Did Not Seek Medical Assistance by Qluintile .................... 99 Table 69: Health Care Access ................................................................100 Table 70: Distribution of Health Care Utilization and Access by Quintile .......................... 101 Table 71: Degree of Difficulty in Paying for Health Care .................................................... 101 Table 72: Place of Birth of Last Child ............................................................... 102 Table 73: Average Length of Stay in Hospital ............................................................... 103 Table 74: Estimated Eligible and Actual Beneficiaries of the CCP (April 1998) ................ 109 Table 75: Pensioners in 1993-1998 (thousands) ............................................................... 110 Table 76: Households Eligible for, and in Receipt of, Social Protection Benefits ............... 111 Table 77: Pension Eligibility and Payment by Region ......................................................... 112 Table 78: Reasons for Not Receiving a Benefit given by Eligible Households ................... 113 Table 79: Average Value of Pensions and Salaries .............................................................. 114 Table 80: Summary of Targeting Options ............................................................... 118 Table 81: Budgetary Funds Available to Support the Poor .................................................. 119 Table 82: Existing NGOs Working in the Social Sectors in Tajikistan ................................ 131 Table 83: Govermnent Spending on Social Sectors 1999-2000 ........................................... 136 Table 84: The Effect of Economic Growth on Poverty Reduction by Year 2005 ................ 137 Table 85: Pssible Poverty Reduction Indicators and the Situation in 199,9/2000 ................. 137 Table A2.1 The Risk of Household Poverty by Household Size . ............................ 148 Table A2.2 Composition of Poor Households by Household Size . .......................... 148 Table A2.3 The Risk of Individuals Living in Poor Households by Age . ..................... 149 Table A2.4 Composition of Individuals Living in Poor Households by Age . .................. 149 Table A2.5 The Risk of Household Poverty by Type of Settlement . ......................... 150 Table A2.6 The Risk of Household Poverty by Region .................................... 150 Figure 1: Cumulative Distribution of Per Capita Household Income and Expenditures ........ 19 Figure 2: Proportion of Individuals who are Poor by Region ................................................. 22 Figure 3: Proportion of Individuals who are Poor by Age Group .......................................... 25 Figure 4. Proportion of Individuals who are Poor by Household Composition ..................... 26 Figure 5: Food Security ............................................................... 32 Figure 6: Median Household per Capita Net Education Expenditures ................................... 78 (as percent of Total Household per Capita Expenditures) ....................................................... 78 Figure 7: Gender Gap in Net Enrollments: Urban Areas ........................................................ 82 Figure 8: Gender Gap in Net Enrollments: Rural Areas ......................................................... 83 Figure 9: Educational Attainment by Poverty Quintile .......................................................... 86 Figure 10: Median months of arrears by quintile ............................................................... 112 - iv - PREFACE This poverty assessment was carried out in November 1999. Much of the analysis is based on the results of the Tajikistan Living Standards Survey which was undertaken earlier in the year. The work was also based on a considerable amount of complementary data collected through other surveys, social assessments and statistics from a wide variety of sources. The World Bank team was led by Michael Mills (Principal Economist), and included Chris De Neubourg (labor market), Cevdet Denizer (economist), Annelies Drost (education), Jane Falkingham (poverty profile and social protection), Isabel Hemming (health), Taies Nezam (social development), Ray Purcell (agriculture) and Michael Thurman (governance). The initial planning work for the task was undertaken by Geremia Palomba (Economist). Team assistance was provided by Carmen Laurente. The poverty assessment was carried out under the overall guidance of Maureen Lewis (Sector Leader for Economics in the Human Development Department of the Europe and Central Asia Region) and Annette Dixon (Director, Human Development Department of the Europe and Central Asia Region). The mission worked with three particular teams of national experts. The first team was formally established as a Working Group on Poverty and Social Protection by the Prime Minister, and was headed by Mr. B. T. Turaev (Deputy Chairman, State Statistical Agency). Its members included: Messrs/Mesdames Valiev D. A.; Alifbekov Z. A.; Mirzoeva A. D.; Alimov A. L.; Djononov S.; Sharipova E. M.; Nosirov E. M.; Shohmakhmadova S.; and Sharipov Z. The second team, with which the mission worked, was the SPRITE ("Social Protection in Transition Economies") team headed by Professor Komilov. The SPRITE team organized two seminars on poverty for a large number of officials and national experts. The first seminar was held in November, 1999, when the poverty assessment mission was undertaken; and the second seminar took place in May 2000, after the draft report had been prepared. At these seminars, there were major presentations on poverty issues by selected national experts and also by World Bank team members, as well as substantial small-group discussions. Following the first seminar, the Prime Ministerial Working Group on Poverty and Social Protection compiled a first draft of a National Program to Alleviate Poverty and Develop Social Protection Mechanisms in Tajikistan. In March 2000, the President established another team, headed by Mr. G. Babayev (State Economic Advisor) to produce an Interim Poverty Reduction Strategy Paper. This team also participated prominently in the May 200 seminar. In February 2000, the World Bank also organized a country economic mission. The purpose of that work was to focus on the macroeconomic framework, an analysis of growth possibilities, the factors hindering a supply response from the reform measures already put in place, and the restructuring needs of the agricultural and industrial sectors in particular. The poverty assessment report and the country economic report complement each other closely. - 1 - SUMMARY AND CONCLUSION 1. Poverty is the central development issue in Tajikistan. The country is now one of the poorest in the world, with an estimated per capita GNP of no more than $330 (1997). Poverty is not new in Tajikistan, as the country came to independence with widespread material poverty. That was made worse by the civil conflict in the early 1990s. However, with the cessation of violence in the country, with economic growth having resumed since 1997, and with reforms now being made to restructure the economy, it should be possible to make significant progress in poverty reduction during the coming years. 2. This report suggest that there should be four key pillars to a. poverty reduction program strategy: (i) the stimulation of high labor productivity and economic growth; (ii) the provision of basic social services; (iii) the targeting of assistance to the poorest; and (iv) the development of a well-governed and safe environment. Ultimately, economic growth is the main mechanism to ensure that future generations in Tajikistan will be able to find gainful and highly productive employment and to bring prosperity to all; and so action on the labor market and on agricultural and rural development policies form the first of the proposed four key pillars for a poverty reduction strategy. However, poor people also need to have sufficient human capital so that they can take advantage of existing and new opportunities. Access to good quality basic schooling and health services is not only a human right, it is also essential for poverty alleviation. The third key pillar of the proposed poverty alleviation strategy concerns the targeting of assistance to the poorest, that is, those people who have special difficulties or needs and for whom targeted assistance is required. An efficient and effective social safety net is also required to facilitate the transition process and to obtain widespread public support for some of the difficult reform decisions (such as public sector retrenchment) which need to be taken. The fourth pillar of the proposed poverty alleviation strategy is the development of a well-governed and safe enviromnent in which people can live and look after themselves. A profile of poverty. 3. To develop an appropriate strategy for poverty reduction, a clear understanding of the nature of poverty in the country is essential. Within Tajikistan itself, poverty is viewed as a multi-dimensional phenomenon. When residents are asked to define it, they answer lack of clothing, food shortages, inadequate salaries, low pensions, lack of land or livestock and a range of other indicators. In order to obtain a firm quantitative foundation for assessing the dimensions of poverty, the Tajikistan Living Standards Survey (TLSS) collected data on demographics, housing, expenditures, consumption and other areas. Clearly, the extent of poverty depends on the choice of poverty line. However, whatever measure is chosen, it is clear that the level of material poverty in Tajikistan is high, with four out of five 'poor'; a third 'very poor'; and nearly 20 percent 'extremely poor' (below $1.075 PPP). Over half of all households had not eaten any meat in the 7 days prior to the survey, 61 percent had not eaten eggs and 85 percent had not eaten confectionery. Three-quarters of the population are very concerned about how they will provide for basic necessities in the next 12 months. -2- Summary Table: Poverty Measures in Tajikistan (a) Proportion of population below minimum consumption line 96% (b) Proportion of population poor (below State Statistical Agency poverty line of 83% TR20,000) (c) Proportion of population very poor (below 50% of State Statistical Agency 33% poverty line) (d) Proportion of population extremely poor (below $1 .075 PPP a day) 17% Source: TLSS 4. The data from the TLSS may be compared with data from other sources. The Tajik Social Investment Fund (TASIF), Government agencies, donor agencies (UNDP and the Asian Development Bank) and international NGOs have all completed various social assessments of Tajikistan. According to the TASIF, some 60 percent of the population consider themselves poor. While the food security situation is acute, there is no evidence of widespread severe malnutrition. Nevertheless, a series of anthropometric and food security surveys over the last six years clearly indicate that there is a significant amount of undernutrition and that there was a steady decline in the nutritional status of children through the 1990's. The situation was especially serious in some regions in the period 1995-1997. With the upturn in economic growth since 1997, it is possible (but not yet certain) that the situation may have improved somewhat since then. Together the data from all of these sources provide a picture of the extent of poverty, the geographical and demographic patterns of poverty, poverty and the labor market, social services and expenditures, and infrastructure and assets. 5. The distributions of both incomes and expenditures within Tajikistan are very heavily skewed, with households highly concentrated in a narrow range of values in the bottom four- fifths, with the result that headcount measures of poverty are very sensitive to even small changes in the value of an absolute poverty line. A strategy for reducing poverty should focus on those families and individuals who are at the bottom of the distribution, and also on the most vulnerable segments of society. Households with many children experience a higher risk of living in poverty than adults do, and the situation is undoubtedly very serious for street children and institutionalized children. Poverty rates among the very old (age 75 or older) are also high and are highest among single and disabled pensioners. As expected, data show that the risk of being poor is inversely related to education. Persons with no education were more than two and a half times as likely to be living in a household in the bottom quintile as individuals with higher education. According to the TLSS, less than half of all households have access to piped water; nearly a quarter are reliant on water from rivers or lakes or ponds, 75 percent of households have no source of hot water, 85 percent rely on an outside latrine, two thirds of households heat their home for no more than four months, and only 14 percent of households have a phone inside the home. 6. The findings of the TLSS further demonstrate that substantial proportions of households are food insecure. Food was the principal household expenditure during the month preceding the interview, and one third of households had to incur debt in order to buy - 3 - food, according to the TLSS. In terms of coping strategies, 72 percent of households reported consuming food grown by the household. But financial hardship is not limited to the poorest group. Even among well-off households, nearly 30 percent reported eating smaller portions and reducing the number of meals a day. About 25 percent thought they would have to sell household assets, and more than 25 percent would have to borrow to make ends meet. Of all households eating less than two meals a day, more than 50 percent reported that they would have to reduce the number of meals even more. Employment and poverty. 7. According to the TLSS, 56 percent of the population participate in the labor force, a relatively low number compared with other republics of the FSU. Some 90 percent of men aged 30 to 54 belong to the labor force. Older residents, many of whom work in agriculture, are continuing to work; 30 percent of men and 15 percent of women are active after age 60. A large number of people are not in the labor force for traditional reasons such as school enrollment, pensions, disability, and home care. Yet a disturbingly large- number of young people are unemployed and are no longer seeking gainful employment. Gender differences in school attendance above the age of 16 are also large, especially for individuals between 20 and 24, with women far less enrolled in schools. Women also stay out of the labor force, even at young ages, for reasons related to family responsibilities. 8. The formal part of the economy still remains state-dominated and many people work in the public sector, especially in state companies and state farms. However, the state sector is shrinking due to lack of resources and it cannot employ more people. The old labor absorption mechanisms of the Soviet system no longer work and new mar]ket mechanisms are too weak to absorb the excess supply. Service jobs make up the second most important sector. But the private sector is still in its infancy. The majority of private activities are concentrated in informal family businesses and street trade. Officially, the unemployment rate is 3 percent, but a large number of people are among the "hidden" unemployed, meaning that they are formally employed but are not working because they are either on forced holidays or are working part-time involuntarily. When these hidden emaployed people are included in the unemployment rate, the level may be as high as 33 perc ent. The average wage is no more than one third of the subsistence minimum. 9. To alleviate poverty, the functioning of the labor market needs to be improved. Since labor is the only source of wealth that is accessible to (nearly) all, poverty cannot be effectively alleviated without providing people with jobs. A strategy aimed at enhancing economic growth is therefore extremely important. The Government needs to improve conditions for private business initiatives, and it is already looking carefully at ways in which the environment for private sector development could be improved. The regulations and laws on bankruptcy, taxes and registration are not known widely nor implemented well, and this discourages private business initiatives enormously. The Institute of Labor has started the process of formulating a new law on employment and new regulations regarding minimum wages, but clear regulations are needed. Further banking reform is also highly needed, given that access to a capital market and effective protection in the banking and insurance businesses are preconditions for the development of a capitalist economy. The Government also needs to help to improve entrepreneurial skills and support new private business initiatives. Incubation centers for private businesses could be established to provide initial -4 - training, counseling, monitoring and supervision of new businesses. Many programs that would normally be conducted under the control of local public authorities could probably be used to enhance private sector businesses. 10. It is necessary to identify the constraints to the development of the private sector, and the Government is already planning to conduct a comprehensive survey of private enterprises in the three major municipalities of the country. It is also forming private sector advisory groups, comprising municipal officials and representatives from the private sector. The country also needs to develop the institutional capacity needed to analyze labor market developments and to monitor labor market policy. Now that national survey data are available through the TLSS, a major effort needs to be made to build up the national capacity in social policy monitoring and evaluation. In the short term, this means: (i) setting up a policy monitoring and evaluation unit within the Ministry of Labor and the Institute of Labor; (ii) seeking technical assistance to support the activity; and (iii) considering the publication of an annual labor market report. To encourage the development of a functioning labor market, it is also essential that the Government should also pay its own wage arrears and respect its own employment contracts. Agriculture and poverty. 11. Agriculture plays a vital socioeconomic role in the economy and in the lives of a majority of the population. As other sectors have collapsed, the relative role of agriculture has increased. Agriculture now makes up 30 to 40 percent of GDP, more than 30 percent of export revenues, and 30 to 40 percent of Government tax revenues mainly through the taxation of cotton. It also provides formal occupations for more than 50 percent of the labor force. The workers on state farms have tended in the recent past to receive payments in-kind. Informal agricultural employment and self production on small plots now contribute to the basic livelihood of most of the rural population. Great changes in cropping patterns have taken place since 1991. The figures suggest that 200,000 to 300,000 arable hectares, or 20 to 30 percent of the total production area, may now be out of use. The main reason is the breakdown of the irrigation and drainage systems. In termns of production, there has been a decline in the land productivity of cotton since 1991 and an increase in total grain area and production. The tendency to increase the area of wheat, which is the main staple, has been constrained by rust disease. As noted earlier, the TLSS results show that rural areas are relatively worse off than urban areas, even when household economies of scale are taken into account. When asked about survival strategies, participants rank their household plot and livestock at the top of their lists, ahead of migration, trade, humanitarian assistance, wages and pensions (in descending order of importance). Given that the first pillar of the strategy to alleviate poverty is to stimulate labor-intensive economic growth, the agricultural sector should be a focus of attention. 12. Improved access to land needs to be considered a priority in a poverty reduction strategy. The country's area available for crop production is limited as mountains cover much of Tajikistan's surface. Arable land is some 960,000 hectares, or 7 percent of the total area of 143,000 square kilometers. Much of the arable land is subject to arid or semi-arid conditions, and irrigation systems exist on some 720,000 hectares. Pastures are a significant resource, with 3.6 million hectares under permanent pasture. Between 1995 and mid-1999, some 120 state farms were privatized and most of them were converted "dekhan" (private) - 5 - farms. Since June 1999, the program of land reform has accelerated, and targets have been set for the conversion of a further 160 kolkozes into private dekhan farmrs by March 2000 through issuing land share certificates to employees. The World Bank is assisting the land privatization process through its Farm Privatization Support Project (FPSP). Some small lots of land have also been distributed to households to supplement existing plots. These additional lots have allowed a greater level of food self-sufficiency and opportunity for sales. 13. For many of the most vulnerable, improved and extended land access could make a major difference. It is therefore recommended that: (i) an equitable and inclusive distribution of access to land should be ensured for rural households; (ii) there should be transparent legal protection of land access and use rights for individual dekhan shareholders; (iii) comprehensive information should be provided to shareholders on individual land rights and on choices of farm management systems; (iv) participatory consultation approaches should be undertaken for land stakeholder decision making; (v) there should be maximum flexibility of farm management arrangements to enable both individual and collective and mixed systems on former kolkozes; (vi) applied research, advisory and other support services (including farmer to farmer approaches) should be introduced to promote intensive, small scale technologies and farm management; and (vii) the status of some 200 farms designated for retention under the state should be reviewed. 14. Cotton production is extremely important. It dominates the agricultural economy, is the country's single most important cash crop, and covers more than 5;0 percent of the national irrigated area. The production and delivery of cotton is given absolute priority at all levels of the Governnent. In order to achieve improvements in resource use in the agricultural sector, part of the privatization program has already focused on the state cotton ginneries and the state cotton-marketing organization. Though rescheduled for completion by September 1999, the process is still ongoing. State orders for cotton were phased out in 1996, but some rayon Governments continue to play a key role in administering the current system. This system of producing and delivering cotton has a negative effect on poverty. First, the interest of the centralized system to control the number of producers and contracts has slowed down the land reform program, and has delayed realizing its potential to reduce poverty. Second, despite the fact that the financial returns on cotton are potentially good, the actual returns paid to producers are extremely low. The wages of much of the rural population working on kolkozes are also extremely low. As can also be seen from the TLSS data, the non-payment of wages and wage arrears at the local level has a major impact on poverty. For the future, therefore, it is recommended that: (i) the privatization program for the state ginneries and the central cotton marketing organization should be sustained; (ii) there should be freedom of choice for the cropping decisions of new private farms; and (iii) new institutional arrangements need to be developed to pernit the practice of small scale cotton production. 15. The irrigation and drainage systems have seriously deteriorated since the breakup of the Soviet Union. As a result, irrigation volumes have been reduced by as much as 50 percent. A good deal of irrigated land has been lost to production due to irrigation or drainage failure. For the future, it is recommended that: (i) irrigation rehabilitation should be pursued on the basis of economic viability and where there are potentially good economic retums on investments; (ii) rainfed, livestock and non-agricultural technologies should be investigated and introduced for areas where irrigation is not economically viable; (iii) user - 6 - charges for irrigation water should be applied and extended; and (iv) institutional reform of irrigation management systems should be carried out at the community, district and regional levels. Recently a credit for a Rural Infrastructure Rehabilitation Project has been approved by IDA, and this project should contribute to developments in this area. 16. Through carefully targeting interventions, micro-finance has an important role to play in assisting the most vulnerable groups. Some international donors and NGOs have already extensively used micro-credits for rural communities. Sustainability is always an issue with micro-credit because such schemes are typically donor driven and subsidized. Because loans are small, it is not uncommon for administrative costs to be higher than the value of the loan. To ensure sustainability, very high rates of repayment and low administrative costs are needed. As a result, it is recommended that: (i) financial sector restructuring should be sustained; (ii) credit should only be extended to private entities; (iii) micro-grants should be targeted toward the most vulnerable groups; and (iv) micro-credit should be targeted toward vulnerable groups and areas, and community savings and credit schemes should be introduced and extended. Education and poverty. 17. Access to good quality basic schooling and health services is not only a human right, but is also essential for poverty alleviation. Tajikistan's historically impressive educational statistics--especially for women, girls and ethnic minorities--place it in the ranks of high income countries, being in this respect well ahead of most other FSU countries. However, this situation is rapidly changing with the decay and destruction of school buildings, the flight of teachers both away from the country and also away from the profession, lack of basic textbooks and teaching materials, and absence of many children especially in war- affected areas, who are unable to attend school for much of the year. 18. The collapse of budgetary revenues over the 1992-1997 period forced severe reductions in social expenditures in all categories. Reported expenditures on education fell to the lowest levels in Central Asia. Education had been free and compulsory for all citizens at all levels until the mid-1990s. However, since then, numerous attempts have already been made to diversify sources of revenue to generate additional income in the education sector. Both formal and informal fees have also been introduced in basic education in the form of parental contributions to schools or payments for specific extra-courses. Unfortunately, there is insufficient knowledge about the extent and use of formal and infornal fees and about their equity effects in the education sector. Although some supplementary private payments for basic education may be necessary in the circumstances of Tajikistan, and may have actually prevented a collapse of the schooling system, there needs to be extreme caution over the potential equity and other effects of this policy on children, particularly those coming from poor families. Specifically, fees need to be transparent, subsidies consistent and well targeted, and the revenue from fees should be devolved rather than centralized. It is believed that is already strong evidence that the lack of textbooks has already adversely affected the poor. While the Government is currently addressing the need to distribute textbooks, it is important that it ensure that the poor have equitable access to the required textbooks as part of the reform measures. -7 - 19. In the present circumstances of Tajikistan, there needs to be a keen focus on the issue of access to education especially at the basic level, particularly by the poor. Access to education comprises barriers and constraints on both the supply side and also the demand side. If children are not attending school, it may be due to problems with the quality and activities of the schools, or it may be due to factors at home or more generally relating to poverty. For the nation as a whole, about 97 percent of children in the relevant age group are reported to be enrolled at primary school, and about 85 percent are enrolled at lower secondary school. Although these rates are still very high on an international comparative scale, considering the country's per capita income level, they show a marked decline compared to the country's historically strong and almost universal access to basic education. In particular, enrollment rates in grades 6-11 have dramatically decreased. The variations in the enrollment rates by income groups, especially at the lower secondary level, also show that the very poor are less likely to enroll their children than non-poor households. Further analysis should be undertaken into the barriers and constraints facing the poor in accessing education, and into the factors causing high absence rates. There should azlso be an analysis of regional, geographical and gender disparities within the education sector, and the links with poverty status. 20. Training should also be provided in establishing a monitoring and evaluation system for schools and in education policy development. There should also be a dialogue between the Ministries of Finance and Education in order to ensure that the education sector receives sufficient budget, and that the distribution of the education budget explicitly takes into account the needs of the poorest groups. The budgeting system needs to be reformed to change the normative approach, introduce incentives and ensure that efficiency savings (for example, from changes in student/teacher ratios) remain within the sector. Objectives and standards should be established to secure equal access to high quality education for all citizens of the country. The rehabilitation and restructuring of schools should be continued and accelerated; and new policies to raise extra funding for schools (such as through the rental of textbooks and the creation of parent-teacher associations) should be developed with particular attention to the needs of the poor. Of particular importance is the need to ensure that all teachers' salaries are paid regularly on time by the local Governments. 21. Increasingly questions are being asked about the validity of the current school curricula in terms of catering to a more modern labor market, rather than preparing students for a state controlled working environment. There is need for revisions to be made to the curriculum (and consequent retraining of teachers) to ensure that there is a strong emphasis on the application of knowledge and new skills. While the skills provided by basic education are important for all people to have, it is also important that students can continue with post- basic education which is crucial for the personal and social development of children and also for the economic and social development of the country. Therefore, in addition to giving the highest priority to basic education, it is also important that the Government focuses on the needs of the vocational and technical training system. A large share of t]he students at the vocational and technical schools are likely to come from poorer families, and these schools are in urgent need of upgrading. Most of them are presently outdated, inefficient and inflexible, and need to be restructured, reoriented and in some cases downsized in order to provide more short-term and flexible training courses. One important way for people in the rural areas to get themselves out of poverty is through improved practices in farming, farm business or small businesses generally; and the vocational and technical educational system - 8- could play a major role in this. So there is need for a review of the vocational and technical training system in order to enable the training schools to provide more short-term and flexible training courses and to contribute to improved practices in farming, farm business and small businesses generally. Health and poverty. 22. The health system is in a very serious situation, with the poor in particular suffering from lack of access to decent quality services. Tajikistan used to rank with middle upper- income countries in terms of the major health indicators. There are major constraints on the accuracy of the data, but it is believed that life expectancy has declined since independence although it may have improved somewhat since its low point in 1994. The official Government statistics suggest that in recent years there has been an improvement in infant and maternal mortality rates, and a decrease in birth and death rates, but the health status of the people has probably deteriorated in some important ways in recent years. In particular, the rates of respiratory diseases, intestinal infections, malaria and typhoid all rose in the period 1995-1998. The findings of the TLSS further demonstrate that substantial proportions of households are food insecure. Surprisingly, according to the TLSS results, the majority of people reported that their health status over the last year had been good or very good. Even so, health status in Tajikistan remains precarious, as the country has to cope with a double burden of disease, inflicted by both chronic non-communicable diseases and infectious diseases. 23. At independence, Tajikistan inherited the standard Soviet health system, which was generally comprehensive but highly centralized and inefficient. There were a large number of hospitals, hospital beds, doctors, and nurses and medical technicians. The exigencies of transition and civil war, with the associated sharp economic decline and resource constraints, have created a widening gap between the health care budget and the actual costs of care. Availability of care does not constitute accessibility of care; and in Tajikistan, although there is still an oversupply of facilities, beds and personnel, there is also a striking absence of even rudimentary medical equipment, supplies and pharmaceuticals. Another particular problem concerns the salaries of health workers which are less than half of the average of all workers' salaries. 24. Access to health care for the poor is now a particular problem, especially as cost recovery schemes and private sector expansion are introduced. As social inequalities in Tajikistan have increased, health inequalities have developed accordingly. Of great concern, the poorest 20 percent of the population are reporting illness and seeking care at lower rates, as they face financial barriers to care more frequently. The poorest are able to devote a smaller proportion of household expenditure to health care, and they are more likely to be seen by a feldscher than are the non-poor. They (and their children) face a higher risk of water-borne disease than the richest quintile, having less access to centralized or piped water. Some women of reproductive age are particularly vulnerable to the effects of poverty on health. 25. There has been significant discussion and planning in the Ministry of Health in recent years about the reform of the health care system and especially about concentrating more resources at the primary level. The World Health Organization has been assisting with this. -9- Despite the plans made, implementation has been constrained and only modest actual resource reallocation has yet occurred. The ongoing IDA-funded project will help the Ministry of Health with the further implementation of the reforms, but it will only focus initially on two rayons. There will soon be a parallel social sector rehabilitation project funded by the Asian Development Bank, and that will extend the reformns further. But much remains to be done. The incentive system will also need to be changed. Health care financing is still input-based, and this rewards excess capacity and unnecessary hospital admissions of extended duration. In general, the health delivery system still emphasizes curative care, rather than disease prevention and health promotion. 26. If a greater proportion of the available resources were to be allocated to primary health care, there would be an improvement in equity as well as efficiency. The poorest quintile of the population access primary care more frequently than tertiary care; and so redirecting resources to primary care rather than to hospital based services (more frequently used by the non-poor) would target the poor in Tajikistan. Young children and women of reproductive age, who are the most frequent consumers of health care, and among the most vulnerable, also access most services at the primary level, and therefore improvements in primary and maternal health services would additionally benefit this group. But the quality of care should also be improved in the peripheral facilities, and health worker capacity enhanced, in order to increase utilization rates generally of primary care. Strengthening primary care, and primary care providers (feldschers and midwives), is therefore the key strategy for restructuring the health delivery system to the benefit of the poor. Social protection and poverty. 27. The third key pillar of the proposed poverty alleviation strategy concerns the targeting of assistance to the poorest, that is, those people who have special difficulties or needs and for whom targeted assistance is required. During the last five years, civil conflict and the economic and social dislocation associated with transition have exacerbated the disadvantage of some of the "traditionally poor"-- pensioners, families with large numbers of children and single parent families-- and given rise to a new group, the "working poor". And while the number of vulnerable people has increased, the ability of the Govermnent to fund social protection has decreased dramatically. The value of benefits has fallen in real terms and the number of actual recipients has been reduced considerably below even the Government's target. 28. In view of the large number of extremely poor people in Tajikistan, it is important to examine the organization and the financing of the existing safety net programs and to evaluate whether they are appropriate and effective in reaching the poor. Vulnerable groups are currently supported by a complex mix of both formal and informal safety nets, with benefits in cash and in-kind from Government, NGOs, and the extended family and wider community. Much of the support to the poor is provided by informal safety nets--by community groups, NGOs and the family. 29. There are two main types of official social protection benefits available in Tajikistan: the cash compensation program offering social assistance benefits to the poor; and pensions providing social insurance benefits to the elderly, disabled and bereaved. The annual Government outlay for the cash compensation program should be about TR6 billion, - 10- assuming that the eligible population is about one million people (just less than 20 percent of the total population). In practice, however, the cash compensation payments since 1997 have been considerably less. In order to improve payment rates, two reforms were recently made to the program: the paperwork required for claiming the benefit was simplified, and the duration for the period of the claim was increased to three months to reduce transaction costs. However, these reforms have had little impact. The other social benefit available is the pension program, which also needs to be reformed. The value of pensions relative to salaries has declined from 50 percent in 1995 to 35 percent in 1998, and pensions have become almost worthless. 30. The cash compensation program could be redesigned in several ways. One alternative is consumption-based proxy-means testing. Proxy-means tests use a set of characteristics that prove to be good predictors of poverty in order to establish eligibility for a social program. A second and simpler way is to target transfers according to some fixed observable characteristic of the recipient household or individual, such as the number of dependent children or single parent status. The poverty profile demonstrated that the number of children in the household is one of the strongest correlates of poverty in Tajikistan. Therefore, any change that affects children will also affect the vast majority of households. One option would be to introduce a child benefit that is linked to school attendance, which might improve attendance rates and help alleviate poverty as well. Another approach would be to allow exemptions from fees for textbooks and other materials for the poorest children. Another alternative could be an in-kind benefit such as free school lunches, which would be targeted at the poorest children and might address some of the problems of malnutrition and school attendance. 31. Yet another alternative is for individuals to select themselves for assistance. Self- targeting programs such as public works (self targeting based on below market wages) have been found to be effective mechanisms of providing income and/or food security in other parts of the world. Typically such programs are hybrid in nature, combining poverty alleviation (i.e. cash transfers) with a work requirement to ensure self-targeting and with infrastructural development that promotes economic growth. Such a program could build on the experiences of the Tajikistan Social Investment Fund. Given the pressing need in Tajikistan for both of these elements, the development and expansion of public employment programs deserves attention. 32. In summary, it is clear that the existing system of social protection should certainly be reformed, given that it is ineffective and inefficient. Having an efficient and well targeted safety net will also be important as the Government moves ahead with civil service reform and especially with staff retrenchments. The Prime Ministerial Working Group on Poverty has already evaluated the alternative mechanisms for targeting the most vulnerable, and the Government intends to pilot a reform of the cash compensation program based on school enrollment or attendance, with local community involvement. The reformed system of cash compensation should be monitored closely and adjustments then made on the basis of experience gained. In addition to reform of the cash compensation system, there is need for reform of the pension system and an expanded program of public works. - 11 - Governance and poverty. 33. Poor governance contributes significantly to the problem of poverty in Tajikistan. The main historic factors in the political life of Tajikistan are the legacy of 70 years of Soviet rule, the civil war and unrest that raged throughout the republic from 1992 until the peace accords of 1997, and provincial alignments of power. However, the recent political developments now bode well for an accelerated program of poverty reduction. Since the signing of the peace agreement between the Government and the United Tajik Opposition in June 1997, there has been an important foundation for peace and securit,y. The Government is also embarking on a major program of public sector reform. 34. The fundamental aspects of governance in Tajikistan are inherited directly from the Bolshevik politics. Tajikistan's public administration reflects a structure similar to other FSU republics, with a republican Government overseeing a three-tier local Government structure at provincial, district and village levels. The absence of an overall body of regulations covering civil service management, together with inadequate pay and incentives, have resulted in low morale and motivation among Government employees, difficulties in retaining competent staff, and distortions of reward systems and administrative structures as ministries resort to offering a range of non-monetary benefits in order to retain and motivate key staff. Responsibility is also fragmented. The structure of decision-making is still highly centralized, and there is also an absence of sufficient checks and balances in the Government -- the judiciary is extremely weak compared to the legislative, and it is especially weak compared to the executive branches of the Government. The civil war has resulted created an atmosphere of lawlessness in which armed extortion is common. The lack of a strong judiciary and police force make it hard for impoverished persons to seek redress under the law. There are also many problems with the existing legal system. For example, the legislation on the rights of citizens lacks sufficient transparency. The Parliament, possessing insufficient expertise in international legal standards, still tends to formulate laws in the Soviet manner. 35. The constraints on the rule of law encourages abuse of power and position in the local economy of Tajikistan, and this negatively affects the livelihood of the population, especially in rural areas where over 70 percent of the population lives. Most of the rural population is engaged in agriculture -- even doctors and teachers, who are often not paid their meager salaries, receive their primary income from subsistence agriculture. Agriculture is managed in such a way that farmers have few rights and must circumvent the law as a coping mechanism. Private business and trade create an opportunity for small retailers to ply their wares and for farmers to sell produce from their kitchen gardens. However, a "cut" is taken from most trade in bazaars by inspectors, policemen, and criminal groups. Due to the collapse in the economy, state budgets no longer suffice to support public services; but it is the poor who are least able to cope with these problems, since they possess neither the money to bribe nor connections to wield influence. 36. It is highly encouraging that the Government has already expressed its strong political will to implement key reforms in public administration, and it is now actively preparing a program of governance reforms. Implementation has already started withl, for example, the establishment of a new state procurement system. The Government also iformulated an anti- - 12- corruption program, which includes removing price distortions in the economy, reviewing laws and decrees, reforming agriculture and land rights, training law enforcement officers and the judiciary, and combating drug trafficking. Some important progress has been made in some of these areas. For example, there have been attempts by the Constitutional Court to improve the standards of legislation. There has also been some improvements in the work of the police in the anti-corruption efforts. A major program to eliminate drug trafficking has also begun. In addition, the number of military checkpoints has declined dramatically, following the peace accord of 1997 and a subsequent decree of the President. 37. There are several further measures that could be taken to improve the lot of the poor in Tajikistan through better governance. These include "top-down" measures, such as strengthening the judiciary and police force, as well as "bottom-up" measures such as encouraging citizens to take joint action through non-Governmental organizations. An obvious priority in reducing lawlessness is to reduce the number of weapons in the country. One way to do this might be means of a weapons buy-back program. Another priority in reforming governance is to improve the capacity of the judiciary to increase the checks and balances in Government and to help strengthen the rule of law. This could be done by increasing their salaries and providing their offices with basic equipment. The training of judges could also be improved through seminars and technical assistance. Governance could be further improved by rendering the law more transparent. Campaigns to educate the citizenry concerning their rights and duties under the law would also improve transparency in governance. 38. In addition to the measures designed to improve governance at upper levels of the state, it is necessary also to provide impetus to improving governance from the "bottom-up". Creating more Non-Governmental Organizations (NGOs) in rural areas could help to organize the population to fight any abuse of positions corruption and to provide them with legal aid. NGOs could also improve governance in education, health care, and environmental management. Community institutions such as the mahallah and jamoat might also encourage more popular participation in governance. The further liberalization of marketization in agriculture and the total elimination of implicit as well as explicit state orders would reduce the opportunities for local officials to abuse their powers in determining the terms of contracts. - 13 - INTRODUCTION 1. Poverty is the central development issue in Tajikistan. The country is now one of the poorest in the world, with an estimated per capita GNP of only $330 (1997). Poverty is not new in Tajikistan, as it came to independence with widespread material poverty. As shown in Table 1. in 1989 the country had the lowest mean per capita income amongst the Soviet republics, well below 50 percent of the mean income in Russia, and the highest proportion of the population in poverty. At independence, the human development index (HDI) in Tajikistan was also lower than in Russia and other parts of Central Asia. Despite the material poverty, however, literacy rates in Tajikistan at independence were at the level of highly industrialized countries; infant mortality rates were low; and access to education and health services was free and almost universal. These standards were, however, largely the result of substantial budgetary transfers from Moscow. Table 1: Poverty and Human Development in USSR (1989) Relative per Prop. of UNDP Human Life Adult capita mean Population with Development Expectancy Literacy (%) income* Per Capita Index (1991) (years) (1991) (1991) Monthly Income below RR75 Russia 100 5 0.858 Kazakhstan 80 15 0.774 69 97.5 Kyrgyz Republic 58 33 0.685 68 97.0 Turkmenistan 57 35 0.697 66 97.7 Uzbekistan 51 44 0.664 69 97.2 Tajikistan 46 51 0.629 70 96.7 All USSR 89 11 Source: Atkinson and Micklewright. 1992; United Nations Development Program (UNDP) Human Development Report, 1994. Note: * Per capita gross household income for workers and collective farm workers in 1989. 2. Soon after independence, Tajikistan entered a period of civil conflict and massive economic decline which lasted until 1997. The country lost its traditional mrtarkets for imports and exports, and also suffered from the end of budgetary transfers from Moscow. These developments led Tajikistan to severe economic decline. As shown in Table 2, gross domestic product (GDP) declined precipitously and inflation soared after 1991. At the same time, the Government budget shrank drastically; and between 1992 and 1997, the Government's revenue as a percentage of the GDP was reduced by more than half. These events had an adverse effect on the material welfare of people, and also oln their capacity to live a healthy and secure life. The conflict disrupted people's lives and dlestroyed the civil society; the economic decline worsened the already high levels of poverty, and created pockets of deep distress and social exclusion; and the sharp decline in public spending reduced the Government's ability to assist needy people and to provide basic services such as education and health to all. - 14 - Table 2: Summary Macro-Economic Indicators, 1991-1999 Year Percentage Change Consumer Price Governtment in GCP Index Revenue (% GDP) 1991 -7.1 1992 -29.0 26.6 1993 -11.0 27.1 1994 -18.9 350.4 44.5 1995 -12.5 609.3 15.2 1996 -4.4 418.3 12.1 1997 1.7 88 13.7 1998 5.3 43.2 12 1999 5.5 (est.) 20.3* (est.) 12.8 (est.) Source: Govemment and IMF; World Bank for CPI. Note: * Estimated on monthly consumer price index from January through August. 3. There have been two major developments in the last three years. First, the scale of the civil conflict was reduced considerably after the signing of the peace agreement in June 1997, and since then the peace accord has largely been implemented. Second, various structural economic reforms were introduced; at the same time growth resumed, and inflation was brought under control. The economy grew slightly in 1997, accelerated in 1998 to 5 percent, and is projected by the International Monetary Fund (IMF) to be 5.5 percent in 1999 and to increase to 6-7 percent annually over the next few years. Inflation has also been relatively low since 1997. Tight fiscal policies have narrowed the budget deficit to 3.8 percent of GDP, largely through expenditure adjustments. Government revenues are, however, projected to be no higher than 14 percent GDP in the near future due to the extremely weak tax collection capacity; therefore the Government budget will continue to be highly constrained. Moreover, the economic structure of the country depends significantly on the export of only a few commodities, particularly cotton and gold, and is thus exposed to the effects of external price shocks. At the same time, unfortunately, the human development indicators have been worsening. In 1997, the UNDP ranked Tajikistan as 115 out of 174 countries using the HDI. -15- CHAPTER I: A PROFILE OF POVERTY A. Measuring Poverty in Tajikistan 1.1 Events through the 1990's exacerbated the inherited problem of material poverty in Tajikistan, and also gave rise to new dimensions of the phenomenon. To develop an appropnate strategy for the alleviation of poverty, it is critical to have a firm understanding of the nature of poverty in the country. This requires a wide range of information, both qualitative and quantitative. Fortunately, there is a considerable amount of qualitative data from work completed in last few years. This includes various social assessments which have been undertaken; a large volume of data collected by the Tajikistan Social Investment Fund (TASIF); many specific reports produced by Government agencies such as State Statistical Agency (SSA); and also other reports by donor agencies (such as UNDP and the Asian Development Bank) and international non-govermnent organizations (NGOs).l 1.2 These sources of information show that in Tajikistan, poverty is viewed by most people as a multi-dimensional phenomenon.2 When asked to define it, respondents typically emphasize (i) lack of clothing, (ii) food shortages, (iii) inadequate salaries, and (iv) low pensions. Some respondents also include lack of land or livestock in the definition. In the war-affected areas, such as in Khatlon and the Karategin Valley, local communities also include shortages of construction material and insufficient shelter. In contrast, communities residing in valleys (in Leninabad, Khatlon and the Regions of Republican Subordination (RRS) also include inadequate drinking and irrigation water, and low crop yields. Mountainous/remote communities in areas such as Gomo-Badakhshan (GBAO) also include (i) lack of physical infrastructure (transportation, communication, electricity), (ii) lack of social infrastructure (health, hygiene, education), (iii) unemployment, and (iv) and underdeveloped production and distribution channels. 1.3 In addition, to obtain new and comprehensive quantitative data, the Tajikistan Living Standards Survey (TLSS) was carried out in Spring 19993 . This survey collected data on demographics and housing, expenditures and consumption, food security and agriculture, education and health, employment and migration etc. While the data are believed to be reliable, as with any survey and analysis of poverty, there are many approaches to its measurement. These include issues such as whether to use an absolute or relative approach, the choice of the poverty line, the selection of the welfare indicator, the valuation of in-kind benefits, and the valuation of home production. The survey results are also limited as they only represent one point in time, and exclude the homeless. The main approach used here, ' These include a Food Security Survey carried out by ECHO; a Household and Bazaars Suarvey carried out by Save the Children US; and recent nutritional surveys by German-Agro Action (in the Regions of Republican Subordination and Leninabad) and by Action Against Hunger (in Khatlon and Khulyab). 2 Between November 1997 and October 1999, the TASIF conducted seminars and surveys in 11 rayons (in all major regions of the country, including urban and rural, mountainous and valley, and war-affected communities) to inform the targeting of its micro-projects. In each rayon, participants (local government officials, mahalla representatives, farm managers and laborcrs, women and pensioners, etc.) identified community-specific poverty criteria; and then, based on these criteria, selected the poorest jamoats and kishlaks. 3The survey methodology is discussed in more detail in Appendix 1. The issue of equivalence scales is discussed in more detail in Appendix 2 - 16- however, is first to focus on five possible absolute poverty lines (based on expenditures and using an intertnediate assumption for economies of scale); then to examine the issue of the distribution of expenditures; and finally to focus on the poorest 20 percent of households. The data from the TLSS are compared with the qualitative information obtained from a wide variety of other sources. In this way, a picture is built up of the extent of poverty (using different assumptions); the geographical and demographic patterns of poverty; and the correlates of poverty with the labor market, the use of social services, the structures of incomes and expenditures, and infrastructure and assets. B. The Level and Depth of Poverty 1.4 The picture of poverty obtained from the various social assessments and seminars conducted by the TASIF suggest that about 60 percent of the population consider themselves as poor. This is confirmed by data from the TLSS in which just over six out of ten households ranked themselves as being on the bottom three rungs of a nine-step ladder. It is widely felt that the most vulnerable groups are pensioners, the disabled, families who have lost their breadwinner, large families (with five or more children), teachers and doctors, and the unemployed. In cotton-growing areas, collective farm workers are considered vulnerable; in war-affected areas, families without shelter and/or livestock are considered vulnerable; and in mountainous areas, families without land are considered vulnerable. Although subjective, this is an important perspective on poverty in Tajikistan. 1.5 The people's own perception of poverty can be compared with the quantitative results from the TLSS. Using the poverty lines suggested by the SSA, taking a rate of TR20,000 for the "poor" and TRlO,000 for the "very poor", and assuming that there are some moderate economies of scale enjoyed by households containing more than one person (assuming a theta of 0.75), about 83 percent of the population may be considered to be very poor and 33 percent may be considered to be very poor (using expenditures rather than incomes). This is a head-count of poverty. In addition, however, it is also useful to consider the poverty-gap index (P1), which gives an indication of the depth of poverty and the cost of eliminating it by showing how much would be necessary to bring every household up to the minimum subsistence level. Table 3 shows that the gap is very considerable (at 35.8) if the Government's poverty line of TR 20,000 is used. Finally, the Foster-Greer-Thorbecke (P2) measure shows the severity of poverty, by weighting the poverty gaps of the poor by the size of those gaps, thus giving a greater weight to those who are most poor. This measure can thus be thought of as the sum of two components: an amount due to the poverty gap, and an amount due to inequality amongst the poor. In the case of the TLSS data, Table 3 indicates that the index is 19.0 using the Government's poverty line of TR 20,000. 1.6 If on the other hand, the poverty line is based on a purchasing power parity (PPP) poverty line of $1.075 a day4, the poverty rate would then only be about 16.3 percent (with 4In May 1999, $1 could be exchanged for TR1,200 on the foreign currency exchange market. However, this exchange rate does not take into account differences in the cost of living between the USA and Tajikistan. There is currently no official consensus on the appropriate exchange rate to use to calculate PPP for Tajikistan. The World Bank has, however, recently produced an estimate for 1999 of $1=TR234. Thus an "extreme" poverty line of $1.075 PPP a day is equivalent to TR7,557 a month, whilst a more moderate poverty line of $2.15 PPP a day is equivalent to TR15,1 11 a month. - 17 - P1 at 4.4 and P2 at 1.8). Using an unofficial minimum consumption basket of TR32,083 per person per month5 would imply that about 96 percent of the population may be considered to be poor. Table 3: Poverty Measures in Tajikistan (a) Minimum consumption basket 1998 (TR32, 083) % poor 95.7% P1 56.4 P2 36.8 (b) $2.15 PPP a day (poverty line = TR15,111) % poor 65.4% P1 22.9 P2 10.9 (c) $1.0 75 PPP a day (poverty line = TR 7,55 7) % poor 16.9% P1 4.4 P2 1.7 (d) State Statistical Agency (poverty line = TR20, 000) % poor 82.6% P1 35.8 P2 19.0 (e) State Statistical Agency (poverty line = TR] 0,000) % poor 32.8% P1 9.2 P2 3.9 Source: TLSS Notes: (i) Sample size 14,142 individuals. (ii) Based on expenditures rather than incomes. (iii) Assumption that theta (for economies of scale) equals 0.75. 1.7 There are several major conclusions from the TLSS. First, the level of poverty varies enormously depending on the poverty line used. From Table 3, it may be seen that the estimate of poverty ranges from 17 percent (using the $1.075 a day poverty line) to 96 percent (using the minimum consumption basket). Using the criteria developed by the Government's SSA, the poverty rate is slightly over 80 percent. Second, as shown in Appendix 2, reported household income is lower than expenditure, except at the very top of the distribution beyond the 98th percentile, and therefore poverty defined according to income will always be higher than when defined according to expenditure. Income data is usually subject to under-reporting; and in the case of Tajikistan, it is exacerbated by the growth of the informal sector, arrears in payments in the formal sector and the de-monetization of the economy. Figure 1, which shows the cumulative distribution of both per capita household income and expenditures, helps to explain the sensitivity of the results to the various poverty lines. The distributions of both incomes and expenditures within Tajikistan are very heavily skewed, with most households highly concentrated in a narrow range of values in the bottom 5 The Governrent has defined a provisional minimum consumption basket and its value in 1999 was estimated to be TR32,083 per person per month. This figure is made up of an allowance of TR23,934 for food-stuffs (based on a basket of goods that provide a rninimum calorific value), TR2,947 for non-fbod items and TR2,695 for services. However the minimum consumption basket has yet to be formally adopted by parliament, and in any case is not used to define the level of social transfers. -18 - four-fifths, with the result that headcount measures of poverty are very sensitive to even small changes in the value of an absolute poverty line. Figure 1: Cumulative Distribution of Household per capita Income and Expenditures, 1999 Cumulative Distribution of Hlousehold per capita Incone & Expenditure, 1999 100 90 - _ 80 U 70 _ _ _ _ _I ° 60 0) 40 0 30 - 20 - 10 0 0 10000 20000 30000 40000 50000 60000 Tajik MbWes Source: TLSS 1.8 Compared to other Central Asian republics for which data is available, the TLSS results are consistent with the widespread view in the country that the vast majority of people are poor. Inequality also seems to be lower in Tajikistan than elsewhere in the region (see Table 4). While the TLSS data show that individuals living in households in the top 10 percent of the expenditure distribution spent four times as much as those living in the bottom 10 percent, the gini coefficients for the distribution of both income and expenditure are less that in the neighboring countries. However, inequality has increased over time. Atkinson and Micklewright (1992), using the 1989 Family Budget Survey data estimated that the gini coefficient for the distribution of per capita income was 0.308 in Tajikistan. Ten years later, according to the TLSS, it had risen to 0.47. Table 4: Distribution of Income and Expenditure in Selected Countries Gini coefficient from LSMS Individuals in Poverty (%) data: selected years (per (assuming theta equals 1) capita expenditure) Azerbaijan(1995) 0.35 68.1 Kazakhstan(1996) 0.35 34.6 Kyrgyzstan (1993) 0.54 (1996) 0.46 68.7 Tajikistan (1999) 0.47 96.0 - 19- C. Identifying the Poorest 1.9 The vast majority of the population of Tajikistan are poor, at least using the minimum consumption basket as the poverty line. A strategy for the reduction of poverty in the country needs to take this into account. But the choice of poverty line is essentially a political one, and it is also necessary to focus on those at the bottom of the distribution in order effectively to target policy interventions on the most vulnerable in society. The main analysis of the profile of poverty now focuses on individuals who live in households in the bottom 20 percent of the distribution of per capita expenditure. This approach is simple and transparent, and has the advantage of avoiding a degree of complexity that may threaten a broad endorsement of the poverty line. 1.10 Poverty can be looked at in two ways: firstly the risk of being poor faced by individuals with different characteristics, and secondly the composition by characteristics of those that are poor. For each of the following parameters, the first table presents the percentage within each quintile of the distribution of per capita expenditure (with the incidence of poverty being defined as the percent of any particular ,group in the bottom quintile); and the second table presents the composition of both the richest and poorest quintile, as well as that of the population as a whole. 1. 11 Poverty by Location. The TLSS data can be used to draw sonie conclusions about the geographic profile of poverty in the country. Table 5, for example, shows that only 18.6 percent of individuals living in urban areas can be said to be poor, compared with 23.4 percent of those living in rural areas. Thus the relative risk of poverty for those in urban areas is 0.83, compared to a relative risk of poverty for those in rural areas of 1.04. Put another way, urban dweller are 20% less likely to be poor than on average, whilst rural dweller are 4% more likely to be poor. This is partly due to the fact that rural households tend to be larger than urban ones, with a mean household size of 7.6 people in rural areas compared with 5.7 in urban areas. However a slight differential between those in urban and rural areas remains even when household economies of scale are taken into account. Table 5: Poverty Incidence amongst Individuals by Location Poorest 2 3 4 Richest 20 20 percent percent All individuals 22.4% 21.7% 20.5% 19.1%Mo 16.3% Urban 18.9% 19.9% 19.4% 19.8%Yo 22.0% Rural 23.4% 22.2% 20.9% 18.9% 14.6% Dushanbe 7.1% 17.5% 12.9% 25.91% 36.6% GBAO 39.1% 26.9% 18.5% 10.2% 5.4% RRS 17.0% 16.0% 20.7% 22.9% 23.4% Leninabad 22.4% 23.7% 21.7% 18.1%fo 14.2% Khatlon 26.8% 24.2% 21.2% 17.1% 10.7% Source: TLSS - 20 - 1.12 Poverty is much lower in Dushanbe than elsewhere in Tajikistan, whilst GBAO is the worst off region, followed by Khatlon, Leninabad and RRS. Individuals living in GBAO are three-quarters more likely to be poor than on average, with a relative poverty rate of 1.75. They are also particularly exposed to some potential natural disasters, especially as it is in that region that Lake Sarez is situated. The extent of poverty in that region also contrasts sharply with Dushanbe, which has a relative risk of poverty of 0.32. However, as Table 6 shows, although poverty in GBAO is relatively high, that oblast only accounts for 6.9 percent of all poor people. Table 6: Composition of the Poorest and Richest Quintiles by Location Poorest 20 percent Richest 20 percent All Tajikistan All individuals 100.0% 100.0% 100.0% Urban 18.5% 29.7% 21.9% Rural 81.5% 70.3% 78.1% Dushanbe 2.1% 14.5% 6.4% GBAO 6.9% 1.3% 3.9% RRS 19.2% 36.4% 25.3% Leninabad 26.1% 22.8% 26.1% Khatlon 45.7% 25.0% 38.1% Source: TLSS 1.13 The data from the TLSS may be compared with information obtained from other, more qualitative sources. Starting with GBAO, the poorest region according to the TLSS data, there is evidence not only of the extent of poverty there, but also of some deterioration over time6. This is seen from the results of three nutritional surveys carried out in 1994, 1996 and 1998. The latest survey found that, although the rate of deterioration in the health and nutritional situation in the oblast was slower during the 1996-98 period than during 1994-96, it is still getting worse and is now acute. The key findings of the 1998 survey include: (i) 6.1 percent of children between 6 and 59 months of age are wasted (a weight for height measure), reflecting an acute or recent nutritional deficit; (ii) 53 percent of children between 6 and 59 months of age are stunted (a height for age measure), reflecting chronic malnutrition; (iii) 26.8 percent of children between 6 and 59 months of age are under-weight (a weight for age measure); and (iv) there is a high rate of iron and vitamin deficiencies among women of reproductive age (15-59) and children under five, reflecting that the food provided by the humanitarian agencies or grown locally does not ensure good nutritional health. Although there are some important similarities in the health and nutrition situation in GBAO compared to other parts of the country, the extent of stunting and also iodine deficiency in children 6 to 12 years of age, and the prevalence of anemia in women, and are 6 As discussed later in this report, this agriculturally disadvantaged region has moved from being 15 percent self sufficient in wheat in 1995 to a projected 80 percent self-sufficiency in 1999. The impact of land redistribution there to individual households on their livelihoods has undoubtedly been dramatic and positive. It is therefore surprising that the nutritional status of the children has apparently deteriorated during this period. This phenomenon requires some further analysis. - 21 - more severe in GBAO. This confir-ms that the poverty situation is probably most severe in that part of Taj'ikistan. Figure 2: Proportion of Individuals who are Poor by Region 4 u0 ne BO RS einbd Khto 1.4 Ante pr f h cuty hr tepvet staio3emst b eatvl bdi Khto. cin gistHne cnute ure n 98t3ass0tentrto neso th oulto i htobatbyfcsigo hide bten25n 9 ots.Ti gopi chilren n Kugan-usabe and A7. peren So th cideninad Khlyabtreafetenwt sthpounatinirhonic mhatolnutritifon;using) aout6neret childrenbewn haad beemnts vacinae frorpi meuaslesl(v thermsvlerarlesins ofirston anboie dfefciencby, anod manyeccommunicable keidinses areon the incrveyase: due aoto ignorance,nd poor qualdrnity watrgadsaniTueation.4 Inerestingly the sretembleethtchildren in urbana areasfce it atn are morte mal-noutrished.i aot87eceto 1.15re Histouricall,Tuwas alway thoughcet Lfteniaa chblasen was thelyaparto fftecutry with sthenleas povrty Ihrni 199,l erantgrnAtion;bu (GAA)eno conlduced had sureyn toacciaess the nurition, theinraltheoigoane and fodscrtpiutonr qandlivin cotrnditionstaion.Lentrsinabdglasthan also in the RSS, regions where the organization is providing food, non-food and rehabilitation assistance. The organization had conducted a similar survey in 1996, which serves as a baseline. The 1998 survey found the food security situation of the population to be "critical". Of the households surveyed, 44 percent in RRS and 11I percent in Leninabad had experienced a day without food during the week preceding the survey (even though the survey took place in September, the most food-secure month). Most hiouseholds complained about regular food shoirtages; and in the RRS, the food situation had deteriorated since the war. The nutritional situation of the households was found to be "rnarginally inadequate" - 22 - due to low protein consumption. This had not changed significantly in the last two years. Most children are breastfed until the age of 18 months, but babies between 6-12 months are not adequately fed because they do not receive supplementary food. The nutritional status of children under five years of age showed that: (i) 46 percent suffered from chronic malnutrition; (ii) 20 percent are affected by severe growth retardation (stunting); and (iii) 11 percent suffer from acute malnutrition (wasting). Acute malnutrition was more prevalent in the RRS than in Leninabad. Children under 18 months of age were most affected by wasting due to the high prevalence of disease at this age. Children over two years of age were more affected by stunting. 1.16 In summary, then, the poverty picture obtained through the TLSS is generally borne out by other sources of data. Taking the prevalence of stunting of children, the situation is particularly bad in GBAO (53 percent); it is very serious in most of Khatlon (39 percent); and it is still a major problem even in Leninabad (20 percent). 1.17 Poverty by Demographic Group. According to the results of the TLSS, children experience a higher risk of living in poverty compared with adults, with a relative risk of between 1.03 and 1.11. The risk of poverty increases sharply according to the number of children under 15 living in the household. Only 7 percent of individuals living in households with no children are poor, compared with 31 percent of those living in households with 5 or more children. People living in households with children comprise the vast majority of the poor: over four-fifths live in households with at least 3 children and nearly a half live in households with at least 5 children. Therefore targeting large households with children may represent an important option for reaching the bulk of the poor. Table 7: Poverty Incidence amongst Individuals by Demographic Group Poorest 2 3 4 Richest 20 20 percent percent All individuals 22.4% 21.7% 20.5% 19.1% 16.3% 100% Age in Years 0-5 23.1% 23.1% 20.8% 18.6% 14.4% 100% 6-15 24.8% 21.6% 20.0% 19.1% 14.5% 100% 16-64 20.8% 21.5% 20.9% 19.3% 17.6% 100% 65 + 22.7 18.9% 20.3% 19.4% 18.7% 100% No. of Children under 15 Zero 6.8% 15.1% 16.2% 15.7% 46.2% 100% 1-2 16.5% 18.6% 20.5% 23.3% 21.1% 100% 3-4 20.2% 22.2% 21.6% 20.4% 15.6% 100% 5 or more 30.7% 23.9% 19.9% 15.1% 10.5% 100% No. of Elderly Zero 21.2% 21.1% 20.2% 19.4% 18.1% 100% 1 25.5% 23.6% 20.8% 17.8% 12.3% 100% 2 21.9% 21.4% 21.8% 20.1% 14.9% 100% 3 ormore 78.3% 21.7% 100% Gender of Household Head Male 21.1% 21.9% 20.8% 19.6% 16.5% 100% Female 28.6% 20.3% 19.5% 16.4% 15.0% 100% Source: TLSS - 23 - 1.18 Besides poverty among children in general, there are some particular groups of children in distress. For example, there has been a growing problem of street children who started to appear in the early 1990's after the deterioration of the economic and social environment. The problem of street children in Dushanbe was assessed by UNICEF in 1995 and Medicins San Frontieres (Holland) in 1997. Both studies relied on qualitative methods of interviews and observations. The first study interviewed 184 children in nine different sites around the city and some "experts"; the second interviewed 203 children in various sites in each of the city's four districts, and concerned government and international community officials. Estimates of the total number of street children in Dushanbe range between 1,000 and 2,000. The majority of these children work or beg to buy food arid/or supplement their family income. However, it does seem that the majority of the street children do have homes in which to stay at night; and so the situation, while serious and deteriorating, is not totally dire. 1.19 Another group of concern is institutionalized children. In 1998, Orphans and Refugees Aid, an international NGO, prepared a report on the care of children in internats (state institutions). Children enter intemats for a variety of reasons: (lue to the inability of parents to feed or clothe them (60-70 percent of them), physical or mental disability, delinquency, the death of both parents, their abandonment by one or both parents, or other reasons such as their parents being disabled, alcoholics or in prison. F'rior to the collapse of the Soviet Union, internats were well funded and provided comprehensive care. Now, due to a variety of factors-lack of funds for staff salaries, for building maintenance, and for food and clothing-the physical, intellectual and emotional growth of children is jeopardized. During their stay in the internat, the children are socially and emotionally excluded from the larger society; and they also become dependent on the institution. So, when they leave the internat as a young adult, most are unable to cope with the outside world. There are few opportunities for further education or meaningful employment. It is not surprising that many become involved in criminal activity. 1.20 Older people are also more likely to be poor than other adults, with 22.7 percent of people aged over 65 living in the bottom quintile of per capita household expenditure, compared with 20.8 percent of persons aged 16-64. However, older people make up only a small proportion of the total poor (4.1 percent). The risk of poverty is greater for people living in a household containing one older person as compared with a household containing none or two. Most older people live with younger household members, and single elderly person households are very rare, comprising less than 1 percent of all households. Households with three or more people aged 65 and over are also very unusual in Tajikistan (constituting only 2 percent of all households). However, people living in such households are significantly more likely to be poor than other types of household with a relative risk of poverty of 3.5. Interesting, if these households were not poor, then they are located at the other end of the spectrum i.e. in the top quintile. This may reflect that fact that the receipt of three pensions, when paid, is sufficient to push a household a long way up a relatively flat distribution. In Russia, poverty was found to be inversely related to age. However in Tajikistan the relationship between age and poverty is far from straightforward. Figure 3 shows that poverty rates amongst the very old (aged 75+) are higher than even those for children. Therefore, elderly people living alone, although numerically very small, may be amongst the poorest of the poor. - 24 - Figure 3: Proportion of Individuals who are Poor by Age Group 28 26__ 24__ . 22 20 1 8 12 0-9 10-19 20-34 35-54 55-74 75+ Source: TLSS 1.21 Again it is useful to compare the TLSS results with information obtained from other, qualitative sources. Many people in Tajikistan do believe that pensioners and the elderly are a particularly vulnerable group, but they also realize that they are not a homogeneous group. In total, about 548,000 people (9.2 percent of the entire population) receive pensions, and of them about 65 percent (354,700) receive a pension of less than TR 2,000 per month. About 10 percent of pensioners (56,000) receive a social pension (allowance) because they did not work and qualify for a full pension. On the other hand, some people are still able to retire early because they provided a special service to the state, for example, through working in a "strenuous" industry. Overall, the Ministry of Social Protection (MSP) considers about 9,000 single and disabled pensioners to be especially vulnerable. The MSP provides assistance (food, clothing and coal) to about 6,000 members of this group in their homes or residential centers. Some of the single pensioners are Russians whose families have emigrated to other parts of the FSU. 1.22 In general terms the TLSS results do not seem to show any significant difference in the poverty rates for men and women in Tajikistan. However, poverty is here defined by the expenditure of the household and assumes that all household resources are shared equally among their members. This may not be a realistic assumption in Tajikistan, and there is some evidence that the circumstances of transition may have tended to increase gender-based disparities within the household rather than reduce them. In 1996, UJNHCR and Relief International conducted a survey to assess the situation of women in the country. That survey concluded, for example, that the collapse of the social allowances and services has impacted women's lives more significantly than those of men, since the burden of caring for children and the elderly fall disproportionately on women. There is also some evidence that - 25 - women's wages have fallen more than men's. In the Soviet period a high proportion of public sector workers were women (especially in education and health). These are the sectors now where wages have often not been paid and where real pay rates have suffered the greatest fall in value. The greater decline in the relative value of women's wages may, therefore, mean that the proportion of household resources 'enjoyed' by women and children is declining. Figure 4. Proportion of Individuals who are Poor by Household C omposition 20- , 1 ad + kids 2 ads 2 ads, 1-2 2 ads, 3+ 3+ ads 3+ ads, 1-2 3+ ads, 3 kids kids kids Idds Source: TLSS 1.23 There is also a particular problem of female-headed households. The civil war created approximately 25,000 female-headed households, predominately in Khatlon and Gharm. Some women lost their husbands during the war. Others lost their husbands to emigration. A few of the latter group abandoned their families and created new families. In all of these cases, the woman became the head of the household. According to the Save the Children 1998 Socio-Economic Survey of Households, Farms and Bazaars, female-headed households have less access to land, irrigation and livestock. They are also less food secure, but receive more humanitarian assistance. Even with this assistance, their monthly income is less than male-headed households. Table 7 confirms from the TLSS dlata that individuals living in female-headed households experience a greater risk of poverty (28.6 percent) than those in male headed households (21.2 percent). However, such households account for only a fifth of all poor people. - 26 - 1.24 The civil war displaced over 10 percent of the country's population, the war-related displacement was relatively temporary, with most people (95 percent of the internally displaced people and 65 percent of the refugees) returning by the end of 1995. The process was completed after the signing of the peace agreements in July 1997. However, those who had migrated for economic reasons did not return as the situation in the country did not improve significantly. A few also did not return for political reasons. A 1998 UNHCR survey in Khatlon, where most of the displacement occurred, compared earlier returnees (arriving before July 1997), recent returnees (arriving after July 1997) and non-returnees. The key findings from this survey are that: (i) returnees have larger homes, but fewer inhabitable rooms (due to the destruction of some 35,000 homes during the war); (ii) returnees have access to less agricultural land, sow less wheat and produce smaller yields; (iii) returnees have less livestock now, but had more livestock before the war; and (iv) the majority of the recent returnees, most of the earlier returnees and about half of the non- returnees receive humanitarian assistance. In general, there is considerable agreement among the international community that the repatriation of refugees and internally displaced people in Tajikistan has been a success because the Government and Tajik people wanted the situation stabilized, and humanitarian assistance was linked to rehabilitation and development. 1.25 Poverty by Education and Labor Market Status. As is the case in most regions of the world, the risk of being poor in Tajikistan appears to be inversely related to education. According to the TLSS, individuals aged 16 and over with no schooling experience a relative risk of poverty of 1.23 (Table 8). Individuals with primary education or general secondary education are no more likely to be poor than on average. However, individuals with vocational or specialized secondary education are less likely to be poor than on average, with a relative risk of 0.76; and those with some higher education were much less likely to be poor, with a relative risk of 0.46. Thus persons with no education are over two and a half times as likely to be living in a household with a per capita expenditure in the bottom quintile as those with higher education. Overall, however, individuals with no education make up a very small proportion of the poor - a reflection of the fact that less than 2 per cent of the population have no formal schooling. The vast majority of the adult population has at least general secondary education; and so do the majority of the adult poor. 1.26 In contrast to education, there is no clear relationship between labor market status and poverty in Tajikistan. Table 8 shows that a lower proportion of those in the bottom quintile live in a household where the head is employed (61.1 percent) than on average (63.4 percent); but also a lower proportion live in a household where the head is unemployed (5.3 percent) than on average (6.3 percent). The group with the highest risk of poverty are those where the head is out of the labor market, but not retired. Individuals in these households experience a relative risk of poverty of 1.49, and constitute 11 percent of the poor. It may therefore be that labor market status is no longer a good indicator of access to resources. It is not whether a person has a job that is important, but whether a person has a job and receives a salary or wage that is the critical factor. It is also important to note that income from the labor market accounts for only a third of the total income of households in the bottom quintile of consumption, and only just under a half for those in the top quintile. - 27 - Table 8: Poverty Incidence by Education and Labor Market Status. Poorest 20 2 3 4 Richest 20 percent percent All individuals 22.4% 21.7% 20.5% 19.1%go 16.3% Education Age less 15 24.2% 22.2% 20.3% 18.9%/o 14.5% Primary 22.3% 21.8% 21.4% 18.5% 16.0% Secondary 22.6% 21.5% 20.4% 19.1%/0 16.3% Vocational 17.1% 21.1% 22.3% 20.3%g4 19.2% Higher Household Head Labor Market Status Employed 21.6% 21.7% 19.8% 19.1 %0 17.8% Unemployed 18.6% 23.6% 27.4% 19.6% 10.8% Not in work force 33.4% 19.8% 15.1% 16.1%to 15.6% Retired 22.2% 21.7% 23.5% 19.1 % 13.5% No. of Adults Unemployed Zero 21.4% 21.6% 20.4% 19.5%Xo 17.1% 1-2 27.5% 19.9% 23.4% 15.8% 13.3% 3 or more 22.5% 27.5% 16.1% 21.7% 12.2% Source: TLSS 1.27 Poverty by Income and Expenditure Patterns. Labor incomne remains the most important source of income for all households. However, the combined income from the sale of foodstuffs and households assets, on average, accounts for a similar share. Remittances are also very important, whilst the role of the state in providing a safely net is very small. Even amongst those households in the bottom fifth of the distribution of expenditure, social transfers only account for eight percent of income. Table 9: Structure of Total Household Income by Quintile Group. oPorest 2 3 4 Richest 20 20 percent percent Labor income 32 34 34 38 42 Saleoffoodandcrops 16 18 17 14 10 Sale of private belongings 14 13 18 16 15 Sale of commercial goods 1 3 2 2 3 Rent 1 - - I I Withdrawal of savings 2 2 2 3 3 Remittances 14 12 9 10 12 Aid 8 7 7 15 4 Social transfers 6 6 5 5 5 Other 7 5 5 6 6 Total 100% 100% 100% 100% 100% Source: TLSS Note: the table excludes the imputed value of home production. - 28 - 1.28 As might be expected, the share of total household expenditure on food is higher for those households at the bottom of the distribution than at the top, with the poorest household spending 79 percent of all expenditure on food. The imputed value of home production contributes a significantly greater proportion of total food expenditures for the poorest groups, as does the value of food gifts including humanitarian aid, whilst the share of expenditure on the cash purchase of food varies little across the distribution. Expenditures on 'other' items, which includes clothing, books, durables, holidays and weddings, also varies sharply between the rich and poorest households. 1.29 Ownership of Assets and Infrastructure. In Tajikistan, as in other countries of the FSU, in the past there was little or no relationship between a household's ownership of consumer goods and its level of income. This is because under the Soviet Regime, consumer durables were allocated by the command economy rather than by the market economy. However, since independence the sale of household assets has emerged as a key household coping strategies. The TLSS results do indeed show that there is a significant relationship between household per capita expenditure and a range of durables. The strongest correlation is between ownership of a color television, followed by stereo and then video recorder. While this situation is partly due to the differential acquisition of consumer durables by the better-off in the recent past, the TLSS data show that overall there has been a relatively low level of consumer spending throughout the Republic. Under five percent of households in Tajikistan have purchased a major household appliance (refrigerator, vacuum cleaner, washing machine) in the last 7 years, indicating the widespread nature of financial hardship. The most popular item purchased was a stereo/cassette player. 1.30 The majority of households plot (79 percent) in Tajikistan have access to an individual garden, even though many of them are very small; and, in fact, access to a plot is inversely related to poverty, with a higher proportion amongst the bottom quintile having a garden plot than amongst the top quintile. For the less poor groups, having a garden plot is less essential, whereas for the poor it is a critical part of their coping strategy. However, each individual in the poorest quintile has an average of only 5.5 sotkas per head, compared with 11.5 sotkas in the top quintile. Similarly ownership of at least one cow is greater amongst the rich than the poor. 1.31 Other interesting findings from the TLSS include the following: (i) 7 percent of households report that their home was damaged during the war, of which a quarter experienced significant damage and a third almost completely destroyed; (ii) less than half of all households have access to piped water, nearly a quarter are reliant on water from river/lake /ponds, and a further eighth on spring water; (iii) of those who have piped water, a quarter reported that water was only available for five hours a day or less; and only 36 percent reported 24 hour availability; (iv) only a half of households reported that their water quality was good/excellent and a half reported fair/poor; (v) 75 percent of households reported no source of hot water; (vi) only 14 percent of households have a flush toilet and 85 percent rely on an outside latrine; (vii) the. most common source of fuel used by households for cooking is wood (43 percent), followed by manure (17.5 percent) and cotton stem (12.3 percent); (viii) a third of households had only heated their home for 3 months or less in the last year; two-thirds heated it for 4 months or less; and (ix) 14 percent of households have a phone inside the dwelling, 17percent rely on neighbors, and 54 percent have no access to a phone. - 29 - Table 10: Correlates of Household Poverty Demographic variables Number of children in the household 1.32 ** Number of adults in the household 1.17 ** Region ** Dushanbe 1.00 GBAO 7.00 ** RRS 1.87 Leninabad 3.38 ** Khatlon 4.79 ** Socio-economic variables Number of adults employed in the household 0.85 * Head of household educational group * None 1.00 Primary (le 7 year) 0.91 General Secondary (8-12 years) 1.00 Vocational/Specialized 0.68 Some Higher 0.48 # Other 1.19 Ownership of consumer durables Stereo/tape player Yes 0.39 Color TV Yes 0.37 Radio Yes 0.52 ** Sewing machine Yes 0.60 ** Car Yes 0.42 * Bicycle Yes 0.45 ** New Refrigerator (since 1992) Yes 0.23 # Household assets Sotkas of land per capita 0.98 * Number of cows Zero 1.00 One 0.88 Two 0.48 ** Three or more 0.35 ** Housing Gas supply Yes 0.46 * Coal/peat/wood stove Yes 0.64 # Note: ** significant at (p<0.001), * significant at (p<0.01), # significant at (p<0.05). 1.32 Multivariate Analysis of the Correlates of Household Poverty. Many of the correlates of poverty discussed above are related to each other. In order to establish the strength of their relationship after controlling for other factors, a logistic regression was carried out on the TLSS data, with the independent variable beingr whether or not the household is poor as defined by being in the bottom quintile of per capita household expenditure (Table 10). This model does not allow conclusions about causation: for example, it may be that ownership of a durable or assets, such as a car or cattle, facilitates a - 30 - livelihood strategy that protects the household against being poor; or it may be that ownership of a durable (or lack thereof) reflects the purchasing power of the household. Nevertheless, the correlates of poverty (both the strength of the relationship and also the statistical significance) are still interesting. D. Coping Strategies 1.33 Households with limited resources are increasingly employing a range of different strategies to survive on limited resources. The most basic necessity within any household is food, and by far the most important coping strategy with regard to ensuring its supply is its self-production. 84 percent of all households reported having access to an individual garden plot and 72 percent of households reported consuming food grown by the household in the last 7 days. Access to land is therefore a critical factor in many households' survival. Humanitarian assistance is also important, as 23 percent of all households reported the receipt of food gifts in the last seven days and their imputed value accounted for a tenth of total expenditure for the poorest households. However, what is most striking is the widespread nature of behavior change within Tajikistan. Even amongst the most well-off households, nearly 30 percent reported having reduced the number of meals a day, and a similar proportion reported eating smaller portions. This rose to over 60 percent amongst the poorest households. An indication of the pervasive nature of financial insecurity for households across Tajikistan is the fact that over a quarter of all households had sold assets in the last month, and a third had had to borrow from relatives, friends, and neighbors. These proportions were roughly constant for households across the entire distribution. In addition to the coping strategies already employed by households, respondents claimed that they would use a variety of coping strategies over the next six months. A higher proportion of households thought that they would have to modify their diet still further and/or find other work A quarter thought that they would have to sell household assets and over a quarter would have to borrow to make ends meet. Two percent thought that they would have to resort to begging. E. Food Security 1.34 The information presented on household coping strategies suggests that financial hardship is far from being limited to the poorest group. This conclusion is supported by information on food security and insecurity. In particular, it is possible to compare the TLSS data with the results of a nation-wide survey conducted by ECHO in June 1997 to assess the profile and location of food insecure households. According to the TLSS, on average households in Tajikistan in 1999 ate 2.5 meals a day. This is only a slight reduction from the 2.6 reported by the ECHO Food Security Survey in 1997. The average number of meals a day varied from 2.2 for the poorest households to 2.8 for the richest. However, most worrying from a nutritional point of view is the rise in the proportion of households claiming to eat just one meal a day from 10 percent in 1997 to 13 percent in 1999. Over a quarter of the poorest households ate an average of one meal or less a day, and over half ate two or less. Alarmingly of all households eating less than two days a day, over 50 percent stated that they thought in the next 6 months that they would have to reduce the number of meals eaten still further. - 31 - Figure 5: Food Security (kg of Flour in Stock per Household by Household grouip) 20 14 zz/ kg 10 zE 8-/ Poorest 2 3 4 Richiest 20% 20% Source: TLSS 1.35 There has also been a significant change in the diet of the average Tajik since independence, with a shift towards cheaper foodstuffs. Traditionally the mainstay of the Tajik diet was soup - made with a variety of ingredients including vegetables and meat as well as noodles. In addition vegetables stuffed with rice and meat, plov (a rice and meat dish) or meat and potatoes were consumed several times a week, particularly in works canteens. Today, the TLSS results suggest that meat, eggs and confectionery have become luxury items that even the richest only eat a few times a week and that the poorest rarely have access to. Over half of all households had not eaten any meat in the 7 days prior to the survey, 61 percent had not eaten eggs and 85 percent had not eaten confectionery. Table 11: Proportion of Households Reporting Engaging in Selected Coping Strategies in the Last 6 Months. Food Security % of households shifting to cheaper foods 85 % households reducing number of meals per day 44 % households selling assets to buy food 28 % households borrowing money to buy food 34 % households no meat consumption preceding week 53 1.36 Food security is difficult to measure precisely, especially in a one-off survey, but some general conclusions may be drawn about food insecurity at a population level in Tajikistan. Food was the principal reported household expenditure over the month preceding the interview. Bread is the foundation of the diet, and reported protein consumption (meat, dairy, pulses) is low. Meat, a culturally significant part of the Tajik diet, is now rarely eaten; slightly over half of respondent households had eaten no meat in the seven days preceding the survey. Other than reducing the number of meals eaten daily, and reducing portion size (responses which are difficult to objectively evaluate), coping strategies showed little - 32 - variation between quintiles, with about one third of all households having to incur debt in order to buy food, for example. Table 12: Household Food Security and Coping Strategies by Quintile Bottom Top Tajikistan Shifted to cheaper foods 84% 84% 85% Reduced # of meals per day 61% 29% 44% Ate smaller food portions 63% 29% 47% Sold household assets 29% 27% 28% Borrowed 37% 30% 34% Begged 7% <1% 2% 1.37 The TLSS respondents were asked a range of questions concerning their current stock of various foodstuffs, and their perception concerning the household's position with regard to food over the next 6 months and basic necessities in the next 12 months. The store cupboard in most Tajik households appears to have been almost bare in May 1999, with very low per capita stocks of dried fruits and beans and no stocks of preserved fruits. This is perhaps not surprising as the survey was conducted after winter and spring, and before the main harvest period. There is a very strong correlation between food stocks and poverty, highlighting that the poorest households have little cushion by way of stored food. Although the survey was conducted before the harvest, households were not uniformly optimistic that their situation with regard to food would improve in the coming months. Just under a half of all households thought it would definitely get better, but this fell to only 30 percent for amongst the poorest households. This may reflect that even if food availability increases with the harvest, many households felt uncertain that their access to food would improve. In fact, just under a fifth of all households thought that their food situation would get worse, and this rose to a quarter amongst the poorest. F. The Development of a Pro-Poor Country Development Strategy 1.38 In order to develop a poverty alleviation program for Tajikistan, the Government has established a Working Group headed by the Deputy Chairman of the SSA. Other members include the Deputy Chairman of the Social Protection Fund and senior officials in the President's Office and various ministries. The Working Group has already started the process of analyzing data on poverty in the country. The main recommendations which have so far come out of the deliberations of the Working Group and which are endorsed by the analysis here are the following: (i) there is clearly a massive problem of poverty, although the extent of it depends crucially on the poverty line used; (ii) more work needs to be done to develop better indicators of poverty and there is also an urgent need to identify the poorest groups; (iii) it will be critical to monitor trends in living standards and poverty over time, including through the carrying out of repeat surveys using the TLSS methodology; - 33 - (iv) national capacity needs to be developed further, both in terms of data collection and analytical skills; and (v) the Working Group on poverty identification and monitoring should be supported and assisted in its activities. - 34 - CHAPTER II. EMPLOYMENT AND POVERTY 2.1 The previous chapter has shown that poverty in Tajikistan is a widespread and complex phenomenon. However, particularly with the cessation of conflict and violence in the country, the resumption of economic growth in the last couple of years, and the progress being made in the restructuring of the economy, there are some grounds for optimism that poverty can be significantly reduced over the coming years. It is suggested in this report that there are four key pillars for a poverty alleviation strategy. These relate to: (i) the stimulation of high labor productivity and economic growth; (ii) the provision of basic social services; (iii) the targeting of assistance to the poorest; and (iv) the development of a safe and well- governed environment for people to live their lives and look after themselves. This chapter addresses the key issue of employment generation and productivity, and the following chapter focuses specifically on the agricultural sector. These two chapters together form the first pillar of the strategy: the need for high labor productivity and economic growth to enable as many people as possible to earn a decent income and so avoid poverty. A. The Main Features of the Labor Market in Tajikistan 2.2 (a) Labor force participation. Tajikistan has a stock of labor resources that it uses or leaves unutilised. From a poverty perspective, it is important to understand the extent of labor force particivation and to study the reasons for non-participation by gender, age and type of settlement. It is also necessary to examine employment by sector, occupation, status and type of ownership, and to look at unemployment according to various types of definitions. The figures used in this section are (nearly) all based on the TLSS. 7For clarity purposes we follow the internationally accepted definitions as lined out by the International Labor Office (ILO). Under these definitions the following identities hold: Population at Working Age = Labor Force + Persons Out of the Labor Force Labor Force = Employed + Unemployed Employed = Persons Actually Employed + Persons With a Job Not At Work Persons Actually Employed = all persons who were engaged in economic activities for wage or profit for at least one hour during the reference period Persons With a Job Not At Work = all persons who usually belong the former category but not at their jobs because of specific reasons such as illness, holidays, training, etc. during the reference period - 35 - Table 13: The Utilization of Labor Resources Total Men Women ~~~~~~~~~~~~~~~~Urban Rural as%toct . s% (t %lot. Aa%(ot as%tot. A %A(out as % tot. As % (out as%tot. As%(t f Ctpop :lt6 o: ) o6labor pop 1 ;of) labor pop >-l6 of) labor pop >-16 of) labor po 16 of) labor 0 forcee : : force R force force force Pop>=16 100 100 100 100 100 Missing from sample 2.3 2.9 1.8 2.8 2.2 Out of labor force 41.5 100 28.0 100 54.3 100 47.7 100 39.5 100 No specific job 0.9 2.2 1.2 4.3 0.7 1.2 1.5 3.2 0.7 1.9 No jobs 4.5 10.8 5.7 20.4 3.3 6.0 5.2 10.8 4.3 10.8 Study 5.6 13.6 7.3 26.0 4.0 7.5 7.5 15.7 5.1 12.8 Home care 15.4 37.1 1.7 6.0 28.5 52.4 17.5 36.7 14.7 37.2 Pensioners 8.1 19.6 6.3 22.4 9.9 18.2 6.8 14.3 8.5 21.6 Old + disabled 2.8 6.8 2.5 8.8 3.2 5.8 4.0 8.4 2.5 6.2 Not healthy 2.6 6.3 1.9 6.8 3.2 6.0 2.6 5.5 2.6 6.6 Not willing to work 1.5 3.7 1.5 5.2 1.6 3.0 2.6 5.4 1.2 3.1 Labor force 56.2 100 69.1 100 43.9 100 49.6 100 58.3 100 Employed 47.0 83.7 58.4 84.4 36.2 82.5 43.1 87.0 48,3 82.8 With job 46.3 82.3 Full-time 35.0 62.2 45.3 65.6 25.1 57.1 32.8 66.2 35.6 61.2 Part-time 12.1 21.5 13.0 18.9 11.1 25.4 10.3 20.7 12.6 21.7 With a job not at work 0.7 1.3 1 1.4 0.5 1.2 0.9 1,7 0.7 1.2 Unemployed 9.2 16.4 10.8 15.7 7.7 17.5 6.5 13.0 10 17.2 Source:TLSS - 36 - 2.3 From Table 13, it can be seen that the labor force participation rate for the country in 1999 was 56.2 percent, indicating that in 1999 slightly more than half of the people older than 16 were engaged in economic activities. Compared to other republics of the FSU, this is relatively low. Differences between the participation rates for men and women and between people living in urban and rural areas are also serious. Nearly 70 percent of the men at working age were either employed or unemployed against only 43.9 percent of the women. In urban areas approximately half of the people belonged to the labor force, whereas in rural areas this figure was significantly higher (58.3 percent). Table 14: Labor Force Participation Rates by Age Group and Gender Total Men Women 16-19 38.9 39.8 38.1 20-24 55.8 66.4 46.7 25-29 66.4 84.0 48.0 30-39 70.1 88.1 54.0 40-49 72.4 88.6 58.2 50-54 64.3 86.3 40.0 55-59 49.6 69.7 24.7 60+ - 30.4 14.5 Source: TLSS 2.4 The highest participation rates are for the men aged between 30 and 54; between 88 and 86 percent of the men in that age-group belong to the labor force. Women in the corresponding age-groups participate far less (between 54 and 40 percent). Participation rates for older age-groups decline for both sexes reflecting that persons retire after the age of 55 (men earlier than women). It is remarkable that still 30 percent of the men and 14.5 percent of the women are active for the entire group older than 60; this is because many of people work in agriculture and older persons continue to work for wage or profit because of economic necessity. The most troublesome feature, however, is that the participation rates are low in the younger age-groups due to the low enrolment in school after the age of 20 and the difficulty of entering the labor market. This is especially a problem in urban areas. So, in summary, overall labor force participation rates are relatively modest; in all age-groups, men participate more than women, of whom less than half were active in the labor market in 1999; participation rates are significantly higher in rural than in urban areas; men in prime age groups (30-54) nearly all participate; and men and women in younger age groups participate relatively little, indicating problems entering the labor market. Table 15: Labor Force Participation Rates by Settlement and Age Group Total Urban Rural 16-19 38.9 26.2 42.6 20-24 55.8 45.3 58.9 25-29 66.4 53.1 70.0 30-39 70.1 62.4 72.4 40-49 72.4 70.0 73.3 50-54 64.3 62.9 64.8 55-59 49.6 53.9 48.4 60+ - 21.2 21.0 Source: TLSS - 37 - 2.5 Reasons for non-participation. The TLSS data also provide information on the reasons why people do not engage in labor market activities. A relatively large number of people are not participating for 'traditional' reasons (such as school enrolment, pensions, disability and bad health, and home care especially among women); but a disturbingly large number of younger people are discouraged and report not to be active in the labor market because they no longer believe that they will be able to find a job. The gender differences in school attendance above the age of 16 are large, and extremely large for persons between 20 and 24, with women far less enrolled in schools. Women also stay out of the labor force, even at young ages, for reasons related to family responsibilities. Table 16: Reasons for Non-Participation by Age Group and Settlement Total Men Women 16-19 20-24 25-29 16-19 20-24 25-29 16-19 20-24 25-29 No specific job 1.5 4.0 4.4 1.9 6.2 18.9 1.1 2.8 3.8 No jobs 15.7 19.2 15.7 18.3 37.3 47.3 12.9 10.0 13.3 Study 51.0 11.2 2.1 63.1 24.3 1.4 38.7 4.6 6.1 Home care 22.9 52.9 64.8 5.7 12.4 8.1 39.7 73.4 64.8 Pensioners 0.0 0.0 0.6 0.0 0.0 2.7 0.0 0.0 0.0 Old + disabled 0.3 2.5 1.5 0.6 4.5 1.4 0.0 1.4 1.9 Not healthy 3.4 4.0 5.6 3.3 5.1 9.5 3.6 3.4 4.6 Not willing to 5.2 6.3 5.3 5.7 10.2 10.8 4.7 4.3 5.7 work Source: TLSS 2.6 Labor market participation is clearly positively related to educational level. The higher the educational level of a person, the more likely it is that he or she is active in the labor market. Since there is no relationship between unemployment and the educational level at the aggregate level, this implies that the chance that people are employed increases as their level of formal education increase. Of all the persons with higher educational qualifications, 71.3 % are employed; compared to 29.7 % of people with none or little, and compared to 36.9 % of people with lower educational training. Table 17: Labor Force Status by Educational Level Total Employed Unemployed Total 100 47.0 9.2 None 100 29.7 8.6 8th(9dh) class 100 36.9 10.1 Sec. School 100 43.0 9.6 Prof Tech. school 100 70.0 8.5 Spec. Tech. school 100 71.3 7.9 Higher education 100 [45.8] [12.5] Source: TLSS 2.7 Employment. Tajikistan is an agricultural economy: more than half of the employed find their job in the agricultural sector; the service sector is the second important sector; and manufacturing is not very important. Regional differences in employment structure are important, with high concentrations in the service sector (including Government services) in - 38 - Dushanbe; and in agriculture in Leninabad and Khatlon. Dushanbe accounts for only 6.3 % of total employment in the country. Employment by profession and status largely follows the sectoral trends and regional division of labor. Table 18: Employment by Sector Agriculture Total Men Women Urban Rural Dushanbe Gorno- RSS Lenina Khatlon Badakhshan -bad Agriculture 49.3 46.2 54.1 11.0 59.9 1.8 28.6 37.1 50.7 63.4 Mining 0.3 0.4 0.3 1.0 0.2 0.0 0.0 0.1 0.9 0.1 Manufacturing 3.4 4.5 1.7 4.4 3.1 2.6 0.0 7.1 2.7 2.6 Utilities 1.6 2.3 0.6 3.0 1.2 1.3 2.5 1.5 1.9 1.4 Construction 2.5 3.9 0.4 6.1 1.6 8.8 2.5 1.5 2.3 2.3 Retail, hotel, 6.6 7.0 5.8 18.3 3.3 19.8 6.2 4.9 7.1 5.0 restaurant Transport 2.7 4.1 0.6 5.8 1.9 7.9 4.4 2.1 3.9 1.2 Finance, real 0.4 0.4 0.4 1.0 0.2 0.9 1.2 0.3 0.2 0.4 estate Insurance 0.1 0.1 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.2 PubI. Admin, 3.7 4.6 2.4 9.0 2.3 11.0 7.5 2.6 1.5 4.2 defence Education 7.8 7.4 8.5 9.5 7.4 7.5 16.8 5.2 7.7 8.3 Health, social 3.9 2.2 6.5 6.9 3.1 7.1 6.2 3.2 4.0 3.4 work Other services 5.3 5.7 4.7 14.8 2.6 25.0 1.9 4.4 7.0 1.8 Other 8.2 7.6 9.2 6.2 8.8 2.6 6.2 26.3 4.8 2.9 industries Missing in 4.1 3.5 5.0 3.5 4.3 2.6 16.2 3.6 5.3 2.6 sample Table 19: Employment by Occupation Total Men Women Urban Rural Dushanbe Gorno- RSS Lenina KMatlon Badakhshan Armed Forces 0.8 1.4 0.0 1.6 0.6 2.2 2.5 1.2 0.0 0.8 Legisl., sr.off, 1.2 1.6 0.6 1.4 1.2 2.2 1.2 0.9 0.8 1.5 manage. Professionals 5.9 8.0 5.0 11.9 5.4 11.5 18.0 3.6 3.7 8.7 Technicians, 2.6 2.7 2.3 4.0 2.2 3.9 0.6 2.6 1.0 3.6 assoc.prof. Clerks 9.3 9.2 9.4 16.9 7.2 12.3 21.7 6.0 11.1 7.8 Serv. Wk, 5.9 6.6 4.7 15.9 3.1 24.2 3.1 4.5 6.8 3.5 sales Skilled 11.0 11.3 10.6 3.0 13.2 0.0 11.2 1.5 5.2 21.1 agricultural work Craftand 1.6 2.5 0.2 2.6 1.3 3.1 0.6 1.2 2.6 1.1 rel.trade work Plant, machine 3.2 4.9 0.6 3.5 3.1 4.4 1.8 4.3 2.3 3.3 operators Elementary 42.8 37.9 50.3 25.7 47.5 21.2 21.7 44.3 53.7 40.2 occupation Other 10.4 9.9 10.9 9.6 10.6 12.3 1.2 25.5 7.5 5.7 Missing in 4.5 4.0 5.0 3.7 4.3 2.6 16.5 4.4 5.4 2.9 sample 2.8 The formal economy in Tajikistan is still largely state-dominated as most formal employment is in the public sector, the state companies and the state farms. The private sector is very small and is concentrated in services and construction in Dushanbe. Indeed, the TLSS data show that less than 7 percent of the formal employment in the country was in private undertakings in 1999. However, private farming is now starting to play an important - 39 - role. The number of people employed by foreign companies is negligible; 4.2 percent work in private firms and 2.3 percent work on private farms. The vast majority of the employed (71.6 percent) work in the public sector either in state-enterprises or the budget-sector. A large number of people (16.5 percent) find employment in family businesses and informal trading. Since private sector firms are concentrated in retail trade, restaurants and hotels and in construction, it is no surprise to find these activities concentrated in Dushanbe. Private farns are of course found in agricultural areas, except, however, in the most agricultural region in the country, Khatlon. It seems that employment in state farms is the predcominant form of employment in that region. In summary then, the formal sector in Tajikistan is largely state-dominated economy; and, apart from the small private sector, most people are employed on family farns and in informal trading. Table 20: Private Undertakings and Informal Trading by Economic Sector Private undertakings Faniily business and informal trading Total 6.9 16.5 Agriculture 3.2 2.9 Mining 0.0 0.0 Manufacturing 0.1 0.0 Utilities 0.0 0.0 Construction 0.7 0.1 Retail 0.8 4.2 Transport 0.3 0.3 Finance 0.0 0.0 Insurance 0.0 0.0 Defence 0.0 0.0 Education 0.0 0.0 Health 0.0 0.0 Other services 1.1 2.2 Other 0.7 6.1 Source: TLSS 2.9 Unemployment. The official unemployment rate in Tajikistan is based on registration. The unemployed have to register at the labor exchange office, and estimates of the number of unemployed are largely dependent on the eligibility criteria for unemployment compensation. Registration may define some people as unemployed who are not actually available and actively looking for a job (two basic requirements of the ILO-definitions5); but, much more important in the Tajik case, there are many people who oughlt to be defined as unemployed according to ILO-definitions since they actively seeking and actually available for employment, and yet are not counted as unemployed because they do not fit the eligibility requirements for registration or unemployment compensation. The official unemployment rate therefore seriously underestimates the 'real' number of unemployed: using the ILO- definitions, more than 16 percent of the labor force was unemployed in 1999. Gender differences exist, but are not very large: approximately 16 percent of the male labour force s In order to be counted as unemployed, a person has to fulfil four requirements simultaneously according to ILO-definitions: he/she should: (i) not be employed (that is to say not having worked for wage or profit during the reference week for one hour or more); (ii) be willing to work; (iii) be actively seeking employment; and (iv) be available for the labor mnarket (usually defined as being willing and able to accept a job offer in his/her regions within two weeks after the offer). - 40 - are out of work against 17.5 percent of the female labor force. The unemployment rate in urban areas is smaller (13 percent) compared to rural areas (17.2 percent). 2.10 The unemployment rate, however, does not tell the whole story, as a large number of people are hidden unemployed (meaning formally employed, but effectively not working because on forced holidays, working part-time involuntary or working short-time hours) or are discouraged (not looking for a job because they do no longer believe that they are able to find a job). According to the TLSS data, the official unemployment figure (3 percent) and the ILO-unemployment rate (16 percent) both underestimate the labor resources left unused in the economy seriously. When the hidden unemployed are added, the unemployment rate would be 20 percent; adding further the involuntary part-time workers makes the unemployment rate about 25 percent; and adding the discouraged workers and the rest of the labor slack increases the unemployment rates to respectively 31 percent and 33 percent. The relevance of all these figures is also recognised by official statistics on involuntary part-time workers and on people being on forced holidays. In 1996, almost 21,000 employees were affected by involuntary part-time work and 123,300 persons left for vacations because of 'administrative' reasons. The figures were even higher in 1994. As a result, the excess supply of labor in the economy is enormous, with younger age groups disproportionately affected. 2.11 Labor exchanges and training. The existing 67 labor exchange offices in the country which perform six major tasks: (i) the registration of the unemployed job-seekers; (ii) the disbursements of benefits to the unemployed entitled to receive benefits; (iii) the registration of vacancies with state-controlled enterprises and organizations; (iv) guiding the unemployed to existing vacancies, paid public work schemes and unpaid public works schemes; (v) guiding the unemployed to institutes for professional training; and (vi) the stimulation and subsidization of new workplaces by providing credits and wage-subsidies to existing firms, municipalities and new private business activities. In 1998 the following activities were performed by exchange offices: (i) 31,200 benefits disbursed; (ii) 14,882 people guided to regular employment; (iii) 4,944 people; (iv) 9,711 people guided to paid public work schemes; (v) 500 guided to unpaid public work; and (vi) 75,000 people guided to "extra created jobs". The subsidies and credits for funding the "new extra created jobs" were provided by the Social Protection Fund. In 1997, 33 percent of these jobs were created by subsidizing self-employment activities; 15 percent were created by assistance given to dekhan and other small farms; 16 percent were created with existing small and medium sized enterprises; and the rest (24 percent) were created by giving wage subsidies to existing firms and organizations. In view of the difficult conditions, the labor exchange offices work reasonably well; but their activities are necessarily limited, due to the slack demand for labor and the severe budget constraints. Moreover, the geography of the country implies that their reach is limited because it is costly and time-consuming to reach the job-seekers in mountainous areas. 2.12 Vocational training is provided by 73 training institutes with various characteristics. Specialists are trained in skills relevant to about 156 occupations of which 37 are in agriculture. The training institutes, however, face serious budget problems, many of their teachers are extremely badly paid or did not receive salaries, and much of the necessary equipment for the training programs is missing or broken down. As a result the schools are working far below their theoretical capacity. -41 - B. Changes in the Labor Market 1991-1998 2.13 Labor force participation. The estimates discussed in the previous section are all based on the TLSS. In order to provide a more dynamic picture of the labor market, only the official figures are available to be used. These figures differ in various respects from the earlier figures, mostly as they disregard the private sector anid informal trading. Nevertheless, Table 21 shows that the overall labor force participation rate has been declining: in 1991 36 % of the population belonged to the labor force, whereas it was 30 percent in 1998. When desegregated by gender, it is clear that this decline is entirely due to negative changes in the participation of men. However, the decline in the labor force participation rate shown by the official figures is overestimated, since many people became involved in the private sector and in family farning and informal trade. Table 21: Labor Force Participation Ratios 1991-1998 (Registered) by Gender 1991 1992 1993 1994 195" 199 1997 1998 Total 36 35 33 33 33 30 30 30 Men 44 41 37 38 37 32 Women 29 28 29 28 28 28 Source: Govemment of Tajikistan 2.14 Employment. Consistent with the previous figures, total employment as represented by the official figures declined by almost 200,000, from 1,970,000 in 1991 to 1,795,000 in 1998. The decline was particularly heavy until 1996, since when the trend has stabilised (Table 22). The total employment of men declined from nearly 1.2 million in 1991 to less than 1 million in 1996, while the total employrnent of women increased slightly over the same period; so men now only account for 54 % of total employment (against 60 % in 1991). The decline in eemployment took place especially for men in manufacturing, construction and public services at the central and local levels. Female employment was more stable mainly because women are less employed in the sectors most seriously afiFected by decline. 2.15 Unemployment. The number of officially registered unemployed sharply increased from 6,800 in 1992 to 54,100 in 1998. The share of men and women in the total number of unemployed changed in the same period: in the beginning two-third of the unemployed were men; 6 years later there were slightly more women than men registered as unemployed. In 1996 approximately 60 percent of the officially registered unemployed received an unemployment benefit, but this represents only a tiny little minority of the total number of unemployed. -42 - Table 22: Registered Unemployment 1992-1998 1992 1993 1994 1995 1996 1997 1998 Total 6.8 21.6 32.1 37.5 45.7 51.1 54.1 Men 4.4 12.4 17.5 20.2 22.8 24.3 25.3 Women 2.6 9.2 14.6 17.3 22.9 26.8 28.8 Receiving U- 4.8 4.9 19.9 27.1 benefit In % of unempl. 70.0 22.5 14.9 53.1 59.3 Source: Government of Tajikistan 2.16 The number of job-losers among the officially registered unemployment was high in the beginning of the period (1992); almost half of those people who became unemployed in 1992 and 1993 were looking for another job because they lost their previous job. The share of the persons who quit their job voluntarily increased between 1992 and 1996. However, the most dramatic development was the increase in the number of people who became unemployed after leaving school: their share increased from 2.4 percent to 37.1 percent of the officially registered unemployed. In absolute numbers this means that in 1992, 160 persons became unemployed after graduation: in 1996 this figure was 16,995 persons. This again confirms the difficulties of younger people trying to enter the labor market. Since the absolute number of unemployed increased significantly over the 1991 - 1996 period, despite the decline in the share of job-losers, their absolute number did not change that much. Every year in the period 1992 - 1996, between 1,400 and 4,600 people lost their jobs and became officially unemployed. Of course, some people (approximately 14,000 persons) did find a (new) job every year; but this is only a very small fraction of the total number of unemployed. The average unemployment duration for those people who found a new job was between 3.4 and 5 months. Table 23: Reasons for Changing Jobs andlor Labor Force Status 1997-1999 Reasons Forced leave (enterprise closed, staff reduction, end contract, fired) 41.3 Found better state job 10.0 Found better private job 12.2 Left labor force because of education, maternity, military.. 5.7 Left labor force because of retirement, bad health 10.0 Other reasons 20.9 Source: TLSS 2.17 Changes in Labor Force Status 1997-1999. The TLSS provides some information on employment characteristics, and particularly interesting are the changes between the various types of employers over the last two years. Most people who changed their jobs between 1997 and 1999 stayed employed roughly within the same sector. There was some movement out of Government offices and state-enterprises towards collective farms, but the Tajik labor market was relatively stable. More than 40 percent of the changes were forced by enterprise closures, staff reductions etc.; 22 percent of the changes were initiated because the persons involved could get a better job (10 percent in the state sector and 12.2 percent in the private sector). Nearly 16 percent left the labor force (6 percent for reasons related to - 43 - pregnancy, study or military service and 10 percent for reasons relalted to retirement and disability). C. Labor, Wages and Poverty 2.18 Employment and poverty. In Chapter 1, it was concluded that ithere is no systematic difference in labor force status between the various expenditure quintiles, that labor market participation (or non-participation) is not linked to poverty, and thalt employment is not associated with poverty. The TLSS data can also be analyzed by sector; and again, in general, there is no systematic or large effect of employment in each of the various sectors. There is, however, one exception to this: employment in the agricultural sector is negatively related to the income-position of the household. In other words, the more persons there are in a household who are active in agriculture, the more likely that the hlousehold belongs to the poorest part of the population. In all other sectors there is no monotonous association between the number of employed in the sector and the income-position. Table 24: Average Monthly Wage per Household by Settlement Income All wages Non-zero Non-zero Non-zero Group wages urban rural 8161.13 10519.65 16001.27 8510.70 1 4692.07 6218.40 7949.94 5725.21 2 5633.27 7270.98 10941.57 6130.12 3 6586.82 8468.77 12278.46 7423.37 4 8008.12 10328.06 15603.79 7944.95 5 16064.14 20193.91 26844.19 16531.77 Source: TLSS Note: A zero wage, however, is of course a strange concept. This refers to people working without receiving a wage and is linked to the widespread phenomenon in the Tajik labor market of wage arrears. 2.19 Wage levels and poverty. Although there is no strong association between employment and poverty, there is a strong link between wage levels and poverty. Table 24 shows a clear-cut and obvious relationship between the income position of a household and the average wages of its household members. If only non-zero wages are considered, the average wage in the poorest quintile of the population is TR6,218; the average wage in the highest quintile is more than 3 times as high (TR20,193). The differences are larger in urban than in rural areas, and they are especially due to differences in the average wages of the male household members. The men in the lowest quintile earn approximately TR5,000 per month, while men in the highest quintile earn 4 times more TR20,000. The differences in the wage discrepancies of women is extreme: women in the highest income-class earn less than the men in the lowest quintile, and the spread of female wage-earnings is very small (ranging from TR1,500 to TR3,100). On average women earn about one quarter of the average wage of men. In general, therefore, it is safe to conclude that, although employment itself is not related to poverty, wages are very strongly related to poverty. 2.20 Wage arrears and poverty. In recent years, wage arrears have been a serious and widespread phenomenon in the Tajik labor market: in January 1997 the total sum of wage arrears in the Tajik economy amounted to almost TR4 billion or 11.1 percent of the total wage sum. The arrears were particularly important in agriculture, in construction, in geological and in hydro-mechanical services, but they were also considerable in -44 - manufacturing, municipal services and education. According to the 1999 TLSS data, wage arrears still then had a disproportional impact on the income distribution. In fact lower income-households suffer a lot more from wage arrears than higher income families. This can be seen from Table 25. In 1999, more than 35 percent of the employed in the economy suffered from wage arrears, and this percentage was highest in the second quintile (38.4 percent) and lowest in the fourth quintile (29.8 percent). The difference between the second and the fifth (highest income) quintile was more than 10 percent, allowing the conclusion that wage arrears are positively related to poverty: the more a household is confronted with wage arrears, the higher the chance that it belongs to the poorer strata of the population. According to the Government, the wage arrears problem has improved since 1997, but data are not available and the situation is complicated as the problem is mainly manifested at the local level. In some cases, it appears that the central Government passes money for wages to the local Governments, but that some of which then use the money for other purposes. Table 25: Share of the Employed Affected by Wage Arrears by Quintile Expenditure Quintile Number of % Affected by % households Wage Arrears 1 280 38.4 21.7 2 340 43.2 26.4 3 244 31.6 18.9 4 213 29.8 16.5 5 213 32.3 16.5 Total 1290 35.2 100 Source: TLSS 2.21 While wage arrears are relatively concentrated among the poorer households in the economy, the income out of labor activities accounts for less than half of the household income sources. For all households, it seems that a considerable share of household income is generated outside the labor market in a narrow sense; and for many households, the sales of food and crops, sales of commercial goods, and also loans and gifts are all important income sources. In general it can be said that for the lower income quintiles, in particular, the lack of earning capacity in the labor market has to be complemented by other income generating activities especially in informal trading. 2.22 Benefits in kind. Benefits in kind contribute considerably to household incomes in some sectors. As can be seen from Table 26, this is particularly true for persons working in collective farms and for people working in family businesses and informal trading. Remuneration in kind and barter trade are important for these households. It is a marginal phenomenon for employees in Government offices and state enterprises affecting in both sectors less than 2 percent of the employed. - 45 - Table 26: Ownership of Benefits in Kind Total employed 16+ 100% Total employed receiving benefits in kind 12.4 Government office 1.5 State enterprise 1.5 Co-operative 0.3 Collective farmer 4.3 Joint-stock company 0.0 Joint venture 0.0 Private enterprise 0.5 Private farm 0.2 Foreign company, org. 0.0 Family bus. Informal trading 4.1 Source: TLSS 2.23 Real wage levels. Table 27 gives figures on nominal and real wages in Tajik Roubles and US-Dollars (using the official exchange rate) for the period 1992 - 1998. Although the exchange rate can be disputed, it is still clear that wages are not very high and that they have not changed much over the last decade. Nominal wages can also be compared with the subsistence minimum as defined by the Government: since 1995; the average wage has been about one third of the subsistence minimum. The minimum wage hardly exceeded US$1 over the last decade. In other words, wage levels are stable but very low; and the minimum wage level is considerably below the subsistence level however defined. Table 27: Average Nominal Wage, Minimum Wage and Subsistence. Minimum in Tajik Rubles and US dollars, 1992-1998 1992 1994 1995 1996 1997 1998 Average nomninal wage per capita In TR 2035 34904 731 2805 4975 8590 In USD 10,6 15,8 7,0 9,6 8,9 11,0 Minimum remuneration rate In TR 1260 8000 144 322 322 1000 In USD 6,57 3,62 1,38 1,10 0,57 1,3 Subsistence minimum in - 19,2 24,7 27,0 28,0 30,6 December per capita, in USD 2.24 Coping strategies. Coping strategies consist of very many different elements, but using the labor market by performing additional work is usually one of them. Approximately 14 percent of the employed have an additional job. Most jobs are in agriculture, in retail trade and in other services. The people performing these activities have their primary sector of employment in one of many different sectors: in agriculture, in manufacturing, in retail trade, in transport, and in the state controlled sectors such as defence, education and health. Additional work activities are important, but many households have to undertake a variety of other coping strategies too in order to survive. - 46 - D. The Main Labor Market Issues 2.25 In summary, it is clear that Tajikistan is an agricultural- and a state dominated economy. The private sector is at an early stage of development, and the majority of the private activities are concentrated in informal family businesses and street trade. Only 7 percent of employment is in private firms and farms. This constrains the development of a well functioning labor market. Although much of the labor force is reasonably well skilled, many workers are employed in elementary occupations, especially in agriculture requiring none or very little skills. The educational differences between men and women are huge and to the detriment of women. Employment is not directly related to poverty, in contrast to wages; and wage arrears are widespread. Wages are an important factor in incomes; but, even if paid, they are so low that other income sources are very important as well. 2.26 Since independence, many people have lost their jobs, but labor shedding has not been massive. The vast majority (85 percent) of people employed in 1999 held the same job in 1997. Although many people have recently been able to find a first job, the majority of the new labor market entrants (particularly school leavers) have become unemployed and continue to be so. Many younger people have therefore become discouraged and do not seek gainful employment any longer. Even with the start of economic growth since 1997, the growth so far has only been marginal and only in the small private sector and in the informal economy. In general, then, Tajikistan is still in the early stage of transition. Much of the economy is still controlled by the state, notably in Government services, state-enterprises and collective farms. The state sector is shrinking because of lack of resources and because it cannot employ more people. The private sector is in its infancy and its growth potential is extremely limited as well. 2.27 Against this background, the predominant labor market and poverty issue pertains to the extremely big excess supply of labor and the very few market mechanisms that may lead to adjustments. The excess supply of labor is due to: (i) the enormous demographic pressure with high (though falling) birth rates; and (ii) the lack of demand for labor to absorb the supply. The old labor absorption mechanisms of the Soviet system are not able to work any longer, while new market mechanisms are far too weak to be able to guarantee the absorption of a significant part of the excess supply. Price-adjustments (downward wage adjustments) are unrealistic since current wages are already below subsistence level for most employed. Currently the excess supply of labor is "absorbed" by overt unemployment, hidden unemployment, subsistence agriculture and street trading. The result is a huge labor slack concentrated among younger people and labor market entrants, among women and in some regions. The labor slack in turn leads to the loss of potential income and depressed economic growth. E. The Development of a Pro-Poor Employment Strategy 2.28 A poverty-alleviation oriented labor market strategy should aim to do the following: (i) encourage the development of a well-functioning labor market; (ii) increase the number of job opportunities for the existing excess supply of labor; (iii) improve the institutional conditions for private business activities; (iv) improve the skills and support private business - 47 - activities; and (v) enable funds and financial support to be channeled to private business activities. Additionally, the country should have the institutional capacity necessary to analyze labor market developments and to monitor labor market policy. 2.29 Developing a well functioning labor market. The transition from a command economy to a market economy implies the need for new institutions, laws and regulations in the labor market, especially as the country used to have a "full-employment commitment" and the current employment law is out of date. The Institute of Labor has started the process of formulating a new law on employment and new regulations regarding minimum wages; but clear regulations are needed, for example, on labor contracts for all parties and also on other aspects of the labor market. It is important that Tajikistan seeks initernational assistance regarding all aspects of labor regulations and tripartite agreements (for example, from the ILO or from other multilateral and bilateral donors), and that an internally consistent set of regulations is developed. 2.30 Besides developing appropriate labor market institutions and regulations, it is equally important that the legal framework is respected by all parties and that adjudication procedures work effectively. In this respect it is extremely important that the Government itself respects all regulations and contracts. In the short term, very high priority should be given to the payment of all wages and new wage arrears should also be avoided, especially as wage arrears have a direct impact on poverty. In order to set the scene for further institutional development, even the retrenchment of staff should be preferred when the Government is not able to respect its employment contracts. 2.31 The Government also needs to identify the main constraints to the development of the private sector. To do this, the Government already plans to conduct a comprehensive survey of private enterprises in the three major municipalities of the country (Dushanbe, Khojand and Kurgan Tube). The survey will also include an assessment of the performance of privatized enterprises to ascertain the impact of privatization thus far. Private sector advisory groups, comprising municipal officials and representatives from the private sector, will be formed for each of the participating municipalities as well as within the central Government. This is an encouraging development. 2.32 Increasing job opportunities and stimulating economic girowth. Ultimately economic growth is the main mechanism to ensure that future generations in Tajikistan will be able to find gainful employment and to bring prosperity to all. At present in Tajikistan, there is a major problem due to the fact that many of the younger generation in particular have no access to jobs. Despite the initiatives and the current policies of the labor exchange offices in job placements and public work schemes, and despite the efforts of TASIF to provide micro-credits and to promote labor-intensive microprojects in the poorest areas, many people are left without a job. Since labor is the only source of wealth that is accessible to (nearly) all, poverty cannot be effectively alleviated without providing income to people by providing them with jobs. 2.33 A strategy aimed at enhancing economic growth is therefore extremely important. Given the excess supply of labor, the country should aim at a labor intensive growth strategy. - 48 - Even without a full analysis here of such a strategy9, it is logical that small-scale agricultural processing industries and labor intensive services will have major roles to play. However, whatever strategy is chosen, the extent of excess labor is so massive that it will take a long period of sustained economic growth to absorb it. The current employment elasticity is so small that it is hard to forecast how long and how big economic growth would have to be in order to absorb the excess supply.'0 This is not an encouraging situation, especially as the shedding of labor from state controlled parts of the economy is far from finished. Moreover, it is also clear that there is currently a hidden supply of labor in the family sector, in subsistence agriculture and in informal trading. This labor supply will come to the market if more employment possibilities would become available. However, even though growth prospects may be limited, the country needs to pursue policies which maximize the numbers of jobs created. 2.34 Improving institutional conditions for private business initiatives. In parallel with the development of labor market institutions, there is similar need for the development of regulations regarding the establishment and functioning of private businesses. The existing regulations and laws on bankruptcy, taxes and registration etc are not implemented well and this discourages private business initiatives enormously. The Government should seek technical assistance in the area of the formulation of laws concerning private business operations. Banking bank reform is also highly needed, as access to a capital market and effective protection in the banking and insurance businesses are preconditions for the development of a capitalist economy. 2.35 Improving entrepreneurial skills and supporting new private business initiatives. Currently the economy suffers from a lack of incentives and ideas to set up new small and medium sized enterprises. In many sectors there are no or only few private initiatives, and the existing ones tend to be limited to a small range of activities. Although the labor exchange offices and the TASIF provide some training and micro-credits, there are insufficient possibilities for private business development. It is therefore important for incubation centers for private businesses to be established to provide some initial training, counseling, monitoring and supervision of new businesses. These centers should be relatively small-scale and easily accessible. The centers should not only respond to requests and initiatives taken by others, but should also try to come up with initiatives and train potential candidates who would be able to implement the business plan. How these centers should be developed in terms of institutional environrnent is difficult to say. Linking them up with the existing labor exchange offices is a possibility, but there would be a substantial danger that the incubation centers would then be too close to the idea of unemployment policy and thus endanger the dynamic inspiration that such centers should provide. Another option would be a link to the TASIF, but that organization is focused on poverty alleviation and locating the proposed incubation centers there would distort their basic mission and philosophy. The conclusion is that the incubators should be located away from both the existing labor offices and also the TASIF. It is recommended that the Government should 9The forthcoming country economic report of the World Bank will focus on the issue of economic growth. '° The employment elasticity for the recent period of limited economic growth since 1996 using the official employment figures, is hardly positive (+ 0.005). Even if an heroic assumption regarding private sector development between 1997 and 1999 is adopted, and if it is assumed that nobody left the stock of emnployed in this period, the employment elasticity would be no higher than 0.103. - 49 - seek technical assistance in this area from bilateral donors that have well-developed examples in their home country. 2.36 Channeling funds and financial support to private business initiatives. Small businesses are confronted with a lack of private savings and accessible funds, with no access to the capital market or to venture capital. Labor exchange offices and TASIF provide micro-credits and micro-grants to private undertakings, but their resources are too limited. One possible strategy to expand the opportunities for the private sector would be to channel part of the public work programs through private business initiatives. Many programs that would normally be conducted under the control of (local) public authorities could probably be used to enhance private sector businesses. For example, a program for school meals could be set up through organizing a tender rather than by public provision. Applicants could first be assisted by the proposed incubation centers to make a business-plan and to prepare their application; and after being active in school meal catering, the small companies could perhaps be helped to expand to provide catering facilities to institutions and companies, etc. It is also recommended that the Government try to seek donor support for micro-grants (some of which could be in kind) and micro-credits. 2.37 Developing institutional capacity to analyze labor market developments and to monitor labor market policies. The Ministry of Labor and the Institute of Labor are currently equipped to collect and process the official labor market figures, but there is a lack of capacity for monitoring developments in the labor market and for analyzing survey data. Now that the first national representative survey data are available through the TLSS, a serious effort should be made to build capacity in social policy monitoring and evaluation. In the short term this means: (i) setting up a policy monitoring and evaluation unit within the Ministry of Labor and the Institute of labor; (ii) seeking technical assistance for this activity on a longer term basis; and (iii) considering the publication of an annual labor market report. 2.38 The following are the recommendations that arise out of this analysis. On the development of institutional capacity: (i) A policy monitoring and evaluation unit should be set up within the Ministry of Labor and the Institute of Labor. (ii) Technical assistance should be sought to develop institutional capacity on longer term basis; and (iii) The publication of an annual labor market report should be planned. On the development of a functioning labor market: (i) Wage arrears should be paid. (ii) Contracts should be respected. (iii) Technical assistance should be sought (for example, from the ILO) on labor market regulations, tripartite agreements and employment laws. - 50 - On increasing job opportunities. (i) Growth oriented and labor-intensive macro-economic policies and institutional reform (including of the banking sector) should be pursued. (ii) Technical assistance should be sought on the formation of laws concerning private business operation. (iii) There should be establishment of incubation centers, where there would be initial training, counselling, monitoring and supervision support for private. (iv) The existing the public works program should be expanded, with an increase in the scale of work of the TASIF, and some part of it should be channelled through private business initiatives. - 51 - CHAPTER III. AGRICULTURE AND POVERTY A. The Main Features of Agriculture in Tajikistan 3.1 Agriculture plays a vital socio-economic role in the economy amd in the lives of the majority of the population. As other sectors have collapsed, the relative role of agriculture has increased. It now contributes about 19 percent of GDP, about 30 percent of export revenues, and about 30-40 percent of Government tax revenues mainly through the taxation of cotton. It also provides formal occupations for about 60 percent of the country's labor force. 3.2 Much of Tajikistan's surface is covered by mountains. This curtails the area available for crop production. At around 960,000 hectares, the country's arable area is 7 per cent of the total area of 143,000 square kilometers. Per capita availability of arable land is around 0.15 hectares, or 0.2 hectares for the rural population. Much of the arable area is subject to arid or semi-arid rainfall conditions, and irrigation systems are present on around 720,000 hectares. Pastures are a significant resource, with around 3.6 million hectares under permanent pastures, mostly in the mountainous areas. Agroclimatic conditions vary from the hot, dry plains (from 300 meters elevation) to high glacier mountains up to 7,500 meters. Growing conditions are mainly temperate but can be subtropical in the southern plains areas of Khatlon where citrus is grown. Arable, pasture and meadow areas represent 32 percent of total area. 3.3 At independence, the land was farmed by about 600 state controlled sovkozes and kolkozes. Since then, a number of sovkozes have been converted into kolkozes. The remaining sovkozes have been officially renamed goskoz, of which 196 have been retained as research, and seed and livestock multiplication units. Some sovkozes and kolkozes have been transformed into joint stock companies, cooperatives and private dekhan farms. However, despite some trade and price liberalization, all large production units effectively remain under informal state control at this stage and the majority of farmland remains under a high degree of state influence. Formal agricultural employment on state production units was mainly paid in-kind for several years, although the tendency now is for more workers to be paid in cash. Informal agricultural employment and self production on small plots now contribute the basic livelihood of most of the rural population. 3.4 Tajik agricultural statistics tend to be uncertain, and the figures in Table 28 should be interpreted with this in mind. The figures for 1998 are particularly questionable. The table shows, however, orders of magnitude in the movements in cropping patterns that have taken place since 1991. The figures suggest that 200,000-300,000 arable hectares, or 20-30 percent of the total production area, may now be out of use. This is primarily due to the breakdown of the irrigation and drainage systems. The main production features are the decline in the land productivity of cotton since 1991, and the increase in total grain area and production. However, the tendency to increase the area of wheat, which is the main staple, has been constrained by rust disease. In general, land productivity is low. The figures reflect the yields for large scale, capital intensive production units represented by the state controlled farms. Both cotton and grain yields are poor by international standards, as was the case also under the Soviet system. Now, low levels of land productivity are attributed - 52 - officially to lack of finance and capital inputs. All state and collective farms are caught in a deep spiral of indebtedness to state and other entities (for taxes, energy, water, inputs and credit). Table 28: Trends in Crop Area, Yield and Production since 1991 Crops Area "000" Ha Yield "01" KgsfHsa Production "1000" Tons 1991 1996 1997 1998 1991 1996 197 1998 191 1996 1997 198 Cotton 299 235 200 249 28 14 15 16 828 322 290 406 Total Grains 226 392 418 236 13 10 11 21 299 402 456 496 Wheat 144 312 329 212 10 11 15 16 141 328 499 339 Barley 46 40 36 170 10 7 7 11 47 27 25 187 Maize 16 11 8 7 38 17 20 66 60 19 16 46 Rice 9 12 13 8.8 27 20 25 26 24 24 33 23 Potatoes 13 6 3 4 140 88 100 157 182 53 32 63 Vegetables 28 8 9 6.9 194 14 150 210 543 11 127 145 Fruits 23 23 23 54 100 120 100 19 230 274 228 103 Grapes 28 15 15 22 12 9 12 28 34 13 17 62 Total 606 662 636 734 Source: World Bank estimates 3.5 The Government's current medium term development strategy concentrates, inter alia, on accelerating the large scale privatization and land reform programs, deepening financial sector reform, and continuing with the liberalization of the trade and exchange regimes. In order to achieve improvements in resource use in the agricultural sector, a main item of the privatization program has been the effort to privatize the 22 state cotton ginneries and the state cotton marketing organization. Though rescheduled for completion by September 1999, the process is still ongoing. In addition, between 1995 and mid 1999, around 120 state farms were "privatized". These were converted into "dekhan" (private) farms. The land reform program started in June 1999, and targets were set for the conversion of a further 160 kolkozes into private dekhan farms by March 2000 through issuing land share certificates to employees. The World Bank is assisting the land privatization process through its Farrn Privatization Support Project (FPSP). The Project is piloting land surveying, mapping and title registration procedures, together with measures (infrastructure rehabilitation and production grants) to stimulate productive activity on ten of the reforming farms. Table 29 summarizes the main structural reform measures set for the agricultural sector in the Government's Memorandum on Economic Policies for 1999/2000 which is part of the Enhanced Structural Adjustment Facility (ESAF) agreement with the IMF. - 53 - Table 29: Agricultural Sector Reforms under the ESAF, 1999-2000 Measure Responsibility Timing Land reform Establish land registry Ministry of Justice, Ministry September 1999 of Agriculture, Land Reform Commnittee Start dealing with land issues in the economic court, Ministry of Justice, Land September 1999 and clearly determine legal land rights Reform Comrmittee Privatize state and collective farms by issuing land Land Reform Commnittee, use and land share certificates as follows: Ministry of Agriculture - 20 farms June 1999 - cumulative 60 farns September 1999 - cumulative 110 farms December 1999 - cumulative 160 farns March 2000 Liberalization of inputs Complete the process of liberalizing marketing for all Ministry of Agriculture December 1999 agricultural inputs The irrigation system Rehabilitate the irrigation system Ministry of Irrigation December 2000 Calculate the economic cost of water supply Ministry of Irrigation, September 1999 Ministry of Economy Ensure that tariffs for irrigation adequately cover Ministry of Irrigation, costs Ministry of Economy - 30 percent cost recovery December 1999 - 50 percent cost recovery December 2000 Rural credit Develop a rural credit system Ministry of Agriculture, December 1999 National Bank Source: Memorandum of Economic Policies for 1999-2000, Govemment of Tajikistan B. The Profile of Rural Poverty 3.6 The initial results from the TLSS indicate that 73 percent of households are in rural areas; but because of larger family sizes, these households cornprise 78 percent of population. The oblasts with the highest proportions of rural population are the RSS (89 percent of its households) and Khatlon (82 percent of its households). As noted earlier, the TLSS results show that rural areas are relatively worse off than urban areas, even when household economies of scale are taken into account, and that poverty rates differ between regions. Almost 80 percent of the country's poorest households (the bottom quintile of the national consumption distribution) live in rural areas, compared with 62 percent of the top quintile. Table 30: Rural-Urban Distribution of Households by Regions Households Rural (%) Urban (%) Total Dushanbe 0 100 100 GBAO 80 20 100 RSS 88.9 11.1 100 Leninabad 71.1 28.9 100 Khatlon 81.8 18.2 100 Source: TLSS - 54 - 3.7 Household size tends to be larger for rural as compared with urban households (Table 31): only 1.7 percent of rural households comprise 3 persons or less, compared with 8.8 percent of urban households. Over one third of rural people live in households with more than 10 persons. Table 31: Distribution of Individuals in Households by Rural and Urban Number of Persons in Household 1-3 4-6 7-9 10+ Rural 1.7 26.1 35.8 36.7 Urban 8.8 41.8 30.3 19.0 Source: TLSS 3.8 The proportion of population below 15 years of age is higher in rural than in urban areas (Table 32). Table 32: The Age Composition of Population by Rural and Urban 0-15 Years 16-64 Years 65+ Years Rural 46.1 49.5 4.3 Urban 40.7 54.9 4.3 Source: TLSS 3.9 The rates of special, vocational secondary, and higher education are all lower in rural than in urban areas. The share of population with vocational and special secondary education is 8.2 per cent compared with 12.8 per cent in urban areas. Those with some higher education are only 2.9 percent compared with an urban rate of 7.8 percent (Table 33). Table 33: Educational Status by Rural and Urban Primary Other Unknown General Vocational Some (age less Primary or none Secondary or Special Higher than 15 Secondary Rural 46.1 5.7 3.5 33.5 8.2 2.9 Urban 40.7 5.3 3.7 29.7 12.8 7.8 Source: TLSS 3.10 Despitc most household heads being formally employed in the large farm sector, self employed agriculture now plays an important role in rural life. Rural households have a high level of participation in own-account agriculture (Table 34) with 93.8 percent of rural households accessing some amount of land for farming. Garden or household plots are extremely important in rural household economies, and 92 percent of rural households have a garden plot. A high proportion of urban households (37.9 percent) also use small plots for vegetable growing. The average size of households plots for rural households is 0.13 ha. The average proportion of garden plot irrigated is 0.08 ha; but this statistic disguises the fact - 55 - that in the lowland plains areas, garden plots are almost always irrigated. By contrast in the higher rainfall, higher altitude areas, garden plots are often not irrigated. Table 34: Participation Rates and Land Available for Rural IIouseholds item % of Area Cropped Ha Of which Irrigated : : Households All Households Ha Access to Land 93.8 Household Plot 92.0 0.13 (n=1958) 0.08 (n=1495) Wheat 49.4 0.62 (n=759) 0.21 (n=710) Cotton 7.7 0.62 (n=110) Other Crops 21.2 0.23 (n=336) Orchard 6.4 0.14 (n=88) Fallow 0.5 0.26 (n=9) Source: TLSS preliminary analysis 3.11 In common with all other formner communist countries, household plots (and their extensions in Tajikistan known as "Presidential" plots) have developed over time into mixed activity mini-farms. These areas are intensively cultivated. In the plains areas of Tajikistan, double cropping is the norm. On the household plots, a variety of vegetables including potatoes are grown. On the Presidential plots, wheat followed by maize or vegetables are grown. Almost always tree crops providing fruit, nuts and fuel are present on household plots. Livestock (mainly cows and chickens) are part of an integrated system. As well as providing food for family consumption and sale, crops also provide residues as well as grain which help feed livestock. In return, in mountainous areas, livestock provide manure for fertilization, dung which is sun dried for cooking and winter heating, and draft power. Household farming systems are labor intensive, and meticulously planned and managed to ensure that output from every square meter of land is maximized, given the resources of the family. Table 35: Contribution of Own Farming to Household InDcome Food Net Agricultural Income Rural 45 8 Urban 7 3 All 35 6 Source: TLSS 3.12 The role of household agricultural self-employment based on the household plots is shown in Table 35. More than 50 percent of household income is derived from this source in the form of consumed and sold products. Even food deficit families sell products such as potatoes and vegetables as a main way of raising cash. Nearly half (49.4 percent) of rural households grow wheat, while only 7.7 percent grow cotton on their own plots. Many families, of course, are involved in cotton production through their formal employment on the local sovkoz or kolkoz. Orchards and fallow play little role in rural household economies due to the concern of households to concentrate their limited land areas on household food staple production. - 56 - 3.13 The importance of livestock in household economies is shown in Table 36. Over half (52 percent) of all households own cattle, 20.2 percent sheep, 17.5 percent goats, and 34.2 percent own chickens. The ownership of a cow is particularly important for rural families, since milk products provide a critical contribution to the diet especially of children, and an opportunity to sell for cash. Only 1 percent of households owns a tractor, but between 15 and 20 percent own a form of animal traction which can be used for transport and land preparation. Table 36: Ownership of Livestock and Other Assets Item % Cattle 52.7 Sheep 20.2 Goats 17.5 Horses 5.3 Donkeys 14.9 Chickens 34.2 Tractor 1.0 Cart 3.4 Source: TLSS 3.14 As noted earlier, there is a correlation in the TLSS data between poverty and family size. This relationship is consistent with the opinions expressed by rural families in participatory surveys that the "most vulnerable" families tend to be the largest families with large numbers of young children. In addition, though, there is a clear inverse correlation between poverty and land availability, as poverty increases as per capita land availability decreases. On average, the 60-80 percent quintile has twice the per capita land availability of the bottom quintile; and the top quintile has access to three times as much land per capita. This finding also fits well with participatory survey findings, as many respondents rank insufficiently fast land reform as the main cause of poverty, only after such exogenous factors as civil war, trade disruption and natural disasters. Table 37: Land Availability per Capita by Quintile for Rural Households Quintile Mean Land Ha Bottom 20% 0.06 20-40 % 0.09 40-60% 0.10 60-80% 0.11 80-100% 0.17 Source: TLSS preliminary analysis 3.15 When asked about survival strategies, participants rank their household plot and livestock at the top of their lists, ahead of migration, trade, humanitarian assistance, and wages and pensions (in descending order of importance). Improved access to land therefore needs to be considered as a priority in a poverty reduction strategy. In addition to the need for land reform, the other key rural development issues needing to be addressed relate to the cotton sector (which dominates commercial agriculture), irrigation (as so much of the crop agriculture depends on it), and finance and credit. These are not the only issues of - 57 - importance to the development of agriculture and to the creation of productive employment in the rural sector, and the forthcoming country economic report will suggest further ideas, but this chapter focuses selectively on these four agricultural issues. It should also be remembered that for some of the most vulnerable, improved land access and productivity will not necessanrly make a difference, especially for families without labor, and for pensioners and the handicapped living alone. For these groups, non-agnrcultural solutions as well as official safety nets are more important. Nevertheless, it should be remembered that even for large families with small children, extreme vulnerability may be a transient phenomenon. Children who are young now will, in a matter of years, contribute labor to farm and family food production. Here, as well as with the rural population generally, better access to productive agnrcultural resources is likely to have a key role in poverty alleviation. C. Land Reform 3.16 Land reforn and pnrvatization were introduced onto the policy agenda in Tajikistan even before independence, as the Law on the Peasant Farm was adopted by the Supreme Soviet in 1990. Although the Tajik Constitution forbids the transfer of land to pnrvate ownership11, there has been a plethora of decrees and other resolutions on land refonr through the 1990's. Three main fonns of land redistribution have emerged out of them. 3.17 Extensions of Household Plots. In all countnres of the FSU, households were allowed plots of land for housing and small scale home cultivation. T'ypically, house and "garden" would be on the same plot. In general, these individually managed plots were limited to 0.2 ha. In Tajikistan, the traditional household plots appear to have been more restricted, to areas of 0.1 - 0.15 ha. This was probably due to official concern to maximize the area available for cotton. Plot sizes in non-irrgated, usually higlher rainfall hilly and mountainous areas are larger. In the low rainfall plains areas, household plots are nearly " According to Article 13, "the land and its natural resources are the exclusive property of the State, and the State guarantees their efficient use in the interests of the people". 12 After independence, Tajikistan initiated a restricted form of land privatization through Law No. 6 of 1991 on the Denationalization and Privatization of State Property. Since then, a number of decrees have generated a range of arrangements by which land can be redistributed. The most important items of this legal framework are: (i) The Presidential Decree "On Peasant Farms" of 6 March 1992, which enabled hiouseholders to apply for land to be worked as independent (dekhanskyli) farms on the basis of life-long, inheritaLble but not saleable leases; (ii) The Presidential Decree "On Renting Land" of March 1992, which authorized kolkozes to rent and lease land to households for independent cultivation on fixed term agreements ranging from one to ten years, in return for an agreed proportion of the crop; (iii) The Land Reform Law of 1992, which specified that land distribution decisions in the event of farm restructuring are taken by the head of the rayon hukumat, and that land is to be distributed between the permanent members of the collective body in the form of shares, giving a personal right to a plot of land; (iv) The Presidential Decree of October 1995, which allocated 50,000 ha of land for private supplementary cultivation of household plots. A follow-on Decree in 1997 provided for the release of an additional 25,000 ha of land for the same purpose. This land is commonly known as "Presidential Land"; (v) The Land Code of 1995, which consolidated much of the previous legislation. In addition, it provided clarifications allowing dekhan tenants to transfer their rights to family members or to other qualified people in the event of an inability to work or retirement. It also introduced the concept of primary and secondary users, which provided for the transfer of land use by the primary to the secondary user; (vi) The Presidential Decree of June 1996 on the reorganization of agricultural enterprises which replaced the services of the Ministry of Agriculture in the land area with the Land Reform Committee; (vii) The Presidential Decree of December 1996, which provided for the transformation of state companies into joint stock companies; and (viii) The Presidential Decree of June 1998 on the "realization of land use rights" which provides detailed procedures in this area. - 58 - always irrigated, as already noted. As already noted, a complex form of integrated agriculture is carried out on these plots. Land use is intense and land productivity high. Many irrigated plots are double and sometimes triple cropped with a range of potatoes and other self-consumed and marketable vegetables (onions, carrots, eggplants, cabbage, cauliflower etc). Nearly all household plots have fruit and fuel wood trees. In addition, the plots partly sustain large and small livestock from crop residues. Occasionally, even wheat is grown on the household plot. The TLSS survey data indicate that 45 percent of the total consumption of rural households is provided from own account agricultural plots. This may even be an underestimate because of the timing of the survey in early spring, with income and consumption data based on the previous month. 3.18 Between 1996 and 1998, 75,000 ha in small lots were distributed by Presidential Decree to households to supplement existing household plots ("Presidential land"). Recipients included both agricultural and non-agricultural households of rural communities. Allocations were based on the number of family members, but were adjusted for the household plot area already held. As with other land distribution measures, rayon authorities devised the detailed allocations. In general, allocations were in the range of 0.016 - 0.03 ha per capita, partly depending on the perceived scarcity of land locally. The impact on the livelihoods of these household plot extensions appears to have been highly positive, because they have allowed a greater level of food self sufficiency and opportunity for sales. In the populous plains areas, the new plots are often double cropped with winter wheat followed by maize or vegetables. The addition to staple food availability from Presidential plots can be the equivalent of 4-8 bags (200-400kg) of wheat, and 3-6 bags (150-300kg) of maize. The crops provide grain and residues which are important for household livestock production. Taking a staple food requirement per capita per year in grain equivalent of 150-175 kg not including provisions for livestock, the "Presidential" land program has supplied an annual increment to staple food supply for 3-4 household members. 3.19 Leased and Rented Land. A multiplicity of land rental and hiring arrangements have been introduced on kolkozes and sovkozes in the past eight years. In the most formalized cases, there have been contractual arrangements to create large farm units. The Ministry of Agriculture has recorded 84 lease farms, legally registered, on areas varying from 500 ha to 1,500 ha. In most of these cases, the entire kolkoz and sovkoz have been taken over by their senior management. Rental payments are usually based on fixed payments per hectare. Many of these farms took over the indebtedness of the former kolkoz or sovkoz, and they typically operate on forward contracts for the supply and delivery of cotton. These contracts are administered through the rayon authorities . 3.20 In addition to the formal leasing of large units, there has been much small scale, informal leasing, without written agreements. One common form of this is for the kolkoz to "rent" land to employees in lieu of unpaid wages. This and other rental and lease arrangements are usually based on a form of sharecropping, where a portion of the crop output is taken by the renter i.e. the kolkoz. Often, the kolkoz will provide instructions and inputs for the crops to be cultivated. In these cases, 70-80 percent of the harvest will be paid as rental. Where a lessee provides his own inputs, around 50 percent of the harvest is paid to the lessor. Short terrn leased land is often poor quality land worn out by years of cotton monocropping. In many cases, the land is taken back by the kolkoz after one or two years for reincorporation into cotton production. The total number of non-formal lease/rent - 59 - arrangements is not known, because they are informal and unrecorded, but maybe 20-25 percent of the 600,000 rural households have been involved at some point. 3.21 The World Food Program (WFP) has supported more formal arrangements for this type of small scale leasing through a project aimed at supporting the most vulnerable families. The project facilitates the process of access to land for these families, and protects that access by ensuring a formal lease contract. Agreements with selected kolkozes are negotiated on behalf of the beneficiaries. The latter sign individual or group contracts for renting plots of 0.5 to 1.0 hectares on leases of up to four years. Each participant pays 10-20 percent of crop income as lease and water charges. By June 1999, about 19,000 households on 12,400 ha were involved in the WFP project. The WFP evaluation dalta indicate that these small lease lands have had a positive impact on household economies, similar to that apparent on the "Presidential land". However, 10 percent of participating kolkozes are reported to have breached WFP agreements by reclaiming land from beneficiaries on a number of questionable grounds including failure to cultivate cotton. 3.22 The overall poverty impact of renting and leasing land has probably been minimal, with the exception of the WFP land lease project, as poor households on the 84 new large lease farms will have continued to work as employees for low wages. An additional one hundred thousand or more other families have been subject to arbitrary, short term arrangements which probably had little or no sustained impact on their household economies. In the case of the WFP lease program, the sustainability of leases still has to be addressed, because most kolkozes are now in the process of transformation to dekhan farms. Most of the 19,000 vulnerable households fortunate enough to have benefited from the WFP schemes will almost certainly have had a major increase in their self produced food supply. 3.23 Dekhan Farms. The term "dekhan" or "private" farm covers a range of farm organization formulations. Two basic models have so far emerged from the transformation of state farms into dekhan farms. These are: (i) small and medium size (2-50 ha) family dekhan farms, and (ii) large (50-500 ha) collective dekhan farms (sometimes called dekhan associations). In both cases, the farrns are created with a lifelong inheritable dekhan lease. The restructuring of state farms is largely the responsibility of local authorities. The process at the local level is under the joint responsibility of: (i) the chairman of the kolkoz who reviews and approves the application to create a dekhan farm and submits it to the district hukumat; and (ii) a district land reform commission chaired by the hukumat head which approves the submission from the kolkoz and passes it on to the Land Reform Committee in Dushanbe which provides the final approval. 3.24 Unfortunately, so far the process of obtaining dekhan land rights has been exclusive, complicated and expensive. First, Article 69 of the Land Code includes an explicit presumption that the applicant has "the necessary knowledge, qualifications and agricultural experience", and many kolkoz administrators are extremely dismissive of the capabilities of kolkoz employees to farm. Second, obtaining dekhan land rights is expensive. The transaction costs of processing the dekhan application and obtaining the land rights certificate are consistently reported to be in the region of $250. In addition to the official charges, there are costs of transport to convey the application between kolkoz, rayon and Dushanbe plus a number of informal "processing" charges. Altogether, permissions are needed from the kolkoz, the jamoat, the hukumat, the local land commission, the Notary, the Ministry of - 60 - Justice, a Bank, the Statistics Agency and the Tax Authority. Perhaps not surprisingly, until recently, the conversion of state farms to dekhans has been very slow. The first phase of dekhan privatization mainly involved the creation of medium size family farms. By 1997, around 7,000 such farms had been established. By mid 1999, the figure had increased to around 10,000, and has accelerated in the four months to November 1999 to 13,000 . The process of obtaining dekhan rights is highly dependent on access to information, networks and resources. As a result, most of the new dekhan farmers are kolkoz administrators and specialists, hukumat officials, businessmen and relatives. 3.25 The World Bank has consistently supported the "dekhanisation" process. Most recently in the middle of 1999, the implementation commenced of the five year Farm Privatization Support Project (FPSP), the objectives of which are to: (i) develop procedures and institutional mechanisms at the state and regional level to ensure fair, secure and equitable transfer of land and other farm assets to private individuals or groups; (ii) test and implement these procedures in ten selected former state and collective farms to provide models for wider replication; and (iii) create sustainable family farming units and provide them with the enabling conditions (irrigation, drainage and credit) for them to operate independently in a market economy. The strategy of the project is to apply a systematic approach to the development of land survey, registration and certification procedures. Three of the ten farms have significant on the ground activity so far. 3.26 In contrast to the process throughout most of the country, nearly all land in GBAO was distributed to individual families during the period 1995 to 1999. With support for input provision from the Aga Khan Development Network (AKDN) and other donors, this agriculturally disadvantaged region has moved from being 15 percent self sufficient in wheat in 1995 to a projected 80 percent self-sufficiency in 1999. The support from the donors was conditional on individualized, private farm management. The effect of this process of land redistribution to individual households on their livelihoods has undoubtedly been dramatic and positive. In 1997, after reaching agreement with the local authorities on land distribution to individual households, the AKDN moved into five districts of the more fertile Karategin region where similar improvements in production and productivity with wheat and potatoes are being experienced. Around 20,000 small farmers are participating in AGDN programs in the two areas. 3.27 In the summer of 1999, a new and much more extensive wave of dekhan privatization was initiated by the Government, and 160 kolkoz are scheduled for conversion to dekhans by March 2000. The Land Reform Committee has given each rayon a quota of kolkozes to be converted. The model being widely implemented under the new wave of privatization is that of the large scale collective dekhan farm, although the detailed modalities relating to the kolkoz conversion process are primarily in the hands of the rayon hukumats. In general, though, it seems that the decisions on the conversion of kolkozes under the latest privatization drive are not always being made in democratic ways. Very partial information and consultation is being provided to kolkoz employees who are the new dekhan "shareholders", mainly due to the traditional view of the bureaucracy that the integrity of large farm units should be retained. In addition, amongst kolkoz employees, particularly in the plains cotton growing areas, there is still a passive even submissive attitude towards farm and local Government authority. -61 - 3.28 The overall impact on poverty of the four year dekhan program is a key question, and one which is difficult to assess. On the positive side, the dekhan farrms are clearly more productive than the previous systems, and the process of their creation has led to an increase in the production of grains and wheat in particular.13 This should have provided some benefit to the poor through greater availability of grain and perhaps lower prices. On the other hand, despite clear data on the new ownership pattern of the land distributed, it seems that the land converted and distributed may have been transferred largely to groups which were already relatively wealthy rather than to the poorest or even poorer groups. This is probably the case in the cotton growing areas. The experience in GBAO, which is not a cotton growing area, is an exception as the land was distributed to all nuclear families. But that region of the country only accounts for about 30,000 of the 600,000 or so families in the rural areas. 3.29 Up until recently, the quantitative progress of the dekhan program had also been so slow that by June 1999, only 70,000 ha (7 percent of arable area) had been turned over to private management. However, by March 2000, nearly 70 percent of the remaining kolkozes will have been "privatized", and the risk is that the new wave of privatization may sweep past the efforts and early lessons of the FPSP. Despite the official policy, the danger is that the implementation on-the-ground of the latest wave of "dekhanization" may not be consistent with the official policy on individual rights to land access. It is therefore critical that attention be paid to: (i) the protection of individual land rights; (ii) the transparency of information about choices of farm organization and management systems; (iii) the participation of all stakeholders and their consultation on the selection of those choices; and (iv) the flexibility of farm management arrangements, so that individual and collective production arrangements can coexist where appropriate. Table 38: Numbers of Farms and Estimated Arable Areas (JFune 1999) Farm Type Number Area Ha S )hare % Joint Stock Companies 43 55,000 6 Formal Lease Farms 84 100,000 11 Collective Farms (Kolkoz) 239 300,000 34 Goskos (formerly Sovkos) 196 250,000 29 Dekhan Farms 11,500 70,000 8 Dekhan (coordinating) Associations 82 Leasehold Associations 23 100,000 11 Total 880,000 100 Source: Ministry of Agriculture for numbers of farms; area is consultant estimates. 3.30 Other Forms of Land Transformation. A number of other forms of farm organization have come into existence in recent years. Mostly, these simply involve name changes to the kolkoz. They include joint stock companies, lease farms, agricultural cooperative associations and collective dekhans. The numbers of each form of farm organization and broad estimates of arable land share under each category is provided in Table 38. 13 A visit for this study to the hilly (and not cotton affected) Shurabad rayon revealed that all kolkoz and sovkoz land had been de facto distributed to individual households during the last five years. As a result of both intensifying and extending the area under production, grain and pulse production had increased from 5,500 tonnes in 1995 to 15,000 tonnes in 1999. Per capita availability of staples had increased from 124kg to 372kg. This had been achieved without the benefit of external assistance, and by using low input systems. - 62 - D. Cotton 3.31 At the macro level, cotton is extremely important. It dominates the agricultural economy, is the country's single most important cash crop, and covers more than 50 percent of the national irrigated area. Cotton comprises 30 percent of exports, and has huge fiscal significance, providing 30 percent of total state tax revenues. The production and delivery of cotton is given absolute priority at all levels of Government. Local and central Government have a fiscal and budget interest, accentuated by the difficulties of controlling the budget deficit and of increasing tax collections. Trading and banking groups have a commercial interest, as well as an interest in recovering trade credits. Informal interests also play a major role in the system, and they have been responsible for trying to perpetuate the system of producing cotton under a centrally administered system during the transition to a market economy. 3.32 State orders for cotton were phased out in 1996. Nevertheless, in some rayons, the local Governments continue to play a role in administering the current system. Most cotton production until 1999 has been grown on kolkozes. In almost all cases, kolkozes are indebted to a range of service suppliers including banks, water and power utilities, input suppliers, and their own labor forces. Many of the debts are between state enterprises. Since kolkozes have no working capital, 90 plus percent of cotton production is carried out on the basis of a forward contract.14 Production progress is closely monitored and controlled. In some rayons, even small private farmers are given area quotas and "plan" output targets. Although the output price parameters for cotton are specified under the forward contract system, the values of the inputs to be supplied are not. In addition, about 44 per cent of the realizable export parity price is deducted for taxation and marketing expenses. With the exception of picking payments, producer payments are reported to be late or not paid at all. Payments for harvesting appear to be paid and are passed on to the pickers. 3.33 A number of reforms to improve the efficiency of the cotton industry have been introduced with IMF and World Bank support. Cotton taxation was rationalized in 1996 though implicit taxation in the form of delays in payment or non-payment appear to continue. The cotton marketing company is no longer in existence, and the Government ginneries are in the process of being privatized. However, the marketing system and cost structure for cotton in Tajikistan is still very complex, and it is difficult to establish what is really happening without in-depth analysis. Nevertheless, what is clear is that the net effect on poverty of the current system of producing and delivering cotton is negative for several reasons. First, the interest of the centralized system to minimize and control the number of producers and contracts has slowed down the pace of land reformn implementation to some extent, and has thus delayed the realization of its potential to reduce poverty. Second, despite 14 The contract is between the seller (the farm) and the buyer of cotton fiber to be honored in the future (when the cotton is ginned) at the prevailing Liverpool price at the date of shipment. The contract is scrutinized by the Cotton Exchange, a government agency created to promote competition, but in practice fulfilling a control function. In a cover letter to the forward contract, the rayon hukumat guarantees to ensure the loan repayment by producing farms. In return, the intermediary companies supply producers with inputs including seed, fertilizer, fuel and mechanization. Rayon governments "negotiate" with kolkozes and other production units annually about the area of cotton to be grown. This practice has been extended in many instance to the new dekhan farms, both individual family farms and collectives. - 63 - the fact that the financial returns to cotton are reported to be potentially good, even at the current low levels of international prices, the actual returns paid to producers are not high. This situation involves an imperfect and complicated system of producer payments, combined with Government taxation, farm indebtedness and commercial and shadow interests. Third, and as a result, the wages of much of the rural population working on kolkozes are also very low. As can also be seen from the TLSS data, the non-payment of wages and wage arrears has had a major impact on poverty. 3.34 The cotton sub-sector, as currently managed, prevents the development of the agricultural economy. The crop selection and mix on more than half of the arable area are governed by a form of central planning, rather than by private choices which maximize the benefits to producers. The issue is not whether cotton should be grown or on what scale. But rather that it should be grown on the basis of private profitability and in the context of transparent real resource costs and market values. Cotton can be successfully grown on a small scale and has the potential to be a remunerative cash crop for simall farmers. Small scale cotton production can be found in countries with labor surpluses such as Egypt, Sudan and Zimbabwe. The on-farm production process can be highly mechanized or labor based. At present, the system in Tajikistan is essentially a mechanized system wvhich has only partly adjusted to changing resource availability. Production units continue to be large collectives, and primary and secondary cultivation is carried out by machinery. ]Harvesting is almost exclusively manual, carried out by a reluctant labor force. If small scale, labor intensive systems of cotton production were pursued as an alternative to the present system, services would need to be developed for the bulking up and transportation of output and for the provision of inputs. Small-holder cotton production is sometimes carried out by out-growers linked to a large scale unit. Or it can operate with a close link to a marketing and input supply services company. E. Irrigation 3.35 System Deterioration. Crop agriculture in much of Tajikistan is dependent on irrigation. 5 In most regions, irrigation is energy intensive due to high lift pumping schemes. These are supplied with low cost electric power which is generously subsidized. 6 Since the breakup of the Soviet Union, almost all pumping stations, and the main irrigation and drainage works have not been maintained. As a result, irrigation volurmes have reduced by 40-50 percent. On average, only three out of five pumps may work in a typical pumping station. In soviet times, water was provided free to farms. Traditional regimes of irrigation 5 Irrigation in Tajikistan dates back many hundreds of years. But the establishment of large scale irrigation systems commnenced in the 1 930s in the lowland, low rainfall plains areas. Strategically, this was part of the Soviet plan to exploit favorable climatic conditions for cotton growing in the Central Asia republics. Till then, the plains areas had been the living areas of pastoralists and nomads. With the introduction of cotton, many thousands of people and hundreds of comrnunities were relocated to supply the labor force needed for cotton production. Tajikistan's irrigated area was only 3.5 percent of the 21 million hectare irrigated area of the Soviet Union. But its percentage of arable land under irrigation was one of the highest in the Soviet Union. By the 1990s, 720,000 hectares or around 75 percent of arable land in Tajikistan was served by irrigation systems. As a result, 90 percent of domestic fresh water withdrawals are now for irrigation. Also noteworthy is that, based on historical agreements with the four other Central Asian republics, Tajikistan exports over 80 percent of the water originating on its territory. 16 The agricultural sector pays around 0.0017 US cents/kwh. Internationally traded electricity in the countries of the FSU is in the 3-5 cents/kwh range. - 64 - water management employed excessive amounts of water, particularly on pumping schemes. Because of past overuse of water, the decline in crop productivity resulting from system deterioration will not be as steep as the reduction in water volumes suggest. This is because the lower volumes of water will be used more carefully, and the productivity of a unit of irrigation will probably have improved. 3.36 Similarly, drainage systems have deteriorated through the failure to clean main collector drains, and the breakdown of drainage pumps. Nationally, as much as 20 percent of irrigated area appears to have been lost to production as a result of either irrigation or drainage failure. Some waterlogged areas have been taken out of cotton production, and rice is being produced in some areas. The formal responsibility for the operation and maintenance of the irrigation and drainage system lies with the Ministry of Irrigation working through organizations which exist at the oblast and rayon level. In practice, some of these offices appear to have ceased to function. Much operation and maintenance activity is now carried out on a crisis response basis by the kolkozes. 3.37 It is difficult to assess the impact on livelihoods and poverty resulting from this irrigation and drainage decline. However, it is likely to be broadly negative as there will have been some reduction in yields, production and returns to kolkozes and their employees, though not as large as the irrigation deterioration figures might suggest. So far, the capacity for household production does not appear to have been substantially impaired by irrigation and drainage failure, but further deterioration of the irrigation network will have serious consequences for the households of the plains areas when pumping stations break down completely. The issue of system rehabilitation is a very long term one. At this stage, nearly ten years after independence, there has been only limited rehabilitation of the irrigation system through international financing. The World Bank will make an additional significant contribution through the FPSP on the ten former kolkoz farms, and through the planned Rural Infrastructure Rehabilitation Project (on 130,000 ha). The latter is likely to start some time in 2000. 3.38 Water Charges. As a response to the decline in central budget allocations for the operation and maintenance of irrigation and drainage systems, the Government introduced water charges in 1996. Charges are set according to crop, and may typically be about TR80,000/ha ($50) for rice, TRI2,000/ha ($7.5)for cotton and TR 8,000/ha ($5) for wheat. The restoration of budget allocations to anything close to former levels is extremely unlikely because of a wide range of claims on a limited budget. Cost recovery through the raising of user water charges is the only conceivable way that the main systems can be maintained and operated. In the case of the secondary networks, cost recovery in combination with community maintenance can be encouraged. And for tertiary in-field systems, farm and farmers are already carrying out much of the physical works. 3.39 The impact on poverty and household livelihoods resulting from the imposition of water charges has so far been neutral because new dekhan farms are exempt for water charges for at least a year and for longer in some rayons. In addition, it is likely that the new dekhan farms are not being farmed by the poorest; and the Presidential land, which has been the most widespread form of new land access for poor households, has in general been exempt from water charges. Leased land has mostly been subject to water charges paid in kind through crop sharing.. - 65 - 3.40 In an economy restructuring from centrally planned systems of service provision to one based on the principles of the market economy, it is inevitable that some services which were fornerly free will no longer be so. Services which have a directly productive impact such as irrigation should be priority candidates for reorganization into commercial "fee for service" activities. In the case of irrigation, the past failure to collect water user charges will lead in the future to system breakdown and higher levels of hardship and impoverishment than are being experienced at present. Targets for increasing the levels of cost recovery have been set under the ESAF agreement. These should be pursued not leastl because the impact of irrigation on production on much of Tajikistan's arable area is dramatic, making the difference between no crop and two crops. However, the effective application of charging for water in the future will need to be accompanied by institutional change not only in land access and use, but also in the institutional arrangements which exist for irrigation and management. 3.41 Institutional Change. There is clear need for institutional change in the irrigation sector to match the changes in the privatization of land management. At the water intake level, the oblast water management department of the Ministry of Irrigation is responsible for pumping water from the source to the main distribution system. At thie distribution level, which coincides with the rayons, there is a water distribution and management organization for ensuring the supply to the end users. The Government is in the process of reforming the irrigation sector, and it has already passed the Water Code. It is preparing for the formation of water users' associations, and the gradual increasing of water charges to recover operation and maintenance costs. The priority for institutional change is at the farm level, in order to replace the kolkoz based systems with private arrangements. The creation of water users' association through a bottom up, participatory process can bring together individual users for the common purpose of local level water distribution and water charge collection. The TASIF has already started the process of creating such groups in conjunction with water micro-projects, although international experience shows that this can be a lengthy and difficult process. 3.42 Two World Bank supported Projects are intended to help promote institutional reform in the irrigation sector. The FPSP will assist in the establishment of water users' associations on the ten farms to enable them to be self sustaining and capable of managing field level irrigation and drainage facilities, and to collect irrigation user fees. The Rural Infrastructure Rehabilitation Project will carry out rehabilitation works on 130,000 ha of irrigation command area associated with the ten farms of the FPSP. In addition, it will support the institutional development of the Ministry of Irrigation, the three oblast water management organizations, and the rayon water distribution organizations. At the field level, the project will also support user associations. The issue here, as is the case with land reform, is to avoid arrangements for the mainstream privatization of water which are inequitable, partial to elite groups, and difficult to dislodge. Again, lack of information and participatory consultation with dekhan members are the key weaknesses. The poverty impact of slow institutional change in the sector has so far not been acute. Water still tends to flow. But as with the issue of water charges, failure to replace old with new could, in the not too distant future, lead to serious consequences. - 66 - 3.43 High Lift Irrigation. It is normal in the shake out from Soviet irrigation that rehabilitation of some areas is found not to be economically viable when measured against market economy criteria. Typically this applies to areas of lift irrigation where high levels of capital replacement are needed, combined with high levels of energy use. There is a likelihood that this will be the case in Tajikistan. The social impact of ceasing to supply high lift irrigation areas would be negative for the affected communities particularly if they are in low rainfall zones. This issue needs to be faced, and the Government needs to be aware of it. The answer is not to subsidize loss making irrigation schemes, but rather to allocate resources to investigate and develop alternative agricultural, livestock and non-agricultural technologies suitable for these areas. F. Finance and Credit 3.44 The formal banking sector in Tajikistan consists of around twenty five licensed commercial banks. The four largest (Agroinvestbank, Onrenbank, Tajvnesheconomobank and Sberbank) account for about 70 percent of loans and 90 percent of deposits. These banks have historical roots in the FSU banking structure, with its large specialized sectoral banks. Three of the four banks have become joint stock companies and were privatized through a combination of infusion of new private capital and privatization of some of the shareholders. Only the Sberbank (Savings Bank) has remained a state-owned bank. Macroeconomic instability and political uncertainty have been major factors in the deterioration of loan portfolios. The use of directed credits to priority state enterprises also contributed to poor performance. Lack of progress in the privatization of state-owned enterprises has hindered the banks' ability to diversify portfolio risk. 3.45 In a market economy, land is usually a private asset which can be bought, sold and mortgaged on the basis of a land market. Because of the form of land holding in Tajikistan, the use of land as security for credit will be complicated since the lifelong inheritable lease is not saleable. But the lease is transferable and could in principle be used as collateral. Other forms of secured credit are also possible, such as crop and livestock hypothecation, where the end products are used as security. But these are also complicated and high risk. 3.46 Financial sector reform in transitional economies typically leads to fewer, stronger but more conservative banks. Agriculture is generally regarded as a high risk form of lending. Agricultural commercial credit is likely to remain inaccessible, scarce and expensive for many years to come. From the poverty perspective, this scarcity of capital can be paradoxically benign. In an agricultural economy characterized by abundant, unutilized labor, scarce unsubsidized credit encourages substitution into labor intensive, employment creating technologies, and away from capital intensive inputs. This is a positive tendency in so far as it facilitates income-earning opportunities for the poor. However, most of the current wave of conversion from kolkozes to new private farms involves setting up large production units. The organizational and management systems, and senior management personnel will in general be those inherited from the kolkozes. The concern is that the management strategy will be to attempt to pursue the traditional form of large scale, capital dependent mechanized agriculture. Capital is unlikely to be available; but there is the danger that capital substitution by labor based technologies will be ineffective, because of the difficulties of labor management and supervision on large units. If this happens, there will be - 67 - a negative effect on the prospects for poverty reduction, as labor intensive investments and technologies would be further deterred and delayed. 3.47 Micro credits for rural communities have been extensively used by international donors and NGOs to target special areas and groups. German Agro Action, CARE, the AKDN, Save the Children (US) and Save the Children (UK), the TASIF, and the WFP have all been involved in micro credit/grant programs which have included agriculture. Sustainability is always an issue with micro-credit, as such schemes are commonly donor driven and subsidized. Because loans are small, the administrative costs in relation to loan values tend to be high. It is not uncommon for administrative costs to be higher than the value of the loan. Group lending is one way out, but this needs careful, highly tuned planning and management. The Tajikistan experience of micro-credit in agriculture and its impact on rural poverty has been mixed. The performance and outcomes of the NGO schemes have varied. On some schemes, productivity and livelihoods have been enhanced, and loan recoveries have been over 90 percent. In particular, there has been a successful start in group lending to groups of poor women through the TASIF, and it is planned for that experience to be expanded. However, in some other programs, credit recovery rates have been less than 60 percent. To ensure sustainability, very high rates of repayment and low administration costs are needed. Even a fund with 95 percent recovery will devalue to 78 percent of its original value after 5 years unless defaults are totally covered by the interest rate on recovered loans. Micro-finance coverage is presently limited to less than 50,000 of the country's 600,000 or more rural households, and it is hard to see extensive replication of existing schemes to the mass population being possible. G. The Development of a Pro-Poor Agricultural Strategy 3.48 Because most poor people live in rural areas, the reduction of poverty in the country requires a strategy for the transferal of agricultural assets from public to private hands, the enhancement of incentives, and investments in rural physical infrastructure. However, the situation in the Tajikistan is characterized by two features which perpetuate the current impoverishment of rural populations. These are: (i) the incomplete nature of the land reform program, which does not yet allow the full adjustment of land holding, land use and farm production systems to higher productivity, labor intensive, and employment generating systems; and (ii) the current system of management and operation of the cotton sector, which results in a widespread failure to provide remunerated employment. 3.49 The starting point of the pro-poor agricultural strategy is to recognize that resource costs in the economy in general, and in the agricultural economy in particular have completely reversed in the last ten years. The current agricultural system, the structures and the strategic thinking that underpins it, are the product of an era when 40 percent of the Government budget was provided as transfers from the central Soviet budget. In the absence of an incentive structure, the main objective of the work force was to minimize effort and to maximize informal rents from the sovkoz or kolkoz. Now capital is scarce and expensive, labor is abundant, cheap and unrewarded. However, agricultural organizational structures, management systems and management thinking are still geared to the unrealities of the old system. Adjustment led by relative resource costs and market values has been consistently slow. - 68 - 3.50 The second feature to recognize is that, despite some reforms, the centrally administered cotton program is still held back from contributing more to the improvement of living conditions of the rural population. Even now, some Government officials still tend instinctively to support "cotton by command". Newly created, supposedly private farms are not exempt from state interference, despite legal provisions to protect the freedom of those farms. Land redistribution has also been very limited so far, and it seems to be characterized by inequity in terms of real access. This may continue to be the case, despite the fact that a major farm reorganization exercise affecting 160 kolkozes is underway. In reality, many state controlled kolkoz farms are currently being converted into state controlled "private" collective farms. There are some exceptions, including the AKDN experience in GBAO and the ten PFSP supported farms. The experience of household, Presidential and lease plot farming in Tajikistan, and a body of international experience, also suggests that small scale, labor intensive farming in transitional economies can be scale and resource appropriate, economically viable, employment generating and independent of subsidy. It is hoped that these and other examples of individualizing land holding will become the models for mainstream reform, but there is concern that this may not automatically follow. 3.51 Little scope has yet been created for the mass of rural families to respond to the changes in the fundamentals of the rural setting. Information on their legal rights and possibilities is provided by Governmental institutions only on a limited basis. This is probably due to a lack of understanding in the technocracy whose thinking is dominated by old perceptions. These perceptions relate to the acceptance of the standard model in western and soviet agriculture of capital intensive agricultural systems requiring large units to obtain scale efficiencies in the use of machinery and services. Small family farms are regarded as inefficient, a perception often encouraged by foreign agricultural experts and interests. 3.52 International experience in transition economies also provides empirical pointers to the benefits of inclusive land individualization. In Georgia, as in Armenia, Romania and the Baltic states, much land has been held and farmed by individual families since the early 1990s. A 1996 World Bank study of farm households in Georgia, where the average size of the more than half a million small farms is 0.75 ha, found that incomes of families surveyed were much higher than the mean income of urban families. "Despite lack of commercial banking .., private farmers in Georgia manage to produce, purchase inputs, and make a profit from sale of farm products already under the present circumstances". The report recommended that the Government " should assign the highest priority to the transfer of .. land holdings from (remaining) collective and state farms to private farmers". This relatively favorable situation was achieved by small farmers with no help from the Government and little from the donor community. 3.53 Future development strategy with a poverty dimension should seek to deploy land redistribution with equity as the basis for a growth based development to alleviate rural poverty. To succeed, this will need to be supported by continuing reforms in the cotton and irrigation sectors. At the same time, provision needs to be made to allow alternative labor intensive technologies to evolve in response to fundamental resource costs. Micro-finance has an important role to play in assisting the most vulnerable through carefully targeting interventions which are likely to need external subsidy for the foreseeable future. - 69 - 3.54 A poverty alleviation strategy which uses agricultural growth as a springboard is both essential and feasible at this stage in Tajikistan. The reform framework for such a strategy has already been initiated by the Government, but so far its implementation has been slow, incomplete and imprecise. The most important building blocks for poverty alleviation in the short to medium term relate to: (i) providing wider and deeper land access and use for family based farming; (ii) the production of cotton in ways which stimulate production by the poor; (iii) the restoration of a sustainable irrigation and drainage system; and (iv) for the poorest, targeted forms of micro-finance. More specifically, the following are the recommendations that arise out of this analysis. On land reform: (i) The Presidential land reform program should be extended, and an equitable and inclusive distribution of access to land should be ensured for rural households. (ii) There should be transparent legal protection of land access and use rights for individual dekhan shareholders. (iii) Comprehensive information should be provided to shareholders on individual land rights and on choices of farm management systems. (iv) Participatory consultation approaches should be undertaken for land stakeholder decision making. (v) There should be maximum flexibility of farm management arrangements to enable both individual and collective and mixed systems on former kolkozes. (vi) Applied research, advisory and other support services, including farmer to farmer approaches, should be introduced for the promotion of labor intensive, small scale technologies and farm management. (vii) The status of the 196 farms designated for retention under the state should be reviewed. On cotton: (i) The privatization program for the state ginneries and the central cotton marketing organization should be sustained. (ii) There should be freedom of choice for the cropping decisions of new private farms. (iii) New institutional arrangements need to be developed to permit the practice of small scale cotton production. - 70 - On irrigation: (i) Irrigation rehabilitation should be pursued on the basis of economic viability, and where there are potentially good economic returns from investments. (ii) Rainfed, livestock and non-agricultural technologies should be investigated and introduced for areas where irrigation is not economically viable. (iii) User charges for irrigation water should be applied and extended. (iv) Institutional reformn of irrigation management systems should be carried out at the community, district and regional levels. On financial reforms: (i) Financial sector restructuring should be sustained. (ii) Credit should only be extended to private entities. (iii) Micro grants should be targeted at the "most vulnerable" groups. (iv) Micro-credit should be targeted at vulnerable groups and areas, and community savings and credit schemes should be introduced and extended. - 71 - CHAPTER IV: EDUCATION AND POVERTY 4.1 The previous two chapters have focused on the resumption of economic growth and ways in which productive employment opportunities can be created in order to help people, and especially poor people, look after themselves. Together, action on labor market and agricultural policies form the first of the proposed four key pillars for a poverty alleviation strategy. However, poor people also need to have sufficient human capital so that they can take advantage of existing and new opportunities. Access to good quality basic schooling and health services is not only a human right, but is also essential for poverty alleviation; and so the next two chapters concentrate respectively on the education and health sectors. 4.2 Tajikistan's historically impressive educational statistics--especially for women, girls and ethnic minorities--place it in the ranks of high income countries, being in this respect alone well ahead of most other FSU countries. However, this situation is rapidly changing with the decay and destruction of school buildings, the flight of teachers both away from the country and also away from the profession, lack of basic textbooks and teaching materials, and absence of many children especially in war-affected areas, who are unable to attend school for much of the year. A. The Main Features of the Education Sector17 4.3 Like in other FSU republics, investment in social infrastructure during the Soviet period allowed Tajikistan to reach the level of middle income colntries' educational development, though it was mainly the result of the large budget subsidy from Moscow. Prior to independence, for example, Tajikistan achieved a high adult literacy rate (99% in 1990), almost universal 11 years of basic education, and a relatively well educated labor force (with 77 percent of workers having ten or more years of schooling). Like other FSU countries, Tajikistan has a system of four levels of education: preschools; general secondary schools (which include primary grades 1-4, secondary grades 5-9, and upper secondary grades 10-11); specialized secondary schools (i.e. "technicums") and vocational and technical schools' ; and higher education institutions. According to the Constitution, basic education (grades 1-9) is compulsory and free of charge for all children, having been reduced from 11 years in 1996. However, the state also guarantees free upper secondary education (grades 10-11), secondary special and higher education on a competitive basis in public education institutions. 4.4 The Ministry of Education is responsible for the overall education policy and budget, curriculum, and textbook development, and administration of preschool, primary, secondary, specialized secondary, and higher education. In 1998, the education sector employed a total of 112,500 employees from pre-school to universities. Teachers are trained in one of the 10 teacher training institutions (secondary special schools) and/or the Pedagogy University. There are also 6 teacher re-training institutions. Most basic education teachers in urban areas are women, while most in rural areas are men. 17 This section draws on a draft education sector report written by the World Bank in 1999. 18 Specialized secondary schools can last 3-4 years after completing Grade 9; and 2-3 years after completing Grade I 1. - 72 - Table 39: Educational Facilities and Students, 1998 Type of Establishment Number Students Pre-schools 562 52,900 General schools 3,522 1,436,000 Extra-cunricula institutions 112 73,781 Special educational institutions 42 19,400 Vocational schools 72 24,700 Technical schools 50 39,200 Higher educational institutions 24 75,500 Total 4,484 Source: UNDP Human Development Report, 1999. 4.5 Pre-school education, which can begin as early as three months, is only partially intended to prepare children for entry into the more fornal education system and actually encompasses most of the elements of daycare. Like in other FSU countries, the pre-school system used to be heavily subsidized by the state, and local Governrnents and enterprises covered nearly all the recurrent expenditures. However, during the past several years, most state preschools have been closed due to the financial difficulties faced by local administrations and enterprises. The number of 3-6 year old children enrolled in preschools dropped from 115,000 in 1992 to about 56,000 (or 6 percent of the relevant age group) in 1998. Most of these children are in privately operated preschools, which provide limited childcare facilities and support to working parents. 4.6 In 1998, there were about 1.4 million children enrolled in schools in Tajikistan. Of this total, roughly 48 percent were in primary grades, about 46 percent in lower secondary grades, and about 6 percent in upper secondary grades. In addition, there about 19,000 students enrolled in specialized secondary education which offer training in teaching, health sciences and a number of other industrial and technical trades and professions. Access to specialized secondary education is determined by an entrance examination given in Grade 9. In the past, the number of students admitted to each of the specialized secondary schools has also been limited by the anticipated demands of employers. 4.7 There are two main types of schools providing vocational/technical training. The first group includes vocational and technical schools, which are controlled by the Ministry of Labor, and which were attached to industrial or agricultural enterprises. The main purpose is to train students for the industrial and agricultural sectors to fill specific jobs within a specific enterprise. Many students who have a special interest in a trade or profession but who have not gained admission to the specialized secondary schools are enrolled in vocational schools. On the other hand, specialized secondary schools, controlled by the Ministry of Education, tend to have a slightly more "professional" and academic focus in their training, and train students for midlevel specialist positions. The training in vocational and technical schools lasts for 2-3 years, while it varies between 2 and 4 years in specialized secondary institutions, depending on whether the students completed secondary education or not. The training is for 2 years for students who have completed grade 11, while it is 4 years for those who have completed grade 9. Unlike the pattern of enrolment in the general education system, there has been a sharp decline in enrolment in these sectors of the educational system since 1990. The number of students in specialized secondary schools dropped from about 41,000 in 1992 to 19,000 in 1998. Similarly, the number of students in vocational and technical education - 73 - dropped from about 43,000 in 1992 to 25,000. Surprisingly, in spite ofl sharp declines in the number of students, the number of institutions in both sectors remained about the same during the transition, which is a concern in terms of the efficiency in the use of scarce resources available for the education sector. Students increasingly prefer to study in a general secondary education school, since there has been less confidence in the ability of the specialized and vocational schools to ensure employment in the present labor market. 4.8 The number of higher education institutions has increased from 18 in 1992 to 24 in 1998. The number of students attending higher education also increased slightly from 69,000 in 1992 to about 76,000 in 1998. About 60 percent of the university students are enrolled in humanities programs, about 11 percent in engineering, 9 percent in medicine, and 7 percent in natural sciences. Despite an increase in the number of institutions, higher education shares the same problems with other levels of the educational system: inadequate funding; lack of textbooks, instructional materials and equipment, and even, basic office supplies; departure of faculty members and administrators, and the absence of rationa]l curriculum reform. University faculty members have, like other teachers, been subject to low salaries, and irregularly paid. Some of them have emigrated to Russia and to other countries of the CIS or have left the teaching profession to find other types of employment in the private sector. 4.9 The Law on Education which was passed in 1994 allows the establishment of private schools, and the Ministry of Education licenses them to ensure that minimum standards are maintained. As of June 1998, there were two private universities and two private general secondary schools. The Aga Khan Foundation currently fully sponsors the Khorog University in Gorno-Badakhshan, and plans to develop this institution (using English as the language of instruction) as a regional university to serve the region especially the people in the mountainous area. B. Public and Private Spending on Education 4.10 The collapse of budgetary revenues over the 1992-1999 period forced severe reductions in social expenditures in all categories. In key areas such as education, reported expenditures fell to the lowest levels in Central Asia. 4.11 The situation in 1998-2000 is shown in more detail in Table 41. This shows that planned public spending on education in 1999 amounted to only 14.0 percent of the total budget, equivalent to just $5 per capita. Actual spending on education was only 12.2 percent of the total. The national budget for Year 2000 shows a further drop in the allocation for the education sector to 13.5 percent: an amount of TR 37,425 million has been approved, against a total of TR 276,966 million. Although local Governments have assumned the ownership of social assets and have been given the management of all social facilities, they do not have the equivalent budgetary allocations and transfers to keep the inherited level of service delivery 9. Local Governments are thus unable to finance, service and maintain the historically high level of social sector provision. '9 The lack of budgetary resources actually led to the decentralization process to the district and school levels. - 74 - Table 40: Actual Education Spending by the State Budget, 1992-1999 1992 1993 1994 1995 1996 1997 1998 1999 % GDP State budget social 19.9 21.3 20.1 8.3 5.2 3.9 4.0 3.4 Of which Education 11.1 8.8 8.7 4.0 2.1 2.1 2.2 2.1 SPer Capita Statebudgetsocial 10.4 26.0 27.5 8.4 8.3 5.5 6.8 5.8 Of which Education 5.8 10.7 11.8 4.0 3.4 2.9 3.8 3.6 % State expenditure State budget social 34.3 41.0 36.5 24.8 28.9 25.9 23.5 19.9 Of which Education 19.2 16.9 15.8 12.1 11.8 13.9 12.9 12.2 Memo Items Education expenditures 22373 28362 State social expenditure 40749 46112 Stateexpenditures (TRmn*) 37454 329056 945245 55173 94720 173376 231920 State exp net of transfers to SPF (TR mn*) 35640 320384 940865 55173 94720 160259 199797 GDP(TRmn*)** 64760 632000 171797 308453 626800 1025211 1348000 Population (in)*t* 5.6 5.6 5.7 5.9 6.0 6.1 6.1 Exchange rate (TRI$)**** 222 933 2205 328 750 977 1299 Source: MoF, IMF. Table 41: Education Budget Plan and Execution, 1998-2000 1998 1999 2000 Plan % Actual % Plan % Actual % Plan % TR inn TR mn TR mn TR mn State Expenditures 189508 173376 256209 231920 276966 Of which 21446 11.3 22373 12.9 30826 12.0 28362 12.2 37425 13.5 Education Source: MoF 4.12 Besides the low level of spending, there are also problems caused by the often substantial deviation of actual spending compared to the planned budget. The figures for 1997 are shown in Table 43. It may be seen in particular that spending on capital investment and repair during 1994 and 1997 was about twice the planned level.20 There are also major problems due to the low level of teacher salaries and the fact that salaries have only been paid late and in arrears. Ensuring access to education for the poor requires an equitable share of educational expenditures targeting the needs of the poor. However, line items that could importantly benefit the poor, such as scholarships and expenditures on food, have a relatively 20 The budget system is set out in the "Law of the Republic Tajikistan on Budget Organization and Budget Process", as adopted in May 1997. The rights of local budgets are determined by the "Law on Local Government", which was passed in late 1994. Revenues and expenditures of the entire budget system are specified in the annual budget law. The state budget comprises the local budgets and the Republican budget. Each government level has its own budgetary independence. Local authorities have their own sources of revenues, receive revenues from shared taxes, and determine their own expenditures. Most local budgets also receive substantial transfer payments from the republican budget. The Ministry of Finance and the local admninistrations (hukumats) are in charge of budget planning and execution. The parliaments (Majlisi Oli and Majlisi) at the local and republican levels review and approve the budget plan, and monitor the budget execution. - 75 - low share within the budget. Moreover, the actual expenditures of these line items fall substantially below their planned levels. In particular, actual expenditures on scholarships and food (87.5 percent and 89.3 percent respectively) were the lowest compared to the planned levels of any other line item within the education budget during; the period of 1994- 1998." Table 42: Actual Education Expenditure by Item (% of total), 1997 1997 Local Republican Nati,onal Salary and SPF 64.7 46.1 61.3 Utilities 13.7 6.9 12.5; Scholarships 0.2 7.5 1.5; Food 31 11.5 4.6 Equipment 1.2 1.5 1.3 Capital Investment and Repair 4.7 15.8 6.7 Other expenditures 12.0 10.7 11.8 Total 100 100 100 Source: MoF Table 43: Actual Education Expenditures (as % of Plan), 1994-1998 1997 Local Republican National Salary and SPF 98.9 84.4 97.5 Utilities 104.0 73.6 101.5 Scholarships 47.2 121.9 87.5 Food 95.6 100.1 89.3 Equipment 110.6 74.0 96.4 Capital Investment and Repair 194.4 219.5 189.7 Other expenditures 84.9 117.4 90.9 Source: MoF 4.13 Planned education expenditures by type of institution is shown in Table 44. This shows that the local funding of general secondary schools increased substantially after 1994 and reached 70 percent in 1998. Table 42 shows actual education expenditures by budget categories in 1997. About 65 percent of the local budgets were spent on salaries and payroll taxes, and 46 percent of the republican budget was spent on salaries and payroll taxes. In 1999, it was announced that the salaries of teachers would be increased by 20 percent; while this would obviously be to the benefit of teachers, it will also put more pressure on the local budgets. 4.14 In addition to concerns about the efficiency of spending, there are also issues relating to the equity of the expenditure patterns by region. For example, Table 45 shows per capita spending on education at the oblast and rayon levels. In Khatlon, for instance, where more than one third of the Tajik population lives, the level of expenditures is particularly low compared to the national average. Interestingly, GBAO, which is one of the poorest regions of the country, exhibits the highest spending per capita, at about 50 percent above the national average in 1998. - 76 - Table 44: Planned Education Expenditures, 1997-1998 1997 1998 Local Rep. National Local Rep. National Kindergartens 11.8 0.0 9.0 11.3 0.0 8.7 Schools 63.S 5.0 49.9 70.9 8.1 56.4 Intemats & Special Schools 4.7 5.3 4.9 4.1 8.5 5.1 Secondary special educational institution 3.0 9.2 4.5 1.6 11.0 3.8 Professional-technical colleges 0.0 22.1 5.2 0.0 24.6 5.7 Higher Educational Institutions 0.0 54.4 12.9 0.0 42.4 9.8 Orphanage 1.4 0.0 1.1 0.5 0.0 0.4 After-school work with children 2.8 0.6 2.3 2.1 0.4 1.7 Evening schools 0.8 0.0 0.6 0.5 0.0 0.4 Institutesforapprovingqualification 1.0 2.5 1.3 0.4 3.4 1.1 (teacher) Teacher preparation 3.5 1.0 2.9 2.0 1.5 1.9 Textbooks 0.1 0.0 0.1 0.1 0.0 0.1 Capital Investments 1.1 0.0 0.8 1.5 0.0 1.2 Other expenditures 5.9 0.0 4.5 4.9 0.0 3.8 Table 45: Local Education Expenditure Per Capita, 1994-1999 1997 1998 1999 Plan Adual Pban Actual Plan Plan Jan-Jun Local MOF .h. ; , (-.~~~~~~~~~~~~~ov v FlWsres Firs As % of Total GBAO 167 152 220 142 301 275 Khatlon (incl 74 75 78 72 67 82 Nurek) Leninabad 112 119 112 116 103 106 Dushanbe 105 97 103 120 136 97 RRS Ill 106 98 107 102 94 City Kofamichon 134 91 120 95 154 107 City Rogun 85 59 82 76 71 78 City Tursunsade 119 192 92 220 105 85 Varsobski 105 87 90 89 76 88 Gharmski 109 70 103 52 92 102 Gissarski 91 105 124 130 108 101 Dgirgatalski 95 63 89 88 94 93 Komsomolabadski 120 91 79 84 95 83 Leninski 94 77 70 61 76 79 Tavildarinski 84 76 129 158 92 115 Tadgikabagski 122 46 100 82 83 87 Faisabadski 142 121 121 92 123 129 Schachrinavski 133 108 85 95 71 87 Source: MOF. 4.15 Education had been free and compulsory for all citizens at all levels until the mid- 1990s. However, the sharp decline in public resources has led the Government to have to try to find alternative sources of revenue for providing educational services. Numerous attempts have already been made to diversify sources of revenue to generate additional income in the education sector. Some cost recovery measures have already been introduced formally and/or informally at all levels of education. In higher education, students are increasingly paying the costs of their education. The Government has also been promoting the financing of students' education by employers. To some extent, this policy has been successful - 77 - because there has been a growth in numbers of students admitted under contract with employers. 4.16 Both formal and informnal fees21 have also been introduced in basic education in the form of parental contribution to schools or payments for specific extra-courses. Payments collected at the school level are mostly used to pay teachers' salaries and school operation and maintenance. While the constitution guarantees that compulsory education is provided free of charge, private supplementary payment at the school level is now common throughout the country. Unfortunately, there is insufficient known about the extent and use of formal and informal fees and about their equity effects in the education sector. Although some supplementary private payments for basic education may be necessary in the circumstances of Tajikistan, there needs to be extreme caution over the potential equity and other effects of this policy on children, particularly those coming from poor families. The concern is that such payments may have a direct effect on poor households, as they are less able to meet these payments and also as they tend to have more children. Figure 6: Median Household per Capita Net Education Expenditures (as percent of Total Household per Capita Expenditures) 186 16 n 10 F : = E I z 3 _ 1 0 ; 4 a 2 2,,1 2~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 0 I st 2nd 3rd 4th 5th Qu intiles 4.17 Figure 6 shows the burden of education expenditures on the poor. The figure shows that households from the poorest quintile spend about 17 percent of their per capita expenditures on education, compared to households from the top quintile with about 5.3 percent of their per capita expenditures. This in turn reflects that poor households give high priority to education and are willing to enroll their children at a relatively higher cost to their 21 Formal fees for extra-curricula classes were introduced in three public secondary schools in Dushanbe. According to education officials, some classes (foreign languages, science, mathematics and computers) are offered on a fee basis. These formal fees, ranging from TR2,000-4,000 a month, are determined by schools and the revenue collected is reported to the Rayon Education Department, which is turn deposits the money in a bank for the school. The fees are used mainly for additional salaries, operations and maintenance. - 78 - budgets. But the higher share of education expenditures for the very poor also indicates that very poor households are likely to face considerable cash constraints in having to pay for increasing direct costs for education; and as such, those households having little or no cash income cannot enroll their children at all. 4.18 Many people believe that the lack of textbooks has adversely affected the poor. As the scarcity of textbooks, which historically were provided free of charge, has created a market in which textbooks are often sold at high prices, poor people are not able to obtain the necessary textbooks needed for their children. This can lead not only to poor learning outcomes, but also to non-enrollment or non-attendance, which in turn will result in lower education attainment for the poor. While the Government is currently addressing the need to distribute textbooks, it is important that it ensure that the poor have equitable access to the required textbooks as part of the reform measures. 4.19 Decreased state support for child care in some regions has prevented many of the poor households from enrolling their youngsters in pre-school and/or day care, particularly due to the unsatisfactory conditions in those institutions. Often, siblings are expected to care for these youngsters and, as such, cannot attend school. While non-poor households have been able to seek private day care for their children, the poor and very poor are not able to meet these costs and must keep their children at home. As such, public resources need to be reallocated to benefit the poor with compensation schemes to enable these families to seek the proper day care for the very young. 4.20 There is, therefore, an urgent need to not only secure the education share of the state budget, but also to re-allocate items within the education budget, across line-items as well as ensuring regional equity. In 1998, the total education expenditures as a share of total state expenditures stood at about 14 percent as then agreed with the World Bank. Since then the share has fallen considerably. In addition, the structure of the national (state) budget allocations to the education sector has direct implications on the extent to which people have access to education. While the central budget finances specialized secondary schools, vocational and technical education, higher education, boarding facilities and internats, the local budgets pay for preschools and basic education. In principle, local education budgets are supplemented by transfers from the central budget; however, in practice, the fiscal constraints have severely curtailed these transfers, and local education budgets are not able to meet the required expenditures to finance their education services, except in the wealthier areas such as the cities of Dushanbe and Khodjand. C. School Enrolments and Poverty 4.21 In the present circumstances of Tajikistan, with the decline in the public resources available for education and with the increasing pressures on people to pay for schooling themselves, there needs to be a keen focus on the issues of access to education especially at the basic level, and particularly on how to ensure that the poor continue to be able to build up their human capital. Put another way, there has to be a major concern about the danger of a lost generation (or even generations) developing. 4.22 Access to education comprises barriers and constraints on both the supply side and also the demand side. If children are not attending school, it may be due to problems with - 79 - the quality and activities of the schools, or it may be due to factors at horne or more generally relating to poverty. Before analyzing the reasons for poor access, it needs to be detennined if indeed enrollments are low, or if problems of access are appearing in other ways. Table 47 illustrates net enrolment rates for basic education22, broken down by the five quintile groupings. For the nation as a whole, about 97 percent of children in the relevant age group are reported to be enrolled at primary school, and about 85 percent are enrolled at lower secondary school. Although these rates are still very high on an international comparative scale considering the country's per capita income level, they show a marked decline compared to the country's historically strong and almost universal access to basic education. In particular, enrollment rates in grades 6-11 have dramatically decreased. The variations in the enrollment rates by income groups, especially at the lower secondary level, also show that the very poor are less likely to enroll their children than non-poor households. Table 46: Net Enrollment Rates in Basic Education by Quintile Level of Education National ist 2nd 3rd 4b stb average quintile quintile quintile quintile quintile Basic Education (7- 90.4% 86.4% 90.1% 91.9% 92.4% 92.8% 16) Primary (7 -11) 96.7% 94.9% 95.9% 96.2% 98.5%Y0 99.2% Secondary (12 - 16) 84.7% 79.6% 84% 88% 86.7%o 87.6% Source: TLSS. 4.23 The lower rates at the lower secondary level are partly driven by the fact that children are often involved in the survival strategies of their families. As in other developing countries, for example, children (especially girls) often work and assist in the daily household chores. Other children (especially boys) often assist in agricultural work during the peak of the harvest seasons, preventing them from attending schools. This would not only affect their enrollment rates, but it also would affect their attendance rates. The other reasons for non-enrollment or non-attendance were attributed in the TLSS to: (i) the irrelevance of education, (ii) no clothing, (iii) the high indirect costs associated with edlucation, (iv) illness, (v) no supplies, and (vi) the absence of a teacher. 4.24 The perception of the irrelevance of education, especially at the secondary level, may be directly related to the very limited labor market opportunities currently prevalent in Tajikistan. In addition, questions have been raised about the validity of the current school curricula in terms of catering to a more modemn labor market, rather than preparing students for a state controlled working environment. Furthenmore, due to the destruction of many school buildings during the civil war and also due to the neglect of defenred maintenance and of minor repairs of many school buildings during the fiscal crisis, many schools especially in the rural areas are currently in disrepair (with broken school furniture ancd equipment, leaking roofs, broken windows, leaking pipes and no heat, electricity, or proper sanitary facilities). 22 Net enrolment is defined as the number of students currently enrolled as percentage of all student of the age cohort. Primary net enrollment corresponds to the age group 7 - 11. Lower secondary enrolment corresponds to the age group 12 -16. Students responding with a positive answer to the question from the TLSS survey as to whether currently enrolled or not in school, were considered "currently enrolled." - 80 - Similarly, proper clothing is essential for children to remain in school, especially during the winter months. The very poor households, who cannot afford the purchase of proper school clothing, therefore cannot enroll their children. In view of the very low level of teachers' salaries, many teachers are often forced to supplement their official incomes with secondary jobs. In addition, the frequent wage arrears have caused low teacher morale and have often kept teachers away from their schools. Many of the skilled teachers have already left the teaching profession to find alternative employment and have been replaced by inadequately trained and less skilled teachers. Although Tajikistan used to be characterized by an 'oversupply' of teachers, as the student/teacher ratio was very low compared to other countries outside of the FSU, the present situation regarding the stock of teachers is therefore uncertain. Table 47: Net Enrollment in Basic Education by Region and Quintile Net Enrollment Regional Poverty I'' 2 3rd 4tb 5th average Incidence23 quintile quintile quintile quintile quintile Primary (7- 11) Dushanbe 95.4% 81.3% 100% 92.8% 87.5% 96.6% 97.5% GBAO 98.4% 98.8% 95.7% 100% 100% 100% 100% RSS 96.7% 89.6% 96.9% 92.6% 96.1% 96.9% 100% Leninabad 96.9% 93.1% 96.6% 97.8% 93.5% 100% 98% Khatlon 96.7% 96.7% 93.5% 96.3% 98.4% 99.2% 100% Secondary (12 - 16) Dushanbe 74.7% 81.3% 87.5% 80% 58.8% 69% 83.9% GBAO 95.5% 98.8% 94.1% 100% 94.4% 100% 83.3% RSS 81.4% 89.6% 67.1% 77.8% 85.5% 86.2% 85% Leninabad 86.4% 93.1% 79% 88.8% 90.3% 87.5% 86.9% Khatlon 85.6% 96.7% 80.2% 82.4% 90.2% 89.5% 95.3% Source: TLSS. 4.25 Table 47 shows net enrollment rates across the five major regions of Tajikistan by quintile. The variations between the regional enrollment rates can be partly explained by the fact that, since independence, much of the administrative authorities and responsibilities of service deliveries has been delegated to the regional powers. The regional authorities lack the capacity to implement these responsibilities and do not have the necessary financial resources. However, the table shows a surprising negative correlation between the regional poverty levels and secondary level participation rates, suggesting that conditions are very much region specific. As such, some regions have been less able at keeping the school system functioning. Also, destruction due to the civil war has been more intensive in certain parts and many schools in those regions have been forced to close down. The historically strong tradition and high value placed on education in the GBAO region is reflected in this region's high participation rates. 23 Based on households. Using $1 PPP poverty line of TR 29,880 month. - 81 - Figure 7: Gender Gap in Net Enrollments: Urban Areas 35 , 3 0 , 25 0U2 10 C- 5 0 -5 1LISt r2nd Q uin tiles --0 Prim ary 0 --Secondary 4.26 In contrast, Dushanbe shows the lowest rates within the country, with pronounced disparities between the various quintile groupings. Data from the TLSS reveal that in Dushanbe the girls' enrollment rates at secondary level is only 62 percent, while boys' enrollment stands at 89 percent. This disparity suggests that girls in Dushanbe may be engaging in the survival strategies of their families. This marked gender disparity might be specific to Dushanbe only, and more work needs to be done to better understand the interplay between gender, education, and poverty. 4.27 Figures 7 and 8 show the gender gap in primary and secondary enrollment for urban and rural areas in Tajikistan. These two figures illustrate that the gender gap at primary and secondary level education follow similar paths in both urban and rural areas, although not consistently. The gender gap at the secondary level is persistently higher than that at the primary level in both urban and rural areas. For the country as a whole, poverty seems to aggravate the gender gap, with girls' enrollment lagging behind boys' enrollment. As illustrated in Table 49, the data from the TLSS also reveal that some variations exist in the urban and rural rates by region. For example, the urban/rural gap is somewhat more pronounced in the RSS region compared to the other regions within the country. - 82 - Figure 8: Gender Gap in Net Enrollments: Rural Areas I 0 o . . . .... ----.... >< 15 0)10 c3 5 5 _ 1st 2nd 4th -D5 Quintiles -- Primary Secondary Table 48: Net Enrollment in Basic Education by Settlement and Region Net Enrollment Dushanbe GBAO RSS Leninabad Khatlon Primary (7- 11) Urban 95.4% 100% 90.3% 96.5% 96.4% Rural --- 98.3% 97.2% 97.0% 96.7% Secondary (12- 16) Urban 74.7% 100% 65.9% 84.1% 88.5% Rural --- 95% 83% 87.2% 85% Source: TLSS. D. Poverty and Reasons for Absence at School 4.28 The above analysis has mainly focused on net enrollment rates in basic education. However, while children might be officially registered at their school, they do not always attend school. The following table illustrates the proportion of students who are currently enrolled but who are reported to have missed school two weeks or more during the last calendar year.24 In Khatlon, for example, about half of the students have reported extended 24 The survey included the question on whether a student was absent from school for two weeks or more during the previous academic year. Another question addressed the reasons for being absent. Many of the responses for being absent included reasons as 'bad weather and lack of clothing', whereas reasons associated with sickness or 'bad health' were less important - assuming that 'being sick' would be the generally accepted reason for not - 83 - absence from school during the last academic year. Only 9 percent reported their absence due to illness, but expressed bad weather conditions and the lack of clothing as the two main reasons for non-attendance. Absence is also a main problem in the RSS region, but less so in Dushanbe, where most students reported their absence as due to illness and the lack of clothing. Table 49: Reasons for Students' Absence in Basic Education by Region Absence rates Dushanbe GBAO* RSS Leninabad Khatlon Compulsory (7 - 16) 13.6% 17.3% 41.9% 22.6% 50.4% Reasons for non-attendance * * Other work 13.6% - - - 4.7% 16.7% 9.4% No clothing 22.7% - - - 33% 38.7% 30.6% Bad weather 9% - - - 25.8% 1.7% 42% Illness 45.5% --- 17.9% 31.5% 8.9% Source: TLSS. * No consistent information available on reasons for non-attendance for the GBAO region. ** as percent of all reasons. 4.29 For the country as a whole, the absence rate in basic education is 38.4 percent. Absence rates are high for all quintile groupings, reflecting that many c]hildren remain out of school for an extended period. It is interesting to note that absence due to illness seems to become a more important factor for the less poor and the non-poor. The majority of students coming from the poor families reported no clothing and bad weather as the two main reasons for non-attendance. In particular, more than 70 percent of the students c.oming from the very poor families reported these two reasons for being absent from school. Table 50: Reasons for Students' Absence in Basic Education by Quintile A4bsence rates Xst 2nd 3rd 4th So quintile quintile quintile quintile quintile Compulsory(7- 16) 41% 34.1% 39.8% 34.7% 31.7% Reasons for non-attendance Other work 7.3% 8.4% 12.4% 8.1% 10% No clothing 44.9% 29.1% 35.3% 21.6% 22.6% Bad weather 27.4% 35% 26.7% 37.4% 33.3% Illness 8.5% 13.5% 14.3% 19.8% 25.2% Source: TLSS. 4.30 Extended absence rates due to lack of clothing and bad weather reflect two main factors. First, the overall burden of poverty prevents households from keeping their children attending school. This raises the question whether the reasons for being absent from sclaool do not extend beyond the time of 'two weeks', as bad weather occurs during the harsh winter months, and 'lack of clothing' reflects a structural (and therefore also a more pernanent) problem, which also extends, beyond the two week time period. As such, the analysis presented here assumes absence rates as 'extended absence. - 84 - in school. Second, the destruction due to the civil strife and lack of maintenance in many of the school buildings have left these schools without proper heat and make school attendance particularly harsh during the cold winter months. As such, the factors influencing absence rates show that access to education is very much restricted by both supply and demand side factors, i.e. the lack of proper school facilities and also poverty in the form of lack of clothing. E. Technical and Higher Education 4.31 Basic education provides students with the necessary foundation and skills to continue with upper secondary education, vocational/technical education, specialized secondary education or higher education. While the skills provided by basic education are important for all people to have, it is also important that students can continue with post- basic education25 which is crucial for the personal and social development of the children and also for the economic and social development of the country. This is especially important for the attainment of long-term growth in the country. In Tajikistan, however, most students are not able to continue beyond the basic level. Table 51: Enrollment Rates for Post-Basic Education by Level of Education for Heads of Household Poverty Combined Male Female Gender Gap* Quintile I" Quintile 10.3% 14.9% 6.3% 8.6% 2 dQuintile 13.9% 20.4% 8.1% 12.3% 3'd Quintile 17.7% 21.9% 14% 7.9% 4th Quintile 13.2% 17.8% 8.8% 9% 5'h Quintile 21.9% 31.5% 12.4% 19.1% *jin percentage points source: TLSS 4.32 The table shows that the overall enrollment rates in post-basic education in Tajikistan are low. For the country as a whole, only 15.3 percent of all students aged 17 to 23 are attending higher education institutions. There seems to be a strong correlation between poverty and higher education enrollment. In particular, the relatively large gender gap and relatively low enrollment rates are of concern, in that higher education is dominated by male students. 4.33 Historically, Tajikistan's education system catered to a controlled and centrally planned labor force with repressed wages. The financial returns obtained by individuals from seeking additional education were not relevant, as education was provided free of charge26 and wage differentials were mostly, if not only, secured through preferential treatment rather than through a well-functioning labor market. In addition, the fact that most people lived, and still do, in rural areas, made the pursuit of higher education less urgent. In this context, the historic educational attainment of the Tajik population was a function of the extent to which the system was able to provide compulsory and higher education to all the people in 25 For this analysis post-basic education refers to: vocational and technical schools, specialized technical schools, higher education, and graduate studies. 26 During the Soviet era there existed student stipends at higher education institutions for poor students. - 85 - the country, regardless of their relative income level. However, the current situation in the country has constrained people from pursuing education beyond the compulsory level and, as such, from realizing their full potential. 4.34 Figure 9 below illustrates the current educational attainment of the Tajik people (aged 7 and above) for the five quintile groupings27. For the country as a whole (five quintiles combined), 11.2 percent have only primary level or less, 32.7 percent have secondary level, 21.3 percent have professional technical education level, 12.6 percent have specialized secondary education, and 17.7 percent have higher education. About 4.5 percent of have none. The figure shows that primary and secondary level attainment is equal among the five quintile grouping. However, poverty increasingly constrains attainment at higher levels of education as the graph illustrates. It is important, therefore, that the country expands its policy on higher education to secure equal access to higher education for the very poor. Figure 9: Educational Attainment by Poverty Quintile 100% 80% 60% 20% 0% 8th/9th secondary proftech spec.sec higher educ. none M Ist quintile *2nd quintile 03rd quintile 04th quintile *Sth quintile 4.35 In Tajikistan, as in many other countries, the decision whether to send a child to school, is often dictated by the head of household. Evidence from other countries in transition have shown that the educational attainment of the head of household does influence the decision on enrollment. In Tajikistan too, children frorm households, in which the head of household has a higher level of education, are more likely to enroll in school than children from households in which the head of household has a low level or no educational attainment. This is illustrated by the following table. 27 Based on highest certificate or diplomna obtained. - 86 - Table 52: Net Enrollment in Basic Education by Education of Household Head Educational Attainment for Head of Household by Level Currently 8'19'1 Sec. Prof. Spec. Higher Cand. Doctor Other enrolled Level Level Tech. Sec. Eduic. Science Science Enrolled 84.7% 84% 90% 90.4% 93.7% 96.5% 100% 94.4% Not 15.3% 16% 10% 9.6% 6.3% 3.5% -- 5.6% Enrolled Source: TLSS 4.36 In the past, the higher educated people found work in the public sector. But with the current transition, a contraction of the public sector would certainly curtail the absorption of these highly skilled people. In addition, as Tajikistan remains predominantly agrarian and must engage in labor-intensive growth, the immediate focus should be on ensuring that people can finish compulsory education. It is important that the Govermnent closely monitors indicators as these and the others presented above, as they reflect a negative trend currently prevalent in the country, which will undermine the future human resource base of the country. As the above illustrates, the erosion of the human resource base is driven by declining enrollment and non-attendance rates, and the perceived notion of a low return to education. Factors influencing this decline are closely related to poverty. 4.37 In addition to giving highest priority to basic education, however, it is also important that the Government focus on the needs of the vocational and technical training system. A large share of the students at the vocational and technical schools are likely to come from poorer families, and these schools are in urgent need of upgrading. Most of them are presently outdated, inefficient and inflexible, and need to be restructured, reoriented and in some cases downsized in order to provide more short-term and flexible training courses. One important way for people in the rural areas to get themselves out of poverty is through improved practices in farming, farm business or small businesses generally; and the vocational and technical educational system could play a major role in this. F. The Development of a Pro-Poor Education Strategy 4.38 Tajikistan inherited an extensive network of education institutions and good education indicators compared with countries with similar GDP per capita. It had high enrollment rates at all levels of education regardless of gender, poverty level or geographic location. Enrollment and completion rates in basic education were more or less universal (97 percent) for all children ages 7-15, regardless of poverty level and/or geographic area; the adult literacy rate was nearly universal for the population aged 15 years and older, over 80 percent had attended at least eleven years of education, and over 15 percent had completed higher education. The quality of education as measured by some crude input indicators was also satisfactory. The country had an extensive network of education institutions at all levels of education with a large number of highly trained teaching and non-teaching staff. The state financed the provision of free textbooks and teaching materials, and subsidized clothing and school meals in the primary grades. Teachers were well trained and provided with the necessary teaching and learning materials as well as some additional benefits such as housing and subsidized transportation. - 87 - 4.39 Nevertheless, since independence, Tajikistan, like the other Central Asian republics, has struggled to retain the positive achievements of the past, while reorienting the education system to the needs of a market economy and a democratic society. 'The evidence suggest that the quality of education has deteriorated considerably largely due to inadequate resources as well as funding too many teacher and too many schools. Although the available TLSS data have not yet suggested the existence of considerable declines in enrollment rates in basic education by region, the deterioration of the quality of education (due to lack of essential instructional inputs such as textbooks or teacher training) is likely to have considerable negative effects on children's learning achievement and further education in rural and poor regions. 4.40 Evidence throughout the world attests to the importance of access to quality education for poverty alleviation. In particular, promoting universal access to basic education is one of the most powerful tools to reduce poverty and stimulate economic growth, at least in the long run. The sustainable improvement of the education sector in Tajikistan crucially depends on the resumption of economic growth and on the distribution of the gains across the population. In the meantime, the focus of public policy should be to improve efficiency in the use of the available scarce resources, aim at preventing further deterioration in the coverage and quality of education services, particularly in basic education, while improving equity in access to education especially in basic education. 4.41 So far, however, the deterioration in access to education has mainly been tackled from the supply-side. In particular, the current IDA-funded education reform project aims at the provision of textbooks for basic education across the country, school rehabilitation and refurbishment in 20 pilot schools, and teacher and management retraining for new skills and methods. The forthcoming ADB-financed social sector rehabilitatiion project will also support similar school improvements and capacity building in the sector with a particular focus on basic education. These operations seek to address some of the priority needs of the sector, and this needs to be continued and indeed extended. In addition, however, it is now important to focus on the particular schooling needs of the poorest groups, including especially those not enrolled or not attending basic education. 4.42 It is believed that the sharp increase in poverty rates and the changes in the education funding (reduction of public resource availability and introduction of formal and informal fees for many education-related services) have reduced school attendlance, particularly for children coming from poor households and rural areas. To revert this trend and to contribute to reduce poverty in the medium and long terms, it is important that the poor can have guaranteed access to quality education, especially at the basic educational level. The following are the recommendations that arise out of this analysis. (i) The centralized system of education funding should be maintained, with the Government continuing to play a critical role in the financing of education particularly for equity reasons. However, efficiency improvements need to be made in the use of available resources for education and in the present resource allocation mechanism. (ii) Basic education should be protected as worsening enrollment and attendance rates are likely to affect future poverty alleviation efforts. In particular, high priority should - 88 - be given to basic teaching materials (e.g. learning materials and teacher training) in the education budget; resource mobilization policies (such as for the rental of textbooks or for the creation of parent-teacher associations) should also be developed with particular attention to the needs of the poor; the rehabilitation and restructuring of schools should continue and be accelerated; and funding for the salaries of teachers in primary and secondary education should be increased, if necessary through reductions in the number of teaching and non-teaching staff and increases in teaching loads. Excessive staffing in the education sector should be reduced, but without undercutting the quality of education and including adequately compensating those who leave and also those who continue to teach. (iii) The education needs of the poor and of students coming from disadvantaged families should be addressed, as they are probably unable to meet the rising both direct (formal and informal) costs of education. Specific policy options targeted to the poor may include: the provision of free basic education materials (e.g., textbooks and other essential education materials); reducing the impact of "informal" payments in education through the introduction of a transparent formal student fee policy; the introduction of targeted student financial support on the basis of needs as well as academic merit; the introduction of objective student selection examinations in higher education; and the establishment of community-based pre-schools which can mobilize parent and community resources to provide inexpensive early childhood education programs. (iv) Regional and rural/urban variations in access to high quality education should be reduced through reforms in public education finance and in the resource allocation mechanism. Priority should be accorded to reducing the gender gap in basic and higher education. Where the barriers and constraints to girls' participation in basic and higher education are known, specific measures need to be taken into account to ensure equitable access to education for these students. Further studies need to be carried out to identify other factors that mitigate girls' access to basic and higher education, to allow the Government to better design appropriate interventions, addressing the needs of this particular target group. (v) Emphasis should be placed on the development of new skills (in problem solving, teamwork, communications, information management and self-management) through active learning methods in order to develop accountability, entrepreneurship and democracy. (vi) A monitoring and evaluation capacity should be established in the Ministry of Education and in the local Governments to support tasks such as policy development and planning, student enrolment and attendance, monitoring and assessment, and also as a basis for accountability. (vi) A non-formal adult training system should be developed as the education and training systems can play a role in poverty alleviation efforts. Public policies should focus largely on providing short-term non-formal adult training programs for farmers, small and medium-scale business people, and other individuals who are interested in learning new productive skills or update their current skills demanded in a market - 89 - economy. The Government should examine the skills needs in the labor market and re- orient its existing vocational-training system (including specialized secondary schools and higher education institutions) to provide such short-term training programs. (vii) Further studies should be carried out into the relationship between education and poverty to improve the design of education policies and so reduce the impact of poverty on enrollment and attendance rates and on learning achievement. In particular, it would be advantageous to carry out studies on (a) the factors affecting the access of the poor to education, especially in basic education, by income group, gender, language, and location (region or rural/urban); and (b) the effects of fiscal decentralization from the central Government to local Governments and to parents on access to quality education. - 90 - CHAPTER V: HEALTH AND POVERTY 5.1 The last chapter focused on the education sector. The other key sector which can contribute substantially to the building up of the human capital of the poor is the health sector. Together, these sectors form the second of the proposed four key pillars for a poverty alleviation strategy. Unfortunately, however, the health system is in a very serious situation, with the poor in particular suffering from lack of access to decent quality services. Tajikistan used to rank with middle upper-income countries in terms of the major health indicators. Despite major constraints on the accuracy of the data, the health status of the people has probably deteriorated since independence. A. Health and Nutritional Status 5.2 Official statistics of health status. The official Government statistics suggest that in recent years there has been a decline in the national birth rate (from about 39/1,000 in 1994 to 25/1,000 population in 1997), in the rate of infant mortality (from 41/1,000 to 31/1,000 population in 1997) and in the maternal mortality rate (from 88/100,000 to 66/100,000 live births). It is believed that life expectancy has improved a little since 1974. Table 53: Official Health Indicators 1994 1997 IMR per 1,000 live births 40.6 30.7 MMR per 100,000 births 87.6 65.5 Under 5 mortality per 1,000 - 120 Total Fertility Rate 4.1 3.7 Average Life Expectancy 66.3 68.3 Birth Rate per 1,000 population 38.4 25.0 Death Rate per 1,000 population 6.2 5.8 Source: GoT; UNDP; USAID 5.3 In examining the data for individual diseases, however, it is clear that health status in Tajikistan remains precarious. Tajikistan copes with a double burden of disease, inflicted by both chronic non-communicable diseases (in a profile similar to Western countries) and infectious diseases (where the profile is closer to developing countries). Cardiovascular and pulmonary diseases (particularly strongly associated with unhealthy lifestyles, including excess alcohol and tobacco use and high fat diets) account for much of the mortality. Infectious disease disproportionately affects young children, contributing to the high under- five mortality rates. In more detail, Table 55 shows that the rates of respiratory diseases, intestinal infections, malaria and typhoid all rose in the period 1995-1998. There was a peak in diphtheria in 1995, but the mass vaccination campaign then caused a significant drop in its incidence. - 91 - Table 54: Infectious Disease Incidence per 100,000 195 1996 1997 198 Respiratory infection 4,175 3,966 4,021 6,709 Intestinal infection 847 666 915 929 Hepatitis 349 139 278 122 Malaria 105 281 613 316 Typhoid 27 214 498 172 Measles 1.0 0.7 64 50 Pertussis 3.6 1.4 4.4 1.1 Diphtheria 77 25 10 3 Source: Ministry of Health 5.4 The official data on tuberculosis suggest that the rate of the disease has dropped slightly from 34.9 per 100,000 to 33.5 per 100,000. However, insufficient supplies of tuberculosis antibiotics nation-wide have, to date, precluded the institution of the WHO recommended short course therapy, and most patients are instead subjected to very lengthy hospitalizations and erratic drug treatment that promotes the development of multi-drug resistant forms of TB. Without an assertive and rapid intervention, a very serious tuberculosis problem could be imminent in Tajikistan. Table 55: Tuberculosis Cases 194 1995 1996 1997 Total registered 9,088 8,142 8,287 8,171 Newly diagnosed 2,000 1,659 1,647 1,994 Per 100,000 34.9 28.6 27.9 33.5 Source: Ministry of Health 5.5 In reality, however, the accuracy of the official data needs to be questioned due to the collapse of the health information system and most of the other statistical reporting systems too. The data that are collected are entirely facility-based, and the parallel sanitary and epidemiological system (SES) is barely working and is poorly integrated into the main health information system. The diagnostic skills of many health workers are limited, and case definitions do not always coincide with international standards. Although these problems have existed for some time, even looking at trends in disease patterns can be misleading as many sick people are now less likely to report to health facilities for treaLtment. 5.6 Results from the living standards survey. In view of the doubts about the accuracy of health statistics, it is useful also to review the results from the TLSS to assess health status. Interestingly, in the survey, the majority of people reported that their health status over the last year had been good or very good. Not surprisingly, tbhe prevalence of both chronic and acute morbidity increased with age, and women generally reported higher levels of morbidity than men in the same age groups. - 92 - 5.7 Overall, a relatively low proportion of the overall population (6 percent) sought medical assistance in the 2 weeks prior to the survey or reported being hospitalized in the previous year (5 percent). The condition for which medical assistance sought provides an insight into burden of disease in Tajikistan. The majority of children required treatment for respiratory and intestinal infection, reflecting a declining health status. There was also a high incidence of infectious diseases, notably malaria, typhoid fever, tuberculosis, and measles. Amongst women of reproductive age, a significant proportion of health care use was related to child bearing. Amongst men, heart and respiratory conditions were significant - especially for older men. Forty percent of consultations amongst men over 65 were related to heart conditions. These findings are in line with other, more detailed statistics concerning the profile of disease in Tajikistan. Table 56: Condition for which Medical Assistance was Sought by Age and Gender Men Women 0-15 16-64 65+ 0-15 16-64 65+ Heart 3 19 40 6 16 14 Respiratory 49 24 12 52 21 28 Digestive 2 15 4 7 8 8 Diarrhea 9 3 8 6 4 4 Malaria 6 4 - 7 3 4 TB 4 4 4 4 6 5 Injury 7 4 4 - 2 2 Matemity/gynecological - - - 1 15 10 Abortion - - - I - Cancer - - - - I I Other 20 27 28 17 24 23 Total 100% 100% 100% 100% 100% 100% Source: TLSS. 5.8 In general, therefore, combining the information from the official statistics with observations and judgements from local experts and also the TLSS findings, it is believed that there has been a re-emergence and upsurge in the incidence of several infectious diseases, notably malaria, typhoid fever, tuberculosis and measles. This underscores serious weaknesses in the expanded program of immunization (EPI). A rise in respiratory and intestinal infection reflects declining health status and the poor water and sanitation situation, particularly in young children who are most vulnerable to these conditions. 5.9 Nutritional status and children's health. The results of the TLSS also show that Tajik women are successful breast feeders, with 96 percent of women breastfeeding their last child, although only 65 percent began on the day of delivery. About 19 percent of women are continuing to exclusively breastfeed beyond six months, leaving those children at increased risk of delayed growth. Table 57: The Prevalence of Breast Feeding Breast Feeding % women breastfed last child 96 % women exclusively breastfeeding beyond 6 months 19 Source: TLSS. - 93 - 5.10 In addition to the results of the TLSS, use can also be made of the results of seven other nutrition and anthropometric surveys that have been carried out variously since 1994, by the Aga Khan Foundation (AKF), CARE, German Agro Action (GAA), and Action Against Hunger. Although the findings are not directly comparable with each other because of design and methodological differences, they do all clearly document a worsening trend. The surveys were conducted in different parts of Tajikistan on children between the ages of 6 and 59 months (children are the most physiologically vulnerable to food shortages and therefore this age group is the most sensitive indicator of the nutritional status of a given population group). The most useful surveys may be the series conducted by AKF in Gorno- Badakhshan (GBAO), because they have been canied out biannually since 1994 in the same region of Tajikistan. They indicate a steady deterioration in nutritional status28. Moderate wasting, or acute malnutrition, denotes curTent nutrition and health problems, and is defined as weight-for-height scores of below minus 2 standard deviations (-2SD)) from the reference mean. Moderate stunting, or chronic malnutrition, denotes chronic exposure to insufficient food and ill health, and is defined as height-for-age scores of below minus 2 standard deviations from the reference population. Table 58: The Prevalence of Acute and Chronic Malnutrition In Children under 5 Years NCO Moderat wasting Moderate stunting CARE 1994 4% 30% GAA 1996 10% 41% GAA 1998 11% 46% AKF 1994 3% 40% AKF 1996 6% 45% AKF 1998 6% 54% Action Against Hunger 1999 7% 41% 5.11 Although there is little evidence of widespread severe malnutrition, there is significant undernutrition, and a series of anthropometric and food security surveys over the last six years clearly indicate a steady and fairly steep decline in nutritional status. The findings of the TLSS further demonstrate that substantial proportions of households were food insecure in 1999. Abnormal anthropometry is a late indicator of inadequate nutrition, and in populations with low margins of reserve, like Tajikistan, is a cause for concem. Cases of chronic malnutrition (or stunting) are very closely associated with poverty and ill health; the documented and troubling decline in nutritional status since 1993 reflects the decline in household economic security over the same period. On the other hand, as there has been 28 The deterioration in nutritional status is perhaps surprising in view of the increased agricultural production achieved in this period. There are several possible reasons for this: for example, the increase in production was also accompanied by a decrease in food aid; the improved agricultural performance may not have been sufficient to offset the other effects caused by the economic dislocation of the region; and nutritional status depends on many factors besides just grain production. This phenomenon merits further investigation. - 94 - economic growth since 1997, the nutritional situation may perhaps have improved somewhat, although there are no data yet to show this. B. Main Features of the Health Sector 5.12 At independence, Tajikistan inherited the standard Soviet health system, which was generally comprehensive but highly centralized and inefficient. There were a large number of hospitals, hospital beds, doctors, and nurses and medical technicians. The whole population was entitled to a wide range of services provided by the State, with financing coming from the general state budget, enterprise budgets, and extra-budgetary funds. Private payments were limited to a few non-essential services, and some unofficial payments were made to public providers for preferential treatment. However, many protocols and procedures were inappropriate, management systems were hierarchical, and consumer choice extremely limited. Table 59: Primary Health Care Facilities FAPs SVAs SUBs 1995 1,577 486 200 1996 1,583 485 206 1997 1,613 485 206 Source: Ministry of Health 5.13 The exigencies of transition and civil war, with the associated sharp economic decline and resource constraints, have created a widening gap between the health care budget and the actual costs of care. Therefore, availability of care does not constitute accessibility of care; and in Tajikistan, although there is an oversupply of facilities, beds and personnel, there is a striking absence of even rudimentary medical equipment, supplies and pharmaceuticals. In a comprehensive facility survey of two rayons (Varzob and Dangara), half of all FAPs/SVAs did not have adequate functioning cold chain equipment, two thirds were unable to conduct growth monitoring, and over half had no oral rehydration salt in stock at the time of the survey. Table 60: Health Personnel per 10,000 Population 1995 1996 1997 Doctors 20.7 20.2 19.6 Nurses 61.3 59.3 57A Pharmacists 0.9 1.0 0.8 Total doctors 12,104 11,964 11,771 Total nurses 35,911 35,020 34,452 Total pharnacists 1,024 674 758 Beds per 10,000 73.3 72.5 70.1 Total hospital beds 46,463 42,999 42,058 Source: Ministry of Health - 95 - 5.14 Another particular problem concerns the salaries of health workers. Tables 61 and 62 show the present salary levels for various types of workers, and indicate that the salaries of health workers are less than half of the average of all workers' salaries. Table 61: Health Personnel Salaries Health worker monthly salary ranges :v Physician TR 3,200-6,500 Feldscher TR 1,685-3,421 Nurse TR 1,685-3,421 Ancillary TR 1,514-2,940 (1999 exchange 1,600 TR per dollar) C. Financing of Health Care 5.15 Public financing. There has been a steady decrease in public spending on health during the transition period. Health expenditure as a percent of GDP has dropped from an estimated 2.3 percent in 1994, to 1.0 percent in 1999 (see Table 62). Since 1995, the proportion of the budget allocated to the health sector has dropped steadily. These considerable reductions have eroded the capacity of the health system to provide effective and accessible medical care to the public. Table 62: Actual Health Spending by the State Budget, 1992-1999 1992 1i93 1994 195 199 1X997 198999 % GDP State budget social 19.9 21.3 20.1 8.3 5.2 3.9 4.0 3.4 Health 2.3 3.1 1.3 1.3 1.2 1.0 i Per Capita State budget social 10.4 26.0 27.5 8.4 8.3 5.5 6.8 5.8 Health 3.1 1.2 2.1 1.8 2.0 1.8 % State expenditure State budget social 34.3 41.0 36.5 24.8 28.9 25.9 23.5 19.9 Health 4.2 7.8 7.3 8.7 6.9 6.0 Memo Items Health expenditures 39385 943 4011 8259 11950 13893 State social expenditure 119421 3032 15951 24528 40749 46112 State expenditures (TR mn*) 37454 329056 945245 12132 55173 94720 173376 231920 State expnet of transfers to SPF (TR mn*) 35640 320384 940865 11943 55173 94720 160259 199797 GDP (TRnm*)** 64760 632000 171797 45853 308453 626800 102521 134800 Population (mn)*** 5.6 5.6 5.7 5.8 5.9 6.0 6.1 6.1 Exchange rate (TR/$)**** 222 933 2205 135 328 750 977 1299 Source: MoF, IMF. - 96 - Table 63: Health Budget Plan and Execution, 1998-2000 logs 1999 2000 Plan % Actual % Plan % Actual % Plan % TR mD TR mn TR mn TR mn State Expenditures 189508 173376 256209 231920 276966 Health 13772 7.3 11950 6.9 18190 7.1 13893 6.0 19089 6.9 Source: MoF 5.16 Focusing on line items in Table 64, it may be seen that, in contrast to the pattern in education, the share of salaries and social insurance payments in state health spending went down between 1994 and 1998. The decline was driven by the drop in the share for the local budgets, while the spending share for the republican budgets increased. In line with the developments in education, the share accruing to food increased after 1994. For 1998/9, the food share equaled around 30%, the highest share among the line items. Spending on capital investment and repair almost halved between 1994 and 1998. Table 64: Planned Health Expenditure by Item (% of total) 1994 1997 1998 1999 Local Rep. State Local Rep. State Local Rep. State Local Rep. State Salary and SPF 38.4 23.9 33.8 31.8 27.7 31.3 20.6 32.3 23.0 21.1 13.5 19.8 Utilities 19.7 19.6 19.7 15.3 7.1 14.2 15.9 3.9 13.4 14.8 4.9 13.1 Food 16.0 14.8 15.6 20.6 9.9 19.2 32.6 22.8 30.6 31.0 21.8 29.5 Drugs 13.5 18.5 15.1 11.9 7.4 11.3 18.3 7.8 16.1 17.9 12.3 16.9 Others 12.2 23.2 15.7 20.4 47.6 23.8 12.5 32.9 16.8 15.1 47.0 20.5 Source MOF 5.17 The breakdown of health expenditures by institutions is only available for the local budgets (see Table 65). Hospitals account for the bulk of health spending. Together with policlinics and ambulances, their share totals to around 87 percent of overall health spending, compared to around 81 percent in 1994. The spending on primary health care facilities is minute. Spending on feldscher accuscherske punkt (FAPs), now called medidinski dom, amounted in 1998 to no more than 3 percent of the total, while the funding share of rural outpatient clinics (SVAs) was close to zero. In summary, not only has there been a very serious decline in the budget available for the health sector, but the available funds are not optimally utilized, as the allocation of resources for health services favors inefficient tertiary care over primary care. Table 65: Planned Local Health Expenditure by Institution (% of total), 1994-1998 1994 1997 19_ Hospitals 74.7 77.3 78.3 SVA 0.2 0.0 0.1 Policlinics and Ambulances 6.6 8.3 8.7 FAP 2.4 2.7 2.1 First medical aid stations 1.1 1.4 1.3 Blood stations 0.3 0.1 0.0 Sanatoriums for tuberculosis 0.7 0.9 0.6 Sanatoriums for non-tuberculosis 0.3 0.4 0.5 Houses for orphans up to age of five 0.7 0.8 0.6 - 97 - 1994 1997 1998 Sanatorium-epidemiological stations 3.2 3.8 2.8 Disinfectionary stations 0.1 0.1 0.0 Measures against epidemnics 0.0 0.0 0.0 Health centers and measures for sanitary education 0.0 0.0 0.0 Odter health measures 0.3 0.4 0.5 Exp on technical monitoring and construction 0.0 0.0 0.0 Exp on accounting 0.5 0.9 0.6 Exp on centralized economic services 0.0 0.0 0.0 Capital investments 9.1 2.9 3.6 Source: MoF Table 66: Local Health Expenditure Per Capita, 1994-1S199 1994 1997 1998 1999 Plan Actuail Plan Actuai Plan Actual Plan Plan Jan- Local NIOF Jun % of Total GBAO Na 95.4 240.7 117.6 251.9 85.7 176.4 241.0 Khatlon (incl 113.1 98.5 99.5 77.7 93.4 65.5 48.1 95.8 Nurek) Leninabad 196.6 125.3 97.7 147.1 107.3 130.6 110.4 108.6 Dushanbe 1189 113.4 159.9 134.8 139.2 211.5 392.1 125.1 RRS Na 63.2 59.8 53.7 62.4 70.7 43.3 63.8 City Kofamichon 80.5 59.6 68.2 46.6 68.4 61.1 S9.7 64.3 City Rogun 116.9 65.1 85.5 29.5 78.2 53.0 41.6 81.7 City Tursunsade 123.4 66.8 81.2 111.6 84.2 192.4 54.3 86.5 Varsobski 62.8 36.8 50.4 29.0 27.2 32.2 31.0 43.9 Gharrnski 90.5 58.3 56.7 48.4 86.5 39.1 41.3 70.8 Gissarski 67.3 60.7 46.9 57.2 60 2 61.8 36.5 60.7 Dgirgatalski na 0.0 68.2 37.7 81.9 27.3 41.5 71.8 Komsomrolabadski 526 282 608 37.2 774 344 58.3 68.1 Leninski 67.9 47.7 41.6 31.1 28.6 30.4 18.7 36.0 Tavildarinski 84.2 40.2 134.8 64.8 0.0 2165 129.5 211.1 Tadgikabagski 65.5 33.4 55.9 21.2 67.3 102.9 48.8 62.3 Faisabadski na na 60.3 62.7 65.1 49.5 60.9 61.4 Schachnnavski na na 59.3 58.2 86.7 65.8 43.3 79.4 % of RRS City Kofanichon 9.916885 94.3 114.2 86.8 109.7 86.4 137.5 100.8 City Rogun 14.4006 103.1 143.2 55.1 125.5 75.0 95.9 128.0 City Tursunsade 15.20581 105.7 135.9 208.0 135.1 272.0 125.1 135.6 Varsobski 7.733699 58.2 84.4 54.0 43.7 45.6 71.4 68.8 Gharrnski 11.14771 92.3 94.9 90.1 138.7 55.3 95.0 110.9 Gizzarski 8.29259 96.1 78.5 106.6 96.5 87.3 84.0 95.1 Dgirgatalski 0 0.0 114.1 70.2 131.3 38.7 95.7 112.5 Konisoniolabadski 6.47927 44.6 101.8 69.3 124.1 48.7 134.4 106.7 Leninski 8.336272 75.5 69.6 58.0 45.8 43.0 43.0 56.4 Tavildannski 10.38123 63.6 225.6 120.8 0.0 306.2 298.2 330.7 Tadgikabagski 8.075931 52.9 93.5 39.5 107.9 145.5 112.4 97.7 Faisabadski 0 0.0 100.9 116.8 104.4 70.0 140.4 96.2 Schachnnavski 0 0.0 99.2 108.4 139.0 93.1 99.8 124.5 Source: MOF. 5.18 According to local budget plan data, about 47 percent of the local health spending takes place at the oblast level. Rayons account for about 42 percent, and villages and urban settlements spent the remaining 10%. Actual local health spending per capita in 1997/8 was highest in Leninabad and Dushanbe, and lowest in Khatlon and RRS (see Table 67). - 98 - According to the 1999 budget plan draft, per capita spending is highest in GBAO, but the budget execution in GBAO was substantially short of plan in 1997/8. Among the rayons of the RRS, City Tursunsade and Tavildarinski spend most in per capita termns, while Dgirgatalski, Varsobski, and Leninski are about 50% short of the RRS average. D. Access to Health Care 5.19 As noted earlier, overall, only a relatively low proportion of the overall population sought medical assistance in the 2 weeks prior to the survey or reported being hospitalized in the previous year. Table 68 examines the relationship between health status, health seeking behavior and the financial resources of the household in order to assess any possible emerging inequalities in access to health care. The table shows that there is an inverse relationship between financial well-being and health, with the poorest reporting illness and seeking care at lower rates. Table 67: Self Reported Morbidity by Quintile of Per Capita Household Expenditure Poorest 2 3 4 Richest All 20% 20% Taj Chronic illness lasting more than six months Yes 8.3% 8.2% 8.7% 10.5% 14.0% 9.7% No 91.7% 91.8% 91.3% 89.5% 86.0% 90.3% Acule illness in the last two weeks Yes 6.7% 7.9% 7.2% 8.3% 11.5% 8.1% No 93.3% 92.1% 92.8% 91.7% 88.5% 91.9% Sought medical assistance in last two weeks Yes 3.9% 5.3% 5.2% 5.9% 8.8% 5.7% No 96.1% 94.7% 94.8% 94.1% 91.2% 94.3% Hospitalized in the last year Yes 3.5% 4.7% 5.0% 6.0% 7.3% 5.2% No 96.5% 95.3% 95.0% 94% 92.7% 94.8% Note: all chi-square significant at (p<0.001) Source: authors own analysis of the TLSS 5.20 Of those who reported that they needed medical assistance but that they did not seek such assistance, the majority of respondents (52%) self medicated using traditional or over the counter medicines. However a significant minority (33%) reported that affordability was the main reason - indicating that lack of financial resources is already a barrier to access to health care for a significant proportion of the population. Although the poor report less illness, when they do require medical care it appears that the informal cost of that care is a barrier to access more frequently than for other groups. Table 68: Reasons Why People Did Not Seek Medical Assistance by Quintile Poorest 2 3 4 Richest All 20% 20% Tal Self medicated 42 49 50 55 65 52 Believed problem would go away I1 3 16 5 6 8 Too far/facility closed/poor service 1 2 4 5 3 3 Could not afford 42 41 28 30 24 33 Other 5 5 2 5 2 4 Note: all chi-square significant at (p<0.001). Source: TLSS - 99 - 5.21 In summary, access to health care for the poor is a particular problem, especially as cost recovery schemes and private sector expansion are introduced. As social inequalities in Tajikistan have increased, health inequalities have developed accordingly. The poorest 20 percent of the population are reporting illness and seeking care at lower rates, and face financial barriers to care more frequently. Factors which influence illness perception and health seeking behavior are complex, and in Tajikistan these determinants are not yet well understood, so it is unclear why poorer households in the survey reported illness less frequently than the non-poor. One possibility is that the very poor, lacking the resources to access medical care easily, define illness more narrowly than those able to afford treatment, which in effect thus reduces the number of times they must initiate attemjpts to raise funds for health care. The poorest may also be deferring care (and the recognition of illness) until their illness is severe. Table 69: Health Care Access Health CIre Access % paying charges for last consultation 4,3 % providing gifts for last consultation 17 % citing expense as reason for not seeking care 33 % currently pregnant women w/o prenatal care yet 37 % women citing expense as reason 44 % women delivered last child at home 29 % citing expense as reason unable to buy prescription. 84 % borrowing money to pay for health care 31 % selling household assets to pay for health care 26 Source: TLSS E. Utilisation of Health Care Services 5.22 The poorest 20 percent seek care and are hospitalized at lower rates than the richest 20 percent. The poorest are able to devote a smaller proportion of household expenditure to health care29, and they are more likely to be seen by a feldscher than are the non-poor. They (and their children) face a higher risk of water-borne disease than the richest quintile, having less access to centralized or piped water. Women of reproductive age are particularly vulnerable to the effects of poverty on health; 60 percent of the poorest women without reproductive care cite expense as the barrier, compared with 37 percent of the richest. 29 It is interesting that the poor spend a lower proportion of their incomes on health than the rich; whereas in the case of education expenditures, the reverse is true. - 100 - Table 70: Distribution of Health Care Utilization and Access by Quintile Bottom Top Tajikistan Acute illness in preceding two weeks 7% 12% 8% Sought care for illness 4% 9% 6% Government physician provided care when ill 77% 84% 85% Feldscher provided care when ill 11% 2% 4% Means of transport to consultation; walking 72% 56% 60% Means of transport to consultation; public 16% 27% 24% Needed medical care, but did not seek 5% 7% 5% Citing expense as reason for no care when needed 42% 24% 33% Hospitalization in last year 3% 7% 5% Inability to afford as reason for no prenatal care 60% 37% 44% Services too far away as reason for no prenatal care 21% 12.5% 25% Proportion of h/h expenditure on health 3% 7% 4% Water source: centralized/pipe 42% 57% 46% Water source: river/lake/pond 29% 16% 24% Source: TLSS 5.23 With the contraction in Government expenditure there has been a concomitant increase in private spending for health, which has had the effect of restricting access to care for many, especially the very poor. Health inequalities have developed, and the most impoverished in Tajikistan are increasingly alienated from social services, including health. The decline in both national and household economic security can be documented by the levels of access and use of health care services. Lack of money has led to many people delaying medical care, and the percent of children born in hospitals/matemity homes is steadily dropping. Poor households are less likely to report illness than others, and less likely to utilize health services when ill. The very poorest in Tajikistan are most affected. There has also been a sharp decline in public spending on pharmaceuticals. The most significant item of private health expenditure is drugs, despite the substantial provision of drugs and medical supplies to health facilities through humanitarian assistance. Private spending for pharmaceuticals exceeds public spending. Table 71: Degree of Difficulty in Paying for Health Care Very difficult 41% Difficult 52% Not difficult 7% Source: TLSS 5.24 As Government subsidies for the health sector have declined, patients have increasingly been obliged to supplement inadequate health budgets by contributing informal payments. Although there is a tradition in Central Asia and the Caucasus of presenting monetary or in-kind gifts to caregivers as a mark of gratitude, this voluntary tradition is being supplanted by provider generated demands for payment as a precondition to treatment. Of households surveyed for the TLSS, 48 percent reported making payments for their last consultation, and 18 percent gave gifts. Qualitative data collected suggest that health care providers assess patient ability to pay and charge accordingly, and also that these unofficial - 101 - user fees are open to some negotiation. The TLSS data provide some indirect confirmation of this; the bottom quintile made substantially smaller payments and gifts than the top, although this may also be a consequence of the poorest sector accessing primary care (where informal payments are rare or nominal) more frequently. The effect of informal health payments on health care access and utilization is not insignificant. The majority of those needing health care reported difficulty in paying for it. Almost one third of households are going into debt in order to afford health care, and increasing numbers are resorting to the sale of household assets. Table 72: Place of Birth of Last Child Bottom Top Tajikistan At home 35% 20% 29% Maternity home 43% 59% 50% Home of midwife 6% 4% 40%o Other facility 16% 17% 17/% 5.25 Women have been particularly impacted by changes in the health system and the erosion of access to adequate basic services. During the Soviet period comprehensive prenatal care included at least 15 health facility visits, and 90 percent of all births were delivered in maternity wards. The TLSS data show that the majority of married women of reproductive age (16-49) reported that they did have a medical consultation during their last pregnancy. However, the situation appears to be deteriorating, with 37 percent of respondents pregnant during the TLSS survey reporting that they had had no consultations or prenatal care, with nearly half of these women citing inability to afford it as the main barrier to reproductive care. Almost one third of women surveyed delivered their last child at home. Children born at home are less likely to be appropriately immunized because initial vaccinations are given in the hospital/maternity home. The poorest women are most affected, with 35 percent delivering at home compared with 20 percent of the richest. F. The Restructuring of the Health Services. 5.26 There has been significant discussion and planning in the Ministry of Health (MH) in recent years about the reform of the health care system and especially about concentrating more resources at the primary level. The MH reform strategy includes the following principles: (i) more emphasis should be given to protecting people's health, and the primary health care system should be strengthened; (ii) the quality and cost-effectiveness of medical care should be improved; (iii) improvements should be made in management skills; (iv) health care financing should be reformed; (v) innovations in the sector should be encouraged; and (vi) there should be constant monitoring and evaluation of reforms. This reform strategy has recently been developed further with technical assistance from the World Health Organization. - 102- Table 73: Average Length of Stay in Hospital 199s 1996 197 General beds 15 15 15 TBbeds 110 111 111 Source: Ministry of Health 5.27 Despite the plans made, implementation has been constrained and little actual resource reallocation has yet occurred. The ongoing IDA-funded project will help the MH to start the process of implementation of the reforms, but it will only focus initially on two rayons. There will soon be a parallel social sector rehabilitation project funded by the Asian Development Bank, and that will extend the reforms further. But much remains to be done. The incentive system will also need to be changed. For example, while there has been some significant reduction in bed capacity (over 20,000 beds have been reported abolished since 1991), the savings have not been substantial, because the bed reductions have not resulted in ward or facility closures, nor in any real decrease in health personnel numbers or length of stay. Also, any savings do not get returned to the health sector due to the continuation of the normative budgeting system. Health care financing is input-based: the health budget is still determined by established norms (i.e., number of hospital beds) rather than services provided. This rewards excess capacity, and unnecessary hospital admissions of extended duration. Therefore, the health delivery system still emphasizes curative care, rather than disease prevention and health promotion. G. The Development of a Pro-Poor Health Strategy 5.28 In summary, the health system is now mainly still characterized by: (i) inadequate funds to pay personnel even the minimal salaries which they are supposed to receive; (ii) very limited stocks of medicines and medical supplies; (iii) a significant loss of staff through emigration and resort to informal sector activities, motivated simply by the need to survive; (iv) aging facilities and equipment, and many buildings and other infrastructure damaged during the war; (v) reduced utilization rates (despite a still high average length of stay in hospital of 14 days) and a collapse of the referral system; (vi) a growing tendency for people to postpone or defer medical care and/or to rely on self-medication; and (vii) a markedly skewed distribution of staff and resources particularly towards the capital city of Dushanbe. In this situation, there is growing evidence that it is the poor who are suffering most; and it is also the poor whose human capital is most at risk. 5.29 If a greater proportion of the available resources were to be allocated to primary health care, there would be an improvement in equity as well as efficiency. The poorest quintile access primary care more frequently than tertiary care; and so redirecting resources to primary care rather than to hospital based services (more frequently used by the non-poor) would target the poor in Tajikistan. Young children and women of reproductive age, who are the most frequent consumers of health care, and among the most vulnerable, also access most services at the primary level, and therefore improvements in primary and maternal health services would additionally benefit this group. But the quality of care must also be improved in the peripheral facilities, and health worker capacity enhanced, in order to increase - 103 - utilization rates generally of primary care. Strengthening primary care, and primary care providers (feldschers and midwives), is therefore the key strategy for restructuring the health delivery system. 5.30 The following are the recommendations that arise out of this analysis: (i) Current levels of funding are inadequate to meet hea.lth care needs, but inefficient hospital services are still allocated too large a proportion of a deficient budget. (ii) Scarce resources should be directed towards improving primary care, rather than tertiary care. Specifically, there should be a reallocation of Government health expenditures to the primary care sector (medidins]ci dom and SVAs), increasing the current level of funding to 50 percent and reducing hospital funding to 50 percent. (iii) The number of underpaid, under-trained and underused health workers should be cut; excess, underused bed capacity should be eliminated; and the number of medically inappropriate hospitalizations and specialty referrals should be reduced, so as to create savings that could then be redirected to primary care. (iv) Savings achieved specifically through manpower reduction should be translated immediately into health worker salary increases, as current official salaries are so low that they require workers to supplement their incormes in order to meet cost of living imperatives. Health worker apathy and payment demands to patients cannot be eliminated until salaries reach a reasonable level. (v) Reduction of excess physical and human resource infrastructure (public sector health personnel), reduction in medical university enrolment, and consideration given for rationalization or downgrading of SUBs. (vi) Norms based staffing should be eliminated at all levels, and a population-based funding system should be introduced for both primary and secondary services. (vii) Consideration should be given to the institution of lirmited official user fees/payments, initially for pharmaceuticals only, and with explicit exemption policies established, both for users (the most impoverished) and conditions (tuberculosis and other communicable diseases, routine immunization, maternal-child care). Cost recovery schemes in Tajilkistan should be undertaken very cautiously, and only after careful piloting, because the impact of user fees on the poorest could be negative, and could decrease utilization rates further. (viii) There should be a renewed focus on basic immunization, management of sick children, maternal and perinatal care, and reduction of avoidable morbidity and mortality through the promotion of healthy life-styles. -104 - (ix) Consideration should also be given to an expanded role and scope of practice for feldschers and midwives, in addition to focus on family practitioners. Increase the functional autonomy of feldschers. (x) Efforts should be made to identify and promote affordable, available and appropriate complementary foods for infants (six to twelve months) and for children of different age groups; and more attention should also be paid to nutrition programs, including salt iodization, flour fortification and the treatment of anemia in pregnant women. - 105 - CHAPTER VI: SOCIAL PROTECTION AND POV]ERTY 6.1 The third key pillar of the proposed poverty alleviation strategy suggested in this report concerns the targeting of assistance to the poorest. It was earlier argued that there is a primary need for productive employment and economic growth, so that as many people as possible can earn a decent income and so avoid poverty. It was then argued that the provision of basic social services is absolutely necessary not only as a human right but also so that poor people have sufficient human capital to take advantage of opportunities. In this chapter, there is an analysis of those groups of people who have special difficulties or needs, and for whom targeted assistance is required. 6.2 Prior to independence there was a comprehensive system of social welfare benefits, based on the principles of social solidarity. With a guarantee of full employment, unemployment was unknown. For those unable to work, there was an extensive system of invalidity and old age benefits; and for families with young children, there were generous child benefits. Coverage of benefits was universal and almost every household was eligible for at least one. In addition to cash benefits there were numerous 'benefits-in-kind', including free pre-school and child care, free or heavily subsidized holiday camps, subsidized housing and utilities, free cultural and sport facilities, and generous maternity leave. Many of these social welfare benefits were delivered via the state owned enterprise. 6.3 Over the last five years, civil conflict and the economic and social dislocation associated with transition has both exacerbated the disadvantage of the 'old poor' - pensioners, families with large numbers of children and single parent ifamilies - and given rise to new groups of poor in need of social cash transfers. Most prominent amongst these are the 'working poor'. The earnings of many breadwinners are simply not sufficient to cover the costs of daily living and average per capita income is lower than the minimal consumption budget. However, at the same time as the increase in the number of vulnerable people, the ability of the Government to fund social protection has been severely curtailed. The state budget has fallen in real terms, and the existing systems of assistance to the most vulnerable have come under increasing pressure due to the rising number of people in need coinciding with tightening fiscal constraints. The value of benefits has fallen in real terms and the number of recipients has been reduced rather than expanded. ]n view of the large number of extremely poor people in Tajikistan, it is important to examine the organization and the financing of the existing safety net programs and to evaluate whether they are appropriate and effective in reaching the poor. It is also important to keep firmly in mind that an efficient and effective social safety net can facilitate the transitio:n process, as public support is needed for the Government to take some difficult decisions about public sector reforms. A. The Main Features of the Social Protection System 6.4 Vulnerable groups in Tajikistan are currently supported by a complex mix of both formal and informal safety nets, with benefits in cash and in-kind from Government, non- Governmental organizations and the extended family and wider community. - 106- Box 1. How are the poor supported? * Informal safety net Extended family; remittance; home production * Formal safety net Cash benefits - pensions, old age homes In-kind benefits Institutions - orphanages, old age homes Social services - education, health State-owned enterprises Social Fund (TASIF) providing infrastructure rehabilitation and micro-credit Special features for Intemally Displaced People (IDPs)- Food for work and puhlic works * Humnanitarian assistance 6.5 By far the most important form of support to the poor is provided by the informal safety net - by community groups, NGOs and the family. Most significant within this is the home production of vital food-stuffs, transfers of food and other goods between members of the extended family and wider community, and cash remittances from household members currently living outside the household either in another part of Tajikistan, elsewhere in the FSU or further afield. Remittances accounted for over 11 percent of total household income (excluding the imputed value of home production) for all households in Tajikistan, and 14 percent of the income of the poorest households (as defined by being in the bottom quintile of per capita household expenditure). 6.6 Prior to independence, the formal safety net provided a wide variety of cash transfer paymnents. It is estimated that social transfers made up 14 percent of total gross income within the FSU. The majority of these payments were for families with children, including: one-off birth payment, payments for mothers on maternity or child-care leave, monthly allowances for children aged 0-18 months and 1.5-12 years; additional benefits for single mothers and the mothers of more than 4 children; payment for expenses related to the education of disabled children and several others. The other main group of beneficiaries was older people, with a range of old age and work related pensions. With fewer resources and a growing number of people in 'need', the Government has needed to introduce the targeting of family allowances, with payments being limited to families where the per capita income is less than a notional subsistence level. In addition, the real value of the benefits paid has fallen. Thus in 1999, the fornal safety net in terms of cash transfers contributed just 5 percent to total household income (see Table 9 earlier). 6.7 Since independence, the Government (with support from the World Bank) has created the TASIF which has now completed 106 micro projects out of a portfolio of 137 micro - 107 - projects. The projects are for the reconstruction and repair of schools, clinics, water supply and gas supply to households; electrification; repair of bridges, drainage and embankments. They are targeted on the poorest communities. The TASIF also suppiorts a micro finance program which has reached 6,000 borrowers through with than 10,000 loans through the local organization Sitora Najot. The TASIF has also worked with and co-funded several international NGO programs: through the AKF partnership, 50 irrigation canals were reconstructed and 8,155 hectares of land were brought under cultivation; through the SCF- UK partnership, support was provided to 3,750 female-headed households, 23 schools and 2 daycare centers; and through the SCF-US partnership, the group guaranteed lending program was successfully transformned into the local NGO Sitora Najot (wvhich continues its partnership with the TASIF). The TASIF is now continuing to build on its experience of community development and is increasing its participation in micro-projects and programs benefiting poor communities through the country. It is important that this program continues with external assistance. B. The Current Systems of Cash Benefits 6.8 There are two main types of social protection benefit currently available in Tajikistan: the cash compensation program offering social assistance type benefits to the poor; and pensions proving social insurance type benefits to the elderly, disabled and bereaved.30 6.9 The cash compensation program. The cash compensation program (CCP) was introduced in March 1996 to replace the existing system of child allowances and a universal bread subsidy. The level of payment is set at TR 500 per eligible person per month. Eligibility is determined by a commission, which includes both work place representatives and local staff of the Ministry of Social Protection (MSP), and is limited to membership of one of four target groups: (i) Farnilies with per capita income of less than two times the level of the minimum wage (TR 4,000). The benefit is then payable for each child under the age of 8. (ii) Families with children under age 16 who have lost one or both parents and who are receiving a survivors pension. (iii) Disabled (regardless of employment status) and non-working pensioners with pensions below the minimum pension level of TR 2,000. (iv) Students in vocational, specialized secondary and higher eclucation regardless of any scholarships received. 6.10 In 1998 the Ministry of Finance (MF) estimated that 1,092,000 people were eligible to receive cash compensation payments (17 percent of the total population), of whom 64 percent were children, 8 percent students, and 28 percent pensioners and invalids. However, according to administrative data, in October 1998 only 160,000 people wvere in receipt of a 30 Besides the cash compensation system, there is a fairly extensive network of institutions of orphanages and sanitoria inherited from the Soviet period. It has not been possible to analyze the functioning of these nor the expenditures on them. Also, it should be noted that some groups of the poor, such as street-children, are homeless and would therefore not have been included in the sampling frame of the TLSS. Later in CYOO, there will be technical assistance team funded by the Asian Development Bank which will focus on these issues, and advise the Government accordingly. - 108- CCP benefit, i.e. just 15 percent of those who were estimated to be eligible and just 3 percent of the population.3' Table 74: Estimated Eligible and Actual Beneficiaries of the CCP (April 1998) Total eligible benericiaries of whom. 1$092,OO0 (19 percent pop) Children 708,000 Students 83,000 Pensioners & Invalids 301,000 Actual Beneficiaries (October 1998) 160,000 (15% of eligible beneficiaries; 3 % of population) 6.11 Some information about the payment of CCP can be inferred from public expenditure data. Theoretically, the statutory obligation of the Government to pay cash compensation amounts to about TR6 billion annually, assuming that the eligible population is about one million people (just less than 20 percent of the total population). In practice, however, the cash compensation payments in 1997 were just TR2.3 billion. In 1998, taking into account the TR1.5 billion paid to clear arrears, a total of about TR3.9 billion was paid for cash compensation. As a result, the Government incurred TR2.1 billion in arrears through 1998, in addition to the TR3 billion estimated to be outstanding from the previous year. In 1999, the picture was even worse, as only TRO.5 billion was paid out during the first half of the year. 6.12 There are several possible reasons for this situation. First, there may be low take-up of the benefit by potentially eligible households. This could be due either to the very low value of the benefit (TR500 per person per month) accompanied by high transaction costs in terms of paperwork and travel to collect the payment, or lack of information about the program among the eligible population. Alternatively, it may be that funds are not available to pay benefits to all those who claim it. Decentralization of the administration of the program to the local Governments, some of which are considerably poorer than others, may mean that some authorities are less able to afford to make the payments than others. In addition, corruption may mean that not all the funds released by central Government make it to their final destination. 6.13 In order to improve payment rates in March 1999, two reforms were made to the program: the paperwork required for claiming the benefit was simplified, and the duration for the period of the claim was increased to three months to reduce transaction costs. Both of these reforms may be expected to improve the take-up rate (i.e. the demand for CCP), but will have little impact on the supply side. 31Interestingly, the results of the TLSS indicate that 4 percent of households reported that they were eligible for a CCP for children aged under age 8, perhaps indicating that self-reported eligibility is related to having received the benefit at some time in the recent past. - 109 - 6.14 Pensions. In 1996, the Government merged three extra-budgetary social funds - the Pension Fund, Social Insurance Fund and Employment Fund - into one Social Protection Fund (SPF) which pays all social insurance type benefits. Table 75: Pensioners in 1993-1998 (thousands) 1992 1993 1994 l99S 1996 1997 1998 Total number of people 545 604 585 566 555 548 557 Old age pension 397 408 401 382 370 359 360 Disability 54 65 65 65 65 60 59 Survivors 91 84 66 69 73 71 63 Employment service 1.2 2.1 2.1 2.6 3.4 4.7 Social 40 52 58 56 53 56 59 (Working pensioners 52 47 42 35 37 36) Source: State Statistical Agency 6.15 In 1998, 557,000 people, or 9 percent of the population, were registered as receiving a pension or other social insurance type benefit. Of these, the majority (655 percent) were in receipt of an old age pension, but one in ten pensioners was in receipt of a disability pension and just over a further one in ten was receiving a survivors pension. 59,000 elderly persons received a social pension as they who had not accumulated sufficient entitlement during their working life for a minimum old age pension. In the budget for CY2000, it is planned to eliminate the overlap between the Social Protection Fund and the cash compensation program, with all pensions below the minimum being brought up to TR2.,000 monthly. This will effectively abolish social pensions. C. An Assessment of the Current Cash Benefit Systems 6.16 The effectiveness of the current system needs to be assessed against the criteria of coverage, targeting efficiency and adequacy. 6.17 Coverage. Households in the TLSS were asked whether there was anyone in the household eligible for 15 different benefits.32 Table 77 shows the responses for the four most commonly reported benefits. Over one in three households reported that a member of the household was eligible for an old age pension (reflecting the co-residence of older people within multi-generational households), one in ten reported a member eligible for a disability pension, and one in 17 for a survivor's pension due to loss of the imain breadwinner. However, only one in 20 reported that a child under age 8 in the household was eligible for cash compensation payment. 32 Old age pension, disability pension, survivors pension, early retirement pension, social pension, one-time childbirth allowance, benefit for child under 18 months, CCP for child under 8, unemployment benefit, sick pay, maternity leave, funeral allowance, compensation for victims of Chemobyl, Afghan veterans payment, and other. - 110- Table 76: Households Eligible for, and in Receipt of, Social Protection Benefits Percent Of Pereent at Median households which least one months of eligible percent month in arrears (max in arrears months receipt reported) Old age pension 35 43 68 4 (20) Disability 11 47 66 4 (52) Survivors 6 46 68 4 (15) Cash compensation payment 5 19 50 4 (18) to child under age 8 Source: TLSS 6.18 There may be difficulties in using self-reported eligibility as a measure of eligibility for a social protection benefit. For social insurance type benefits, there appears to be good correspondence between self-reported and actual eligibility. For example, 35 percent of Tajik households contain at least one woman aged 55 and over or a man aged 60 and over - a figure that tallies almost exactly with reported eligibility of an old age pension. However, for social assistance payments, self-reported eligibility may underestimate the actual number of households potentially entitled to a benefit. From the TLSS, 62 percent of households have a per capita official income (consisting of the sum of household wage income and transfer income) of less than TR2,000, of which three-quarters contain at least one child aged under 8. Thus, according to the TLSS, nearly half (47 percent) of households would be potentially eligible for a cash compensation payment for a child under 8; but only 5 percent report such eligibility. This points to considerable confusion surrounding eligibility for CCP. 6.19 Table 76 also illustrates that the majority of households who reported being eligible for a benefit did not receive any payment in the last month. Over half of social insurance beneficiaries did not receive their pension, whilst four out of five 'eligible' households with a child under 8 did not receive a cash compensation payment. Two-thirds of eligible households also report being at least one month in arrears.33 Pension payments were in arrears for a median of four months. However, the length of time varied by quintile as shown in Figure 10 below - illustrating that there is an inverse relationship between payment of pensions and poverty. 33 The percentage reporting being in arrears is greater than the percent reporting non-payment of a benefit. Although a benefit may have been received in the last month, that payment may not have been sufficient to compensate for all the accumulated arrears. - 111 - Figure 10: Median Months of Arrears by Quintile 4- 2.1 SOAP 1.5-1 0~~~~~~~~~~~~ Disability 1- 0.5- 0- Poorest 2 3 4 Richest 20% 20% Source: TLSS 6.20 The level of non-payment and arrears varied across the Republic. Pensioners in Dushanbe fared best, with 88 percent having received a pension in the last month; whilst non-payment was worst in Khatlon, with only 26 percent having received any benefit. The percentage of old age pensioners who reported being at least one month in arrears also varied between 22 percent in Dushanbe, 46 percent in GBAO, 60 percent in Leninabad, 72 percent RRS, and 89 percent Khatlon. A similar pattern was found with regard to payment of disability and survivors pensions. Table 77: Pension Eligibility and Payment by Region Old age pension Disability Survivors pension pension % elig. % ree. % % elig. % ree. % elig. % rec. arrears Dushanbe 25 88 22 13 59 2 100 GBAO 35 60 46 17 31 15 42 RRS 43 41 72 14 35 9 45 Leninabad 37 52 60 11 65 5 81 Khatlon 29 26 89 10 32 6 20 Source: TLSS 6.21 The main reason for non-receipt of social insurance benefits was non-payment by Government (Table 78). For cash compensation payments (child allowances), the main reason for non-receipt appears to be not lack of funds, but rather administrative difficulties, as 54 percent reporting that their documents were not ready. Once again this highlights the difficulties with the current system of social assistance. - 112- Table 78: Reasons for Not Receiving a Benefit given by Eligible Households Old age Disability Survivors Child pension Documents not ready 2 9 4 54 Gov. does not pay 96 86 92 36 Amount too small to bother - I - - Impossible to travel to Benefit office I - - - Other 1 4 4 10 100% 100% 100% 100% Source: TLSS 6.22 Targeting efficiency. There is inadequate data to adequately assess the targeting efficiency of the current CCP, as so few households (less than 1 percent) are actually in receipt of a benefit.34 However, of the small number of cases in receipt, the vast majority (85 percent) did have per capita official incomes under the minimum age - indicating that Type II errors of inclusion are low, and that where the benefit is paid it is generally being paid to poor households. In contrast, 93 percent of households with at least one child under 8 and income below the minimum wage were not in receipt of a benefit - indicating very high Type I errors of exclusion. 6.23 The main targeting error is therefore one of exclusion, rather than wrongful inclusion. The possible reasons for this have already been discussed above. It appears that the problems of low take-up and inefficient administrative procedures may not have been solved by the March reforms, although the take-up since the TLSS was carried out needs to be monitored to see if there has been any improvement in the last few months. 6.24 Adequacy. The final area of evaluation of the current benefit system is its adequacy. It is clear that cash compensation payments are currently being paid at a level insufficient to lift families and older people out of poverty. The nominal level of CCP has remained unchanged since March 1996. As such, the real value has been severely eroded by inflation. Currently the monthly payment covers the cost of two loaves of bread, or less than two percent of the minimum consumption basket of TR 32,083. 6.25 The value of pensions relative to salaries has also declined from 50 percent in 1995 to 35 percent in 1998. Given that the real value of salaries has been falling over this period, pensions have become almost worthless. In 1998, the average pension was TR3,019 34 Targeting efficiency is normally evaluated by examnining the relative share of benefit expenditure received by different sections of the pre-transfer income distribution. The higher the share received by those households at the bottom end of the distribution, the more concentrated the benefits, and the better the benefit is targeted. Two types of targeting errors can occur. First, they may be non-payment to poor households, known as 'exclusion' or Type I error. Second, there may be payment to non-poor households, known as 'inclusion' or 'Type 11' error. POOR NOT POOR IN RECEIPT Success Type II (inclusion error) NOT IN RECEIPT Type I Success (exclusion error) - 113- (US$3.88) a month, and the minimum pension was TR2,000. The minimum pension is received by 73,000 pensioners, or 13 percent of all pensioners. ln addition, 300,000 pensioners receive a pension below that of the minimum pension and are officially entitled to cash compensation. Table 79: Average Value of Pensions and Salaries 1"94 1995 1996 1997 1998 Average salary 40449 785 3116 4975 8590 Average pension 18032 392 876 1062 3019 Minimal pension 11776 256 483 483 2000 Ratio of average pension to salary % 45 50 28 21 35 Source: State Statistical Agency. 6.26 In summary, it is clear that the existing cash compensation system is not working - both because so few people in practice receive a benefit (about 5 percent of the total population instead of the 20 percent who are eligible); and also because its value is so low (equivalent to just 2 loaves of bread a month). The pensions system is functioning somewhat better than the cash compensation system, but there remain significant problems with arrears and the low average value of pensions. D. Options for the Reform of Social Assistance 6.27 The design of an effective safety-net poses two major problems. First, the adequacy of the level of transfers is crucial to the effectiveness of the system. T'his does not simply require that transfers are set at a significant level, but also that they are paid in time and efficiently. Second, given the tight fiscal constraint, effective targetingJ of cash transfers to the poorest becomes a crucial condition for the system to be effective. Thus, any options for reform need to be assessed both in terms of their targeting efficiency, and also their administrative feasibility and cost effectiveness. The current system of cash compensation payments is based on both an income-test and categorical targeting. However, there is limited capacity in the Government for income-testing or general means testing. Furthermore, there are problems of targeting by income when transfers and wages are not paid or paid very irregularly, and where corruption is endemic. Therefore alternatives need to be considered. 6.28 Proxy means testing. One alternative possibility to full income-testing is consumption based proxy means testing. Proxy means tests use a set of characteristics that prove to be good predictors of poverty in order to establish eligibility for a social program. Characteristics might include whether land is available for cultivation, whether the individual (or family) is physically able to cultivate the land, the supply of water/gas/electricity in the home as well as family structure, gender of head of household, ownersh[ip of durable goods, occupation and education. In Table 10 earlier, the correlates of poverty showed a number of household characteristics that are associated with poverty; and this indiicates that it may be possible for a proxy means test to be developed for Tajikistan. 6.29 The advantages of a proxy means test are that it avoids some of the difficulties of income measurement and verification. The proxy items of information are easy to collect and check. Misreporting or misrepresentation of the proxies, such as the number of children or - 114- ownership of a particular consumer durable, is less likely as they can be easily verified by documents and/or a home visit. However indicator-based targeting- is information intensive, and much more pilot work would need to be done on identifying the components of the proxy means test formula and the weights to attach to each of these social indicators.35 Administratively the adoption of a proxy means test would require an entirely new infrastructure - in terms of eligibility forms, staff training and computers - which would be very expensive. 6.30 Categorical targeting. A simpler way still is to target transfers according to some fixed observable characteristic of the recipient household or individual, such as the number of dependent children or single parent status. This avoids the difficulties of an income test, with all its complexities (cash or in-kind, formal or informal), problems of verification and implications for work incentives. The main disadvantage of categorical targeting is that certain vulnerable groups who do not fall into the category may be excluded. Care must therefore be taken to ensure that the search for simpler, more transparent and attractively feasible assessment mechanisms and tools do not lead to a 'trade-off position' with significant exclusion errors. 6.31 The poverty profile demonstrated that the number of children in the household is one of the strongest correlates of poverty in Tajikistan. Furthermore, 91 percent of households contained at least one child under 16 (72 percent contain at least one child under 8), and 96 percent of individuals lived in a household containing at least one child under 16. Therefore, any change that affects children will also touch the vast majority of households. A benefit that is targeted on children also presents an attractive policy option. 6.32 It may be possible to reform the CCP in a way that both improves its targeting efficiency and has wider benefits. Income poverty is only one dimension of well-being, and individual welfare also depends on wider capabilities including health and survival, education and personal development, and social inclusion/participation. With the introduction of increased formal and informal charges for health care, textbooks, school 35 The first step in designing a proxy means test is to define the measure of household welfare. The TLSS does not include sufficient detail to estimate such actual consumption; therefore we are left with a choice between household income and expenditure. Given the problems in measuring income discussed in the poverty profile, we would use household expenditure plus the market value of goods produced and consumed by the household as our indicator of permanent income and living standards. To control for household size, total household expenditure is divided by the number of adult equivalents in the household to obtain equivalent per capita household expenditure. The next step in formulating a proxy means test is to identify a set of variables that correlate well with household welfare (per capita expenditure). In selecting the variables in is important to take three factors into account: (i) they must be closely correlated with consumption to maximize accuracy in prediction and hence in targeting; (ii) from a progranmmatic point of view they must be easily measurable; and (iii) they need to be easily verifiable. Good predictors of consumption that cannot be measured or verified will undermine the adrministrative feasibility of the program. Once the equation has been specified, it is relatively straightforward to use the predicted household welfare level from the regression equation to assign households to the eligible or ineligible groups. Separate equations can be estimated for different regions and for rural and urban areas. The decision as to where to set the cut off for eligibility (or the 'poverty line') is essentially arbitrary, determined by policy and factors such as available budgetary resources. - 115- lunches and bus fares etc, the access of many children to basic social services has been severely eroded. As discussed in the last two chapters, a prionrty must be to protect human capital in education and health. There are several ways in which this could be done. (i) One way to achieve this may be to introduce a child benefit that is linked to school attendance, as has been done in some other countries.36 Such a benefit could both improve school attendance rates and help alleviate poverty. (ii) Another approach would be to allow exemptions from fees for textbooks and other materials would be another way forward. This might combine categorical targeting (i.e. targeted on children of a particular age) with some other targeting, such as proxy means-testing, to identify the poorest pupils.37 (iii) Another alternative could be an in-kind benefit such as free school lunches, which would be targeted at children and might address some of the problems of malnutrition and school attendance. However, the experience of other countries is that such school lunch programs tend not to be a supplement to the nutnrtion of children (but rather substitute for food that they would have consumed at or from home). School lunches are not clearly not a good substitute for cash payments to needy families. 6.33 Self-targeting. Another alternative is for individuals to select themselves for assistance. Self-targeting programs such as public works (self targeling based on below market wages) have been found to be effective mechanisms of providing income and/or food secunty in other parts of the world. Typically such programs are hybrid in nature, combining poverty alleviation (i.e. cash transfers, with a work requirement to ensure self-targeting) with infrastructural development that promotes economic growth. Such a program could build on the experiences of the Tajikistan Social Investment Fund. Given the pressing need in Tajikistan for both of these elements, the development and expansion of public employment programs is an attractive option, deserving of attention. 6.34 Interestingly, some other types of local self-targeting schemes, such as food kitchens, have begun to emerge in Tajikistan, largely administered by NGOs, which lend support to the idea of more extensive, Government sponsored, public works. Public works programs, 36 A school scholarship system that is essentially universal for girls has been introduced to good effect in Bangladesh. 37 Armenia is facing similar problems to Tajikistan in terms of chronic shortages of public expenditure for social services. As a result parents of children enrolled in public schools now have to pay for food, teaching that falls outside of the core curriculum (such as music) and fees for textbook rental. In order to prevent such fees acting as a barrier to access to poor children, the Government has introduced some assistance iin terms of targeted exemptions from textbook fees for children from poor families. Each school is allocated a fixed amount sufficient to waive the textbook fees for 10% of the students. Which children are exempted is decided at the local level, either by the school principal or in some cases by the school parent-teacher association. The scheme has yet to be fully evaluated, but informal appraisals suggest the system has been well accepted and there are no reports of children going without textbooks as a result. A good deal of variation in program implementation has been observed across school districts. Some schools have attracted local businesses to contribute towards the book fund, others have increased the fee above the standard cost recovery rate so as to cross-subsidize a larger group. - 116- however, can only be used in conjunction with other benefits, as they do nothing to address the problems of those groups that are unable to work. Therefore, they should only be considered in addition to a reformed system of cash compensation, rather than in lieu of it. 6.35 Community-based targeting. Community based targeting is not a separate targeting mechanism, but rather refers to a targeted system that place community agents in charge of assessing eligibility and/or implementing delivering As such it does not really belong in the typology presented. Indeed, community based targeting can be based on income tests, proxy means tests, categorical and self-targeting mechanisms. However, it is worth discussing the strengths and weaknesses of targeting driven by communities rather than by Government administrators. 6.36 A recent review38 of community based targeting argues that several advantages may be expected: (i) potentially lower costs through better cost sharing and faster start up where other administrative structures are weak or non-existent; (ii) actively involving community groups as stakeholders may also lead to better monitoring and accountability: (iii) a local definition of deprivation may also increase flexibility, allowing eligibility to be adapted to local conditions and culture rather than rigid technical nationally based formulas; (iv) participation and community mobilization may confer legitimacy to programs and help build political support for targeted approaches; and (v) by involving local groups in decision making this will improve local social capital. 6.37 However, community-based targeting also has drawbacks - not least the problem that if there is a degree of discretion allowed, eligibility for the social program may be influenced by local politics and community preferences, and some groups may be excluded. This may be a particular problem in Tajikistan where there is corruption. Indeed, insecurity, corruption, and the weak local administrations all constitute a major obstacle to the introduction of any new targeting mechanism. It would therefore be vital for extemal checks and balances to be put in place to ensure that errors of exclusion (and inclusion) were minimized. It may be that the community could play this role in relation to a publicly administered system39; but if the state had to put in place checks and balances on a fully community based system, this would potentially offset many of the advantages listed above. Community based targeting may also increase conflict within a community, which would be of serious concern in Tajikistan where people are working hard to heal the rifts of civil war may be counterproductive. Communities also vary in their willingness and ability to target resources. The Aga Khan Foundation noted an unwillingness amongst part of the population in GBAO to single out particular groups for assistance; and in several instances, communities preferred to distribute humanitarian aid equally to all households regardless of status and for redistribution to then take place at the household level. 3 Conning and Kevane (1999) 39 Mexico 's Progresa program provides an example of a program of targeted assistance to families who keep their children in school. The program uses a mix of targeting methods, combining geographic targeting (the program is only available in very poor areas), categorical targeting (only families with children in school are eligible) and individual assessment (using a proxy means test). The program also involves a measure of commnunity based targeting through the requirement that the list of beneficiaries in a given area be ratified in a local community meeting. At the meeting families excluded by the proxy means test can be included if the community deems they are in need, and included families can be excluded if the community deems they are not in need. - 117- 6.38 In summary, the trade-offs between the advantages and disadvantages of widening community targeting in Tajikistan require very careful consideration - particularly in the light of the very real questions concerning issues of local governance in Tajikistan. Table 80: Summary of Targeting Options Proxy means- Categorical Self targeting Community based testing tartgeting targeting Description Uses other kinds of Restricts benefits to Individuals select IJses community information that identifiable social themselves for groups to identify are good predictors groups such as assistance. Tecipients for cash of consumption school children. E.g. public works benefits. Can also and are easy to programs, where delivery benefits or collect and verify. self targeting mnonitor delivery based on below process. market wages Strengths Administratively Removes need for Administratively simpler than full means testing. simple. May lead to means-testing Administratively better monitoring simple. aznd accountability. Easy to verify. Improves social capital. Weaknesses Information May include non- Difficult in Communities vary in intensive; poor. country where capacity. May be Needs careful May exclude poor market wages are influenced by local piloting followed not covered by very low and paid politics and by staff training categories. irregularly. community and investment in preferences with the equipment result that some groups may be excluded. Susceptible to abuse, especially where corruption is endemic E. The Development of a Reformed System of Social Protection 6.39 The main problem with the current benefit system is not the targeting mechanism, with too many non-poor households receiving benefits, but rather it is the woefully inadequate value of the benefit. The major obstacle to poverty alleviation in Tajikistan is not targeting efficiency, or lack thereof, but is rather lack of funds. Before reforming the social protection system, real consideration needs to be given to the level of financial resources available to support the poor. Targeting a very low benefit to the poorest (regardless of the targeting mechanism used) may cost more in administration than is gained in benefit pay out. -118- Table 81: Budgetary Funds Available to Support the Poor 1998 199 2e00 Actual Actual Rev. Rev. Rev. Actual Prog. Prog. (TR m) (% of (% of (TR m) (% of (% of (TR m) (% of GDP) GDP) GDP) GD) GDP) SPF 19,611 1.9 2.1 26,015 2.2 1.8 31,970 1.8 CCP 4,382 0.4 1.0 6,000 0.5 0.2 6,500 0.4 Total 23,993 2.3 3.1 32,015 2.7 1.9 38,470 2.2 CCP 2,000 0.2 0.6 Arrears Source: IMF 6.40 In 1999, TR6,000 million was available to support the most vulnerable under the cash compensation program. This was equivalent to about 0.5 percent of GDP. However, even this amount was not actually spent. In CYOO, the budget allocation is about TR 6,500 million, which is an increase in absolute terms but a slight decrease as a proportion of GDP. The allocation for the SPF will be about TR31,970, which includes provision for all pensioners to receive at least the minimum pension of TR2,000 monthly, which will mean that the poorest pensioners will no longer be eligible for cash compensation payments. 6.41 One option is to keep the CCP as it is at present. But it has been shown that the existing program is inadequate as a means of social protection. In principle, it might be possible to address all of the current weaknesses of the present system, and to try to get it working as originally planned. But there are grave doubts about whether that is feasible. Indeed, the officials of the MSP and the Prime Ministerial Working Group on Poverty have already started to think about reform options, and have drafted a Plan for the improved targeting of the CCP. The draft reform plan proposes a combination of categorical and community-based targeting and is linked to school-children and attendance at school. In 1999 there were 1,147,255 children aged 6-13 years and 213,474 children aged 14-15 years enrolled at general education schools. The proposed concept is to try to target the poorest 20 percent of children, providing each of them with an annual benefit of about TR24,000 or TR2,000 a month (equivalent to the minimum wage or about 10 loaves a bread a month)40. This would be done through parent-teacher associations, and it could perhaps be tried first at the 20 pilot schools in the IDA-supported Education Project, as they already have established parent-teacher associations which could assist in the development and monitoring of the proposed new approach. Of course, there would still be many issues to address: for example, whether the benefit would be linked to school enrollment or continued attendance at school; what would be the cut-off age for the children who would benefit; what approach to take to the pre-school children of the poorest families (especially if they do not have older brothers or sisters); whether the benefits would only be provided in-kind and/or also in cash; how exactly to channel the funds and assistance; and the respective roles of the local hukumats and the education staff; who would administer the program at the school level, and what would be the respective roles of the teachers and the social protection staff there; and how to create and then involve the local parent-teacher associations. So it will be particularly 40 Alternatively, if a universal child benefit linked to school attendance for all children under 15 were to be introduced, TR6,500 million would give each child approximately TR4,800 a year, if all the money were to be spent on benefits and none on system administration. - 119- important for the proposed new program to be piloted and closely monitored, and then for any necessary adjustments to be made depending on experiences gained 6.42 In conclusion, a poverty alleviation strategy needs to contain nmeasures to assist the poorest groups in society who cannot take advantage of the new opportunities created by the market economy and by economic growth. The TLSS data show some of the inadequacies of the existing system, and especially the limitations of the CCP. 6.43 The following recommendations come out of this analysis. (i) The existing system of social protection should certainly be reformed, as it does not work well and is inefficient. (ii) Whatever targeting principle is chosen, the principle shoulcl be accepted that the basis for granting social assistance should be centered on a household's poverty situation. (iii) The Prime Ministerial Working Group on Poverty has pro,posed a new form of social protection using on a combination of categorical and community-based targeting, and this should be piloted as soon as possible. (iv) In addition to reform of the cash compensation system, there is also need for an expanded program of public works (see Chapter 2). (v) Further attention needs to be paid to the options for the reform of the pensions system in the near future. - 120 - CHAPTER VII: GOVERNANCE AND POVERTY 7.1 The previous chapters have focused on (i) the resumption of economic growth and productive employment creation especially in agriculture, (ii) the strengthening of the basic social services, and (iii) the reform of the social protection system as key elements in a poverty alleviation strategy. The fourth element of the proposed strategy is improved govemance in the country. Coming out of the Soviet era, there is urgent need to reform the system of public administration and Government, and to improve the process of policy development and service implementation. The transition from a centrally planned to a market-dominated economy requires a lot more than just privatization and a smaller state sector, and the skills needed of state employees in the new environment are actually higher than in a centrally planned one, where orders were simply given from above. But there is also need for an explicit linking of public sector reforms and poverty reduction, as the former is a necessary but not sufficient condition for the latter. Unfortunately, the challenge of public sector reform in Tajikistan has been complicated by the context in which it has to take place. In particular, the severe economic collapse that the country experienced after the fall of the Soviet Union and up to 1997 made it more difficult for the authorities to address the inherited problems of abuse of position and power, and the tendency of officials to take advantage of their positions. Poor governance harms the poor by distorting markets, undermining rational economic choice, and setting negative precedents for rule of law. It is also a brake upon economic development, which, if not specifically addressed, will remain even after the economy improves. The Government is well aware of this and is committed to improving governance, including through a major public sector reform program. The success of this will be crucial to achieving a reduction in poverty. A. The Political and Economic Context to Governance 7.2 Poor governance41 significantly exacerbates the problem of poverty in Tajikistan. In a recent survey in Tajikistan, households were asked how problematic various factors were to their lives. Households ranked organized crime and corruption at five on a scale of one (not problematic) to six (very problematic), and corruption was rated as more problematic than political instability. Eighty-four percent of households stated that they were likely to pay bribes to Government officials when dealing with them. 7.3 Governance is strongly influenced by the context within which policies are formulated and implemented. The main historical factors in the political life of Tajikistan are the legacy of 70 years of Soviet rule, the civil war and unrest that raged throughout the republic from 1992 until the peace accord of 1997, and provincial alignments of power. On the positive side, since the end of the internal conflict, the context has been more optimistic with the resumption of economic growth and political stability. 7.4 The fundamental aspects of governance in Tajikistan are inherited directly from the past. The structure of decision-making is still highly centralized. Policy is transmitted from the central Government to provincial executive committees (hukumats), which in turn give 41 This includes "the unlawful use of governmental power and the transactions that go with it by public officials to enrich themselves through accepting bribes or favors." - 121 - orders to district executive committees within their provinces. The checks and balances within the Government system are relatively weak-for example, the judiciary is weak compared to the legislative, which in turn is weak compared to the executive branches of the Govenmment. These features of governance make it difficult for the rule of law to prevail and for any abuses of position to be stopped. The aftermath of the civil war in Tajikistan also limits attempts to strengthen the rule of law. Great progress has been made in the post- conflict environment, but peace is still fragile and local warlords govern some districts in the republic. The influence of strong family ties on politics is also strong, but it is commonly overestimated. In central Asia generally, it is true that extended family ties remain strong, and nepotism in Govemment and business is occasionally quite blatant. However, in Tajikistan, family-based power structures are ultimately subordinate to the Soviet-style power structures that governed so many aspects of the population's lives during the pre- independence era. Also, although provincial cliques are significant in Tajikistan's politics, within the regions there are many differences over political ideology and the role of Islam in society and the Government, as well as cleavages by ethnic and extendedl familial groups. 7.5 The recent political developments bode well for an accelerated program of poverty reduction. Since the signing of the peace agreement between the Government and the United Tajik Opposition in June 1997, there has been an important foundation for peace and security. Nearly three years after signing, implementation is broadly on track, despite several major security episodes, each of which had the potential to derail the peace process. All refugees in Afghanistan were repatriated in 1998, and the opposition has been successfully reintegrated into Govenmient structures. 7.6 This analysis has several important implications for addressing the problems of govemance and corruption in Tajikistan. First, the problems of govemance are the legacy of Soviet-style govemance and the atmosphere of lawlessness fostered by the civil war, and they are not due to the Tajik social structure. Thus, policies to improve govemance should be ideologically and regionally neutral, focusing on the underlying systemic factors. In addition, programs to reform govemance need to focus on the long term, as improving governance and eliminating abuse of power often requires considerable time. But because improving governance is a long-term endeavor, it should begin as soon as possible, and with as much effort as possible. Finally, the new political context provides an excellent opportunity for the Govemment and others to design and carry forward a strengthened program of poverty reduction measures. B. The Impact of Improper Governance on Poverty 7.7 Improper govemance exacerbates poverty in Tajikistan in a number of ways. During the civil war, there was an atmosphere of lawlessness in which armed extortion was widespread. The constraints facing the judiciary and the police force also made it hard for impoverished people to seek redress under the law. Moreover, insufficient popular participation in decision-making allowed there to be corruption at the lower levels, especially in the agriculture, trade, education and health sectors. Perhaps above all, the economic collapse in the period up to 1997, coupled with the rigidities of the inherited system of service provision, led to a deterioration in the standards of the social services and widespread informnal payments being made to service providers. - 122 - 7.8 Public administration. Tajikistan's public administration reflects a structure similar to other FSU republics, with a republican Government overseeing a three-tier local Government structure at provincial, district and village levels. At the republican level, a total of 53 ministries, state committees, and state agencies report directly to the Goverunent. This has enhanced the Government secretariat role and weakened policy and program management roles among line ministries. In local Governments, responsibilities are typically divided, with departments having an informal "dual subordination" to their local administrations and to the technical department or ministry in the next higher tier of Government. Internal structures within ministries are often fragmented, and in some cases continue to reflect former roles under the command economy, with an excessive emphasis on control functions. The absence of an overall body of regulations covering civil service management, together with inadequate pay and incentives, have resulted in low morale and motivation among Government employees, difficulties in retaining competent staff, and distortions of reward systems and administrative structures as ministries resort to offering a range of non-monetary benefits in order to retain and motivate key staff. 7.9 As in other FSU countries, responsibility is also fragmented. Many ministries have a large number of deputy ministers relative to the number of department and division heads they supervise. Salaries are very low, having dropped significantly in real terms since the beginning of the transition period in line with sharply reduced public expenditures, and they undermine staff motivation, create the potential for brain drain to the private sector and lead to difficulty in recruiting and maintaining specific skills. The problem is more acute at senior levels: the low salary levels, relative to the growing private sector, partly explain the increasing difficulty of recruiting and retaining good managers for key state positions. Another problem arises because there are also significant remuneration gaps between those public sector agencies that have some capacity to raise revenue themselves, and those that do not. The development of these extra-legal sources of revenue raises concerns about their expenditure. At the same time, low salaries and poor remuneration raise wider governance issues, specifically increased incentives for corruption and the securing of additional employment. 7.10 Weapons and drugs. Highway checkpoints, traditionally run by the MVD State Automobile Inspectorate (GAI), were historically a source of graft in central Asia. During the civil war, however, the population of Tajikistan gained access to unprecedented quantities of weaponry, and the militarization and multiplication of checkpoints intensified this tendency, and extortion from the population at highway checkpoints by armed militia or police became more common. Fortunately, the situation is now improving in the aftermath of the civil war, especially with the integration of many fighters into the official forces and with the reduction of the number of checkpoints; but the problem of extortion of money from the population is still not completely solved. Many farmers taking goods to sell in the bazaar must still pay a bribe to pass their goods through the checkpoints. This increases the cost of transportation, since drivers must be compensated for the added risk of passing through checkpoints. This cost is passed on to farmers and traders, who must also charge more due to the "cut" taken from their goods en route through the checkpoints. In areas where these endeavors are most widespread, the Ministry of Internal Affairs (MVD) has responded by creating special police departments in the district where the activity is occurring. On average, there is only one MVD officer per jamoat, or sub-district, in the rural areas, and so the MVD contingents are sometimes unable to overcome armed groups in the rural areas. - 123- 7.11 The Government is also attempting to address the problem of narcotics trafficking through Tajikistan. The use of narcotics within Tajikistan has not increased dramatically since the Soviet period, but the border with Afghanistan is not effectively sealed and various groups took advantage of the civil war to build up a lucrative drug trade. Significant amounts of narcotics, mostly opium, are now transported into and through the republic, especially on the road from Khorog to Osh (in the Kyrgyz Republic). This occurs despite the efforts of the Customs Inspectorate which was established in 1993 and which has responsibility for the border with neighboring states. The MVD has had some successes in intercepting narcotics, but the amount intercepted is believed to be srnall compared to the estimated 150-200 tons of opium awaiting shipment from northern Afghanistan. The continuation of narcotics trafficking works against the Government's efforts to improve governance and thereby alleviate poverty. 7.12 The legal system and law enforcement. The judiciary is the weakest of the three branches of the Tajik Government. All provincial and district judges obtain their positions through a highly centralized selection process, while all Justices of the Supreme Court, Supreme Economic Court, and Constitutional Court are proposed by the President and confirmed in Parliament. Judges can be dismissed by the President. Defense lawyers in particular are weaker than the judges, and the work of lawyers and court staff is evaluated by local hukumats, who report to the President. The curtailed financial support from the budget has inevitably caused serious problems for the judiciary. The system of legal education, the training of lawyers, and the retraining have been weakened by this, and for example textbooks on the way that the judiciary works under a democratic system are extremely difficult to find. In addition, the conditions under which court officials must work make it difficult for them to adjudicate cases. The salaries of court officials are extremely low and are often not paid on time. Provincial level judges receive slightly over $13 per month, while those in the districts receive around $10 per month. The infrastructure of the courts is also dilapidated. In most courts, there are virtually no computers, fax machines, photocopy machines, nor even sufficient quantities of typewriters. Court buildings are typically decrepit and lack heating. This situation makes the administrative work associated with the court extremely time consuming and delays the adjudication of cases. 7.13 There are also problems with the drafting and dissemination, of new laws. For example, the legislation on the rights of citizens lacks transparency; many laws have inadequate mechanisms for the adjudication and protest of illegal practices; and some of them also tend to leave too much to the discretion of officials, who are able to manipulate them according to their own personal interests. Since there is no systematic mechanism for distributing new legal codes, laws and decrees to the district courts, many of them are unaware of new legal standards and some precedents set by recent decisions of the superior courts. Also, few people have full knowledge of their rights and duties under the law and most of the population cannot afford access to legal procedure. The provincial hukumat is empowered to grant exemptions to the payment of court fees in order to imrpove the access of the poor to the legal system, but this process does not seem to work well. 7.14 The attitude of many MVD personnel towards the law is also a problem. Historically, the police in the Soviet era did not have strong respect for the legal rights of the citizenry; and after the civil war, the MVD recruited many young men who were skilled in the use of - 124 - weapons in warfare but who were not experienced professionally in police work. The majority of the police force is now armed with automatic rifles, but they are paid very little officially and have inadequate and outdated equipment. Within the MVD, there is a special Directorate for Combating Organized Crime and Corruption., and within that Directorate there are separate Departments for Corruption, Banditism and Spetsnats42. However, the average salary of the staff in the Directorate is only $30 per month (even following a ten percent salary increase in 1998) and this obviously affects the performance of the staff there. 7.15 Because the judiciary and law enforcement have difficulty in ensuring the rule of law, the population often seeks other means of redress. The most common method employed by the population to obtain aid or redress is to appeal to the district hukumat. This habit has taken hold over the course of decades of Soviet rule, and has led to a situation where the local hukumats are often totally overburdened with work. The hukumat is the locus of power in the districts. Since there are few checks upon the powers of the hukurnat, the nature of local governance in Tajikistan often depends upon the character of the hukumat, rather than the powers delineated in the law. If the chairman of the hukumat is prone to abuse of position, it is the poor who tend to suffer the most due to their inability to pay bribes or peddle influence. 7.16 Local economic activities. The constraints on the rule of law in the local economy negatively affects the livelihood of the population, especially in rural areas where over 70 percent of the population lives. Most of the rural population is engaged in agriculture -- even doctors and teachers, who are often paid their meager salaries late or not at all, receive their primary income from subsistence agriculture. Agriculture is managed in such a way that farmers have limited rights and many circumvent the law as a coping mechanism. The state, especially centralized agricultural bureaucracies, sometimes interferes in the work of collective and newly established independent (dehkan) farms; and it is reported that some farmers have to resort to bribery and influence peddling to obtain land use rights, water, fertilizer and other inputs. Commissions in charge of allocating land and converting collective farms into dehkan farms sometimes do not consult with local farmers, preferring instead to use the allocation and conversion process to grant land use rights to the more powerful and wealthy members of the community in exchange for favors. Fees for the registration of land use rights also tend to be very high. In addition, there is substantial inertia against marketization, especially in the cotton sector from which a substantial portion of the country's hard currency assets are earned through export to Western and Russian firms. Although by law farmers are free to sell their cotton harvest to whomever they choose, not all of them are actually able to do so in practice. Many farmers in the southern districts, for example, have not received payment for their cotton for two or three years. Moreover, the prevailing policy of determining cotton prices in contracts without determining input prices leaves most farmers at the mercy of local officials and subsequently in debt. 7.17 Private business and trade create an opportunity for small retailers to ply their wares and for farmers to sell produce from their kitchen gardens. However, a "cut" is often taken from much of the trade in bazaars by inspectors, policemen and criminal groups. The 1999 survey indicated that only about 20 percent of private business owners believed that tax and customs authorities will try to extract a bribe "sometimes," "seldom," or "never" (6.5, 5.5, 42 Spetsnats are the elite troops that provide armed support for the other two sections. - 125- and 6.5 percent, respectively). Positions in tax offices were viewed as most profitable in terms of the potential to generate large incomes through graft and extortion. Thus, it is believed that illegal practices reduce the income of entrepreneurs and the already-poor farmers. Moreover, the "cut" increases the price of food and consumer goods for most of the population of the country. 7.18 Local social services. Under the Soviet system the state proviided for a substantial portion of the welfare of the population in the form of subsidized education, health care, housing, food and goods. Due to the collapse in the economy in Tajikistan, state budgets no longer suffice to support public services. Because of increased competition for public services and the impoverishment of many officials, the use of bribery and connections is even more essential for obtaining state benefits than before the civil war. In the 1999 survey, households ranked high schools and universities and health care institutions as those in which use of money, presents, contacts, or threats was most likely to be necessary. In education, especially in high schools and universities, officials often demand bribes or gifts for entrance, good grades, and graduation. On a scale of one ("never") to six ("always"), respondents to the corruption survey ranked the likelihood of use of bribes in education from a minimum of 4.5 to a maximum of 5.3. Using the same scale for health, they ranked the probability of using bribes, etc. to obtain health care from a minimum of 4.4 to a maximum of 5.3. According to the TLSS data, official charges comprise 33 percent of the total cost of health care, compared to 19 percent for "gifts." In the case of both education and health care, the maximum ratings were given by the poorest sector of the population. The poor are least able to cope with such problems, since they possess neither the money to bribe nor connections to wield influence. This is evident in the results of the corruption survey, where the poorest group (incomes less than $5/month) ranked corruption as the most problematic (5.3). It should also be kept in mind that all income groups, except the very highest, perceive corruption as a very negative factor in their lives (4.8-5.3). C. Ongoing Efforts to Improve Governance 7.19 The above problems are challenging; but with the new opportunities created by the political stability and improved economic context since the resumption of growth in 1997, it is very encouraging that the Government has started to address them and indeed to make some significant progress. 7.20 In the first place, the Government has embarked on a major program of public sector reform. As earlier indicated, Tajikistan's public administration still strongly reflects the former command economy. As the economic reform process deepens, Government ministries and agencies are needing to be restructured to facilitate and stimulate economic activity and provide efficient and timely public services. Such improvements in govemance are now being addressed in the Government reform program and also in part through efforts to improve the legal and regulatory framework governing public and private sector activities. Some progress has also been made. For example, the Government established a State Procurement Agency in June, 1998 to regulate and exercise oversight on public procurement. In addition, the initial legal and institutional framework to govern public procurement has been completed and introduced. An internal audit department within the Treasury is also currently being established, to undertake a full auditing of Treasury operations and also to carry out spot checks on ministries and other budgetary institutions. - 126 - 7.21 The Government is now planning further public administration reforms, and it fully understands that developing effective ministries, with greater policy expertise and broader sector-wide perspectives, will provide a firm foundation for further policy and institutional reforms. The Government is also aware that flattening structures and increasing spans of control will encourage delegation and more strategic, results-based management, and so help to reduce administrative costs. The Government's strategy is to introduce structures that clarify lines of accountability by ensuring that each agency and individual manager reports only to a single supervisor. This will reduce the excuses that can be used when agreed upon targets are not met, improve accountability, and enhance Government efficiency. However the Government also realizes that these reformns will take time to achieve, given their political sensitivity and the vested interests of some of the individuals involved. 7.22 Some important progress has also been made in the security situation. For example, the number of military checkpoints has declined dramatically, following the peace accord of 1997 and a subsequent decree of the President. At the height of tensions, 19 checkpoints limited transit into and out of Dushanbe. Presently, there are only three checkpoints in and around the city. According to the MVD, between 1997 and 1999 the total number of checkpoints in the country decreased by a factor of three. Nevertheless, farmers and traders still have problems passing checkpoints without being solicited for bribes, especially on roads leading from the Gharm and Gorno-Badakhshan regions. The population, and the poor in particular, do not have the power to prevent such harassment, and the problem of petty corruption needs to be solved. 7.23 There has also been some improvement in the work of the MVD in its anti-corruption efforts. Since 1997, the MVD has made significant strides in eliminating corruption, most notably through the Directorate for Combating Organized Crime and Corruption, the structure of which is designed to prevent interference from the local Governments. The Directorate has been particularly active in apprehending white-collar criminals, having identified many of the main culprits in money-laundering schemes. Recently, the Directorate has been involved in the conviction of some prominent Government officials. 7.24 A major program to eliminate drug trafficking has already been begun by the UN, which is in the process of establishing an Office for Organized Crime and Narcotics in Tajikistan. The project will be implemented over the course of three years, with funding of $11.5m. The agency has recruited 150 officers from Tajikistan and four international experts. It will also have at its disposal dogs trained (at Russian bases) to detect drugs. The agency will be responsible for intercepting narcotics and strengthening controls over the border with Afghanistan. The MVD plans to support and cooperate with the new agency, which will report directly to the President. 7.25 In conclusion, then, there has been some substantial progress in the formulation and initial implementation of some governance improvements, including through work on the reform of public administration, the development of an anti-corruption program, removing price distortions in the economy, reviewing laws and decrees, reforming agriculture and land rights, reforming the state procurement system, training law enforcement officers and the judiciary, and combating drug trafficking. - 127- D. "Top-Down" Measures to Address Outstanding Problems 7.26 Despite the progress made so far, there are inevitably many additional measures that need to be taken to improve the lot of the poor in Tajikistan through better governance. In general, there is need for a combination of "top-down" measures and "bottom-up" measures. The measures proposed below are a selection of actions that are all considered to be feasible and desirable, and they could be supported by various forms of external technical assistance (such as for training for the judiciary and police force). 7.27 Public sector reform. It is encouraging that the Government has already expressed its strong political will to implement key reforms in many of these areas; and, as noted above, it is actively preparing a program of public sector and governance reforms (supported with some technical assistance from the World Bank). The following are among the highest priorities for attention. 7.28 First, the reform of Government structures is critical for the development of a market economy, and detailed reviews need to be conducted in each sector to identify functions that should be eliminated either immediately or in the longer term. The outcome of such detailed reviews would not only help reduce unnecessary administrative costs and constraints on private sector development, but it would also support the development of a poverty reduction strategy in freeing up the Government to focus its efforts on those areas where the public sector needs to play the major role. The Government is already committed to carrying out the functional reviews first for two or three pilot ministries, and it would be important for these reviews to focus on activities (such as the social sectors) which are particularly important for the poor. 7.29 Second, the Government is aiming to ensure that the public sector will be able to retain and recruit essential managerial and technical skills, and plans to incorporate current bonuses and allowances into the main pay structure, introduce a revised grading structure and reflect strategic targets in the 2002 budget. It will be critical that the future pay strategy explicitly takes into account the poverty reduction strategy. It will also be important for the forthcoming pay and incentive study to take into account the social implications of the impact on staffing levels. 7.30 Third, establishing a merit-based civil service, accompanied by the pay and incentives reforms, would substantially increase the capacity and efficiency of the state sector. In particular, introducing standardized recruitment and promotion procedures, based on appropriate job descriptions and selection criteria, will improve the quality and transparency of the selection processes. 7.31 Fourth, the Government is also committed to improving the budget management systems, through a medium term budget framework, improving the management of public expenditure and strengthening the inter-Governmental finance system. These reforms are all critical for better macroeconomic performance, and they could all contribute significantly to the reduction of poverty in the country if that aim is kept clearly in sight. It will therefore be important for all proposed reforms to be judged constantly against the criterion of their contribution to poverty reduction. - 128- 7.32 Demilitarization. Another obvious element in assisting the poverty reduction program would be further efforts to reduce lawlessness in Tajikistan through continuing the demilitarization process and reducing armed extortion of the poor. One possible way to demilitarize the country would be through a weapons buy-back program. An obvious concern about such a proposal is that it could significantly increase the demand for weapons on the black market if implemented incorrectly. If the price offered by weapons collection centers were to be too high, unscrupulous individuals could profit from selling weapons repeatedly after obtaining more. Weapons collection centers would have to be set up in specific locations, and the destruction of the weapons would need to be as visible and graphic as possible. The advantages and potential dangers of a possible weapons buy-back program should be discussed further, especially as the MVD Directorate for Combating Corruption and Organized Crime is a strong advocate of such a buy-back program. 7.33 Strengthening the legal system. Another priority in reforming governance is to improve the capacity of the judiciary in order to increase the checks and balances in the Govermnent and to help strengthen the rule of law. The starting point in aiding the judiciary should be judges, since, if empowered, they would be able to supervise the adjudication process and in turn empower defense attorneys vis-a-vis prosecutors. Court officials would have less incentive to take bribes if they received better salaries and if they had a workable infrastructure at their disposal. A rate of $100 per month for higher and oblast courts and $55 per month for district courts has been proposed by court officials. This is a difficult issue, but it should be reviewed further as part of the ongoing planning of a comprehensive reforn of the public sector. Basic office kits including heaters, typewriters, photocopying machines, fax machines, and computers should be distributed to the courts. A similar program for defense attorneys and prosecutors should be considered. 7.34 The training of judges could also be improved through seminars and technical assistance relating to international law, trial/appeal techniques, drafting of legal decisions, human rights, and the financing of the legal system. Since 1996, donor organizations have taken turns funding an annual 3-day workshop for judges at Shahambari where these and other topics are discussed. The American Bar Association (ABA) has conducted workshops to train judges in adjudicating cases under a democratic system of Government. These initiatives need to be expanded and focused more directly upon outlying districts in order to involve local judges on a more frequent basis. Leaders of the seminars and trainers could be recruited from among the several highly qualified judges in the superior courts in Dushanbe. 7.35 Governance could be further improved by rendering the law more transparent. A review of laws could reduce the number of opportunities for discretionary decision-making that encourage illegal practices. There may be considerable scope for this. For example, the ABA's expert assessment of the Criminal Code of Tajikistan in 1998 resulted in 75 changes to the code. Reform of tax laws may also help to eliminate market distortions and reduce opportunities to extort money from agriculture and trade. Transparency is presently also limited by the meager information resources that the court system has at its disposal. Current copies of the criminal, civil and other codes could be distributed in binder format to allow updating. A weekly or bi-weekly legal newspaper could publish court decisions, selected court dockets, and legal treatises. - 129 - 7.36 Campaigns to educate the citizenry concerning their rights and duties under the law would also improve transparency. A publicity campaign targeted at the poor could involve creating posters and advertisements that describe the citizenry's legal rights in common language. Posters could be displayed in high traffic areas, such as bazaars; and there could be radio and television broadcasts of public service announcements and programs featuring prominent legal and law enforcement personalities. The MVD Directorate for Combating Organized Crime and Corruption already gives interviews and photographs to newspapers and participates in TV programs on narcotics trafficking. A campaign to further publicize the Government's commitment to combat corruption might encourage the population to take initiative in support of the Government's program. Finally, another step would be to permit the population to examine internal Governmental documents, such as budgetary and expenditure documents and records. 7.37 Strengthening the police. Providing technical assistance for law enforcement agencies could further strengthen the rule of law. The MVD Directorate for Combating Corruption and Organized Crime, as noted above, has dramatically improved its operations but it could be much more effective if it were to be given adequate equipment (such as computers, telephones, fax machines, audio-visual equipment and transport). The Directorate also wants Tajikistan to join the Interpol in order to coordinate efforts against international drug cartels and terrorist organizations, but the cost of joining Interpol is $100,000 initially, with annual dues of $40,000 thereafter. The Directorate should also be encouraged to investigate any high profile cases of corruption. Arrests of any high-ranking officials engaged in corruption would help to convince the population that the Government is really committed to eliminating corruption. E. "Bottom-Up" Measures to Address Outstanding Problems 7.38 In addition to these "top-down" measures, it is necessary also to provide impetus to improving governance from the "bottom-up. Many of the poor face poor governance as an ingrained part of their daily life, as some local Government officials (particularly depending upon the character of the district hukumat) and local leaders are insufficiently responsive to them. 7.39 Non-Governmental organizations. Creating Non-Governmental Organizations (NGOs) in rural areas could help to organize the population to fighit corruption and to provide them with legal aid. Over 500 NGOs have been officially registered in Tajikistan, but only about 120 of them are active. Moreover, NGOs are highly concentrated in Dushanbe and Khojand, while rural areas, where the majority of the poor reside, have received less attention. Due partly to the efforts of the Counterpart Consortium, some progress has been made in establishing NGOs. In particular, conilict resolution and planning workshops have been run in some rural areas, in which the community gathers to discuss their main problems. Common themes are employrnent and access to land, both of which are primary concerns of the poor. Some NGOs (such as "Fidakar" and "Murad" in Kurgan Tube) have developed their capabilities to the degree that they are now able to send trainers into other districts. - 130 - 7.40 Some training has already been given to NGOs to make them more aware of new laws in Tajikistan and also of international laws. Some NGOs are also instructing children in schools concerning their rights under the law. The "Society and Law" NGO in Dushanbe is already devoted to creating legal libraries and disseminating legal knowledge among the population. In order to support legal reforms, however, it would help to have more NGOs established with an explicit legal focus. Legal NGOs could serve purposes that will more directly aid the rural poor. In particular, they could serve as conduits to identify and support cases dealing with poverty issues that will establish precedents within the legal system. Legal NGOs could also provide funding for cases involving the poor, who commonly cannot afford to have their case heard in court. NGO members might also be trained as court monitors. 7.41 Social services and community activities. NGOs can also improve governance in education, health care, and environmental management. Reducing unofficial payments to teachers in schools might be accomplished through the creation of Parent-Teacher Associations (PTAs) that encourage parents to take joint action to ensure that their children are given an adequate education. If information concerning school budgets were made available to the PTAs, they might also be able to assist in monitoring the education system. The Ministry of Education, which has identified corruption as one of the key issues facing this sector, is supportive of such associations, and some are now being established in the 20 pilot schools being supported through the IDA-funded project. Since education and health care in Tajikistan are typically the concern of mothers, NGOs for women in particular may help to make these sectors abide by the rules stated in law. Environmental NGOs could serve as "watchdog" groups to report violations of environmental regulations and exert community pressure on enterprises to comply with them. Table 82: Existing NGOs Working in the Social Sectors in Tajikistan Pocus ofNGOs Nunber of NGOs Women's Issues 23 Health Care 10 Environment 9 Education 2 7.42 The number of active NGOs in Tajikistan whose primary focus is education, health care, the environment, and women's issues is listed in Table 82. This table shows that there are already several NGOs that deal with women's issues. Most health care NGOs provide assistance to handicapped, elderly, and/or indigent individuals. Although there are several NGOs that have educational components in their agenda, the number with a primary focus on education specifically is quite small. Women's NGOs could be encouraged to take up health care and education issues. In addition to the NGOs, 20 community development centers have recently been established mostly in outlying districts. These centers have a multi-sectoral focus that encompasses agricultural projects, making coal bricks for fuel, and cultural and sports programs. - 131 - 7.43 Community institutions such as the mahallah and jamoat might also encourage more popular participation in governance43. There are strong traditions of community self-help in Tajikistan, chief among them being the hashar, which is often used in building houses, administering community festivals and events, rendering aid to the poor, and, in the past, maintenance of irrigation canals. Although these institutions may help unite poor people, these institutions are not entirely "traditional", as the mahallah and jamoat were incorporated into and subservient to the Bolshevik Government during the 70 years of Soviet rule. Their present relationship with the Government is unclear. It may be that the mahallah and jamoat have reverted back to more traditional form or become something different altogether during the course of the civil war. Finally, measures to encourage participation in governance by the poor would be more effective if the executive branch of the central Government relinquished its right to appoint the hukumat chairmen and allowed the population to elect them instead. 7.44 Agriculture. Reform of governance is necessary in agriculture, the source of livelihood for most of Tajikistan's poor. There are several ways that this might be accomplished. The further liberalization of marketization in agrictulture and the total elimination of implicit as well as explicit state orders would reduce the opportunities for local officials to abuse their powers in determining the terrns of contracts. Land reform can help reduce abuse of power and poverty by making sure that the rules of land allocation are transparent and by ensuring that any privatization programs have built-in safeguards against corruption in land purchases and privatization that favors those who are better-off. Associations that empower the farming population, such as cooperatives, could support popular participation in decision-making and constrain officials who do not follow official rules appropriately. 7.45 A particularly positive development in agricultural reform has been the formation of an association of dehkan farmers under the aegis of CARE in Leninsky District. The Leninsky District Farmer's Association (LDFA) supplies inputs to farmers on credit and trains them to run their own affairs. The LDFA, presently in its third year, now has its own agricultural extension agents and nascent irrigation associations. Farmers have banded together and, without any patronage from the higher reaches of the Government, have resisted a concerted effort by the local hukumat to interfere in the work of the LDFA. The results of the better governance can be seen in the enhanced agricultural productivity. In the LDFA's first year, yields of wheat and most other crops doubled, although the yield of potatoes increased three-fold. Although poor weather in the last two years have hindered further increases in yields, farms participating in the project remain substantially more productive than other farms in the district. Indeed, because of the economic success of the LDFA, farmers in adjacent districts have made repeated inquiries about establishing similar organizations in their locales. So this model of farmers' association could be expanded to other. Such joint action could also help reduce extortion from entrepreneurs in bazaars, small retail businesses, and trade in general. Trade and retail associations could discourage officials from abusing their positions and could make charges for places of business and 43 A mahallah is a community or neighborhood in a city or town that is based on territoriasl, familial, and/or professional principles. It supervises many community functions in the area under its purview. The jamoat is essentially the same entity in rural areas. - 132- taxation more transparent. Presently there are NGOs in Dushanbe, Khoj and, and Chkalovsk that focus on protecting small businesses. F. The Development of an Improved Governance Strategy 7.46 The Government has already started the process of improving governance in the country. Further measures taken to improve governance would have positive externalities for nearly every program to assist the poor of Tajikistan. Establishing an improved rule of law would greatly reduce the likelihood that reforms implemented by the Government and donor agencies would "remain on paper". The effect would be felt in agriculture, health, education, the environment, and other sectors that have most critical impact on the poor. Since many of recommended actions are mutually reinforcing, the timing of their implementation would be critical to the success of their execution. For example, measures to establish rule of law by empowering the judiciary should be taken before encouraging the population to increase its use of the court system. This would provide a more viable and receptive justice system for the impoverished section of the population to work. Measures to foster joint action in agriculture, health, education, the environment, and trade should also clearly be coordinated with existing donor programs in these sectors. 7.47 The following recommendations come out of this analysis. (i) The Government should be helped and encouraged to continue with its program of public sector and governance reforms, especially in the reform of Government structures, the revision of the pay and salary structures, the development of a merit-based civil service, and improved budget management systems. In carrying out such reforms, it will be particularly important to focus explicitly on the links with the poverty reduction strategy. (ii) Every effort should be made to encourage and enable the Parliament to legislate with greater legal rigor. (iii) Consideration could be given to the introduction of a weapons buy-back program in order to contribute to demilitarization. (iv) To help strengthen the rule of law, the capacity of the judiciary should be increased through increased salaries for the judiciary, the provision of basic office equipment and improved working conditions. The training of judges should also be improved through seminars and technical assistance relating to international law, trial/appeal techniques, drafting of legal decisions, human rights, and the financing of the legal system (v) The law should be made more transparent through a review of laws, a reduction in the extent of discretionary decision-making, an increase in the amount of information made available to courts, and campaigns to educate the citizenry concerning their rights and duties under the law. (vi) The MVD Directorate for Combating Corruption and Organized Crime should be strengthened to improve its operations further through the provision of - 133 - equipment, joining the Interpol, and investigating high profile cases of corruption. (vii) Further training should be given to NGOs to make them more aware of new laws in Tajikistan and also of international laws; and special efforts should be made to encourage .the establishment of NGOs with an explicit legal focus. (viii) The creation of parent-teacher associations should also be encouraged in order for parents to take joint action to ensure that their children are given an adequate education. (ix) The nuances of local level govemance in various regions, the relationship of the regions with each other and with the central Govemment, and the nature of the mahallah and jamoat should all be researched further to gain a fuller picture of the problems of governance and corruption. - 134 - CHAPTER VIII: LOOKING FORWARD 8.1 The picture painted by the above analysis is a bleak one. Levels of material poverty in Tajikistan are high, with over 95 percent of the population living below the minimum consumption basket, four out of five 'poor', a third 'very poor' and nearly 20 percent 'extremely poor' (below $1.075 PPP). According to the results of the TLSS, levels of subjective poverty are also high, as two-thirds of households rank themselves as being amongst the poorest in society. Three-quarters of the population are very concerned about how they will provide for basic necessities in the next 12 months. As well as financial and psychological stress, there are also signs that many households are suffering from food insecurity. Nearly half of the population has reduced the number of meals that they eat in a day and/or is eating smaller proportions. This may have a damaging long tern impact on the nutritional and health status of the population. A quarter of households report having had to sell household assets in the last 6 months, and a third have had to go into (or increase) debt by borrowing. Amongst the very poorest, 7 percent have resorted to begging. There is also evidence that a significant proportion of children are missing from school due to financial hardship. The most common reason for absence, excluding the weather, is lack of shoes and clothing. This will have a damaging long term impact both upon the welfare of the child itself, in terms of future earning capacity, but also for the nation as a whole in terns of the future human capital of Tajikistan. 8.2 The actual amount of revenue required to eliminate 'poverty' is very sensitive to the choice of the poverty line. Using the SSA poverty line of TR 20,000 a month, and assuming that the total population of Tajikistan is now 6.1 million, the poverty gap would be TR 527 billion a year. Total GDP for 1999 is forecast to have been about TR1,350 billion, and so the cost of bringing everyone in to Tajikistan up to the level of the SSA poverty line would be roughly equivalent to 39 percent of GDP. The cost of eliminating 'severe' poverty i.e. using a poverty line of just TR 10,000 a month would still require TR 75 billion a year - equivalent to 5.5 percent of GDP; whilst an 'extreme' poverty line of just $1.075 a day would need TR 27 billion a year - equivalent to 2 percent of GDP. 8.3 In contrast, total spending by the Government (excluding the Social Protection Fund) amounted to just 3.4 percent of GDP; with education accounting for 2.1 percent, health 1 percent, social protection (pensions) 0.2 percent and social protection 0.1 percent. Therefore even to eliminate 'extreme' poverty would still entail a significant increase (i.e. about 60 percent) in current levels of Government social expenditure. It is therefore unlikely that the Government would be able to alleviate much more than a small fraction of poverty. To raise everyone to a level around the subsistence minimum would require the Government to devote all of GDP to this task. -135 - Table 83: Government Spending on Social Sectors 1999-2000 1999 2000 Plan Actual Actual Actual Plan Plan TR mn TR mn As % of As % of TR mn As % of Gov. Exp. GDP Gov. Eip. Education 30,826 28,362 12.2 2.1 37,425 13.5 Health 18,190 13,893 6.0 1.0 19,089 6.9 Social Protection 3,225 2,500 1.1 0.2 3,560 1.3 (Pensions) Cash Compensation 6,185 1,357 0.6 0.1 6,321 2.3 Total 58,426 46,112 19.9 3.4 66,395 24.0 Government 256,209 231,920 276,966 Expenditure GDP 1,199,000 1,348,000 8.4 In contrast, it is interesting to compare what has been happening to Government spending on the social sectors in the last two years. This is shown in Table 84. Several important conclusions emerge. First, in contrast to the target of spending 22 percent of total Government spending on health and education, agreed under the SAC 1, the planned spending on these two sectors in 1999 was just 19.1 percent (i.e., TR 49,016 million out of TR 256,209 million). Second, the actual spending on them in 1999 was even lower, at 18.2 percent (i.e., TR42,255 million out of TR 231,920 million). This was largely due to under-spending on the health sector. Including social protection and the cash compensation program, the total was just 19.9 percent. In addition, there is still a significant problem of payment and salary arrears in the social sectors. In the budget for the Year 2000, the proportion of spending on health and education is somewhat higher, at 20.4 percent, but this is still below the agreed SAC figure of 22 percent. However, the proportion of the budget allocated to the cash compensation program (2.3 percent) in Year 2000 has been kept at roughly the level of 1999 (2.4 percent), even though there was a major problem of under-spending (0.6 percent) in 1999. It is, therefore, apparent that the challenge there is to ensure the success of the proposed pilot reform program. 8.5 In general, then, it is clear that there is a massive challenge ahead to reduce poverty. It is also clear that transfer programs could not possibly succeed, that economic growth has to be at the heart of the strategy, that the poverty reduction program has to operate within a highly constrained fiscal situation, and that further attention is needed to ensuring that the priority programs are protected and implemented efficiently. As noted earlier in this report, it is here proposed that the Government adopt a strategy with four key elements: (i) the stimulation of labor-intensive economic growth; (ii) the provision of basic social services; (iii) the targeting of assistance to the poorest; and (iv) the development of a safe and well- governed environment for people to live their lives and look after themselves. - 136 - Table 84: The Effect of Economic Growth on Poverty Reduction by Year 2005 Year 0 Year I Year 2 Year 3 Year 4 Year S (a) $2.15 PPP a day (poverty line = 15,111 TR a month) % poor 65.4 62.0 57.7 52.6 48.4 44.9 P1 22.9 20.9 18.9 17.1 15.5 13.9 P2 10.9 9.8 8.7 7.8 6.9 6.1 (b) $1.075 PPP a day (poverty line = 7,557 TR a month) % poor 16.3 14.9 13.0 11.7 10.4 9.0 P1 4.4 3.8 3.3 2.9 2.5 2.1 P2 1.8 1.5 1.3 1.2 1.0 0.9 8.6 A critical question is the rate at which poverty might be expected to be reduced through this strategy. Assuming that (i) the distribution of income were to remain constant, (ii) growth in real income directly translates into growth in real expenditure, (iii) poverty is measured by using equivalent household expenditure, (iv) theta=0.75, (v) extreme poverty is measured against $1.075 PPP a day, and (vi) poverty is measured against $2.15 PPP a day; then if economic growth were to increase at 5 percent annually for the next five years, the extent of extreme poverty would drop from 16.3 percent to 9.0 percent, and the extent of poverty would drop from 65.4 percent to 44.9 percent. Of course, the assumption about the distribution of income throughout the country is a critical one. To the extent that the distribution moves in favor of the poor and the extremely poor, then the progress in poverty reduction achievable through economic growth would be that much more. Table 85: Possible Poverty Reduction Indicators and the Situation in 1999/2000 Situation in Year 199/2000 Economic growth 3.7% Proportion of population in extreme poverty (using $1.075 PPP) 16.9% Proportion of population in poverty (using $2.15 PPP) 65.4% Labor force participation 56% Infant mortality 31/1000 Lower secondary school enrollment 85% Gender gap between enrollment of boys and girls in lower secondary school 12% Stunting among children Over 40% Proportion of the state budget allocated to education, health and social 20% protection 8.7 Table 85 suggests some possible indicators for poverty reduction and shows the situation in 1999/2000. It is recommended that the Government itself identify its own indicators and sets specific targets for poverty reduction over the next five to ten years. In order for progress to be evaluated in achieving these targets, it will be important for the official statistical and monitoring systems to be strengthened. In particular, it is recommended that the TLSS be repeated at least once every two years. Ideally, the household survey would be carried out annually, so that changes in living standards could be - 137- measures regularly, so that a series of special modules on particular subjects could be added, and so that the survey could be held at different times of the year in order to assess seasonal effects. 8.8 Even though economic growth is absolutely critical for substantial and sustained poverty reduction, it is also very important to realize that much can be achieved in improving human development indicators through measures that are at least partly independent of economic growth. For example, infant mortality could probably be reduced directly through relatively simple steps such as strengthening the vaccination program and ensuring that children who are sick with diarrhea can receive appropriate treatments. Similarly, the national educational policies could focus specifically on such issues as school attendance or perhaps the proportion of girls in secondary education; and/or particular attention could be given to improving the nutritional status of young children. The following activities have been chosen as being illustrative of possible elements of a targeted program of interventions that could impact rapidly on poverty. These proposals have arisen from discussions with key informants in ministries and NGOs, and also with other national experts; and they are aimed at attacking selected problems 8.9 In the education sector, there is clearly a growing problem of school attendance by the children of poorer families and especially in certain regions (such in Khatlon and RSS). While the reasons for non-attendance need further investigation, it is likely that interventions through school meal programs, special financial arrangements for text books and stationary, and perhaps clothing allowances could all be considered. One intervention possibility would be to provide free lunches for children in the primary grades, as it would impact positively on attendance rates and child undemutrition. The Save The Children (US) has been operating a large school meal program in Tajikistan since 1994, with food provided by the US Department of Agriculture. It has built up a program of school feeding for Grades 1-4 in 635 schools mainly in the districts of Khatlon. 160,000-170,000 pupils and staff are beneficiaries. Plans are being made to extend it to cover pre-school children also. The SCF/US ration consists of rice, wheat flour, corn soya meal and vegetable oil. The current phase of the SCF/US program has external support until the end of 2000. According to SCF/US, attendance rates have increased by 20-22 percent as a result of its school-feeding program. The impact of school feeding on the nutrition status of children has not been measured by SCF/US. Options for school feeding concentrate on ensuring that the most vulnerable age group pupils (i.e. grades 1-4) are provided with at least one nutritious meal per day. If such a program were to be carried out for gradel-4 pupils and staff in Khatlon (in those districts not already covered by SCF/US) and RRS, it is estimated that the annual cost would be about TR 5.4 billion ($2.7million). Such meals were provided in all schools until 10 years ago, and a restored program could be implemented through the Ministry of Education. Alternatively, it could perhaps be tendered out in order to encourage the development of the private sector at the same time. On the other hand, an expanded school meals program for all grade l-4 pupils in all regions of the country would probably cost about TR 13 billion ($6.5 million). 8.10 Another possible targeted program would be to assist the poorest groups with the financing of rented textbooks. The aim would be to help upgrade the quality of schooling by providing a basic learning tool for the poorest quintile of pupils in gradesl-4. Textbooks were provided universally in primary and secondary schools until ten years ago, and plans - 138- are now being made for reforms in their procurement (through tenders), distribution and usage. The World Bank, the Asian Development Bank and UNICEF are all active in this sector. In particular, plans are being devised for a textbook rental scheme in the two pilot districts being supported by the World Bank, but this could be complemented by special new arrangements for the poorest children especially in the regions worst affected by low attendance. The total cost in the first year of assisting the pupils from the bottom quintile group in grades 1-4 in the worst affected regions of Khatlon and the RRS is estimated at about TR 607 million ($300,000), while the cost in the second year would reduce to about TR 152 million ($76,000). Such a scheme could be implemented through the same mechanism that is proposed for the pilot social protection program using parent-teachers associations to identify the poorest 20 percent of children. If such a scheme were to be extended to text books for the poorest pupils in all regions, the cost in the first year is estimated to be about TR 1,104 billion ($550,000); in the second year, it would fall to about TR 276 million ($138,000). 8.11 As discussed earlier, the Prime Ministerial Working Group on Poverty has already proposed that the reform of the social protection system should be based on the identification of the most needy children using schools and parent-teacher associations. It is also proposed that the first phase should be a pilot exercise, targeting children from the bottom quintile in grades 1-9 in two districts. The districts which have been chosen are in the regions badly affected by school absenteeism, Shurabad in Khatlon, and Shahrinav in RRS. The pilot scheme is intended to begin in September, and to extend country wide in January 2001. The pilot phase should cost about TR 56 million ($28,000) and the national expansion about TR 6.7 billion ($3.3 million). 8.12 Similarly, in the health sector, there are some affordable interventions which could be targeted on the poorest groups and which could impact rapidly on poverty. For example, the immunization program is a fundamental component of primary health care. At the moment, however, the Ministry of Health is able only to finance some of the operational costs of the immunization program; and since 1993, vaccines and equipment for primary immunization has been provided almost exclusively by the donor community, coordinated by UNICEF. Present funding commitments run out at the end of the year. The sustainability of the immunization program is vital in order not to lose routines, which would require a complete restart, involving high costs. The program's sustainability could be strengthened considerably by introducing some Governmental financing of the vaccine and equipment costs in a phased way. For example, the Govermnent could contribute ten percent of the vaccine and syringe costs initially, and they could be stepped up annually. On this basis, the first year cost would be TR 98 million ($49,000), and the second year costs would be TR 196 million ($98,000). For cost effectiveness, procurement could continue to be carried out by UNICEF, though the execution of the program could continue to be carried out through Ministry of Health and local Government facilities. 8.13 The TLSS cost about $200,000 to carry out, and it was funded jointly by the World Bank and UNDP. As living standards change over time, and perhaps quite significantly and quickly, follow up surveys will be needed to build on the work of the first survey, to further define living standards and poverty countrywide, and to monitor the impact of intervention programs. The cost of a repeat survey is estimated to be about TR 300 million ($ 150,000). In general, implementation arrangements would follow those used in the first survey. As - 139 - substantial know-how has already been transferred by foreign consultants to the local staff of the State Statistical Agency, the need for future international inputs would be accordingly reduced; but some assistance would still be needed for survey methodology, preparation and monitoring. 8.14 The following recommendations come out of this analysis. (i) Further analysis should be undertaken of the incidence of public spending, especially in areas of immediate importance to the poor, to ensure that key programs are adequately funded and that spending contributes s much as possible to poverty reduction. (ii) The Government should set specific targets for welfare indicators and poverty reduction. (iii) A list should be compiled of possible projects of a targetedl program of interventions that could impact rapidly on poverty; the projects should be fully costed and implementation arrangements studied. (iv) Alternative funding sources, including the Government's own budget and external donors, should be explored for the financing of the list of possible targeted interventions. - 140- APPENDIX 1: THE TAJIKISTAN LIVING STANDARDS SURVEY METHODOLOGY I. The Tajik Living Standards Survey (TLSS) was conducted jointly by the State Statistical Agency and the Center of Strategic Research under the Office of the President, in collaboration with the sponsors: the United Nations Development Programme and the World Bank. Intemational technical assistance was provided by a team from the London School of Economics (LSE). The purpose of the survey was to provide quantitative data at the individual, household and community level to facilitate purposeful policy design on issues of welfare and living standards of the population of the Republic of Tajikistan in 1999. 2. The TLSS was carried out between May-June of 1999. A total of 2,000 households containing 14,142 individuals were interviewed. Households were randomly selected over 125 population points, which were stratified across urban and rural areas within oblasts to ensure a nationally representative sample. The questionnaire was based on the standard LSMS for the CIS countries, (see Oliver, R., LSMS No. 130) and adapted and abridged for Tajikistan. In particular the heath section was extended to allow for more in depth information to be collected and a section on food security was also added. The employment section was reduced and excludes information on searching for employment. There is no information on anthropemetric measures. The questionnaires were translated into Tajik, Russian and Uzbek. Sampling 3. The TLSS sample was designed to represent the population of the country as a whole as well as the strata. The sample was stratified by oblast and by urban and rural areas. Number of people, thousands Number of Primary Sample by January 1,1998 Units within strata Total City Village Total City Vllage Total 6043.9 1629.4 4414.5 125 34 91 Dushanbe 509.3 509.3 - 11 11 - RRS 1352.1 174.2 1177.9 27 3 24 Leninabadoblast 1850.4 525.1 1325.3 38 11 27 Khatlon oblast 2135.7 395.6 1740.1 44 8 36 GBAO 196.4 25.2 171.2 5 1 4 4. In common with standard LSMS practice, a two-stage sample was used. In the first stage 125 primary sample units (PSU) were selected with the probability of selection within strata being proportional to size. At the second stage, 16 households were selected within 44 each PSU, with each household in the area having the same probability of being chosen44. The two-stage procedure has the advantage that it provides a self-weighted sample. It also 44 In addition to the main sample, the TLSS also included a secondary sample of 15 extra PSU (containing 400 households) in Dangara and Varzob. This data was collected for the sole purpose of providing baseline data for the World Bank Health Project in these areas. The sampling for these additional units was carried out separately after the main sampling procedure in order to allow for their exclusion in nationally representative analysis. - 141 - simplified the fieldwork operation as a one field team could be assigned to cover a number of PSU (see below). 5. A critical problem in the sample selection with Tajikistan was the absence of an up to date national sample frame from which to select the PSU. As a resu]l[t lists of the towns, rayons and jamoats (villages) within rayons were prepared manually. Current data on population size according to village and town registers was then supplied to the regional offices of Goskomstat and conveyed to the center. This allowed the construction of a sample frame of enumeration units by sample size from which to draw the P'3U. This procedure worked well in establishing a sample frame for the rural population. however administrative units in some of the larger towns and in the cities of Dushanbe, Khojaand and Kurgan-Tube were too large and have to be sub-divided into smaller enumeration units. Fortuitously the survey team was able to make use of information available as a result of the mapping exercise carried out earlier in the year as preparation for the 2000 Census in order to sub- divide these larger areas into enumeration units of roughly similar size. The survey team were also able to use the household listings prepared for the Census for the second stage of the sampling in urban areas. In rural areas the selection of households was made using the village registers - a complete listing of all households in the village which is (purported to be) regularly updated by the local administration. When selecting the target households a few extra dwelling were also selected to be used if replacements were needed in the field. In actuality non-response and refusal were very rare and use of replacement households was low. Fieldwork teams 6. A total of 60 fieldwork staff were recruited, comprising 12 fieldwork teams of one supervisors plus 4 interviewers. Out of the 12 Supervisors, eight were employees of the State Statistical Agency and four were from the Center for Strategic Research. Of the 48 interviewers, 36 were employees of the State Statistical Agency and the remaining 12 were from other Government and public organizations. Training 7. Supervisors were trained over a period of five days in March 1999 which included; two days of training, two days of field work which was used to pilot the survey and one day summary discussion. The Supervisors then also participated in the training for the interviewers which was also held over five days prior to the start of the main fieldwork operation. The main survey began on 3rd May 1999. Pilot Survey 8. The household questionnaire was piloted over two days in three jamoats ( districts/rayons). A total of 40 household were surveyed over two days. jPilot projects were selected in Dushanbe (two Mahalla Committees in October and Frunze Districts), Gissar rayon (two jamoats) and Varzob rayon (three jamoats). Each interviewer surveyed four households over two days, with a total of 192 household covered in two days. Supervisors - 142 - oversaw the sampling methodology of households was ensured questionnaires were correct filled. Difficulties encountered 9. A few selected jamoats that were initially selected had to be replaced since permission to sample in those areas was not granted. Permission was obtained from the United Tajik Opposition (UTO) which was in control of parts of the Karategin Valley. 10. In rural areas, a disproportionate amount of time was sent on questions pertaining to agriculture, definitions of income and covering the greater number of children in the household. In cities, (particularly Dushanbe) there were a few problems with respondents not willing to participate. In this circumstance, the nearest neighboring household was approached. In only a few cases were the female questionnaires completed in the presence of the respondent's husband. In a few regions, the interviewers were at exposed to the risk of typhoid and scab and had to take precautions when carrying out the interviews. Questions 11. The TLSS consists of three parts: a household questionnaire, a community level questionnaire and a price questionnaire. 12. Definitions. Households are defined as all people who normally live, eat their meals together and share expenses in a dwelling, see Instructions For Interviewers in Appendix A. Household head The head of the household is the person considered the most senior or has the most authoritative position in the household and is selected by the household members themselves. All questions relating to the household are addressed to the household head. 13. Household questionnaire. The Household questionnaire comprises of 10 sections covering both household and individual aspects. The various sections of the household questionnaire are given below and the level of analysis is given in (italics) for the whole section and specified where it differs. 14. Community/Population point Questionnaire. The Community level or Population Point Questionnaire consists of 8 sections, detailed below. The community level questionnaire provides information on differences in demographic and economic infrastructure. Section Contents 15. The below brief descriptions provide a summary of the information found in each section. The descriptions are by no means exhaustive of the information covered by the survey and the users of the survey need to refer to each particular section of the questionnaire for a complete picture of the information gathered. 16. Household information/roster. This includes individual level information of all individuals in the household. It is a way of determining who in the household at the time of - 143- the interview belongs to the household. Information on sex, age, relation to household head and marital status are included. 17. Dwelling. This section includes infonnation covering the type of dwelling, utilities and water supply availability as well as questions pertaining to expenses related to the dwelling, such as rents, and the payment of utilities and other household expenses. Information is at the household level. 18. Education. This section includes all individuals aged 7 years and older and looks at educational attainment of individuals and reasons for not continuing education for those who are not currently studying. Questions pertaining to household educational expenditures are also covered. 19. Health. This section examines individual health status and the nature of any illness over the recent months. Additional questions relate to more detailed information on the use of health care services and hospitals, including expenses incurred due to ill health. 20. Employment. This section covers individuals aged 11 years and over. The first part of this section looks at the different activities individuals are engaged in to determine if a person is engaged in an income generating activity. Those who are engaged in such activity are required to answer questions in Part B, which relate to the nature of the main activity the individual is engaged in. Part B covers questions on the nature of the work and the nature of the organization the individual is attached to as well as questions relating to income, cash income and in-kind payments. There are also a few questions relating to additional income generating activities the individual is involved in, in addition to the main activity. Part C examines what an individual was doing two years ago. 21. Migration. This section covers all individuals aged 15 years and older and determines how long respondents have resided in their present location. Part B relates to households who were displaced asserting how many in the family were affected and for what reason. Part C relates to the property left by those who are displaced. 22. Sources of Income of the Household. This section covers specified sources of income over the previous month from all members in the household. Part A covers such as income, movable property and alimony, where part B includes information on income from social protection payments, such as employment pensions and family allowances. Part B also includes a summary question on total income from all sources for all household members. 23. Consumption and Expenditures. The section gathers information on household expenditure and in particular consumption. Part A focuses on a summary of 24 categories of household expenditure undertaken over the last month and the last year. Part B covers information on 33 specified food items, including expenditure on the item, as well as value of growing and consuming. Part C provides information on issues of food security and coping strategies and includes questions on subjective perceptions of welfare. 24. List of Durables. This section includes ownership of 16 durable items, including motorcycles and cars. - 144 - 25. Agriculture. This section provides information across a variety of agricultural aspects. Part A focuses on land use and ownership across different specified land types, including how much was earned from the different types of land and also sources of irrigation. Part B includes questions on costs of inputs and outputs of land and livestock. Part C covers income and expenditure across 17 specified agricultural related property including different livestock and different equipment. 26. Female Questionnaire. This section of the questionnaire looks at particular aspects of the health of married women, in particular fertility issues. Another part of this section focuses on information on each child born. 27. Population point /Community. This section provides information on the nature of the different population points. Part 1 covers demographic information such as population of the community and the ethnic make-up. The part covering infrastructure includes questions on the availability of different utilities, distance from the capital and the quality of the roads. A part on the nature of the economy of the population point includes information on the economic activity in the area, the existence of state enterprises and to what extent economic conditions have changed over the last year. Another part focuses on information about any refugees or displaced persons in the population point. There is a section on education relating to the school attendance of boy and girls, and to the quality of the schools in the area. A part on health looks at the availability of health facilities and medication, as well as the quality of these services. A section on agriculture focuses on the nature of the agricultural activities in the community, including questions on irrigation and the use of specific inputs. There is also a question on the average wage of specified agricultural labor. The final part provides information on the availability and accessibility of 45 different institutions and services such as dentists, kindergartens, state employment services, theatres and bus stations. - 145- Household Questionnaire Section 1. Household information (individual level) Section 2. Dwelling (household level) Part 2A: Characteristics of the Dwelling Part 2B: Expenditures on Dwelling Section 3. Education (individuals aged 7years +) Section 4. Health (individual level) Part 4A: General Health Status Part 4B: General Utilization of Health Care Services Part 4C: Hospital Utilization Section 5. Employment (individuals aged 11 years +) Part 5A: Time use Part SB: Employment and Wage main job Part 5C: Employment History Section 6. Migration Part 6A: Place of Birth and Migration (individuals aged 15 years -F) Part 6B: Households of Displaced Persons (household level) Part 6C: Property of displaced persons (household level) Section 7. Sources of Income of the Household (household level) Part 7A: General Part 7B: Income from Social Protection Payments Section 8. Consumption and Expenditures (household level) Part 8A: General Expenditures Part 8B: Household food consumption and expenditure Part 8C: Household perception of food security and coping strategies Section 9. List of Durables (household level) Section I0. Agriculture (household level) Part lOA: Agricultural activity Part lOB: Inputs and Outputs Part 1 OC: Agricultural Property Section 1 1. Female Questionnaire (Married Females aged 15-49 years) Questionnaire for Population point (PP) (population point) Section 1. Demographic information Section 2. Infrastructure Section 3. Economy Section 4. Refugees and Displaced persons Section 5. Education Section 6. Health Section 7. Agriculture Section 8. Institutions - 146 - APPENDIX 2: THE SENSITIVITY OF THE POVERTY PROFILE TO ALTERNATIVE ASSUMPTIONS OF EQUIVALENCE SCALES 1. In order to compare the living standards of different households it is necessary to adjust total expenditure for household demographic characteristics, and for different cost functions between households, by incorporating economies of scale and employing equivalence scales. Household members have different needs depending on their age, location and personal characteristics. Economies of scale generally arise due to per capita economies in sharing utility and housing costs, although in Tajikistan this was not very significant in the past as the State provided those services. 2. Typically equivalent household consumption is defined as follows: Ee = E/no 3. Fe is the household equivalent expenditure (or income), E is total household expenditure (income), n is household size. 0 is the elasticity of household needs with respect to household size: an elasticity of 1 is equivalent to dividing by the number of persons in the household (and assumes no economies of scale and that the needs of children in the household are the same as those of adults), while an elasticity of zero implies that aggregate household expenditure is the relevant indicator of individual welfare. It has been argued that the choice of equivalence scale can significantly alter the profile of poverty (Lanjouw and Ravallion, 1995). In particular, work by Lanjouw, Milanovic and Paternostro (1998) found that using a per capita welfare indicator can lead to a conclusion that larger households are poorer, whilst alternative equivalence scales will reverse this policy conclusion. 4. The derivation of equivalence scales involves several factors including how needs vary with age and activity level and the share of food in total household expenditure. Many equivalence scales take the food share of low income families as a reference (Ravallion 1998). Foley estimated 0 at 0.9 for Russia in 1992 (Foley 1993). In 1997, however, Foley considered that household economies of scale in consumption could be ignored and that household per capita consumption was a good enough approximation, although he recognized that this situation would change as Russian housing and utility prices were liberalized. 5. Other poverty assessments in the region, most notably Kazakhstan, Azerbaijan and Armenia, have also taken household per capita consumption as the main welfare indicator. The poverty assessment in Kyrgyzstan using data from the 1993 KLSS employed a poverty line which reflected different needs by age and sex, but which did not incorporate any additional factor for household economies of scale. 6. Below we present data on impact on the poverty profile of using a range of alternative equivalence scales within Taj ikistan. - 147 - (a) Household size Table A2.1 The Risk of Household Poverty by Househol[d Size Household Size Expenditure e = 0.s = 0.6 ID =0.7 0 - 0.8 0= 0.9 0= 1.00 1 52.0% 36.0% 24.0% 12% 0% 0% 2-4 23.3% 20.7% 17.5% 14.9% 11.5% 10.1% 5-9 21.0% 21.3% 22.0% 22.3% 22.1% 21.4% 10-14 12.4% 14.9% 16.5% 18.3% 22.7% 25.8% 15+ 6.8% 8.5% 10.2% 13.6% 20.3% 25.4% All 20% 20% 20% 20% 20% 20% 7. Table A2.1 shows the risk of poverty, defined as being in the bottom 20% of the distribution of expenditure, by household size using different equivalence scales with the value of theta varying between 0.5 and 1.00. The data confirm the findings of Lanjouw, Milanovic and Paternostro (1998) that using a per capita poverty standard results in a higher proportion of larger households, and a lower proportion of smaller household, being defined as poor. This conclusion is reversed when theta takes a value between 0.8 and 0.7. This points towards a value of theta of 0.7-0.8 for Tajikistan. This would be consistent with the share of food in total expenditure, which as we saw in Table 10 was 0.79 for the bottom quintile. (Note that the risk of poverty for households with between 5 and 9 members does not appear to vary according to changes in the value of theta. The average household in Tajikistan in 1999 contained 7 members). Although the risk of poverty for different household sizes varies considerably depending on the assumption concerning the strength of household economies of scale, the composition of the poor varies much less (Table Al.2). Table A2.2 Composition of Poor Households by Household Size Household Size Expenditu re 0 =0.5 0=06 0.6 a 0= 0.7 0= =0.8 0 =0.9 0 =1.00 1 3.3% 2.3% 1.5% 0.8% - - 2-4 20.3% 18.0% 15.3% 13.0% 10.0% 8.8% 5-9 65.5% 66.5% 68.5% 69.5% 68.8% 66.8% 10-14 10.0% 12.0% 13.3% 14.8% 18.3% 20.8% 15+ 1.0% 1.3% 1.5% 2.0% 3.0% o 3.8% All 100% 100% 100% 100% 1 00% 100% 8. Over two-thirds of poor households contain between five and nine members, regardless of which equivalence scale is used. Even at the most exireme assumption of economies of scale, only 3 percent of poor households are single person households. At the more realistic assumption of theta being equal to 0.8, single person households make up just under 1 percent of all poor households. (b) Age 9. One of the most important findings of the work of Lanjouw, Milanovic and Patemostro (1998) from a policy perspective was that the use of a per capita definition of - 148- household welfare effectively discriminated in favor of households with children at the expense of the elderly; the logic being that elderly persons are much more likely to live in smaller households than children. Table A2.3 presents data to examine whether this is the case in Tajikistan. Note that individuals are defined as being poor if they live in households in the bottom quintile, ranked according to equivalent household expenditure. Note that given that household size is related to poverty, we would not automatically expect a fifth of all individuals to be located in the bottom quintile of the household distribution. As the table demonstrates, this proportion varies according to the assumption regarding the value theta. Table A2.3 The Risk of Individuals Living in Poor Households by Age Age Expenditure Group o = 0,5 0 = 0.6 0 = 0.7 0 = 0.8 0 = 0.9 0 = 1.00 0-15 18.9% 20.0% 21.1% 21.9% 23.3% 24.2% 16-64 16.6% 17.1% 17.7% 18.7% 20.0% 20.9% 65+ 20.9% 22.1% 22.2% 22.9% 22.4% 21.9% All 17.8% 18.6% 19.4% 20.3% 21.6% 22.4% 10. Both elderly persons (aged 65 and over) and children (aged less than 16) are more likely to be poor than individuals on average, regardless of the assumption concerning the value of theta. However at values of theta 0.9 or greater, children are more likely to living in poor households than elderly persons whilst the reverse is true for values of theta of 0.8 or less. This adds weight to the argument of a value of theta of 0.8 as being appropriate for Tajikistan. Table A2.3 shows how this would alter the age composition of the poor. Children under 16 comprise 45 percent of the total population of Tajikistan, whilst older people aged 65 and above make up just over four percent. Both groups are over-represented amongst the poor, but not by a significant factor. Alternative values of theta may affect some individuals, but not the overall picture of poverty by age. Table A2.4 Composition of Individuals Living in Poor Households by Age Age Expenditure Group o=.S 0 = 0.6 0 = 0.7 0 = 0.8 0 = 0.9 0 = 1.00 0-15 47.6% 48.2% 48.7% 48.5% 48.5% 48.5% 16-64 47.3% 46.7% 46.3% 46.6% 47.0% 47.3% 65+ 5.1% 5.1% 5.0% 4.9% 4.5% 4.2% All 100% 100% 100% 100% 100% 100% - 149 - (c) Urban - rural differences Table A2.5 The Risk of Household Poverty by Type of Settlement Expenditure 0 = 0.5 0 = 0.6 0 = 0.7 0 = 0.8 8 =0.9 0 = 1.00 Urban 20.8% 19.7% 18.4% 17.8% 16.2% 15.1% Rural 19.7% 20.1% 20,6% 20.8% 21.4% 21.8% All 20% 20% 20% 20% 20% 20% 11. It is generally the case that poverty rates are higher in rural areas than urban areas. However, the greater the economies of scale within households that are assumed, the smaller the differential between urban and rural areas and with the extreme assumption of a value of theta equal to 0.5 the relationship is reversed. However, at levels of theta of 0.8, urban households are still more likely to be poor than rural ones. (d) Region Table A2.6 The Risk of Household Poverty by Region Region Expenditure 8 =0.5 0 = 0.6 0V=0.7 0= = 0.8 0 = 0.91 0 = 1.00 Dushanbe 12.5% 10.8% 10.2% 7.4% 5.7% 5.1% GBAO 32.5% 33.8% 33.8% 32.5% 31.3% 32.5% RRS 11.6% 12.3% 13.0% 13.7% 14.6% 15.7% Leninabad 23.5% 22.5% 21.2% 21.2% 20.4% 19.7% Khatlon 22.6% 23.3% 24.1% 24.6% 25.3% 25.1% All 20% 20% 20% 20% 20% 20% 12. The poverty rate in Dushanbe is most affected by alternative assumptions concerning the strength of household economies of scale, varying from just 5 percent on a per capita measure to over 12.5 percent on the strongest assumption of theta taking a value of 0.5. 13. Although the level of poverty is affected by the assumptions concerning equivalence scales, the ranking between regions is not significantly affected, despite the fact that there are regional variations in household size and composition. Mean household size varies between 5.2 in Dushanbe to 8.3 in RRS, with households averaging 7.0 people in GBAO, 6.1 in Leninabad and 7.7 in Khatlon. - 150- Tajikistan at a glance 9/22/99 Europe & POVERTY and SOCIAL Central Low- Tajikistan Asia income Development diamond* 1998 Population, mid-year (millions) 6.1 473 3.51S Life expectancy GNP per capita (Atlas rethod, USS) 350 2,190 520 GNP (Atlas method, USS billions) 2 1 1,039 1,844 Average annual growth, 1992-98 Population (%) 1,5 0.1 1.7 Labor force (%) 2.4 0.6 1 9 GNP Gross per primary Most recent estimate (latest year avilable, 1992-98) capita enrollment Poverty (% ofpopulafion below national poverty line) Urban population (% of total population) 33 68 31 Life expectancy at birth (years) 68 69 63 L Infant mortality (per 1,000 live births) 30 23 69 Child malnutrition (% of children under 5) .. .. .. Access to safe water Access to safe water (6% of population) 69 .. 74 Illiteracy (% of population age 15+) 1 4 32 Gross primary enrollment (%of school-age population) 95 100 108 - afikisten Male 97 101 113 ---- Low-income group Female 94 99 103 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1977 1987 1997 1998 Economic ratios GDP (US$ billions) 3.7 1.1 1 3 Gross domestic investment/GDP .. 29.9 .. 7.0 Trade Exports of goods and services/GDP . . Gross dormestic savings/GDP .. 13,1 .. .. Gross national savings/GDP .. .. . .. 1 Current account balance/GDP -5.5 -10.8 Domestic Interest payments/GDP 0.3 0.6 ! Investment Total debt/GDP 107.3 91.2 Savigs Total debt service/exports 5.0 13.0 Present value of debt/GDP 35.9 Present value of debVexports - 92. .. I Indebtedness 1977-87 1988-98 1997 1S98 999-03 (average annual growth) GDP -119 17 53. - Tajikistan GNP per capita .. -12.9 1.6 5.2 . --- Low-income group Exports of goods and servtces .._.._.._.._.._* STRUCTURE of the ECONOMY 1977 1987 1997 1998 Growth rates of output and investment (%) (% of GDP) 10 Agriculture 26.3 27.1 8.8 Industry 39.1 19.7 45.7 -.r97 Manufacturing .. -- .. _ Services . .. Private consumption .. 64.0 .40 General govemment consumption .. 22.8 .G01 --O-GDP Imports of goods and services . 1977-87 1988-98 1997 1998 Growth rates of exports and imports 1%) (average annual growth) 6 Agriculture .. .- 6 Industry 40 y Manufacturing 20 Services .. . . Private consumption .-20 - 93 95 96 97 98 General government consumption . .. . .. Gross domestic investment .. .. -. .40 Imports of goods and services .. .. .. .. ,-Exports -Imports Gross national product .. -11.3 3.3 6.9 Note: 1998 data are preliminary estimates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. Tajikistan PRICES and GOVERNMENT FINANCE 1977 1987 1997 1998 Inflation (%) Domestic prices (% change) I 0 Consumer prices 1o600 2.7 s Implicit GDP deflator . 2 9 101.4 0 9 500 400 Govemment finance 200 (% of GOP, includes curesnt grants) 0 Current revenue 12.6 11 8 93 94 95 96 97 98 Current budget balance -2.1 -0 9 -GDP deflator --O-CPI Overall surplus/deficit . -4.0 -3.5 TRADE (US$ millions) 11977 1987 1997 1998 Export and import levels (USS millions) Total exports (fob) - 746 637 900 Aluminum 252 239 Cotton fiber 167 139 90 Manufactures ..00 Total imports (cif 785 766 Food 300 Fuel and energy 281 271 Capital goods -8 -7 92 93 94 95 9e 97 99 Export price index (1995=100) Import price index (1995=100) . Exports 1 Imports Terms of trade (1995=100) - - BALANCE of PAYMENTS (US$ m,llions) 1977 1987 1997 1998 Current account balance to GDP ratio (%) Exports of goods and services 746 637 0 Imports of goods and services 785 766 -2 92 Resource balance -9 -3 Net income -36 -41 1.1 Net current transfers -s Current account balance -60 -140 - tri: Financing items (net) . 76 176 _ 0 Changes in net reserves -16 -36 -12 Memo: Reserves including gold (US$ millions) 30 65 Conversion rate (DEC, local/USS) . 1.80E-2 328 2 475.7 EXTERNAL DEBT and RESOURCE FLOWS 1977 1987 1997 1998 (US$ millions) IComposition of total debt, 1997 (US$ millions) Total debt outstanding and disbursed 1,180 1,185 IBRO . 0 0 74 50 30 IDA 50 0 Total debt service 37 196 IBRD 0 0 IDA 0 0 279 Composition of net resource flows Official grants . 68 Official creditors 14 Prvate creditors 0 Foreign direct investment 20 Portfolio equity 0 World Bank program Commitments . 22 0 A- IsRD E- Bilateral Disbursements 22 0 B - IDA D - Othel mutilateral F - PrN9ate Principal repayments 0 0 c-IMF G - Short-term Net flows . 22 0 Interest payments . 0 0 Net transfers . 22 0 Development Economics 9/22/99 Financing items for 1998 includes a capital account balance of $120 million.