economic growth and human development

Umrbek AllakulovSummer School on Human Development

in Uzbekistan 2010

Economic Growth and Human Development

• Economic growth and human development

• Links between growth and HD

• Growth and HD in Uzbekistan– Poverty eradication

– Child mortality

– Education

• The case of Karakalpakstan

• Closing remarks

Outline

• Impact of economic growth (given by

per capita GDP growth) on human

development is found to be robust,

yet not automatic

Economic growth and human development

• two main casual links

between growth and

human development

• Brazil with more than 6%

growth rate and Gini

coefficient of 0.634

Links between growth and HD

The three ratios:

1. the public expenditure ratio as given by the proportion

of GNP allocated for public expenditure;

2. the HD or social allocation ratio, the proportion of public

expenditure earmarked for social (HD) sectors; and

3. the social (HD) priority ratio, given by the proportion of

social expenditure for basic social services or other

priority areas as defined by the government (Ranis &

Stewart, 2000).

Allocation of resources for HD

• More equal distribution of income

• Expansion of income earning

opportunities

• Enhancement of access to

productive assets

• Good governance

• Improved community action

Enhancing the links from growth to human development

• Initial years – exports restricted and imports

liberalized

• High rates of inflation – purchasing power

decreased

• Decline in GDP

Growth and Human Development in Uzbekistan

• Terms of trade increased - forgo fewer exports in

return for more imports

• more products and services are made available in

the country

Foreign trade

Crisis resistant economy

• Poverty eradication

– HDI of Uzbekistan rose from 0.687 to

0.710 between 2000 and 2007, 119th

among 182 countries

– Category: more than 10% of the

population inhabits on less than $1.25 a

day

– income poor of Uzbekistan were found to

be “asset rich” and “human capital rich”

From economic growth to human development

Poverty eradication

• immunization is

received by 96%-99%

children aged between

12-23 months during

the last decade

• 70% in 1994

• to reduce by two-

thirds of the under

five child mortality

rate by 2015 - LIKELY

Child mortality

• Better nutrition

• Increased public spending on healthcare

– Both in absolute and relative terms

– From 7% to 12% of total public expenditure

– Public spending on healthcare still too low

• 2.5% of GDP in UZB and 9% GDP in OECD

Economic growth – decrease in child mortality?

• Free and obligatory primary and secondary

education is guaranteed by the Constitution

• average income of those with higher education was

1.6 higher than those without any formal education

• 7%-9% of gross national income directed to support

education

• adult literacy rate of 99.4% and an average years of

schooling reached 11.74 years in 2007

Education

• 37% of the total land area of Uzbekistan,

although its GDP accounts for only 2.4%

of the national income

• agricultural production such as cotton,

rise, and melons

• Karakalpakstan accounts for only 5.6%– Low density

– Unattractive for investments

– Transportation costs are high as settlements

are distant

Economic conditions and HD in Karakalpakstan

• Out of its 1.5 million population, 1.1 million live in the rural areas

• 50-70% of the rural population is estimated to be poor, out of which 20% is severely poor

Economic conditions and HD in Karakalpakstan

• Karakalpakstan has one of the highest

infant mortality rates as well as one of the

highest unemployment rates

• more than 40% of population do not have

access to safe drinking water – spread of waterborne diseases

• Severe droughts in Amudarya threatens the

economic well being

Poor economic conditions and HD

• Majority of the problems can be effectively eliminated through

creation of additional income opportunities, employment creation,

and diversification of the economy in the region

• additional funds to support low income households in the region

• incentives for enterprises to attract investments in certain

branches of the economy – Enterprises with FDI are exempted from payment of income (profit) tax,

property tax, tax for social infrastructure development and area

improvement, single tax for microfirms and small enterprises, as well as

compulsory deductions to the Republican Road Fund

Towards economic growth in Karakalpakstan

• more than $3.367 million

foreign investments in 2007,

mainly in the oil and gas

sectors

• $1.1 billion investment needs

are identified

Investments – key to growth

• Economic growth and human development are highly

interdependent

• BUT(!) not all countries with high rates of growth

achieve high levels of human development

• economic growth has been translated into human

development to a certain degree in UZB– Public spending

• further economic growth can be utilized in

Karakalpakstan to achieve progress in human

development

Closing remarks

Questions?