Tashkent, Uzbekistan (UzDaily.com) -- World Bank held a presentation of the report "Improving the efficiency of public spending on human capital and water infrastructure in Uzbekistan" for representatives of local expert and academic circles. 

The paper analyzes public spending and challenges in the areas of health, education, social protection, irrigation, and water supply and sanitation. The report is based on statistics provided by the State Statistics Committee and line ministries and highlights trends in relevant sectors from 2015 to 2021. This study was prepared at the request of the government of Uzbekistan.

The report notes that Uzbekistan has seen improvements in fiscal policy and public financial management in recent years. They have played an important role in creating a stable macroeconomic environment for the continuation of reforms. The study highlights the need to place greater emphasis on delivering better and more inclusive public services to more citizens.

There is significant scope for improving the quality of public services by improving the efficiency, financial sustainability and effectiveness of public spending in relevant sectors that provide services to the population, the report says.

The following excerpts from the study summarize some of the challenges in the health, education, welfare, irrigation, and water and sanitation sectors. They also contain the recommendations of the authors of the report, the implementation of which can improve the efficiency of public spending and the quality of services in these sectors of the economy.

Healthcare

Public spending in the health sector of Uzbekistan amounted to 2.3% of GDP in 2019. This is in line with spending in this sector in countries with per capita income levels at the bottom of the group of countries with middle income (Uzbekistan is included in this group), but still lower than in the Europe and Central Asia region as a whole (excluding high-income countries).

The main challenges affecting the provision of quality services in this sector include: 1) the low level and effectiveness of spending on health services; 2) a very high share of public spending on salaries and staff bonuses, despite low wages per worker; 3) the lack of adequate mechanisms for financing the activities of hospitals, stimulating their efficiency and effectiveness; 4) a large share of spending out of pocket of households (more than 60% of all spending) goes to finance health care), as well as official and unofficial payments to public health care providers; 5) a significantly fragmented network of hospitals, which negatively affects the quality of medical care; 6) lack of access to health care for the population with low incomes; 7) as well as the lack of adequate coverage of the population with medicines.

In order to improve public spending in this sector in the short term, the following public policy measures are recommended: 1) finalize the development of a new health development strategy that provides the resources necessary to implement reforms in the sector; 2) an increase in state budget expenditures on health care provided for in the new strategy in order to reduce the population’s spending on basic medical services; 3) creation of a strategic procurement agency that combines the functions of payment and planning of relevant medical services.

In the long term, the following public policy measures are recommended: 1) establishment of a nationwide e-health and clinical information system; 2) development of a master plan for the development of health infrastructure with the necessary infrastructure, human resources, equipment and methods of patient care; 3) improving the processes of strategic procurement for healthcare needs by developing a system of accountability and transparency in the conditions for concluding contracts, introducing uniform quality standards and procurement control mechanisms; 4) as well as the consolidation of hospitals at the regional level.

Education

Government spending on education was 5.6% of GDP in 2019 and 6.2% of GDP in 2021. In 2019, the government spent the largest share of total education spending on general secondary education (about 65%), it was followed by preschool education (21%), higher education (10%) and secondary specialized education (4%).

The quality of education in the country needs to be improved. Thus, by the age of 18, a student in Uzbekistan reaches only 62% of his productivity potential.

At the same time, there are significant differences in education spending per student at the regional level. For example, in the city of Tashkent, spending per student in the general secondary education system was 2.15 million soums, and in Navoi it was 3.7 million soums in 2019, which is a 72% increase.

In order to improve public spending in this sector in the short term, the following public policy measures are recommended: 1) implementation of measures that pay special attention to the quality of education, equal access to education and the accountability of the education system to the public; 2) the introduction of nationwide systematic assessments of the quality of education, which are currently being tested; 3) implementation of a strategy to restore knowledge lost due to school closures and learning at home during the COVID-19 pandemic.

In the long term, the following public policy measures are recommended: 1) improving the qualifications of teachers and reforming the system for attracting, retaining and developing teaching staff at all levels of education (preschool, general secondary, secondary specialized and higher education); 2) development and implementation of measures to harmonize education with the needs of a rapidly developing economy, including the growing need for more modern skills and knowledge; 3) paying special attention to updating and improving curricula, teaching skills and student assessments; 4) implementation of strategies for the institutional transformation of the education system to ensure its greater operational autonomy, more targeted funding and effective management.

Social protection of the population

Uzbekistan has a comprehensive system of social protection for the population, but its effectiveness is limited by inadequate public budget spending (as of 2019), inadequate statistics, and fragmentation.

In recent years, spending on social assistance in Uzbekistan has been less than 1% of GDP (2019), well below international standards. This is explained by the fact that the allocation of funds from the state budget for social assistance was carried out not according to objective needs, but according to regional quotas.

Active employment promotion programs such as public works are a relatively new phenomenon in the country. An insignificant share of the total budget expenditures (about 0.085% of GDP) is allocated for their implementation.

The growing demographic burden requires urgent action to reform and strengthen the country’s pension system. Thus, the share of pension expenditures decreased from 5.9% of GDP in 2015 to 4.8% of GDP in 2018–2019. This indicates a lag in the indexation of pensions relative to the growth in incomes of the able-bodied population.

In order to improve public spending in this sector in the short term, the following public policy measures are recommended: 1) increase funding for active employment promotion programs to ensure access to jobs for the most vulnerable groups (for example, by providing incentives for enterprises that employ workers from vulnerable groups) ; 2) increasing funding for social assistance to cover all those in need based on a targeted approach based on the actual needs of the relevant representatives of vulnerable groups; 3) clarification of the role of various institutions involved in the provision of social protection, the appointment of a responsible body for monitoring and evaluating the effectiveness and efficiency of social protection programs; 4) as well as revision of the rules for indexation of pensions.

In the long term, the following public policy measures are recommended: 1) the establishment of a specialized ministry or agency to oversee the implementation of all social protection programs and their compliance with the national social protection strategy; 2) collection of statistical information in all areas of social protection for changes in public policy in this sector based on evidence; 3) increase retirement age, adopting a more flexible approach to accounting for pension rights, and reforming the solidarity pension financing system.

Water management in irrigation

The irrigation and drainage infrastructure of Uzbekistan is in urgent need of modernization. Almost all agriculture in the country depends on irrigation. 90% of all water used is for irrigated agriculture. According to statistics, 75% of the existing area of the drainage system needs reconstruction, 70% of water pumps require major repairs, and 66% of the entire infrastructure of the main canals require anti-filtration coatings.

Addressing these infrastructure gaps will require an investment of US$400 million per year over the next ten years to maintain water infrastructure at current service levels. At the same time, the modernization of the system will require approximately the same amount of investment. By comparison, in 2020, total capital expenditures for irrigation and drainage were only US$200 million.

Irrigated agriculture in Uzbekistan is heavily dependent on electric pumps. Pumping stations, most of which were built more than 30 years ago, consume most of the electricity in the agricultural sector and about 16% of all electricity consumed in the country.

In order to improve public spending in this sector in the short term, the following public policy measures are recommended: 1) an increase in state budget funds for the repair and maintenance of irrigation and drainage systems, as well as an increase in capital budgets to accelerate the program of their overhaul and modernization; 2) accelerate the implementation of projects that help reduce the consumption of electricity by water pumps (by replacing them with less energy-intensive models); 3) further deployment of programs that encourage farmers to use drip irrigation.

In the long term, the following public policy measures are recommended: 1) transition to per cubic meter water use tariffs with full cost recovery and to a higher level of collection of water use charges; 2) studying the experience of using micro- and mini-hydro power plants on irrigation canals as an alternative source of electricity supply in rural areas, including for the purpose of using pumps only in cases where the use of gravity (gravity) irrigation does not seem technically or economically feasible.

Water supply and sanitation services

According to national statistics, the population’s access to piped water networks is relatively high (87%), but the share of households receiving water suitable for safe consumption is much smaller (69%). Mostly built 40–50 years ago, the water and sanitation infrastructure has reached its end of life and requires extensive rehabilitation and renewal. Public spending in this sector, despite significant growth in recent years, has fallen short of the requirement to replace assets, maintain and expand water and sanitation systems to meet the needs of a rapidly growing population.

Ensuring uninterrupted service is a common and serious problem, as many water supplies operate less than 12 hours a day. Water loss in pipes reaches 30-50%. In 2016, about 3.7 million people (12% of the total population) were served by a centralized sewerage system, mainly in large cities. Wastewater is collected but generally not treated according to international standards.

In order to increase the efficiency of public spending in this sector, the following public policy measures are recommended: 1) development of tariff setting systems, determining tariffs for water supply and sanitation services for each region separately, taking into account financial affordability and incentives for efficient water use; 2) capacity development of utilities providing water supply and sanitation services, regulatory bodies, as well as Uzsuvtaminot JSC; 3) achieving the creditworthiness of the above-mentioned utilities and creating conditions for the implementation of public-private partnership projects in this sector; 4) ensuring the autonomy of utility companies and the gradual rejection of state subsidies for their activities.