The MDGs in the European Region and Beyond: A Holistic Approach Needed to Correct Uneven Progress

The regions covered by the United Nations Economic Commission for Europe (UNECE) -- the whole European continent, North America and Central Asia -- are characterized by a tremendous diversity in levels of economic development. While most countries of Western Europe and North America have levels of gross domestic product (GDP) per capita well above $20,000, for Eastern Europe, the Caucasus and Central Asia (EECCA) and South Eastern Europe (SEE), the level is below $10,000. Some countries are emerging market economies, thus very close to the corresponding average GDP per capita of Latin American countries and some better-off African countries, such as Egypt (above $4,000). Others have much lower levels of income; for example, Tajikistan has the same level as Rwanda (about $1,200) and in Moldova, the income level is close to that of Ghana ($2,000).

This situation is reflected in the uneven progress with the Millennium Development Goals (MDGs) within the UNECE region. While the MDG targets have largely been reached in North America, Western and Central Europe, many Goals are still a challenge for most of the EECCA/SEE countries. Overall, these countries recorded sustained economic growth between 2000 and 2005, largely due to a favourable global environment, including low interest rates and high commodity prices and, to a much lesser degree, to institutional reforms and their further integration into the global economy.

Degrees of achievement. Overall, this economic performance has reduced the level of poverty (MDG 1), but in an uneven manner. In the resource-rich countries, the benefits of growth resulting from commodity exports have not trickled down sufficiently to the poorest sectors of the population, due in particular to a lack of investment in new job-generating activities and an insufficient redistribution of the surplus through income transfers or targeted social programmes. For low-income countries, the significantly lower growth rate has so far not been mitigated by the level of official development assistance (ODA) commensurate with the financing needs of these countries for substantial poverty reduction. Another major reason for the persistence of poverty is the employment situation. With very few exceptions, such as Armenia, Moldova and Ukraine, the activity rate between 2000 and 2005 in EECCA countries stagnated and even declined in some cases. Overall, it has stayed within the range of 45 to 55 per cent, except for the Russian Federation, where it is stable at 66 per cent.

The territorial and ethnic dimensions of poverty also need to be considered. For example, in Kazakhstan, the proportion of the population living below the national poverty line varies between less than 3 per cent in the main cities (Almaty, Astana) to more than 25 per cent in some regions in the west and the south of the country. In Albania, Romania and Serbia, the percentage of those living on under $2 per day is between 20 and 40 among the Roma communities, while the same indicator is below 5 per cent for the rest of the population. While a trend towards poverty reduction can be observed in the EECCA/SEE countries, there is still a large proportion of the population subject to relative poverty, with part of it still living in absolute poverty (under $2 a day). People in rural areas are particularly affected, as well as the unemployed and unskilled labour, ethnic minorities, retired and elderly persons, single-parent households and persons with health problems.

Additional progress is also needed in order to achieve equal opportunities for men and women (MDG 3). Women's jobs are increasingly concentrated at the lower-end of the labour market, with only a moderate share of women in managerial positions. Gender inequality in employment, marked by lower wages, combined with a deterioration of public services, including childcare facilities and a move towards market-based pension systems, make women more prone to poverty. The feminization of poverty is especially seen among older women, single mothers and those living in large families. Furthermore, the gender-pay gap is particularly high, around 30 to 50 per cent, in such countries as Armenia, Georgia, Kazakhstan, the Russian Federation and Tajikistan. This gap has not declined even with recent economic growth, with the exception of a few countries, such as Armenia and Ukraine. Women face even higher inequalities in the political sphere: their participation in national parliaments is still marginal, with only three countries of the EECCA/SEE region showing a percentage higher than 20 per cent -- Belarus, the former Yugoslav Republic of Macedonia and Moldova -- while in eight countries, the share remains well below 10 per cent.

While the region shows a declining pattern in child mortality (MDG 4), global estimates suggest that in a number of EECCA/SEE countries, the pace of decrease is not fast enough to achieve the target by 2015, i.e. reducing child mortality by two thirds. In Azerbaijan and the countries of Central Asia, it is estimated that 6 to 10 children out of 100 do not live to reach the age of five; this points to significant deficiencies in primary health care.

Concerning the spread of epidemics (MDG 6), recent estimates by the Joint United Nations Programme on HIV/AIDS (UNAIDS) show that the number of people living with HIV in EECCA countries is about 1.6 million, compared to 630,000 in 2001. The Russian Federation and Ukraine are the two most affected, accounting for almost 90 per cent of newly reported HIV diagnoses in 2006. Another major health problem affecting both EECCA and SEE countries is the re-emergence of tuberculosis. Its incidence rates are particularly high in Central Asia, between 120 and 140 per 10,000 persons per year, with a peak of almost 200 new cases in Tajikistan in 2005 (as compared to an average of 20 in the European Union countries). Access to safe drinking water (MDG 7) remains a problem in a number of EECCA/SEE countries. The percentage of households reached by piped water is usually more than 80 per cent of urban dwellings, while it is often very low in rural areas. In ten countries of the region, less than 30 per cent of rural dwellings have piped water, with a predictable impact on public health.

The achievement of the MDGs is still a relevant concern for the EECCA region, and some countries of Southeast Europe. It is therefore crucial to consider the overall approach to economic and social policies, which can best accelerate progress towards achieving the Goals in these regions. While growth is a key factor for poverty eradication, it is unlikely to prove sufficient for attaining a number of targets. This is especially true for those that relate to non-income aspects of poverty, such as regional, ethnic and gender disparities, and inequalities in the access to education and health systems.

An inclusive development process. Addressing these key issues for an inclusive development process calls for an holistic approach -- going beyond the conventional emphasis on macroeconomic stabilization policies, combined with specific measures targeted to the poorest segments of the population. What is missing in such an approach is a focus on the need to direct more investment into human capital. Investing in health and education services, and in improving the situation of women as an important resource for the economy, is indeed crucial for addressing the needs of the poor in the short term and putting growth on a more sustainable path in the medium and long term.

The current growth dividend and the resources being made available by high commodity prices in some EECCA countries are not being sufficiently directed towards such human capital investment. Even in these resource-rich countries, access to quality education and health services is increasingly determined by income levels, which is mainly due to the privatization of many of these services. If not countered, this selective access may not only reduce longer-term growth, but also lower the probability of achieving a number of MDGs. In the low-income countries of the region, this risk is aggravated by tight budgetary constraints, which have led to significant cuts in public expenditures. As these countries rely on significant resource transfers in the form of ODA, there is an urgent need for the aid levels to be increased, but these must also be better targeted to specific social programmes for the poorest populations and, more broadly, to investment in human capital.

In conclusion, an inclusive development process in the region requires a policy mix that combines macroeconomic policies to put growth on a sustained path with structural policies to maximize job creation through geographical and sectoral diversification of activities, and social policies geared towards combating gender and ethnic discrimination, as well as ensuring universal access to education and health. The external environment should not be omitted in such policymaking, with two major concerns in mind. One is to address the unresolved political conflicts in the region, as they are a major growth-limiting factor and affect the poor in particular. The other is to foster subregional and regional economic integration, since keeping the borders open and facilitating trade are also powerful factors that influence growth and poverty reduction.

UNECE contributes to this latter objective of economic cooperation and integration, in particular through its activities in trade facilitation and border-crossing, as well as pan-European and Euro-Asian transport links, which are directly related to the targets on international trade and landlocked countries as contained in MDG 8. Through its environmental programme and its gender-related activities, UNECE also contributes to the achievement of MDGs 3 and 7, respectively. Furthermore, as stated in its 2005 report on reform, the UNECE ensures the regional monitoring of MDG trends and offers a platform for all stakeholders to share their information, views and experience in the implementation of the MDGs, which are still a challenge for a significant number of its Member States.