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How the EVFTA will Create New Opportunities for Trade

Global MarketAfter ten years of negotiation, the European Union Vietnam Free Trade Agreement (EVFTA) came into action on August 1, 2020. The deal will reduce tariffs by 99% over the next 10 years and will provide relief from the economic drops caused by COVID-19. The market contains over 500 million individuals and is valued at 18 trillion USD. The trade relationship will enable Vietnam to compete in the global market better, especially against markets like Japan and South Korea. Currently, out of all of the countries in the Association of Southeast Asian Nations (ASEAN), Vietnam is the European Union’s (EU) second-largest trade partner behind Singapore. Compared to its regional rivals of Indonesia and Thailand, Vietnam has a stronger trade relationship and involvement in the global market.

Vietnam and the EU Ties

For exports, Vietnam relies on the EU as its largest partner. Vietnam’s exports to the EU are larger than any other ASEAN country. A World Bank study found that from 2001 to 2018, Vietnam’s exports to the EU have grown annually at an average rate of 16%, gaining it a trade surplus over the EU. According to the European Commission, these exports are mostly textiles and clothing, agriculture products like coffee, rice, seafood, electronic products, telephone sets and more.

As the agreement is implemented, both countries could see a rise in GDP and new job opportunities, amongst other positive effects. More immediately, Vietnam’s GDP will increase by 2.18-3.25%, said the Ministry of Planning and Investment. Unlike most countries, Vietnam will see positive economic growth this year – estimated to be up by 4.8%, according to a study by the World Bank. In 2030, Vietnam will see a 6.8% growth in its GDP.

Both countries will have large growths in their exports. The EU could see a $16.9 billion per year increase in exports by 2025. Vietnam is expected to increase exports by 42.7% in the first five years of the deal, mostly in farm produce, manufacturing and services. Additional domestic reforms by Vietnam could raise productivity and further increase GDP by 6.8% in the next 10 years.

Vietnam’s Participation in Global Value Chains

As Vietnam increases trade with other countries through agreements, it will become more involved in the global market. Further globalization will also push Vietnam to participate more in global value chains (GVCs), shifting away from the manufacturing market from China. The bilateral treaty signed between Vietnam and the EU will also ensure that electronics and electrical equipment (a large portion of current imports) comes to Vietnam exclusively from the EU.

Due to this shift, the EU has increased its foreign direct investment in Vietnam. The EU already was the largest foreign investor in Vietnam, with a total of 6.1 billion euros endowed as of 2017, mostly into processing and manufacturing. This investment will go towards new jobs and increased productivity by reducing the number of imports to Vietnam and shifting towards in-house production for higher gains.

To be eligible to avoid tariffs, Vietnamese products must not contain imports from other countries. In addition, agriculture must meet requirements for sanitation, meaning farmers will have to refine their growth system. The deal places especially tight regulations on the quality of agricultural and manufactured products shipped by Vietnam, pushing technological developments in order to avoid drops in efficiency.

Poverty Reduction

Over the past two decades, Vietnam has made steady progress in reducing extreme poverty. From 1992 to 2018, Vietnam’s GDP per capita increased by more than four times, pulling extreme poverty rates from 52.9% down to 2% of the population. EVFTA will continue this trend. A World Bank Study found that EVFTA is expected to reduce extreme poverty (less than $1.90 per day) by 0.1-0.8 million people by 2030, 0.7% more than the poverty-reduction rate without the agreement. Overall, this will amount to an 11.9% decrease. In addition, poverty at $3.20 per day is expected to reduce from 8% to 3.5%.

Vietnam has now broadened its poverty baseline from $1.90 to $5.50. From 2016 to 2030, developments caused by EVFTA will influence this poverty rate to drop from 29% to 12.6%, allowing Vietnam to achieve upper-middle-class status. In addition, the income gap between genders will be decreased by 0.15 percent. This difference affects low-income families the most, as they are traditionally involved in manual labor jobs where this is most prevalently seen.

This agreement will open up new territories for both the EU and Vietnam to expand into. Vietnam’s primarily agricultural economy might see large shifts into one of manufacturing and processing. This agreement is a stepping stone for Vietnam’s involvement in the global market, and it might be a sign of large changes to come.

– Nitya Marimuthu
Photo: Pixabay

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Andorra Struggles With COVID-19 Response

Andorra Struggles With COVID-19 ResponseAndorra, one of Europe’s smallest and oldest countries, does not boast full European Union membership. Instead, sandwiched between Spain and France’s 11,000 foot high Pyrenees borders, Andorra relies on integrating relations with the two countries. Yet, as Andorra’s economy and demographics differ greatly from most of the European Union, Andorra has a unique agreement with the body of countries. Unfortunately, lacking full E.U. membership and the benefits this includes, Andorra has faced struggles with their COVID-19 response.

A Unique Agreement With the European Union

As evidenced by the recent Brexit controversy, E.U. membership comes with positive and negative aspects. Entry challenges proved a significant hurdle for Andorra; therefore, it initially did not join the union. Only after the 2008 recession did Andorra arrange a special agreement with the European Union, like other European micro-states.

Due to tourism, the country’s main economic draw, and Andorra’s location on a map, some economic realities have been unavoidable. After 2008, Andorra began using the Euro and entered trade agreements slashing tariffs. However, unlike the rest of Europe, Andorra continued to restrict individual taxes. This branded the small country as a hot spot for tax evasion. This caveat kept Andorra afloat but alienated the country from the rest of Europe. Due to international pressure in 2011, the country began moving towards international tax standards.

Even though it lacks full European Union membership, Andorra still retains membership in the United Nations, the Council of Europe and the Organization for Security and Cooperation in Europe.

Does Andorra qualify for European Union aid?

Full European Union member countries qualify for aid programs. The European Union, like most international institutions, provided large amounts of COVID-19 aid–37 billion Euros in the initial program to be exact. Individual countries qualify for an additional 100 billion from the E.U. for employment assistance.

However, Andorra’s partial membership benefits to the European Union are limited to:

  1. The customs union, which is a group of countries that have agreed to charge the same import duties as each other and allow free trade between themselves.
  2. Tariff exemption to void taxes imposed by a government on goods and services imported from countries outside of the European Union.
  3. Euro use for stable and standardized currency.
  4. Access to name and tax databases.

COVID-19 in Andorra

As Andorra’s place in the European Union is unclear, so is its ability to receive COVID-19 aid. It appears that Andorra cannot and has not accessed any European Union COVID-19 aid. As neighboring Spain and France have done, Andorra implemented specific travel limitations. Uniquely, its rules included odd and even-numbered homes taking turns with short exercise periods.

Poverty in Andorra

The tough situation created by COVID-19 shutdowns and the ambiguous nature of Andorra’s relationship with the European Union have left the country exposed to further poverty. Unlike countries with widespread extreme poverty, Andorra’s poverty is specific to immigrant labor unemployment during tourism lulls and the housing crisis. Both of which, when paired with COVID-19, have the potential to drastically increase Andorra’s 4% poverty rate.

As of now, Andorra continues to encounter additional struggles with their COVID-19 response. As the post-2008 trend of strengthening relationships between Andorra and the E.U. continues, more poverty prevention aid will hopefully find its way to this small, land-locked country.

– Rory Davis
Photo: Flickr

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Personal Debt in the Czech Republic

debt in the Czech RepublicThe Czech Republic is a country cradled in Central Europe and is a member of the European Union. Despite its membership in the EU, the Czech Republic opted out of adopting the Euro in favor of keeping its own currency, the Koruna (CZK). Formerly a communist country in the Soviet Bloc, the Czech Republic adopted democratic market-oriented policies following the Velvet Revolution in 1989. With this shift toward free markets and an industrial economy, the Czech Republic experienced a credit boom in the early to mid-1990s. Unfortunately for Czech households, with rising credit comes rising debt in the Czech Republic as well.

A Closer Look at Debt in the Czech Republic

After shedding the yolk of communism in 1989, the Czech Republic embraced free-market policies focused on industrialization and the growth and privatization of business. Deregulation ensued, with particular focus placed on unshackling the banking and lending industries.

Following the credit boom of the 1990s, a reform on the lending system in 2001 provided the opportunity for a slew of private bailiffs to emerge to collect debts racked up throughout the spending boom in the previous decade. These private debt collection agencies often employ aggressive strategies to enforce repayment. The private bailiffs often pursue debts regardless of the debtor’s ability to pay. They utilize brutal strategies for recollection such as freezing bank accounts and siphoning earned income. They even enter into debtors’ homes to seize property.

How Debt Destroys Opportunity

Currently, 863,000 Czechs face at least one seizure order. This means, due to the current legal framework, their income above a certain minimum amount can be forcibly redirected towards debt repayments. This represents roughly 10% of the current population of the Czech Republic.

Personal debt in the Czech Republic can become financially crippling for many people. Those with outstanding debts have their income siphoned away to pay the interest. This leads many to enter into the black market to find jobs which would not disclose their income. This expansion of the black market is exacerbating a labor shortage within the Czech economy.

People who accumulate even small debts such as those from telephone bills may face compounding debt traps. This is a result of poor financial literacy and loose regulations on lenders and financial institutions. In addition, there are laws that make bankruptcy declaration extremely convoluted and difficult. This legal and institutional framework of the Czech debt system regressively places an undue burden upon the middle and lower classes to pay debts which they cannot afford. Thus, it stifles economic mobility and magnifies the financial hardships faced by the Czech people.

Finding Ways Out of Debt in the Czech Republic

Fortunately for many within the Czech Republic, various government and non-government solutions are being implemented. Financial literacy is critical when navigating the complex landscape of personal debt, which is one of the main services that Czech nonprofit People in Need provides. People in Need offers debt advisory services to Czech citizens to help them understand financial planning, borrowing and repayment of loans. People in Need also helps debtors legally defend themselves from unjust collections strategies as well as petition for bankruptcy. This can be an important tactic for alleviating debt in the Czech Republic.

The Czech government is also aware of these systemic issues. As of 2017, Parliament has debated bills addressing these strict policies regarding seizures and bankruptcy. Since the early 2000s, the law allows companies to better collect their loans by paying collections agencies. These agencies can cause the fees owed by debtors to skyrocket, potentially over ten-fold. This is due to costly collections processes as well as fees collected by the agencies. Both the government as well as nonprofit organizations like People in Need are working on ways to lower fees. They also work to expand access to the possibility of bankruptcy and more generous debt relief.

Conclusion

The Czech Republic serves as an important case study in national debt policy. Even a relatively rich country in Europe can still place undue financial burdens on its lower classes through inadequate lending laws and aggressive privatization of the credit industry. The work being done by nonprofits and the government should act as an example in reforming household credit markets and hopefully create a more just and forgiving landscape for lenders within the Czech Republic.

– Ian Hawthorne
Photo: Flickr

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How Health Tourism in Croatia Benefits the Economy

Health tourism in CroatiaWith over 1,000 islands and 3,600 miles of coastline, Croatia is the perfect tourist getaway. After facing devastating wars, Croatia has turned to tourism to boost its economy. Croatia’s beaches and national parks have become notable tourist attractions. In fact, 19.6% of the country’s GDP depends on tourism. The combination of its magnificent landscape and suitable healthcare has resulted in the emergence of a new type of travel in the Balkans: health tourism in Croatia.

Poverty in Croatia

The Yugoslav Wars resulted in freedom for the former states of the Yugoslavia Republic; Croatia gained its independence in 1991. The war affected the regions along the country’s borders of Serbia and Bosnia-Herzegovina. Unable to recover from the war, these regions became highly impoverished. 

In 2013 Croatia joined the European Union. While the EU typically has 8% unemployment, Croatia’s unemployment rates are much higher, reaching 15.4%. The cost of living in Croatia is higher than in other Eastern European countries, making it more difficult for those in poverty to afford what they need. To provide relief, the country has implemented its “Strategy for Combating Poverty and Social Inclusion in the Republic of Croatia.” This plan’s purpose is to improve the condition of vulnerable groups and help those that are socially excluded by offering more opportunity.

Health Tourism in Croatia

As Europeans grow frustrated with healthcare in their home countries, they travel to other countries to access medical care. This innovative and growing trend has promoted the rise of health tourism in Croatia. Market Research Future (MRFR) projects that the global medical tourism market will grow 21.4% a year for the next five years. The reasons health tourism has grown in Croatia include:

  • The health care system appeals to patients as it is both affordable and reputable. Obtaining surgeries in Croatia often costs less compared to receiving that same treatment in visitors’ home countries. Additionally, EU citizens can use their EU health insurance in Croatia.
  • The use of the internet and social media encourages travelers to visit attractive destinations like Croatia. Websites promote healthcare options while emphasizing the popular vacation spots in the area.
  • Technological advancements continue in the health care system. The quality of medical specialties in Croatia constantly progresses and ensures excellence.

The main concentration of health tourism in Croatia involves medical surgeries and wellness. Croatia specializes in popular medical procedures including plastic surgery, orthopedics and dentistry. Spa tourism encourages travelers to relax in the therapeutic resort town of Opatija. Tourists can explore the country while getting procedures all in one trip.

Future of Health Tourism

The same conflict that led to Croatia’s independence also brought about poverty and unemployment that continues to impact Croatians. In order to improve its economy, Croatia focused on tourism and created a strategy to combat poverty. Now, the country’s beautiful coastlines have become trendy destinations and health tourism in Croatia captivates vacationers. Improvements in healthcare have resulted in more Europeans flocking to Croatia for medical surgeries and therapeutic resort towns. Almost 10% of tourists visit Croatia for its healthcare, and that number is expected to grow. As the demand for health tourism in Croatia increases, this new industry can generate future economic benefits.

– Hannah Nelson
Photo: Pixabay

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5 Facts About Poverty in the Czech Republic

Poverty in the Czech Republic
In the European Union, the Czech Republic ranks second in terms of the risk of its population falling below the poverty line. A record low of 3.4% of the Czech Republic’s population is at risk of poverty according to Eurostat data. This is in comparison to the average of 10% of the European Union’s population that poverty threatens. With that in mind, here are five facts about poverty in the Czech Republic.

5 Facts About Poverty in the Czech Republic

  1. The Czech economy has been on an upward trend, which has helped young people. The improvement of the Czech economy has helped reduce the poverty rate in the country. The GDP growth rate and unemployment levels are among the best in Europe. The unemployment rate for the country was 2.9% in 2017, which ranks among the top tier in the world. The GDP growth rate of 4.4% in the Czech Republic is among Europe’s best and the GDP rose to $245.2 billion in 2018 in comparison to $186.8 billion in 2015. This has benefited young employed Czechs between the ages of 18 and 24, of whom only 1.5% were at risk of poverty in 2017. With a high labor shortage, this in turn has increased the wages young Czechs can attain.
  2. Women are at a higher risk of poverty. The Czech Republic has one of the highest wage gaps between men and women. On average, a Czech woman’s salary is 22% lower than her male counterparts. Women on a pension and single mothers are the two groups that poverty in the Czech Republic most affects. Mothers who come back from maternity leave often see a reduction in pay after returning to work, up until age 50. Women, who on average live six years longer than their spouses, often see a rise in their expenses after the death of their spouses.
  3. Education plays an important role. Education plays a large role in determining poverty status in the Czech Republic, especially among youth. Children whose parents are relatively low-skilled and low-educated are one of the highest at-risk groups for poverty in the E.U. However, children of the well-educated in the Czech Republic are among the lowest risk for poverty in the E.U. Because of the risk of poverty from their parents, some children struggle with living in adequate housing while trying to maintain their education. For those children who struggle to finish their education, SOS Children’s Villages will assist them with job training and living facilities.
  4. Measures that the new government introduced have helped. The new administration, which took power in 2014, has undertaken reforms to increase social welfare and attract financial investment. These reforms have improved the living conditions in the country which have played a role in reducing poverty. The Czech Republic also introduced an online tax reporting system that should increase revenues and decrease tax evasion. The economic reforms have resulted in a budget surplus (1.6% of GDP in 2017) and a decrease in unemployment from 6.1% in 2014 to 2.9% in 2017, as well as increased GDP per capita by over $2,000 from 2015 to 2017.
  5. Housing costs are expensive. For two straight years in 2017 and 2018, the Czech Republic had the least affordable housing in Europe according to a study by Deloitte Property Index. The average Czech worker will have to work 11.8 years in order to have enough money to be able to afford a home. This was the highest figure in the study and 59% higher than the average. Factors relating to the housing market include lack of new apartments on the market, regulatory measures by the Czech National Bank and public sentiment. However, some cities like Ostrava do have affordable housing and housing is becoming more affordable in other cities as well.

These five facts about poverty in the Czech Republic highlight a few key points. New government measures have helped in the fight against poverty as well as the growth of the Czech economy. Young people have been doing extremely well in the country which has helped bring the overall poverty rate down. However, the nation can still do more work in the fight against poverty, especially in terms of helping female workers in the country and making housing more affordable. Overall, one can be optimistic about how the Czech Republic is taking further steps to reduce poverty in the country.

– Zachary Laird
Photo: Flickr

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National Governments Fight EU Youth Unemployment

EU Youth UnemploymentIn 2019, the EU youth unemployment rate was at its lowest point in the last 10 years. More than 3.3 million young people (aged 15-24 years) were unemployed that same year, but compared with the previous year (2018), the situation looks much better. In 2018, more than 5.5 million young people were neither employed nor enrolled at an educational institution or training program. This vital change is achieved thanks to multiple EU policies and tools. It provides proper training and education, prepares youngsters for the labor market and gives them the chance to be competitive and successful. However, it is important to note that youth unemployment is 10 points higher than the average and there is a lot more space for improvement.

EU Youth Unemployment: Social and Economic Impacts

Eurostat reports show that EU youth unemployment rates are much higher than unemployment rates for all other age groups. In January 2019, jobless men and women above the age of 25 are 5.7%. As for the same period, rates among youths are 14% which is almost three times higher.

The unemployment rate is an essential indicator of both social and economic dimensions of youth poverty. Dangerously high unemployment rates show that young people can’t find their place in the labor market. Thus, they are not an active part of society. Jobless youngsters most often live with their parents, which destroys their learning motivation and civic engagement. Additionally, the lack of financial independence prevents them from going out and traveling. The combination of these factors kills their drive to find a job that creates even deeper despair on the emotional level.

A vicious circle starts forming around these young people who lose interest in social causes, politics and innovations. Once they lose their drive, long term unemployment is just the next step, according to studies in the EU. Unfortunately, many teenagers and twenty-something college graduates do not find jobs right after leaving the education system.

EU Institutions and National Governments Tackle Youth Unemployment

Young people’s labor market performance has indeed improved significantly over the past few years. According to the European Commission, there are 2.3 million fewer young unemployed now than five years ago. Around 1.8 million young people started apprenticeships, education or other kinds of training. Youth unemployment had decreased from 24% in 2013 to 14% in 2019.

The significant decrease of EU youth unemployment is possible through a combination of EU and national governments’ efforts to fight this phenomenon with various measures. This includes the promotion of a life-cycle approach to work, encouraging lifelong learning, improving support to those seeking a job and free training programs.

The latest research shows that apprenticeship and traineeship programs help prepare young people for the labor market and build relevant skills. Coordinating social policies like education or youth engagement and economic policies like employment rates is hard but a balanced governmental approach. With support from the local business in different countries, the number of youth employment increases in recent years. New partnerships have been set up with social partners, youth services and youth organizations as well.

These efforts should work to tackle EU youth unemployment by helping students and young professionals build attractive resumes for businesses operating on the global labor market. Nowadays, finding a job is more challenging than ever. Global competition requires all kinds of skill-sets from newcomers. In addition, these programs are designed to reinforce youngsters’ positions at this entry point. Besides, NGO initiatives and partner organizations create platforms for online education. The platforms are for people to take specialized courses without the need to enroll in an official university program. It’s easier, faster and very practical. Usually, such NGOs cannot provide certificates or diplomas, but the good news is businesses don’t need one. If the young person shows skills and a can-do attitude, he/she is hired.

The Changing of European Higher Education

The European conservative format of higher education is also changing slowly. More universities invite businesspeople to the campuses. This way the students can get the chance to meet entrepreneurs with hands-on experience and learn in a more informal environment. This type of education is most popular in the U.S., while formal education in Europe is still lagging in this regard. But times are changing, dynamics of life, work and study are different, and all involved parties are adjusting. There is no doubt that universities should work hand in hand with businesses to ensure a prospective future for young people.

– Olga Uzunova

Photo: Flickr

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10 Ways the EU Supports the Least Developed Countries

10 Ways the EU Supports the Least Developed CountriesThe European Union (EU), comprised of its 27 member states, is the biggest economy in the world. As such, the EU is the biggest exporter and importer of goods and services provided by third parties (non-union members). On the other end of the spectrum, the world’s Least Developed Countries (LDCs) account for only 2% of the global economy and only 1% of global trade in goods and services. The EU’s social policies have always been supportive of these LDCs. Yet, they acknowledge that economic policies and opportunities are most effective in supporting these countries. Even though the LDCs function in the global economy, they struggle with exports (while obtaining the full benefits). Because of this, the EU began allocating resources to help these countries. The EU also opens the European market to their products and services. Here are 10 ways the EU supports Least Developed Countries.

10 Ways the EU Supports the Least Developed Countries

  1. No Customs Taxes, No Quotas: LDCs exporters are not taxed when accessing the EU market. There are no limits on how much LDCs can export to member states without this taxation. This applies to all products or services, as long as it complies with the EU’s quality standards. The only exception is the trade of arms and ammunition.
  2. EU Aid for Least Developed Countries: The EU encourages the LDCs to increase exports and production by investing in their local economies. The Aid for Trade is the EU’s stimulus for the LDCs to take on infrastructural projects such as roads, bridges and ports. It is believed this aid helps the countries develop further and become more competitive.
  3. Least Developed Countries Get Complimentary Access to the EU Market: The EU’s trade policy for LDCs differs from other developing countries. In some cases, it is even more accommodating than their partnerships with traditional allies. By giving LDCs uninhibited access, the EU is providing a competitive advantage over other third parties. This way, LDCs have more opportunities to trade with the EU than stronger economies. Hence, this gives them a better chance to grow.
  4. Full Access for Services: The EU makes it easy for companies in the LDCs to sell innovative services. For example, engineering, management advising and IT. There is dual reasoning behind this policy. First, it creates a more competitive market. Second, it helps LDCs enhance their local technology and engineering service sectors.
  5. Opt-out from World Trade Organization’s Patents: The EU created unique policies that apply only to LDCs to encourage innovation. The LDCs may request an opt-out from the World Trade Organization’s (WTO) rules on intellectual property. This could include things like expensive patents or designs. These things can block their developmental progress. Further, the EU gives LDCs access to otherwise patent-shielded drugs, to ensure that people have access to the medications they need.
  6. Governmental Support and Counseling: The EU supports the LDCs’ governments, so they can make trade a central part of their national agenda and plan to develop their economies. As part of this effort in 2015, the EU pledged €10m to a program designed and guided by top European economists.
  7. No More Unfair Competition Among Farmers: Subsidizing local farmers to export is a common practice around the world. As a result, farmers in weaker states struggle to compete; sometimes they even declare bankruptcies. In 2015, the EU and Brazil discussed a new deal with the WTO. This deal would scrap the unfair practices and export subsidies to farmers. The deal is still in process, but it hides an excellent premise for all the LDCs that would profit from it on the background.
  8. Backing the Fair Trade: EU trade deals with the LDCs that specially designed products to promote fair and ethical trade of products. This includes cocoa, coffee, fruits and other foods; these products are mainly supplied from these countries. Additionally, the EU supports the LDCs by partnering with the International Trade Centre. It invests in projects like 1 RUN that trains small-scale farmers in the LDCs to produce their crops more sustainably.
  9. The Trade Facilitation Agreement: The EU is the loudest supporter and promoter of the WTO’s Trade Facilitation Agreement. It will make it much more manageable and more affordable to clear goods through customhouses – giving crucial administrative relief to exporters from the world’s poorest countries.
  10. EU Supports the Least Developed Countries on the World Stage: The Union is a prominent member of the world’s international organizations, including the WTO, the UN, and the United Nations Conference on Trade and Development (UNCTAD). In each one, the EU prioritizes the needs of the Least Developed Countries and encourages other members to open up their markets and provide finance to help their advancement.

 – Olga Uzunova

Photo: Pexels

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An Update on the Europe 2020 Strategy on Poverty

Europe 2020 strategy on povertyEach decade the European Union (EU) establishes an agenda to achieve goals for growth and social well-being. For the previous decade, the EU strategy focused on “smart, sustainable and inclusive growth” led by advancements in five main areas: employment, R&D and innovation, climate change and energy, education, poverty and exclusion. These five factors were essential in strengthening the EU economy. It also prepared the EU’s economic structure for the challenges of the next decade.

The Europe 2020 strategy set the target of lifting “at least 20 million people out of the risk of poverty.” To achieve this, the EU’s agenda included actions in stimulating education programs and employment opportunities. These actions aim to help Europeans at risk of poverty develop new skillsets. They also help Europeans find jobs that position them better in society.

For the last 10 years, poverty reduction has been a key policy component of the EU. In 2008, Europe had 116.1 million people at risk of poverty. As a result, EU members sought to reduce the number of poor Europeans to less than 96.1 million by 2020. Yet, as of 2017, the number of people at risk of poverty had only decreased to 113 million. So, what were the challenges that kept the EU from achieving its goal?

Employment in Rural Areas

The main tools the Europe 2020 strategy relied on greater access to education. Eurostat research shows that employment is crucial for ensuring adequate living standards. Furthermore, it provides the necessary base for people to live a better life. Although the EU labor market has consistently shown positive dynamics, the rates didn’t meet the Europe 2020 strategy target employment rate of 75 percent, especially in the rural areas. Jobless young people in rural Europe make up more than 30 percent of people at risk of poverty. As a result, the lack of new job openings and career paths in rural areas hindered individuals from escaping poverty and social exclusion.

Local Governance and Application of EU Strategic Policies

According to reports from 2014, the EU’s anti-poverty strategy was interpreted differently in every country. There is no common definition of poverty across all 27 member states. Therefore, the number of people at risk and their demographics vary. Moreover, EU policies were not implemented in all countries equally. Regional administrations and rural mayors are responsible for implementing EU anti-poverty policies. This localized approach resulted in a lack of coordination that was needed to correctly and efficiently realize the EU’s tools and strategies.

Education: The Winning Strategy Against Poverty

Despite these challenges, the EU showed that poverty can be addressed through education. Seen as key drivers for prosperity and welfare, education and training lie at the heart of the Europe 2020 strategy. Since higher educational attainment improves employability, which in turn reduces poverty, the EU interlinked educational targets with all other Europe 2020 goals. The Europe 2020 strategy did in fact achieve its goal of reducing the rates of people leaving education early to less than 10 percent in several EU countries. It also increased the number of workers having completed tertiary education to at least 40 percent. Both of these goals provide reasonable evidence of downsizing the risk of poverty by providing access to education.

Today, upper secondary education is the minimum desired educational attainment level for EU citizens. A lack of secondary education presents a severe obstacle to economic growth and employment in an era of rapid technological progress, intense global competition and specialized labor markets. Europeans at risk of poverty profit the most when given access to secondary education because it provides a path to staying active in society and learning marketable skills. The longer young people from rural areas pursue academic goals, the higher the chances of employment.

Moving Forward

As the Europe 2020 strategy showed, universal access to education has the potential to impact poverty across the European Union. Gaining new skillsets is one of the best ways to provide Europeans at risk of poverty and social exclusion with more opportunities for development and prospects for a better life.

– Olga Uzunova 
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Uzbekistan’s Economic Transformation

Uzbekistan’s Economic TransformationAlthough the poverty rate in Uzbekistan is only 14 percent, the standard of living and GDP per capita are low. The government of Uzbekistan has partnered with the World Bank to undertake a massive economic transformation. It hopes to develop its economy, spur investment and improve livelihoods. The government is improving infrastructure efficiency and social services to achieve high-middle-income status for its residents by 2030. This is a part of the development strategy called Uzbekistan Vision 2030. The World Bank, International Finance Corporation, Asian Development Bank and the European Union have worked cooperatively to facilitate Uzbekistan’s economic transformation.

Massive World Bank Loan

The World Bank has worked with Uzbekistan since 1992 and funded more than 20 projects, totaling $3.6 billion. The bank recently approved a $500 million loan to stimulate private sector growth and job creation. Uzbekistan’s transformation into a successful market economy will ultimately result in a higher quality of life for its citizens. Currently, Uzbekistan’s GDP per capita stands at $6,900, almost one order of magnitude lower than the United States’ GDP per capita of $54,541. Uzbekistan believes that poverty levels will shrink as a direct result of developing its private sector economy and boosting GDP per capita.

Cyril Muller, World Bank Vice President for Europe and Central Asia, said that the loan will “boost growth, promote transparency and accountability and improve services for citizens.” In 2018 and 2019, Uzbekistan reduced trade and investment barriers, decreased strict business regulations, loosened its currency and opened markets to spur investment and boost imports and exports. These recent changes to its economic policy show Uzbekistan’s commitment to loosening its controls on prices, production and foreign investment.

Livestock Sector Receives Support

The European Union and the World Bank jointly funded a five-year project in 2019 aimed at developing Uzbekistan’s livestock sector. More than $150 million will go towards addressing supply chain problems such as low productivity, substandard animal health services, financial constraints on research institutions and poor access to markets for smallholder farmers. The Minister of Agriculture of the Republic of Uzbekistan, Jamshid Khodjayev, said that this project aims to increase the efficiency of the livestock sector by increasing the number of small farmers participating in commercial value chains, improving productivity and ensuring the sustainability of incomes.

The project will also support credit lines for farmers and other workers in the livestock industry. The agriculture industry employs about a quarter of the population. Livestock is an important agricultural product in Uzbekistan. About 90 percent of “livestock production relies on small farm holdings” and about 4.7 million smallholders depend on livestock for a living.

Energy Sector Boosts Agribusiness

“More than 126,000 MWh of electricity and 50 million cubic meters in natural gas” are available for use every year thanks to $50 million of project financing to improve energy sector performance and competitiveness. Since 2012, more than 560 farms and agribusinesses received credit lines made available through six financial institutions. Investment portfolio assets include agricultural machinery, greenhouses, livestock, orchards, vineyards and vegetable farming.

The poverty rate in Uzbekistan declined from 27.5 percent in 2001 to 14 percent in 2016 as a result of strong economic growth. GDP growth was a robust 8 percent for 2015 and 2016. The business environment has improved significantly due to a more open economic policy. Uzbekistan’s economy will continue to see improvement from internal changes to business-related statutes, like reducing the number of days to register businesses and property. Support from multilateral banks like the World Bank will further promote Uzbekistan’s economic transformation.

– Lucas Schmidt
Photo: Flickr

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8 Facts About Education in Spain

Education in SpainThe Spanish education system does not match up to the standards of the rest of Europe or other developed nations. However, the government is doing its best to put measures in place aimed at improving these standards. Below are eight facts about education in Spain:

8 Facts About Education in Spain

  1. The current system of education in Spain, also known as the Ley Orgánica de Educación (LOE), or the Fundamental Law of Education, means that education is free and compulsory between the ages of 6 and 16. This system also typically requires parents to pay for books and other materials such as uniforms.
  2. It is estimated that as of 2016, 98.3 percent of the population in Spain is literate. This is largely attributable to the 10 years of compulsory education.
  3. The Ministry of Education, Culture and Sport generally oversees education in Spain. However, each of the 17 autonomous regions in the country can make most of the decisions regarding their systems.
  4. Schools are categorized in three ways, there are state schools that are fully funded by the state, privately-run schools which are funded partly by the state and partly by private investors and purely private schools. A majority of Spanish students, 68 percent to be exact, attend state schools. This compares to only 6 percent of students who attend purely private schools.
  5. There are four levels of education in Spain. The first is a nursery or preschool, which is optional. Next comes six years of primary, which is the first stage of compulsory education, followed by compulsory secondary education for four years. Finally, there is an optional level of upper secondary education. At the primary level, the average number of students per class is around 25. While in secondary, the average number of students per class is around 30.
  6. A 2019 study by the Organisation for Economic Co-operation and Development (OECD) shows that Spain experiences more class time than both the European Union and OECD averages. The difference is more pronounced in high school, where Spain’s class time per year is 1,045 hours. This compares to the EU average of 893 hours, while the OECD average consists of 910 hours. This doesn’t seem to have any positive outcome, considering Spanish students perform worse on average than other students regarding the Program for International Student Assessment (PISA) test. PISA experts believe the problem lies in the teaching methods, as Spanish students tend to memorize information instead of trying to find their own solution to problems.
  7. From pre-primary to secondary education, the enrollment rate was above 90 percent at each level in 2017. However, for tertiary education, the enrollment rate falls to 88.85 percent during the same period. Again, this is attributable to the fact that tertiary education is neither compulsory nor free. Interestingly, more girls than boys enrolled at each stage of education. This includes a marked difference at the tertiary level where the enrolment rate for females is 97 percent compared to 81 percent for males.  However, Spain also faces the greatest number of school dropouts in the EU.
  8. The government expenditure on education has steadily declined since 2009, including spending of 4.87 percent of the GDP on education, compared to 4.21 percent in 2016. This puts makes Spain on the tail-end of European countries when it comes to governmental education spending

While there are positives surrounding education in Spain, the situation requires additional efforts. With increased investment by the government and improved policies, schools will be able to afford more resources, hire more teachers and reduce the ratio of students to teachers. In doing so, students can receive more personalized attention and a better academic experience. Further, this will improve the quality of education and possibly reduce the time spent by students in the class. Finally, these enhancements will likely decrease the unemployment rate and greatly improve the quality of life in Spain.

– Sophia Wanyonyi
Photo: Wikimedia Commons

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