The FINANCIAL -- Pension funds, unemployment and education remain longstanding problems in Georgia which need to be solved. World Bank recommends indexing inflation while introducing complementary voluntary or mandatory retirement savings schemes to support coverage.
There are three main lines of reform to support employment: to strengthen agricultural productivity and facilitate agri-business; to encourage urbanization; and to develop a supporting environment for businesses. There is urgent need to take measures to enhance the education quality. This is a summary of the recommendations delivered by World Bank experts to The FINANCIAL.
Reform should strengthen agricultural productivity and facilitate agri-business, which will support rural livelihoods and economic opportunities; it must encourage urbanization through strengthened access to public services including infrastructure, health and education, since this would support the overall productivity growth needed for the expansion of exporting sectors; and develop a supporting environment for businesses so they can invest, grow in terms of size and productivity, and achieve export competitiveness. These three strategic reforms are all critical in supporting the private sector, which will have to be the main driver of job growth. All this has to be tied together by strong macroeconomic fundamentals to support higher domestic savings, help bring the costs of borrowing down, and encourage foreign direct investment in export sectors, especially labour-intensive manufacturing.
In Georgia, the overall enrolment in schools and education attainment measured by years of schooling are comparable to those in countries at a similar development level. However, the overall quality of human capital cannot only be measured by “level”, but needs to take into consideration the quality of the education.
Georgian students are not performing satisfactorily in international student assessment. There is urgent need to take measures to enhance the quality of education. Key reforms are needed in managing a high quality and motivated teaching force; improving school-based management to strengthen accountability for learning outcomes at school and classroom level; and placing an overall quality assurance system in place.
“Georgian students are not performing satisfactorily in international student assessment”
While pensions have increased even after adjusting for inflation, the point about increase in prices at the same time is a valid one. The World Bank’s position is that lack of indexation to inflation encourages ad hoc pension increases, with implications both for the state budget and also for adequacy of benefit. Our recommendations are to index the inflation while introducing complementary voluntary or mandatory retirement savings schemes to support coverage.
Typically, the introduction of pension funds would be preceded by lengthy consultations with stakeholders and active public outreach.
In line with the World Bank advice, the Government of Georgia has introduced pension payments as part of a social protection enhancements strategy in order to mitigate the negative effects of the 2008-2009 crisis and reduce poverty.
The social effects of the reform thus far have been highly important and the Georgian pension system was very successful in providing minimum pension benefits which prevented the elderly from falling into poverty, irrespective of the work history of the individual. However, the current system does not address the risk of a significant income drop upon retirement for people who have had a formal employment history and higher wage income.
Many countries in the world have additional pension employment schemes (mandatory and voluntary) which allow people to make and accumulate additional pension savings for future retirement and smoothen their income shift in transition from work to retirement.
The Government of Georgia has been undertaking additional measures to increase pension income in Georgia by increasing pension payments from the state budget. However, this is a large fiscal cost and even these measures may be insufficient for the future pensioners. Therefore, the Government of Georgia has asked the World Bank to discuss additional reform measures and mechanisms to raise pension funds and ensure future pension payments in a fiscally sustainable way and help citizens of Georgia to smooth the transition from work to retirement.
The Government has created an official Working Group comprised of senior policy makers and chaired by the Deputy Prime Minister - the Minister of Economy and MOESD, recently having created a special department to advance the reform. The World Bank is just beginning to work with the team and stands ready to provide support in this important area of reform. The Bank continues to offer assistance to the Government as the Government develops its reform agenda, particularly by providing lessons from international experience.
The Government started the implementation of the Universal Health Care programme in 2012. The registration rate is expected to reach over 90 percent in the next 3 years. This is a major step forward towards the UHC goals. However, challenges remain in terms of the benefit package particularly in terms of limited drugs coverage. Given that household expenditure on drugs is quite high in Georgia, how to gradually expand benefits within the fiscal constraint will need to be well thought out. In the meantime, improving the quality of health service delivery and improving programme efficiency will also need increased efforts.
Public Service Hall
Referring to Public Service Halls - a totally new culture of public service was created: putting citizens first. New public service halls provide an array of public services, and most services can be accessed online, even from abroad. Improvements in efficiency have been supported by a self-funding model that has enabled the registries to increase their revenues, become financially viable, and improve the services they provide.
In 2011, the Government opened the first four public service halls, in Batumi, Kutaisi, Mestia, and Rustavi. These new institutions go one step beyond the one-stop shop idea by allowing citizens to access services from various agencies under a single roof. Citizens can register property or businesses; obtain identifications, passports, and birth and death certificates; and get notary services at a public service hall. Self-service areas are available for a number of simple transactions; customers are directed either to quick service areas for simple questions or to operator desks for tasks that will take more than five minutes. Employees are intensively trained, not only in the technicalities of their work but on creating a friendly, customer-oriented environment.