Policy Brief_Uzbekistan Towards 2030: A New Social Protection Model f bunxjnse pwvc en 9 | Page 2

Uzbekistan Towards 2030: A New Social Protection Model for a Changing Economy and Society
Box 1. The social protection model of Uzbekistan
is different from other foreign models
Social protection models in various countries can be split into
two major groups.
One option is to focus more on the safety net functions of so-
cial protection and develop a generous social security system, pro-
viding universal access to basic social services and encouraging a
more egalitarian distribution of income. In this case, the scale of
redistribution policies leads to a high tax wedge in the economy
(the Scandinavian countries are examples of such a system).
The other option is to limit social spending and reduce the tax
burden in order to stimulate development of the private sector,
generate employment and, hence, improve welfare without creat-
ing an excessive fiscal burden (this model is more relevant to Asian
countries that are striving to maintain high economic growth rates
along with modest social safety nets).
Uzbekistan’s social protection model does not fall into either
of these groups, due to the conditions under which the country
started its economic reforms in the early 1990s.
• On one hand, the real sector of the economy, which was previ-
ously a part of a much larger system and which, de jure, be-
came independent, was not designed for a high tax or social
burden.
• On the other hand, the country had a developed system of so-
cial institutions, at a level comparable with rich countries. In
the early 1990s, Uzbekistan offered free health care and pri-
mary, general secondary, secondary-special and higher edu-
cation. A sharp reduction in financing of social services would
have resulted in an even bigger drop in incomes, as in 1991
the social sector accounted for over 18% of employment.
• In terms of civilizational development, the quality of human
capital and societal commitment to humanistic values, Uz-
bekistan was also close to developed economies.
Under such conditions, a sharp cut in social expenditure, even
for the sake of economic growth, was not considered, even in prin-
ciple. Since 1991, the share of social expenditure and social protec-
tion in the state budget has never fallen below 50%.
The main characteristics of the Uzbek social protection model
are still in place, while state social expenditure is around 60%. In
terms of the tax burden and social contributions, government ex-
penditure as a proportion of GDP and uniformity of the income dis-
tribution, Uzbekistan is closer to the developed economies. How-
ever, in terms of economic growth rates and GDP per capita, the
country is more similar to its Asian counterparts.
Figure 1. Taxes in Uzbekistan are considerably lower than in
Scandinavia Figure 2. As in the Scandinavian model, Uzbekistan has large
social expenditures
Figure 3. Compared to Asian countries, income is distributed
more equally in Uzbekistan Figure 4. Uzbekistan manages to have high economic growth rates
and at the same time maintain an effective social protection system
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