[asia-apec 1588] World Bank Report - Post Soviet Poverty

[APEC Monitoring Group]

Poverty Skyrockets in Former Soviet States

By HANS GREIMEL
Associated Press
09/19/00



 PRAGUE, Czech Republic -- Poverty in countries of the former Soviet Union
has increased tenfold since the collapse of communism, the World Bank
reported Tuesday.
In its first study of poverty and inequality in Eastern Europe and Central
Asia, the international lending institution said it was disappointed its $35
billion in loans to the region have not paved a smoother transition to a
free market economy.

"It's clear that in a system where the government is weak, the overall
effectiveness of our loans is not, and can't be, as effective as in areas
with stronger, efficient governments,'' World Bank Vice President Johannes
Linn said in releasing the 500-page study at a press conference.





"It's disappointing, and with the benefit of hindsight, we would have done
some things differently,'' Linn added.

Meeting for the first time in the capital of a former communist country, the
World Bank, along with its sister lending organization the International
Monetary Fund, hope to showcase the Czech Republic as a former Iron Curtain
success story.

But while the Czech Republic is a front runner to join its rich Western
neighbors in the European Union, its eastern neighbors are still reeling
from the collapse of the Soviet Union.

In the former Soviet states alone, cumulative economic output plunged nearly
50 percent over the last 10 years, while output in other Eastern Europe
countries shriveled by 15 percent, according to the World Bank.

All that contributes to a population stuck in unprecedented poverty, with
roughly 21 percent living on less than $2 a day level in 1998, compared to
only 2 percent in 1988.

Tajikistan topped the list, with just under 70 percent of its people living
in poverty. At the other end were the Czech Republic and Slovenia, where
less than 5 percent of the populations are poor.

Russia was in the middle of the pack, with roughly 20 percent living in
poverty.

"Many in the region weren't poor 10 years ago,'' said World Bank economist
Ana Revenga, who co-authored the report. "They had jobs, livelihoods,
expectations for pensions, and then had the rug literally pulled out from
under them overnight.''

While maintaining the World Bank's loans to the region were still
worthwhile, Linn said they would have been more effective had the Bank
required more local political participation in the reform efforts and
focused more on fostering social safety nets for the poor.

That would have entailed closer work with other non-governmental
organizations, Linn added.

In the meantime, the World Bank has fine tuned its lending criteria to
refuse loans to countries with high levels of corruption.

"In the end, the government needs to want to make changes, and when that is
not the case, then we stop lending,'' Linn said. "It's a learning process.''