Updated by Bolotbek Orokov , Artiom Sici on 08.10.2018
The social protection system in the Kyrgyz Republic has been undergoing a series of reforms following the collapse of the Soviet Union in the 1990s. With limited financial resources, institutional framework, and programmes, the system, which still retains some features inherited from the former state, has faced difficulties in terms of meeting the population’s needs in a society transitioning to a market economy. Despite the challenges faced, the current level of social protection system in the Kyrgyz Republic is relatively broad in its scope. The Kyrgyz Republic ratified the ILO Convention on Maintenance of Social Security Rights, 1982 (No. 157) in 2018, and has implemented Assessment Based National Dialogue on Social Protection in the period between2016-2018.
The national legislation covers risks in the case of old age; disability; unemployment; employment injury; health care; sickness; as well as family, maternity and survivors’ benefits. The system includes social insurance schemes (contributory old-age, disability and survivor pensions, as well as health insurance), employer’s liability schemes (employment injury, unemployment, maternity, and sickness benefits), social services, and social assistance schemes (unemployment, non-contributory old-age, disability, and survivors’ benefits).
Although broad in scope, the system faces challenges in ensuring effective coverage and adequacy. The coverage of mothers and new-borns at 23.8% is among the lowest in the region, despite the fact that Kyrgyzstan has one of the highest maternal mortality rates in the region. In context, a country where child poverty (children under the age of 6) measured 43.1% in 2015, almost 10 % higher than overall poverty rate (32.1%), only 17.8% of households with children received child benefits. Pension coverage of retired workers, as well as coverage of older people without (sufficient) employment-based insurance history, is near universal. Recognising the fact that the average replacement rate is declining, and the average old-age pension is only just above the subsistence minimum threshold, the Government is planning to increase the levels of pensions, in line with the recommendations of the Assessment Based National Dialogue on Social Protection. Similarly, Basic Health Insurance is comprehensive and near-universal, playing a critical role in access to health and national Social Protection Floors. However, the need to improve the quality of medical services and expand the health service network was emphasised in the national dialogue on social protection.
Because of a lack of access to work based on employment contracts and to basic income, informal work or migration are becoming coping strategies for many. Informality is on the rise, accounting for 71.8% of total employment in 2014, up from 60.2% in 2002. The rate is higher among men than among women, and higher in rural, as opposed to urban areas. This creates pressures on the social insurance system in terms of its sustainability, but it also has implications for a significant number of workers who are not insured against risks, both now and in future. It is estimated that between 15% and 20% of the population works abroad. Countries include the Russian Federation, South Korea, Kazakhstan, and Turkey. While remittances act as a buffer against poverty, migration causes concerns related to the social protection of migrant workers, as well as their families who remain at home.
The total social protection expenditure, including health, in 2014 was 9% of the country’s GDP. Of the total public social protection spending by guarantee, without health, 9.0 % was for older persons; 3,1% for the population in active age (sickness, maternity, employment injury, disability), 2.5% for general social assistance, and 1,2% for children.
The Kyrgyz Republic joined the ILO’ s Global Flagship Programme on Building Social Protection Floors for All in 2016. Recognising the need to strengthen the existing system and expand it progressively, the participants of the assessment based national dialogue identified the following priorities:
- Improving the adequacy of pensions and social allowances/child benefits, unemployment, and maternity benefits, as well as extending their coverage to ensure that minimum income guarantees are met
- Improving the accessibility, quality of, and coverage in regards to health care services
- Developing mechanisms for the transition from informal to formal labour relations
- Developing a network of community-based social welfare services for children, children and adults with disabilities, elderly, and left behind families of migrants
The national legislation of Kyrgyzstan covers risks in case of old age; disability; unemployment; employment injury; health care; sickness; as well as family, maternity, and survivors’ benefit. The system includes social insurance schemes (contributory old-age, disability and, survivors’ pensions, as well as health insurance), employer’s liability schemes (employment injury, unemployment, maternity, and sickness benefits), social services, and social assistance schemes (unemployment, non-contributory old-age, disability, and survivor benefits). Persons who did not accumulate sufficient years of contribution to be eligible for social insurance benefits are eligible for social old-age, disability, and survivor benefits.
The social insurance system provides cash benefits to workers, self-employed persons, and farmers in the event of old age, disability, and death of the breadwinner. Pensions are the main form of social insurance benefit. There are three main types of pensions: an old-age pension, a disability pension, and a survivor pension. In addition to this, there are provisions for voluntary pension insurance and funeral grants.
The social insurance system is funded by contributions paid by employers (17.25% of wage) and employees (10% of wage). Of the total contributions (27.25% of gross wage), 25% is used to finance pension insurances (23% to the insurance component and 2% to mandatory individual savings accounts), 0.25% to health care of workers (in sanatoriums), and 2% to health insurance (medical services). Of the 10% of the wage employees themselves contribute, 2 % is allocated to their mandatory individual savings account.
Self-employed workers contribute 10% of their income, of which 9% is allocated to pension insurance and 1% for health insurance (medical services). Since January 1st, 2015, farmers holding properties with a total area measuring less than two hectares contribute 0.5% of the average regional or urban wage. Farmers holding properties of two to ten hectares pay 1% of the average regional or urban wage, with those holding more than ten hectares contributing 2%.
The social security schemes for working persons cover only those employed in the formal sector. This is troubling because the number of informal workers is very high – informality is estimated at 71.8% - leaving a large number of people without coverage. According to the National Institute of Data, in 2012 most informal workers were engaged in farming, retail, construction, manufacturing, and transportation.
Workers employed with labour contracts are required to participate in the social insurance scheme. Some farmers and self-employed workers often do not participate because of a lack of income, a lack of awareness of the benefits of social insurance schemes, as well as a lack of trust in institutions, to deliver access to said rights and benefits both now and in the future. In addition to this, effective and equitable tools for monitoring contributory payments are not in place.
Compulsory Health Insurance includes basic, compulsory, and voluntary health insurance pillars for medical care services. The contribution rate is set at 2% of the workers’ wage and is paid by the employer. Apart from employed nationals, others such as self-employed people and non-Kyrgyz citizens residing in the Kyrgyz Republic can also join the compulsory medical insurance scheme, as long as they individually pay contributions.
Employers are required by law to ensure employees against liabilities for injury and disease arising due to working conditions. They are also required to pay maternity benefits to formally employed women. Injury and disease benefits are directly paid by the employer through their own resources. For the first 10 working days, maternity and sickness benefits are paid by the employer, while from the 11th working day onwards, these are paid for from the State budget.
The Kyrgyz Republic was amongst the first countries in the Commonwealth of Independent States (CIS) to reform its social assistance system by applying categorical approaches. The reform took place between 1995-1998. A new pillar of the social protection system was introduced combining categorical and targeted approaches to reach the most vulnerable groups of the population. Thus, currently, the social assistance system includes non-contributory benefits and targeted benefits provided to certain groups of the population. These are divided into three types of support: first, social allowances (cash benefits) financed by state or local budgets; second, health assistance for all Kyrgyz nationals; and third, assistance for unemployed persons through cash benefits and active labour market programmes.
Social service is an activity that aims to provide social and legal assistance, as well as placement in residential care and rehabilitation to Kyrgyz nationals living in difficult circumstances.
Social services are regulated by national legislation and predominantly rely on residential institutional care for older people, children and adults with disabilities, children with no parental care, and children deprived of parental care. Day care centres for children and adults with disabilities are in the embryonic stage of development, as well as emergency psychological counselling centres and social support services provided by mobile teams.
The social service system includes the following types of facilities:
- residential care facilities for older people, children and adults with disabilities, children with no parental care and children deprived of parental care;
- day-care centres for elderly, children and adults with disabilities;
- centres with mobile teams for in-home care provision;
- social rehabilitation centres for children and adults with disabilities;
- centres providing social assistance to families and children;
- urgent psychological counselling centres;
- urgent social assistance services (mobile teams); funeral services and social welfare services.
All these services are free of charge for users.
Expenditure on social protection and health
In the Kyrgyz Republic in 2014, 9% of GDP was allocated to social protection and health care expenditures (World Social Protection Report (WSPR) 2017/19). There are significant regional variations in terms of the share of GDP invested in social protection.
According to the National Statistics Committee, the share of public expenditure on social protection and health in the Kyrgyz Republic against total public expenditure increased from 24% to 28.6 % between 2010 and 2014. Of the total public expenditure for social protection, 9.3 % was allocated to public health care and 19.2 % for other programmes. Despite the gradual increase of public social protection expenditures and a decrease in poverty rates, the non-contributory social benefits have not yet reached the minimum subsistence level, i.e., the official minimum standard of living in the country.
The poverty rate measured at 3.20 USD per day was 3.2% of the population in 2016, whereas the poverty rate measured at 1.90 USD per day was 1.4% of the population in 2016 (source: World Bank). The poverty rate at the national poverty line stood at 25.4% in 2016 (source: World Bank).
In conclusion, despite the broad legal coverage of social protection, social protection schemes are not able to ensure basic income security for individuals in times of difficulty across the lifecycle. Even though it is near universal, the average old-age pension is only just above the minimum subsistence level for the elderly. All other benefits are below the minimum subsistence level, which was 4900.79 Soms (roughly 72 USD) in 2017 (source: National Statistics Committee).