Social Security Policy and Pension Reforms in the Western Balkans
| Author | Will Bartlett,Merita Xhumari |
| DOI | 10.1177/138826270700900401 |
| Published date | 01 December 2007 |
| Date | 01 December 2007 |
| Subject Matter | Article |
RefoRms In The WesTeRn balKans
Will Bartlett* and Merita Xhumari**
Abstract
Despite recent economic growth, the countries of the Western Balkans share a
catalogue of social problems ranging from high unemployment, low participation
rates, falling birth rates, ageing populations, severe poverty, and migration of many
young and skilled people. This article tracks the similarities and differences in the
responses of the countries of the Western Balkans to these difficulties, with a focus on
pension systems reform. It shows how social protection systems have been weakened
by efforts to cut public expenditure and reduce budget deficits and how, following
the advice of international organisations and policy advisers, several countries have
introduced partially privatised three-pillar pension systems in an environment of
underdeveloped capital markets. It discusses the features of the new reformed pension
systems, and reviews the systems in those countries which have not yet adopted such
reforms. It highlights the problems and risks facing the partially privatised pension
schemes. The article also considers the context for the different approaches adopted
in the region. It concludes that at the present state of their economic transition
and development, the late reforming countries would be better advised to focus
on improving the efficiency of their existing arrangements, and on the regional
coordination of their social security and pension systems, rather than engaging in
radical privatisation in pursuit of uncertain benefits.
Keywords: Western Balkans; social security; pension systems; pension reforms;
welfare state; economic transition
*
Reader in Social Economics, School for Policy Studies, University of Bristol, 8 Priory Rd, Bristol BS8
1TZ; e-mail: will.bartlett@bristol.ac.uk.
**
Lecturer in Social Policy, Faculty of Social Sciences, University of Tirana, Rr. Milto Tutulani,
Tirana, Albania; e-mail: mxhumari@icc-al.org.
European Journal of Social Security, Volume 9 (2007), No. 4
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Will Bartlett and Merita Xhumari
1.
INTRODUCTION
In the early 1990s, four new states declared their independence from former Yugoslavia:
Bosnia and Herzegovina (BiH)1, Croatia, Macedonia, and Slovenia. The remainder
of the former state reconstituted itself as the Federal Republic of Yugoslavia, which
comprised the republics of Serbia and Montenegro. Within Serbia, the autonomous
status of the provinces of Kosovo was rescinded in 1990 as the Milošević regime
contrived to consolidate its power. Direct rule by Belgrade was imposed on the
province, leading to a decade of tension which resulted in the war of 1999 which pitched
NATO against Serbia. Kosovo then came under United Nations administration, but
has had a provisional government since 2001 with authority over most domestic issues
such as social policy and including pensions, social security, health and education.2
Montenegro eventually declared its independence in 2006, while the final status of
Kosovo remains undecided. Neighbouring Albania overturned the one-party rule of
the Albanian Party of Labour (the communist party) in 1991, and has succeeded in
making its transition to democracy in a context of widespread poverty, accompanied
by mass internal and external migration. The EU has had a natural policy interest in
the region, as a core European region. Slovenia became an EU member in 2004, but
the other countries have so far remained outside the EU, and have collectively become
known as the ‘Western Balkans’, a term invented by the European Commission to
provide a framework for its pre-accession policies towards this group of countries.
The wars in Croatia in 1991, BiH from 1992 until 1995, in Kosovo and Serbia in
1999, and the violent civil conflict in Macedonia in 2001, destroyed much physical
infrastructure and displaced hundreds of thousands of people. Albania also suffered
a severe civil conflict in 1997 after the collapse of a number of pyramid savings banks
wiped out the life savings of hundreds of thousands of people, leading to a popular
uprising, widespread destruction of state property, and the collapse of the government
(Vaughan-Whitehead 1999). The economy of the Federal Republic of Yugoslavia
suffered from poor macroeconomic policies and hyperinflation, as well as the effects
of UN sanctions. The 1999 NATO bombing campaign destroyed many infrastructural
1
BiH (BiH) emerged from three years of intense warfare between 1992 and 1995 with a complicated
constitution which effectively partitioned the country into two entities. The Federation of BiH (FBiH)
covers 49 per cent of the territory populated mainly by Muslim and Croatian ethnic groups. It is
governed under a complex federal structure based on cantons. Within FBiH the Croatian inhabited
region of Herzegovina is de facto semi-autonomous with strong economic, financial, and political
links to neighbouring Croatia. The other entity, Republika Srpska (RS), covers 51 per cent of the
territory, and is mainly populated by the Serbian ethnic community. The RS has strong links with
neighbouring Serbia. The central government of BiH has relatively few powers, and responsibility
for social security, pensions, health and education is devolved to the entities, and within FBiH, to
the cantons.
2
The Provisional Institutions of Self-Government (PISG) were established in May 2001, consisting of
a government, an assembly, and a presidency.
298
Intersentia
Social Security Policy and Pension Reforms in the Western Balkans
and industrial facilities and led to a further sharp fall in real GDP. In Macedonia, the
recovery from post-independence recession which had begun in 1996 was brought to
an end by the civil conflict of 2001.
Following the democratic changes that took place in Croatia and the Federal
Republic of Yugoslavia in 2000, the Western Balkan economies have entered a period
of more or less sustained recovery. Economic growth has been strong compared to
performance over the previous decade, averaging 4 per cent per annum between 2000
and 2005. Albania has experienced the most rapid growth, averaging almost 6 per cent
over the same period, although this was based largely on labour export and remittance
income, with little impact on employment levels. By 2003, GDP growth in the region
was above the EU average including the new EU member states from Eastern Europe
(Sanfey et al. 2004).3 Nevertheless, the economic situation remained difficult, and
by 2003 none of the countries except Albania had surpassed the level achieved in
1989.4 Taking 1989 as a benchmark, by 2003 Croatia had made the strongest recovery,
reaching 91 per cent of its 1989 level of GDP. Macedonia reached 81 per cent, and
Serbia-Montenegro reached only 50 per cent of its previous level. It is therefore hardly
surprising that some of the poorest countries in Europe are to be found in the Western
Balkan region. According to World Bank data, BiH had an average income per capita
of just $2,440 in 2006, while the level of per capita income was only marginally higher
in Albania, Macedonia and Serbia.5 The exception is Croatia which has an average per
capita income more than three times that of BiH, and above that of some of the new
EU member states.
Even though the region has experienced rapid growth in recent years, social
problems remain deeply embedded as a result of the years of stalled transition and
extended conflict. Labour market outcomes are particularly problematic with high
levels of unemployment, low participation rates, and large informal economies (Bartlett
2007a). Survey data6 indicate that the unemployment rate is highest in Kosovo, at an
extraordinary 41 per cent, followed closely by Macedonia at 37 per cent. In BiH the
3
Only Kosovo experienced negative growth due to reduced international assistance and the failure to
implement effective reforms.
4
UNECE Economic Survey of Europe, Geneva, 2004(2). Comparative data on the respective countries
are relatively scarce although, in recent years more data has been compiled by international
agencies including the UN Economic Commission for Europe (UNECE, the European Bank for
Reconstruction and Development, the ILO, the UNDP, the World Bank and other organisations.
Data are also available online from almost all the respective national statistical agencies, although
with patchy coverage. Data for BiH are most problematic, since statistics are collected by separate
statistical agencies in the two entities, FBiH and RS. The capacity of the central statistical agency of
BiH to reconcile these data at a national level is limited.
5
Data on GDP and related statistics is available online from the World Bank and the IMF.
6
Labour Force Surveys are carried out in most countries of the region and are available at the websites
of national statistical offices. In BiH data is taken from a Household Panel Survey. Albanian data refer
to registered unemployment, which is thought to be more accurate than in the case of the Yugoslav
successor states where access to health insurance provides incentives for false registration.
European Journal of Social Security, Volume 9 (2007), No. 4
299
Will Bartlett and Merita Xhumari
unemployment rate was 22 per cent in 2004, according to household panel survey
data. In Serbia and Montenegro, labour force surveys showed that the unemployment
rate increased from 12 per cent in 2001, to 21 per cent in...
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