Romania’s Development and Anti-Poverty Policies. Effectiveness of National Responses in Addressing a Global Problem

Dear Rector, distinguished guests and colleagues,

Thank you for the invitation to attend today’s event. I welcome the initiative of the National School of Political and Administrative Studies (SNSPA) to host this conference focused on poverty and measures to reduce it and increase inclusion.

The World Bank Group is a global development organization which has two overarching institutional goals - reduce poverty and boost shared prosperity, or in other words increase prosperity for the bottom 40 percent of the population. Dramatic successes were achieved in the past two decades in reducing poverty. Our goal is to bring poverty to less than 3 percent of the world’s population by 2030, but hurdles remain in reaching this target. According to our latest data almost 900 million people continue to live in extreme poverty around the world (defined as less than $1.90 per day), hundreds of millions go hungry every day, and almost 7 million children under five are dying every year. Addressing inequality is therefore central to global efforts to further reduce poverty.

In Romania, the World Bank has contributed over the past two and a half decades towards addressing policy and institutional constraints to poverty reduction and inclusive growth, supporting structural reforms in the public sector focused on reducing inefficiencies, unlocking the country’s development potential and supporting investments in the private sector to spur job creation and greater economic opportunity.

Our current Country Partnership Strategy with Romania is built on three pillars of engagement – building a 21^st century government, supporting growth and job creation, and supporting greater social inclusion. We believe these three pillars are essential for poverty reduction efforts and helping the poorest fully benefit from Romania’s growth trajectory in recent years.

Romania has taken important steps in recent years in fighting poverty and sustaining development. However, 40.2 percent of the people remain at risk of poverty and social exclusion according to Eurostat data (the highest percentage in the European Union) and poverty is three times higher in rural than in urban areas. Key development disparities continue to prevail especially between urban and rural areas, hampering the achievement of national economic and social development targets. In Romania, 46 percent of the population live in rural areas, where human capital is severely under-utilized and pockets of poverty and social exclusion prevail. Poverty rates for rural population are increased by the demographic challenge and migration. 

Three-quarters of the poor have been poor for at least three years, which means that poverty is persistent. Poverty is also persistent across generations - children born into poor families have fewer opportunities for a better life, partly because they never attend school, or if they do attend they drop out of school early. Lacking the basic skills required for getting a job as young adults they join their parents and communities in informal employment, inactivity and at times delinquency.

Many of the people in poverty are Roma. Roma have a 10 times higher risk of being poor than the general population regardless of their age, education, or area of residence. In 2013, for example, 33 percent of Roma were in absolute poverty while only 3.4 percent of non-Roma were below the poverty line. What is worrying is that the poverty risk is extremely high for Roma children. Their poverty rate is 37.7 percent compared to a national rate of 4.3 percent.

The social and economic inclusion of Roma is therefore essential if Romania is to meet its Europe 2020 targets and achieve EU convergence. Whilst the Romanian population is aging and shrinking, the Roma cohort is young and growing. Between 6-20 percent of new labor market entrants in Romania are Roma. Therefore, ensuring equal opportunities for Roma is not just a moral and social imperative, it is also an economic necessity.

I would like to acknowledge that in the past months the Government has made important progress in putting forward measures to reduce poverty and social exclusion. Last year Romania adopted the National Strategy and Strategic Action Plan on Social Inclusion and Poverty Reduction for 2015-2020, developed with support and expertise from the World Bank. In February of this year, the Government passed a comprehensive anti-poverty package of 47 measures to combat poverty in the country through 2020. Some of the key measures, including increasing the employment rate, reducing early school leaving rate, scaling-up of national health programs and others will strongly contribute to narrowing the urban-rural poverty gaps.

One of the most important anti-poverty legislative measures is currently tabled for debate in the Romanian Parliament. I am referring to the Social Inclusion Income - or in Romanian Venitul Minim de Incluziune (VMI) - a consolidation of three existing means-tested programs. Once this law is approved, it will have a major impact on bringing around four million Romanians, or one million families, out of poverty and exclusion.

The new legislation will aim to consolidate three existing social assistance programs – Heating Benefit, Family Benefit and Guaranteed Minimum Income (GMI). These three programs have different eligibility thresholds and criteria, are administered differently, have a high public cost and are not well-targeted to reach the poorest. These programs help only about 46 percent of the poorest quintile and up to 61 percent during cold season. This means that resources are not directed towards those most in need.

This is the reason why the World Bank has been supporting the Government of Romania in its efforts to unify, simplify and increase the efficiency of the social assistance programs by supporting legislation to introduce the Social Inclusion Income.

There are three significant points I would like to highlight regarding its impact: it will reverse the recent trend of increasing poverty which is pronounced in rural areas; it will provide stronger incentives for the poor to get back to work and reduce the in-work poverty rate; and it will be an operational instrument to identify the poor and help with tailored and targeted benefits, services and other measures.

Increased efforts are required to ensure that poverty reduction and social inclusion measures are sustainable and irreversible in Romania. In particular, three major policy areas are critical to address social inclusion:

First, access to education is a pillar of ending poverty and has the potential of being one of society’s greatest “equalizers”.

Second, access to equal employment opportunities, for example, is essential for all, particularly in rural areas.

Third, equal access to public services, like health, adequate housing, water and sanitation services have the potential to break cycles of exclusion and limited access to opportunities.

In conclusion, it is important to highlight that a coordinated approach is needed to ensure that policies target the poor, vulnerable and most marginalized. There is already a large spectrum of sector policies, programs and interventions focused on reducing poverty and social exclusion that require better coordination. Given the strong correlation between poverty and social exclusion, making progress on both fronts will require more and better social interventions that will connect people with jobs, cash support, and services. It will also be essential to increase capacity for accurately assessing needs at all levels and to coordinate social services, employment services, and healthcare services in order to bring the non-working but work-capable beneficiaries of social protection into employment. Tackling poverty and social exclusion will therefore require the provision of integrated services and ensuring that different programs and interventions are harmonized and aligned.

The World Bank will continue to contribute to Romania’s development and growth through its engagement with the Government, Parliament, academic and civil society, and all stakeholders. We all need to join our efforts to support inclusive and sustainable growth in Romania.

Thank you.