A new World Bank report on poverty says that falling living standards in former Soviet republics are largely a result of government policies that favor a narrow set of private interests rather than the broader public good.

The study was released on 19 September in Prague ahead of this week's annual meeting of the World Bank and International Monetary Fund. It says economic policies in the poorest countries of the former Soviet bloc often serve an elite group of individuals who have close ties to governments.

World Bank economist Ana Revenga said in Prague last week that "the increase of inequality in the [Commonwealth of Independent States] has a lot to do with the capture of the policymaking and the legislative agenda by vested interests-- or the 'capture of the state,' you may call it."

Both Revenga and the report cite high levels of bureaucratic corruption and criminality as major causes of poverty. "There are countries in [Eastern Europe and former Soviet republics] where, in some sense, the state is captured by vested interests," Revenga noted. "It's very hard to imagine these governments taking action in a sustained way that is good for [fighting] poverty if many of those actions go against those interests that have taken the state hostage."

The World Bank says the creation of new jobs has been severely hampered by widespread protection rackets that allow criminal groups to extort money from small businesses to such an extent that many of those businesses are unable to survive. In contrast, Revenga notes that small businesses have been a major source of new jobs in those East European countries where post-communist reforms have been more successful.

Another dangerous trend cited by the World Bank is that doctors and school teachers in the poorest former Soviet republics increasingly demand what the report calls "underthe -table" payments because they cannot survive on their meager state salaries. Revenga says this trend is especially dangerous for the poor because they are becoming trapped in a cycle where it is difficult to receive proper health care and education.

Disturbing health trends in post-communist states include a decrease in male life expectancy, the resurgence of tuberculosis, a drastic increase in sexually transmitted diseases, and the looming threat of an AIDS epidemic.

Emerging signs of nutritional deficiencies among children are becoming apparent in parts of northeastern Romania. Eastern Ukraine and Georgia's Imereti region also were listed as areas where poverty abounds.

The World Bank says the gap between rich and poor is becoming especially pronounced in Russia, Armenia, and Moldova. In Russia, for example, about 20 percent of the population is surviving on less than $2 a day. That means that Russia is home to nearly two-thirds of all people trying to survive below the $2-a-day poverty line in a former Soviet republic. "In places like Russia, you've had a shrinking pie and the poor have been getting a shrinking slice of that pie," Revenga notes.

The World Bank also says countries with the largest number of people living on less than $2 a day are Tajikistan (67 percent), Moldova (55 percent), Kyrgyzstan (50 percent), and Armenia (42 percent). About one-fifth of the people in Azerbaijan and Georgia also live on less than $2 a day.

Azerbaijan, Ukraine, Kyrgyzstan, and Moldova were named by the World Bank as countries where economic reforms often are hijacked by private vested interests.

Russia, Romania, Bulgaria, Croatia, Slovakia, Georgia, and Latvia were singled out as states where private monopolies and oligarchs have profited, at the expense of the larger economy, by bribing policy-makers to slow reforms.

World Bank loans to Turkmenistan were temporarily halted because of corruption allegations there, but Linn says financing could resume soon. Belarus currently receives no financing from the World Bank because of concerns about a lack of commitment in Minsk to basic economic reforms.

Serbia was not included in the study because it is not a member of the World Bank and because the bank is unable to verify whether the data provided by Belgrade accurately reflects the situation of the country's poor.

Speaking in Prague last week, World Bank Vice President Johannes Linn admits that the institution becomes defensive when faced with criticism, including the accusation that its recommendations are a cause of the widening gap between rich and poor. And Linn also admits that the bank has committed several errors in its recommendations to countries making the transition from central planning to market economics.

Linn says one mistake has been to underestimate the scope of corruption and criminal influence in Eastern Europe and the former Soviet republics. Another mistake, according to Linn, was the World Bank's insistence on broader control of the reform process to ensure that fewer monopolies would be created through sales of state-owned assets and other market reforms.

Finally, Linn said the World Bank did not properly emphasize the importance of maintaining social security programs when the transition process began 10 years ago.

UKRAINIAN SECURITY SERVICE PROBES ALLEGED STATE COUP ATTEMPT... The Ukrainian Security Service (SBU) has instigated criminal proceedings in connection with the state coup attempt that it allegedly uncovered last week (see "RFE/RL Newsline," 25 September 2000), Interfax reported on 25 September. Ivan Kononov, an SBU official from Chernihiv, told journalists that the SBU arrested Yuriy Petrovskyy, who is suspected of being the coup's organizer, and a resident of Chernihiv identified as Bulakhov. According to Kononov, all suspects in the case are members of either the All-Ukrainian Union of Soviet Officers or the Ukrainian Union of Soviet Officers. Kononov showed journalists a leaflet allegedly printed by the coup plotters, which calls for "returning power to the working people in the form of soviets" and reintroducing the 1977 constitution of the Ukrainian SSR in Ukraine. JM

...BUT POLITICIANS REMAIN SKEPTICAL... Parliamentary deputy speaker Viktor Medvedchuk said on 25 September that the SBU report on foiling the state coup is "not serious." Another deputy speaker, Stepan Havrysh, said the SBU's revelation is "superfluously sensational" and has a "destabilizing character." Socialist Party leader Oleksandr Moroz suggested the coup attempt was "invented." And Ukrainian Popular Rukh leader Yuriy Kostenko commented that Ukraine's constitutional system is threatened not by an anticonstitutional plot but the current economic crisis. JM

A new World Bank report on poverty says that falling living standards in former Soviet republics are largely a result of government policies that favor a narrow set of private interests rather than the broader public good.

The study was released on 19 September in Prague ahead of this week's annual meeting of the World Bank and International Monetary Fund. It says economic policies in the poorest countries of the former Soviet bloc often serve an elite group of individuals who have close ties to governments.

World Bank economist Ana Revenga said in Prague last week that "the increase of inequality in the [Commonwealth of Independent States] has a lot to do with the capture of the policymaking and the legislative agenda by vested interests-- or the 'capture of the state,' you may call it."

Both Revenga and the report cite high levels of bureaucratic corruption and criminality as major causes of poverty. "There are countries in [Eastern Europe and former Soviet republics] where, in some sense, the state is captured by vested interests," Revenga noted. "It's very hard to imagine these governments taking action in a sustained way that is good for [fighting] poverty if many of those actions go against those interests that have taken the state hostage."

The World Bank says the creation of new jobs has been severely hampered by widespread protection rackets that allow criminal groups to extort money from small businesses to such an extent that many of those businesses are unable to survive. In contrast, Revenga notes that small businesses have been a major source of new jobs in those East European countries where post-communist reforms have been more successful.

Another dangerous trend cited by the World Bank is that doctors and school teachers in the poorest former Soviet republics increasingly demand what the report calls "underthe -table" payments because they cannot survive on their meager state salaries. Revenga says this trend is especially dangerous for the poor because they are becoming trapped in a cycle where it is difficult to receive proper health care and education.

Disturbing health trends in post-communist states include a decrease in male life expectancy, the resurgence of tuberculosis, a drastic increase in sexually transmitted diseases, and the looming threat of an AIDS epidemic.

Emerging signs of nutritional deficiencies among children are becoming apparent in parts of northeastern Romania. Eastern Ukraine and Georgia's Imereti region also were listed as areas where poverty abounds.

The World Bank says the gap between rich and poor is becoming especially pronounced in Russia, Armenia, and Moldova. In Russia, for example, about 20 percent of the population is surviving on less than $2 a day. That means that Russia is home to nearly two-thirds of all people trying to survive below the $2-a-day poverty line in a former Soviet republic. "In places like Russia, you've had a shrinking pie and the poor have been getting a shrinking slice of that pie," Revenga notes.

The World Bank also says countries with the largest number of people living on less than $2 a day are Tajikistan (67 percent), Moldova (55 percent), Kyrgyzstan (50 percent), and Armenia (42 percent). About one-fifth of the people in Azerbaijan and Georgia also live on less than $2 a day.

Azerbaijan, Ukraine, Kyrgyzstan, and Moldova were named by the World Bank as countries where economic reforms often are hijacked by private vested interests.

Russia, Romania, Bulgaria, Croatia, Slovakia, Georgia, and Latvia were singled out as states where private monopolies and oligarchs have profited, at the expense of the larger economy, by bribing policy-makers to slow reforms.

World Bank loans to Turkmenistan were temporarily halted because of corruption allegations there, but Linn says financing could resume soon. Belarus currently receives no financing from the World Bank because of concerns about a lack of commitment in Minsk to basic economic reforms.

Serbia was not included in the study because it is not a member of the World Bank and because the bank is unable to verify whether the data provided by Belgrade accurately reflects the situation of the country's poor.

Speaking in Prague last week, World Bank Vice President Johannes Linn admits that the institution becomes defensive when faced with criticism, including the accusation that its recommendations are a cause of the widening gap between rich and poor. And Linn also admits that the bank has committed several errors in its recommendations to countries making the transition from central planning to market economics.

Linn says one mistake has been to underestimate the scope of corruption and criminal influence in Eastern Europe and the former Soviet republics. Another mistake, according to Linn, was the World Bank's insistence on broader control of the reform process to ensure that fewer monopolies would be created through sales of state-owned assets and other market reforms.

Finally, Linn said the World Bank did not properly emphasize the importance of maintaining social security programs when the transition process began 10 years ago.