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A.

Morozkina
Economic Expert Group
Priorities for strengthening cooperation among BRICS countries
Introduction
Global economic activity has consistently disappointed since the global financial crisis
and is expected to strengthen marginally in 2015 relative to 2014. The outlook for global growth
has again been revised down by the International Monetary Fund. Employment generally
remains below pre-crisis levels, investment and trade continue to disappoint, income inequality
is rising, and there are ongoing concerns about financial stability in some areas. Looking
forward, while risks to the outlook are more balanced than at time of Fortaleza summit, they
remain substantially on the downside.
Strong macroeconomic frameworks, well regulated financial markets and robust levels of
reserves, which have allowed EMDCs in general, and the BRICS in particular, to better deal with
the risks and spillovers presented by the challenging economic conditions in the last few years,
remain our priority.
Further macroeconomic coordination amongst all major economies, in particular in the
G20, remains a critical factor for strengthening the prospects for a vigorous and sustainable
recovery worldwide. In this context, Russia is interested in promoting BRICS commitment to
continue working among ourselves and with the global community to foster financial stability,
support sustainable, stronger and inclusive growth and promote quality jobs. At the 2014 Summit
in Brisbane, G-20 members put forward comprehensive growth strategies which promised to
raise the level of collective G-20 GDP by an additional 2 per cent by the end of 2018, compared
to the baseline of the October 2013 IMF World Economic Outlook (WEO). The BRICS must
stand ready to contribute to this goal. Current developments in the economic outlook underscore
the importance of ensuring that these growth strategies are implemented in a full and timely
manner.
Economic cooperation and cooperation in social sphere among BRICS may contribute to
this goal. And as these areas are key common points of interest for BRICS, they are to be
promoted further in order to strengthen cooperation within the group as well as its role on the
global stage.
Further promoting New Development Bank
Ratification of the Agreement establishing the New Development Bank (NDB), with the
purpose of mobilizing resources for infrastructure and sustainable development projects in
BRICS and other emerging and developing economies, is an important step. As an integrating
institution, center of identifying and resolving issues relevant for all member countries, NDB
will complement the existing system of institutions and mechanisms.
Item 15 of Ufa Declaration We welcome the entry into force of the Agreement on New
Development Bank signed during the VI BRICS Summit in Fortaleza. We also welcome the
inaugural meeting of the Board of Governors of the NDB held on the eve of the Ufa Summit and
chaired by Russia, as well as the work done by the Interim Board of Directors and the Pre
Management Group aimed at the earliest launch of the Bank. However, we must work further to
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make the bank fully operation as fast as possible.


The newly established bank could add to the existing system and become an important
institution for the member countries. Its key advantage is an opportunity to combine efforts of
BRICS countries in the fields relevant for all five countries. It includes urban infrastructure
challenges such as water supply, waste processing, development smart cities1. Also despite the
efforts of the existing institutions infrastructure is relatively underdeveloped in BRICS countries
comparing with the developed countries (Table 1).
Table 1 Infrastructure indicators from the Global Competitiveness Report, 2013-2014, scores
on a 17 scale, with 7 being the most desirable outcome.
Quality of
roads

Quality of
railroad
infrastr.

Quality of
port
infrastr.

Quality of
air
transport
infrastr.

Quality of
electricity
supply

3.4

2.8

1.8

2.7

3.3

4.8

China

3.9

3.6

4.8

4.2

4.8

3.2

India

4.3

4.5

4.7

4.5

4.5

5.1

Russia

3.8

2.5

4.2

3.9

3.9

4.5

South Africa

4.5

4.9

3.4

4.7

6.1

3.8

UK

5.4

5.3

5.0

5.7

5.6

6.7

Germany

6.2

6.0

5.7

5.8

6.1

6.1

USA

5.7

5.7

4.9

5.7

5.9

6.2

South Korea

5.6

5.8

5.7

5.5

5.8

5.7

Japan

6.0

6.0

6.7

5.2

5.4

6.0

Quality of
overall
infrastr.

Brazil

BRICS

memo

Source: Global Competitiveness Report 2013-2014, Global Economic Forum


Also joint development of technologies in the spheres relevant for all BRICS countries

1 Rogatnykh E. (2013) Industrial, Agricultural and Service Sectors of BRICS Countries:


Innovation and Mutual Reinforcement, Presented at International Conference Complementarity
of BRICS National Economies and Mutual Cooperation 18 October 2013, Moscow
2

(nanotechnologies, energy efficiency) could be more efficient than individual. Therefore the
countries could benefit from the efforts of the Bank in this field.
Bank also could execute analytical and advisory functions in the field of common BRICS
issues such as middle income trap, agriculture in tropics, SMEs development. It is highlighted
that all countries of the Group are struggling with domestic inequality issue, including social and
regional2. In BRICS: social inequality in developing countries 3 common issues of social
inequality are considered in details.
As an integrating institution, center of identifying and resolving issues relevant for all
five countries NDB could complement the existing system of institutions and mechanisms.
Performing this function, BRICS Bank could increase the role of the group in the global
financial architecture. At the moment the role of the BRICS countries in the global financial
architecture is considered as not corresponding to its role in global economy 4 and is expected to
raise5. The role of the BRICs countries in Bretton-Woods institutions (IMF, World Bank) could
be considered as one of the indicators. Voting power of the BRICS countries in these institutions
is much lower than the one of the developed countries and often lower than a share of the BRICS
countries in the global economy (Table 2). BRICS countries insist on reforming the governance
system and quota formula, but a new reform does not make any sense as the previous reform (of
2010) is not ratified by all members. According to the reform of 2010, share of each of the
BRICS countries increases (except South Africa).
Table 2 - Share of the BRICS countries in the world GDP by PPP (2013), IMF and WB quotas of
the BRICS countries
Voting
Voting
power in the
power in World Bank,
IMF after
2013
the reform
of 2010

Share in
the world
GDP by
PPP

IMF quota
after the
reform of
2008

Voting
power in
IMF after
the reform
of 2008

China

15.84

4.00

3.81

6.39

6.10

5.43

India

6.65

2.45

2.34

2.75

2.63

2.90

Russia

3.43

2.50

2.39

2.71

2.59

2.35

IMF quota
after the
reform of
2010

2 Grigoriev L., Morozkina A. (2013) BRICS: Different Economies, Similar Problems.


Russia in Global Affairs, no 2, pp. 26-40
3 Silvrio M. (2012) BRICS: Desigualdades Sociais Nos Pases Emergentes. Available at:
http://observatorio-das-desigualdades.cies.iscte.pt/
4 Preksin O. (2013) The Great Financial Construction Site. BRICS Business Magazine, no 3, pp. 4445.Armijo L.E., Roberts C. (2014) The Emerging Powers and Global Governance: Why the BRICS Matter, for the
Inclusion. Handbook of Emerging Economies/ R. Looney (ed.). N.Y.: Routledge.

5 ONeil J. (2013) Five Surprises Ahead. BRICS Business Magazine, no 2, pp. 28-33
3

Brazil

2.96

1.79

1.72

2.32

2.22

1.75

SAR

0.65

0.79

0.77

0.64

0.63

0.80

Source: IMF, World Bank


Thus, BRICS countries cannot influence activities of these organizations, however, after
establishment of the BRICS institution the situation could change. First, BRICS countries will
determine the volumes and directions of financial assistance to the third countries (share of
BRICS countries, according to the Agreement, should not decrease below 55%), in contrast to
other multilateral financial institutions. At the same time equal distribution of the voting power
between BRICs countries (parity could also remain later) allows to equally take into account
opinions of the five founding countries.
Second, BRICs countries could determine lending conditions, in contrast to IMF and the
World Bank, and even to establish its own system of financing for development. Public debate
has grown over the Bretton-woods institutions and there is an opinion that they have deepened
Asian and European Debt crisis by their lending conditions. BRICS countries created a potential
to change current system of financing for development, lending conditions and monitoring of
results. But the question whether this potential will be realized or the five countries will follow
the traditional path remains unanswered.
Thus, NDB has a potential to increase the role of the BRICS countries in the global
financial architecture. As an integrating institution, center of identifying and resolving issues
relevant for all member countries, NDB will complement the existing system of institutions and
mechanisms. At the beginning it could focus on the following questions: middle-income trap,
urban infrastructure development. In the field of financing for development the newly
established institutions partly duplicates existing institutions and mechanisms. But it could
promote the role of the BRICS countries by using resources primarily from the founding
countries and considering their interests in the first place. New Development Bank has all
chances to become not only a political initiative but an instrument in place for addressing
common BRICS issues.
Social sphere
At the moment members of the Group actively address to related issues, sign agreements,
develop exchange of experience programs and mutual help formats in social protection,
healthcare, education and provision of housing. 2014 BRICS Fortaleza Declaration proposes the
study of new cooperation fields, including labor resources and social services. Meeting of
ministers responsible for social security (as well as ministers responsible for education and
healthcare) is included in Fortaleza Action Plan.
BRICS population considerably differs by socioeconomic characteristics (Table 3). India
and South Africa are countries with relatively young population and high birth rates; Russia and
China have to deal with population aging problem. As a result, firstly, special attention is paid to

develop opportunities for the youth6; secondly, pension system is under reform7.
Table 3 - BRICS countries socioeconomic characteristics

Population density,
persons per sq. km
Life expectancy at
birth, years
Crude birth rate, per
1000 persons
Economically active
population, % total

Latest available year


from the given period

Brazil

Russia

India

China

South
Africa

2011-2013

23.6

8.4

382

141

42.3

2010-2013

74.8

70.7

66.1

74.8

58.1

2011-2013

14.8

13.2

21.6

12.1

21.6

2012-2013

65.9

52.7

53.1

56.6

35.4

Population of 15 years
2011-2013
24.1
16.1
29.1
16.5
30.0
and younger, % total
Population of 60 years
2011-2013
11.0
19.0
8.1
14.9
7.6
and older, % total
Urban unemployment,
2012-2013
6.1
5.5
5.3
4.1
25.1
%
Gini coefficient, %
2010-2013
50
42
37
47
65
Source:
BRICS
(2014)
Joint
Statistical
Publication.
Available
at:
http://brics.ibge.gov.br/downloads/BRICS_Joint_Statistical_Publication_2014.pdf
Housing
One of the important issues for cooperation in area of social sphere for BRICS is housing
and living standards. BRICS countries address it in the framework of BRICS Urbanization
Forum and BRICS Friendship Cities Forum. These platforms are aimed to facilitate the
cooperation and sharing best practices in the sphere of urbanization, city development, poverty
reduction and inequality. On the last Forum held in 2013 in Durban member countries
emphasized the growing importance of urbanization and highlighted the following priorities to
be covered at the next Forum: the linkage and importance of joint rural and urban development,
development of single-industry towns and decaying areas, sustainable city development8 .
City development is one of the priorities of social policy on international level as well as
in the national development strategies. Despite the differences in economic, demographic and
social conditions urbanization and rural development are an important issue for all BRICS
6 Sinha P. (2013) Combating Youth Unemployment in India. Available at:
http://library.fes.de/pdf-files/iez/09728.pdf
7 Pozen R.C. (2013) Tackling the Chinese Pension System. Available at:
http://www.paulsoninstitute.org/media/105497/china_pensions_pozen_english_final.pdf
8 BRICS Leaders (2013) 2nd BRICS Urbanisation Forum The Durban Declaration. Available
at: http://www.brics5.co.za/assets/The-2nd-BRICS-Urbanisation-Forum-The-DurbanDeclaration-1-November-28th-2013-Durban-KwaZulu-Natal-South-Africa.pdf
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countries, though the problem tends to manifest itself in different ways depending on the country.
In four out of five BRICS countries (except for India) urban population is bigger than rural. At
the same time, Brazil and Russia have the lowest urbanization rates, while in China, India and
South Africa urbanization is growing rapidly. Although there is huge difference in social and
economic processes, countries face the same problems in terms of housing.
Table 4 - Basic numbers on urbanization, 2014
Urban
population,
(% of total)

Urbanization
rate,
(%annually)

Population in
major cities,
(% of urban
population)

Population in
agglomeration
s
with
population
more than 1
million, (% of
total)

Improved
sanitation
facilities,
(%of
population
with access to
sanitation
facilities)

Brazil

85

1,2

12

40

81

Russia

74

0,3

12

21

71

India

32

2,4

14

36

China

53

2,9

23

65

South Africa

64

2,2

27

38

74

Source: World Bank


It is worth mentioning that despite different situations BRICS countries share a lot of
problems. In the framework of cooperation on sustainable city development and social welfare
BRICS countries might want to focus on the problem common for all member countries
substandard housing. According to McKinsey estimations Russia, Brazil, India and China are in
top ten countries with the largest share of population suffering from substandard housing.
Table 5 - Substandard housing
Brazil

Russia

India

China

South Africa

Share of urban
population,
suffering from
substandard
housing,
%,
2009

27

12

29

27

231

Population,

11

..

28

62

N/A
6

suffering from
substandard
housing, millio
n
:
Woetzel,
Ram,
Mischke,
Garemo,
Sankhe,
2014
http://www.mckinsey.com/insights/urbanization/tackling_the_worlds_affordable_housing_challe
nge
In Russia the program Affordable housing and communal services is implemented, 25
million m2 of living space is expected to be built under this program by 2017. The subprogram
Housing for Russian family will be financed via issuing bonds with collateral. That should
lower the price for final consumers. Financial support is also provided to low income
population in the form of loans, maternity capital and other. This subprogram is aimed at low
income population, population suffering from substandard housing and families with multiple
children.
Energy Efficiency
Sustainable development and economic growth in the near future will be facilitated by
improvements in energy efficiency. Therefore BRICS countries are to cooperate in development
of new technologies in energy sphere as well as development of energy auditors for conducting
energy audits for the effective and efficient use of energy resources.
Russia has a large underutilized energy-saving potential, which can solve the problem of
Russias economic growth as well as an increase in the production of all primary energy sources.
The power intensity of the Russian economy (based on purchasing-power parity) significantly
exceeds that in the United States, Japan and developed countries of the European Union.
The Russian fuel and Energy complex has one of the largest potentials for energy
efficiency. In particular there is an opportunity for structural modernization of the distribution
grid complex, where significant losses are observed. In case of modernization the losses can be
cut by 60%.
Migration sphere
Internal and international migrations are both strategically important for BRICS. Five
countries could cooperate in the sphere of increasing the quality of internal migration, including
joint development of instruments fostering migration to promising regions and investment in
corresponding infrastructure. Government policies on migration are to be focused on illegal
migration prevention and establishing proper procedure of obtaining work and residence permits
and registration procedures.
Internal migration in Russia is relatively low, though the absolute numbers are significant
(through the 2000-s, the average number was 2 million migrants annually). The main reason of
the increase of internal migrants since 2011 is the change in legislation and statistical
measurements (people who migrated for the period at least 9 months were included in general

statistics, before, only the period of 1 year and more were counted) 9. About 47% of internal
migrants move to other regions, thus, most of the internal migration flows occur within the
region accounting for migration to cities or/and bigger cities.
Current internal migration patterns dont go in accordance with national strategic
interests10. The main trend of internal migration in Russia is the so called Western drift:
movement from the East to western regions (Center, South and Volga regions). Another
important tendency is the migration to cities, regional centers (mostly, million-plus cities) and
federal centers Moscow and St-Petersburg11.
Inward migration has been a significant compensation factor for natural population
decline (migration compensated more than a half of natural decline 12), representing nowadays an
integral part of Russian social and political reality and being an important contributor to
economic development. The most common reason to migrate in Russia is temporary labour
migration. 80% of immigrants come from CIS countries, 13% from China (estimations are based
on the amount of work permits granted) 13, almost all immigrants are employed on low-qualified
jobs. The amount of illegal migration is estimated between 3 and 7 million people per annum 14.
The impact of immigration is seen not only within Russian economy (as they comprise up to
10% of workforce): remittances to CIS countries made by migrants working in Russia represent
an important factor of economic sustainability of respective countries. So to say, in 2013
remittances sent from Russia to CIS countries reached $20,7 billion US dollars15.
Healthcare
BRICs countries are committed to promoting development of healthcare systems in
BRICs countries. In Ufa declaration (item 60) leaders stated that there are three main areas
where BRICs will work together:
1) Management of risks related to emerging infections with pandemic potential;
2) Compliance with commitments to stop the spread of, and eradicate, communicable
diseases that hamper development (HIV/AIDS, tuberculosis, malaria, neglected tropical
diseases, poliomyelitis, measles);
9 http://demoscope.ru/weekly/2014/0595/tema01.php
10 http://2020strategy.ru/data/2012/03/14/1214585998/1itog.pdf
11 http://demoscope.ru/weekly/2014/0595/tema02.php
12 The framework of Russian migration policy till 2025 / Available at:
http://www.fms.gov.ru/upload/iblock/07c/kgmp.pdf
13 MPC Migration Profile: Russia / Migration Policy Centre// Available at:
http://www.migrationpolicycentre.eu/docs/migration_profiles/Russia.pdf
14 Vishnevskii A.G. Population of Russia 2009. The Seventeenth Annual Demography Report //
Available at: http://id.hse.ru/data/2011/11/01/1269320456/02.pdf
15 Bank of Russia statistical service // Available at: http://www.cbr.ru/statistics/Default.aspx?
Prtid=tg&pid=svs&sid=ITM_53569
8

3) Research, development, production and supply of medicines aimed at providing


increased access to prevention and treatment of communicable diseases.
The most important issues for further cooperation are development of PPP and
mobilization of private capital, which is leading to increase in quality of social services such as
healthcare.
Healthcare was first mentioned as a promising sphere for cooperation in Sanya
declaration in 2011. Then the first meeting of the ministers of Healthcare took place, and their
first declaration highlighted the following common issues for BRICS countries: universal health
coverage, healthcare expenditures, communicable diseases (HIV, tuberculosis), as well as noncommunicable diseases16.
At the time there are no tangible results yet, and also there is no information on the
activities of the established working groups probably they will be presented on the next
meeting of the health ministers. However, it does not mean that cooperation in the health sphere
is inefficient. In is necessary to keep searching for areas of common interests, where experience
of some countries could be useful for other or where common efforts of five countries could have
a synergy effect: from development of pharmaceutical technologies to promotion of new
international cooperation forms.
Second issue, which is discussed within BRICS meetings, and is extremely important for
Russia, is combating HIV/AIDS. HIV/AIDS spread in Russia for some years appears to be
threatening. During last 7 years number of infected with HIV/AIDS has doubled, each year
number of new cases registered is growing. Partially, it can be explained by development of
detection measures, however, more often as a key cause experts mention increase of number of
drug users. Other BRICS countries are also concerned about HIV/AIDS disease (Table 6),
therefore cooperation in this sphere might be useful for all five countries. In particular, the group
could jointly work on creation of vaccines.
Table 6 - HIV indicators
Prevalence of HIV
among adults aged 15
to 49

Number of deaths due to


HIV/AIDS

Number of people (all


ages) living with HIV,
2009

Brazil

0.5

16 000

490 000

Russia

1.1

20 511

980 000

India

0.3

130 000

2 088 642

China

0.1

26 000

780 000

South Africa

17.9

200 000

6 400 000

Germany

0.1

1 000

67 000

Indonesia

0.5

29 000

605 500

16 BRICS Health Ministers (2011) Beijing Declaration. Available from:


http://www.mid.ru/brics.nsf/0/66A1B2E6460EB69DC32578DC0038982E/$file/img-7181045430001.pdf
9

Kazakhstan

0.1

500

13 000

Mexico

0.2

5 600

174 300

USA

0.6

17 000

1 200 000

Japan

0.1

100

8 900

Source: World Health Organization


Non-communicable diseases are also of high importance for Russia, and experience of
other BRICS countries could be studied in our country. One of the ways to lower the incidence
rate is promotion of healthy lifestyle, including regular physical activities. China is one of the
leaders in popularization of healthy lifestyle and regular sports activities in particular. Key part
of the action plan sport for all, launched in 1996, was construction of sports grounds and their
equipping. Similar priority was set in the plan Was to health, approved in 1997 17. According to
the new set of measures prepared in 2014, China plans to increase sports areas to 2 square
meters per capita.
Table 7 - Non-communicable diseases
All
NCDs,
deaths
per
100 000

Total
NCD
deaths,
thousand

Insufficien
t physical
activity,
2008

Alcohol
consumptio
n (liters),
2010

Obesity
(body mass
index >= 30),
2008

Tobacco
consumption
, 2011

Brazil

514

978

49.4

7.38

19.5

22

Russia

790

1 802

20.8

11.12

24.9

59

India

682

5 869

15.6

2.46

1.9

25

China

576

8 577

31

5.75

5.6

47

South
Africa

711

264

52.4

7.77

33.5

28

Germany

365

791

28

11.21

21.3

35

Indonesia

680

1 106

29.8

0.08

4.7

67

Kazakhstan

950

132

31.5

6.58

24.4

40

Mexico

468

468

37.7

5.37

32.8

27

USA

413

2 334

40.5

8.55

31.8

14

Japan

244

948

60.2

6.89

4.5

34

Source: World Health Organization


17 WHO (2005) Review of Best Practice in Interventions to Promote Physical Activity in
Developing Countries // Background Document prepared for the WHO Workshop on Physical
Activity and Public Health // Beijing, 2427 October 2005 // Available from:
http://www.who.int/dietphysicalactivity/bestpracticePA2008.pdf
10

One of the measures to combat such disease as tuberculosis is increase of excise duties on
tobacco. Thus, the cost of a pack of cigarettes is one of the lowest in Russia (1.7 USD), whereas
in China, Brazil and South Africa this cost is much higher (2.1, 2.7, 3.3 accordingly). In
developed countries the price is much higher 6.3 USD in USA, 6.9 USD in Germany.
Education
Education is of strategic importance for sustainable development and inclusive economic
growth. Ufa declaration confirms that the BRICs countries are willing to work towards
cooperation between competent authorities of the BRICS countries for accreditation and
recognition and encourage students mobility among BRICS countries (item 63). There is a
need for further cooperation and pooling of BRICS expertise in the sphere of additional
development of training and skills. Regular training increases productivity, effectiveness of new
technologies implementation. Also cooperation of education and labour market is needed. More
flexible educational processes and increased interconnection with the labour market demand will
also be beneficial.
In Russia in the sphere of higher education, structural and regional inequalities have
created a dramatic mismatch between the skills needed in the labour market and the education
received. Mismatch of the education system and labour market is leading to deep imbalances on
the labour market, which is lacking some professions (including technical specialists and
engineers). At the same time, many graduates choose a job unrelated to education background.
Current education in Russia on all levels is often associated with low quality due to its
focus on formal part and less on content. Low income of teachers, low prestige of this profession
and aging of this social group, obsolescence of equipment add to this process. According to
PISA, Russias average score is lower than OECD average. The same applies to higher education
in THE WUR18 and ARWU19 rankings Russia is represented by only two universities.
In 2013 government introduced set of measures
education20:

addressing major challenges in

official disintegration of services to free and paid courses. The list of compulsory
courses is published. All of the courses excluded from this list are to be paid for;

per capita financing in higher education;

increase of availability of student loans. Student loans will have low interest rate
and period of grace of 5 to 6 years after graduation. Government will cover losses
of the banks. This measure concerns priority specializations such as technical,
business-education, natural sciences;

disintegration of education to applied and academic. On the early stages education


will be combined, later student will choose more appealing direction;

18 http://www.timeshighereducation.co.uk/world-university-rankings/
19 http://www.shanghairanking.com/
20 Based on Results of 2013 and medium-term forecast, Center for Macroeconomic Analysis
and Short-term Forecasting
11

to increase Russian universities position in global rankings, 15 most promising


institutions received 600 mln. Rubles each.

Also in 2013 were discussed possible ways to address major challenges associated with
Unified State Examination including: change the form of exam to electronic; exclude the first
part focused on basic knowledge; introduction of the verbal part and composition.
Concerning education, BRICS countries could further cooperate and pool its expertise in
the following spheres:

additional training and skills development. Regular training increases productivity,


effectiveness of new technologies implementation;

cooperation of education and labour market. There is a clear need to make educational
process more flexible and interconnected with the labour market demand.

Conclusion
Economic and social sphere have potential for further strengthening links between BRICs
countries. Joint analysis and actions might bring synergy effect and help to achieve more that
individual actions. NDB has a potential to increase the role of the BRICS countries in the global
financial architecture. Analysis of the partner-countries experiences in social sphere may be quite
beneficial for BRICS, especially in the sphere of progressive taxation as a mechanism to fight
inequality, promotion of healthy lifestyle, public private partnership in healthcare, cooperation in
academic mobility, education standards unification. Russia can share experience in healthcare
and education coverage, national programmes of social protection of vulnerable social groups.

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