Economic Security Assessment
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UKRAINE Economic Security Assessment Government-controlled areas of Donetsk and Luhansk oblasts within 20km of the contact line March, 2019 Funded by: In partnership with: Cover photo: agricultural equipment in the area within 5km of the contact line. REACH 2018. About REACH REACH is a joint initiative of two international non-governmental organizations - ACTED and IMPACT Initiatives - and the UN Operational Satellite Applications Programme (UNOSAT). REACH’s mission is to strengthen evidence- based decision making by aid actors through efficient data collection, management and analysis before, during and after an emergency. By doing so, REACH contributes to ensuring that communities affected by emergencies receive the support they need. All REACH activities are conducted in support to and within the framework of inter- agency aid coordination mechanisms. For more information please visit our website: www.reach-initiative.org. You can contact us directly at: [email protected] and follow us on Twitter @REACH_info. Economic security assessment – March 2019 SUMMARY Context Eastern Ukraine has experienced armed conflict since early 2014, when hostilities began between the Ukrainian government and non-state armed actors from the self-proclaimed Donestsk People’s Republic (DPR) and Luhansk People’s Republic (LPR). Following more than five years of armed conflict, the dynamics of conflict have become more predictable, with the majority of areas in eastern Ukraine clearly separated into government-controlled areas (GCA) and non-government controlled areas (NGCA) as divided by the “contact line” separating Ukrainian government forces from armed actors in NGCA. While hostilities are ongoing, clashes have mostly been confined to areas within 5km of the contact line on either side since 2015. Due to the more consistent nature of conflict, the crisis can be seen to have moved into a protracted phase, though this should not be interpreted to mean reduced humanitarian need. Indeed, the 2019 Humanitarian Needs Overview (HNO) reported 3.5 million people with ongoing humanitarian needs across both the GCA and NGCA and 5.2 million people affected by conflict.1 More than five years of armed conflict have also had a significant impact on economic activity in Ukraine. This economic impact is not only visible in NGCA, where sanctions prohibit most international commerce, but also in GCA where smaller cities and rural areas are now effectively cut-off from the urban centres in NGCA that once acted as economic anchors for the region. As a consequence of this economic impact, there has been a significant reduction in industrial production and economic capacity in the area, and corresponding high rates of inflation. To address both immediate and chronic humanitarian need, seven clusters are operational in Ukraine as of March 2019.2 An increasing number of actors that make up these clusters are engaging in or exploring the use of multi- purpose cash (MPC) assistance to populations in the areas most affected by disruptions in economic activity. Assessment This assessment was commissioned by European Civil Protection and Humanitarian Aid Operations (ECHO) to fill an information gap relating to the effect of protracted and long-term conflict on livelihoods in the areas adjacent to the contact line. The study utilised a mixed-methods approach involving a review of official state statistics, literature from humanitarian actors, a household survey and limited direct observation to compile data to inform livelihoods and cash-based programming in the priority areas of the Humanitarian Response Plan (HRP) areas within 20km of the contact line.3 Primary data collection consisted of 820 household surveys in government-controlled areas of Donetsk and Luhansk oblasts. The assessed area was stratefied by distance to the contact line and urban/rural characteristics of settlements, with results generalisable in the area 0-5km from the contact line (urban and rural settlements) and 5-20km from the contact line (urban and rural settlements) with a 95% confidence level and 7% margin of error for each stratum and 95% confidence level, 3% margin of error overall. Data was collected by face-to-face interviews between 13 February and 7 March, 2019. The study explored the following research questions: • How have regional and national economic indicators concerning household employment, income and spending evolved since the beginning of the conflict? • How do economic indicators concerning household employment, income and spending vary between Donetsk and Luhansk GCA, the overall Ukraine situation and other eastern Ukrainian regions? • How have household income and sources of income evolved for populations living along the contact line since February 2018? • How have household expenditures evolved for populations living along the contact line since February 2018? 1 United Nations Office for the Coordination of Humanitarian Affairs (OCHA), 2019. Humanitarian Needs Overview Ukraine. Available online. 2 For an up-to-date list of functioning clusters in Ukraine, see the Humanitarian Response website. 3 United Nations Office for the Coordination of Humanitarian Affairs (OCHA), 2019. Humanitarian Response Plan Ukraine. Available online. 1 Economic security assessment – March 2019 • How has food security evolved for populations living along the contact line since February 2018 • What are the main barriers for people accessing cash and markets along the contact line? Key Findings The findings of the assessment were divided into four sections: 1) demographics and household profile; 2) household income; 3) household expenditure and 5) access to markets. Key findings for each section are outlined below: Demographics and household profile: A high rate of vulnerability was found in all assessed areas, though particularly near the contact line where populations face additional physical protection concerns. The assessed area contained settlements with varying characteristics, including the large urban centre of Mariupol (the largest city in GCA of Donetsk and Luhansk oblasts) but also some of the most isolated and hard-to-reach settlements in eastern Ukraine. Such variation in settlement characteristics was evident in other findings of the assessment, with rural households often experiencing more severe conditions in settlements adjacent and further away from the contact line. Household income: Findings regarding household income indicated geographic variation in employment rates as well as sectors of employment, with households in areas adjacent to the contact line as well as rural areas further from the contact line more likely to have unemployed members. Households in urban centres were more likely to have members employed in the industrial sector, which was nearly non-existent as a sector in rural areas. Rural households in areas further from the contact line were likely to be engaged in agricultural work, while those nearer to areas of active conflict were more likely to work in the service sector. Humanitarian aid appeared to be concentrated in areas near the contact line, with 50% of households having received assistance in the 12 months prior to data collection (as compared to 9% in the 5-20km area). Households most often noted their preference for multi-purpose cash as a preferred modality for assistance. Household expenditure: Some variation was found in average household spending patterns between assessed areas, with urban areas spending a slightly larger share of their budgets on food and utilities. In numeric terms, households reported increased gross expenditure from the time of the REACH Winter Assessment in 2018 in most of the assessed spending categories. The section also found that there was a correlation between the principal type of fuel used for heating and perceptions of warmth and quality of fuel available. The section concluded by examining some of the livelihoods-related coping strategies utilised by households, finding a relatively high rate of households reducing essential health expenditure. Access to markets: Households living in most assessed areas were likely to live in close proximity to at least one food market, though it was most often a small shop. Winter conditions also reportedly affected households’ access to markets, and respondents noted lower quality and reduced variety of produce available in the winter period. Conclusions With the conflict in eastern Ukraine continuing into a protracted phase, the populations living in the areas experiencing active conflict have needed to adapt to the new reality of living in a territory divided into government and non-government controlled areas. Regional and national economic indicators show a degree of stabilisation of the situation following a rapid deterioration at the onset of the conflict, though high rates of inflation continue to erode the spending-power of households. On the household-level, findings of this report indicate the need for ongoing attention to issues surrounding livelihoods and economic security, particularly for elderly and vulnerable groups living near the contact line, as well as for rural populations. 2 Economic security assessment – March 2019 CONTENTS SUMMARY ........................................................................................................................................................ 1 List of Acronyms ......................................................................................................................................................