Reform in the Cuban public sector

Reform in the Cuban public sector
By Wang Ping
June 10, 2011

As the only socialist country in the Western hemisphere, Cuba adheres to
the Soviet model in organizing its state-controlled economy. The means
of production are owned and run by the government. According to
government statistics, there are more than 5 million people in the labor
force – and almost of all of the labor force is employed by the state or
cooperatives closely connected with the state. The private sector is not
only small but also tightly controlled and regulated.

In 1993 the government legalized self-employment in 150 occupations for
workers laid off in the economic crisis brought on by the loss of Soviet
subsidies. From 2003 to 2007, the Cuban government stopped expanding
private sector activities and has tried to push the private sectors that
were created out of business.

With serious economic difficulty in 2010, the Cuban government restarted
its policy to reduce the size of the public sector and created
opportunities for small businesses, as well as open more opportunities
for self-employed workers. In April last year, President Raul Castro
said that there are more than 1 million "excess" workers on the state
payroll, which generated low productivity and inefficiency. To deal with
these problems, the government announced that half a million state
workers would be laid off from September 2010 to the first quarter of
this year. These measures show economic change is gathering speed.

To absorb all the workers who are laid off, the government expects that
hundreds of thousands will move into some form of private enterprise
over the next few years. The government has granted new licenses to
entrepreneurs, vastly expanding the kinds of businesses that can be run
privately. The government has also loosened restrictions on private
sector employment and expanded the scope of the cooperative sector. In
October last year, it published new rules regulating the self-employment
sector. This included increasing the number of activities authorized to
178 in the self-employment sectors, opening the door for self-employed
workers to hire labor, and introducing a new tax scheme to include taxes
on sales, profit, payroll and social security.

The openings in the private sector are welcomed by many Cubans who are
hoping for new opportunities. Cuba is now in the process of massively
reducing the size and participation of the public sector. The most
recent data released by the Ministry of Labor and Social Security
indicates that 221,839 new licenses have been awarded between October
2010 and April 2011. In less than a year since the initial announcement
was made, 309,728 people have taken up self-employment.

The growth of self-employed Cubans not only marks a major shift toward a
larger private sector in the socialist economy, but could lead to great
changes in traditional Cuban economic and social philosophies if the
government follows through on the full scale of its announcement.

The author is the director of the Center for Latin American Studies at
Nankai University.

http://www.china.org.cn/opinion/2011-06/10/content_22757864.htm