Social assistance lessons for Viet Nam Dr Stephen

Social assistance: lessons for Viet Nam Dr. Stephen Kidd 18 th July 2014

Social security: a fundamental human right Universal Declaration of Human Rights • Art 22: Everyone …… has a right to social security • Art 25: Everyone has the right to a standard of living adequate for health and well-being of himself and his family…and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood… Motherhood and childhood are entitled to special care and assistance Convention on the Rights of the Child • Art 26: States Parties shall recognize for every child the right to benefit from social security, including social insurance • Art 27: States Parties recognize the right of every child to a standard of living adequate for the child's physical, mental, spiritual, moral and social development 2

Social insurance and social assistance Social Security Social Insurance Social Assistance Financed from contributions Financed from general government revenues 3

Definition of social assistance Do Son workshop Alternative Government’s and community’s support in cash or in-kind on non-contributory basis to help the targeting beneficiaries to afford the minimum subsistence level defined by laws. Regular and predictable transfers – usually in the form of cash – that are financed from general government revenues and which aim to provide all citizens with a minimum income guarantee 4

Social security systems develop to address lifecycle risks and challenges • Formal social security is established by governments as informal and community assistance breaks down • Lifecycle risks can no longer be addressed by families and communities 5

Priorities for middle income countries: From tackling poverty to tackling insecurity Insecurity Poverty Social assistance Social insurance 6

Growth has not been inclusive: Long-term threat to stability Annual growth rate in incomes in rural areas: 2004 -2010 9 Falling behind 8 Percentage 7 6 5 4 3 2 1 he st ic 9 8 7 6 5 4 3 2 R Po or es t 0 Wealth decile 7

Undernutrition: up to 5 years of age 8

Viet Nam: an ageing society Proportion of population aged over-60 35 Percentage of population 30 25 20 15 10 5 0 2015 2020 2025 2030 2035 2040 2045 2050 9

Social security systems are designed around the lifecycle 10

South Africa and Brazil: Lifecycle systems South Africa Brazil 11

Viet Nam: Lifecycle system 12

Social security within the broader social protection system of Viet Nam 13

Approaches to social assistance: Entitlement based or poor relief? Approaches Entitlement Poor relief Higher investment Lower investment Higher coverage Lower coverage Higher impacts Lower impacts Countries usually use a mix 14

Challenge of targeting the “poor” Exclusion errors from targeting 100 Exclusion 80 60 40 20 0 POOR LIST Brazil Mexico Targeting is like hitting a moving target 15

Links between social insurance and social assistance: example of pension system 16

so Ge vo o M rgia au rit ius Br a Na zil mi bia S a So ut moa h. A fri Le ca so th Bo o liv Kir ia Tim ib or ati L' Sw Este az ila nd N e Ca pe pal Ve rd e Ch i M le ex Bo ico tsw Ar ana ge n Co tina sta Ric a B e Ba ng lize lad Vie esh t. N am Ind ia Ko % of GDP Low level of investment: Social pensions 4 3. 5 3 2 1. 5 0. 5 Over 70% coverage 2. 5 Under 70% coverage 1 Viet Nam 0 17

Le so Ma tho ldi v Ko es so vo Br az ME il Se RIT yc S he lle s So Kiri ba ut h A ti Ar fric a ge nt i Ge na or Ur gia ug ua Bo y liv Sa ia Co mo sta a Ri ca Ca Ch ile pe Ve rd e N Ma epa l El uriti us Sa lva do Be r Mo lize ng o Ec lia Do u ad mi or nic U an kra i Re ne p Sw ubli az c ila Bu nd Tim lg or aria Ph L'Es ilip te pin SO B es ot CI s AL wa PE na Ba NSI O ng lad N es h Ind ia Ja ma ica Percentage of GDP per capita Low value of benefits: Social pensions and merit payments 70 60 50 30 20 0 Over 70% coverage 40 Under 70% coverage 10 Viet Nam 18

Social assistance is an investment and essential component of a successful market economy • Household level impacts • Strengthens development of children, the future labour force • Enables people to engage in the labour force and deal with risk and shocks • Community level impacts • Promotes more dynamic local markets • National level • Enables a more flexible labour market • Helps tackle inequality and promotes social stability • Generates greater consumption and demand in the economy 19

Impacts on early childhood nutrition: South Africa Old Age Pension Child Support Grant Reduces stunting by 3 -5 cm Reduces stunting by up to 3 cm Contributes to cognitive development The earlier children enrol on CSG, the higher their test scores in Reading and Maths OUTCOME: increase in lifetime earnings 20

Providing predictable cash offers people the opportunity to engage in employment Brazil: labour participation increased by 2. 6 percentage points (4. 3 for women) Social protection transfers creating “dependency” is a myth in developing countries, where transfers are low South Africa CSG: 15% more likely to be in work; 18% more likely to look for work (buy better clothes for interviews: can pay bus fares) Viet Nam: in 2004, social assistance increased probability of women engaging in economic activity by 2. 5% and in employment by 5% However care needs to be taken in design: • • Targeting the “poor” may encourage people to remain “poor” If transfers are too high, people may withdraw labour 21

Increased investment in “own account” income generating activities Mexico: 14% of transfer invested in productive assets Nicaragua: Investment in agricultural machinery Can obtain credit and loans Brazil: investment in small businesses Recipients of SP transfers are seen as better credit risks so are more likely to access a loan Good evidence from Lesotho, Uganda, South Africa and Nepal of older people engaging in small enterprise and employing others People have security and predictability in their lives More willing to invest in higher risk but higher return activities 22

Greater consumption can help drive economic growth at a national level or support recovery during recessions or crises OECD: China: Developed countries benefit from average consumption of 14% of GDP from social security, redistributed through tax system. Recently expanded pension system to 484 million members, to encourage people to reduce savings, which are highest in world Uzbekistan: USA: With fall of Soviet Union, invested 4% of GDP in child benefits, suffering less from crisis than other countries. Boosted spending again during global recession, maintaining GDP growth of 7% During global recession, expansion in food stamps and unemployment insurance had as much impact on economy as investment in infrastructure 23

Masterplan needs to be strategic • Set out long-term objective and direction e. g. • “Ensure that all citizens of Viet Nam have access to a minimum income to contribute to human development, economic growth and shared prosperity” • Set out objectives for next five years: • Prioritise social assistance schemes for expansion (categories of population; coverage; value of benefits; overall costs) • Outline new governance and institutional arrangements for the social assistance sector • Propose investment in strengthening delivery systems and provide broad design • Leave detailed design to further studies and proposals 24

What is possible? Investment of 1% of GDP Scheme Category Proportion reached Size of benefit Cost (% of GDP) Social Pension 65+ 100% VND 360, 000 0. 68% Working age 1. 5% VND 360, 000 0. 1% 0 -4 s 70% VND 145, 000 0. 21% Disability grant Child grant Total 0. 99% Bolivia invests 1. 1% of GDP in its social pension only Lesotho invests 1. 3% of GDP in its social pension only Nepal already spends 0. 8% of GDP in its social assistance system Expansion could take place over 5 -10 years 25