DEVELOPMENT

Social assistance: lessons for Viet Nam

Dr. Stephen Kidd

18th July 2014

2

Social security: a fundamental human right

Universal Declaration of Human Rights

Convention on the Rights of the Child

• 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

• 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

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Social insurance and social assistance

Social Security

Social Insurance Social Assistance

Financed from contributions

Financed from general

government revenues

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Definition of social assistance

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

Do Son workshop Alternative

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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

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Priorities for middle income countries:From tackling poverty to tackling insecurity

57.64% 39.45%

28.50%

17.20%

PovertyInsecurity

Social assistance Social insurance

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Growth has not been inclusive:Long-term threat to stability

Poorest 2 3 4 5 6 7 8 9 Richest0

1

2

3

4

5

6

7

8

9

Wealth decile

Pe

rce

nta

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Annual growth rate in incomes in rural areas: 2004-2010

Falling behind

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Undernutrition: up to 5 years of age

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Viet Nam: an ageing societyProportion of population aged over-60

2015 2020 2025 2030 2035 2040 2045 20500

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Social security systems are designed around the lifecycle

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South Africa and Brazil:Lifecycle systems

South Africa Brazil

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Viet Nam:Lifecycle system

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Social security within the broader social protection system of Viet Nam

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Approaches to social assistance:Entitlement based or poor relief?

Approaches

Entitlement Poor relief

Higher coverage

Lower investmentHigher investment

Higher impacts

Lower coverage

Lower impacts

Countries usually use a mix

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Challenge of targeting the “poor”

POOR LIST Brazil Mexico0

20

40

60

80

100

Ex

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Exclusion errors from targeting

Targeting is like hitting a moving target

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

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Low level of investment:Social pensions

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Over 70% coverage

Under 70% coverage

Viet Nam

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Low value of benefits:Social pensions and merit payments

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Over 70% coverage

Under 70% coverage

Viet Nam

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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

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Impacts on early childhood nutrition:South Africa

Old Age Pension

Reduces stunting by 3-5 cm

Child Support Grant

Reduces stunting by up to3 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

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Providing predictable cash offers people the opportunity to engage in employment

Brazil: labour participation increased by 2.6 percentage points (4.3 for women)

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%

Social protection transfers creating “dependency” is a myth in developing

countries, where transfers are low

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

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Increased investment in “own account” income generating activities

Mexico: 14% of transfer invested in productive assets

Nicaragua: Investment in agricultural machinery

Brazil: investment in small businesses

Good evidence from Lesotho, Uganda, South Africa and Nepal of older people engaging in small enterprise and employing others

Can obtain credit and loans

Recipients of SP transfers are seen as better credit risks so

are more likely to access a loan

People have security and

predictability in their lives

More willing to invest in higher risk but

higher return activities

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Greater consumption can help drive economic growth at a national level or support recovery during recessions or crises

OECD:

Developed countries benefit from average consumption of 14% of

GDP from social security, redistributed through tax system.

China:

Recently expanded pension system to 484 million members, to

encourage people to reduce savings, which are highest in world

Uzbekistan:

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%

USA:

During global recession, expansion in food stamps and unemployment insurance had as much impact on

economy as investment in infrastructure

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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

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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%

Disability grant

Working age 1.5% VND 360,000 0.1%

Child grant 0-4s 70% VND 145,000 0.21%

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