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

2. 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 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 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

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

4. 4 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

5. 5 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 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

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

7. 7 Growth has not been inclusive: Long-term threat to stability Annual growth rate in incomes in rural areas: 2004-2010 Falling behind

8. 8 Undernutrition: up to 5 years of age

9. 9 Viet Nam: an ageing society Proportion of population aged over-60

10. 10 Social security systems are designed around the lifecycle

11. 11 South Africa and Brazil: Lifecycle systems South Africa Brazil

12. 12 Viet Nam: Lifecycle system

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

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

15. 15 Challenge of targeting the “poor” Exclusion errors from targeting Targeting is like hitting a moving target

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

17. 17 Low level of investment: Social pensions Over 70% coverage Under 70% coverage Viet Nam

18. 18 Low value of benefits: Social pensions and merit payments Over 70% coverage Under 70% coverage Viet Nam

19. 19 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

20. 20 Impacts on early childhood nutrition: South Africa Old Age Pension Reduces stunting by 3-5 cm Old Age Pension Reduces stunting by 3-5 cm Child Support Grant Reduces stunting by up to 3 cm Child Support Grant 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

21. 21 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% 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 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

22. 22 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 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 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 People have security and predictability in their lives More willing to invest in higher risk but higher return activities

23. 23 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. 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 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% 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 USA: During global recession, expansion in food stamps and unemployment insurance had as much impact on economy as investment in infrastructure

24. 24 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

25. 25 What is possible? Investment of 1% of GDP SchemeCategoryProportion reached Size of benefitCost (% of GDP) Social Pension 65+100%VND 360,0000.68% Disability grant Working age1.5%VND 360,0000.1% Child grant0-4s70%VND 145,0000.21% Total0.99% 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