International Labour Office 1 The ILO Global Campaign to extend Social Security to all Social Security in Sri Lanka: Towards a social security floor as a new foundation for the system ? Michael Cichon, Emmanuelle St. Pierre-Guilbault, Karuna Pal, John Woodall ILO office, Colombo Social Security Department International Labour Office Colombo, 11 September 2008

International Labour Office 2 The ILO Global Campaign to extend Social Security to all Structure of the presentation Point One : History of Social Security in Sri Lanka Point Two: The present state of social security: sucesses, challenges and current developments Point Three: Towards a social security floor? Point four: What the ILO can offer Point Five:Conclusion

International Labour Office 3 The ILO Global Campaign to extend Social Security to all Point one: History - a success story:One the first countries of the world to adopt an explicit "Grow with equity" policy Phase One - Pre- Independence: History goes back to the early 20th century, public servants pension scheme in 1901, followed by an expansion of tax financed systems and free health services during 1930s –1940s Phase Two – Post Independence: Sri Lanka adopts a dual tax-financed and contributory welfare system, – Cash transfers/assistance aiming at wide population coverage, in kind benefits (i.a. rice rations) and public health care – The creation of the EPF in 1958;

International Labour Office 4 The ILO Global Campaign to extend Social Security to all Point one: History - a success story: one of the first countries to embrace activation policies… Phase Three- about : adaptations of the welfare state to the contracting economy…focusing on the poor Phase Four (post 1990…): Modernising the welfare state through Janasaviya (1989)/Samurdhi (1994) combining transfers with activation and inclusion policies; plus contributory schemes for special groups

International Labour Office 5 The ILO Global Campaign to extend Social Security to all Point Two: The present state of social security – the good news… – Sri Lanka has one of the most developed social security systems in the Region with A conceptually modern social assistance scheme (covering around 40% of the population) A universal health care system covering 100% of the population Pensions for public servants, farmers, fishers and self employed The EPF, ETDF and Approved Provident Funds for private sector workers Covering about 50% of the working age population

International Labour Office 6 The ILO Global Campaign to extend Social Security to all Point Two: The present state of social security – … and the challenges – …improvements are necessary with respect to The targeting and the adequacy of benefits levels in the Samurdhi scheme The quality and cost effectiveness of the public health care system The personal coverage of the income security schemes, about 12 million people not reached by social security schemes (6.7 million elderly and children) The adequacy of benefits provided by the provident funds The range of benefits available is still incomplete (e.g. unemployment benefits are still missing) Coherence of the management and financing of pension schemes

International Labour Office 7 The ILO Global Campaign to extend Social Security to all Point two: Current developments – Current proposals centre around Enhancement of administration and management of the EPF New EPF benefits (withdrawals for health care, housing and education up to 50% of balance) ?? A scheme for construction workers ?? A new unemployment benefit scheme

International Labour Office 8 The ILO Global Campaign to extend Social Security to all Point Three: Towards a social security floor? An ILO proposal … In the framework of its global Campaign to extend social security to all the ILO is promoting a “Universal and Progressive” approach to social security development that envisages: – Building progressively higher levels of protection – Based on a basic floor of social security for all - …and always incorporating existing systems

International Labour Office 9 The ILO Global Campaign to extend Social Security to all The social security development staircase The floor

International Labour Office 10 The ILO Global Campaign to extend Social Security to all The floor could consist of could consist of four essential social security guarantees: Universal guarantee of access to essential health benefits, through a set of sub-systems linked together: basically a public health service funded by taxes, social and private insurance and micro-insurance systems. Guaranteed income security for all children through family/child benefits aimed to facilitate access to basic social services: education, health. Basic means tested/self targeting social assistance for the poor and unemployed in active age groups. Guaranteed income security for people in old age, invalidity and survivors through basic pensions.

International Labour Office 11 The ILO Global Campaign to extend Social Security to all The social security development staircase - the case of Sri Lanka…

International Labour Office 12 The ILO Global Campaign to extend Social Security to all Point Three: A social security floor is affordable: A simulation exercise – Assumptions Basic old age and invalidity pensions: – 20% of per capita GDP paid to all persons over 65 Child benefits: – 10% of per capita GDP for a max. of two children in age bracket 0-14 Essential health care: – based on an health system staffing ratio of 300 medical professionals per 100,000 population, overhead 67% of staff cost … Basic social assistance for the unemployed: – 100 day guaranteed employment paid by 20% of per capita daily GDP to 10% of the population Administration cost: 15% of cash benefit expenditure

International Labour Office 13 The ILO Global Campaign to extend Social Security to all Point Three: Results of a simulation exercise: Gross cost

International Labour Office 14 The ILO Global Campaign to extend Social Security to all Point Three: Results of a simulation exercise:…if the government could spend about 20% of its revenue on basic social security …

International Labour Office 15 The ILO Global Campaign to extend Social Security to all Point Four: What can the ILO do to support developments … A national Social Expenditure and Performance Review (SPER) of the social assistance and social security system A social budgeting exercise trying to establish the fiscal and economic viability of the existing and potentially alternative social transfer schemes such as the social floor… Actuarial, fiscal and economic analyses of individual schemes Training of social security experts (planners, managers, financing experts, supervisors and regulators) Legal advice Facilitating social dialogue

International Labour Office 16 The ILO Global Campaign to extend Social Security to all Point Five: Conclusion Sri Lanka has one of the the most developed social security sytems in the region Based on modern development principles such as "growing with equity" … and modern social security principles that include activation strategies and policies of social inclusion but It has gaps … The 50th anniversary of the most important social security system, the EPF … is a good time to start thinking about an extension of the system…