Project launched to address demographic challenges for national social insurance system

The Ministry of Labour, Invalids and Social Affairs (MoLISA) and the International Labour Organization (ILO) today launched a project to improve social insurance system in the context of Viet Nam’s demographic changes, low insurance coverage and limited law enforcement.

Press release | 17 June 2013
HANOI (ILO News) – The Ministry of Labour, Invalids and Social Affairs (MoLISA) and the International Labour Organization (ILO) today launched a project to improve social insurance system in the context of Viet Nam’s demographic changes, low insurance coverage and limited law enforcement.

The project on “Strengthening the performance of the social insurance system in Viet Nam through improved legislation and legal framework for social insurance” supports the reform of the Social Insurance Law, which is expected to get the green light from the National Assembly next year.

The ILO will provide technical advice on critical issues including the deficit pension fund, law enforcement, the improvement of short–term insurance schemes, and protecting informal workers using a combination of voluntary insurance and social allowances.

“Revising and improving the Social Insurance Law is an urgent task,” said ILO Viet Nam Director Gyorgy Sziraczki. “It’s not only for today but also for the future. The impact of demographics on our future social protection system and job prospects should be taken into consideration.”

Although finding jobs for more than 1 million young women and men entering the labour force every year is the priority for Viet Nam in the short term, the country’s fast aging process poses a serious long-term problem. Viet Nam started its aging phase when over 60-year-olds accounted for more than 10 per cent of the total population in 2012, five years ahead of prediction. With fewer young workers in the future and a generous pension formula, the pension fund will be in jeopardy unless urgent measures are introduced in the reform.

The new reform would need to protect workers after retirement by making sure that employers and employees contribute to the social insurance fund based on the total income instead of the basic salary in line with the new Labour Code, said Mr Sziraczki.

According to Vice Minister of Labour, Invalids and Social Affairs Pham Minh Huan, the amended Social Insurance Law needs to result in an extended coverage of social insurance and diversified types of insurance on the basis of “paying and benefiting”.

The Viet Nam Social Security (VSS) covers Vietnamese citizens with employment contracts of three months or longer but the enforcement remains a challenge. Only one fifth of the total workforce has social insurance today.

Despite increase in compulsory contribution collection to VND 89.6 trillion last year from VND 6.3 trillion in 2001, only 47 per cent of all registered enterprises contributed to compulsory social insurance fund in 2010.

“The reform should offer solutions to expand coverage to informal workers, as mandated by Party Resolution 15 on “some social policies”,” said the ILO Viet Nam Director. A combination of social allowances, incentives, improvement of delivery and strong political will may be required to quickly expand coverage to 80 per cent of the workforce who remain unprotected against risks.

However, the Vice Minister admitted that amending the Social Insurance Law “is a difficult task as it affects everyone and many other aspects of the economy and society.”

“Whether the reform can be successful depends on our determination,” he added.

Facts and figures
 

• The Social Insurance Law was passed in 2006 and came into effect on 1 January 2007.

• 10.4 million workers enrolled in compulsory insurance in 2012, equivalent to 19.5% of the total workforce.

• 139,643 contributors to voluntary insurance in 2012, equivalent to 0.3% of the total workforce.

• Out of the compulsory contribution for a worker, 83 per cent is for pensions and survivors benefits, 12 per cent for sickness and maternity and the remaining 5 per cent for work injury.

• Compulsory contribution collection in 2012 was VND 89.6 trillion.