Social protection

Better coverage is key to Viet Nam’s social insurance reform

If social insurance coverage increases, the State can focus on those who are not yet protected, to make sure that everybody gets support whenever needed.

Press release | 29 March 2017
HANOI – Extending the social insurance coverage and strengthening the system are vital for Viet Nam’s reform plan to fulfil its determination of achieving universal social protection in the coming time. The social protection floor means every member of the society will be protected at least in terms of healthcare, and basic income security for children, persons in active age but unable to earn sufficiently, and the elderly.

This was the message of a workshop organized by Ministry of Labour, Invalids and Social Affairs (MoLISA) and the International Labour Organization (ILO) in Hanoi on 29 March.

Addressing the event, Deputy Prime Minister Vu Duc Dam emphasized that “we will surely have important changes in this area in the time to come”.

Viet Nam was one of the first countries in the world agreeing to achieve the Social Protection Floor for all and has also set to reach the social protection objective of the UN Sustainable Development Goals by 2030.

MoLISA Minister Dao Ngoc Dung said that Viet Nam has gradually improved its social insurance policies and has so far achieved good results with increasing number of people joining and benefiting from social insurance schemes.

According to the Global Coalition for Social Protection Floor, Viet Nam would need to allocate roughly another 1.8 per cent of its Gross Domestic Products (GDP) to close the social protection gap and bring everybody above the international poverty line of US$1.9 per day.

“Although this gap is bigger than countries like Thailand, it is better than some other nations of the same or higher level of development such as Malaysia,” said Michael Cichon, former ILO Director of Social Security Department. “This is a good sign as it indicates that solving Viet Nam’s social protection gap is fairly feasible.”

Low coverage

Low social insurance coverage is one of the major issues in the social protection system the country is trying to address.

“We need the social insurance coverage to grow, so the State can focus on those who are not yet protected, to make sure that everybody gets support whenever needed,” said Cichon.

Viet Nam has set the target of having half of its labour force covered by social insurance by 2020. In comparison, only 24 per cent of Vietnamese workers, or more than 13 million people, have joined the system to date. Nearly 3 million old-aged people now have pensions.

According to ILO Viet Nam Director Chang-Hee Lee, so far those registered are “among the easiest to reach”.

“Viet Nam may need more effective enforcement and incentive policies, including enhanced social insurance inspection, to increase social insurance coverage,” he said. Small-and-medium-sized enterprises, short-term jobs and family businesses remain largely missed out of the social insurance system.

The present scheme has neither been adapted to cover the self-employed and non-standards form of employment.

Acknowledging that voluntary scheme has also rarely shown convincing achievements in other countries, the ILO representative encouraged Viet Nam to “think about innovative solutions to reach this “missing middle””.

The maturity of the country’s social protection system and nevertheless persisting challenges call for a stronger articulation between the social assistance programmes, which target the most vulnerable groups, and the social insurance scheme based on workers’ and employers’ contributions. This better connection will ensure that no one is left out and level of benefits is sufficient.

The sustainability of the social insurance system is nowadays challenged by the incredibly fast ageing of the population. Life expectancy is now 76 years, compared to 70 in 1990. Particularly, life expectancy of those reaching 60 years of age is 81. It is equivalent to the same figure in richer countries, like Brazil or Thailand, and only 3-4 years short of Western European nations.

“As demographic and economic patterns evolve, adjustments of the retirement age and contribution rate are part of the life of any social protection system. Decades of experience in other countries have confirmed that reforms are not a sign of failure, but rather part of its normal development,” said the ILO Viet Nam Director.

The ILO also recommended the Government step in and increase the level of public spending on social services and cash benefits, and ensure that even the most vulnerable and those leaving in the remote areas are also receiving such support. More efforts in this sense are needed to realize the social protection for all.

“Whichever characteristics Viet Nam’s social insurance system has, the approaches should still be in line with the world’s common trends and principles,” said the Deputy Prime Minister.

He reaffirmed the country’s commitment to improve its social protection, and emphasized “the need to have the whole political system involved to make everybody understand the importance of joining social insurance”.

The high-level workshop on “Extension of Social Insurance Coverage – International Experiences and Recommendations for Viet Nam” was organized within the framework of the ILO-Viet Nam Country Decent Work Programme and the ILO project on promoting and building social protection in the ASEAN funded by the Japanese Government.