ILO Viet Nam Director’s opening remarks to the Workshop on Social Insurance Law Reform

Statement | Hanoi | 27 May 2014
Madame Pham Thi Hai Chuyen, Minister of MoLISA
Madame Truong Thi Mai, Chairwoman of the Social Affairs Committee of the National Assembly
Members of the National Assembly
Distinguished Participants and Guests

It is a great honor for me to join Madame Mai in welcoming all of you to this important workshop. Your presence here is highly appreciated as it is already evening time and we have all been through such a long day.

The ILO has been providing technical assistance to Viet Nam throughout the process of strengthening the social insurance system for over two years.

Social insurance is a major pillar of the social protection system and a topic of critical importance for Viet Nam.

The existing social insurance system has revealed serious flaws:

• First, its coverage rates, especially in the informal sector and among farmers, remain low with only about 20% of the total workforce.
• Second, there exist significant inequities between different participant groups, for example, between public and private sectors, and between men and women.
• Third, the capacity for management and implementation of social insurance programme remains weak. As a result, compliance remains low.
• Fourth, lack of financial sustainability of the current system as the population is ageing fast. Fertility rate has declined sharply while life expectancy increased. The ILO’s actuarial valuation has shown the potential depletion of the pension fund in 20 years unless adequate reforms are undertaken.

The Social Affairs Committee’s Appraisal of the draft Law has raised some specific questions for further discussion, clarification and adjustment in the draft. I hope that by reviewing international experience, this workshop can contribute to the preparation of the law.

Let me highlight four issues:

First, the draft law intends to provide a road map to gradually improve and extend social insurance, with a view of fairness and financial sustainability. This is much welcome as reforms need time and sequencing and the society needs to understand the benefits of the reforms.

Or in other words, a pension reform is not just about financial matters. No one can convince the public and policy-makers that a country has to increase the retirement age only because the pension fund is running out.

Second, one needs to look at the broader benefits of the reform for everyone and the society as a whole. Evidences from other countries suggest that having older persons employed for as long as possible keeps them healthier mentally and physically. It also integrates them more effectively in society and enhances their financial security.

Third, one needs to look at the employment needs of the country in 10, 15 and 20 years. Viet Nam will need to tap into the productive potentials of older workers to meet its manpower needs as the workforce ages. Viet Nam’s labour force was projected to grow by 4.1 million between 2010 and 2015. But after that, this growth will slow down considerably. From 2025 to 2030, the labour force will increase by only a mere 1.3 million – or 70 per cent less than today. So the issue is how to maintain growth and prosperity when labour supply is drying out in an aging society.

Fourth, one needs to look at the social insurance reform as part of an integrated approach that encourages greater co-ordination and collaboration policy portfolios to foster the productive capacity, health and well-being of an ageing society. For example, tapping into productive potentials of older people through longer working life would need actions to improve working conditions, their skills and values and shape positive perceptions towards older workers.

While each country strives for the same objective, country’s situation, development stage, and policy room vary. There is no single solution that fits everyone.

The ILO is proud to have supported the Government’s reform efforts with actuarial studies, technical consultations and knowledge sharing. We recognize that these are challenging areas of reform and stand ready to support Viet Nam in moving forward on its own path.

Thank you very much.