Viet Nam: EXTENSION - Technical Consultant for assessment of government expenditure on social protection benefits in Viet Nam

TERMS OF REFERENCE

Assessment of government expenditure on social protection benefits

1. Background

Vietnam’s economy is one of the most dynamic in East Asia, with growth averaging 6.5 per cent a year during 2000-16. This positive outlook accelerated in 2017 and 2018, two exceptionally good years of growth, low inflation and record FD; trends expected to continue into the future. Domestically, the relatively high elevated public debt limits the scope for raising expenditure but the macroeconomic conditions remain generally accommodative and provide an opportunity for additional reforms to ensure durable growth. The 2018 IMF Vietnam Article IV calls on the government to meet infrastructure needs but also protect social spending and adequately fund the social insurance system. Social protection, or social security, is defined as a set of policies and programmes designed to reduce and prevent poverty and vulnerability throughout the life cycle. Social protection includes income security benefits for children and families, maternity, unemployment, employment injury, sickness, old age, disability, survivors, as well as health protection. Social protection addresses all these policy areas by a mix of contributory schemes (social insurance) and non-contributory tax-financed benefits, including social assistance. In May 2018, Viet Nam’s Central Party Committee promulgated Resolution 28-NQ/TW which acknowledges that the implementation of social protection is still inadequate and has not been adapted to the needs of the most vulnerable. In order to address this, Resolution 28 endorses the establishment of a multi-tiered system, where non-contributory and contributory tiers function together to reach universal coverage. Viet Nam has made remarkable policy developments in terms of establishing social insurance and tax-financed social assistance provisions. However, for a multi-tiered social protection system to operate as such, increased coherence in the design and administration of different tiers is essential. Currently, while both Master Plans on Social Insurance (MPSIR) and on Social Assistance (MPSARD) establish targets for the expansion of coverage, these are not aligned or ambitious enough to reach the joint goal of universal coverage. Coverage of social assistance programs remains particularly low for a middle-income country such as Viet Nam. In April 2017, the Government of Viet Nam issued the Decision 488/CP-TTg on the Approval of the MPSARD 2017-2025 that adopts a right based and life cycle approach to expand social assistance coverage and increase benefit levels to children, the elderly, and people living with disabilities. Despite this step, no new expenditure commitments have been made by government. Moreover, a combination of low coverage and low value of transfers limits the potential impact of existing transfers on poverty reduction, family wellbeing and economic growth. Over the past decade, Government spending on social protection has remained constant but low at around 3% of GDP. In 2015, a UNDP study found that the bulk of this expenditure was going to programs not available to the general population. In terms of social insurance, the UNDP study found that the largest share of the allocation was directed to the pre-95 benefits – pensions subsidies to civil servants who could not fully participate in the contributory system introduced in 1995. This is the largest single component of social protection spending, accounting for 1.15% of GDP in 2013. Similarly, on the social assistance side the merits regime constitutes a third of total allocations, or about 1% of GDP in 2013. In contrast, the allocation for the nine regular categorical transfers under the Decree No.136/2013/ND-CP was 0.17% of GDP the same year, of which only 0.04% of GDP was allocated for children. This is an increase from 0.1% in 2008, but during this time, lack of indexation has eroded benefits considerably. According to VHLSS 2014 , key regular social assistance programmes under Decree No.136/2013/ND-CP reach less than 10% of the population, including direct and indirect beneficiaries. Strikingly, almost 80% of the poorest members of the population are not covered. Impact of the Decree are sub-optimal due to low value of transfers. In the poorest group, average social assistance transfers account for 7.5% of per capita consumption, insufficient to achieve substantial and sustainable improvements in people’s lives. The MPSARD’ Action Plan suggests to undertake an analysis to build justification for the transfer values outlined in the MPSAR, assessing them against national and international standards.

1. Purpose and Objectives

The broad objective of this work is to perform a forward-looking review of Government spending in social protection. The review will cover tax-funded benefits designated as social assistance as well as social insurance in national legislation, and distinguish these from other social spending, such as the National Poverty Reduction Programme (NPRP). For the MOF/ the National Institute for Finance (in conjunction with the Department of State Budget and Department of Public Expenditure), the purpose of the study will be to have an updated analysis of the structure and trends underlying government expenditure in the area of social security, both for regular transfers and social insurance subsidies, and how these align with the most recent requirements raised by the endorsement of Resolution 28 and Decision 488. This work will intend to facilitate a review of the current allocation of social security funds and identify opportunities to increase the impact of this allocation. For MOLISA/Department of Social Assistance (DSA), the study will be an opportunity to generate evidence on the adequacy of current benefits and the resources required to implement the expansion goals set by the MPSARD Action Plan, as well as to guide the review of Decree 136. For the Social Insurance Department (SID), the study will provide an overview of the evolution of social insurance spending patterns and opportunities to adjust allocations according to evolving priorities. Overall, the study will support MOLISA to get an overview on expenditure across all social security budget lines and the opportunity to analyse concrete fiscal space options to allow for the expansion of coverage for all under a multi-tiered system. As MOLISA prepares technical proposals to update key legislation such as the Social Insurance Law and Decree 136, results of this analysis are expected to contribute to the reform process by informing policy options for the expansion of coverage and improvement of adequacy of benefits in line with a multi-tier design, particularly prioritizing children, people living with disabilities and the elderly.

1. Stakeholders

This research will be a joint effort between the Departments of Social Insurance (SID) and Social Assistance (DSA) of the Ministry of Labour and Social Affairs (MOLISA), the Budget Department, Department of Public Expenditure and the National Institute for Finance (NIF) of the Ministry of Finance (MOF), with technical support from the ILO-Irish Aid project and the UNICEF project with MOLISA and MOF. All stakeholders will have an opportunity to validate all final products of every task through public consultation and direct written comments to draft reports.

1. Major tasks and methodology

Task 1: Adequacy of benefits Lead agency: MOLISA Department of Social Assistance

ILO Social Protection Floors Recommendation No. 202 states that social protection benefits should, at a minimum, benefit levels should ensure effective access to essential goods and services and protection against poverty, vulnerability and social exclusion. MOLISA’s MPSARD Action Plan calls for a gradual increase in the values of existing government-funded social assistance transfers, in line with the availability of the State budget. However, no analysis has been undertaken to justify the proposed values or assess their adequacy to meet the benefit’s policy objectives.

• Define adequacy in terms of the policy objective of each benefit examined (i.e. poverty prevention) and compare current and proposed benefit levels in Viet Nam (i.e. benefit levels under Decree 136 and MPSARD Action Plan) to regional and international practice and standards.
• Evaluate what happens over the years to purchasing power of beneficiaries and their real value and what is their income position relative to other groups of society.
• Propose minimum benefit levels required to meet policy objectives.

Task 2: Indexation mechanism Lead agency: MOLISA Department of Social Assistance

The Government stipulates the adjustment of social insurance benefits (specifically pensions) based on the increase in the consumer price index and economic growth to suit the state budget capacity and social insurance funds. This protects pensioners against inflation but according to the latest actuarial valuation, is also a big factor in the rising cost of the scheme. On the other hand, regular non-contributory social transfers like the social pension are not indexed at all, leaving recipients vulnerable to the fast erosion of this income, failing to protect them from poverty and vulnerability and excluding them from participating in the gains of the economy. While protecting adequacy as determined by Task 1 and ILO Minimum Standards, a new indexation mechanism (based on wage growth and/or inflation or a mix of both) is necessary.

• Investigate the consequences of different benefit adjustment options from the point of view of adequacy as well as its cost implications.
• Propose a mechanism to protect the value of benefits through “cost-of-living” adjustments or indexation, including how to ensure that adjustments guaranteeing benefit adequacy are financially viable. *Project the cost and welfare impact of priority benefits, as established by the MSARD Action Plan, as well as wider proposals for universal coverage under a multi-tiered system.

Task 3: Expenditure analysis Lead agency: MOF (NIF and Budget Department, Department of Public Expenditure)

Update social protection expenditure data for at least the past 5 years and analyse expenditure patterns, including trends in overall size and composition of spending. The analysis would additionally provide an assessment of these trends in view of their impact on poverty rates and welfare outcomes (education and health), with results dissagregated by age, gender, geographical location and wealth quintiles, and highlight financial gaps for reaching established coverage targets with adequate benefit levels.

• Analysis of macroeconomic indicators over the past decade (GDP growth, inflation, fiscal debt, total revenue and expenditure)
• Analyse components of revenue and expenditure and their trends.
• Analysis of past experience in social protection expenditure (number of beneficiaries, total benefit amount, average benefit amount, demographic and financial weight by benefit type). Analyse coverage and expenditure trends.
• Organize one capacity building for MOF team on the principles of social protection design and investment.

Task 4: Costing and fiscal space analysis Lead agency: MOF (NIF and Budget Department, Department of Public Expenditure)

• In the context of increasing expenditure on social protection, develop a model for assessing fiscal space both within current social protection allocations and the larger government revenues pool.
• Update cost-projections of tax-financed benefits (including social insurance and social assistance) under current design and proposals for (i) adequacy improvement and (ii) coverage expansion targets set by MPSAR and R28. Highlight financial gaps for reaching these targets.
• Use macroeconomic findings to develop reasonable assumptions for macroeconomic projections and validate with IMF.
• Identify potential sources of fiscal space, with particular focus on existing social protection allocations.

• Compare evolution of fiscal space to cost projections and propose a roadmap for the gradual expansion of benefit increase and coverage over a medium-term, which allows the government to meet policy goals.

• Workplan

• Task 1: Adequacy of benefits (Technical Consultant) - February

• Task 2: Indexation Mechanism (Technical Consultant) - March

• First Consultation (DSA) - March

• Task 3: Expenditure Analysis (NIF & Technical consultant) - April

• Task 4: Fiscal Space Analysis (Actuarial & Technical Consultant) - April

• Technical Validation Worskhop (MOF) - May

• Final Consultation (MOLISA) - May

• Deliverables

• Deliverable 1: Technical consultant delivers report encompassing the results of Task 1 and 2, incorporating feedback from MOLISA, ILO and UNICEF.

• Deliverable 2: Technical consultant and NIF deliver a Technical Note with the results of Task 3, drafted with backstopping of the technical consultant.

• Deliverable 3: Actuarial consultant delivers Technical Note with partial results of Task 4, drafted in consultation with technical consultant. Deliverable 4: Technical consultant delivers final report incorporating all previous inputs and concrete policy proposals.

• Reporting and Administration

External collaborators will report to the CTA of the ILO-Irish Aid Project, in collaboration with the CTAs of other active ILO social protection projects in Vietnam and the Regional Senior Social Protection Specialist. Technical supervision will be provided by ILO and UNICEF jointly, while MOLISA’s departments of Social Insurance and Social Assistance Provide policy leadership and decision-making. MOF validates data and methodology.

1. Expertise and qualifications of the subcontractor

The institution will be able to offer a team comprised of international and national consultants, who together should possess the following qualifications:

• Advanced degree in social security, social policy, economics, or other relevant fields.
• The Team Leader should have over 15 years of experience in undertaking research on contributory and non-contributory social security programs, and providing advisory support in policy dialogues with high-level decision-makers in Government.
• Familiarity with the Vietnamese socio-economic context, social policy development process and recent reform developments.
• Ability to contextualize expertise and deliver complex topics to a non-expert audience. The use of participatory methodologies for the consultation events is a must.
• Excellent verbal and written communication skills in English, and ability to formulate concepts into concrete practical advice.
• Ability to produce high quality analytical, strategic and concise documents.

• Excellent team work skills and timely submission of quality work.

• Attestation of adequate medical and injury insurance

The consultant(s) must be aware that the ILO accepts no liability in the event of death, injury, or illness of the consultant. The consultant must attest that he/she is adequately covered by insurance for these risks. In no circumstances shall the consultant be covered by any ILO insurance. It is the consultant’s own responsibility to take out, at their own expense, any personal insurance policies that are considered necessary, including a civil liability insurance policy.

1. Source of Funds ILO- Irish Aid Project (VNM/16/54/IRL).

Interested candidates should submit separate technical and financial proposals to

dangthihanh@ilo.org

The deadline for applications is February 22, 12pm Hanoi time.