APEC’s Measures for Strengthening
Social Safety Nets
in the Asia-Pacific Region
Chanyong Park, Kyewoo Lee and Hyunsong Lee
Ministry of Health and Welfare of Korea
Korea Institute for Health and Social Affairs
TABLE OF CONTENTS
List of tables
List of figures
Preface
Executive Summary
I.
Introduction
II. APEC and Social Safety Net
1. Definition of Social Safety Nets
2. Programs of Social Safety Nets
3. APEC and Social Safety Net
III. Current State of Social Safety Nets in Five of the APEC Member
Economies
1.
2.
3.
4.
5.
The Philippines
Malaysia
Indonesia
Thailand
Vietnam
IV. Social Safety Net Activities in APEC Region
1. APEC Social Safety Net Activities
2. Social Safety Net Projects Initiated by International Organizations
V. Possible Areas for Strengthening APEC Social Safety Net
1. General Deficit of Social Safety nets
2. Possible Areas for Strengthening APEC Social Safety Net Activities
3. Social Safety Net Capacity Building
VI. Concluding Remarks
Abbreviations
References
2
Tables
III-1-1
III-1-2
III-1-3
III-1-4
III-1-5
III-1-6
III-1-7
III-1-8
III-1-9
III-2-1
III-2-2
III-2-3
III-2-4
III-2-5
III-2-6
III-2-7
III-2-8
III-2-9
III-2-10
III-2-11
III-2-12
III-2-13
III-3-1
III-4-1
III-4-2
III-5-1
III-5-2
III-5-3
III-5-4
III-5-5
III-5-6
IV-1-1
Changes in Stock Market and Exchange Rate Indexes, 1997
Costs of Financial Crises
The Asian Financial Crisis and Its Economic Impact
Classification of APEC Member Economies
Benefits and Costs of NFA Rice Subsidy, 1997-1998
CIDSS Target Areas, 1994 and 1997
Improvements in the Barangay after MBN was introduced
Consolidated Government Expenditures on Basic Social Services,
1996-1999
(% Distribution of Total Government Expenditure)
Key Social Indicators
Selected Indicators for Quality of Life
Monthly Poverty Line Income by Year and Region
Change in Poverty Rate
Poverty Rate by Region (1990)
Distribution of Income (1997)
Distribution of Household by Monthly Gross Household Income
Distribution of Labor Force and Unemployment
Trend of Key EPF Indicators
EPF Membership and Savings from 1995-1999
Contribution Rates to EPF
Scheme of Withdrawal from EPF by Type of Account
% Age of Amount Withdrawn from EPF by Reasons (1999)
Trend of Key SOCSO Indicators
Funding Support by Donors and International Organizations
Social Safety Net Projects of Ministries
Funding Support by Donors and International Organizations
Social Assistance (Protection) Programs, 1997
Financial Plan for HEPR, 1998-2000
Summary of the Main Formal Financial Institutions
Targets Under the Ten-year Development Strategy, 2000-2001
Benefits from Social Protection/Poverty Reduction Programs by
Consumption Quintile
Key Development Indicators: Vietnam
Review of APEC Social Safety Net-related Activities
3
Figures
III-1-1
III-1-2
III-1-3
III-5-1
III-5-2
III-5-3
III-5-4
III-5-5
III-5-6
III-5-7
III-5-8
Retail vs. Release Price, Farm vs. Support Price, Philippines, 19951998
NFA Rice Distribution and Poverty Incidence, 1998
Share of Various Regions to Total PCFC Loans (December 2000)
State Health Spending as % of Total State Spending and GDP
Distribution of State Health Spending Across Household Expenditure
Quintiles
State Education Spending as % of Total State Spending and GDP
Distribution of State Education Spending by Household Expenditure
Quintile
Extreme Poverty in Vietnam, 1990, 2000 and 2010
Overall Poverty in Vietnam, 1993 and 1998
Distribution of Social Security and Assistance Expenditures by
Program
Basic Social Service ODA as % of Total ODA
4
Preface
The Asian economic crisis back in 1997 provided an opportunity for the
APEC member economies to realize the importance of social safety nets
and since then, strengthening social safety nets has emerged as a major
task. However, it is very difficult to enhance social safety nets for the sole
purpose of coping with the economic crisis in a short period of time. With
the support from international organizations and through the international
cooperation, social safety nets have been reinforced to some degrees,
however, systematic and consistent establishment and reform of the
existing systems is inevitable and required for the long-term.
Under this premise, strengthening social safety nets in the APEC
area has become the top priority. APEC is an organization with the
objective of achieving globalization and economic liberalization.
Moreover, it has the goal of achieving free and open trade and investment
no later than the year 2010 for the advanced economies and no later than
the year 2020 for the developing economies. However, the trade and
investment liberalization is deemed difficult unless the social safety nets
are firmly established. Therefore, strengthening the social safety nets
within the APEC area is given top priority among other main issues.
However, the fact that the APEC member economies are at different
stages of economic development poses difficulty in strengthening social
safety nets as a cooperative effort and hence, mutual understanding among
member economies is necessary. Thus, APEC member economies came
together and established APEC Ad Hoc Task Force on Strengthening
Social Safety Nets. All twenty-one member economies jointly discussed
regarding the multilateral ways to enhance social safety nets in the APEC
area, and the result of the findings have been included in this report.
This report had been prepared by Dr. Chanyong Park, Director of
International Studies and Cooperation Office (hereinafter ISACO) in the
Korea Institute for Health and Social Affairs (hereinafter KIHASA) based
on the reports he previously prepared and submitted to APEC Senior
Officials Meeting (hereinafter SOM) II and SOM III held in the People’s
Republic of China in year 2001. For the section III-1 Current State of
Social Safety Nets in APEC Member Economies, Professor Kye Woo Lee
of Ewha Womans University has collaboratively prepared the report on
Socialist Republic of Vietnam and the Philippines, and Professor
Hyunsong Lee of Hankuk University of Foreign Studies was in charge of
5
the report on Malaysia.
In addition, invaluable support provided by the dedicated
researchers of ISACO, Ms. Diane Lee and Ms. Jae Youn Woo, had
contributed greatly. In particular, we would like to take this opportunity to
sincerely express our deepest condolences towards Mr. Daniel Oexeman
who passed away last November. Mr. Oexeman played an important role
in assisting Dr. Chanyong Park for the past year in the making of the
successful completion of this report but he came short of witnessing the
fruits of his efforts.
This report is expected to function as a cornerstone for the relevant
activities in strengthening social safety nets in APEC area hereafter and it
is hoped that the social safety nets experts of APEC member economies
would benefit from reading this report.
The views and opinions expressed in this report are those of the
author alone and do not necessarily reflect the views of the KIHASA.
December, 2001
Kyungbae Chung, Ph.D.
President
KIHASA
6
EXECUTIVE SUMMARY
The Asian economic crisis in 1997 exposed the inability of many APEC
developing member economies to deal with external shock as well as the
weak domestic social infrastructure’s inability to cushion against the
impact of the shock. Thus, when the crisis emerged they were caught
unprepared and external assistance including collective efforts was
necessitated. The first collective initiative on the social safety nets in
APEC Economic Leaders Meeting was launched in November 1998.
Since then, a number of initiatives and proposals in this regard have taken
place in various fora within APEC. The next step is to look for ways to
actively enhance social safety nets (hereinafter SSNs) in the APEC region
by implementing the outcomes of these activities. APEC Ministers agreed
to establish the Ad Hoc Task Force on Strengthening APEC Social Safety
Nets (hereinafter the ‘Task Force’) in the twelfth APEC Ministerial
Meeting in November 2000. The value-added for the Task Force is found
in directing greater attention to the need to coordinate the current work
being undertaken throughout APEC with respect to social safety nets. At
the first meeting of the Task Force, held last February 2001 in Beijing,
China, the member economies’ delegations agreed on conducting
preliminary research to take stock of social safety net activities in APEC.
At the second meeting of the Task Force held May 2001 in China, the
member economies’ delegations agreed that capacity building is the area
where APEC can make major contributions to strengthen social safety nets.
The third meeting of the Task Force, held on 19 August 2001 in China,
agreed to establish an APEC Social Safety Net Capacity Building
Network (CBN) that would function virtually.
MAIN FINDINGS
Social Safety Nets of APEC Members Economies
The five economies; the Philippines, Malaysia, Indonesia, Thailand and
Vietnam, most immediately hard hit by the 1997 economic crisis had
social safety net programs at the time of the onset of the crisis, however,
these programs were not suited to respond to the magnitude and
complexity of social problems resulting from the economic crisis. In many
instances, lack of current, accurate poverty data at the beginning of the
7
crisis hampered the expansion of existing projects and the establishment
of new programs. Omissions in data made accurate targeting of programs
challenging as well. Payments to the social sector often did not reach their
intended beneficiaries. Economies most affected by the crisis lacked
adequate social insurance programs such as unemployment insurance.
Though pension and health insurance were present, often the coverage of
programs was limited. Social safety net programs were frequently
designed with no explicit guarantee that the effectiveness of the program
would be evaluated through the use of output indicators. Some programs
were often without specific goals, such as number of persons served,
degree of poverty alleviation or level of employment creation. General
deficits of social safety nets in those economies are as follows; corruption,
lack of transparency, leakage of funds; mis-targeting, exclusion of the
poor; lack of poverty monitoring system, lack of poverty related data;
defect of governance, low capacity of management, insufficient
preparedness, delayed disbursement; lack of public spending prioritization,
fund misallocation, insufficient funding; lack of program evaluation
system; insufficient infrastructure for social safety net, ineffective welfare
delivery system, etc.
Social Safety Net Activities of APEC and International Organizations
APEC has conducted a series of activities intended to strengthen social
safety nets. Two efforts stand out in current APEC practice: the
Australian-Thai Social Protection Facility (SPF) to assist developing
economies in Asia by improving their social policy and programs and the
establishment of the Asia Recovery Information Center (ARIC) at the
ADB. Since the onset of the 1997 economic crisis, the major vehicle of
the World Bank support has been through adjustment. In April 1999 a
$600 million Social Safety Net Adjustment Loan was approved for
Indonesia which supported policy reforms in safeguarding key safety net.
After the crisis, ADB also embarked on a policy reorientation to focus its
operations to poverty eradication so as to mitigate the adverse impacts of
financial crisis.
CONCLUDING REMARKS: Possible Areas for Strengthening APEC
Social Safety Net
Major deficits of social safety nets in APEC member economies hit by the
1997 economic crisis result from mis-targeting or exclusion of the poor,
8
lack of poverty monitoring systems and program evaluation systems,
governance, low capacity of management, fund misallocation, inefficient
welfare delivery system, etc. Possible measures to improve the
implementation of social safety net programs can be concentrated on
building capacity for managing social safety nets. Based on the
demonstrated need to strengthen the social safety nets of economies in the
region, one option might be to enhance social safety net function through
capacity building. The recommendation for capacity building comes at an
important time. The concerned economies are in the process of assessing
the effectiveness of social safety net plans formulated in response to the
economic crisis. Furthermore, as international donor organizations call for
more effective expenditure of funds donated for social safety net purposes,
it becomes necessary to address the issues that determine the eventual
effectiveness of these programs.
As the value-added dimension for APEC, the CBN would build capacity
for the implementation of social safety net recommendations made by the
APEC Finance Ministers Process and HRDWG. 1 Attention to gender
issues will be integral to the work of the CBN. Among proposed priority
themes for the APEC SSN CBN are: i) pre-crisis social safety net planning
and prevention measures; capacity for evaluating effectiveness of policy
action; ii) collection of dis-aggregated data and access to current data; iii)
identifying at-risk populations; iv) designing response institutions and
financing; v) strengthen transparency and accountability in social safety
net operations.
1
Human Resources Development Working Group.
9
I. Introduction
The Asian economic crisis in 1997 exposed the inability of many APEC
developing member economies, especially in South East Asia, to deal with
external shock as well as the weak domestic social infrastructure’s
inability to cushion against the impact of the shock. Many of the
economies had limited experience with such shocks, and therefore were
unable to carry out rapid response to the crisis, let alone conducting
adequate impact assessment and monitoring. Thus, when the crisis
emerged they were caught unprepared and external assistance including
collective efforts was necessitated.
International donor organizations, such as the World Bank and Asian
Development Bank, and advanced economies in the APEC region have
provided financial or technical assistance in the form of aids or loans for
mitigating the impact to the countries in crisis.
Also, APEC has been undertaking a range of social safety net activities
since the 1997 economic crisis. APEC Leaders at their 6th Leaders
Meeting in 1998 affirmed that social impacts of the financial crisis should
be addressed with high priority. Since then, a number of initiatives and
proposals in this regard have taken place in various fora within APEC as
well as collectively with other regional and international organizations.
Related projects were discussed in Ecotech Fora, the Economic
Committee, etc. of APEC. In particular, guidelines for such activities were
established in Finance Ministers’ Meetings.2
Even though a variety of activities on social safety nets is being pursued
by various bodies in APEC, it is unclear how these efforts are being
integrated. Thus, there is no single concrete APEC-wide program that
tackles the problem in a comprehensive way.3 Under these circumstances,
at the APEC Forum in Seoul (2000), strengthening Social Safety Nets in
APEC areas was proposed to provide mutual assistance and share the
A project entitled “Social Safety Programs in Selected Southeast Asian Economies 19972000” was conducted from 1999 to 2000 to review social safety net programs introduced
between 1997 and 2000 in selected APEC economies in order to identify practices that
have been effective in achieving poverty alleviation.
3 APEC, 2000.
2
10
burden among member economies in times of unforeseen difficulties. A
little later, the Twelfth APEC Ministerial Meeting held on 12-13
November 2000 endorsed the proposal on the Revitalization of Social
Safety Net Activities in APEC by Korea and Thailand. And APEC
Economic Leaders at the Brunei summit (2000) endorsed the need to
address social safety net issues as part of an overall desire to “look after
those disadvantaged by economic change.” Leaders urged addressing
privatization issues as well as “strengthening social safety nets to deepen
the regions understanding of how markets and institutions can be
strengthened to face ongoing change.”
The Korea-Thai proposal contains the establishment of an Ad-hoc Task
Force on Strengthening APEC Social Safety Nets “for reviewing APEC's
activities on social safety and forward recommendations to Ministers in
2001.” The Task Force was established and held the first meeting
February 2001 in Beijing, China, and agreed to conduct preliminary
research on APEC’s social safety net activities. The research paper,
submitted to the third meeting of the Task Force, demonstrated possible
areas of improvement for the implementation of APEC social safety net
programs and recommendations. The recommendations were submitted to,
and endorsed by, APEC Senior Officials’ Meeting III, which was held in
China 2001. However, the research was not made for the operational
policies but diplomatic meeting. By this reason, further development of
the research has been asked to be rich and useful for the operational
purpose, on the basis of the preliminary research paper.
The objective of this research is to provide the necessary information for
the purpose of helping to establish basic directions for strengthening
APEC social safety net by reviewing the social safety net activities under
way in APEC members and international organizations. The research aims
at identifying gaps and missing links between collective APEC social
safety net-related activities and similar undertakings elsewhere and to
suggest possible areas where the functioning of the APEC social safety net
programs can be strengthened.
11
II. APEC and Social Safety Net
1. Definition of Social Safety Net
Social safety nets have been defined differently by scholars and
international organizations; however, the core concept is fundamental.
That is, the definition of social safety nets can encompass all kinds of
social devices to protect people from poverty, unemployment, disease,
disaster, etc. Recently, the social safety net tends to be focused on
emergent situations caused by socio-economic crisis or natural disaster.
However, the definitions of social safety nets differ by some degrees
between different institutions and the following lists some of the divergent
opinions.
The World Bank defines social safety nets as “programs that protect a
person or household against the adverse outcomes of chronic incapacity to
work (chronic poverty); and a decline in this capacity from a marginal
situation that provides minimal means of survival with few reserves
(transient poverty).4 In ADB, the term “social safety net” is used as an
alternative to social protection.
Accordingly, social protection 5 is defined as the set of policies and
programs designed to promote efficient and effective labor markets,
protect individuals from the risks inherent in earning a living either from
small-scale agriculture or the labor market, and provide a basis of support
to individuals when market-based approaches for supporting themselves
4
http://www.worldbank.org/poverty/safety/index/.htm.
The ADB’s social protection contains five components: i) labor market policies and
programs designed to facilitate labor adjustments and promote the efficient operation of
labor markets, ii) social insurance programs to cushion the risks associated unemployment,
disability, sickness, maternity, work injury, and old age, iii) social assistance and welfare
service programs to provide a floor for those with no other means of adequate support, iv)
micro and Area-Based Schemes to cushion the risk to agricultural incomes from crop
failure or temporary market disruptions, and address reduction of risk and vulnerability at
the community level; and v) child Protection. Of the five components, the three first (labor
markets, social insurance and social assistance) are normally included in any social
protection strategy.
5
12
fail. 6 This definition recognizes that social protection encompasses
activities that span both the formal and informal sectors, regardless of
whether households derive their incomes from industry, services or
agriculture. In fact, social protection shares a large part of social policy
with social safety nets, however, social protection address mainly social
issues as a formal long-term, whereas social safety net’s aim to cope with
not only formal programs of long-term, but also short-term but sudden
disruption such as economic crisis and natural disaster.7
UNRISD8 states that the concept of social safety nets is not new - early
“poor relief” laws were often described as safety nets, while public works
programs have a long history in both developed and developing countries.
The term has more recently been explicitly linked to adjustment, and in
this context has taken on a particular connotation. Most adjustment-related
safety net programs are meant to supplement the activities of existing
ministries and agencies unable to address the direct or indirect social costs
of adjustment. So a social safety net is a variety of mechanisms
implemented in conjunction with structural adjustment measures, and
designed to address either structural or transitional poverty and
unemployment, to reduce the impact of adjustment measures on certain
groups, or to create or improve both social and physical infrastructure.
Emergency funds, compensatory funds, employment funds and social
investment funds are various types of safety nets.
APEC describes social safety net as a set of specific programs designed to
provide targeted income support and basic services to poor people and
those needing assistance after economic downturns, natural disasters and
other temporary adverse economic circumstance. 9 In the international
context, social safety net can be viewed as a means to assist countries to
overcome the undesirable side effect of globalization and the ensuing
process of restructuring and reform to adopt to the changing parameter in
the world economy. 10 Also, APEC HRDWG’s 11 report describes that
6
Ortiz, 2001.
Puguh, 2001.
8
UNRISD carries out research and studies which are "urgent and important" to the work
of the United Nations Secretariat as well as to regional and national institutes working in
the fields of economic and social development.
9 APEC, 2000.
10 Ibid.
11 Human Resources Working Group.
7
13
social safety nets is to tide livelihood over during the period of economic
downturn. Coping with household insecurity requires a combination of
private savings, informal support, employer obligations and public
provisions.
The varied definitions of social safety nets described above can be
summarized as the following. The definition of social safety nets can
encompass all kinds of social devices to protect people from poverty,
unemployment, disease, disaster, etc. The social safety net tends to be
focused on emergent situations caused by socio-economic crisis or natural
disaster. However, this study is concerned with social safety nets
described above by APEC.
2. Programs of Social Safety Nets
As mentioned above, the definition of social safety nets can encompass all
kinds of social devices to protect people from poverty, unemployment,
disease, disaster, etc. Generally the following programs are considered as
formal social safety nets: social assistance; social insurance, including
national pension, health insurance, employment insurance and industrial
injury insurance; public works, loans for the poor or the unemployed, food
stamps, etc.
As is well known, many APEC member economies rely on informal (or
traditional) social safety nets provided by family or community. However,
the informal social safety network, so heavily relied on in the past, has
gradually diminished with increased industrialization and urbanization.
The informal support mechanism is especially ineffective when a number
of people are similarly affected. In the shift toward modernization, the
role of policy-mandated formal social safety nets is increasingly important,
and the commitment of long-term public policies and their administration
are serious issues. Asian countries hit by the 1997 economic crisis have
social insurance schemes such as health care, vocational injury
compensation, and pension. Over time, each of those countries has
developed social insurance schemes of varying levels of coverage and
generosity. However, it is difficult to say that social insurance in Indonesia,
Malaysia, Thailand and Philippines plays a role as a social safety net due
to the low ratio of insurance premium contributors to total labor force or
to total population.
14
The social assistance system is one type of social safety net. But in the
Asian countries, price control, food subsidies, or nutrition subsidies for
growing children, which could protect the purchasing power of vulnerable
households for essentials, are more prevalent as social assistance systems.
Also, free or low-priced textbooks, and student loans or subsidies for
tertiary education are frequently used policy tools contributing to basic
human resource security. During a period of emergency, free shelter and
meals for those temporarily affected are necessary interim relief. Ancillary
social service provisions are also included as a type of social safety nets.
Those with responsibility to care for family members, most often women,
still may not be able to enter the labor market. Making available childcare
services and long-term care facilities at affordable prices are strategies for
responding to the change in family structure in the modern labor market.
Job-related programs such as training programs for job transitions and
making available employment information, etc. are included as a type of
social safety nets and these are effective in coping with changes in the
structure of industry. Public works play a safety net role by conferring
transfer and stabilization benefits to the poor.
3. APEC and Social Safety Net
APEC is the largest and most important economic forum in the Asiapacific region. It aims to advance trade and investment liberalization and
facilitation and economic and technical cooperation. Through
liberalization and cooperation, APEC aims to spread the fruits of
globalization among its members. In particular, strengthening social safety
nets will be indispensable for reaching the Bogor Goals of free trade and
investments by 2010 for the advanced economies and 2020 for the
developing economies. Further liberalization will raise interdependence
among and comparative advantage of member economies. Above all it
will heighten competition. The ultimate aim is to achieve sustained
growth and prosperity for the welfare of all people in the APEC region.
The 1997 economic crisis provided a chance to reconsider the impact of
globalisation and liberalisation. In particular, it exposed the social
dimension of the economic crises. Although there may be differences over
assessing the causes and significance of the economic crisis, there is full
agreement that reform and liberalization cannot proceed without the
establishment of adequate social safety nets. Furthermore, the economic
crisis exposed that social safety net programs in many APEC economies
15
were inadequate. Above all, the crisis caught many economies off guard in
their ability to administer and manage social safety net programs
effectively under duress. A fundamental analysis on the relationship
between social safety nets and APEC’s TILF12 is therefore necessary.
Amartya Sen said that globalisation could be a major force for prosperity
only if it was backed by adequate national policies in a conducive social
and economic environment. He stressed that countries threatened by
globalisation were those where human development was very low. There
are major gains to be made in globalisation, but if a country has
globalisation at the highest possible speed and pays no attention to lack of
social opportunity, it was creating problems for itself. In that case, the
blame lies not with globalisation but with concomitant policies with which
it was being married. Globalisation needs to be put in a broader context of
social and economic policies. He suggested a social safety net to take care
of the people when things go wrong for one reason or another. He said
“The problems arise when people in the countries enjoying protective
environment are suddenly pushed into a highly-competitive situation, and
when they opened economies suddenly, there were a lot of people who
were not in a position to compete in a global world”. One of the reasons
for people suffering in Indonesia was that it had no social safety net when
financial crisis hit, though the country had done well on human
development and growth rate, Professor Sen added (Times of India, 16th
October, 1998, New York).
The liberalization of trade and investment should create equitable benefits
to all member economies. However, the inception of trade and investment
liberalization often brings about unexpected financial downturn for those
businesses lacking preparedness. The main reason for such negative
outcomes is the relatively lower productivity of domestic businesses
compared to that of foreign businesses. In the international market, among
equally priced products, a product of lower quality will not achieve
market competitiveness. Thus, businesses with lower international
competitiveness due to lower productivity are making efforts to build
competitiveness through technological innovation. But more frequently,
these businesses attempt to boost their productivity through structural
adjustment. This situation should be explored from the standpoint of
businesses and employees respectively. First of all, from the corporate
standpoint, those economies in this kind of situation tend to have a certain
12
Trade and Investment Liberalization Fund.
16
limitation or difficulty in performing structural adjustment in most cases.
The main reason being that employees are strongly opposed to accepting
the legitimacy of structural adjustment and the hardships that often
accompany it. When the society is not well equipped with social safety
nets for its people, corporate structural adjustment becomes a very
controversial issue and suffers setbacks due to reactions from labor unions
and those most vulnerable to the layoffs. Meanwhile, when a society has a
strong social safety net for its people in which specific social safety net
programs, including employee insurance and public assistance, can
provide durable livelihood protection, employees tend to have less
apprehension concerning their own rights, and the company can execute
comparatively easy structural adjustment. In the past, massive employee
layoffs in the advanced economies, and a lack of accompanying protest,
demonstrate this logic. Even in situations where structural adjustment may
be difficult, a partial structural adjustment might take place making some
laborers unemployed. Moreover, the quality of life may deteriorate
because of business bankruptcies or a decline of income due to an
economic slump. In both cases, the purchasing power of insufficiently
competitive economies with poor social safety nets takes a plunge,
affecting trading partners negatively. At the same time, a sharp increase in
unemployment and poverty brings a deepening of social anxiety and later
hinders the sustainable relationship with investment partners in foreign
countries.
Continued studies and experience have reached a concerted conclusion
that globalization is an inevitable and necessary process for the benefit of
the world as a whole. In spite of this, recently there have been a number of
anti-globalization demonstrations led by international NGOs at
international organizations' general assembly meetings such as the IMF
and WTO. Demonstrators assert that globalization has the opposite
function in which it would widen the gap between rich and poor countries.
On this issue, OECD has recently published a paper stating that
globalization would bring benefits to some countries and suffering to
others. Thus, generalizing the effect of globalization is difficult, but the
fact that a certain country or certain stratum within a country suffers from
globalization should be realized. Hence, any investor economies that
benefit from the liberalization of trade and investment should pay special
attention to strengthen social safety nets in partner economies. The simple
reason is that any efforts seeking only short-term interests without
focusing on strengthening social safety nets will generate much more
negative responses to the process of globalization than the recent reaction
17
of NGOs.
Currently, the economic level of APEC member economies is quite
diverse, from the most advanced economies, newly industrialized
economies to developing economies. Due to the diversity in economic
status of each member economy, the strengthening of social safety nets is
absolutely essential in trade and investment liberalization, and thus, APEC
has a responsibility of achieving the liberalization and the process towards
it. This will be APEC’s value-add; also, social safety nets enable the
member economy to perform structural adjustment. This, in the end, will
not only strengthen the financial power of an enterprise, but also shorten
the time to reach full-fledged trade liberalization. The Asian economic
crisis in 1997 has demonstrated the inability of many APEC developing
member economies, especially in South East Asia, to deal with external
shock as well as the weak domestic social infrastructure’s inability to
cushion against the impact of the shock. Many of the economies had
limited experience with such shocks, and therefore were unable to carry
out rapid response to the crisis, let alone conducting adequate impact
assessment and monitoring. Thus, when the crisis emerged they were
caught unprepared and external assistance including collective effort was
necessitated.
The first collective initiative on the social safety nets in APEC Economic
Leaders Meeting was launched in November 1998. Since then, a number
of initiatives and proposals in this regard have taken place in various fora
within APEC as well as collectively with other regional and international
organizations. Although there seem to be various APEC collective
activities in response to the social impact of the crisis, most of these
efforts do not, however, seem to have produced tangible outcomes so far.
A variety of activities on social safety nets is being pursued by various
bodies in APEC, but it is unclear how these efforts are being integrated.
Thus, there is no single concrete APEC-wide program that tackles the
problem in a comprehensive way.13 The value-added for this work can be
found in directing greater attention to the need to coordinate the current
work being undertaken throughout APEC with respect to social safety nets.
Also, the rationale for APEC's involvement in the area of social safety
nets can be found in providing a better basis for demonstrating the ways in
which social safety nets can complement APEC's broader agenda.
13
APEC, 2000.
18
III. Current State of Social Safety Nets in Five
of the APEC Member Economies
Between June and December 1997, a group of Asian countries underwent
a severe financial crisis. Compared with the recent financial crises in other
regions, the depth and the costs of this crisis were more serious. The stock
market tumbled, and the exchange rate depreciated deeply. During the
period, equity prices in the Philippines dropped by 34%; nominal
exchange rates in Indonesian Rupiah increased by 122%, and in the
Philippines the Peso depreciated by 50% (Table III-1-1). Non-performing
loans accounted for between 35%-75% of the banking system’s total loans,
their resolution costs were estimated at 45%-60% of GDP (Table III-1-2).
The contagious Asian financial crisis aggravated the distressing Russian
economy, negatively affected Latin American economies, and
subsequently threatened the stability and growth prospects of the world
economy.14
Table III-1-1. Changes in Stock Market and Exchange Rate Indexes, 1997
(Unit: %)
Country
Indonesia
Malaysia
Philippines
Thailand
Stock market
Jan.-June
July-Dec.
14
-45
-13
-45
-11
-34
-37
-29
Note:
Exchange Rate
July-Dec.
-122
-53
-50
-93
% change in an exchange rate index defined as the local currency
divided by the dollar, where a negative sign indicates an increase in the
index.
Source: Bloomberg, 2001.
14
Lee, K., 1999.
19
Table III-1-2. Costs of Financial Crises
Indonesia
Thailand
Malaysia
Philippines
(Unit: %)
Non-performing Loans (a)
75
55
35
15
Cost as % of 1998 GDP (b)
50
45
45
Note: (a) As % of total loans, estimated peak level during crisis.
(b) Direct costs to government and quasi-fiscal costs such as exchange-rate
subsidies.
Source: Barclays Capital, IMF, 2001.
The crisis, which stated in the financial sectors, quickly spread to the real
sectors of the economy, which in turn adversely affected the labor market.
GDP per capita in Thailand declined by 10.8% in 1998, and in the
Philippines 2.6%. The unemployment rate in the Philippines from an
already high level of 8.6% in 1996 to even a higher level of 10.1% (Table
III-1-3). This incremental unemployment resulted from bankruptcies,
downward adjustment of existing firms, and the economy’s inability to
absorb new entrants to the labor force.
20
Table III-1-3. The Asian Financial Crisis and Its Economic Impact
Indicator
Indonesia
Annual per capita GDP growth
1990-96
5.7
1998
-14.4
Annual per capita private
Consumption growth
1990-96
6.8
1998
-4.7
Annual inflation
(consumer price index)
1990-96
8.8
1998
57.6
Poverty incidence
1996
11.3
1998
20.3b
% Change
79.6
Unemployment
1996
4.9
1998
5.5
Government spending
(ratio of 1998 to 1997)
Education
72.3
Health
87.8
Malaysia
Philippines
Thailand
7.0
-9.3
0.4
-2.6
7.0
-10.8
5.4
-12.6
1.0
1.3
6.4
-15.1
4.2
5.3
9.8
9.7
5.0
8.1
8.2
37.5
11.4
13.0
14.0
2.5
3.2
8.6
10.1
1.8
4.5
86.3
90.3
102.6
97.6
98.7
89.3
Source: World Bank b, 2000.
Financial crisis interrupted 30 years of steady growth that had made
remarkable progress in reducing poverty and improving social indicators,
accompanied by only modest increases in inequality in most East Asian
countries. The social impact of the crisis was swift and unexpectedly
complex. A severe drought added to the economic hardship in some
countries, for example, El Nino in the Philippines. Poverty increased
substantially in all countries hit by the crisis. Indonesia experienced the
sharpest rise in poverty. However, in the Philippines which had
participated less in the growth boom before crisis and so suffered less
from it, more than 90% of families reported being adversely affected by
the crisis, while 17% reported a job loss within the country and another
5% reported job losses due to retrenchment of migrant workers.
21
The deep recession ended a decade-long trend of steady reductions in the
number of East Asian people living below the poverty line and pushed
millions of Filipinos below the poverty line, measured by consumption
expenditures, without jobs or access to essential social services, loss of
physical assets, as well as rising rates of malnutrition and school dropouts
among poor children. These conditions could aggravate chronic poverty
and could lead to irreversible losses of human capital among the poor and
vulnerable, undermining an economy’s ability to sustain growth.
From the onset of economic reconstruction, international organization
experts advised the Government that special attention should be paid to
the strengthening of social safety nets, especially for the most vulnerable
groups of the society, such as women, children, and the poor. 15 As
observed in the previous crises elsewhere, these groups might bear the
brunt of adjustment costs, and measures to ease the social costs of
adjustment would complement the other structural reforms and help
mobilize social political consensus on the adjustment process. Scholars
and social activists, as well as feminist leaders, expressed concerns about
the socially underprivileged groups, especially women, and called for
special action programs for protecting them.
Though the crisis worsened the welfare of poor households, increases in
poverty and inequality were generally smaller than had originally
anticipated. For example, the impact of the crisis on school enrollments
has been modest in all the crisis countries including the Philippines.
Likewise, the negative effect on morbidity, nutrition, and utilization of
public health services is less dramatic. By and large, real wages remained
constant throughout the aftermath period. There may be several reasons.
First, the contraction in output was smaller and less protracted than
expected. Second, labor mobility between formal and informal sectors,
and urban and rural areas may have cushioned the impact of the crisis by
distributing the burden more broadly. Third, the relative change in prices
induced by currency devaluation was probably favorable to the rural poor
engaged in the production of marketable surpluses, especially for export.
Fourth, poor households reduced savings and reallocated items within
their budgets to protect their consumption of critical items such as staple
foods. Finally, public transfer - in the form of unemployment insurance
and other safety nets - may also have played a role.16
15
16
Lee, E., 1998.
World Bank b, 2000.
22
East Asia’s recovery has now reversed some of the devastating
consequences of the crisis of 1997-1998. Estimations for 2001 for the East
Asian countries show that the percentage of the populations spending
below $1.50 per day has fallen from their crisis peaks. In Malaysia, the
number of poor has already low to begin with 1.9% of the population in
1995, and are estimated to decline to negligible levels. In Thailand the
percentage of the poor was 15.7% in 1999, and is estimated to decline to
12.2% in 2001. In Indonesia, although the data prevent definitive
conclusions, the poverty rate is expected to drop from the highs of 37% in
1999 to 32% in 2001, which is still well above the 25.7% prevailing on
the eve of the crisis. In Philippines, the percentage of the poor was 27.5%
in 1997, and is estimated to be 25.4% in 2001.
Despite these positive trends, there is no question that the poor come out
of the crisis more vulnerable than before. Labor markets are less stable,
and having drawn down savings and borrowed to survive the recession
years, millions still have their livelihoods at stake and are at risk of falling
back into poverty if economic conditions should worsen.17 It is therefore
timely to review the experience with the social safety nets prevailing in
some East Asian countries, draw some lessons that could help guide
improvement of social policies in the same countries and disseminate
them to other developing countries more generally.
The social safety net arrangements will be described in the following
APEC member economies: the Philippines, Malaysia, Indonesia, Thailand
and Vietnam. Included are programs in existence prior to the crisis, as
well as those established in its wake. Economies were selected for
evaluation relative to the extent to which they were affected by the
economic crisis, or, as is the case with Vietnam, the extent to which recent
economic restructuring and privatization have made heavy demands on
social protection programs.
Table III-1-4. Classification of APEC Member Economies
Member Economies
Hit By The 1997
Economic Crisis
17
Other Member Economies
Ibid.
23
Donor
Economies
Korea
Recipient
Economies
Indonesia, Malaysia,
Philippines, Thailand
Australia, Canada, Chinese Taipei,
Hong Kong China, Japan, New
Zealand, Singapore, USA
Brunei, Cambodia, Chile, Mexico,
Peru, PNG, Russia, Vietnam
1. The Philippines
Social Safety Net Programs
In the wake of the financial crisis and El Nino disaster, numerous social
safety net programs have been adopted by the various government
agencies. However, only some representative programs are highlighted
here. They are the Food Subsidy Program, Poverty Alleviation Fund,
Comprehensive and Integrated Delivery of Social Service, Lingap Fund,
Credit Based Livelihood Program, Public Workfare and Employment
Program, SZOPAD Social Fund, National Health Insurance Program,
Expansion of Social Security System, and Government Expenditures on
Basic Social Services. Each of these programs would be reviewed from
the viewpoint of institutional arrangements, operations and impact
evaluation would be provided. (This section relies heavily on Manasan,
2001).
Food Subsidy Program
The National Food Authority (NFA) implemented the Rice Subsidy
Program in 3 municipalities in each of 4 provinces (Antique, Iloilo,
Sorsogon, and Surigao del Norte), starting in April 1998. The program
was designed to provide rice at a subsidy of P2.50 per kilo to poor
families living below the food poverty threshold. The said families were
identified with the help of the Department of Social Welfare and
Development (DSWD). The beneficiaries were then given discount cards,
which they use when they purchase rice from accredited rice retail stores.
The second phase of this program involved the distribution of ironfortified rice. However, it was implemented only in Sorsogon and Surigao
del Norte because of budget constraints.18 In parallel, the NFA launched
the Enhanced Retail Access for the Poor (ERAP) sari-sari stores, which
18
Reyes, et al, 1999.
24
sell basic commodities (like sugar, coffee, milk, cooking oil, sardines, and
noodles) at prices below the market price. The main criterion used in
determining the location of the store was accessibility to consumers in
depressed and remote areas. Although the NFA initially hoped to establish
one ERAP store in every barrangay (the smallest political/administrative
unit), as of January 1999, 1,231 such stores have been established. In 1997,
there were more than 43,000 barangays. In 1998, government’s response
to the financial crisis focused primarily on ensuring an adequate supply of
rice. Thus, the NFA increased imports of rice to about 2 million tons so
that NFA rice releases in 1998 went up to about 22% of total consumption,
almost tripled the 1997 level of 8%.
Currently, the NFA is mandated to concentrate its efforts on identified
target areas (i.e., in depressed barangays, where the 100 poorest families
in each province or city are located). However, the appropriation for the
ERAP stores and the Rice Subsidy Program under the Lingap program for
1999 was only P400 million, just a small fraction of the total financial cost
of NFA operations, some P6,208 billion in 1998. This program is
administered by the NFA, a state-owned corporation. The NFA was
established in 1987, but it had its roots in the National Grain Authority,
established in 1972. Prior to 1987, the NFA was originally attached to the
Office of the President (OP), but it was transferred to the Department of
Agriculture in 1987, and then moved back to the OP in 1998 when the
Estrada assumed Presidency. The NFA is mandated to stabilize palay and
rice prices and maintain a buffer stock, by setting a floor price for palay to
protect farmers’ income, and a ceiling price for rice to protect consumers’
welfare. The NFA objectives were ensured through its authority to procure
rice stocks at the officially determined prices and monopolize rice
import/export. NFA authorizes registered retailers to sell its rice to
consumers and operates an extensive network of warehouses for its
buying and selling operations. Thus, this traditional poverty alleviation
program was expanded to provide for a social safety net after the Asian
financial crisis.
To date, no formal evaluation of the NFA Rice Subsidy Program and the
ERAP sari-sari stores is available. However, earlier evaluations of past
NFA activities provide an indication of the efficiency of these programs.
Recent studies indicate that the NFA has not been able to prevent high
consumer prices of rice or low producer prices of palay, and its
effectiveness as a poverty alleviation institution was undermined. On the
one hand, retail rice prices in the market have been consistently higher
25
than official NFA price in 1995-1999 (Figure III-1-1). On the other hand,
farm gate prices of palay are often above the official NFA support price in
the same period, making the latter irrelevant to farmers.
Figure III-1-1. Retail vs. Release Price, Farm vs. Support Price, Philippines,
1995-1998
20.00
18.00
P/ KG
16.00
14.00
12.00
10.00
8.00
6.00
4.00
Ju
l
-9
8
Ja
n
Ju
l
-9
7
Ja
n
Ju
l
-9
6
Ju
l
Ja
n
Ja
n
-9
5
2.00
0.00
Month/Year
Farmgate Price
NFA Support Price
NFA Rice Release Price
Rice Retail Price
Source: Manasan, 2001.
Roumasset attributes the divergence between official and actual market
prices to the fact that the NFA is a relatively small player in the total
national market. Consequently, the program’s coverage of the targeted
poverty group is also small. During the period 1996-1998, the NFA’s rice
release as a percentage of the country’s total rice consumption was 12.9%
on average. This means that on average only about 13% of the country’s
14 million households could have been actually benefited from the NFA
rice subsidy. During the same period, the NFA’s procurement of palay as a
26
percentage of total national palay production was less than 1% on average.
This suggests that less than 1% of the estimated 3 million palay farmers
could have actually benefited from the implicit subsidy to palay farmers.
As indicated above, during the height of the crisis in 1998, NFA rice
releases expanded to 22% of total rice consumption, and potentially the
programs could have played as an effective social safety net. However, the
NFA programs are a general consumer or producer subsidy and, as such,
target their intended beneficiaries poorly and benefit even the non-poor.
The regional distribution of the NFA rice was not sensitive to poverty
incidence (Figure III-1-2). For instance, the share of NFA rice in total
consumption in ARMM, CAR, and Western Visaya was about 15%, 16%,
and 7%, respectively, (well below the national average of 22%) in 1998,
although the incidence of poverty in said regions was 57%, 43%, and 40%,
respectively (higher than the national average of 31.2%). In contrast, NFA
rice accounted for 28% and 27% of total rice consumption in Central
Luzon and Southern Tagalog (including NCR), respectively, when poverty
incidence in these regions is the lowest around the country at 15% and
16%, respectively.
27
Figure III-1-2. NFA Rice Distribution and Poverty Incidence, 1998
70.00
60.00
10.00
50.00
8.00
40.00
6.00
30.00
4.00
Poverty Incidence
% of Total Consumption in each region
12.00
20.00
2.00
10.00
0.00
0.00
CA
R
I
II
III
IV
V
V
I
II
V
III
V
IX
X
X
I
II
M
RM
X
A
Region
% of Total Consumption in each region
Poverty Incidence
Source: Manasan, 2001.
The efficiency of the NFA as a poverty alleviation and safety net agency is
questionable. Since the NFA’s programs are loss-making by nature, on the
one hand, the government provides the NFA with budgetary support in
terms of both equity infusions and operational subsidies. In addition, the
national government guarantees all NFA debts. In 1998, the total financial
cost of NFA operations was P6.2 billion. On the other hand, the NFA
transfers income to consumers by subsidizing the consumption of rice.
In 1998, the value of the income transfer to consumers, i.e. the difference
between the market price and the NFA release price of rice, was P4.9
billion. Thus, the net costs to the NFA of delivering one peso of income
transfer to the consumer are P1.3 (Table III-1-5). The NFA programs are
28
not cost-effective at all. Moreover, international experience in general
food subsidy programs reveals that the cost of transferring income to the
poor is high since non-poor families also benefit from such subsidies. The
leakage from such scheme was typically estimated above 50% in India,
Egypt, Morocco, and Pakistan. If one assumes a 50% leakage, then the
cost-benefit ratio of the NFA rice subsidy program is estimated to be equal
to 2.5.
Table III-1-5. Benefits and Costs of NFA Rice Subsidy, 1997-1998 (in billion
Pesos)
Total Financial Cost of NFA Operations
Operational subsidies
Equity infusion
Inc. (dec) in debt
Less: Increase in value of rice stocks
Income Transfer to consumers
Cost/Income Transfer w/Zero Leakage
Cost/Income Transfer w/50% Leakage
1997
3,915
1,500
78
3,878
1,541
1,868
2,10
4.19
1998
6,208
1,223
100
8,776
3,891
4,885
1.27
2.54
Source: Manasan, 2001a.
Given this perspective, provision of food subsidy to the poorer segment of
society as a safety net program can be done more effectively through food
stamps in urban area (as in Mexico and Honduras) and food-for-work
programs in rural area. The design of these programs should be guided by
certain institutional arrangements (such as financial autonomy,
exemptions from the regular budgetary and procurement controls, and
convergence with human resource development programs) and targeting
principles (such as the use of geographic targeting, means-testing with
incorporation of screening costs and penalties for leakage and undercoverage, and self-targeting).
Poverty Alleviation Fund
In 1996 the Ramos Administration formulated the Social Reform Agenda
(SRA), which was institutionalized through the Republic Act 8425 (Social
Reform and Poverty Alleviation Act). It has three broad objectives: (i)
eradication of absolute poverty (incomes below the food threshold); (ii)
reduction of relative poverty; and (iii) the fast-track growth and
29
development of 20 of the poorest provinces in the country. To attain these
objectives, nine flagship programs (social development, socialized
housing delivery, workers’ welfare and protection, agriculture and
ecological development, fisheries and aquatic resources conservation
management and development, protection of ancestral domain, expansion
of credit for informal sector, livelihood, and institution building and
effective participation) were implemented led by a lead agency or
“champion” to address the critical need of basic sectors (e.g. farmers,
fishermen, indigenous people, urban poor, informal sector) located in the
convergence areas (communities in the poorest 20 provinces). A package
of projects were formulated and implemented in each of the flagship
programs, and these were financed through the Poverty Alleviation Fund
(PAF) created in 1996. The PAF was administered by the National AntiPoverty Commission (NAPC), a body created by law under the Social
Reform and Poverty Alleviation Act to orchestrate the fight against
poverty and achieve convergence on poverty alleviation activities of
various government agencies.
Although the PAF-1 in 1996 (P4 billion) and PAF-2 in 1997 (P2 billion)
were meant for the implementation of poverty alleviation projects in
general, PAF-3 in 1998 (P2.5 billion) was primarily intended to respond to
the adverse impact of the natural disaster (El Nino and La Nina) and the
Asian economic crisis. The programs implemented with the Fund had the
makings of a well-targeted poverty alleviation program. It could minimize
leakage by defining geographical and sectoral targets. However, the actual
selection of the priority provinces was not entirely poverty oriented. Only
nine provinces belonged to the list of 20 provinces with the highest head
count poverty index, but six were relatively rich provinces. Also, the
goods and services provided under the programs did not match the needs
of the target clientele. Furthermore, the PAF-1 projects were hounded by
slow disbursement largely because of the delay in the issuance of
guidelines, and the PAF-3 projects were delayed by the tardiness in the
allocation of budgets as well as the advancement of cash and inadequate
project preparation.19
Comprehensive and Integrated Delivery of Social Service (CIDSS)
Strictly speaking, the CIDSS is a regular program of the DSWD aimed at
alleviating poverty. However, the General Appropriation Act of 1998
19
Balisacan et al, 2000.
30
increased the funding support for this program during the height of the
economic crisis. From this perspective, the CIDSS has been viewed as a
social safety net program.
In 1994, the DSWD launched the CIDSS to pilot test a comprehensive and
integrated approach to poverty alleviation. Since then, it has served as one
of the nine flagship programs under the SRA of the Ramos Administration.
The CIDSS has also been selected as one of the flagship program under
the National Anti-Poverty Action Agenda (NAAA) of the Estrada
Administration. Therefore, a more detailed explanation of this program
would shed light on the operations of other programs under the SRA and
NAAA.
The primary goal of the CIDSS is to empower impoverished and
disadvantaged families, sectors and communities, so that their minimum
basic needs are met. To achieve this goal, the CIDSS pursues the
following strategies.20

Convergence of services: consolidation and cooperation of many
government and civil service organizations in addressing the needs of
the disadvantaged segments of society;

Focused targeting: identification of families and localities that will be
the primary beneficiaries of the services to be delivered using
minimum basic need (MBN) indicators;

Community based: mobilization of the community as an organized
and proactive group so as to encourage their participation in
formulating, financing, implementing, and monitoring and evaluating
anti-poverty projects;

Minimum basic needs (MBN) approach: prioritization of the basic
requirements for survival and security of marginal families, based on
a poverty survey of the community itself and using 33 MBN
indicators, which include survival (food, clothing, health, water, etc.),
security (shelter, peace and order, income, etc), and enabling needs
(basic education, child and family care, people’s participation in
community development, etc.);

Capability-building: transfer of knowledge and skills necessary in
20
Bautista, 1999.
31
meeting the MBN as an individual, family, and community and local
government unit (LGU);

Resource mobilization: generation of revenues aside from those
allotted by the national government.
In 1994, the CIDSS was implemented in 150 barangays in 75
municipalities in 33 provinces (16 of which were priority provinces under
the SRA). By 1997, CIDSS was in 1,154 barangays in 432 municipalities
in 77 provinces. The CIDSS is present in 28.1% of the target
municipalities, in 2.7% of the total barangays and in only 2.1% of the
target barangays (SRA areas). Thus, the coverage of the CIDSS is by no
means large (Table III-1-6). Targeting in the CIDSS is done first by
geographical area. In 1995-96, only municipalities belonging to the fifth
and sixth income class (the poorest) were eligible under the program.
However, the coverage was expanded in 1997 to include all municipalities
regardless of income class. At barangay level, they are selected on the
basis of an MBN survey, the willingness of local group to undertake the
CIDSS, accessibility, and the peace and order situation in the area. At
family level, those families with the most number of unmet indicators in
the MBN survey are deemed to be the poorest in the community and are
chosen as the principal beneficiaries of the program.
32
Table III-1-6. CIDSS Target Areas, 1994 and 1997
LGU
SRA
Areas
NonSRA
Area
Total
LGU
SRA
Areas
NonSRA
Area
Total
1994
Municipality
Total
CIDSS
% to
Covered
Total
16
221
28
12.6
Barangay
Total
CIDSS
Covere
d
4,238
56
17
378
47
12.4
10,386
94
0.6
33
599
75
12.5
1997
Municipality
Total
CIDSS
% to
Covered
Total
14,624
150
1.0
Province
% to
Total
1.3
20
960
135
14.1
Barangay
Total
CIDSS
Covere
d
19,056
407
57
575
297
51.6
24,177
747
3.2
77
1,535
432
28.1
42,233
1,154
2.7
Province
% to
Total
2.1
Source: Manasan, 2001a.
One weakness of the program is the leakage of the financial resources.
Although the program was to target the poorest barangay in the
municipalities, only some 78% of the selected barangays were in fact the
poorest.21 At the barangay level, families were supposed to be selected
on the basis of the MBN indicators. However, an evaluation noted that
only 45% of CIDSS workers relied entirely on the results of the MBN
survey. The others selected families on the basis of the recommendations
of local elected officials.
Another problem with the program is that funding support for CIDSS was
reduced in 1998 during the time of the crisis. Although total
appropriations for the CIDSS rose continuously from P246 million in
1995 to P411 million in 1997 and P439 million in 1998, actual
21
Bautista, 1999.
33
expenditure obligations declined from P379 million in 1997 to P353
million in 1998. In that year, only 80% of appropriations were actually
spent compared to 92% in 1997. The average amount of CIDSS funds
obligated per family served declined by some 17% nominally from P1,587
in 1997 to P1,315 in 1998. In real terms, however, the degree of decline is
more dramatic at 24%. This came about as the coverage of the program
was broadened even while actual expenditure obligations were reduced
(Table III-1-6).
Evaluation of safety net programs is scarce in general. One recent
evaluation on the basis of a sample survey of 80 CIDSS barangays and 80
non-CIDSS barangays in 1998 indicated that the program had achieved
some degree of success in addressing the minimum basic needs of local
communities. In particular, 28 out of 33 MBN indicators improved in
CIDSS areas, while only 18 indicators did so in CIDSS areas. Also, the
unmet MBN indicators of CIDSS barangays were reduced by 7.3%, while
they even rose in non-CIDSS barangays by 2.4%. Consequently, 98.5% of
respondents in CIDSS areas indicated that the quality of life in their
barangays improved, compared to 84.8% in non CIDSS areas. Moreover,
77.8% of the respondents in CIDSS areas reported that more services were
delivered in their brangays with the installation of the program, compared
to only 44.9% in non-CIDSS areas (Table III-1-7).
34
Table III-1-7. Improvements in the Barangay after MBN was introduced
Assessment of
CIDSS
Improvements
Frequency
%
With improvements
318
98.5
No improvements
5
1.5
Total
323
100.0
Major Contributions of MBN (Multiple Response)
More interaction between
227
67.0
community and barangay
officials
Residents are more
242
73.5
informed about their
situation
More community members participate in:
-Planing
225
68.4
-Implementation
212
64.4
-Monitoring
196
54.6
More services have been
256
77.8
delivered in the barangay
Non-CIDSS
Frequency
%
251
84.8
45
15.2
296
100.0
162
51.3
203
64.2
142
128
108
142
44.9
40.5
34.2
44.9
Note: Computation of % is based on the total number of respondents per area.
Source: Bautista, 1999.
Another bright point in CIDSS program is its success in empowering
communities. The proportion of residents’ who report being more
informed about the introduction of the MBN approach was 73.5% in
CIDSS areas, compared to 64.2% in non-CIDSS areas. At the same time,
68.4% of respondents in CIDSS areas indicate that there is more active
community participation in planning with MBN program, compared to
44.9% in non-CIDSS areas. Indeed, increased community participation
appears to be the key to the success of the CIDSS program. A more
impressive feature of the program is that the gains from the CIDSS have
been attained in relatively little fiscal cost (around P900 per family on the
average in 1995-1997).
ERAP para sa Mahirap (ERAP for the Poor) and Lingap Fund
Under the Estrada Administration (1999-2000), the CIDSS was given a
new name: “ERAP para sa Mahirap”. However, the program thrust
remained basically the same except that now it is the centerpiece program
for the government’s poverty reduction efforts, which targeted to reduce
35
poverty incidence to 25% by 2004. To achieve this, the Lingap para sa
Mahihirap Program Fund or Lingap Fund was given an appropriation of
P2.5 billion in 1999 budget, which was administered by the National AntiPoverty Commission (NAPC) as was the PAF. The Lingap Fund was
directed to the poorest 100 families in every province and city nationwide.
Thus, the target beneficiaries of the Lingap Fund consist of 16,100
households. The Department of Interior and Local Government (DILG)
coordinated the identification of the 100 poorest families with the help of
the LGUs.
At least two weaknesses can be pointed out: One relates to the targeting
method, and the other to decentralization. First, although the programs
were envisaged to target on the poorest families, the actual interventions
focused on the community level, thereby expanding the reach of the
program. This has resulted in a program that is too dispersed as an area
program, and too expensive as a means-tested program.22 Simulations
made on the impact of various targeting approaches indicate that the
Lingap approach yields a small impact on poverty reduction relative other
alternatives.23 Second, although DILG coordinates the identification of
the poorest families with the help of LGUs, they were not given enough
time to make a careful identification of their poorest families in their areas.
For those LGUs, which do not have MBN data for barangays, the
identification has been unsystematic. LGUs were not given a role in the
design of projects and the resource allocation of funds to implement local
poverty alleviation programs. Congressmen played a more vital role in the
allocation of the fund. Effectively, only 38% of the Lingap Fund was
controlled by coordinating agencies and the NAPC while the rest (68%)
was under the discretion of Congressmen.24
Credit-Based Livelihood Programs
Access to credit can be an important instrument for poverty alleviation.
Moreover, it can also function as a safety net since it helps the poor in
smoothing their consumption and income stream in times of crisis. In fact,
many microcredit institutions, both public and private, expanded their
program during the crisis in 1998 and 1999 and have served as an
effective safety net. As in many other countries, the poor in the
22
23
24
World Bank, 2001.
Balisacan et al, 2000.
Ibid.
36
Philippines have limited access to credit because of credit institutions’
stringent requirement such as collateral, inadequate information on
financing sources, and high transaction costs involved in processing many
but small loans.
In the Philippines, microcredit to the poor comes from two main sources:
government directed credit programs and private microfinance institutions.
Government directed credit programs refer to those programs that are
funded out of the government’s budgetary allocation or loans/grants from
donor agencies and are lent out at subsidized rates. These programs can be
classified further by those offered by government non-financial agencies
(GNFAs), government owned and controlled corporations (GOCCs), and
government financial institutions (GFIs). Private microfinance institutions
include credit cooperatives, credit unions, rural banks, and credit NGOs,
which are also an important source of seed capital for the livelihood or
microenterprise activities of the poor. For comparison, two government
directed credit programs and two NGO-initiated microfinance programs
are reviewed here. The government directed programs include the SelfEmployment Assistance (SEA) of the DSWD and the People’s Credit and
Finance Corporation (PCFC). These programs were not designed
originally as a safety net, but were expanded during the crisis. The NGO
programs refer to the El Nino Emergency Project of the Philippines Rural
Reconstruction Movement (PRRM) and the Ahon sa Hirap (ASHI), which
pioneered Grameen Banking approach in the Philippines. The former was
intended by design to serve as a social safety net while the latter is regular
NGO-administered poverty reduction program, which also served as a
safety net during the crisis.
Self-Employment Assistance (SEA) Programs.
The SEA is a community-based microfinance project under CIDSS
managed by the DSWD and is aimed at building the capabilities of
people’s organizations to self-administer the provision of socialized credit.
The SEA operates at two levels: Level-I and Level-II. The Level-I of the
program is the SEA Kaunlaran Association (SKA), which is a group of
20-30 members organized as a development group and are given training
on microfinance development. SEA lends some seed capital (no more than
P150,000) at zero interest to the SKA so that it can on-lend to its members
for their livelihood needs. The average size of the individual loan is
P6,000. Some SKAs impose a 10% service fee. Individual borrowers pay
weekly amortization to the SKA, which in turn repays the DSWD. The
37
collection is deposited in a bank and forms part of a “revolving fund”. The
20-30 members are subdivided into smaller groups of 5 each, which acts
much like a pressure group. If one member fails to pay his/her dues, other
members are obligated to pay in his/her behalf. Failure to repay the loan
may result in non-release of the loans of the other group members. Each
group is also encouraged to save and build up funds for equity capital,
operating expenses and emergency purposes. Savings contributions are
collected weekly together with the loan amortization and deposited in a
bank. Level-II of the program deals with institutionalization of the gains
of Level-I through the organization of the SEA Kabayans, comprised of 25 SKAs, which have established a good track record in terms of their
capability to manage their finances and generate savings through Level-I
operations. The program has been effective in terns of outreach, savings
mobilization, loan repayments, and efficiency of financial operation, but is
unsustainable in the long run.
The SEA program has been found to be fairly effective in terms of
outreach. It has reached nearly four times its estimated number of
beneficiaries. In 1998 alone, 19,757 members benefited from a total credit
of P53.4 million for livelihood projects under Level-I operations. At
Level-II, P12.6 million were granted to 16 SEA Kabayans composed of 49
SKAs to augment their capital base. Beneficiaries are mainly women
(receiving more than 11% of total loans granted), but also include poor
families, single parents, unemployed, senior citizens, scavengers, out-ofschool youths, and street children, and disabled persons. The success of
the outreach efforts was attributed to the network of social workers in
SEA. The program has been successful in encouraging its members to
save. As of 1997, the beneficiaries have been able to save P52 million, the
same amount that the SEA lent to beneficiaries under Level-I in 1998. The
credit repayment rate is high at 90%. This is indicative not only of the
strong social preparation of the SKA but also of the consistency between
the loan size and the borrower’s absorptive capacity. The cost per peso of
SEA loans (at P0.10 per peso) is low compared to similar programs.
However, since SEA loans are interest free, the program is not able to
recover its financial, operational, and administrative costs. This makes the
program unsustainable and dependent on the continuous infusion of funds
from the government’s budget.
38
People’s Credit and Finance Corporation (PCFC)
The People’s Credit and Finance Corporation (PCFC) was established in
1995 with an initial paid-in capital of P100 million. It became operational
in 1997. It is intended to be the lead institution in the wholesale delivery
of funds to microfinance institutions (i.e., rural banks, cooperatives,
NGOs, and community organizations) for relending to the poor. The
PCFC operates a number of credit programs: the Helping Individuals
Reach their Aspirations through Microfinance (HIRAM), the Rural
Microenterprise Fianncing Program (RMFP) that is funded by Asian
Development Bank (ADB) and International Fund for Agricultural
Development (IFAD), and the UNDP Microfinance Support Program. All
programs make funds available to eligible microfinance institutions for
on-lending to the poor. The PCFC provides both institutional credits (i.e.,
loans for on-lending) and institutional credit (i.e., loans to strengthen the
financial intermediary’s capability to implement and manage their PCFC
funded credit programs). It charges an interest of 12% and a service fee of
1%. The maximum initial end-borrower loan that is allowed is P6,000.
The PCFC accredits the microfinance institutions on the basis of the
following criteria: (a) outreach of at least 150 existing borrowers, (b)
over-all collection rate of at least 85%, and (c) over-all past due rate of not
more than 15% for NGOs/cooperatives and 20% for rural banks. To
qualify for the PCFC’s programs, the financial intermediaries should have
a full time core management team, staff with basic credit and financial
management skills, a savings mobilization program, and a track record in
lending of at least one year.
The PCFC conduits are spread all over the country. As of the end of
December 2000, the PCFC had 178 active intermediaries, of which 37%
are rural banks, 31% are cooperatives, and 15% each are NGOs and
cooperative banks. Some 324,000 individuals have benefited from its
various programs, receiving loans that amount to P8,000 each on the
average. So far, the PCFC has released a total of P2.5 million in loansP1.5 million under the HIRAM and P0.8 million under the RMFP. The
PCFC’s collection rate in the last four years is a credible 98% while its
past due rate is only 2%. Evaluation of the impact of the PCFC is
preliminary. Per capita household expenditures of PCFC clients tend to be
higher than those of non-clients. Moreover, poverty incidence among
clients is lower than that among non-clients. These findings indicate that
participation in the Grameen bank type program helps improve the
welfare of clients. However, the weaknesses of the PCFC program are two
39
folds. First, The distribution of the loan funds has not been pro-poor. The
regions with a higher poverty incidence tend to receive a smaller portion
of PCFC’s total loan releases (Figure III-1-3).
Percent of total Loans
25.00
35.00
30.00
20.00
25.00
15.00
20.00
10.00
15.00
10.00
5.00
5.00
0.00
R CA
eg R
R ion
eg 1
R ion
eg 2
R ion
eg 3
R ion
eg 4
R ion
eg 5
R ion
eg 6
R ion
eg 7
R ion
e
R gio 8
eg n
R ion 9
eg 1
R ion 0
eg 1
1
C ion
AR 1
A 2
AR GA
M
M
N
C
R
0.00
Regional Loan Shares
Regional Shares of Poor Families
Source: Manasan, 2001.
40
Percent of Total Number of Poor Families
Figure III-1-3. Share of Various Regions to Total PCFC Loans (December 2000)
Second, like the SEA program, the PCFC is financially unsustainable. The
program is not able to recover cost, whether it includes either
administrative costs only or both administrative and financial costs. The
total number of government directed credit programs in both agriculture
and non-agriculture sectors have grown rapidly over the years. As of
March 1997, there were 86 direct credit programs, of which 41 were
implemented by GNFAs and the other 45 by GFIs. The initial fund
allocation for 63 of these programs amounted to P40.5 billion (or 1.8% of
GNP) in 1996. In addition, losses associated with interest and default
subsidies for only 20 programs for which data were available amounted to
P1.9 billion in 1996 alone. These subsidy do not go solely to the intended
clientele of the programs, but are shared with private financial institutions,
cooperatives, and NGOs acting as financial intermediaries.
To reduce the fiscal costs associated with government directed credit
programs, the government adopted a market-oriented policy framework
for microfinance in 1999. With this reform, direct involvement of GNFAs
and GOCCs in the implementation of credit programs have been avoided,
and the GFIs would be acting as wholesalers, i.e., second-tier financial
institutions. Instead, private financial institutions will play a greater role
as retailers, i.e., first-tier intermediaries, in the provision of financial
services to the poor. The subsidies that government provide will be made
more transparent so as to encourage the private sector to provide
microcredit to the poor.
NGO’s Production Assistance Guarantee Fund
This program was designed by an NGO called the Philippines Rural
Reconstruction Movement (PRRM) to address the farmers’ need for
assistance because most of their seeds were either sold for cash or
consumed during the El Nino emergency in 1997. The PRRM, however,
wanted to differentiate this program from its regular credit activities. Thus,
the PRRM entered an agreement with a rural bank (the Provident Bank of
Kidapawan) as a financial intermediary to facilitate loans to the El Nino
affected farmers through a guarantee fund scheme. Part of the reason for
doing so was to give the farmers an opportunity to establish a good track
record with the bank for their sustainability. The bank charges a service
fee of 6% per loan assessed. Another 6% was charged to make the
guarantee fund earn and be self-sustaining. In the initial stage of
implementation, the maximum loanable amount was P1,950. The use of
the loan proceeds is restricted to organic farming.
41
In 1999, about 160 farmers availed of a combined loan amount of
P422,650. Despite rat infestation and other crop diseases, loan repayment
was a creditable 82%. Because of the success of the program, the bank
expanded the program. It also decided to raise the loan amount as well as
the rate of interest although the bank spread was fixed at 6%.
Ahon sa Hirap, Inc.
Ahon sa Hirap, Inc (ASHI) program is the oldest and the only existing
replica of the pure Grameen Bank approach to development credit for the
poor in the Philippines. The Grameen Bank approach is based on the
principles that direct access to non-collateral loan funds and periodic but
small repayments together with forced savings would enable the poor to
increase their income and employment opportunities. In so doing the poor
would not only rise from poverty but also contribute to the social and
economic development pursuits of the country. ASHI traces its beginning
in 1989 as an action-research project of the University of the Philippines
Los Banos. Four areas were initially selected but one more area was soon
added. The initial success of the project attracted a number of religious
groups making the program a part of their mission work. Eventually, the
ASHI was registered with the Securities and Exchange Commission as a
non-stock, non-profit Non-Government Organization (NGO) in
September 1991. This transformation allowed it to receive grants and
donations from various local and international agencies.
However, its operations suffered from a poor repayment performance in
1994, and the ASHI turned itself around after rigorous retraining and
reeducation of all the staff on the Grameen principles. They recognized
the causes of failure: (a) clients’ investment in non-viable ventures; (b)
utilization of loans for purposes other than what were described in the
loan proposals; (c) delivery of loans to “non-poor” members who
experienced higher rates of defaults due to the lack of credit discipline;
and (d) tolerance of irregular or lump-sum repayment practices and apathy
between staff and members.
ASHI’s geographical coverage of its operation expanded from four to
eight areas. The members have grown from 100 in 1989 to about 8,800 to
date. Its loan portfolio has increased from an initial P40,000 in 1989 to
P21.1 million as of March 2000. More notable is the achievement of a
98.89% loan repayment. ASHI attributes this to its earnest effort to
impress upon its clients the four core values of unity, discipline, hard work,
and perseverance.
42
Access to the ASHI program has been associated with substantial
reduction of poverty. Among its clients in the fourth loan cycle and above,
the number of very poor was reduced from 76% to 13 %, compared with
about 50% among non-clients. ASHI clients have improved also the
quality of their housing. More than half of ASHI clients now live in
houses that score “out of poverty” on the ASHI house index. ASHI clients
are also better off in the educational attainment of their children. While
only 9 out of the 152 ASHI families have children attending college or
have already graduated, no families among non-clients have been able to
send their children to college. During times of poor catch or harvest,
clients and non-clients had similar coping strategy, i.e., tighten their belt.
However, only a small percentage of ASHI clients compared with nonclients borrowed from usurious sources. This is because ASHI does
function as a safety net in times of calamities or “hungry” season.
Members can withdraw from their emergency group savings or personal
savings. Also, rescheduling or restructuring of loan repayments during
such times is possible. In addition, there are special loan windows for
home repairs as well as health and educational loans. Lastly, ASHI clients
have a strikingly different savings behavior. While 86% of ASHI clients
reported that they have some personal savings, only 16% for the nonclients had any.
Public Workfare and Employment Program
The Philippines has had a rich experience in implementing public works
programs as counter-cyclical interventions. For example, as recently as in
1986, the Food for Work Program was launched in Negros Occidental and
five other provinces. It aimed to mitigate the impact of the sharp decline
in world sugar prices on sugar cultivators, particularly the unemployed
sugar workers (sakadas). The program included activities involving land
development (small irrigation projects and afro-forestry work in the
uplands), physical infrastructure development (construction and
rehabilitating roads and bridges, public markets), and social infrastructure
development (day care centers, health and training facilities). The
selection of projects followed a bottom-up approach at the barangay level
with participation of the council, indigenous NGOs, and other
community-based organizations. These project plans were submitted to
the municipal office of the Department of Interior and Local Government
(DILG) for review to ensure consistency with local development plans
and priorities. The projects that passed were then endorsed to an
interagency provincial task force that evaluated the proposed projects for
43
both technical and administrative feasibility. The number of employed
individuals by the program fluctuated between 179,000 and 883,000
persons per year during 1986 and 1991. The success of the program in
providing employment and consumption smoothing on a short-term basis
encouraged the DSWD to apply the approach in providing some relief to
the victims of the Mt. Pinatubo eruption in 1991. Food and cash were
given to displaced families and in return they were asked to participate in
community activities.
In 1988, the Aquino administration required national and local
government agencies to promote labor-intensive, small rural-based
projects. As part of this national development strategy, many land
development projects under the Comprehensive Agrarian Reform Program
and a road improvement project partly financed by the World Bank with
technical assistance from the International Labor Organization. The rural
road improvement project created 247,600 labor-days per year during
1987-1993.
The public workfare program as the first real social safety net was created
by the Ramos Administration in February 1998. The President mandated
the Department of Labor and Employment (DOLE) to formulate a
Comprehensive Employment Plan. Most programs were geared to the
preservation of employment in the organized sectors, but the DOLE also
created Rural Works Program and Special Program for the Employment of
Students.
Rural Works Program.
The DOLE allocated P14 million to finance the Rural Works Program for
displaced workers in Mindanao. The program funded small infrastructure
projects (repair and maintenance of schoolrooms, health and daycare
centers, roads, bridges, and irrigation networks; cleaning of drainage and
waterworks systems; reforestation projects) in selected depressed areas
and rural communities to provide employment and income for workers
displaced by company closures or retrenchment and those affected by El
Nino. Workers were paid minimum wage, 60% of which was paid by
DOLE, and the remaining 40% by local government units (LGUs) and
NGOs involved. Some 3,364 unemployed workers found temporary jobs
in various government infrastructure projects worth P4.4 million under
this program.25 This means that average wages distribute to individual
25
Reyes et al, 1999.
44
workers was about P760 per person.
Social program for the Employment of Students
Originally this program was designed to help poor but deserving students
pursue their education by giving them employment during the summer
and Christmas breaks. Students were placed in public and private
establishments and were paid 60% of the prevailing minimum wage by
their employers. However, with the advent of the economic crisis in 1998,
the DOLE gave them remaining 40% in the form of vouchers, which they
can use to pay their tuition and fees. And the DOLE gave priority to
children of displaced workers. In 1998, the DOLE spent P110 million for
the SPES and benefited 96,557 students.
There is no doubt that the public workfare programs created employment
and income at relatively low costs and smoothed the income and
consumption streams. The kind of works offered were also manual and
hard work, and they were self-targeting. However, the wage setting
procedures were not consistent with the self-targeting criteria and the
objectives of the poverty alleviation or safety net. All previous public
workfare programs paid wages well above the minimum wages or average
daily wages in the area by as much as 25%-50%. However, the Rural
Works Program corrected the wage setting criteria, making the program
more self-targeted to the poverty group and more like a real social safety
net.
SZOPAD Social Fund
The SZOPAD Social Fund was established under the Office of the
President in October 1997 to provide grant financing to local government
units (LGUs), NGOs, and community groups for small scale social and
economic infrastructure such as rural roads, rural water supply and
sanitation, small scale irrigation schemes, communal clinics and schools.
Funding for the Social Fund came from an US$10 million loan from the
World Bank and another US$10 million loan from the OPEC Fund for
International Development.
The overall goal of the Social Fund was to support the speedy
implementation of the development provision of the peace agreement with
Moro National Liberation Front (MNLF) signed in 1996. It focuses on the
delivery of physical infrastructure and services in the under-served and
conflict affected areas in the so-called Special Zone of Peace and
45
Development (SZOPAD) in Mindanao while creating jobs that provide
quick income transfers. The Social Fund adopted two ways of targeting.
First, through geographic targeting, limits were placed on the share of
resources going to each province and municipality on the basis of their
relative access to basic services and available poverty indicators. Second,
through self-targeting, the menu of sub-projects is restricted to basic and
primary level services to ensure that poor groups themselves are the main
beneficiaries of the services.26 To be eligible for sub-project financing,
beneficiary communities should contribute a minimum of 5% of the
subproject cost and should be involved in the preparation, implementation,
supervision, and operations and maintenance of the subproject.
As of June 2000, a total of 461 subprojects with a cost of P279.4 million
have been approved. Some 275 those projects have been completed,
which are mostly school buildings. About 232,000 households are
estimated to benefit from these subprojects. To date, two major challenges
remain for the Social Fund. First, there is a need to ensure that
beneficiaries will provide adequate operation and maintenance support to
the subprojects to sustain the benefits accruing from the projects. Second,
given the resource constraints, there is a need for more focused targeting
so as to give higher priority to subprojects that cater to the needs of the
MNLF, indigenous people, and war-affected poor communities.
National Health Insurance Program
The National Health Insurance Act27 established the Philippine Health
Insurance Corporation (PhilHealth) and mandates it to administer the
National Health Insurance Program (NHIP). The Program covers all
actively paying Social Security System members and their dependents. A
monthly contribution of between 0.5% and 2.5% of covered wages not
exceeding about P1,200 is paid by the employee and his/her employer and
is divided equally between them. A self-employed member has to pay the
entire monthly contribution of 2.5% or P1,200.
The NHIP’s Indigent Program or the “Medicare para sa Masa” (Medicare
for the Masses) is designed to extend the coverage to the indigent or
marginal sector which accounts for about 25% of the population. The Act
mandates all LGUs to help identify the indigents and to subsidize their
premium contributions. Specifically, the first through third income class
26
27
World Bank, 1998.
Republic Act 7875 of 1995.
46
LGUs are required to share equally with the central government the health
insurance premium of their indigent members. However, the fourth
through sixth income class LGUs are allowed to increase the share
progressively from 10% in the first and second year to 50% in the sixth
year of implementation. Beneficiaries are given health cards, which
entitles them to in-patient curative hospital care and regular out-patient
benefits (under Phase I) and special out-patient services for specific illness
(under Phase II), which include primary consultation with physicians,
chest x-ray, urinalysis, fecalysis, sputum microscopy, and complete blood
count) are envisioned to be delivered by the Rural Health Units (RHUs)
operated by LGUs. In return, the LGUs will be paid by capitation, i.e.,
uniform fee per enrolled household. Prior to the implementation of Phase
II, the LGU concerned has to pass an ordinance putting up the PhilHealth
Capitation Fund, where the capitated amount of P300 per enrolled
household per year shall be deposited. The capitation amount can only be
used for the purchase of medical equipment and supplies, drugs/medicines
and a maximum of 20% for administrative cost.
The NHIP’s indigent program does provide a built-in response mechanism
that will help the poor gain better access to health services during times of
crisis in three ways. First, given their low incomes, indigents typically
utilize government health facilities. Second, during the Asian financial
crisis, fiscal constraints forced the government to cut back on the budgets
of public health units reducing the quality and quality of services that are
available to the poor. The “Medicare para sa Masa” program would make
the public health services for the poor more stable during economic crises.
Third, the Capitation Fund serves as an avenue for poorer LGUs to access
a greater amount of central government subsidy. If a lower income LGU
spends more of its health budget for the indigents and RHUs services,
instead of hospital services, it will get a greater amount of capitation than
a higher income LGU would get from the central government.28
Although the NHIP include an innovative design for a safety net, its goals
and targets are too ambitious to be realistic. Currently, the formal sector
workers and informal sector workers account for about 42% and 33% of
the total population, respectively. While about 90% of the formal sector
workers are actually making contribution to the Program, only 5% of the
informal sector workers are covered under the Program. Moreover, the
indigents are estimated to be about 25% of the total population. However,
28
Manasan, 2001a.
47
only 5% of the indigents are actually covered under the NHIP. If the pace
of the coverage expansion in the past six years serves any indication for
the future, the full coverage of the indigents would take another 18 years.
The government will have to review the priorities of its resource
allocation or adjust the targets for achievement more realistically.
The benefits are provided to NHIP members who have paid at least three
monthly contributions during the 12-month period preceding
confinement.29 This eligibility requirement is flexible enough to provide a
safety net during a crisis. In other countries, the health insurance program
often requires a continuous contribution record for a fairly long period,
and the government had to shorten the required period in the wake of the
crisis, which resulted in displaced workers and unemployment caused by
enterprise closures/retrenchment.
Expansion of Social Security System
In the wake of the crisis, the programs of the Government Service
Insurance System (GSIS) for government employees and the Social
Security System for employees in the private sector were expanded to
help their members to cope with the crisis. The expansion took two forms:
liberalizing loan terms and creating emergency loan facilities.
Liberal Loan Terms
The SSS reduced the minimum number of monthly contributions that is
required before a member may qualify to take out a on-month salary loan
to 36 effective September 1, 1998. The interest rate was also cut from
10% to 6%. Moreover, the interest rate is no longer paid in advance. In
addition, the SSS condoned penalties for housing loans that were overdue
for the period May 8, 1998 to May 9, 1999. The GSIS also increased the
maximum loan amount for salary loans from the equivalent of 3 months to
5 months.
As of the end of 1998, 17,600 members have availed of the condonation
program with the total value of penalties condoned at P34 million.30
Emerging Loan Facility
Workers who lose their jobs also lost their access to loans from the SSS
29
30
Editorial Staff, 1996.
Reyes et al, 1999.
48
since the salary loan required the approval of employers. During the Asian
crisis, the Employees Compensation Commission established the
Emergency Loan Facility for Displaced Workers (Economic Crisis Fund)
in the amount of P500 million and the Emergency Loan Facility for
Displaced Sugar Workers (Sugar Workers Fund) in the amount of P100
million to enable workers, who had been separated from formal
establishments for economic distress, to avail of emergency loans for
purposes of consumption smoothing. The maximum loan amount is twice
their monthly salary credit but not to exceed P12,500 at the subsidized
interest rate of 6% per annum, free of any service charge and payable
within 2 years with a grace period of one year. During the period May
1998 and May 1999, a total of P443.4 million in loans were released from
the Economic Crisis Fund to 40,491 workers, and P36.6 million in loans
from the Sugar Workers Fund to 3,481 displaced sugar workers.
Workers cannot avail of a loan unless they are up to date in their payment
of SSS premiums prior to their separation from employment. Especially,
self-employed workers are more vulnerable to unemployment spells
during crisis times and are less likely to be current in their contributions to
the SSS; hence, less likely to be eligible for the emergency loan facility.
Therefore, first, the SSS should have the flexibility of allowing their
members to borrow against their retirement contributions already made
when become unemployed and then replenish the same when they find
employment once more. Second, there should be an income smoothing
institutions (such as savings fund) to cater to the needs of the selfemployed and marginal workers (about 45% of the labor force) who are
not currently covered by the SSS/GSIS. Currently, the PAG-IBIG Fund (a
kind of providence funds) is available to generate savings as part of the
SSS, but its membership is on a voluntary basis for lower income and selfemployed workers.
Government Expenditures for Basic Social Services
Provision of basic social services (basic education, basic health care
services, nutrition, water and sanitation) constitutes the last resort of social
safety nets. In particular, in those countries where the coverage of the
social insurance system is limited, and public assistance programs
designed specially for the underprivileged population is scanty,
49
importance of basic social services as a safety net is more enhanced. This
is so because the segments of the population who are excluded from the
social insurance system have no recourse but to rely on publicly provided
social safety net programs during times of crisis. However the principal
problem with the provision of basic social services as a safety net during
an economic crisis is that the need for basic social services increases
precisely when the government could least afford them. The government’s
fiscal position tends to be adversely affected by natural disaster and
economic disruptions.
The Philippine experience during 1997-1999 illustrates this problem well.
Following the onset of the Asian financial crisis in July 1997, the needs
for social safety nets increased sharply. However, central government
revenues started to falter in the last half of 1997. In 1998, total tax take
was P96.5 billion short of the original target. Tax effort plunged from
15.3% of GNP in 1996 to 14.8 in 1998 and 13.7% in 1999. Consequently,
the central government expenditure program was forced to modify.
Administrative Order 372, issued in February 1998, imposed a 25%
reserve on total appropriations for non-personnel expenditures of all
central government agencies. Likewise, the order imposed a 10% reserve
on the internal revenue allotment (IRA) share of LGUs. Only in July 1998,
the government announced the exception of major departments engaged in
the delivery of basic social services from the mandatory reserves that were
imposed earlier. Despite this policy pronouncement in favor of the social
services, the social service sector in the aggregate failed to maintain their
share in the central government budget. This is because the lifting of the
reserves was not implemented immediately. For instance it was not until
the last quarter of 1998 when the mandatory reserve was actually lifted in
the Department of Health (DOH). Moreover, a slowdown in the release of
the Notice of Cash Allocation effectively restricted the spending of
government agencies. Furthermore, the revenue situation of the central
government deteriorated every year, and claims of other sectors competed
keenly for the resources. Thus, the share of social services in total central
government expenditures dipped from 24.9% in 1997 to 22.4% in 2000.
Although the basic social services fared slightly better than the non-basic
social services, they followed more or less the same trend. The share of
basic social services in total central government social expenditures rose
from 64.6% in 1997 to 66.9% in 1998, but contracted to 65.8% in 1999
and 65.3% in 2000. The trend was not much different in the LGUs. Thus,
the consolidated general government expenditures on basic social services
rose from 16.8% in 1996 to 18.9% in 1998, but declined to 18.6% in 1999
50
(Table III-1-8).
Table III-1-8 Consolidated Government Expenditures on Basic Social Services,
1996-1999 (% Distribution of Total Government Expenditure)
Basic Education
Basic Health/Nutrition
Mixed Basic Soc. Service
Water and Sanitation
Basic Social Services
Total Education
Total Health/Nutrition
Total Social Services
Basic soc. Serv./total soc
Ser
Basic Ed./Total Ed.
Basic Health/Total Health
1996
14.05
1.98
0.63
0.19
16.84
18.48
4.60
28.25
59.63
19976
15.51
1.95
0.62
0.29
18.37
19.82
4.81
28.98
63.40
1998
16.36
1.83
0.60
0.14
18.94
20.29
4.45
28.89
65.56
1999
15.79
2.06
0.58
0.16
18.59
19.60
4.59
28.83
64.49
76.03
43.05
76.26
40.53
80.63
41.20
80.58
44.91
Source: Manasan, 2001b.
This Philippine experience is indicative of the inadequacy of government
spending on social safety net during the crisis and points to the needs for
developing a more financially sustainable social safety net program. In
this connection, multilateral development financing organizations would
be able to play an important role. These organizations are a primary
source of information on international best practice and the lessons
learned from similar experience in other countries. In addition, they also
play a major role in building the capacity of local institutions in program
design and implementation. Finally, the quick disbursing loans that
provide budget support to the government not only help ease the overall
fiscal bind the government faces during times of crisis, but also help
protect government spending on the social sectors. A case in point is the
Social expenditure Management Loan from the World Bank.31
31
Reyes et al, 1999.
51
Recommendations
Pre-Crisis Planning for Safety Nets and Poverty Reduction Programs
It is important to institute many and effective poverty reduction programs
before a crisis erupts. Poverty reduction programs have served as a useful
basis for designing social safety net programs. Most active social safety
net programs used in the Philippines in the aftermath of the Asian crisis
and the El Nino have been the extension or reinforcement of the poverty
reduction programs that had operated for some time before the crisis in the
country. There are several reasons for this phenomenon. First, since the
majority of poverty groups take the brunt of the economic disruption, it is
logical that poverty reduction programs have been mobilized as social
safety net programs. This is so particularly in a country like the
Philippines where the poverty incidence is high even before a crisis erupts.
Second, it takes time for the government or an NGO to launch a new
safety net program in the wake of a natural or human-made crisis. Finding
the nature of the crisis and targeting on the most vulnerable groups of
population require new data on the crisis and the new poor. Collection and
analysis of those data and designing a new safety programs and launching
it on a large scale following the bureaucratic processes and political
negotiations takes time. Third, recent experiences have demonstrated that
the social effects can become manifest very quickly after the onset of
economic crisis. Finally, the Philippines has been subject to crisis of one
form or another, e.g., typhoons, floods, El Nino, La Nina, earthquake,
volcanic eruptions, financial and even civil and religious conflicts. It is
imperative to initiate a pre-crisis planning for safety nets. Social safety
nets in place before a crisis occurs can address the needs of the poor in
good economic times and can be adaptable to combat the effects of crisis.
An Effective Information System
The government of the Philippines may want to review the system of ongoing data collection on poverty, income, expenditures and labor force
and make it more relevant to policymaking. Two or three sets of data
serves as a basis for designing, monitoring and evaluating social policies
and safety net programs since the Asian crisis. They are the Family
Income and Expenditure Survey (FIES), the Labor Force Surveys (LFS),
and the Annual Poverty Indicator Survey (APIS). However, these sets of
surveys have not been harmonized in purpose and measurement of key
variables. Consequently, they do not render a clear cut before-and-after
comparison. Such a data problem created not-so-productive discussions
52
among researchers and analysts immediately after the Asian crisis
regarding the relative effects of the Asian crisis and El Nino on the
welfare of the Filipinos and the locus of the poor. Some argued that the El
Nino actually had a stronger effect on the Philippines than the Asian
financial crisis.32 Others, however, argued that the crisis may have had a
much greater effect than what was believed. 33 And others recently
rejoined the debate to reconcile the differences.34 If one cannot pinpoint
the location of the poor (e.g. urban or rural areas), an effective safety net
instrument can not be successfully designed or selected.
An effective safety net program should be designed on the basis of timely
and reliable information on the nature of the risk and the vulnerable
groups, i.e., the old poor and the new poor. Also, since the government
tends to move quickly to implement new programs or expand existing
programs, it is important for the government to have a data collection
system and monitor and evaluate the success or shortcomings of the
programs during the implementation process.
Basic Social Services and Social Safety Nets
Basic social services serve as an effective social safety net, and therefore
expenditures for basic social services should be protected. During
economic crisis, malnutrition may rise and children may drop out of
school, limiting their ability to emerge from poverty in the future.
Moreover, earlier experience with crises situations suggests that during
periods of crisis the poor tends to cut back on their consumption of basic
social services primarily because their incomes have been reduced. This
suggests that the public basic social services should be protected during
times of crisis. Furthermore, because of a more severe resource constraint
during a crisis, basic social services should be more efficiently delivered.
In the Philippines the basic social services have been better protected
relative to non-basic social expenditures or other expenditures. However,
its share in total government expenditures declined after a brief increase in
1998. Targeted human development programs have been used successfully
in Latin America, like Mexico’s Progresa program (World Bank b). These
programs transfer income in cash or in-kind to poor household with
children conditional on productivity - enhancing interventions such as
32
33
34
Datt and Hoogeveen, 2000.
Dios, 1999; Lim, 2000.
Albert, 2001; Tabunda, 2001.
53
school attendance and hospital visits.
Selection of Program Instruments
The government of the Philippines has employed a variety of safety net
instruments. However, in the future it may want to make a more judicious
selection among a wide range of available instruments. Selection of safety
net instruments should be made on the basis of the nature of the risk,
target groups to be protected, and the cost-benefit or cost effectiveness of
safety net instruments. Selecting a cost-effective instrument is more
important during times of crisis because of the severe resource constraints.
The traditional Food Subsidy Program of the National Food Agency and
government’s ERAP stores have been subsidies for the general public and
have not been well targeted, and therefore not cost-effective. Good
targeting should ensure the inclusion of the poor (i.e., minimize errors of
exclusion) and at the same time should limit the leakage of benefits to the
non-poor (i.e., minimize errors of inclusion). The food coupon programs
would be more cost-effective and would promote the private food stores
in the remote areas. In the early 1990s, the government of Mexico and
Honduras has converted the general food subsidy program into a food
coupon program with the assistance of the World Bank.
The credit-based livelihood program is well targeted, but the government
non-financial agencies and public corporations have crowded out the
private sector credit institutions by providing non-transparent subsidies to
the poor directly. The government credit agencies should function as
second-tier, wholesale credit agencies with a transparent subsidy to
promote the participation of private credit agencies in a more risky retail,
first-tier credit market. The final borrowers should have access to credit at
market interest rates, which are already a subsidized credit line in view of
their higher than usual credit and commercial risks.
The social investment fund should ensure that beneficiaries participate in
the construction of physical or social infrastructure, rather than simply
benefiting from the use of the infrastructure. This will enable the social
fund to transfer incomes to the poor with a self-targeting process of
providing employment opportunities. At the same time, social fund
operations should make sure that the beneficiary communities are
responsible for operations and maintenance of the infrastructure provided
with the fund so that the benefits can be sustained for a long time.
54
The social security system and health insurance system have focused on
the relatively higher income groups and exclude lower and marginal
income people. They do not serve as a good safety net unless the systems
expand their coverage. It is an innovative plan to expand the coverage of
the national health insurance program by providing financial incentives to
the LGUs. However, the central government has a comparative advantage
in improving equity than decentralized governments. If the decentralized
governments themselves are not equally endowed in terms of resources
and administrative capabilities, they cannot improve equity of the national
population much. Decentralization is essential for effective design and
implementation of safety nets. The central government will therefore have
to strive to redress inequity among decentralized local governments first.
The central government will have to increase ear-marked transfers to
underprivileged local governments so as to increase expenditures for
primary health services for the poor. Unless they first spend more of their
own funds on basic health services for the poor, they would not be able to
collect a larger amount of capitation fund from the central government.
Among social security instruments, the unemployment insurance system
would serve as a more cost-effective social safety net, and the government
of the Philippines should make effort to introduce it gradually. The
unemployment insurance program, like means-tested cash transfers, food
coupons, or public workfare programs, has the features of self-targeting
and can function as part of the automatic stabilizer to the economy. As the
economic activities decline, more people would be eligible for the
program. And as the incomes of people improve with the economy, fewer
people would qualify for the program.
The public workfare program in the Philippines has created employment
opportunities and has transferred income to the poor effectively, but it
needs some adjustment. Especially, the wage setting procedures and
standards should be made more self-targeting by avoiding compensations
higher than minimum wages and conflicts with the agricultural production
cycle.
Targeting Approach
Social safety net programs financed by the Poverty Alleviation Fund and
the Lingap Fund should be more rigorously targeted. As shown in the
CIDSS program, many social safety net programs financed by the Poverty
Alleviation Fund have been first targeted on the basis of the geographic
criterion and then a means test such as the MBN system. In practice
55
however, the geographic criterion was superseded by the inclusion of nonpriority provinces and municipalities. At barangay and family levels, the
means test was not followed rigorously. By the time the Lingap Fund
approach was announced, there was no clear geographic criteria. Almost
any province, municipality, and barangay was eligible as long as it
contains poor families. Moreover, the selection of families were not based
on the MBN data, but on the recommendation of the political leaders of
the community. One way of getting away from such political interventions
is to apply the geographical targeting more rigorously coupled with selftargeting elements. Following the means test is administratively complex
and costly if the local government is not strong institutionally.
Financial Sustainability
The government of the Philippines may want to collaborate with
multilateral development banks like the World Bank or ADB to support
the design and implementation of poverty reduction and safety net
programs. Besides the technical assistance, they can help shield the safety
net programs from the political pressures. Most of all, these organizations
would provide budget supports through quick disbursing loans. One of the
greatest challenges in implementing social safety nets in times of crisis is
the financial constraint. Financing social safety nets put pressure on
government budgets precisely when the government could least afford it.
Another way of overcoming the financial constraint is to focus on the
cost-effective social safety net programs such as the targeted human
development program with minimized leakage. For example, Mexico’s
Progresa costs only about 0.2% of Mexico’s GDP and 1% of the federal
budget, reaching almost two million households.35
Lead and Coordinating Agency
The principle of the convergence of services has not been followed
rigorously. Numerous but small social safety net programs have been
launched and managed by almost all central government departments and
agencies, but they have not been effectively coordinated. Legally, the
National Anti-Poverty Commission (NAPC) is to orchestrate the fight
against poverty and achieve convergence on poverty alleviation activities
of various government agencies. However, in the fields of social safety
nets, not all programs financed by the Funds have been considered or
35
World Bank b, 2000.
56
approved by the NAPC, and implementing agencies are not required to
report periodically the progress and the results of their programs.
Therefore, design and implementation of the safety net programs have
followed the multi-agency approach with overlapping programs and waste
of resources. The NAPC should be accorded with greater authority for
coordination of program design, resource allocation, implementation,
monitoring and evaluation.
Monitoring and Evaluation
To date, few evaluation studies have been carried out, and therefore few
feedback to the design and planning process. Besides implementing
agencies’ reporting, beneficiary-based or objective third party’s
monitoring and evaluation reports should be prepared periodically for
each major safety net program. Such a periodic feedback would be critical
for the decision-makings on the design, resource allocation and
implementation of the safety net programs on a continuing basis.
Table-III-1-9. Key Social Indicators
Human Development
Primary enrollment rate (net)
Secondary enrollment rate (net)
Immunization rate (%)
Poverty and Income istribution
National headcount index
Latest data
(date)
1999-00
97.0
65.4
73 (1998)
1999
26.3
57
Previous Period
(date)
1998-99
95.7
65.2
72 (1993)
1997
25.1
Urban headcount index
Rural headcount index
Gini index
Government Expenditure
Education (’98 bn Pesos)
Education (% of total)
Health (’98 bn Pesos)
Health (% of total)
Labor Market
Unemployment rate (%)
Male
Female
Underemployment rate (%)
Participation rate (%)
Male
Female
Days lost due to strikes/lockouts
(’000)
Real wages (% change)
Non-agricultural
Agricultural
12.7
38.7
0.43
1999
106.3
19.4
13.3
2.4
April ’00
13.9
12.7
15.9
25.1
66.7
83.8
49.7
229 (1999)
11.9
36.9
0.43
1998
106.2
20.1
13.7
2.6
April ’99
11.8
11.2
12.8
22.7
69.6
86.3
53.0
557 (1998)
+0.9 (’99over ’98)
+8.3 (’98over ’97)
Source: World Bank a, 2000.
2. Malaysia
Malaysia is a federation of thirteen states and two federal territories Kuala Lumpur in the Peninsular and Labuan in Sabah. The Country
consists mainly of three parts, Peninsular Malaysia, Sabah and Sarawak.
Sabah and Sarawak are in the north of the Borneo Island and displays
great difference from the Peninsular in ethnic composition and socioeconomic characteristics. Malaysia is a multi-ethnic, multi-religious, and
multi-cultural country. It has a population of about 21.8 million people in
1999, with 57.9% Bumiputra (Malays), 24.9% Chinese and 7.0% Indians.
The Population has increased rapidly so far, recording 2.4% of annual
growth rate during the period 1975-1999. However, the rate is expected to
be lowered substantially in the 21st century, projected at about 1.5%
during the period of 2000-2015. The rates of population growth between
the main ethnic groups vary with about 2.7%, 1.3% and 1.5% respectively
for the Bumiputra, Chinese and Indians. Since the ethnic composition is
58
complicated and overlapped with socio-economic differences across such
ethnic groups, one of the main targets of socio-economic development has
been focused upon the lessening of socio-economic gaps across ethnic
groups, particularly between Bumiputra and Chinese. As a matter of fact,
the problem of ethnic gap is overlapped with regional gap. Chinese and
Indian reside mainly in the urban area and in the Peninsula, while a large
number of Bumiputra are living in the rural area or in Sabah and Sarawak.
Therefore, to eradicate the poverty of Bumiputra is closely related to the
work of coping with the rural poverty and to balanced development across
regions.
Before the outbreak of financial crisis in mid-1997, Malaysia has been one
of the most successful cases in the developing countries. The nation
sustained its pace of development, with Gross Domestic Product (GDP)
growth rates averaging above 8.0% per annum since the mid-1980s. The
unemployment rate was also less than 3 %. The per capita income in
nominal terms increased from RM1,106 in 1970 to RM9,786 in 1995,
which amount to USD$4,340.
This rapid economic development is reflected by improvements in social
indicators. The achievements in increasing life expectance and
diminishing infant mortality are particularly impressive. The life
expectance at birth has increased to 69.8 and 74.5 years respectively for
male and female in 1999. The infant mortality rate has shrunk by one fifth
for the past three decades, recording 7.9 persons per 1,000 births in the
year. These improvements in the basic health status of its population were
through improved public health measures, and greater access to health
care.
The enrollment rate has increased rapidly too. Universal public education
has been realized coming to the 1990s. The lower secondary enrollment
ratio is about 83%, and for upper secondary about 56%. The enrollment
ratio for tertiary education is about 23% at the polytechnics and 3.7% at
the public universities. If students in private and foreign universities are
included, the latter ratio could be doubled. As a result of this continuous
effort, the literacy rate has been lowered rapidly. The literacy rate
recorded 86.4% and 97.1% for the adult and the youth respectively in
1999.
Substantial efforts have been made to improve the quality of life in rural
areas: 97% of rural households have access to paved roads, 76% have
piped water in their houses, 80 % have access to electricity, and 94% have
59
access to at least one primary school.
Women have benefited from the rapid economic growth - through higher
incomes and greater access to social services. World Bank estimates
suggest that the probability of being poor is no greater for female-headed
households (9.6%) than for male-headed households (10.1%).
Furthermore, female life expectancy is greater than the regional average.
Yet little progress has been made in integrating women into the work
force. Women’s participation rates barely increased from 46.6% in 1970 to
47.1% in 1995, which amounts to about 60% of men’s participation rates.
On average, women’s wages were half those of men between 1987 and
1991.
Table III-2-1. Selected Indicators for Quality of Life
Life Expectancy (in years)
- Male
- Female
Infant Mortality Rate (per 1,000
persons)
Population per Doctor
Literacy Rate (per 1,000 persons)
Telephones (per 1,000 persons)
Utilities (% population)
60
1970
1990
1999
61.6
65.6
39.4
68.8
73.3
13.0
69.8
74.8
7.9
4,302
58
17
2,656
85
114
1,433
95
307
- Water
- Electricity
Personal Computers (per 1,000
persons, 1997)
48
44
-
80
80
46.1
91
98
-
Source: UNDP, Human Development Report, Database, 2001.
State of Poverty and Unemployment
In the recent history of Malaysia, the problem of poverty is closely related
to the social problem concerning multi-ethnicity. In 1969, a severe ethnic
violence broke out between the Malays and the ethnic Chinese. Riots
started in Kuala Lumpur when Malays demanded the expulsion of nonMalays. The ethnic violence was related to the dissatisfaction of the local
Malays with their lower economic status as compared to that of the ethnic
Chinese and the Indians. Among the three ethnic groups, Malays tend to
live in the rural area. Chinese are mostly urban residents with incomes
twice as large as the Malays. Indians hold socio-economic position
between the Chinese and Malays, many of them working as rubber tappers.
Although the Chinese are by far the wealthiest group, politically the
Malays have control. The critical socioeconomic element in Malaysia is
the disparity between political and economic status, which stems from not
only the ethnic division, but also the division between rural and urban
populations.
Even though the level of poverty in Malaysia is more severe in the rural
area, the urban poverty is as much enormous. The Malays holding the
poor class in the urban area is as much marginalized from social and
economic resources as those in the rural regions. They are living in poor
housings and limited access to basic amenities, and have little opportunity
to obtain reasonable earnings job. All of these factors contribute to the
continuation of poverty over generations. A substantial proportion of
urban as well as rural people seem to be under poverty until the 1990s.
Since there is no reliable data on the state of poverty across the nation in
the past, an exact estimation of the poverty rate is not possible until the
early 1990s.
The poverty line income (PLI) in Malaysia is defined in terms of the
minimum expenditure level required to maintain a certain standard of
living and is updated annually using the Consumer Price Index. The PLI is
61
defined as an income sufficient to purchase a minimum basket of food to
maintain household members in good nutritional health and other basic
needs such as clothing and footwear, rent, fuel and power, transport and
communications, health care, education and recreation. Different poverty
line incomes have been used to reflect variations in costs of living and
household size between Peninsular Malaysia, Sabah and Sarawak. In 1989
a poverty line income of RM370 per month for a household of 5.14
persons was estimated, while for Sabah and Sarawak the respective
poverty line incomes were RM544 per month for a household of 5.36
persons and RM452 per month for a household of 5.14 persons. In 1999 a
poverty line income of RM510 per month for a household was estimated,
while for Sabah and Sarawak the respective poverty line incomes were
RM685 per month and RM584 per month for a household of 4.6, 4.9 and
4.8 persons in Peninsular, Sabah and Sarawak respectively. The hardcore
poverty line is estimated at half the official half the PLI.
Table III-2-2. Monthly Poverty Line Income by Year and Region
Monthly Gross (poor) PLI
Peninsular Malaysia
Sabah
Sarawak
1989
370
544
452
1992
405
582
492
1995
425
601
516
(unit: RM)
1997
454
626
535
1999
510
685
584
Source: Robert, 2001.
The impressively rapid economic development since the 1970s brought
about a great extent of decrease in the poverty, though the benefits of
development were not distributed fairly to each group. The overall
incidence of poverty hovered almost 50% in 1970. The rural - urban gap
was enormous in those days. More than half of rural people live under
poverty while only one fifth of urban dwellers are poor in 1970. The
general state of poverty has improved impressively along with the
economic development since then. The poverty rate just prior to the
financial crisis has squeezed to as little of 9.6% in 1995. And the rural urban gap has shrunk considerably during the period. In 1995, only 4.1%
of city residents were reported to be under poverty, while the rural
hardcore poor held 16.1%.
Table III-2-3. Change in Poverty Rate
62
Incidence of Poverty
- Total
- Urban
- Rural
Incidence of Hardcore
Poverty
- Total
- Urban
- Rural
1970
1990
1995
1997
1999
49.3
21.3
58.7
17.1
7.5
21.8
9.6
4.1
16.1
6.8
2.4
11.8
8.1
3.8
13.2
-
-
2.1
0.9
3.5
1.4
0.5
2.4
1.4
0.6
1.4
Note: Hardcore poverty is estimated using half of the PLI.
Source: Malaysia, Economic Planning Unit, Prime Minister’s Department The
Malaysian Economy in Figures 1999, Kuala Lumpur, 1999; in Robert,
2001.
The following table shows a great extent of regional variation in the state
of poverty. The fact that less proportion of urban dwellers live under
poverty than that of the rural people is not different across regions.
However, the proportion of the rural poor among the people not living in
Peninsular Malaysia is substantial to think of the general level of
economic development in the country. More than one third of Sabah
residents turned out to lead a life under poverty in 1990, while the
corresponding rate of Peninsular Malaysia is 19.3%
Table III-2-4. Poverty Rate by Region (1990)
Regions
Overall
- Urban
- Rural
Peninsular Malaysia
15.0
7.3
19.3
(Unit: %)
Sabah
34.3
14.7
39.1
Sarawak
21.9
4.9
24.7
Source: Malaysia, Ministry of Finance, Economic Report 1999/2000; in Robert,
2001.
The 1997 financial crisis had wide-ranging effects on Malaysia in that it
weakened the financial sector, affected the real economy, and had socio-
63
economic implications. The economy grew by only 3.0% per annum on
average during the period of 1996-1999. As a result of the crisis, there was
an increase in the incidence of poverty in the country. Particularly, the
urban dwellers are hit severely from the retrenchment of economy. The
soaring unemployment and inflation took hardest toll among the urban
poor. The overall incidence of poverty increased by 19.1% for the two
years of 1997-1999 from 6.8% to 8.1%.36 Like other Asian countries hit
by the financial crisis, the impact of economic crisis was harder on the
urban dwellers than on the rural residents. The urban poor increased by
58.3% for the two years, while the rural poor 11.9%. Rural-urban
migration and the influx of foreign migrants both legal and illegal
exacerbate the increase in the number of urban poor households. Likewise
the urban hardcore poor were more severely hit by the crisis than the rural
counter part.
In Malaysia, the overall distribution of income is not in a good shape,
which reflects the large extent of ethnic and regional differences. The
poorest 10% of people took only 4.4% of the total income while the
richest 20% took 54.3%. The richest 20% of people enjoyed 12.4 times
more than the poorest 20%. The income ration of richest 10% to poorest
10% is as much as 22.1 times. The Gini coefficient, a summary measure
of income disparity, indicates 0.492. The income inequality is
substantially higher in comparison to other neighboring countries or to
other countries of similar level of income. For example, Indonesia
recorded 0.317 in 1999, and Thailand was 0.414 in 1998. Concerning the
impact of the financial crisis, it seems that there was no large extent of
change in the income distribution. According to a study, the Gini
coefficient is reported to have increased from 0.4421 in 1990 to 0.4432 in
1999, indicating a slight worsening of income distribution during the
whole period of the 1990s. However, when the Gini coefficients of before
and after the crisis are compared, they showed no meaningful degree of
change or slight increase during the period.37
Table III-2-5. Distribution of Income (1997)
Share of Income Group
Income Share
36
The estimation of poverty rate varies largely depending upon sources. According to the
estimation of World Bank, the poverty rate is estimated to be 15.5% in the most recent year
available during the period of 1984-99 (World Bank, 2000). The poverty rate shown in this
text is based upon the figures published by the Malaysia government.
37
Robert, 2001.
64
- Poorest 10%
- Poorest 20%
- Richest 20%
- Richest 10%
Ratio of Richest 10% to Poorest 10%
Ratio of Richest 20% to Poorest 20%
Gini Index
1.7%
4.4%
54.3%
38.4%
22.1
12.4
0.492
Source: World Bank, World Development Report, Database.
Table III-2-6. Distribution of Household by Monthly Gross Household Income
(unit: %, RM)
Income Class (RM)
500 - 999
1,000 – 1,499
1,500 – 1,999
2,000 – 2,499
2,500 – 2,999
3,000 – 3,499
3,500 – 3,999
4,000 – 4,999
5,000 and above
Total
1995
10.6
23.9
19.9
13.1
8.9
6.1
4.2
2.8
6.7
100.
65
1999
6.0
19.0
18.8
13.9
10.1
7.3
5.7
3.9
9.8
100.0
Mean Income
Median Income
Gini Coefficient
2,020
1,377
0.4560
2,472
1,704
1.4432
Source: Robert, 2001.
Like other developing countries, Malaysia does not use her labor force
sufficiently. Less than half of the people of working ages are tapped for
economic activities. This is mainly due to the low level of women’s
participation. As little as 44.2% of working age women participated in the
labor markets in 1999. The financial crisis gave a blow to both men and
women. The labor force participation rate decreased meaningfully for both
sexes during the period of 1997-99. The drop of women’s participation
rate is outstanding. It fell as much as 3.2% for the two years. In
comparison to the sharp decrease in the participation rate during the crisis,
the overall unemployment rate shows a slight increase from 2.4% to 3.0%.
Table III-2-7. Distribution of Labor Force and Unemployment
Year
1990
Labor Force (thousand)
7,042
Labor Force Participation Rate
- Total
66.5
- Male
85.6
- Female
47.3
Unemployment Rate
5.1
1996
8,641
1997
9,038
1998
8,881
1999*
9,010
65.8
84.8
45.8
2.5
67.0
85.7
47.4
2.4
64.3
83.4
44.2
3.2
64.3
84.4
44.2
3.0
Note: * Estimate.
Source: McGee et al, 2000.
66
Description of Major Social Safety Net programs
Social safety nets in Malaysia are comparatively well structured but they
could be strengthened. Strong economic growth, virtually full
employment before the crisis and family solidarity so far provided
informal assistance and security to those vulnerable. At the beginning of
the crisis, the Government tried to ensure the provision of what it
considered to be essential social benefits and to limit its direct financial
assistance to the needs of the poor. Budget resources were redistributed
for the Development Program for the Hardcore Poor (PPRT) and microcredit funds were set up to promote income generating activities and job
opportunities were created for the low-income segments of the population,
including the most vulnerable groups through public works.
A major Government concern since the beginning of the crisis, has been
the preservation of the widely acknowledged gains achieved in health and
education. In the health sector, the combined decline of household income
and increased cost of medical supplies had a detrimental effect on the
utilization of the private sector health services, particularly in urban areas.
Subsidies are expected to mitigate the impact of the crisis in the primary
and secondary school levels. In higher education, the Government
increased the allocation for the National Higher Education Loan Fund to
cater to more students, thus enabling them to access higher education in
public and private institutions. Students from low-income groups will also
be eligible for the maximum loan that covers tuition fees, books,
subsistence and other allowances.
The Government has also given high priority to ensuring continued supply
of skilled labor to meet the rising level of skills demanded by knowledgebased and high technology industries, despite the effects of the crisis. To
this end, measures were adopted to improve the skills-delivery system.
Institutional and other reforms were initiated to enhance the efficiency of
the skills-delivery program and increase labor market flexibility. These
measures include improved labor market regulations and information
systems.
Development Program for the Poorest (PPRT; Pembangunan Rakyat
Termiskin)
This program was introduced in 1989 to deal specifically with hardcore
poor households and to meet the varying needs of different subgroups
among the hardcore poor. The program also provided direct welfare
67
assistance. In the rural sector, poverty reduction programs through the
implementation of PPRT focused on the commercial production of cash
crops, livestock and fish rearing, some of which were carried out in
cooperation with the private sector. To improve the quality of life of the
rural poor, the state provided and rehabilitated houses of the hardcore poor
with special attention to the design, size and features of the houses. The
2000 Budget has allocated RM492 million for low cost housing to achieve
the target of building 58,600 units of low cost houses.
Vision Village Movement (GDW)
Beginning in 1991, a nation-wide Vision Village Movement (GDW) has
been directed towards a second transformation of the rural sector. The
movement emphasized the participation of villagers in the planning and
implementation of rural development programs. The objective of this
GDW is to involve 3,000 villages by the year 2000, with 642 villages
participating each year including the poorest villages. The main objectives
of GDW are to develop independence, active participation, empowerment
and skills among the people. GDW is also aimed at paradigm shift from
the common perception of the traditional pattern of land ownership to an
integrated management of the corporate rural economic activities.
Micro-Credit Facilities (quasi-governmental organizations)
This micro-credit fund is meant for the lower income group in urban areas
who may suffer a loss or reduction of real income as a result of
retrenchment. The state together with semi-governmental organizations
like PNB, MARA and PERNAS have taken measures to tackle urban
poverty through micro-credit facilities made available to the urban poor to
assist petty traders and hawkers. RM100 million were allocated for the
“Small-Scale Entrepreneur Fund” and another RM150 million to
“Economic Business Group Fund” to assist petty traders, hawkers and
small entrepreneurs, including women entrepreneurs, in urban areas.
Micro-credit facilities are available for various business activities such as
manufacturing, services, transportation and constructions and loans
granted are up to RM1,000,000.
Micro-Credit Facilities (NGOs)
Amanah Ikhtiar Malaysia (AIM), formerly known as “Projek Ikhtiar”
formed in 1986, is the first NGO aimed at poverty alleviation in the
68
country. The establishment of AIM was for the sole purpose of assisting
very poor households to lift themselves out of poverty primarily by means
of micro-credit to be used for financing income-generating activities. AIM
is one of the agencies that compliments the government’s target of having
only 0.5 % hardcore poor by the year 2000 in both rural and urban areas.
AIM programs include micro-credit financing, human potential
development, mobilization of funds, equity investment and economic
activities.
The Ikhtiar Loan Scheme (SPI) is specialized credit delivery system
focused exclusively on the poor, whereby credit is literally brought to
their doorsteps. This approach ensures that credit is delivered to the target
beneficiaries who in turn will be empowered to improve their living
conditions. The beneficiaries are poor households, regardless of gender,
race or political affiliation, whose monthly incomes do not exceed RM310
or RM67 per capita, while in the case of Sabah and Sarawak, the monthly
income not exceeding RM422 or RM86 per capita and RM362 or RM75
per capita respectively.
Female Single Parents Financing Scheme
Female Single Parents Financing Scheme (SKIT) is a financing scheme
for the benefit of female single parents living in town areas. This scheme
is introduced in view of economic and social problems faced by single
parents due to divorce or death of the breadwinner. The purpose is to
ensure that the living standard of female single parents does not decline
dramatically following these incidents. The maximum amount the first
loan is RM10,000 and the maximum amount of second and subsequent
loans is RM20,000
Fishermen Financing Scheme
Fishermen Financing Scheme (SPIN) is a financing scheme targeted at
coastal fishermen of Malaysia. This scheme is introduced to help small
fishermen increase their livelihood as well as prepare them for the
commercialized fishing industry. It also aims at increasingly fish-based
food production. The maximum amount the first loan is RM10,000 and
the maximum amount of second and subsequent loans is RM20,000.
Educational Loan
Borrowers who have completed the first loan in SPI 1 could apply for
69
Educational Loan whose maximum amount is RM1,000 and to be repaid
within 50 weeks. The purpose of the loan is to cover school expenses of
their children.
Housing Loan
Borrowers who have completed the third loan in SPI 1 entitled to get
Housing Loan whose maximum amount is RM5,000 for house renovation,
land purchase and enlarging business premises. The repayment period for
this scheme is between 50 to 100 weeks.
Social Security Programs
Malaysia’s system of social security consists broadly of three different
schemes; social insurance scheme, compulsory savings scheme, and other
complementary social security institutions. Social insurance principles are
applied to work injury and invalidity benefit schemes for the workers
administered by the Social Security Organization (SOCSO). On the other
hand, individual’s savings mandated by the government are the major
security scheme preparing for old age. Employees Provident Fund (EPF)
is the institution to monitor the compulsory savings, which is operated on
the base of individual account principle. There are a number of specific
schemes covering special groups of the population, including a workmen’s
compensation scheme for otherwise uncovered workers.
Workmen’s compensation scheme is prepared for the physical labors or
workers of small establishment or minimal earnings or casual workers.
Public officers have a compensation scheme of their own, which is
operated separately from EPF or SOCSO’s social insurance. Besides these
general social security schemes, ad hoc supplementary assistances are
provided for the residual groups such as the poor elderly or rubber tappers
or fishermen in the principle of public assistance.
The Employees Provident Fund was enacted in 1951. The EPF is the
major institutional measure available for the preparation of old age and
the main stay of Malaysia’s system of social security in terms of coverage,
comprehensiveness, and size of fund. All workers, with the exception of
certain categories, are principally entitled to join the EPF. Coverage is
provided to the self-employed on a voluntary basis.
The Social Security Organization provides coverage for all workers for
the contingencies of employment injury and invalidity by means of
70
mandatory social insurance. The composition of members for the
SOCSO’s social security scheme is similar to that of the EPF. The two
institutions are provided mainly for employed workers.
The Workmen’s Compensation Scheme, which is managed by private
insurance and supervised by the Ministry of Human Resources, provides
coverage for injury to all employees who are not presently covered by the
social security schemes. The ministry of National Unity and Community
Development provides supplementary assistance to the aged as well as to
families that face economic difficulties due to poverty or natural disasters.
Special State schemes further supplement the Federal scheme such as the
assistance to fishermen or the assistance to self-employed rubber small
holders etc.
Employment Provident Fund
The Employment Provident Fund provides for financial security to its
members or their beneficiaries in the event of retirement, death or
incapacity. Over the years the benefits available to members have been
expanded and improved in line with these objectives and these include the
promotion of house ownership through partial withdrawals and the
payment of additional benefits due to death or incapacity.
Table III-2-8. Trend of Key EPF Indicators
Membership
(thousand)
Contribution Rate (%)
Dividend Rate (%)
Contributions
(US $mil.)
Withdrawal
(US $mil.)
Cumulative Asset
(US $mil.)
1995
7,756
1996
8,050
1997
8,274
1998
9,157
1999
9,543
22
7.50
4,130
23
7.70
5,181
23
6.70
4,937
23
6.70
3,890
23
6.84
3,998
1,264
1,461
1,919
2,221
1,875
39,540
47,122
44,731
39,097
43,970
71
Source: http://www.asean-ssa.org/malaysia-Epf/keyindicators.asp.
The EPF is based on the concept of individual savings in a fund sustained
by contributions from employees and employers. Mandatory contributions
constitute the amount of money credited to individual member’s account
based on the monthly wages of an employee. The Scheme applies
compulsorily to employees, with exception of following categories;
nomadic aborigines, domestic servants, casual and agricultural workers,
legal immigrant workers, and public sector employees. A self-employed
person may elect to join voluntarily.
Since its establishment, the EPF has grown rapidly to be one of the
biggest savings institutions as well as the representative social security
institution in Malaysia. In 1952, the EPF covered 0.5 million employees
under its scheme, this figure has grown to cover most workers in the
country in the late 1990s, as far as membership is concerned. In 1999, 9.5
millions of workers are joined in this schemes. When this figure is
compared to the number of total labor force, 9.0 millions, most workers
seem to join the scheme.
However, the active member, who participate regularly in the compulsory
savings, hold about half of the total members. This implies that one in two
workers does not have even the basic provident fund coverage. The total
membership from 1995 to 1999 showed an increase of 4.15% from 1998
to 1999. The proportion of active members dropped from 52.1% in 1997
to 50.1% in 1999 largely due to the economic crisis. This drop during the
financial crisis was reflected in the decrease of savings amount as well.
While the total savings has grown more than 15% annually until the onset
of the crisis, the growth rate dropped to 12% in 1999.
Table III-2-9. EPF Membership and Savings from 1995-1999
Year
Total
Growth Rate (%)
Active
Inactive
Total Savings
(mil RM)
Growth Rate (%)
(unit: million)
1995
7.78
6.6
3.99
3.77
96.9
1996
8.05
3.8
4.18
3.87
113.5
1997
8.27
2.8
4.31
3.96
129.5
1998
9.16
10.7
4.66
4.50
145.3
1999
9.54
4.2
4.78
4.76
163.4
16.2
17.1
14.1
12.2
12.4
Source: http://www.kwsp.gov.my/kwsp/english/body_statisitic.html. and EPF
72
Annual Report, 1999.
The contribution rates have increased four times since the introduction of
the EPF. In 1999, the contributions in respect of employees amount to
23% of the wage, of which 11% is paid by the employee and 12% by the
employer. For practical purposes, the contributions are specified in RM by
wage bands. There is no ceiling on the wage subject to contributions. Selfemployed persons and pensionable employees can choose the amount of
contribution ranging from RM50 to RM5,000 per month.
Table III-2-10. Contribution Rates to EPF
Year
1952-1975
1975-1980
1980-1992
1993-1995
1996-2000
Employee
5
6
9
10
11
(unit: %)
Employer
5
7
11
12
12
Total
10
13
20
22
23
Source: http://www.kwsp.gov.my/kwsp/english/body_statisitic.html.
Contributions are accumulated in individual accounts, and interest is
added at the end of each year at the rate of dividend declared by the Board.
73
The EPF guarantees a minimum of 2.5% dividend annually. The savings
deposited in the EPF could only be drawn on attaining age 55 or in a very
exceptional incidence strictly stipulated by law until the amendment in
1995. However, since the amendment the contingences to enable the
withdrawal were verified, including housing expenses and medical
treatment as well as retirement.
According to the amendment, the deposits in the individual account are
subdivided into three accounts. The account 1, which amounts to 60% of
the deposits, can be principally withdrawn on attaining age 55. The
member cannot access the savings until age 55. The deposits in account 2,
which amounts to 30% of the deposits, can be drawn for housing purposes
such as acquiring a low-cost housing or other stipulated housing- related
payments. The balance may be withdrawn at age 50. The deposits in
account 3, the remaining 10%, can be utilized for the treatment of critical
illness approved by the Board, provided that their employer does not
cover of partially cover such treatment. A member can also withdraw their
savings to pay for the medical treatment of their spouse, children and
parents. In 1999, the withdrawal of deposits due to normal (55 of age) or
early (50 of age) retirement held as little as 41% out of the total amount of
withdrawal.
Table III-2-11. Scheme of Withdrawal from EPF by Type of Account
Type of Account
Account I
Account II
Account III
Assigned Balance Contingencies to withdraw
60 %
attaining age 55
30 %
for housing purposes, or attaining age 50
10 %
for the treatment of a catastrophic disease
Source: EPF Annual Report, 1999.
Table III-2-12. % Age of Amount Withdrawn from EPF by Reasons (1999)
Reasons
% Age of Amount Withdrawn
74
Retirement (55 years old)
Low Cost Housing
Members Investment Scheme
Redemption of Housing Scheme
Early Retirement (50 years old)
Death
Incapacitation
Leaving Country
Medical
Others
Total
27.94
21.30
15.72
13.14
13.04
3.60
1.89
1.69
0.28
100.00
Source: EPF Annual Report, 1999.
Dividends are paid annually into member’s account at a rate declared by
the EPF subject to the returns from investments made in the approved
financial instruments. For the year 1999, the EPF declared a dividend of
6.84% or 3.84% higher than the inflation rate of 3%. Annual dividend
rates from 1952 to 1999 showed an upward trend up to year 1987,
recording 8.5% of annual interest, but fluctuated between 6.70 to 7.70%
for the period 1995 to 1999.
Social Insurance Schemes
The Employees’ Social Security Act was enacted in 1969. The Scheme is
administered by the SOCSO, a body corporate under the control of the
Minister of Human Resources. The scheme covers the contingencies of
work injury including occupational diseases and invalidity. It is operated
by the principle of social insurance. Membership to the scheme is
mandatory. A person employed under a contract of service or
apprenticeship is covered by the Act. An employee earning a monthly
wage of RM2,000 or less has to contribute to the SOCSO. Once an
employee is covered, he/she is always covered even if his/her monthly
earnings exceed RM2,000.
Both employers and employees should contribute to the scheme by the
rates stipulated by law. The contribution rate for the employee is 0.5% of
wages for the Invalidity Pension Scheme, while the employer pays 1.25%
of wages for the Work Injury Insurance and 0.5% for the Invalidity
Pension Scheme. Employees do not contribute to the Work Injury
Insurance. The government’s financial support to the social insurance is
none.
75
The scheme applies compulsorily to all employees earning a wage below
RM2,000 per month when they first become liable for coverage. Such
employees continue to be covered when the wage exceeds RM2,000 but
are deemed to earn RM2,000 per month. Employees earning over
RM2,000 when first liable are excluded from compulsory coverage but
may join voluntarily, in agreement with the employer. The following
categories of employees are excluded from the scheme by law: domestic
servants, spouses(s) of the employer, public officers, persons detained in a
prison. All public sector employees are excluded from the scheme.
Immigrant workers were originally covered but were excluded from April
1993. An employee who has attained the age of 55 years or is in receipt of
an invalidity pension but continues to be employed is excluded from
coverage for invalidity benefits, but coverage for employment injury
continues. Membership of SOCSO has been increasing continuously over
the years in terms of the number of employees and employers. In 1999,
total membership of SOCSO was 8.6 million, while the total number of
registered employers was 386 thousands. The figure indicates that most of
workers (95%) are registered at the scheme in principle. However, the
active members, those paying the dues regularly, are about 69% of the
registered members in the case of employers. Therefore, about 65% out of
the total workers are estimated to participate in the scheme actually.
Table III-2-13. Trend of Key SOCSO Indicators
1995
Membership Base (thousand)
-Registered Employers
274
-Registered Employees
7,422
Contribution Rate (%)
-Employer
1.75
-Employee
0.50
Annual Contributions
673
(RM mil.)
Annual Benefit Amount
289
(RM mil.)
1996
1997
1998
1999
306
7,614
339
8,253
359
8,429
386
8,598
1.75
0.50
758
1.75
0.50
879
1.75
0.50
878
1.75
0.50
899
316
384
445
497
Source: http://www.asean-ssa.org/malaysia-Epf/keyindicators.asp.
76
Insured persons are classified into one of 24 wages classes, for each of
which the amount of the contributions is specified. Contributions for work
injury benefit represent 1.25% of the average assumed wage and are
entirely at the employer’s charge. Contributions for invalidity benefit
amount to 1% of the average assumed wage and are shared equally
between the insured person and the employer.
Work Injury Insurance
The Work Injury Insurance provides an employee with protection for
accidents that occur while traveling, arising out of and in the course of
employment, and occupational diseases. Benefits covered include medical
benefits, temporary disablement benefits, permanent disablement benefits,
survival benefits, etc. The benefits do not require any minimum qualifying
period. Medical benefits are provided to an employee who meets with an
industrial injury or suffers from an occupational disease. The benefit
package includes: necessary medical treatment, hospitalization, medicines,
artificial limbs and other prosthetic appliances, and physical and
vocational rehabilitation. Temporary disablement benefits are paid in the
event of incapacity of work due to an employment injury subject to a
waiting period of three days. Benefit is payable from the fourth day of
incapacity. The daily rate of benefit amounts to 80% of wages.
Permanent disablement benefit is payable if permanent disablement,
partial or total, results from a work injury. The benefit amounts to 90% of
wages for total disability, subject to the minimum of RM9 per day. The
benefit rate for partial disablement is proportional to the degree of
disablement. Survival benefits are payable in the event of death due to a
work injury, to a widow or children. The widow receives 60% of
permanent disability pension of the deceased, and the children receive
40% (60% if no widow).
Invalidity Pension
Invalidity pension is payable in the event of a serious disablement or
disease of a permanent nature that is incurable or unlikely to be cured, as a
result of which an employee’s earning capacity is reduced by at least twothirds. The Invalidity Pension provides coverage against death or
invalidity of a worker who has made at least 24 monthly contributions
within a period of 40 consecutive months preceding the notice of
77
invalidity.
Full pension is 50% plus 1% for every 12 contributions over and above
the basic 24 contributions subject to a maximum of 65% and a minimum
of RM171.43 per month as of January 1995. If the invalidity pensioner
needs constant attendance, an allowance is payable equal to 40% of the
invalidity pension, subject to the maximum of RM500 per month.
Employer Liability Schemes
The Workmen’s Compensation Act was enacted in 1952, the following
year of enacting the Employee’s Provident Fund Act. Workmen entitled to
compensation under the scheme are all manual workers, irrespective of
their earnings, and non manual workers whose earnings do not exceed RM
500 a month. The Workmen’s Compensation Scheme is not applicable to
workers who are insured under the Employees’ Social Security Act. It also
excludes public servants, domestic servants, outworkers, casual workers
not connected with the employer’s trade, etc. Immigrant workers, who
were originally covered by SOCSO, were brought under the Workmen’s
Compensation Scheme since April 1993. The actual number of workers
covered under the Workmen’s Compensation Act is not know as they are
not required to be registered under the Department of Labor. The total
number of injured workers receiving benefits under this scheme is
reported to have decreased over the years because of the gradual extension
of coverage under the SOCSO’s social insurance scheme. The employer
of an injured worker under the act is liable to pay compensation to the
worker or his/her dependant in the event of his/her death or to pay any
expenses incurred in the treatment and the rehabilitation of the worker. All
the benefits payable under the Scheme are in the form of lump-sum
payments. Employers of workmen who are covered by this Act are
required to purchase workmen’s compensation policy from a private
insurance carrier, which is administered by the Ministry of Human
Resources. The kinds of benefits under this scheme are similar to those
provided by the SOCSO’s social insurance scheme. Those are medical
benefits, temporary disablement benefits, permanent disablement benefits,
and survival benefits.
All government employees regardless of their functions or titles are
entitled to a pension depending on their length of service. Initially a
government employee contributes to the Employees Provident Fund; after
10 years of service he/she is affiliated to the public sector pension scheme.
The pension expenditure is wholly borne by the government. The
78
Pensions Trust Fund was established in 1991. Statutory bodies and local
authorities contribute to this Fund 17.5% of the salary bill of their
pensionable employees. The government contributes to this Fund 5% of
the basic salaries of the pensionable employees in Ministries and
Departments. The Fund will eventually take over the Government’s
pension liability. The pension and gratuity are awarded on retirement in
one of the following circumstances: upon attaining age 55, termination of
service for several other reasons. The pension amounts to 1/600 of the last
basic salary per month of service, subject to the maximum of 50% of the
last basic salary. The gratuity, paid in a lump sum, is equal to the last
annual basic salary per month of service.
Medical Care
Medical care is provided through national health services at the
government hospitals, health centers and clinics. However, the long
waiting period before one gets medical treatment could discourage
patients from going to government hospitals. Also, the recent proposal to
privatize health care raises some concern about its viability. Social
assistance and support (material and financial) for the disadvantaged
group including the hardcore poor, disabled persons, the elderly is the
responsibility of the Department of Social Welfare, Ministry of Unity and
National Development. Whereby the elderly, aged 60 years and above, do
not have permanent income either living alone or living with families are
assisted by the Social Welfare with a financial aid of RM70.00 per month.
This is done to create a caring society which practices a caring culture
embodied in the Vision 2020.38
Public Assistance
The government provides financial assistance to families, children, the
elderly, the disabled and victims of accidents and natural disasters,
provided that they are very poor and not covered by any other social
security measures. A sum of RM115 is given as temporary financial
assistance to families unable to earn as a result of illness, accidents, injury
or death of the breadwinner. Preference is given to children who are
orphaned or forced to live in foster homes. Rehabilitation measures are
38
The estimation of poverty rate varies largely depending upon sources. According to the
estimation of World Bank, the poverty rate is estimated to be 15.5% in the most recent year
available during the period of 1984-99 (World Bank, 2000). The poverty rate shown in this
text is based upon the figures published by the Malaysia government.
79
made available to disabled people while financial assistance enables
family member to be independent. In an effort to promote self-reliance in
the population, a business grant of M$2,000 is provided to families that
have been under the financial assistance. This grant is a one-time grant
and is subject to project approval. Old age assistance is provided to people
who are above the age of 60 years and who do not have families to
support them or a place of residence. The Federal scheme provides a RM
50 monthly allowance to the aged poor. Other than this general measure of
public assistance, there are ad hoc assistance programs varying across
regions.
Recommendations
Even though the rapid economic development has decreased the
incidences of poverty over the years, a substantial proportion of people are
still living below the substance level. In addition, the socio-economic gap
between urban dwellers and rural residents, and between Peninsular
Malaysia and Sabah or Sarawak remains enormous despite government’s
continued effort since the ethnic riot in 1969. The government should put
more emphasis on lessening the regional gaps, not to mention eradicating
the poverty throughout the nation. In the development process more
resources should be distributed to the poor living in those alienated
regions.
About half of the total employed persons are covered by the Employment
Provident Fund or related pension schemes, and those covered by the
SOCSO’s social insurance scheme stays at two thirds of the total workers.
The rest of the populations are still not covered by any social security
scheme. Those are mainly the self-employed, the workers in informal
sectors, and agricultural workers. The public assistance programs are
operated on an ad hoc basis, not reliable as the last resort for the poor at
all. Those lying outside of the social security system cannot but resort to
their individual resources, if any.
Therefore, for the progress of the Malaysia’s social security system, the
government’s major effort should be put on establishing the universal
system of social security by enlarging the comprehensiveness of covered
people. The urban poor and the agricultural workers should be the main
target for the expansion.
During the recent financial crisis, a large number of workers went through
hard times. Since there is no unemployment benefits and little private
80
termination benefits available for the majority of workers, many of the
unemployed fell below the subsistence level during the period. The
unemployment insurance scheme should be introduced for the
disadvantaged workers to be able to sustain afloat during possible
retrenched periods. Taking into account the fact that the sweep of
globalization leads to a new kind of labor markets, in which lay-offs and
part timers are a norm, Malaysia should be prepared to this change by
introducing the unemployment insurance scheme, which provides a
cushion for workers in such unstable markets.
Finally, the public assistance scheme needs to be more systematized and
reliable. The categories of the poor entitled to the benefits should be
enlarged. The fact that recipients live below the substance level should be
the only criteria of eligibility. In order to attain this objective, the
government budget for social security and welfare should be increased
from the current level of 7% of total government expenditure to more than
10%.
3. Indonesia
Prior to the 1997 economic crisis, the Indonesian poverty ratio fell
drastically from 60% in 1970 to 11% in 1996 as the result of a rapid
economic growth.39 However the unprecedented impact of the crisis and
the increasing number of people falling into poverty has astonished policy
makers and pointed to the issue of how to deal with the magnitude of the
problems and how to help the poor.40
Indonesian’s nation-wide social safety net program consisted of divers and
temporary poverty reduction programs and social insurance schemes.
Besides the government of Indonesia’s own resources, funding for the
social safety net program also came from donor agencies including both
bilateral and multilateral donors. By July 1998, Indonesia had received
US$2.8 billion from the Consultative Group on Indonesia.
Description of Major Social Safety Net Programs
39
40
Sumarto, 2001.
Puguh, 2001.
81
Special Market Operations for Rice (Operasi Pasar Khusus; OPK)
The Office of Minister for Food and Horticulture and National Logistics
Agency (BULOG) had implemented OPK during 1998-2000 with state
budget for all provinces. OPK is a targeted subsidy program that
distributes cheap rice directly to the target groups to replace a “general
subsidy” of rice that distorted market prices.
The program first launched in the period of July 1998-March 1999 to help
poor households to fulfil their basic food (20Kg of rice per household) at
cheap price (Rp1,000/kg) with a certain quantity and period. It covered
12.3 million families in December 1999 with approximately 45,000
distribution points nationwide. The Indonesian government fully financed
the program spending of about 3.4 trillion Rp in 1999 but stopped the
program at the end of 2000.41
Although the program was executed well in distributing cheap rice and
helped bring about food price stability, the evaluation of program was not
positive due to inadequate socialization and transparency which led to
mistargeting, fund misallocation, corruption of the implementing agency
and exclusion of non-residential poor. Also, NGO Food Security Program
was initiated by an NGO called the Paramita Social Welfare Foundation
(YKSP). This is one among many Indonesian NGOs distributing food aid
to needy households. YKSP was formed in 1995 by a group of religious
leaders and Buddhist entrepreneurs, and has delivered during SeptemberOctober 1998 approximately 10,000 food parcels (consisting of 10 kg rice,
1 kg sugar and ½ kg of mung beans) to poor communities in North Jakarta,
Central Java, and East Java.
National Food Security Program through Farmers Empowerment
(PKPN-MPMP)
This program was implemented by Ministry of Agriculture during Jun
1998-March 1999 for all provinces with state budget. It is designed to
increase national food stock to be available and affordable for all people,
through improvement in food crop, poultry and fish production. The target
of program is poor farmers/fishermen experiencing reduction in
purchasing power due to crisis impacts.
Scholarship and School Block Grants For Primary and Secondary
41
Ibid.
82
Education (SBG)
This program is implemented by the Ministry of National Education for
1998-2002 for all provinces with state budget and external loans (The
World Bank and ADB). It is meant to finance educational costs of primary
and secondary education students from poor families in order to decrease
the incidence of drop-out due to economic problems, to increase
opportunity to continue to higher educational levels, and to encourage all
school-aged children - particularly girls - to complete a minimum junior
secondary level. Scholarships of this program are for students from poor
families (determined by the school committee), who are enrolled at grade
4, 5, 6 of primary schools or at all grades of junior and senior secondary
schools. The amount of scholarship is as follows: primary student
Rp120,000/year; junior secondary student: Rp 240,000/year; senior
secondary student: Rp300,000/year. Block grants are for students of
public and private schools that mostly need assistance (determined by the
district committee and sub-district committee) amount to Rp2 million/year
for primary school, Rp4 million/year for junior secondary school, Rp10
million/year for senior secondary school.
It is reported that this program is hampered by leakage of the funds and
corruption. And the amount of scholarships is not enough to cover the
educational needs among children from the very poor because the
scholarship was only given to cover school fees and other related
expenses.
Social Safety Net for Health Sector (JPS-BK)
This program has been implemented by Ministry of Health since 1998 for
all provinces with state budget and external loans (ADB). It was designed
to provide medical assistance to improve and to maintain health and
nutrition quality of poor families. Target groups are poor households and
specifically pregnant women and those women who just gave birth with
criteria as follows: having meals less than twice a day, could not afford
basic health services, bread-winner of the family was laid-off, at least one
family member had dropped-out due to economic problems. Several
reports have pointed out some apparent problems of the program related
to mis-targeting to include non-poor families, administrative problems,
tendency towards late distribution of funding to community health centers
and village midwives.42
42
Puguh, 2001.
83
Supplementary Food for Primary School Students (PMT-AS)
This program has been implemented by Ministry of Health, Ministry of
Education and Ministry of Home Affairs etc. since 1996 for all provinces
with state budget. It is to improve nutritional status and health condition
of primary school students, improve students capacity in educational
process, increase awareness of the students and their parents on the
importance of nutrition and good sanitation, increase the utilization of
local products and provide incremental income for the community. Target
groups are all primary school students (both public and private; religious
and secular) located at “backward villages” and urban poor areas, and
local community for increasing awareness of health and education and
provision of incremental income for supplementary food supplies. The
students had supplementary food 66 times (3 times in a week) in 2000
(108 times in 1999/2000) and anti-intestinal worm medicine twice a year.
The weaknesses of the program are a low disbursement rate, poor program
management, lack of innovative adjustment at the district level
Labor Intensive Program (PDKMK)
This program was implemented by Ministry of Manpower during 19981999 for 215 districts in 7 provinces and 220 districts in 27 provinces with
state budget. It is to provide employment that will create socially
productive assets that may contribute to sustained capacity of urban and
rural communities to recover from the economic crisis, empower local
community organizations, create community saving, and expand the
utilization of new technology. Target groups are unemployed persons due
to the economic crisis and drought living in urban and rural areas.
Major activities are construction and rehabilitation of local infrastructures
(irrigation, road, drainage, traditional markets, dams, water reservoir, etc.),
improvement of agricultural and fisheries activities (ponds, fishing net,
utilization of idle land, poultry), as well as agribusiness, improvement of
local small-scale industry (ceramics, construction materials, etc.),
improvement of small-scale traders (kiosk, cart, etc.), and any activities
determined by local community, except construction/ rehabilitation of
roads, irrigation and other infrastructures, that have the characteristics of
creating new employment, providing income for local community,
creating community saving, supporting investment, and expanding new
technology. This program has shown a fairly good performance in fund
absorption and relatively good performance in job creation (about 59
million man working days), whereas there are weaknesses such as poor
84
targeting, male biases and lack of transparency, socialization and sound
management.
Employment Generation (PK)
This program represents one of the first social safety net schemes
launched by the government of Indonesia. It is a massive labor-intensive
effort initiated in various areas in Indonesia and has two main objectives:
1) to provide income support to the unemployed and the poor; and 2) to
create production benefits in the form of lasting social capital, including
people’s skills and enterprise. Small and Medium Enterprises (SME)
Scheme is administered by the Ministry of Cooperatives and aims to help
the SMEs in the form of credit. To date, the Government of Indonesia has
allocated Rp20 trillion in support of SMEs, but the allocation of this
program was not reflected in the budget for social safety net program.
Under this scheme, SMEs are provided with technical assistance and
access to credit to further develop their business and employment
activities.
The above social safety net schemes were considered by the government
of Indonesia as crash programs that were not comprehensively planned.
Several new initiatives were then developed to avoid the earlier mistakes.
Three new initiatives are now being implemented namely: Kecamatan
Development Program (KDP); Urban Poverty Program (UPP); and
Empowerment of Regions to Overcome the Impact of Economic Crisis
(PDM-DKE)
Kecamatan Development Program (KDP)
This program has concentrated on addressing the needs of rural
communities in combating poverty. It focused on providing support to
both private sector economic activities as well as public infrastructure
development. It was initiated before the crisis and reprogrammed to
mitigate negative impacts of the crisis in rural areas.
Urban Poverty Program (UPP)
This program has an objective to empower local communities to help
residents overcome poverty in urban areas. The project will provide
capital to revitalize economic activities of the communities and improve
infrastructures. It will initially target the poor in some 60 urban areas in
Java with total population targeted about 24 million.
85
Empowerment of the Regions to Overcome the Impact of the Economic
Crisis (PDM-DKE)
This program was implemented by the Ministry of Home Affairs and
Regional Autonomy during 1998-2000 for all provinces with state budget.
It is new initiative by which funds are sent directly to the people, using a
community-based approach. The scheme seeks to generate employment
and income among those hardest hit by the crisis and to improve the
overall functioning of social and economic improve infrastructure with a
view to reinvigorating local economies across the entire country.
Target groups are poor people both in urban and rural areas who are
unemployed and could not afford sufficient food, health, and education
services. Geographically in 2000, implemented at the villages with highest
population with the characteristics above, in the sub-districts where KDP
and UPP are not operating. The funds were directly channeled to the
village implementing team who implement, in general, 2 types of
activities: (a) labor intensive projects in construction, operation, and
maintenance of local infrastructures; and (b) economic activities to
support small-scale business.
Social Insurance43
Indonesia has a national pension scheme, a health insurance and a work
injury insurance system, but lacks unemployment insurance. The national
pension, introduced in 1951, covers establishments with 10 or more
employees or a payroll of Rp 1 million. Source of funds come from 2% of
earnings of insured person and 3.7% of payroll of employer. Old age
benefit starts at the age of 55 for those who have contributed for 66
months. As in other developing economies, it has been extended gradually
to cover smaller establishments and casual and seasonal workers.
Health insurance, introduced in 1957, has been expanding as of late.
Medical benefits are medical examination and treatment, hospitalization,
medicines, and maternity care, dental care, eye care, family planning
services and immunization. The benefits are the same for the insured
workers dependents.
Monitoring Facilities
During the early stages of the crisis, it was determined that existing
43
Social Security Administration, 1999.
86
poverty measurements and information was inadequate. The Social
Monitoring and Early Response Unit (SMERU) was established as a result.
SMERU provides rapid qualitative information concerning the impact of
the crisis and on the performance of social safety net programs in the
economy. SMERU is a collaborative multi-donor effort led by the World
Bank with contributions and technical support from AusAID, the
European Unit ASEM Fund, and the U.S. Agency for International
Development (USAID).
Funding for the Social Safety Net by Donors and International
Organizations
Besides the Indonesian government’s own resources, funding for the
social safety net programs also came from donor agencies including both
bilateral and multilateral donors. By July 1998, Indonesia had received
US$2.78 billion for social safety net programs from overseas.
Table III-3-1. Funding Support by Donors and International Organizations
Donor
APEC Member
Japan
USA
Australia
Canada
New Zealand
Non-APEC Member
EU
Germany
International Organizations
World Bank
ADB
WFP
UNFPA
The Rest
Total
Amount (in US$)
%
1,444,000,000
53,000,000
10,200,000
6,710,000
3,642,000
51.90
1.90
1.36
0.24
0.13
6,100,000
168,750,000
0.22
6.06
631,000,000
302,900,000
89,000,000
43,000,000
24,166,168
2,782,468,168
22.70
10.80
3.19
1.55
Source: UNSFIR, 1999; Widiastuti, 1999.
87
100.00
Apart from the government’s social safety net programs, it is important to
recognize a number of additional initiatives by non-government
organizations, religious organizations, and community groups programs,
seeking to provide relief assistance. International NGOs have mounted
support programs particularly in food relief operations. These activities
have also received financial support from bilateral donors (e.g. AusAID,
USAID, and CIDA).
4. Thailand
Since Thailand did not have a full range of social safety net programs at
the time of the crisis, most families were unable to avoid the negative
social impacts following the baht devaluation. Kakwani et al (1999)
estimated that only 45.6% of the population were covered by one of the
available health insurance and welfare schemes. Government mechanisms
did not directly support Thai families to avoid impacts of the crisis. Issues
of targeting and lack awareness of programs detracted from the
effectiveness of the programs.
One accepted lesson of the crisis is that it is better to try to prevent social
impacts on the poor than to try to alleviate the impact of shocks after they
have occurred. As the economic recovery seems to be underway in the
second half of 1999, the government is engaged in developing broader
social protection programs that will reach a greater percentage of the
population.
Description of Social Safety Nets
Miyazawa plan
This is the latest economic rescue package, with financial assistance of
US$1.85 billion from Japan. The objective of the plan is to generate jobs,
including those in small and medium enterprises (SMEs). The World Bank
(1999) claims that by the end of July 1999, over 1.5 million jobs had been
created.
According to Booth (1999), the employment creation projects initiated
88
during the crisis were successful. However, the self-employment in rural
area and informal sectors financially supported by the plan is deemed as a
failure. Her reasoning is that the institutional capacity is inadequate to
change the unemployed to the self-employed.
Urban Community Development Office (UCDO)
This was set up in April 1992. The board consists of representatives from
government, squatter residents, and relevant development NGOs. Its main
objectives include lending money to the poor to enhance their
opportunities to earn more income, secure livelihoods, possess decent
accommodation, and lead their lives in a better environment.
UCDO plays a key role in examining the crisis impacts on the poor in
squatter settlements and proposing appropriate measures and responses.
The agency has a good record in avoiding the usual snags due to
bureaucracy and red tape.
Social Investment Project (SIP)
This project is designed to alleviate social impacts due to the economic
crisis. Loans to SIP, from major international organizations, totaled close
to US$450 million. The project covers a wide range of activities such as
job creation, social welfare, education, and health improvement. SIP can
be divided into two types according to the time frame of spending.
At the end of February 2000 it has disbursed only 28.7% of its total
budget. It also reported that 3,390 projects are complete while 9,100 new
projects are preparing their work plans. Vocational education is the largest
sector in which SIP projects are implemented, followed by employment
generation. As a result of evaluation, the project requires a transparent
process of selecting, implementing, monitoring, and evaluating projects.
Chaipattana Foundation
It was established in 1988 on the initiative of His Majesty the King. The
objective is to promote development and quality of life of Thai people
through various social and economic activities. It plays a crucial role in
reducing poverty by providing means for selected poor communities to
improve earnings, prospects, and through vocational training programs.
The foundation provides an excellent opportunity for rural farmers to form
networks and share a cooperative. It is not bound by bureaucratic rules
89
and regulations, and works closely with and, in support of government
projects. Mongkol Chaipattana Company Limited was established in 1998
by the Chaipattana foundation in compliance with the King’s suggested
solution to the economic crisis. The company has collaborated with the
Agriculture and Cooperative Ministry to create the “Lemon Farm Pattana
Cooperative”, which forms a network of people in rural communities to
market their products in urban areas bypassing middlemen. It is intention
of the cooperative to be owned by rural farmers who can buy the
cooperate share for 100 baht. The company rents Lemon Farm stores,
attached to gas stations owned by Bangchak Petroleum Public Company,
as a main outlet for farm products.
The Lemon Farm Pattana Cooperative provides an opportunity for farmers
to own shares in the enterprise, instead of being suppliers to middleman
traders as in the past. Dividends from the shares provide an incentive for
farmers to produce quality goods and higher earnings eventually lead
them out of poverty. The company also cites the potential earnings on
farm products as encouraging unemployed laborers to work on farms in
their own hometowns.
Table III-4-1. Social Safety Net Projects of Ministries
Project
Target Group
Conditions
Budget/Fund
(million baht)
Benefits
Workers in firms
with more than 10
workers contribute
the 1-3% of wages
to the fund, with
contributions from
employers &
government
Insured employees
for sickness &
work-related causes,
employers’
contributions at 0.21% of wages.
Over 10 employees
establishment
Contribution:
48,630
Benefits: 5030
(1997-1999)
Compensation in case
of sickness, maternity,
invalidity, non-workrelated death, old age
pension, and child
allowance
Contribution:
5571.57
Benefits:
5020.70
(1997-1999)
Compensation in case
of death, injury,
sickness and loss of
organs due to workrelated conditions
a. 200 million
baht Government subsidy in
Year 2000
b. funds from
fees collected
Savings plus interest
for voluntary leave/
death; others, based
on service rate and
length. 30 times daily
wages for retrenched
Ministry of Labor and Social Welfare
1.Social
Security Fund
Workers, Selfinsured person
2.Workmen’s
Compensation
Fund
Employee
3.Employee
Welfare Fund
Employee
90
4.Overseas
Workers Aid
Fund
Overseas job
seekers
Permitted workers to
work overseas
through jobplacement agencies,
independent
overseas job seekers
5.Credit
Loans for
Overseas Job
Seekers
Labor with
external debt
Permitted job
seekers to work
overseas
6.Worker's
Fund
Labor with
non-bank debts
Labor in work
establish-ments
7.Constructio
n Workers and
Their
Families
8.Skill
Development
Fund
9.Revolving
Fund for
Women
Employee and
their families
Workers in
construction sites
10.Social
Services for
Children
without
Families
New labor
force, layed off
labour
Rural women
from neglect to
follow the Act.
150.90
Budget to
compensate
interstates
difference of
3% to debtors
200
11.73
To help raise quality
of life of employees
and families.
370.00 (19971999)
Short-term loan for
training and raising
the skills level
No-interest 15,000
baht loan per group to
be repaid within 2
years
Counseling, financial
and material support;
child support for
foster families;
government
institutions
Protection/ welfare,
Occupational training,
Alternative to
prostitution
Elderly homes and
monthly allowances
5-person production
women group with
training from DPW
52.04
Children
Newborn to 18 years
children including
families;
abandoned/neglecte
d children; adoption.
979.74 (19971999)
11.Services
for
Disadvantage
d Women
12.Services
for Older
Persons
Women and girl
Disadvantaged
women
690.93 (19971999)
Elderly persons
Aged : poor,
homeless, lack of
family support or in
adversaries
2502.09 (19971999)
13.Services
for People
with
Disabilities
People with
Disability
1078.20 (19971999)
91
if employers’ inability
to pay.
death,disabili-ty, notpassing health exam,
abandon by
employers,
adversities in foreign
land, waiting time to
start work, to be
indicted
To receive
compensation for 3%
inter-states difference
within 90,000(bath)
credit
Loans to relieve
workers’ debts form
outside the system
Rehabilitation center,
monthly allowance, job-creating/
employment services
14.Services
for Hill
People
Hill people
924.98 (19971999)
occupation, education,
social, public utility
development
15.Families/
Communities
services
People in
distress
717.99
16.Services
for Disaster
Victims
Disaster
victims
405.95
Temporary shelters,
occupational training,
fund & loans for jobcreation
Relief fund : cost of
funeral, health care,
Construction
materials immediate
services
17.Emergency
Loan
(Pawnshop)
General public
12,818.43
Assist the poor /needy
18.Services
for the
Destitute
Beggar
The beggars, the
homeless, the
destitute
278.61
To provide physical,
mental &
occupational
rehabilitation services
19.Services
for HIVInfected
Person
HIV-infected
person
184.17
Vocational
grant, living
allowance,
government
homes for HIVinfected
children
Voluntarily health
card for the family
of 5 – fee of 500
baht per year gov’t
subsidy of 1000 baht
covering husband,
wife, children under
20 years/other
members in
household
5,800.00
(for 1999,
1,200 came
from ADB
loan)
Disaster victims
Ministry of Public Health
1.Voluntary
Health Card
Project
General public
92
To receive care with
out expenses from the
pre-identified
hospitals
2.Low
Income
Health Card
General public
Household with
monthly income less
than 2,800, single
persons with
monthly income less
than 2,000. Elderly,
Disability, Veterans,
Religious leaders,
HIV/AIDS patients,
Children 0-12 years
old
22,293.18
Compulsory
education available
78,127.03
(1999-2001)
Students from poor
families
Lunch for preschool and
elementary school,
malnutrition
students
Milk for pre-school
and Grades 1-4
students
35,442.95
Card holders receive
health care services
with out cost for the
government health
care establishment
Ministry of Education
1. Compulsory
Education
Pre-elementary
to high school
students
2.Loan for
All students at
Education Fund all levels
3.School Lunch Pre-elementary
Project
school,
Malnutrition
4.School Milk
Project
Source:
Pre/elementary
school (grades
1-4)
7,635.54
8,047.00
9,412.00
8,732.00
Government
supports education
fees and supplies
Education fees
Education expenses
lunches
Milk
Working Group to Prepare National Report on Strengthening Policies
on Social Safety Nets established by the Ministry of Labor and Social
Welfare in Pongsapich, 2000.
Funding for the Social Safety Net by Donors and International
Organizations
Thailand has been financially supported by the Japanese government, the
World Bank and ADB. The total amount of funds received since the
economic crisis reached 78,120 million baht (US$1,953 million) through
1999. Of the total amount, the share of World Bank, ADB and Miyazawa
plan were respectively 21.9%, 10.2% and 67.8%.
Table III-4-2. Funding Support by Donors and International Organization
Institutions
World Bank
ADB
Miyazawa plan
Total
Amount (million baht)
17,120
8,000
53,000
78,120 (US$1,953,000,000)
93
%
21.92
10.24
67.84
100.00
Source: World Bank, ADB Internal Documents.
Recommendations
From the analysis of experience, the targeted poor do not have access to
benefits of these projects as they should have. The obstacles are as
follows: (1) the targeted poor lack information about the projects; (2) the
projects involve sophisticated bureaucracies and are irresponsible for the
poor’s urgent needs; and (3) the project managers in some cases do not
know the appropriate means for implementing the projects
Since the latest economic crisis, a number of programs have been
launched to provide basic needs, generate employment, and promote more
businesses. The crisis demonstrates that existing social safety net
programs and social policies for poverty alleviation are not viable when
the economy collapses. They were designed for conditions of increasing
economic prosperity. Moreover, they are not appropriate for Thailand in
the future. This is because their implementations cannot respond to rapid
and unpredictable changes in social and economic conditions. Therefore,
it is recommended that Thailand move away from social safety net
programs toward more resilient and cost-effective broader social policies
designed to alleviate existing poverty and prevent further outbursts. An
optimal social policy will emerge as a result of trading off between funds
available and program affordability, the length of time for the policy
accomplishment, and the degree of the policy flexibility to changing
social and economic conditions. Learning from experiences that Thailand
had before, during, and after the economic crisis should be sufficient to
suggest and produce such a social policy.
5. Vietnam
The Asian financial crisis, which started in July 1997, had devastating
effects not only on the big financial institutions and corporations, but also
on individuals, households, and whole communities, in particular women
and children. While financial statistics are available and updated promptly,
social statistics are not available immediately or updated periodically, and
people usually find the social consequences of the economic crisis only
years later. While financial and business organizations melt down quickly,
most countries have legal and institutional arrangements, like bankruptcy
94
laws, to protect the business concerns, and they often start again quickly
in one way or another. However, many countries often do not have
adequate social and legal institutions, such as social safety nets, to protect
the individuals, households or communities from falling into poverty and
suffering declines in wellbeing. Consequently, people often do not realize
the devastating effect on individuals. Vietnam was not an exception in this
respect.
Since the Vietnamese economy had not been as open as in some other
Asian countries, the adverse effect of the Asian crisis was not as wideranging and acute as in other countries. However, Vietnam had a large
number of the chronic poor before the crisis, and a review of literature and
data suggests that poor and near-poor households are more vulnerable to a
range of risks, which can have a devastating effect on livelihoods and
wellbeing. Moreover, the people near the poverty line fell into the poverty
group, appearing as the new poor.44 The participatory poverty survey
conducted in 1999 reports that the poorer urban households suffer from
increased competition for unskilled work due to cutbacks by local
enterprises and a growing reserve pool of rural migrant workers.
Therefore, lifting people above the poverty line and preventing people
falling into poverty through strengthening of social safety nets is as
relevant in Vietnam as in other East Asian countries.
Generally speaking, reducing poverty and vulnerability is intricately
related to achieving economic growth. First, such suffering as
malnutrition, missing immunization, and dropping out of school, often
comes at so early a stage of human development that ability to emerge
from poverty in the future is lost irreversibly. This, in turn, may reduce
long-term economic growth. Second, as Vietnam continues to modernize,
its economy will become increasingly integrated with that of the region
and the world. This will provide considerable benefits in terms of exportled economic growth and poverty reduction. However, it will also increase
the degree to which Vietnamese are exposed to global macroeconomic
shocks. If the country is to reap the benefits of globalization, it must also
take adequate steps to mitigate the impact of global crisis.45 Third, an
exclusive focus on growth tends to benefit the rich more than the poor.
Inequality hampers economic growth through political, social, and
economic instability, as often observed in Latin America in the past.
44
45
Vu, 2000.
Poverty Task Force, 2001.
95
Moreover, severe income inequality is likely to induce populist
macroeconomic policies, which are inimical to sustainable growth. 46
Income equality also tends to promote accumulation of human capital
more effectively through universal basic education of the masses, enhance
productivity of the labor force and growth of skills-intensive exports, as
shown in some East Asian countries, compared with Latin American
countries.47 Therefore, the public policies that progressively improve the
welfare of those currently living below the poverty line, as well as
reducing vulnerability and strengthening social safety nets help limit
inequalities, and promote sustainable growth.
Strengthening social safety nets and protecting people from vulnerability
is more important in Vietnam. A large proportion of individuals are
clustered around the poverty line, so that it would take only a small
reduction in per capita consumption to force those now living just above
the poverty line back below it.48
In the following, the social safety nets prevailing in Vietnam are reviewed
and evaluated with a view to making recommendations for their
improvement and strengthening. The social safety nets are classified
between the social security system and the social assistance (protection or
relief) programs. In the category of the social security system, the health
insurance program and other social insurance programs are focused. In the
category of social assistance, some selected non-social insurance
programs are reviewed: they are social guarantee funds, the Hunger
Eradication and Poverty Reduction Program, medical aid for the poor
(health Card), micro-credit programs, Crop Insurance Program, labor
market regulations, and basic social services.
Social Security System
Health Insurance
The provision of public healthcare services in Vietnam dates back to the
1950s, when the system placed special emphasis on providing primary
and preventative health care measures to the rural population. This trend
46
47
48
Sachs, 1990.
Jasperson, 1997.
Poverty Task Force, 2001.
96
continued after national reunification, and by 1997, nearly 99% of all
communes (9,806 out of 9,929) in the country had a community health
station. Additional 926 rural communities had inter-communal polyclinics,
the second tier in Vietnam’s five-tiered public health system.49
A formal health insurance program has been in place since 1993 in
Vietnam. There are two different schemes. The first is a compulsory
scheme that primarily covers civil servants, and employees of state owned
organizations and large (more than ten employees) private enterprises. The
second scheme is voluntary and is aimed at the rest of the population not
covered by the compulsory scheme, including students, farmers,
employees of small enterprises and the family of those individuals
covered under the compulsory system. Most of the enrollees in the
voluntary scheme are students, as schools are often under pressure from
local authorities to enroll students in the scheme.
The compulsory scheme provides both inpatient and outpatient care
benefits, and also pays for drugs used in inpatient treatment. The
voluntary scheme has two packages: a lower priced package that covers
only inpatient care, and a higher priced package that includes outpatient
care, and, in some situations, drugs as well. Most voluntary enrollees opt
for the lower priced scheme.50
Contributions to the compulsory scheme are 3% of basic salary (1% from
the employee and 2% from the employer). Voluntary scheme members
pay annual premium, which varies from VND10,000 to 50,000 per year.
Health facilities at the level of the inter-commune health policlinics and
above are reimbursed by the Vietnam Health Insurance Agency (VHIA)
on a fee-for-service basis: a flat fee for accommodation and standardized
fees for tests and treatments. Vietnam’s health insurance program
currently covers about 12% of the population, leaving 88% of the
population without health insurance. As those left uncovered are primarily
rural, they are also poor, and thus are unlikely at this time to be able to
take advantage of the voluntary health insurance scheme as the premiums
are, though low, still prohibitive. There is a wide range in the rate of
health insurance coverage among different provinces. Hai Phong, for
example, where the health insurance scheme was first tested as a pilot
program, has 38% of its entire population covered by health insurance. By
49
50
UN and MOLISA, 1999.
World Bank, SIDA, AusAID, Royal Netherlands Embassy and Ministry of Health, 2001.
97
contrast, Soc Trang in the Mekong River Delta area has a coverage rate of
only 3.7%.51
The compulsory scheme has been successful in expanding coverage of its
target population. By 1998, the compulsory coverage had been expanded
to 77% of those eligible for coverage. It should be noted that under the
compulsory scheme, the family of the insurance recipient is not covered,
nor is the spouse of the recipient. The families of the compulsory insured
are encouraged to enroll in the voluntary scheme, but few opt to do so.
The voluntary program at present covers a little more than 5% of its target
population. Thus, growth in the overall coverage of health insurance will
have to come from either increased enrollment in the voluntary scheme,
some change in the arrangement of the compulsory scheme so that
benefits are extended to spouse and family, a combination of these, or
another option entirely. The goal of the health insurance programs is
eventually to extend coverage to everyone. One area of potential growth
in coverage will be increased employment in non-farm activities - this will
bring more people under the purview of the compulsory plan as greater
numbers of people become employed in enterprises with ten or more
employees. This will rely on increased industrialization, economic growth
and foreign direct investment in Vietnam. In the rural sector, it is felt that
a general rise in income levels will permit more people to enroll in the
voluntary scheme. This will rely heavily on greater investment in
technology in the agricultural sector and an exodus of people from the
sector to provide increased efficiency.
In the meantime, there is the need to provide short-term interim measures
to attempt to insure that those in need are covered under the scheme.
Moreover, in the transition to a market economy, out-of-pocket payments
that individuals have to make for utilizing health services typically
increase sharply, which can leave the poor in a vulnerable position unless
there are well-functioning mechanisms for exempting the poor from the
increases in health costs. The health insurance program has neither been
an effective poverty reduction program, nor has it been a good social
safety net. It is likely that enrollees in the compulsory insurance scheme
are significantly better off than the general population, which is largely
rural. Enrollees in the compulsory health insurance scheme are primarily
civil servants and salaried employees of state and large private enterprises,
51
Ibid.
98
and many of them are middle-class urban residents.52
In order to encourage the rural population to enroll in the voluntary health
insurance program, the insurance scheme itself must cover more of the
overall cost per capita of health care. Currently, the average health
expenditure per capita in Vietnam is approximately US$27. This amounts
to approximately 7% of GDP per capita and is not excessive compared
with other countries at a similar income level. Annual public health
spending amounts to approximately US$6 per capita in the form of health
insurance coverage, meaning that US$21 must be paid by individuals. In
order to achieve a US$12 minimum per capita public health expenditure
recommended by the World Bank for essential health services in lowincome countries, the Vietnamese government would have to allocate an
additional US$468 million annually.
Social Insurance
The Ministry of Labor, Invalids and Social Affairs (MOLISA) currently
manages a number of programs that provide social safety nets through
social guarantee funds and relief.53 The state social insurance program
offers short-term benefits related to maternity, sickness and employment
injury, and long-term benefits for old-age pensions, disability and
survivors’ benefits. However, unemployment insurance is not currently
provided in Vietnam. The value of benefits is related to salary, and so is
greater for higher-income groups.
The schemes cover 13.8% of the labor force and include public sector
workers, military personnel, State-Owned Enterprise (SOE) employees,
and employees of private sector businesses with ten or more employees.
Coverage is almost universal for civil servants, around 90% for SOE
employees, though coverage is less than one-third for eligible private
sector workers. The low coverage rate in the private sector is attributed to
understaffed labor inspection departments. There is also some disincentive
for workers to enroll in the program since benefits are not adjusted for
inflation and thus do not provide an effective real wage replacement. The
contribution rate is 20% of salary, with the employee contributing 5%, and
the employer 15%.54
52
53
54
World Bank, SIDA, AusAID, Royal Netherlands Embassy and Ministry of Health, 2001.
Vu, 2000.
Vu, 2000.
99
MOLISA administers pensions to 1.2 million retired civil servants as part
of social assistance (social protection) programs. Administrative
responsibility for this pension program is shifting to the new Vietnam
Social Insurance Agency (VSIA). The new fund is designed to be selffinancing through contributions from workers. Pensions for civil servants
who retired prior to 1995 are currently managed by MOLISA, while the
pensions of those who retired after 1995 are managed by the VSIA.
Spending on pension funds accounts for nearly 40% of the total
expenditures for social assistance (social protection programs), though
this proportion will decline as administration of the social insurance
program shifts increasingly to the VSIA. This is not a poverty-targeted
program. Since the benefits are given in proportion to the contributions,
which are determined in relation to the level of salaries, the richer
proportionally benefit more. The insurance covers only the formal sector
employees whose incomes are relatively higher than the average in the
labor market. Moreover, the program is inequitable. In theory, the social
insurance fund is independent of the state budget. Of the 15% employers’
contribution, 5% is retained by the Vietnam Confederation of Labor to
finance the short-term benefits that it administers. The remaining 10% is
to be allocated to the Ministry of Finance (MOF) for the long-term
benefits, which are administered by MOLISA. In practice, however, weak
revenue collection from SOEs resulted in an effective contribution rate to
the MOF of only 5% of the eligible payroll. The shortfall to the public
pension program was made up from general revenues levied on the whole
population, the vast majority of whom are not covered by social insurance.
To make the program a part of the social security system, the coverage
should be expanded, and there should be a voluntary scheme for the
program so that the majority of population who are currently not a
member of the social insurance program can join it.
Social Assistance (Protection or Relief)
Social Guarantee Funds
The MOLISA operates three Social Guarantee Funds: first for regular
relief (for the lonely elderly, orphans, and the disabled poor); second, for
veterans and war invalids; and finally, emergency relief for victims of
natural disasters (Table III-5-1). Overall spending for social security
(excluding health insurance) and social assistance services increased from
12% of total state spending in 1990 to almost 14% in 1997.
100
Table III-5-1. Social Assistance (Protection) Programs, 1997
No. of
Beneficiaries
War Contributor
Pensioner
Poor
Job Training
Disaster Victims
Indirect
Beneficiaries
Total
% of Social
Service
(Protection)
Expenditures
1,400,000
1,200,000
2,460,000
90,000
n.a.
6,000,000
37
40
23
-
11,150,000
100
% of Social
Services
(protection)
out of Total
Public Exp.
14
Source: UN and MOLISA, 1999.
The Social Guarantee Fund for Regular Relief aims at helping orphans,
the disabled, the insane and the elderly without family support. These
beneficiaries are further divided into two groups: those who can go about
their lives with support from the community, and those who cannot. The
first group is allotted a monthly stipend of VND24,000 (USD$1.60). This
payment is often made in rice - 10-12 kg. The second group is eligible for
placement in specialized provincial care centers and a monthly stipend of
VND96,000 (USD$6.40).
The Social Guarantee Fund for Veterans and War Invalids provides cash
transfers to those who “contributed to the national liberation struggle”.
The centrally-funded program is managed by MOLISA and provides
benefits to approximately three million people. The social subsidies, like
the Fund for Veterans and War Invalids, the Social Guarantee fund for
Regular Relief, and the Contingency Fund for Natural Disaster (described
below) account for 16% of central government spending. 55 The
beneficiaries receive cash transfers on a monthly basis. Other benefits are
55
Government of Vietnam, Donors and NGO Poverty Working Group, 1999.
101
available to the beneficiaries, including, medical insurance, funeral fees,
waivers for school fees and access to scholarships, land or housing
assistance and livelihood support.
The Contingency Fund for Pre-Harvest Starvation and Natural Disasters
is designed to assist localities to recover quickly from the consequences of
natural disasters and difficult pre-harvest conditions. Provinces maintain
the contingency funds and, although they are not intended to fully cover
recovery needs, the funds allow local governments to move quickly in the
event of difficulty to mobilize recovery efforts. In the event that more
funds are needed, provinces may apply to the central government for more
funds. In 1997 some 3-5 million people were affected by this program.56
There is ample room for improving targeting of the social assistance
program. Due to shortages in the budget, the actual coverage of the
regular relief program is estimated as follows: 10% of orphans, 21% of
the lonely elderly and 5% of the disabled.57 The Guarantee Fund for
Veterans and Invalids is not targeted directly at the poor either, and it is
estimated that 50% to 70% of war contributor program beneficiaries are
poor. This means that between 18% to 26% of this sector’s resources are
transferred to the non-poor. The government currently has a strategy to
free up funds from this program for other uses. The initiative will offer
beneficiaries a one-time lump-sum payment, after which they would be
ineligible for future benefits. An overall reduction in expenditures for this
program should occur as the number of beneficiary decreases as a result of
death. As these funds become available, it is hoped that they will be
applied to other programs in the sector.
Also, efficiency of the programs could be improved through better
mechanisms to track assistance received by individual beneficiaries.
Presently, beneficiaries may receive benefits from multiple programs, but
there is no mechanism to identify such overlapping benefit outlays.58
The transfer of the responsibility and immediate funding to the
Contingency Fund for Pre-Harvest Starvation and Natural Disasters from
the central government has made the Fund more able to quickly respond
to crisis. However, the effectiveness of the Fund is hampered by lowlevels of funding. The percentage of social sector spending allocated to
56
57
58
Poverty Task Force, 2001.
Vu, 2000.
UN and MOLISA, 1999.
102
disaster relief is also very small: perhaps one-half of 1%. The low
proportion spent for disaster relief reflects the “difficulty in planning for
these unpredictable needs and the strong official encouragement of local
communities to contribute to meeting their needs in this area ”.59 It also
reflects that donor organizations and other non-governmental
organizations contribute much of the total amount spent for disaster relief
in Vietnam.
Besides the social insurance service and Guarantee Fund programs, the
government has provided various specific social assistance programs
aimed at certain target groups. The most prominent programs are HERP,
Medical Aid (Health Cards) for the Poor, Microcredit, Crop Insurance,
Labor Market Regulations, and basic social services.
Hunger Eradication and Poverty Reduction (HEPR)
In 1992, certain provincial governments attempted to integrate antipoverty programs within an overall coordinated framework. This effort at
integration of poverty reduction services was adopted as national policy in
1996, and the first national Hunger Eradication and Poverty Reduction
(HEPR) program (1998-2000) was initiate two years later. This
framework brought together nine component programs, most of which had
existed in some form previously.60
The principal responsibility for the formulation of concrete policies and
projects as well as the provision of funding lies with each separate
ministry, and the responsibility for implementation of HEPR policies and
programs lies with provincial authorities.
HEPR consists of the following components:61
1.
Improvement of basic commune infrastructures: including
construction of roads to commune centers; construction of primary
schools and commune health clinics; safe water supply systems;
electric grids; and commune market places (CEMMA).
2.
Provision of credit to poor households (SVB).
3.
Improving health care to the poor through the provision of free
59
60
61
Ibid.
Poverty Task Force, 2001.
Vu, 2000.
103
medical care (health card) (MOH).
4.
Promoting agricultural and off-farm production of poor households
through ensuring increased access to land (land reclamation,
provision of credit to redeem land mortgaged or previously sold), and
to offer vocational training (MARD).
5.
Improving access of poor to education through exemption or
reduction of school fees, providing free notebooks at primary schools
and scholarships at secondary schools and upgrading commune
schools (MOET).
6.
Production and managerial skill capacity building for the poor
(MARD).
7.
Capacity building for commune leaders, officials, social workers and
HEPR staff.
8.
Permanent settlement of 1.2 million people who are maintaining
shifting living and cultivation and stabilization of 1.9 million people
who are already settled (MARD).
9.
Assistance to ethnic groups faced with extreme difficulties in life and
socio-economic development.
In terms of total funds, infrastructure development and credit services to
the poor are the largest programs (Table III-5-2).
Table III-5-2. Financial Plan for HEPR, 1998-2000
Whole
HEPR
1. Infrastructure
2. Credit
3. Health
4. Promotion
5. Education
Total
(Billion
Vietnamese
dong)
10,124
Government
budget
Financial sources (%)
Voluntary Compul
Intecontri-sory
gration
bution
labor
37
36
6
13
Internatio
nal
aid
7
3,825
47
3
13
30
7
2,700
834
200
800
89
20
50
23
71
25
66
-
4
8
4
11
5
17
7
104
6. Extension
7. Training
8. Settlement
9. Support
Ethnic
10.
Management
200
100
1,200
262
75
60
88
100
7
15
-
7
-
3
100
-
-
8
5
-
10
25
-
Source: Vu, 2000.
The fragmentation of the program’s administration “undermines its
efficiency”. 62 The Vietnam Development Report 2001 suggests three
options for improving the institutional structure of the HEPR:
1.
Strengthen the position of the HEPR office by moving it into the
Government Office and assign to it supervision of HEPR projects,
policy development, monitoring and training.
2.
Keep HEPR central office in MOLISA but restrict its role to
conducting targeted projects with regard to social safety nets,
disaster management, monitoring as well as providing
implementation guidelines, and training to HEPR staff.
3.
Decentralize coordination and management of HEPR activities to
provinces and assign the role of policy design and monitoring and
evaluation to MPI, and training to MOLISA.
Targeting for the HEPR is the responsibility of the MOLISA. This task is
given to the district/commune level governments where MOLISA officials
are most familiar with the realities of poverty in a specific area. Targeting
is seen as a key area for improvement of the HEPR program. The strategy
should include clearer definitions of target groups, as well as identifying
narrower groups for special attention such as women, children in hunger,
etc. Geographic targeting of HEPR should be evaluated as well. Over the
past two years, more than 90% of assistance has been made to the poorest
1,000 communes that are almost exclusively located in remote, upland or
border areas.63
There is little in the way of analysis of HEPR program effectiveness by
which to reach definitive conclusions regarding what elements are
62
63
Government of Vietnam, Donors and NGO Poverty Working Group, 1999.
Government of Vietnam, Donors and NGO Poverty Working Group, 1999.
105
successful, should be expanded and replicated, and which are not
succeeding and should be substantially adjusted. It is important that the
program should be periodically evaluated in order to test the costeffectiveness of its achievements.64
While the above projects are considered essential components of poverty
reduction, they represent only one specific component of a comprehensive
poverty strategy. The HEPR should be viewed as a specific and targeted
poverty reduction strategy, which should be complemented by a more
comprehensive strategy addressing issues of growth, employment creation,
and macro policies for poverty reduction.65
Medical Aid for the Poor (Health Card)
Ill health is one of the most common risks faced by the Vietnamese
population. The poor are discouraged from inpatient services, as even a
single service contact with a public hospital takes up to 22% of all nonfood expenditure for a year for a typical person in the lowest quintile.66 A
single catastrophic illness involving extended hospitalization can wipe out
years of savings and will compromise the ability of the family or
individual to pay for unanticipated health costs in the future. Mechanisms
to meet the costs of medical care for poor and vulnerable groups are
potentially among the most important social protection instrument. The
government has established programs that assist the poor in securing
health care services. In the 1990s, certain groups, including the poor,
handicapped and those suffering from TB or leprosy were supposed to be
exempted from fees for health care.
It is unclear that these exemptions were honored. Since 2000, a new
program, the provision of health cards for the poor, has been adopted as
part of the HEPR. This program is managed by the VHIA. Only four
million of an estimated 28 million poor (14%) have received the cards
thus far. Those attempting to claim health services using VHI membership,
particularly in poorer communes, are often treated after those who are able
to pay cash, and there still exist some charges, both formal and informal
that must be paid. Health consultations remain ostensibly free at commune
centers.67
64
65
66
67
Poverty Task Force, 2001.
World Bank, 1999.
World Bank, SIDA, AusAID, Royal Netherlands Embassy and Ministry of Health, 2001.
Government of Vietnam, Donors and NGO Poverty Working Group, 1999.
106
Financial constraints limit the ability of the government to provide free
cards to all non-insured poor. In the absence of other sources of funds, the
commune clinics, at which most of the poor seek health services, will
continue compromising user fee exceptions and equal treatment of VHIA
card holders. One of the important reasons for the limited access to health
services by the poor is that for administrative reasons the VHIA does not
reimburses health services provided by the commune health clinics
(CHCs). Since it may be administratively cumbersome to do that on a feefor-service basis, it would be best for the VHIA to channel part of the
premiums to CHCs on capitation basis, as in the Philippines.
Micro-Credit
There is a reasonably large amount of micro-finance available in Vietnam,
and the number of borrowers has expanded rapidly during the 1990s as the
Vietnam Bank for Rural Development and other government schemes
have provided loans at subsidized interest rates (Table III-5-3).
Table III-5-3. Summary of the Main Formal Financial Institutions
Institutions
Lending
interest per
month
(short-term)
1.25%
(urban)
1.45% (rural)
Savings
mobilized
Deposit
interest
rate
Source of capital
Yes
Savings, bonds,
SVB, other
sources
Bank for the
Poor
Up to 1.0%
Yes
Shortterm:
0.4%
3-month:
0.6%
6-month:
0.65%
1 year:
0.8%
Unknown
People's
Credit Funds
Mass
organizations
1.8%
Yes
1.3%
Varies
widely
Sometimes
0.8% 2.2%
Program for
0.5%
No
n.a.
Bank for
Agriculture
and Rural
Development
107
Savings, SBV,
VBA, provincial
budgets, external
donors
Savings, loans
from SVB
Government
budget, external
donors, other
Provincial budget
Hunger
Eradication
and Poverty
Reduction
Job Creation
Program
Regreening
Barren Hills
Program
0.9%
No
n.a.
0.5%
No
n.a.
Government
budget
Government
budget
Sources: Vietnam Bank for Agriculture, 1996.
Vietnam Bank for the Poor (VBP)
The Vietnam Bank for the Poor (VBP) has provided more than VND1.9
trillion to 1.2 million poor households as of 1999. The loans made to poor
households are in the amount of VND1.5-2 million (or about US$100133). Founded in 1995 the VBP was given the mission of providing credit
to the borrowers most difficult to reach: the poor and those living in
remote areas. The VBP uses the following strategies to reach the poor:
subsidized lending rates, explicit targeting of the poor, and the
mobilization of capital from various sources, including the Vietnam Bank
for Agriculture and Rural Development (VBARD), foreign lenders,
government budgets, savings banks and bilateral capital sources. The
average farmer has no access to formal financial instruments like those
offered by the VBARD as they usually have no collateral for a loan, and
thus, the VBP was established to service the needs of the very poor
without the requirement of collateral. Because the VBP is administered by
the VBARD, many recipients do not see the difference between the two.
The VBP (along with the Vietnam Women’s Union) often delivers
subsidized loans from the HEPR and others. Because these funds are
subsidized, their supply is restricted and loans from this source are in high
demand. VBARD loans, though not as cheap as VBP loans, are still much
cheaper than informal sector loans.
First, despite achieving some positive impact, there are aspects to the
structure and management of the sector that are problematic. As demand
for cheap loans outstrips supply, credit is rationed, and as such rarely
available to the poor, who must still rely on high-interest loans within the
informal sector.
Second, there is a notable lack of a cash savings facility, which could
108
provide a valuable social protection function. This is in large part because
subsidizing interest rates on loans makes it hard for a bank to offer an
attractive interest rate on deposits.68
People’s Credit Funds
People’s Credit Funds (PCFs) were established in 1993 as savings-driven
credit union-style banks. PCFs are located at the commune level in
contrast to the VBARD/VBP, which are usually located at the district level.
This proximity of bank to member has allowed members to save more
readily, and as a result, the PCFs have done a good job of mobilizing
members savings. PCFs are controlled by the State Bank of Vietnam
(SBV), and therefore are considered as quasi-governmental agencies.69
The relative success of the PCFs is credited to the fact that their lending
and savings interest rates are higher than those of the VBARD/VBP. And
while higher savings interest rates undoubtedly encourage people to save,
it is the fact that these funds do not focus on the poor, and thus maintain
higher lending interest rates, which makes their savings more productive.
Also, as shareholding banks, they tend to attract those who can afford to
purchase ownership shares.
Women’s Union Credit Program
While above-mentioned two credit programs are operated by state-owned
corporations, the Women’s Union operates micro-credit programs as a
non-governmental organization. In the late 1980s, the Women’s Union
started a credit program without requiring collateral. The first successful
pilot program encouraged the Union to expand it further, and currently 2
million poor women enjoy a line of credit of some VND6 billion. The line
of credit operates along the Grameen Bank approach. A small amount of
loan (usually less than the current average loan amount of about VND1-2
million or US$80-120) would be made to poor women without any
collateral for any income generating activities. Organization of peer
support and savings groups is encouraged, but not a requirement. At the
beginning a training session is organized in the use of credit funds, book
keeping, how to run a business, etc. A regular meeting is also organized
among borrowers (once a month). When the initial loan has been used
successfully, two more loans would be made for the same individual, and
68
69
Poverty Task Force, 2001.
Ibid.
109
then she is supposed to be graduating. The interest is charged at 0.7% 1% per month. The Union’s administrative expenses are estimated at 1020% of the total loan amount. The repayment rate is currently at 98%.
The sources of funds are international grants, the National Funds for
Employment Creation, donations from the domestic campaign of A Saving
Day for the Poor, and government funds (MOLISA budget, VBARD,
BVP), and accumulated savings.
The Union has a national net work with some 240 staff members, but has
operated at the commune level, especially targeting its loans on the
mountain and remote poor rural areas. Recently, it has started covering
poor urban areas as well. Although the Women’s Union is the entity
operating the credit program, the major source of the funds is the
government, and the Union does not have its financial autonomy.
Subsidies given to the Union and final borrowers should be made more
transparent, so that the administrative efficiency of the Union can be
monitored, and the financial viability and sustainability of the credit
program can be assessed. Although the loan program appears to be
efficient, no practice of monitoring and evaluation of the program is
clearly observed. The existence of the savings scheme is commendable,
but it is unclear how it operates in practice.
Crop Insurance
Crop insurance offered by the Vietnam Insurance Corporation (Bao Viet)
since 1993 has a good potential to function as a social safety measure.
Three options are available for payment of the premiums: a voluntary
option through the tax collection system; payment through banks (notably
in the Mekong Delta area where the majority of farmers have taken bank
loans), and direct payment facilitated by insurance agents.
The coverage of the insurance program has so far been limited. In year
2,000, only 315,200 farming households and 206,000 ha. (3.4%) of the 6
million ha. of land cultivated in Vietnam were covered by the insurance.
Also, the insurance system is run inefficiently. Over the past five years,
the costs of insurance (VND14.4 billion) exceed revenue (VND13.05
billion).70 Inaccurate valuation and poor cooperation between Bao Viet
70
Silver, 2001.
110
and local authorities contribute to inefficiencies.71
Labor Market Regulations
In anticipation of future industrial growth, Vietnam has established labor
market regulations to protect vulnerable working groups in three areas:
minimum wages, employment termination, and occupational health and
safety and control of child and women labor. Minimum wages vary
between state and domestic companies as opposed to foreign-invested
companies, and within the latter by region. Minimum wages for domestic
sectors are set very low and have little effect on market wages, which
average well above the minimum even for the low-skilled workers. For
foreign-invested companies the minimum wages are set at a much higher
level than the average for the domestic private companies.72
The 1995 Labor Code allows for termination with severance payment of
one month’s salary per year of service in the case of “business
restructuring” or “change of technology”; and with a half month’s
payment per year of service in the case of “natural disaster” or the
closure of the business. Mass layoffs by a going concern require approval
from the local trade union. Disputes over termination with trade unions
require a complex arbitration procedure.
Regarding the control of women and child labor, Vietnam Labor Codes
generally reflect the international conventions. Child labor declined
rapidly in line with reduction in poverty during the 1990s. However, the
issue has not disappeared: girls, ethnic minority children and the children
of migrants are disproportionately likely to be working for more hours
than what is warranted by their development needs.73
Basic Social Services
Although basic social services such as basic education and health aim to
reach every citizen in a country, they help reduce poverty and serve as an
effective social safety net against possible future poverty. Vietnam is a
signatory to the United Nations’ 20/20 initiative, which was born out of
71
72
73
Poverty Task Force, 2001.
Ibid.
Poverty Task Force, 2001.
111
the 1995 World Summit for Social Development and was based on the
conviction that economic growth is closely linked with social progress and
social justice. The initiative set 20% as the target for the proportion of
government spending and ODA spending that should be used for basic
social services.
Basic Health Services
The per capita average health expenditure of US$27 puts Vietnam among
those countries in Asia that spend the most on health care, ahead of India,
Indonesia and China, but behind Malaysia and Thailand. Currently, the
public health expenditure accounts for 1.3% of GDP and 5.6% of total
public expenditures and has remained stable since 1990 when the health
expenditure claimed 5.9% of total government spending (Figure III-5-1).
This lower proportion of state health spending reflects the greater role that
private sector expenditure plays in health care, especially since
implementation of doi moi policies in 1986. It is estimated that more than
three-fourths of all spending for health care is private, and much of this is
for services purchased in the private market. Luckily, the proportion of
public health sector spending allocated to the basic services and programs
increased from 32% in 1991 to nearly 49% in 1997.74 Basic services
include those at commune health centers, inter-commune polyclinics and
district hospitals, as well as the vertical preventive and public health
programs.
As there are large social returns to improved public health in low-income,
it is imperative that Vietnam increases public spending on health,
especially for the basic health services for the poor. Increased public
expenditures for basic health services do not necessarily mean transfer of
resources from other public sectors. There must be changes to be made in
which health services are delivered more effectively and efforts to
increase the effectiveness of current expenditure are increased while
looking for ways to decrease the burden of high out-of-pocket costs to the
poor.
Figure III-5-1. State Health Spending as % of Total State Spending and GDP
74
UN and MOLISA, 1999.
112
7
6
5
4
3
2
1
0
1990
1991
1992
1993
1994
% of State Spending
1995
1996
1997
1998
% of GDP
Source: UN and MOLISA, 1999.
One way to increase the effectiveness of monies already being spent on
health care would be to increase funding for preventive measures, which
account for about 11% of overall health expenditure, as these measures
have extensive positive externalities and should assume a priority role in
health care delivery. Growing Healthy: A Review of Vietnam’s Health
Sector75 makes three further observations on the composition of health
expenditures in Vietnam. Firstly, capital spending assumes a rather large
proportion of total health budgets (nearly 21% in 1998). Second, only
39% of the recurrent budget is spent on salaries and wages, while 59% is
spent on goods and services. Vietnam is unlike other developing countries
which spend the majority share of their recurrent health budget on salaries
and wages and have very little to spend on consumables such as medical
supplies and drugs. Third, the amount spent on subsidies and transfers to
the poor (via free exemptions or free health cards) constitute only 4% of
the recurrent state health budget. High hospital user fees reduce access to
hospital services for the poor and low-income groups.76
Factors responsible for the relatively high overall per capita health
75
76
World Bank, SIDA, AusAID, Royal Netherlands Embassy and Ministry of Health, 2001.
Ibid.
113
expenditure in Vietnam are two folds: First, there is a high reliance on
drug vendors as health care providers in Vietnam. Especially among the
poor who may be seeking ways to circumvent the costs associated with a
formal trip to the commune health clinic, many rely on local drug vendors
as health care providers. Surveys suggest that two-thirds of all individual
health service contacts is accounted for by visits to vendors.
Second, use of hospitals in Vietnam is heavily dominated by people from
the top income quintile. Although the proportion of state health spending
allocated to higher levels of health facilities has declined, about 60% are
still spent on these non-basic services. This has significant equity
implications. The richest 20% of the population capture more than 50% of
tertiary care resources, and the poorest quintile only 2% of tertiary care
and 5% of district hospital care resources (Figure III-5-2). As a result of
the tendency of the better-off to utilize the hospital services much more
frequently than the poor, more than three-quarters of the recurrent state
health budget is spent on hospitals. In 1998, about 36% of all hospital
visits were made by those from the wealthiest 20% of society, while only
8% were drawn from the bottom quintile. Part of this trend may be
explained by the fact that the majority of hospitals are in urban areas.
However, the referral system in both urban and rural areas might be
strengthened to ensure that patients report first to a primary care facility
and not directly to a hospital where costs are higher. At present, many
Vietnamese reports directly to a hospital in the event of a health problem,
though primary care facilities may actually be closer. There is no system
to strongly discourage this behavior.
The government has instituted strategies to protect the poor from
disadvantages related to paying health costs, such as providing the poor
with health cards that entitle them to free health care and the waiving of
health care costs of the very poor. It should be remembered that these
programs are part of the 4% of government budget spent on health
transfers and subsidies.
Percent of State Health
Spending
Figure III-5-2. Distribution of State Health Spending across Household
Expenditure Quintiles
120
100
80
60
40
20
0
0
1
2
3
4
H o useho ld E xp end itures Q uintiles
(V LS S 1: 1992/1993)
O utp atient P rim ary C are
Tertiary Inp atient
114
D istrict Inp atient
D iag o nal
5
Source: UN and MOLISA, 1999.
Basic Education Service
State Spending on education was 12% of total state spending in 1990. By
1997, education accounted for 15% of state spending. During the same
period, state education spending grew from 1.6% of GDP to 3.4% of GDP,
reflecting the priority given to the sector (Figure III-5-3). Although the
proportion of state education spending allocated to basic education
declined from 45% in 1990 to 33% in 1995, since then it has been on the
rise, standing at 35% in 1997.77
Vietnam’s leaders have long been recognized the importance of education
to national development, and they continue to accord a high priority. As a
result, the population literacy rate stands at a high 90%, and gender
differences are small compared to many countries. Primary school
enrollment is nearly universal, drop-out rates have declined to less than
10%, and repetition rates to below 5%. However, there are significant
regional disparities in educational indicators. The poorer in the mountain,
central and Mekong Delta regions enjoy much lower levels of educational
indicators.
% of Total State Spending
& GDP
Figure III-5-3. State Education Spending as % of Total State Spending and GDP
16
14
12
10
8
6
4
2
0
1990
1991
1992
1993
1994
1995
1996
% of State Spending (actual)
% o f S ta te B ud g et (p la nned )
% of G D P
Source: UN and MOLISA, 1999.
77
UN and MOLISA, 1999.
115
1997
Spending on basic education is very equitable, and rather pro-poor.
However, the age distribution of children in poor households is lower than
in richer households, resulting.
Figure III-5-4. Distribution of State Education Spending by Household
Expenditure Quintile
Percent of State Education
Spending
120
100
80
60
40
20
0
0
1
2
3
Household Expenditure Quintile
Primary
Lower Secondary
Tertiary
Diagonal
4
5
Upper Secondary
Source: UN and MOLISA, 1999.
in a slightly higher concentration of primary-school-age children in the
poorer quintiles, and a slightly higher concentration of higher education
age children in the richer quintiles. Consequently, the richer 20% of the
population capture more than one-half of state spending on higher
education (Figure III-5-4)
116
Recommendations
Poverty Reduction Strategy and Programs
Effective social safety nets should not only prevent vulnerable people
from falling into poverty, but should also lift them from poverty. In this
sense, government poverty reduction strategy and programs are also
effective social safety nets. The Government of Vietnam has formulated
sound and practical ten-year Poverty Reduction Strategy and five-year
Economic Development Plan, emphasizing both rapid economic growth
and specifically targeted social assistance programs. Successful
implementation of the Strategy and the Plan would ensure the targeted
reduction of poverty.
Since launching key reforms through its renovation strategy (doi moi) in
1986, Vietnam has made remarkable progress in making transition from a
centrally-planned to a market-oriented economy and in reducing poverty.
It is estimated that in the mid-1980s, about 70% of Vietnamese were
living in poverty78. The proportion of people with per capita expenditures
under the internationally defined poverty line has dropped from 58% in
1992-93 to 37% in 1997-98 (Figure III-5-5).79
Figure III-5-5. Extreme Poverty in Vietnam, 1990, 2000, and 2010
70
60
50
40
30
20
10
0
5 8 .1
3 7 .4
30
17
8
5
1990
2000
2 0 1 0 (estim a te)
Proportion of population below international poverty line (%)
Proportion of populaton below national poverty line (%)
78
79
Government of Vietnam, Donors and NGO Poverty Working Group, 1999.
UN Country Team, 2001.
117
Source: UN Country Team, 2001.
Much of the poverty reduction can be traced to the high annual economic
growth rates of the country in the early 1990s (8-9%), specifically to
Vietnam’s strong agricultural sector performance since the late 1980s.
Government-led reforms at the commune level sharply increased
efficiency in the agricultural sector. These reforms returned land to private
ownership and made people more directly responsible for their own
livelihood, transforming Vietnam from a country experiencing extreme
food insecurity into one of the world’s largest exports of rice, coffee and
other agricultural commodities.80
Though poverty reduction has occurred across all regions and groups,
poverty is unevenly distributed in Vietnam. The 1998 Vietnam Living
Standard Survey (VLSS) demonstrated that poverty was higher in rural
areas and among ethnic minorities; for example, the Northern Uplands,
North Coast and the Mekong Delta together account for nearly 70% of the
poor (Figure III-5-6).
Figure III-5-6. Overall Poverty in Vietnam, 1993 and 1998
70
headcount ratio (%)
60
50
40
1993
30
1998
20
10
0
Viet Nam
Urban
Rural
Source: UN Country Team, 2001.
As mentioned, the overwhelming majority of the population lives in rural
80
Ibid.
118
areas (80%), and these people experience an inordinate degree of poverty.
Nearly 90% of the poor live in rural areas in Vietnam. 81 Thus, to effect
continued large-scale poverty reduction, efforts should be focused on
increasing the incomes of the rural poor, or their migration.
Poverty Reduction for the Future should be a multi-faceted approach
involving the commitment and resolve of all stakeholders. Many groups,
including the World Bank, suggest that continued gains in poverty
reduction are contingent upon a movement of people away from
agriculture and into other “non-farm” activities. Current overpopulation in
the sector contributes to “underemployment.” The Ministry of Industry, in
a nationwide survey of more than 105,000 households, estimated that in
the Red River delta where population density is high, work time is only
slightly over 50%.82 In the event that increased “socialization” of the
economy - increased FDI and new industry and technologies - is
successful in creating new jobs, the overpopulation of the agricultural
sector should be relieved as people move towards these opportunities.
There may be further overpopulation pressure in the agricultural sector,
however, as new technologies are introduced that require fewer and fewer
people to work on the land for the same yields. Effectively addressing this
issue, as well as providing the basis for further poverty reduction, will
require higher-than-current levels of growth.
Over the past four years, real GDP growth has averaged a bit over 5%. It
is estimated that this will not be sufficient to achieve the poverty reduction
goals put forth by the government. The Government’s Hunger Eradication
and Poverty Reduction (HEPR) strategy for 2001-2010 outlines
quantitative targets for poverty reduction defined according to the national
poverty line. These are, by 2005, to eliminate chronic hunger and the
possibility of falling back into hunger, and to reduce the level of poverty
to below 10% based on the new definition of the national poverty line.
And, by 2010, to reduce the rate of poor households to below 5% based on
the new national poverty line (Table III-5-4). These goals call for 280,000
households to be raised out of poverty each year.83
81
82
83
UN Country Team, 2001.
Vu, 2000.
Beard and Agrawal, 2001.
119
Table III-5-4. Targets Under the Ten-year Development Strategy, 2001-2001









Doubling of GDP, which implies a growth rate of 7.2% per annum
Domestic savings to be increased to over 30% of GDP
Exports to grow at more than twice the rate of GDP
Substantial rise in the country’s Human Development Index (HDI)
Eradication of hunger and rapid reduction of the number of poor
households
Reduction of urban unemployment to 5%, and of rural underemployment
to 15-20%
Universalization of lower secondary education (education for all)
Malnutrition rate of children to be reduced from around one-third to
around 20%
Life expectancy to increase from 68 to 71 years
Source: UN Country Team, 2001.
Disaster Preparedness and Risk Management
Existing disaster mitigation measures are estimated relatively well
developed, but disaster prevention measures are less effective. There is
neither concerted, regular and well-planned strategy (nor funding) for
disaster prevention, and this is credited primarily to the unpredictability of
natural disasters. International organizations have heavily contributed
resources in time of natural disaster, but this primarily used for area-wide
disasters and not family-specific crises. Given that climatic crises in
Vietnam arise as a result of the yearly typhoon season, and often strike the
same areas of the country, disaster prevention measures to prepare for
these events should be strengthened. MOLISA expressed a desire to see
more of its personnel involved in disasters prevention and mitigation
services to receive capacity building training in the most effective
methods for addressing natural disasters.
The Vietnamese government and international development finance
organizations should regard addressing risk in Vietnam as crucial to
poverty eradication, social protection and socioeconomic development. A
number of factors contribute to the importance of risk control in Vietnam.
The overall number of people who live in poverty - approximately onethird of the population, the number of people clustering just above the
poverty line, and the reliance of 80% of the population on agriculture,
mean that natural disasters and health problems can drastically reduce a
family’s ability to support itself. A single family-illness, or the loss of
120
livestock or destruction of arable land, can plunge a family into a long
period of extreme poverty.
As mentioned earlier, the poor are relatively harder hit by health problems
than the better off. A single curative visit to the hospital for a poor person
can cost as much as 22% of his/her non-food expenditures for the year.
The equivalent % for the richest quintile is around 5%. Even a visit to a
commune health center, which in theory is supposed to be free of charge,
may cost up to 4% of annual non-food expenditure for a person in the
poorest quintile. On average, an individual belonging to the poorest
quintile faces an opportunity loss (in terms of lost wages) of 25% of
annual non-food expenditure. Families in the poorest quintile allocate
30% of their non-food expenditure to health costs.
Other types of risks encountered often by the rural population are loss of
crops due to bad weather and flooding. And livestock illness, as
mentioned above, can also be very debilitating. Vietnam has crop
insurance (1993) to protect farmers from losses associated to climatic
changes and disease, but as of yet, only a small portion of land is covered
by this insurance. There are problems to be addressed as to who will
manage this plan, who will collect premiums, and who will dispense
benefits in time of crisis. The transfer of responsibility and immediate
funding to the Contingency Fund for Pre-Harvest Starvation and Natural
Disasters from the central government has made the fund more able to
quickly respond to crises, but the effectiveness of the fund is hampered by
low-levels of funding.
There is also the risk that as Vietnam continues to open itself to the
regional and global economy that it will also be exposed to economic
downturns that demand well-planned, targeted and funded social safety
net measures to protect against the negative consequences of trade
liberalization. Although the effects of the 1997 Asian economic crisis
were blunted by the lack of openness of the Vietnamese economy at the
time, the country is likely to be exposed much more directly to shocks in
the future. Reducing vulnerability may be a key element to enabling
further economic development in the country. If a reliable safety net exists,
which at this time it does not, people may be more willing to engage in
riskier, high-return activities, resulting in faster, broad-based and more
sustainable growth.
Recent studies, including the four participatory poverty assessments (PPA)
carried out in 1999 illustrate that poor households remain extremely
121
vulnerable to a variety of risks that can offset or reverse gains made in
poverty reduction. Notably, reliance on a narrow range of activities and
sources of income make a household’s exposure to shocks greater. Many
development options available to the poor for diversifying income carry a
high risk of failure: livestock and fishponds are vulnerable to disease; fruit
and coffee are susceptible to frost in upland areas, and agriculture in
general is often severely threatened by weather. For the poorest
households, investment in risk-reducing measures may be at the expense
of meeting very basic consumption needs and therefore not the immediate
highest priority. Mechanisms to reduce the risk of investing could help
poorer households to break out of a cycle of vulnerability and poverty.84
Improvement in Targeting
Although there are numerous social insurance and social assistance
programs in Vietnam, they do not provide effective social safety nets for
the majority of the poor. On the one hand, the social insurance funds
provide greater income per household on average and benefit a greater
proportion of the families falling in the top quintile. On the other hand,
social assistance program, in particular the poverty reduction programs
and NGO assistance provide more benefits on average to the greater
proportion of the poorer households of the society (Table III-5-5). By
nature, the social insurance programs aim to cover all people in the society,
and until they achieve the objectives, the coverage will be expanding from
the richer segments to the poorer echelons of the society. On the other
hand, the social assistance programs aim to provide social safety nets to
the relatively poor, and therefore target better on the poor. Therefore, from
the social safety net point of view, social assistance programs should be
expanded first until the social insurance system covers the majority of
society.
Moreover, the social assistance programs should improve their targeting.
The first order of targeting to be adopted by the central government may
be based on the geographical poverty criterion, followed by the incometest at the provincial and district levels. And the final order of targeting at
local and household levels should be based more on self -targeting
methods.
84
World Bank, ADB and UNDP, 2000.
122
Table III-5-5. Benefits from Social Protection/Poverty Reduction
Programs by Consumption Quintile
Consumptio
n
quintiles Social insurance
Average
Incidenc level of
e
benefit
Richest
1
13.9% 1,010,353
2
12.1% 903,628
3
11.6% 849,509
4
9.1% 745,967
Poorest
5
9.5% 731,642
Average
,
All
quintiles 11.2% 867,366
Poverty
alleviation
Social subsidies
programs
NGO assistance
Average
Average
Average
Incidenc level of Incidenc level of Incidenc level of
e
benefit
e
benefit
e
benefit
7.3%
10.0%
9.6%
9.4%
251,192
175,030
182,875
181,074
0.2% 327,000 0.1% 443,000
0.9% 92,111 0.2% 143,000
1.3% 46,692 0.3% 112,667
2.1% 76,190 1.2% 42,333
11.6% 196,422 6.4%
41,438
0.5% 206,000
9.6% 194,156 2.2%
57,636
0.5% 104,200
Source: Poverty Task Force, 2001.
Currently, the central government is responsible for issuing guidance on
targeting and benefit levels based on a progressive distribution. However,
the provinces and districts have considerable discretionary power to adjust
spending to reflect total resources available in the jurisdiction. In practice,
their allocation of resources to communes has not been necessarily propoor. Moreover, central government funds are often of secondary
importance to funds raised at local levels. The net result is that it is much
better to be poor in a rich district than it is to be poor in a poor district.85
Decentralized administration in social safety nets should be based on an
equal footing or level playing field in terms of the financial and
institutional capacity of provincial and local governments.
Health Insurance and Social Insurance
85
Poverty Task Force, 2001; van de Walle, 1998.
123
Since the coverage of health insurance is very low at 12% of the
population and has a wide range of variation, it is advisable to launch
some kind of social assistance programs to extend the health services to
the poorest groups of society in the short and medium terms.
In the long run, however, the government should strive to expand the
coverage of the health insurance by accelerating economic growth,
employment in the organized sector and family income. The easiest way
to expand the coverage may be to extend the coverage to the spouse and
family of the members of the insurance scheme by making the voluntary
programs more attractive by increasing the benefits of the insurance
program.
The coverage of the social insurance program (in particular the pension
program) should be expanded by providing for a voluntary scheme first.
Social Assistance Programs
The level of funding for the social assistance programs should be
improved so that the coverage can be expanded. Currently, the programs
cover only a small fraction of target groups. The Government should
make efforts to increase the share of the social assistance programs in the
state total spending. At present, social assistance programs (including the
social insurance programs excluding the health insurance programs
account for only 14% of the total state spending.
Administration of the social assistance program should be transferred to
various Guarantee Funds so that their efficiency can be improved. For
instance, mechanisms should be established to identify beneficiaries of
multiple programs and assign them to a proper program by coordinating
administration of various funds.
Currently, a large part of the social assistance program budgets are spent
for non-basic services (pensions for retired civil servants) and warcontributors. And the portion devoted to the organized services for the
poor accounts for about 22% of all social assistance and insurance
programs (Figure III-5-7). Until the social insurance system covers all
citizens, the public assistance services for the poor should be enlarged.
Monitoring and Evaluation of the HERP
It is important that the HERP component should be periodically monitored
and evaluated in order to test the cost-effectiveness of their achievements.
124
Figure III-5-7. Distribution of Social Security and Assistance Expenditures by
Program
100%
80%
60%
40%
20%
0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Other (non-basic)
Employment/Orphans/Centres of disabled/Benefits for disabled
Assistance to the poor
War affected
Disaster Relief
Source: UN and MOLISA, 1999.
Micro-Credit and Savings Facilities
Suggestions have been made to increase the opportunities for those poor
receiving micro-finance to save their money safely. At present most
government micro-finance schemes offer subsidized loans, but no
convenient deposit facilities. These savings schemes should be secure,
profitable (market deposit rates), convenient to access (locations and
procedures that are simple for the poor), liquid (ease of cash withdrawal)
and anonymous (Poverty Task Force).
Basic Social Services
Neither state nor official development assistance (ODA) reaches the 20%
mark set by the 20/20 Initiative. This initiative was born out of the 1995
World Summit for Social Development. The Initiative set 20% as the
target for the proportion of state spending and ODA spending that should
be used for basic social services, on the basis of the conviction that
125
economic growth is closely linked with social progress and justice.
Vietnam is a signatory of the Initiative. Using the UN definition, the
percentage of state resources spend on basic social services increased
from 6.1% in 1990 to 8.5% in 1997. It is estimated that the same trend has
continued to date. The proportion of ODA resources used for basic social
services by the UN definition was more variable. Between 1990 and 1993,
it rose from 5.2% to 18.6%. Thereafter, the proportion declined, reaching
10.0% in 1997, and has remained at the same level to date (Figure III-5-8).
Figure III-5-8. Basic Social Service ODA as % of Total ODA
20
(%)
15
10
5
(p la n)
Source: UN and MOLISA, 1999.
126
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
0
Table III-5-6. Key Development Indicators: Vietnam
Indicator
Population
Population Growth Rate
Life Expectancy at Birth
Real GDP per capita
Poverty Headcount Ratio
(% of population below international poverty line)
(% of population below national poverty line)
Estimates HIV Prevalence Rate
Population with access to Safe Water Supplies
Proportion of Underweight Children (under 5)
Net Primary Enrollment Rate
Ratio of Girls to Boys in Primary Education
Under-Five Mortality Rate (per 1,000 live births)
Maternal Mortality Rate (per 100,000 live births)
Labor Market
Urban Unemployment rate (%)
Female
Male
Participation rate (%)
Female
Male
Share of wage employment
Female
Male
Share of urban wage employment
in total
Real wages (% change)
Male/Female Hourly Wage ratio (agriculture)
Exchange Rate (US$1:00 )
Value
76.3 m
1.65%
68.3years
US$400
Year
1999
1999
1999
2000
37%
17%
0.22%
51.8%
33.8%
94.8%
98.1%
42
100
1998
6.9 %
6.4
7.2
1997/98
81
82
1998
2001
2000
2000
2000
1999
1998
2000
1999
1997
6.0 %
5.4
6.5
1992/93
79
83
40
60
8.9
43
57
8.1
12.8% pa
1.3
1.2
VND
15,000
2001
Source: Vietnam Living Standard Surveys: 1992/1993 and 1997/1998.
127
IV. Social Safety Net Activities in APEC Region
1. APEC Social Safety Net Activities
APEC Economic Leaders first launched their collective initiative on social
safety nets in November 1998 by instructing the “Ministers to work with
the World Bank and, where appropriate, public and private institutions to
formulate strategies of concrete actions aimed at strengthening social
safety nets.” A year later in Manila in November 1999, a Multiinstitutional workshop organized by the World Bank Institute was
integrated in the Manila Social Forum jointly organized by the World
Bank and the ADB.
In November 2000, the APEC Economic Leaders’ Meeting in Bandar Seri
Begawan further instructed the Ministers to include ways to look after
those disadvantaged by economic change including continued work on
social safety nets. APEC Ministers also reiterated the importance of
supporting the poor and vulnerable segments of the communities that were
affected by the crisis and by the process of economic restructuring. They
noted the further work by various APEC fora to strengthen social safety
nets and to reduce the adverse impacts of the Asian crisis.
Thailand proposed that the Social Protection Facility of 5 million
Australian Dollars, to be donated by the Australian government, be used
as seed money. The Australian government commissioned a study on the
impacts of the crisis on children and associated issues in social safety nets
in Indonesia, Thailand and the Philippines. To address some of the issues
highlighted in the study, the Australian Prime Minister announced at the
APEC Economic Leaders Meeting in Auckland in 1999 a three-year,
Aus.$5 million Social Protection Facility for East Asia. At present, under
the Social Protection Facility Plan, the Institute for Population and Social
Research, Mahidol University, in Thailand has been chosen as a training
institution to provide technical capacity building for key government
agencies in the social policy and program delivery area.
The Sixth APEC Finance Ministerial Meeting in Langkawi, Malaysia, in
May 1999 was the first to make a statement about APEC’s collective
activities on social safety nets. Ministers welcomed the country-specific
128
assistance, both technical and financial, being provided by the World
Bank and the ADB to promote sound design and adequate internal
financing of national social safety nets, taking into account the cultural,
economic, institutional and social situation of the individual economies. In
addition, they agreed that this collaborative work could build on the
findings of the Regional Meeting on Social Issues Arising from the East
Asian Crisis (Bangkok, 21-22 January 1999) and the Ministerial Meeting
of Development Cooperation (Sydney, 5 March 1999). In this regard, they
have endorsed a work program for the Finance Ministers’ process to form
a working group, including the World Bank, the ADB and the IMF, to
explore ways to strengthen social safety nets in a framework integrated
with poverty reduction into growth-orientated macro policies. The effort
on this issue continued in the meeting held at Bandar Seri Begawan in
September 2000. The Ministers recognized that the experiences in
administering social safety nets of the APEC economies were the subject
of an on-going study and agreed to develop a set of guidelines for
responsive and fiscally manageable social safety nets to present to the
APEC Leaders’ Meeting in November 2000.
Since early 1999, the Economic Committee (EC) of APEC has been active
in addressing the analytical examination of the social impact of the crisis.
It had initiated a two-year research project on "APEC Economies Beyond
the Asian Crisis" that included a strong analytical component dealing with
the social impacts of the crisis. The result of the study was revealed in its
report titled “Building the Future of APEC Economies: Move Forward on
the New Economy and Entrepreneurship” in November 2000. The report
found that while a squeeze on basic social expenditure was inevitable,
affected economies tried to maintain the level of developmental
expenditures (including education, health, social security and welfare,
housing and community amenities and economic services) by cutting back
on expenditures for defense and other budget areas.
In May 1999, the HRDWG86 organized a seminar on human resource
management strategies to minimize the effects of job retrenchments. Some
of these programs flowed from the work of the group’s Task Force on the
Human Resource and Social Impacts of the Financial Crisis, which
recommended new or expanded projects in key areas of crisis response.
Also in July 1999, an APEC Forum on Human Resources Development
was held in Japan focusing on the short-term vocational training needs of
86
Human Resources Development Working Group.
129
workers affected by the crisis, as well as longer-term policies on
vocational training to cope with globalization.
In 2000, the HRDWG underwent a restructuring to better reflect the
current priorities of Leaders and Ministers in the area of Human
Resources Development, and also to ensure more effective management
by reducing its size from five to three networks: the Capacity Building
Network (CBN); the Education Network (EDNET); and the Labour and
Social Protection Network (LSPN). The Capacity Building Network
(CBN) promotes human capacity building but oriented to strengthening
markets. The Labor and Social Protection Network’s (LSPN) mission is to
foster human capacity building, social integration, and strong and flexible
labor markets through the development of useful labor market information
and policy, improved workplace conditions and practices, and strong
social safety nets. In 2000, the 9th APEC HRD, Labor and Social
Protection Network (LSPN) International Workshop: "International
Migration and Structural Change in the APEC Member Economies" was
held in Taipei on October 19-20, 2000. Sixteen member economies
presented country reports and regional overviews of international
migration and structural changes in the APEC region. The purpose of the
project was to investigate the relationship between international migration
and structural changes in the APEC member economies. The Workshop
was oriented to labour issues, but did not deal with the issue of social
safety nets.
APEC has conducted a series of activities intended to strengthen social
safety nets, and numerous recommendations have been made. Two efforts
stand out in current APEC practice where an social safety net need has
been filled by coordinated effort: the Australian-Thai Social Protection
Facility (SPF) and the Asia Recovery Information Center (ARIC). The
Australian-Thai Social Protection Facility (SPF) is an Australian-funded
joint effort by AusAid and Thailand’s Mahidol University to improve
social safety net planning and delivery by providing capacity-building to
those parties concerned with social safety net services in a number of
South East Asian Economies. For the purpose of increasing awareness of
social conditions in the wake of the economic crisis, and to assist in
coordination of efforts to combat the negative effects of the crisis, the
Asian Recovery Information Center was established. The concept of the
Asia Recovery Information Center (ARIC) first emerged at the Meeting
on Development Cooperation: Responding to the Asia Crisis held in
Sydney on 5 March 1999. Acting on a proposal by the Australian
130
Government, the meeting agreed that an Internet-based facility would
provide the most efficient means of gathering, collating, and
disseminating this information.
In addition, APEC has been submitted research papers by several member
economies. The two reports closest to the preliminary research of APEC
Social Safety Net Ad Hoc Task Force are: “Social Safety Nets in Response
to Crisis: Lessons and Guidelines from Asia and Latin America,” and
“The Poor at Risk: Surviving the Economic Crisis in Southeast Asia”. The
first one is a paper submitted to the APEC Finance Ministers Meeting
(Feb. 2001). From this research, the following major lessons have
emerged: a) The availability of timely and reliable information on poor
and vulnerable groups is critical for the design and implementation of
social safety net programs; b) Pre-crisis planning can contribute to the
design of effective social safety nets; c) It is essential that the programs
are targeted and provide adequate protection to the poor; d) social safety
net should build on existing public programs and mechanisms for
targeting and delivery; e) Transparency and accountability in the design
and implementation of programs and in the use of resources are critical to
the effectiveness of social safety net programs; g) social safety net
programs should be coordinated across implementing ministries and
departments as well as different government levels to avoid inefficient
overlap and administrative waste; h) The building of adequate
administrative capacity at the local level should precede decentralization.
The second one is a key HRDWG project submitted at the 12th APEC
Ministerial Meeting (Brunei Darussalam 12-13 November 2000): “The
Poor at Risk: Surviving the Economic Crisis in Southeast Asia”(McGee
2000). The research recommends that the governments should establish
some form of social safety net policy unit, which would be charged with
developing a) better systems of quick data collection on the social impact
of the crisis on the poor, b) quick response programs for alleviating social
impact on the poor, c) systems for more effectively targeting the most
severely impacted groups, d) the most effective methods of
implementation and e) systems of effective monitoring of the programs.
The findings of these reports agree on many points with the research
conducted as part of the stocktaking report produced for the Ad-hoc Task
Force on Strengthening Social Safety Nets. Those reports conclude that
social safety nets in APEC can be substantially improved by building the
capacity of social safety net -related officials, and social safety net
capacity building is discussed in the following section.
131
Table IV-1-1. Review of APEC Social Safety Net-related Activities
Action Taken and Measures
Adopted
Virtual Task
Force on the
Social Impact
of the Asian
Economic
Crisis
Report: Impact
of the Asia
Crisis on
Children:
Issues for
SSNs
Australia
Social
Protection
Facility
APEC Leaders
Meeting Kuala
Lumpur 1998
Current Status of Effort
Proposed by the US.
In 1999, Australia was giving
effect to an APEC Leaders'
decision, highlighted at their
1998 meeting, to increase
APEC's attention to SSN issues.
As part of this initiative,
Australia commissioned a team
of experts to undertake a survey
on the impact of the Asia Crisis
on children and its implications.
The report was presented at the
APEC meetings held 7-13
September 1999 in Auckland.
Created with the cooperation of
the Thai and Australian
governments and Mahidol
University
Leaders directed that "as a
matter of high priority, APEC
should intensify efforts to
address the social impacts of the
crisis" and "work with the World
Bank, the ADB, the InterAmerican Development Bank
and, where appropriate, public
and private institutions to
formulate strategies of concrete
actions aimed at strengthening
SSNs."
132
To address the major issues
identified in the report, Australia
announced a three-year, Aus.$5
million Social Protection Facility
for East Asia.
The facility provides capacity
building for civil servants, policy
makers and service delivery people
in Southeast Asia.
The U.S. has established the APEC
Virtual Task Force on the Social
Impact of the Financial Crisis to
exchange inventories and
information on available technical
assistance and SSN programs
through the Internet. The Finance
Ministers' work program includes
examining the social impact of the
crisis and lessons learned to help
build and strengthen social safety
nets, as well as the institutional
capacity to adjust programs flexibly
in times of crisis. The U.S. has
funded the Accelerating Economic
Recovery in Asia (AERA) Program
focusing on Thailand, Indonesia,
and the Philippines. This program
provides $35 million in FY1999 and $53 million in FY2000.
APEC Forum
on HRD, July,
1999, Japan
Third APEC
HRD
Ministers
Meeting,
Washington,
D.C., USA,
July 28-29,
1999
APEC SOM II
Twelfth
Ministerial
Meeting
Bandar Seri
Begawan,
1st – 3rd June
2000
Meeting on the
Social Issues
Arising from
the East Asia
Economic
Crisis and
Policy
Implications
for the Future,
Forum addressed short-term
vocational training needs as well
as longer-term policies on
vocational training to cope with
globalization
The formulation of policies on
labor, employment, training,
SSNs and workplace practices
are the responsibilities of
individual economies. However,
lasting improvements in these
areas require sustainable
economic growth, which may be
enhanced by regional
cooperation in the increasingly
integrated global economy.
Korea introduced a joint paper
produced with Thailand entitled
“Revitalisation of Social Safety
Net Activities in APEC” The
proposal aimed to regroup APEC
economies around a more
practical set of activities of
common interest. Korea,
Thailand and other interested
economies would submit a more
developed paper for
consideration at SOM III, and
based on consensus, would
propose that it be considered by
Ministers and Leaders.
The purpose of the gathering
was to facilitate an on-going
dialogue among various
constituents within the
international community about
what is happening in the affected
countries, short-term responses
to the urgent problems that arise,
and about the broader and longer
term policy implications of these
133
The HRDWG will develop a
program of work for capacity
building and exchange of
information in the areas of labor
market systems, SSNs, and building
the workplace of the 21st century.
Issues for work on social safety
nets should include:
1. unemployment or social
insurance;
2. pensions;
3. income support systems for
people not covered by formal
plans; and
4. programs to enhance
employability, empower
individuals, and mitigate social
assistance dependency.
Australia informed the Meeting that
the Aus.$5 million social
infrastructure facility was now
underway.
This program focused on three
major themes:
1 Common understanding of the
social situation in the region as a
result of the economic crisis;
2 New initiatives to advance social
development;
3 Operational coordination and
partnerships;
The Meeting was the first of a
The World
Bank, January
21-22, 1999,
issues.
series of meetings which will occur
on a regular basis, to take stock and
advance the common agenda.
Improving SSNs: The on-going
review of administration of
SSNs in the APEC region has
developed three main themes:
(1) the need for adequate precrisis safety net planning; (2) the
importance of accurate and
timely information on poor and
vulnerable groups; and (3) the
need to have a range of
instruments to ensure adequate
targeting and coverage.
The Ministers undertook to develop
a set of guidelines for responsive
and fiscally manageable SSNs to
present to APEC Leaders. The
objective of this initiative was to
establish a set of guidelines to be
endorsed by Finance Ministers
regarding the use of SSN policies
and programs and presented to
APEC Economic Leaders in
November 2000. The final report,
“Social Safety Nets in Response to
Crisis: Lessons and Guidelines
from Asia and Latin America,” was
presented to the Finance Deputies
in May 2001.
An in-depth storehouse of
information related to the Asian
Economic Crisis, including
impacts, policies, strategies,
statistics, etc.
United Nations
Conference
Center,
Bangkok,
Thailand
Seventh APEC
Finance
Ministers
Meeting
9-10
September
2000 Bandar
Seri Begawan,
Brunei
Darussalam
ARIC
Web resource hosted by the ADB
and initially proposed by
Australia.
Eleventh
APEC
Ministerial
Meeting
9 - 10
September
1999,
Auckland,
New Zealand
Ministers also agreed to:
establish an Ecotech Clearing
House to enhance information
flows between the identification
of Ecotech needs and the
capacity to provide appropriate
expertise to meet those needs.
The Clearing House was
implemented from January 2000;
134
Ninth APEC
Ministerial
Meeting Joint
Statement
Vancouver,
November 2122, 1997
Economic and
Technical
Cooperation
Tenth APEC
Ministerial
Meeting
Kuala Lumpur,
Malaysia 14 15 November,
1998
APEC Virtual
Task Force on
Emergency
Preparedness
Emergency preparedness for
disasters: Ministers noted that
APEC should define its valueadded role in formulating
emergency preparedness and
disaster recovery measures.
Ministers tasked Senior Officials
to explore measures for joint
action, taking into account the
programs of other regional and
international bodies, and to
provide an inter-sessional report
by June 1, 1998.
Ministers endorsed the APEC
Framework For Capacity
Building Initiatives On
Emergency Preparedness, which
aims to strengthen joint
cooperative efforts to enhance
capacities of APEC member
economies to respond to natural
disasters and emergencies, and
look forward to initiatives to
improve preventive and
responsive measures through
information-sharing and capacity
building.
Established an information
sharing website: APEC
Emergency Preparedness
Website
“APEC Framework for Capacity
Building Initiatives on Emergency
Preparedness,” reported to
Minister’s Meeting.
Ministers endorsed the APEC
Framework For Capacity Building
Initiatives On Emergency
Preparedness.
Source: Author’s rearrangement on the basis of APEC documents, 2001.
2. Social Safety Net Projects Initiated by International Organizations
2.1. The World Bank
Given its global presence, vast resources and strong commitment for
poverty reduction, the World Bank has been a pioneering leader in both
studies on poverty and lending to social protection in general and social
safety net in particular. Though the magnitude of its financial assistance to
social safety net projects is very hard to quantify due to the nature of
social safety net which encompasses a wide range of activities, it is
estimated that about 60% of its annual commitment goes to the projects
with social safety net as the main project component.
135
While virtually all projects financed by the World Bank Group have
varying degree of poverty components, the number of its poverty-focused
adjustment operations has been increasing significantly in recent years
from 49% of its total lending in 1992 to 82% of its total lending in 1999.
The shift of lending focus has been much more pronounced in the case of
IDA countries where the share of poverty-focused adjustment operations
has increased to 82% of the total IDA lending in 1999 compared to 54%
of such lending in 1992.
In addition to the poverty-focused adjustment operations, the World Bank
has been tracking lending with an expected direct impact through the
Program of Targeted Interventions (PTIs). To be classified as part of PTIs,
an investment operation must meet the following criteria: (a) the project
has a specific mechanism for targeting the poor; and (b) the proportion of
the poor among project beneficiaries is significantly larger than their
proportion in the overall population. The number of PTI projects
increased from 31% of the total in fiscal 1992 to 51% in fiscal 1999.
Similarly, the amount lent for PTI projects increased from 15% in fiscal
1992 to 50% in fiscal 1999, respectively. The % share of PTI projects in
the IDA countries were much more pronounced with 59% of total number
of projects and 64% of the lending in fiscal 1999.
Much of the enhanced focus on social safety nets has emerged after 1997
as countries began to deal with the effects of the crisis, reflecting in part,
the increased emphasis being taken to ensure that an appropriate social
protection policy is in place alongside continuing economic growth.
Before the crisis, however, under the rubric of “human development”,
Country Assistance Strategies (CAS) tended to focus on continuing to
improve education and health outcomes in the region, even though there
were significant differences in terms of the outcomes that had been
achieved.
The recent growth of the lending portfolio for social protection reflects the
increasing demand by governments to help respond to the social impact of
the crisis. The total number of operations in the social protection sector is
small, but growing. Thirty-nine ongoing projects can be classified as
social protection, although this classification tends to differ. For example,
of these 39 projects, only 11 are considered social protection projects by
the HNDSP anchor either because they are coded as SP and/or two-thirds
of the loan amount can be identified for social protection activities. These
11 loans/credits comprise: five social investment funds; three safety net
136
operations; two labor/employment support loans; and one pension loan. In
addition to these, another 24 projects have a sub-sector classification of
labor market/employment, including the six recent adjustment loans. Two
more projects are sub-classified as social fund/assistance and one loan in
China supports labor market reform (including workforce reduction) at the
enterprise level. Lastly, an FY95 project in China contains a cross-cutting
social protection component, also at the enterprise level, to strengthen
social security (in pensions, housing, unemployment and health insurance).
The total value of the loan portfolio as of 7/1/99 is $12.2 billion, of which
$9.3 billion is structural adjustment lending (including the $0.6 billion
Social Safety Net Adjustment Loan to Indonesia). Pre-crisis investment
lending (i.e. prior to 8/97) was just over $1 billion, indicating a doubling
in just two years.
In terms of key social protection areas, lending in the past has tended to be
concentrated in the area of labor markets, training and employment
creation. Social Investment Funds are not widespread in the region but
have been developed in Cambodia, the Philippines, Thailand, Indonesia
and Lao PDR. Support for pension reform is only in nascent stages, with a
recently approved LIL in China. As noted in the next paragraph, the bulk
of recent lending has been to support safety nets, including maintaining of
social expenditures in the wake of the crisis.
Since the onset of the crisis, the major vehicle of Bank support has been
through adjustment loans and over half of these (or 80% in value terms)
included a social protection or poverty reduction component. In Thailand,
Indonesia and Malaysia structural adjustment lending assisted in
reconstituting and even expanding budgets in the social sectors to protect
expenditures for social services targeted to the poor. The series of
adjustment loans to those countries is held up as a good example of an
integrated approach to social policy reform. And, in April 1999 a $600
million Social Safety Net Adjustment Loan was approved for Indonesia
which supported policy reforms in safeguarding key safety net programs
(i.e. monitoring and independent verification of delivery of program
benefits) and improving program design.
As of January 1, 1999, Social Protection was placed within the regional
HD Sector Unit to take advantage of synergies in health and education;
this setup reflects the HD network structure. Activities (both analytical
and lending) in the Social Protection area, however, are spread widely
across almost all sectoral units, in headquarters and the field, as well as in
137
the HD and other networks. Sharing information, integrating the analysis
and optimizing the design of social protection work has been made
difficult given this fragmentation and/or shared responsibility across units.
This notwithstanding, the structural adjustment loan series, managed by
EASPR with substantial involvement from EASHD and the country unit
in the field, is often held up as best practice in integrating the three core
areas of social protection. As the Social Protection sector matures within
the EAP Region, coordination of the social protection agenda should be
improved to take advantage of the skills and knowledge that are lodged
across organizational units.87
2.2. ADB
Though the ADB has been a leading development financing institution in
the Asia and Pacific Region for more than 30 years, its lending operations
have been widely spread over many sectors to meet increasing demand for
agriculture, infrastructure and industrial development of its developing
member countries until 1997 when the financial crisis hit most of its major
borrowers. After the crisis, ADB had embarked on a series of policy
reorientation to focus its operations to poverty eradication so as to
mitigate the adverse impacts of financial crisis. In both 1999 and 2000, it
reported that some 40% of ADB’s total annual lending of $5 billion were
directed to projects and programs with primary focus on poverty reduction.
For the past two years, there have been several landmark policy shifts
taken by ADB to put its vision on poverty eradication into action: a new
Poverty Reduction Strategy was formulated in 1999 and ADB initiated in
2000 to implement this Strategy with its three conceptual pillars of propoor sustainable economic growth, social development and good
governance.
Under the first pillar of pro-poor sustainable growth, ADB started to
formulate country-specific Poverty Analyses in full consultation with
governments, other donor agencies and wide range of stakeholders with
an aim to deepen understanding of the causes and manifestations of
poverty in its member countries. Such Poverty Analyses provided the
basis for discussions at a high-level forum in each member which lead to
Country Strategies and Programs, as well as Partnership Agreement for
87
World Bank, 1999.
138
Poverty Reduction. These Partnership Agreements, signed with three
countries of Bangladesh, Indonesia and Mongolia in 2000, represented a
concerted commitment to attain specific poverty reduction targets, and
identify assistance levels and operational priorities. ADB intends to sign
the Partnership Agreement with the rest of its member countries in 2001.
As to the second pillar of social protection, ADB is finalizing its Social
Protection Strategic Framework following an extensive consultation
process involving governments, international development agencies
NGOs and civil society. Social protection, as an integral part of social
development, emphasizes investment in human capital, particularly
women in development, increasing productivity, and reducing human
vulnerability to risks, as a means of addressing poverty and enhancing the
quality of economic growth. The provision of essential social services
such as basic education, health care, safe drinking water and sanitation, as
well as the availability of adequate social safety nets is critical to social
development. ADB’s forthcoming Social Protection Strategy Framework
will strengthen its social development interventions.
The Medium-term Agenda and Action Plan for Promoting Good
Governance was adopted by ADB in early 2001 which articulated its
action plan details under the third pillar of ADB’s Poverty Reduction
Strategy. Good governance benefits all, particularly the poor who are the
least capable of coping with the consequences of bad governance. In all
ADB’s efforts to support and promote good governance, the following
four elements are addressed: accountability, participation, predictability
and transparency.
Another noteworthy development undertaken by ADB in 2000 was the
establishment of the Japan Fund for Poverty Reduction (JFPR) with an
initial contribution from the Government of Japan of 10 billion yen ($92.6
million) to support, on a grant basis, ADB-financed projects with
innovative poverty reduction and related social development activities in
line with ADB’s poverty reduction strategy. Five projects and programs
totaling $7.5 million were approved under JFPR financing in 2000.
139
2.3. AusAID Social Protection Facility (SPF)
Responding to the financial crisis that affected key Association of South
East Asian Nations (ASEAN) economies from 1997 to 1998, AusAID is
funding a Social Protection Facility (SPF) to address pre-existing and
crisis-generated gaps in social protection in many countries of the region.
The SPF will be jointly implemented by an Australian academic
institution and Mahidol University's Institute for Population and Social
Research (IPSR) from 2000 through 2003. The initial focus will be on
Indonesia, the Philippines, Thailand and Vietnam, with assistance to be
extended as appropriate to include Cambodia, China and Laos as the
Facility expands.
The SPF will assist developing ASEAN economies to improve their social
services and safety nets through technical assistance and capacity building
measures. Its goal is to strengthen the institutional capacities of focal
government agencies in social policy development and program delivery.
The Facility will emphasize individually tailored training and placement
programs and maximize the specific skills and knowledge of key
managers and operational teams in areas relevant to their needs.
While assistance under the SPF is directed towards the staff of key social
protection programs, the eventual beneficiaries will be those families and
individuals most vulnerable to poverty, who require access to those
programs so as to lift themselves out of poverty and reduce their longterm vulnerability. This will be achieved through improved policy, design,
targeting, monitoring and implementation of key programs.
The IPSR was selected as the Thai SPF partner based on its past
achievements in this area, its relevant teaching and training programs,
research activities, management capacity and existing regional and
international links. These two partner institutions will work together to
publicize the Facility, accept applications and select program participants,
design suitable programs of training and professional support and make
placements in tune with the current priorities of focal nations.88
88
http://www.mahidol.ac.th/mahidol/spectrum/page5b_vol7_no3.htm.
140
V. Possible Areas for Strengthening APEC
Social Safety Net
This section describes the findings of stocktaking efforts undertaken to
evaluate opportunities where APEC might contribute to the strengthening
of social safety net activities in the APEC region. For the successful
operation of social safety net systems, certain conditions are prerequisite,
that is, optimal budget size and administrative infrastructure for targeting
and delivery, and capacity for monitoring and system management are
required; also, social safety net programs should be in place before a crisis
occurs. However, member economies hit by economic crisis that had
experienced extended, positive economic performance tended not to have
prepared well-designed formal social safety net programs for the
vulnerable prior to the crisis.
1. General Deficit of Social Safety Nets
The five economies researched here had social safety net programs at the
time of the onset of the crisis, however, the severity of the crisis and its
impact on the social sector was profound and rapidly overwhelmed the
resources and capabilities of the majority of existing programs. The quick
onset of the crisis outstripped the ability of governments, NGOs and
others in the region to respond effectively. This inability to respond
effectively was further complicated by difficulties in gathering important
data detailing crisis impacts on different communities. For the most part,
new programs could not be established quickly enough to respond to the
impacts of the crisis, which were felt so soon after its onset. In many
instances, lack of current, accurate poverty data at the beginning of the
crisis hampered the expansion of existing projects and the establishment
of new programs. Omissions in data made accurate targeting of programs
challenging as well. Payments to the social sector often did not reach their
intended beneficiaries. Programs were frequently designed with no
explicit guarantee that the effectiveness of the program would be
evaluated through the use of output indicators. Some programs were often
without specific goals, such as number of persons served, degree of
poverty alleviation or level of employment creation.
141
It is the case of more advanced countries that well-established and funded
social insurance systems act as safety nets during economic downturn or
crisis. The member economies hit by economic crisis introduced national
pension schemes in the 1950s, with Indonesia and Malaysia introducing
work injury compensation before this. Thailand introduced a social
insurance system most recently in 1990s, although it was 1998 before
some of the main programs were actually implemented.89 However, the
social insurance systems of the economies are serving only a portion of
the formal sector, including more stable socio-economic classes such as
civil servants.90 Of social insurance schemes, unemployment insurance is
the most effective to respond to the impact of economic crisis. Those
economies did not introduce unemployment insurance. However it is not
wise to rapidly establish unemployment insurance because it takes time
for the plan to be operational and coverage must be narrow due to the low
proportion of contributors, who are often people working in the formal
sector.
Efforts for strengthening APEC social safety net programs would be better
concentrated on the areas of social assistance and temporary protection
systems for the poor and the unemployed in the short-term and should be
enlarged to social insurance schemes in the long-term. In the process of
reviewing the social safety net programs of member economies, some
problems have repeatedly appeared. Those are shown below, but it is
difficult to rank them because one might be the cause of another.






Corruption, lack of transparency, leakage of funds
Mis-targeting, exclusion of the poor
Lack of poverty monitoring system, lack of poverty related data
Defect of governance, low capacity of management, insufficient
preparedness, delayed disbursement
Lack of public spending prioritization, fund misallocation
Lack of program evaluation system
89
Whiteford and Förster, 2001.
In Indonesia, while contributors to pension schemes are only 7% of the working age
population, recipients are 39% of the population over 60. This may reflect the fact that
pension contributors and recipients are among the relatively privileged groups in society,
who are more likely to survive to old ages. In the Philippines, there are actually more
pensioners than there are people over 60, presumably reflecting higher life expectancies
and effective retirement before the age of 60 years. The proportion of the total population
who are pensioners is 6.2% in the Philippines and under 3% in Indonesia.
90
142


Insufficient funding
Insufficient infrastructure for social safety net, ineffective welfare
delivery system
Corruption, lack of transparency and leakage of funds are core problems
that stand in the way to fair and equitable delivery of social safety net
programs. These issues are often deeply ingrained and inter-related in an
economy and difficult to address. Transparency in implementation of
social safety net programs is critical and often results in some leakage of
budget. These problems are not limited only to the economies mentioned,
but are particularly damaging where the effects of economic crisis are
already being felt. However, it is estimated that Malaysia, Thailand and
Vietnam are in a better situation with regards to transparency and anticorruption, but all five economies have similar problems with leakage of
funds. The leakage of funds does not necessarily originate with lack of
transparency or presence of corruption; it can be a result of mis-targeting,
low capacity of management, insufficient preparedness and misled public
spending priorities.
For targeting populations with low income, it is necessary to have national
criteria for eligibility established by a nation-wide survey of the minimum
living cost and a measure to identify individual or household income. The
concerned five economies have their own poverty lines, however,
surveying individual or household income from self-employment is
difficult. The self-employed and those working in the informal sector
often underreport their income, and their portion to total population is
relatively high in the economies. To ensure cost-effectiveness and
sustainability, social safety net programs have to undergo improvements
in targeting,91 however, means-tested targeting presents major difficulty
and is not often adequate.
In order to better design and implement safety net programs, reliable data
is needed on who the poor are and where they are. In addition,
information should be collected on whether they are part of an identifiable
vulnerable group and, in the event of a crisis, the main characteristics of
the impact (e.g. falling wages, sharp increases in the unemployed, price
rises etc). In the five economies, such information remains insufficient on
several aspects both at the national level and at the decentralized level,
which is especially important given the complexity and heterogeneity of
91
Reyes, 2001.
143
the phenomenon.92 While there are regular and frequent data on economic
output, prices and international reserves, the data on poverty incidence,
school dropouts and malnutrition prevalence are not as readily available.
The absence of an adequate social monitoring system makes it difficult to
assess the impact of macroeconomic policies and shocks to the social
sector. This also hampers the design and implementation of targeted
interventions to alleviate the adverse impacts of the policies and crises on
the households.93
At the implementing levels, the impact of social safety nets of the
economies is reduced by governance defects such as inadequate budgets
and wasteful, inefficient and unresponsive administrations. It is the poor
who suffer most due to poorer access, reduced bargaining power and
limited influence on local officialdom and service providers.94 The use of
diverse executing agencies has been seen by some as a means of
enhancing the efficiency of service delivery through generating
competition for state funds and through bypassing existing ineffective
state bureaucracy. Others have seen it, however, as amounting to a first
step in the disavowal of traditional social responsibilities by the state.
In order to help inform policy makers on programmatic tradeoffs, as well
as to improve the design and implementation of individual schemes,
safety net programs should be systematically and rigorously evaluated in
terms of targeting efficiency, cost-effectiveness and coverage. Periodic
evaluation of the effectiveness of social safety net programs in meeting
program goals should be given high priority. Many APEC member
economies have carried out some form of program monitoring and
evaluation, but these efforts have not always been timely or sufficiently
comprehensive. The Thai government utilized an independent private
evaluator to assess the programs operated under the Miyazawa Initiative,
and the same firm will evaluate the Social Investment Fund.
2. Possible Areas for Strengthening APEC Social Safety Net Activities
92
93
94
World Bank, 1999.
Reyes, 2001.
Ortiz, 2001.
144
The stocktaking involved in completing this research suggests that the five
member economies have similar problems that are adverse to the
implementation of social safety net programs. First of all, the way to
address the complicated problems, such as corruption, lack of
transparency and leakage of funds, would be to develop a participatory
role for civil society to act as a watchdog for the entire of decision-making
process for social safety net design and delivery. To these ends, the civil
society should be trained in current best practices and problem-solving
experiences through practical hands-on exercises.
Means-tested targeting presents major difficulty. In this case, other
approaches can be utilized such as, categorical and geographic targeting,
community-based targeting and proxy means testing targeting. 95 The
problems of mis-targeting and exclusion of the poor - which are closely
related to low capacity of management and lack of poverty related data are mitigated through more investment in capacity building of civil
servants in charge of social safety net programs.
The availability of timely and reliable information on the poor and
vulnerable groups is critical for the design and implementation of social
safety net programs.96 One key element of effective action is a crisis
response system built on timely and diverse types of information. There is
exceptional case among the five economies. Indonesia’s SMERU (Social
Monitoring and Early Response Unit) is an example of a crisis response
information system.
As to the problems of governance, low capacity of management,
insufficient preparedness and delayed disbursement, the recent social
safety nets have faced opposition from the bureaucracy of existing social
ministries. In response, it has been argued that enabling participation by
local organizations is the surest way to ensure that resources are used
effectively, efficiently, equitably and in keeping with local needs. It has
been argued further that enabling NGOs to demand and execute projects
helps to build their capacities to deliver services, and to heighten their
propensity to make other demands from the state on behalf of their
constituents (especially it is hoped, the poor). Where social safety nets do
not rely upon beneficiaries’ participation, it is argued further, social safety
net activity may fail to reach the poor, or even actually undermine
95
96
Blomquist, 2001.
Ibid.
145
organizations of the poor that already operate.97
Evaluation on social safety net programs should be done periodically to
identify where and how social safety net programs should be modified.
Mexico’s PROGRESA program is a good example. It is undergoing a
formal impact evaluation with external evaluators. Dissemination of the
results of impact evaluations could help raise awareness of the costeffectiveness of the social safety net and to increase the accountability and
political support for successful programs.
Possible measures to improve the implementation of social safety net
programs can be concentrated on building capacity for managing social
safety nets. Similar recommendation can be found in the recently released
study by McGee (2000) and others. Based on the demonstrated need to
strengthen the social safety nets of economies in the region, one option
might be to enhance social safety net function through capacity building.
The recommendation for capacity building comes at an important time.
The concerned economies are in the process of assessing the effectiveness
of social safety net plans formulated in response to the economic crisis.
Furthermore, as international donor organizations call for more effective
expenditure of funds donated for social safety net purposes, it becomes
necessary to address the issues that determine the eventual effectiveness
of these programs.
The international organizations and advanced countries of the world
provide substantial support for economies in the region; US$2.8 billion
for Indonesia and about US$2 billion for Thailand. Also, ODA has been
provided to those economies; in 1999, US$2.2 billion for Indonesia,
US$143 million for Malaysia, US$690 million for the Philippines, US$1
billion for Thailand, US$1.4 billion for Vietnam. ODA is not provided
only for social safety net programs but more than half of the fund is
destined for the social sector including education and health, etc. Key
findings indicate that more effective implementation of social safety nets
programs should have priority over fund raising.
Currently, a number of member economies independently operate social
safety net related capacity building projects such as AusAid; also, a
number of international financial organizations including the World Bank,
ADB, ADBI contribute to these projects. However, this may lead to
97
Reddy, 1998.
146
unforeseen duplicated investment and hence an institutional home for
social safety net-related capacity building which coordinates effective use
of resources and which can act as a clearinghouse is needed.
3. Social Safety Net Capacity Building
In the Second Meeting of the SOM Ad Hoc Task Force on the
Strengthening of Social Safety Nets (28 May 2001 in Shenzen, the
People’s Republic of China), Korea and Thailand presented an overview
of the draft preliminary research paper which takes stock of social safety
nets programs in APEC member economies hit by the 1997 economic
crisis, and existing social safety net activities undertaken by international
financial institutions, as well as by APEC member economies. The
research aims at identifying gaps and missing links between collective
APEC social safety net-related activities and similar undertakings
elsewhere and to suggest possible areas where APEC can contribute to
strengthening social safety nets. The conclusion of the research is that
capacity building is the area where APEC can make a major
contribution.98 As a measure to mitigate the external changes for the
member economies’ domestic areas, a series of APEC reports has already
outlined the importance of strengthening social safety nets. Also, as the
best way to strengthen social safety nets, capacity building has been
repeatedly proposed as a key measure. APEC social safety net-related
capacity building can then provide assistance to strengthen economies’
resilience to socio-economic impacts of external shocks.
APEC member economies’ social safety nets have been studied and some
problems have been found. As indicated in a draft of preliminary research
on social safety nets, capacity building is the most effective solution to
overcome such shortfalls. In this context, capacity building programs
There was a similar project “APEC Economies beyond the Asian Crisis” which was a
two-year project started from the beginning of 1999. This project focused on long-term
prospects of the APEC economies beyond the Asian crisis, highlighting key issues
awaiting the APEC economies in the next few decades. This project was carried out as a
collaborative task led by four lead economies: Japan (growth potentials and project
coordination), Korea (trade and investment), Chinese Taipei (SMEs), and the Philippines
(social policy). The report emphasized the importance of capacity building in APEC
economies to meet the challenges of future growth posed by the Asian crisis and the new
economy. Priority areas of cooperation identified in the report that APEC needs to focus on
included: strengthening markets, e-commerce and technology cooperation, entrepreneurship and SME development, education and life-long learning, and social safety nets.
98
147
proposed by the Ad-hoc Task Force on Social Safety Nets should focus on
developing appropriate solutions to this particular problem.
Major deficits of social safety nets in APEC member economies hit by the
1997 economic crisis result from mis-targeting or exclusion of the poor,
lack of poverty monitoring systems and program evaluation systems,
governance, low capacity of management, fund misallocation, inefficient
welfare delivery system, etc. So, an APEC social safety net institutional
home should prioritize the programs of social safety net-related capacity
building as follows: targeting, monitoring, program evaluation, social
safety net -related management.
In the 2nd Task Force Meeting, member economies agreed on the
importance of social safety net capacity building. Currently, a number of
member economies independently operate social safety net related
capacity building projects such as AusAid; also, a number of international
financial organizations including the World Bank, ADB, ADBI contribute
to these projects. However, this may lead to unforeseen duplicated
investment and hence an institutional home for social safety net-related
capacity building which coordinates effective use of resources and which
can act as a clearinghouse is needed.
Capacity building is described as an idea which is used frequently in the
world of development, but rarely given clear definition. Training is not
capacity building, although it certainly is a component of it. Capacity
building seeks to strengthen the self-adaptive capabilities of people and
organizations, in order that they can respond to a changing environment,
on an ongoing basis. Capacity building is a process and not a product. In
particular, capacity building is a multi-level learning process, which links
ideas to action. Capacity building, in this view, can be defined as
actionable learning. As actionable learning, capacity building
encompasses a number of linked learning processes, the cumulative
impact of which enhance the prospects for individuals and organizations
to continuously adapt to change.99
Capacity building can be developed through the path as follows: i)
establish clear goals for change, ii) assess the knowledge, skill and
organizational demands implied in change, iii) assess current state of
readiness to meet the knowledge and skill demands of change, iv)
determine knowledge, structural and skill gaps between current and goal
99
Terrence, 2001.
148
state, v) actionable learning strategies, vi) monitor movement toward or
away from change goals, vii) anticipate and be prepared to change the
change strategies.
149
VI. Concluding Remarks
As a measure to mitigate pressures placed on member economies’
domestic arrangements by internal and external economic changes, a
series of APEC reports has already outlined the importance of
strengthening social safety nets. Capacity building has been proposed in a
number of key APEC reports as the best way to strengthen social safety
nets.100 According to the findings of reports submitted to APEC, major
deficits of social safety nets in APEC member economies hit by the 1997
economic crisis result from mis-targeting or exclusion of the poor; lack of
poverty monitoring and program evaluation systems; low capacity of
management and governance; fund misallocation; inefficient welfare
delivery system; etc. By addressing the above issues, social safety net
capacity building efforts undertaken by APEC can strengthen economies’
resilience to the socioeconomic impacts of external and internal shocks.
This section provides concluding remarks on strategic options that can be
pursued by APEC to strengthen its existing activities on strengthening
social safety nets in order to make a genuine contribution to strengthening
social safety nets of APEC economies. These aim to strengthen the
conceptual and theoretical basis of social safety nets in APEC as well as
offer a broad range of options for concrete action to individual economies,
APEC as a whole, and APEC fora.
The need for APEC to strengthen its social safety net activities was
underscored by the Asian financial crisis, which exposed the essential
insufficiency of social safety nets in many APEC economies. Furthermore,
the crises caught the crisis-hit economies and their policy-makers
unprepared and off guard and demonstrated shortcomings such as limited
fiscal resources, lack of know-how, and weak institutional capacities. The
financial crisis exposed millions of people in the crisis-hit economies to
unprecedented and unsustainable economic and social hardships that
threatened to unravel the social and political fabric of their societies.
Governments were forced to design often ill-advised policies that were
based on insufficient data and created in haste. It is the finding of this
100
For further information on the importance of capacity building as a means to
improving social safety nets, please see the following reports: Blomquist John, 2001;
McGee T. G., et al, 2000; Armstrong, Jill. Viossat, Louis-Charles, et al., 1999.
150
research that there is clear need to enhance the effectiveness of Social
Safety Net Activities through advances in measurement, targeting,
estimation and program design and execution.
As a result of the preliminary research of the APEC Social Safety Net
Task Force, it is generally accepted that capacity building is the most
effective way to strengthen social safety nets as APEC Member
Economies recover from the 1997 economic crisis and provide against its
recurrence. As the HRDWG has already undertaken extensive capacity
building efforts in economic, training and technological areas, extending
that expertise to social safety net issues is appropriate and feasible.
Capacity building programs are provided on the basis on the major
deficits of social safety nets in APEC member economies hit by the 1997
economic crisis. According to the preliminary research of APEC Social
Safety Net Task Force, the programs should focus on i) identifying the
poor (targeting), ii) monitoring, iii) evaluation, iv) designing social safety
net programs and v) management of social safety net system.
Also, development of pension and medical insurance policies to suit the
unique economic needs of developing APEC member is necessary.
In the case of developing Member Economies, management of the
pension and medical insurance systems covering all people is practically
difficult, due to the comparatively low proportion of wage earners. These
member economies need to develop a new pension and medical insurance
model in order to ensure the provision of welfare to citizens below median
income levels. Utilizing the existing pension projects carried out by APEC,
the pension and medical insurance model to suit the unique economic
needs of developing APEC member economies is to be directed.
151
Abbreviations
ADB: Asian Development Bank
ADBI: Asian Development Bank Institute
AERA: Accelerating Economic Recovery in Asia
AGGI: Advisory Group on Gender Integration
AIM: Amanah Ikhtiar Malaysia
APIS: Annual Poverty Indicator Survey
APEC : Asia-Pacific Economic Cooperation
ARIC: Asia Recovery Information Center
ARMM: Autonomous Region in Muslim Mindanao
ASEAN: Association of South East Asian Nations
ASHI: Ahon sa Hirap
AusAid: Australian Government’s Overseas Aid Program
BULOG: Office of Minister for Food and Horticulture and National Logistics
Agency
CGAP: Cancer Genome Anatomy Project
CHC: Commune Health Clinics
CIDA: Canadian International Development Agency
CAR: Cordilleras Autonomous Region
CAS: Country Assistance Strategies
CBN: Capacity Building Network
CIDSS: Comprehensive and Integrated Delivery of Social Service
DILG: Department of Interior and Local Government
DOH: Department of Health
DOLE: Department of Labor and Employment
DSWD: Department of Social Welfare and Development
DRAP: Enhanced Retail Access for the Poor
EAP: East Asia and Pacific
EASHD: Human Development Unit of the World Bank's East Asia and Pacific
Region
EASPR: East Asia and Pacific Region
EC: Economic Committee
EDNET: Education Network
EPF: Employees Provident Fund
FDI: Foreign Direct Investment
152
FIES: Family Income and Expenditure Survey
GDP: Gross Domestic Product
GDW: Vision Village Movement
GNFA: Government Non-Financial Agency
GOCC: Government Owned and Controlled Corporation
GFI: Government Financial Institution
GSIS: Government Service Insurance System
HD: Human Development
HDI: Human Development Index
HDNSP: Human Development Network Social Protection
HEPR: Hunger Eradication and Poverty Reduction
HIRAM: Helping Individuals Reach their Aspirations through Microfinance
HRD: Human Resources Development
HRDWG: Human Resources Development Working Group
IDA: International Development Association
IMF: International Monetary Fund
IFAD: International Fund for Agricultural Development
IPSR: Institute for Population and Social Research
IRA: Internal Revenue Allotment
JFPR: Japan Fund for Poverty Reduction
JPS-BK: Social Safety Net for Health Sector
KDP: Kecamatan Development Program
LFS: Labor Force Survey
LGU: Local Government Unit
LIL: Learning and Innovations Loans
LSPN: Labour and Social Protection Network
MARA: Majlis Amanah Rakyat
MBN: Minimum Basic Need
MNLF: Moro National Liberation Front
MOF: Ministry of Finance
MOLISA: Ministry of Labor, Invalids and Social Affairs
NAAA: National Anti-Poverty Action Agenda
NAPC: National Anti-Poverty Commission
NCR: National Capital Region
NFA: National Food Authority
NGO: Non-Governmental Organization
NHIP: National Health Insurance Program
153
ODA: Official Development Assistance
OECD: Organization for Economic Co-Operation and Development
OP: Office of the President
OPK: Operasi Pasar Khusus (Special Market operations for Rice)
PAF: Poverty Alleviation Fund
PCFs: People/s Credit Funds
PCFC: People’s Credit and Finance Corporation
PDKMK: Labor Intensive Program
PDM-DKE: Empowerment of Regions to Overcome the Impact of Economic
Crisis
PERNAS: Pernas International Holdings Berhad
PhilHealth: Philippine Health Insurance Corporation
PK: Employment Generation
PKPN-MPMP: National Food Security Program through Farmers Empowerment
PLI: Poverty Line Income
PMT-AS: Supplementary Food for Primary School Students
PNB: Philippine National Bank
PPA: Participatory Poverty Assessments
PPRT: Pembangunan Rakyat termiskin (Development Program for the Hardcore
Poor)
PROGRESA Program: Education, Health and Nutrition Program
PRRM: Philippines Rural Reconstruction Movement
PTIs: Program of Targeted interventions
RMFP: Rural Microenterprise Financing Program
RHU: Rural Health Unit
SBG: Scholarship and School Block Grants for Primary and Secondary Education
SBV: State Bank of Vietnam
SEA: Self-Employed Assistance
SKA: Self-Employed Assistance Kaunlaran Association
SIP: Social Investment Project
SKIT: Female Single Parents Financing Scheme
SMEs: Small and Medium Enterprises
SMERU: Social Monitoring and Early Response Unit
SOM: Senior Officials Meeting
SOCSO: Social Security Organization
SOE: State-Owned Enterprise
SP: Social Protection
SPF: Social Protection Facility
154
SPI: Ikhtiar Loan Scheme
SPIN: Fishermen Financing Scheme
SRA: Social Reform Agenda
SSN: Social Safety Net
SSN-CB: Social Safety Net Capacity Building
SSS: Social Security System
SZOPAD: Special Zone for Peace and Development
TILF: Trade and Investment Liberalization and Facilitation
UCDO: Urban Community Development Office
UN: United Nations
UNDP: United Nations Development Programme
UNFPA: United Nations Popluation Fund
UNRISD: United Nations Research Institute for Social Development
UNSFIR: United Nations Support Facility for Indonesian Recovery
UPP: Urban Poverty Program
USAID: U.S. Agency for International Development
VBARD: Vietnam Bank for Agriculture and Rural Development
VBP: Vietnam Bank for the Poor
VHIA: Vietnam Health Insurance Agency
VLSS: Vietnam Living Standard Survey
VSIA: Vietnam Social Insurance Agency
WFP: World Food Programme
WTO: World Trade Organization
155
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