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Social security policy in Vietnam: Reality and some issues

(LLCT) - The model of social security in Vietnam is the combined form of many different models to generalize many forms of social security from low to higher levels with many different beneficiaries in society. This model is gradually formed and developed in the time of centralized bureaucratic command economy before 1986. The remarkable feature of the social security system before the national renewal is to support specific subjects at that time - meritorious people, people in especially disadvantaged situation, poor people and poor localities. Since the national renewal, all the four pillars of this policy have been implemented.          

1. Conception of social security in Vietnam

In a narrow concept, social security includes monetary annuity, pension, allowance and other aid for meritorious people and people in need.

In a wider concept, social security includes social security in its narrow concept and the programmes to reduce poverty, to regulate labour market and other programmes(1).

Some people think that social security is mainly “social insurance”(2) and can be understood as “the assurance to replace or compensate a part of the labourers’ income when their income is reduced or lost due to illnesses, maternity leaves, industrial accidents, occupational diseases, retirement or death after they have paid into social security fund”(3).

The Law on Social Insurance of Vietnam regulated two forms of social insurance: State-regulated compulsory social insurance that employees and employers have to join and voluntary social insurance that the State organizes but participants can choose the amount and the way suitable with their incomes(4).

The law regulates that the State supports the premium rate to ensure participants’ pension and death allowance.

The Law on Social Insurance (2014) regulates five forms of compulsory social insurance and two modes of voluntary social insurance. The former includes(5): illnesses, maternity leave, industrial accidents and occupational diseases, retirement, and death allowance.

The latter covers: Retirement and death allowance. According to the Law on Social Insurance, Vietnam institutionalizes 5 forms of social security, surpassing the required minimum 3 out of 9 forms regulated in Convention 102 of the International Labour Organization in 1952.

The complete conception of social security is reflected in Resolution 15 NQ/TW dated June 1, 2012 of the Party Central Committee (11th tenure) on “Some issues related to social policy from 2012 to 2020”. The Resolution evaluates achievements, points out shortcomings and specifies the course and the solutions to implement the policies on social security in the coming time(6).

2. The model of social security policy

The four-pillar model of social security policy

This model includes 4 main pillars as follows(7):

(1) The policy to ensure jobs, secure income and reduce poverty in order to help people actively prevent risks in the labour market by training professional skills, credits, securing jobs and minimum income and reducing single-dimensional, multi-dimensional and constant poverty.

(2) The social insurance policy aim at helping people to reduce health related risks due to illnesses, industrial accidents, old age and unemployment through different forms to compensate for a part of lost or reduced income. 

(3) The social welfare policy aims at unexpected and regular support to help people overcome the unexpected misfortunes such as bad harvests or famines.

(4) The basic social services policy supports people to get access to basic social services at the minimum level including healthcare, education, accommodation, fresh water, media and legal support. These polices clearly reflect “the model of social protection floor” when building, enforcing and implementing the policy on social security in Vietnam nowadays.

The model of social security in Vietnam is the combined form of many different models to generalize many forms of social security from low to higher levels with many different beneficiaries in society. This model is gradually formed and developed in the time of centralized bureaucratic command economy before 1986. The remarkable feature of the social security system before the national renewal is to support specific subjects at that time - meritorious people, people in especially disadvantaged situation, poor people and poor localities. Since the national renewal, all the four pillars of this policy have been implemented.         

However, the policy on social security in Vietnam is facing many challenges and barriers in its universalization. For example(8), only two thirds of retired people from formal sector receive pension. The number of workers paying insurance premiums only account for 1% of the whole labour force. Only a small percentage of laborers from informal sectors pay insurance premiums.

The model of social security based on life cycle 

The theory of life cycle shows that the life of a person is a living process including many periods and each period demands certain types of social security. A person’s life can be classified into 4 periods with 4 types of social security respectively:

(1) Pre-school including pregnancy period: this period requires maternity care, childcare and death-related benefits.

(2) School period: This period requires educational welfare such as scholarship, orphans allowance and death-related benefits.

(3) Youth period: This is a transitional period into labour force with the risks of unemployment, illnesses, accidents and it requires correlative social welfare policies to support young people.

(4) Working age period: This period requires almost all social welfare policies from ensuring a job and an income, reducing poverty to unexpected and regular allowance, social insurance, medical insurance, retirement insurance and other basic social services. 

(5) Old age: This period requires pension and old-aged allowance

The analysis of social security based on life cycle in Vietnam shows that “not all periods in a person’s life cycle are supported... The social security system misses out the middle group”(9). The majority of people, especially the workers in the informal sector, are not fully ensured social welfare and most of these people are not eligible to receive pension when entering retirement period.  

3. Reality of social security policies

Legal documents

Currently, there are 146 effective documents related to social security (1997-2013)(10). The documents in the category of “Basic educational support” - Decision 1121/1997/QD-TTg dated December 23, 1997 by the Prime Minister on scholarship and social allowance for students at public schools were promulgated the earliest and remain effective until now. The social security documents are not promulgated evenly: from 1997 to 2005, there were 11 documents but there were no documents in 1999, 2001 and 2003. Other 135 documents were promulgated from 2006 to 2013, an average of 16-17 documents a year with the higher number of 31 documents in 2013. 

Form of documents

Among the 146 documents, one is the Resolution of the Party Central Committee (Resolution 15/NQ-TW dated June 1, 2012 on some social policy issues in the period from 2012 to 2020) and 5 are laws: Law on Protection, Care and Education of Children (2004), effective since January 1, 2005; Law on Prevention of HIV/AIDS in 2006, effective since January 1, 2007; Law on Social Security (2006, 2014), effective since January 1, 2007; Law on the Elderly People (2009), effective since July 1, 2010; Law on Medical Insurance (2006, 2016).

Groups of social security policies

Among these 146 documents, two documents related to general social welfare are Resolution 15/NQ-TW dated June 1, 2012 on some social policy issues in the period from 2012 to 2020 and Resolution 70/NQ-CP dated November 1, 2012 of the Government on the Government’s action plan to implement Resolution 15/NQ/TW. The rest 144 documents are divided into 4 groups of social security policies, as follow:

Creating jobs and raising income for laborers: 33 effective documents (2001-2013);

Poverty reduction: 14 documents (2005-2013);

Social insurance: 5 documents (2006-2012);

Supporting vulnerable groups: 18 documents (2000-2013), divided into two subgroups: 16 for social support (2000-2013) and 2 for unexpected risk support due to natural disasters and market risks (2010-2011);  

Supporting people to get access to minimum basic social services: 74 documents (1997-2013), divided into 5 subgroups: 29 documents for supporting minimum basic education (1997-2013), 15 documents for supporting minimum basic healthcare (2002-2013), 13 documents for supporting accommodation (2008-2013), 7 documents for supporting access to clean water (2006-2013) and 6 documents for ensuring media information to the poor (2006-2013).

In reality, Vietnam has invested in carrying out social security policies in both narrow and wide concepts. In its wide concept, social security includes 9 policies: poverty reduction programmes (National programme for sustainable poverty reduction, Programme 135 and 30a) and poverty reduction policies (except supporting education and health insurance); programmes for labour market regulation (vocational training, guest workers and jobs), social and unemployment insurance (pension for people retired before 1995 and support for optional insurance); support for buying health insurance; support for electricity bill for the poor; support for education (tuition remission, scholarship, boarding and lunches); social assistance; unexpected allowance; social support (monthly support in terms of cash based on Decrees 67, 13, and 136).

In its narrow concept, social security includes various allowances(11): monthly monetary allowances, unexpected allowance in cases of natural disasters; allowance for the low-income people; electricity bill support (since 2011); social insurance including pension for people retired before July 1995 paid by the state fund and pension for people retired after May 1995 paid by Vietnam Insurance, allowance for meritorious people, support for civil services in disadvantaged areas; support for building flood prevention works, and resettlement of ethnic groups (since 2009); support for making socio-economic development plan in rural areas since 2009); allowance for communes bordering Laos and Cambodia (since 2009); support for building new rural areas (since 2010); support for aquaculture in islands (since 2010).

Right in its narrow concept, social security tends to open to include programmes for poverty reduction, infrastructure construction in rural areas and construction of new rural areas.

The total budget for monetary allowances, pension and others accounts for 4% of GDP and stays unchanged between 2007 and 2011, among which the social insurance allowances including pension account for over 50% despite the decrease from 2.7% to 2.3%, allowances for meritorious people reduce from 1% to 0.9%, monetary support doubles from 0.2% to 0.5% and others trebles from 0.1% to 0.3%. 

4. Results of the implementation of social security policies

From the angle of State’s investment

By the end of 2015, the implementation of the four pillars of social security policies has recorded many achievements(12):

Labour, jobs and poverty reduction: The national programme of creating jobs and occupational training has created jobs for 320,000 people each year, grant credit terms to the disabled, people of ethnic groups and people whose farm land was taken to develop production, business or get jobs; creating jobs for 1,625,000 people with 1,510,000 jobs in Vietnam and 110,000 fixed-term jobs abroad, the proportion of agricultural labour (include forestry and aquaculture) decreases to 43%, the unemployment rate decreases to 2.3% nationally, the unemployment rate in the urban area reduces to 3.3% and the unemployment rate among the young stays high at 6.8%. 

One of the most remarkable results of the social security policies is the fast decrease of poverty. On the national scale, this rate reduces to 5% and the proportion of poor households in poor districts decreases to below 28%, which is favourable for reducing multidimensional poverty and getting rich.

Social insurance and unemployment insurance: nationwide, 12,166,000 workers (accounting for over 24% of the labour force) join social insurance, among whom 11,912,000 people join compulsory social insurance and 254,000 people join optional social insurance. The total number of people who receive social insurance is 2.8 million people a month. The total number of people who join unemployment insurance is 10,185,000, accounting for 20.2% of the labour force. The unemployment insurance fund has paid 4,800 billion VND for over 600,000 people.

Social assistance: 31,000 tons of rice has been given to 2.1 million people in 21 provinces including Nghe An, Quang Ngai, Thanh Hoa, Binh Dinh, and Quang Binh. Monthly allowances and health insurance cards have been given to more than 2,643,000 people, including 37,348 orphans, 88,594 poor single parents, 1,480,000 over 80 years old, 896,644 disabled people. A system of 408 bases of social assistance is established to bring up and take care of over 41,400 people, of whom 56.5% are the disabled and those with mental illnesses.

Basic social services ensuring minimum education: 97.93% of the 5-year-olds and 86.61% of the 4-year-olds go to kindergarten; 98.69% of children start school at the required age; 90.89% of children go to secondary school at the required age; 62% finish high school; 60% of disabled children go to school; 250 out of 10,000 people are students; 99% of people over 15 are literate. The vocational education system includes 1,467 vocational schools with 190 vocational colleges, 280 vocational secondary schools, 997 vocational centres and over 1000 places with vocational training, which admit nearly 2 million people and support 550,000 with vocational training. The percentage of workers who are trained reaches 51%, among which 38.5% receives vocational training.    

Minimum healthcare services: 98.4% of the communes has active medical stations, 96% of the villages has medical workers; 80% of the communes has doctors; 50% of the communes reaches national standard of communal medical care; 95% of the communes has obstetricians or midwives; medical insurance covers antenatal examination and childbirth at communal medical stations. The percentage of malnutrition children under weight reduces to 14.1%; this percentage for under height reduces to 24.2% and the percentage of maternal mortality rate (live births) reduces to 58.3 out of 100,000; the mortality rate among children under one year old reduces to 14.7‰. Nearly 70 million people take part in medical insurance accounting for 76% of the population, among which 11.796.000 people are poor or of minor ethnicities and 2,992,000 are just above poverty line.   

Minimum accommodation is ensured. By the end of 2015, support has been given to 7,600 poor families in 7 provinces in the Northern Centre and the Central Coast to build houses to avoid storms and floods. Under the programme of constructing social housing for workers in industrial zones, 28,550 flats have been built and 69,300 flats are underway. In the housing programme for low-income people in urban areas, 25,850 flats have been built and 61,290 flats are being built. In the housing programme for students invested by the Government’s bonds, 200,000 students are supported, accounting for 80% of the housing demand.   

Clean water is guaranteed. Over 1,000 clean water facilities have been built; the percentage of people in rural area who can get access to clean water increases to 86% and the percentage of people who can get access to clean water of the Ministry of Medicine’s standard reaches 45%.

Information access is maintained: By 2015, the percentage of communes with public telephone stations reaches 97%; the proportion of communes with cable transmission line is 96%; the network of post offices is maintained with about 16,000 transaction points, among which 7,640 are communal cultural post offices; 24 kinds of publications with over 40 million copies are provided free of charge for ethnic minority people in mountainous areas and especially disadvantaged areas.

However, social security in Vietnam is facing many challenges, one of which is the cumbersome system with over 230 overlapping documents promulgated and implemented by the Party, the National Assembly, the Government and different ministries and branches(13). Other challenges originate from the difficulties and barriers to reach the objectives, quality, effectiveness, coverage, social support and the participation of the related sides in promulgating and implementing social security policies. Facing the issue, many directions and solutions to perfect the policies are introduced such as promoting economic renovation to increase GDP and increase expenditure from national budget on social security to the average level in the Southeast Asia (7% GDP).

From the angle of household income

The social security system is built to reduce poverty and inequality, prevent risks and promote development(14). Therefore, in order to evaluate fully, objectively and appropriately the quality and effectiveness of the social security system, it is necessary to have a people-based perspectives. The question is what people and households gain from social security. A bigger question is how social security progresses. The hypothesis and paradox is that what people benefit from social security in terms of absolute and relative values is small and retrogressive. Based on findings from a survey on the living standard of Vietnamese households in 2004, researchers define the components and income structure from social welfare(15) of the households. Specifically, the income per capita is 6.1 million VND per year, among which the income from social security accounts for 4% or 264,000 VND. The income from social security includes 6 components: educational, medical allowance, social insurance of the employed people, social welfare and social insurance - pension). The social insurance - pension accounts for the greatest proportion with 61.8%, medical allowance 22.6%, social welfare 9.2%, social insurance for the employed people 1.6%. These numbers show that the social security policies have missed out the people in the working age and paid too much attention to the people in the retired age. The three-component social security polices reflect that Vietnamese households’ income from social security is mainly from pension and social insurance for the employed people with 63.4%, educational and medical allowances 27.4% and social welfare 9.2%.     

The households in different regions receive different incomes from social security. The income from social insurance - pension gradually reduces from Northern mountainous areas to the Mekong river delta.

Both the income and the proportion of income from social security of the households in the urban areas are higher than those of the households in the rural areas. Specifically, the income from social security per capita per year in the urban areas is 10.2 million VND, twice as much as 4.7 million VND in the rural areas; the proportion of the income from social security in the urban areas is 166%, twice as much as the percentage of 78% in the rural area.  

The average income per capita of people of Kinh and Hoa ethnicities reaches 6.6 million VND per year, which doubles the amount of 3.1 million VND per year of ethnic minority people. However, the proportion of income from social security in the total income of these two groups of ethnicities is similar: 4.3% and 4.2% respectively.

Comparing the average income per capita of the rich and poor households can show the cumulative tendency of social security in Vietnam. The average income per capita of 20% richest families reaches 15.8 million VND per year, 8 times as much as the amount of 2 million per capita per year of 20% poorest families. The proportion of income from social security per capita of the poor families accounts for 3.4% of the total income, less than the proportion of 4.2% of the rich families.  

“The paradox of social security” is reflected clearly through the comparison of the proportion of social security allowance that the rich and the poor families receive (2004). The poorest group receives 6.6% of the total expenditure of social security, equivalent to 70,000 VND per capita per year while the richest group receives 39%, equivalent to 660,000 VND per capita per year(16).

Theory and reality show that the model of the social security in Vietnam is varied with many components which are interleaving, overlapping and complicated. In fact, social security is implemented in both wide and narrow conception with social investment increasing proportionally with economic growth. However, looking from the people’s point of view, the absolute value and the proportion of income from social security are small and unbalanced. These problems require the construction of laws on social security and criteria to effectively implement the social security policies. 

______________________

(1), (9), (10) UNDP: Growth for everyone: The development of human resources report in Vietnam in 2015 on inclusive growth, Social Sciences Publishing House, Hanoi, 2016, pp.127-128, 119, 120-124.

(2) Ministry of Labour, War Invalids and Social Affairs (2013) cited from the Research Centre of Development: Checking the policies of social connection in Vietnam, OECD, Development Center, 2014, p.139.

(3), (14), (15), (16) Martin Evans et al: How does social welfare in Vietnam progress?, UNDP, Hanoi, 2007, p.1, Asian Development Bank and Donors, Development Report of Vietnam, 2008: Social sponsorship, Hanoi, 2007.

(4), (5), (6) The Law on Social Insurance was approved by the 13th National Assembly of the Socialist Republic of Vietnam at its 8th session on November 20, 2014, effective since January 1, 2016.

(7) Resolution 15-NQ/TW “Some issues relate to social policies between 2012 and 2020”, June 1, 2012.

(8) ILISA - GIZ: The system of developing social security in Vietnam between 2012 and 2020, Hanoi, 2013, p.53; UNDP, Growth for everyone: The development of human resources report in Vietnam in 2015 on inclusive growth, Social Science Publishing House, Hanoi, 2016, p.113.

(11)ILISA - GIZ: The system of developing social security in Vietnam between 2012 and 2020, Hanoi, 2013.

(12), (13) Nguyen Trong Dam: “Ensuring people’s right to social security” Communist Review Online, July 22, 2016.

 

Prof., Dr. Le Ngoc Hung

Dr. Nguyen Ngoc Anh

Ho Chi Minh National Academy of Politics

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