Program Area: 2.20

Project Proposal

SCD/02/009

STRENGHTENING SOCIAL SECURITY/SOCIAL PROTECTION

AND

INCLUDING THE EXCLUDED

STRENGHTENING SOCIAL SECURITY/SOCIAL PROTECTION

AND INCLUDING THE EXCLUDED

Background, Problem Analysis and Rationale:

Rapid technological advances have brought about an increasingly globalized world economy that has brought dramatic benefits in some countries as well as increased vulnerability in many peoples throughout the world. The financial and economic crisis experienced by many Asian countries has shown a lot of these weaknesses including the governments’ difficulty in assisting people whose lives have been rendered precarious by the ill effects of the crisis. Further, the crisis has shown the inadequacy of social protection mechanisms available in these countries particularly for those people in the informal sector, the women, the out-of-school youth, the unemployed, older persons and the disabled.

Social protection, which centres on the concept of social risk management and the ensuing reduction in vulnerability and increased security, may come in the form of labour market interventions, social insurance (including pensions), and social safety nets (including social funds). It is about human capital-oriented interventions that assist individuals, households, and communities to reduce vulnerability by managing risk better. It is also about providing support to the incapacitated poor.

The social risk management framework, however, goes beyond social protection since it includes:

  1. Interventions outside the public sphere such as personal or family-based actions to deal with risk;
  2. Areas that are not related to human capital including infrastructure projects to reduce effects of drought and other crisis situations, economic policies to reduce macro-economic shocks, etc.; and
  3. As framework for poverty reduction to give voice to the poor, security (protection from risk) and opportunity.

Social protection interventions and social risk management are seen to be important agents of social solidarity, social cohesion and social stability. For countries in the ASEAN, building on local strengths, and extending, expanding and complementing existing informal arrangements with formal, market-based and government-provided arrangements would be a practicable way to proceed.

An important aspect of social security is protecting the worker from redundancy and retrenchment and consequent loss of income and social protection in the wake of industrial restructuring as many enterprises are closed /down sized/privatised, and labour volume and structure are adjusted to suit the needs of technological up gradation and productivity. Unskilled/lower skilled persons, women, older persons are effected the most. Separation payments other than provident funds and pensions cushion the impact somewhat but are seldom-sufficient protection against the loss of working status, erosion of social status and loss of regular income. Rehabilitation of the retrenched in the world of work, whether in wage or self-employment, remains a major concern of the governments. Retraining is an important strategy for the purpose but institutional mechanisms for meaningful planning and implementation are seldom adequate. Many workers are forced to enter the informal sector, which is generally overcrowded and productivity and incomes are low.

Yet another aspect of social security and including the excluded, perhaps even more important, is improving productivity and incomes of persons engaged in the informal sector. This sector is often the dominant provider of employment and also contributes a significant part of the national GDP. Labour productivity, however, is very low in the absence of meaningful inputs of technology, skill training, policy support and institutional mechanisms for such aspects as financing and marketing. Intervening in the informal sector through the inputs mentioned above would not only improve the income levels of informal sector workers but also make an important dent in the problem of poverty and assist social restructuring and empowerment of the poor, the rural masses, the women, the under privileged and the disabled.

A high level China-ASEAN Seminar on Social Security: Opportunities and Challenges in the Field of Social Security in the 21st Century, held in Haikou City in November 2001 considered the issues and “recommended that cooperation initially focus on the following clusters of common concerns arising from the seminar:

1)Preparing for the impact of globalization/trade liberalization and economic restructuring on labour/employment, unemployment and poverty, particularly regarding the provision of social security/social protection, including issues common to countries making the transition to market economy and labour mobility;

2)Expansion of the coverage of social security/social protection systems to the informal sector, agricultural sector and non-formal sector workers;

3)The impact of population ageing on the social security/social protection systems/healthcare systems and implications on sustainability and provision of services; and

4)Strengthening the management and administration of social security systems, including issues concerning fund management, sustainability and privatization.

On the modalities and mechanisms for cooperation the seminar recommended that further cooperation could be affected through the following means involving research institutes, governmental agencies, private sector and other related institutions:

1)Exchange of information/networking through regular seminars (preferably on an annual basis);

2)Exchange of officials/attachment visits focussing on specific issues of priority at both policy and technical levels;

3)Collaborative research on issues of priority; and

4)Sharing of training courses/resources.

The CLMV countries have more recently started dealing with economic reforms and are in the process of emerging from the centrally planned economic systems. As labour market rigidities are relaxed and enterprises are free to rationalize their workforce in response to their restructuring plans, the labour is in need of social protection measures such as retirement payments, separation payments, provident funds and disability pensions. While some of these measures exist in certain measures among the CLMV countries, the general environment of social protection requires particular attention and strengthening. Retraining, as pointed out earlier, can be an important source of social protection in as much as it may protect their current jobs longer, permit their adjustment in other areas of current/future activities of the enterprise, and prepare them for adjustment in external labour market –whether formal or informal. Unfortunately the current systems for retraining, whether on-the-job or off-the-job are inadequate to deal with the emerging dimensions of the problem. Policy framework in support of retraining, financial mechanisms to support retraining initiatives and supporting the trainee during the training period, newer methodologies for delivering training inputs to low –educated workers, capacity to identify changes in skill requirements of the labour market, training of trainers, etc, are some issues which also have to be addressed in the context of providing social protection to the labour. The project will give special attention to the needs of the CLMV countries while dealing with the overall issue of social protection and social risk management within the ASEAN.

Regionality

The problem applies with different degrees of severity to the entire region but is particularly important for CLMV countries which are making transitions to market economies. Solution of the problem requires action by all the countries in as much as sharing of experiences will benefit all including the CLMV who stand to gain even more.

Participation

All ASEAN countries including the CLMV.

Beneficiaries

The first and foremost beneficiaries will be labour. The other would be the enterprises since availability of social protection would reduce resistance to labour rationalisation and enterprises will be freer to respond to changing opportunities. Countries, particularly those who are making a transition from centrally planned to more market economies will benefit also in as much as the social and political fall-outs of restructuring and economic reform would be greatly mitigated. ASEAN as a whole also benefits through better integration of policy frameworks which in turn would promote closer economic cooperation.

Commitment and Sustainability

It is generally recognised that movement towards greater social security/ social protection to labour would facilitate the task of accelerating economic growth. Accordingly countries are keen to understand the implications and institute successful experiences consistent with their own current contexts.

Objectives:

For the ASEAN region as a whole but, with special reference to the needs and contexts of CLMV countries, the project objectives are:

1)To build capacity for establishing national systems of social protection or social risk management that build upon local strengths and existing formal and informal mechanisms;

2)To establish mechanisms that reduce the probability of a downside risk during times of economic downturns;

3)To establish mechanisms that decrease or cushion the potential impact of a future crisis;

4)To establish mechanisms that relieve the impact of the crisis once it has occurred;

5)To ensure care and protection of those rendered vulnerable in times of economic shocks and crisis

6)To establish a policy framework and institutional mechanisms for rehabilitation of the redundant and retrenched workers as enterprises continually adjust and restructure their labour force. Also examine the possibility of instituting a National Renewal Fund which would help enterprises finance separation payments to retrenched workers and organise retraining for its current workers with a view to keeping their skills relevant to the emerging requirements of the enterprise and thus protecting them from redundancy and retrenchment in future.

7)To build national capacity to provide retraining to retrenched workers and also develop a framework of policies, strategies and institutional mechanisms for training and skill up-gradation of informal sector workers.

Proposed Outputs
  1. Handbook of social protection/ social risk management of systems in the ASEAN countries;
  2. Directory of services in social protection/ social risk management and institutions in ASEAN handling such services;
  3. Identified needs of CLMV countries; and
  4. Paper on policy options and follow-up actions for adoption by the ASEAN Labour Ministers.

Activities:

1. Prepare a comprehensive issues-paper on social protection/social risk management. This would be prepared by a consultant and cover the following aspects among any others:

  1. Delineate the issues bringing out the criticality of the issues, in particular to sustaining economic reforms, mitigating social risks and promoting meaningful social development, with particular reference to the contexts and needs of CLMV countries. The paper would address the following issues in particular: impact of globalisation/trade liberalization and economic restructuring on labour/employment, unemployment and poverty, and provision of social security/social protection, keeping in view issues common to countries making the transition to market economies and those relating to labour mobility; expansion of the coverage of social security/social protection systems to the informal sector, agricultural sector and non-formal sector workers; impact of population-ageing on the social security/social protection systems/healthcare systems and implications on sustainability and provision of services; and strengthening the management and administration of social security systems, including issues concerning fund management, sustainability and privatisation.

An important concern would be to deal with the issue of how workers could be prepared for employability in the face of economic shocks and learn from past practices in training/job creation and safety nets for workers. The review of the economic crisis in 1997-98 revealed a diversity of negative labour market effects (lay-offs, dismissals, higher unemployment, lower income) upon ASEAN member countries. Individual countries responded in varying degrees depending upon the extent of their vulnerability. There were very clear contrasts in the region. The CLMV group of countries that were in the process of transition from centrally planned command economies were less affected by the economic crisis due to their relatively low exposure to international trade. The rest of ASEAN which have more open but vulnerable market were affected relatively more. The crisis resulted in closure and bankruptcies, mergers and lay-offs. The employers responded through lay-offs, downsizing and reduction of over time allowances and other benefits.

The paper would take into account the nature of impact of the economic crisis of 1997-98 of the labour markets of the ASEAN countries, mainly with a view to understanding the typology of responses of labour market adjustments. The paper would also study the “best- practices” which countries adopted in responding to labour market changes. The purpose would be to identify practices that are most effective in minimising adverse impact on employment of labour. The possibilities in terms of social dialogue, human resource development through re-training and multi-training, employment and job creation, labour market information system should be examined in that context.

  1. Project international experiences on how these issues have been/ are being handled, and what policy measures and institutional arrangements are needed for the purpose.
  2. Delineate the concepts and functioning of such interventions tried elsewhere: the National Renewal Fund, Employment Insurance model of Japan and RoK, proposed Unemployment Insurance Scheme of Vietnam and, examine the potentialities of their adoption backed by an analysis of the pros and cons of each.
  3. Examine, with particular reference to CLMV countries, the potential benefits and implications of instituting such protection measures as retirement payments, provident funds, and disability pensions, using for reference in addressing such issues, the experiences of ASEAN Six.

2. Prepare another paper on the issue of Retraining for the Rehabilitation of the Redundant and Retrenched Workers. This paper would be prepared by a consultant and cover the following aspects among others:

  1. Training and retraining of enterprise workers as a strategy for protecting their employment status within the enterprise as the enterprise undergoes technological restructuring and, for assisting their absorption into external labour market in the eventuality of their becoming redundant with reference to the changing needs of the enterprise. In this context examine the potentiality of instituting a Skills Development Fund taking into account the experiences of similar funds in some ASEAN and non-ASEAN countries.
  2. Retraining of workers for skill-adjustment and retention within the enterprise as the enterprises adjust in response to ongoing economic restructuring.
  3. Retraining of redundant workers to help them adjust in external labour market
  4. Retraining of older workers who have entered the informal sector after retirement from formal sector enterprises.
  5. Needed retraining policies and institutional arrangements at the national level, enterprise level and the level of training institutions
  6. Constraints and limitations in organising such training and examples of successful international experiences.
  7. Training for the informal sector- how it is different from training for the formal sector in terms of target group characteristics, nature of training, training methodologies and delivery mechanisms. The paper would outline the needed policy framework, strategies, and organisational arrangements and the issue of financing training, and resource mobilisation.

In preparing the paper account would be taken of the recommendations of the symposium-workshop on Preparing Workers for changes in the labour market: the ASEAN experience (October 2001), and the existing status of follow up of the recommendations.

3. Share information and best practices on social protection/ social risk management through a regional workshop at which apart from tripartite participation representation of civil society organisations concerned with social protection/social risk management will be secured.

The Consultant on Social Protection/Social Risk Management will produce the background paper referred to at point 1 above and the consultant on Retraining for Rehabilitation of Redundant and Retrenched Workers and Training for the Informal Sector will produce the paper referred to at point 2 above. They will act as resource persons during the workshop, help develop recommendations and produce a report for circulation to member countries for their consideration and action.

As part of the sharing of information and best practices, a Handbook of Social Protection/ Social Risk Management Systems and Practices of ASEAN countries will be prepared and circulated. Best practices and case studies will be documented. The consultant will develop guidelines for documentation and provide some samples as models for writing best practices and case studies. Resource persons from different member countries will be commissioned for the writing. After the first handbook has been published one member country will be identified to coordinate preparation of future issues. Alternatively ASEAN Secretariat may coordinate this effort.

A Directory of services in social protection/social risk management and institutions in the ASEAN providing such services will also be brought out following a similar approach.

4. Annual Regional Conferences: With a view to maintaining the thrust, stimulating national actions and developing common regional perceptions and initiatives, every year a regional conference will be organised on one selected major theme relating to the priority area of social protection/ social risk management, retraining for rehabilitation and, informal sector training. The purpose of the seminar would be to take an in-depth look at the chosen theme, review international and regional experiences, identify topics for collaborative research, and identify opportunities for other collaborative actions to deal with the concerns. An identified member country will host this. The background paper will be prepared through a consultant for discussion at the conference. Output of the conference will be circulated to member countries for further consideration and action. The theme of the next year’s conference and the name of the next host country will be decided at the conference.