Vietnam

Vietnam has succeeded in translating economic growth into poverty reduction in recent years. Despite low per capita GDP the country enjoys infant mortality rates, life expectancy, and adult literacy levels at par with richer countries like China and

Thailand

. However, over one third of the population is poor or near-poor, and inequality and marginalization of certain vulnerable groups have increased.

	Vietnam	China	Thailand
Life expectancy at birth (years)	70.5	71.6	70.0
Adult Literacy rate (percent ages 15 and above)	90.3	90.9	92.6
Infant mortality rate (per 1,000 children)	19	30	23
GDP per capita (PPP US $)	2,490	5,003	7,595
GDP per capita (PPP US $) rank minus HDI rank	16	11	-7

Social protection in

Vietnam

has changed substantially since the introduction of Doi Moi. The social protection system that has evolved since decollectivization is comprised of numerous initiatives, mandated centrally but implemented locally. Long an important function of old cooperatives, social assistance is limited in wide stretches of the country. The most prevalent source of social protection remains the informal network of family and social groups.

Vietnam has an extensive social security and safety net system by poor country standards. However, the bulk of the population is not covered by formal social protection and the poor have benefitted increasingly less from it than the better-off strata. Emerging challenges have added to the pressure to reform the system. Since Doi Moi, the Vietnamese economy has changed significantly. Accession to the WTO by January 2007 signals the progress achieved in moving from a command economy to a socialist-oriented modern market economy.

As a result the Vietnamese social protection system is in the midst of a dramatic transformation. The Government has recently embarked on the process of reforming the system to make it adequate for a socialist market-oriented economy, with the overarching goal of leading the country to the middle-income status by 2010.

The World Bank has been providing support and assistance to the Government in drafting the new Social Security Law passed in 2006. As part of this exercise, World Bank specialists have assisted the Government in: (i) assessing current regulations with an international perspective; (ii) designing a sustainable social security fund; (iii) conducting a survey of needs for voluntary insurance among those not covered by the compulsory scheme; and (iv) evaluating the impact of increased social insurance contributions on labor demand and wages.

The recommendations made by the World Bank aimed to address many of the system’s gaps , particularly those related to coverage of the voluntary scheme and to the sustainability and management of the pension system. However, the new law has not incorporated many of the recommendations, which are expected to feed into the implementation stage.

This note aims to provide an overview of the social protection situation in

Vietnam

as a basis for future work. It describes the main social protection programs currently in place, identifies some of the major gaps and the Government priorities to address them, and suggests options for donors and the World Bank to support and assist the Government going forward.

A World Bank team comprised of both poverty reduction/economic development and human development staff is assisting the Government in health insurance reform. In collaboration with ADB and WHO, a comprehensive policy analysis program currently under preparation will assist the Government in drafting the health insurance law.

This work will have a specific focus on human resource development and financial sustainability issues, two of the Government’s key concerns. Different relevant Government agencies have conflicting positions concerning the appropriate balance between pursuing increased coverage and establishing affordable premium levels. The World Bank will assist the Government in assessing the suitability of different alternatives.

This analytical and advisory activity (AAA) will also aim to help improve coordination among different agencies through a Policy Advisory Committee.

Assisting in the Design of the Retrenchment Compensation Packages and Fund for SOEs Workers (in progress)

The World Bank is assisting the Government in the design of retrenchment compensation packages and a fund for State Owned Enterprises (SOEs) workers. The World Bank has been supporting the Government to revise and update the benefit package using the Downsizing Options Simulation Exercise (DOSE) tool and data from the 2004 household survey. The Government has just decided to use the same fund to support workers who become redundant as a result of the restructuring of State-owned farms and forests, which brings new design complications. The Bank will continue assisting the Government during the next eight to nine months to adjust the fund’s design for this purpose.

Capacity Building for Analysis of Wage and Social Insurance Policies (in progress)

The World Bank is also working with the Government of Vietnam to align labor market regulations with the WTO rules. Recent wildcat strikes have exposed the weaknesses of the minimum wages system that has different mechanisms in place for domestic companies, foreign-invested enterprises and SOEs.

The World Bank started supporting and assisting the Institute for Labor Studies and Social Affairs (ILSSA) to produce solid evidence on how the various wage setting mechanisms in force at present are working in practice, to identify their strengths and weaknesses, and to make recommendations for the design of the new system.

The activity should provide guidance on possible rules to revise minimum wages, to revamp the collective bargaining framework and to adjust government pay. The Bank’s team will continue supporting and assisting ILSSA through a Capacity Building for Analysis of Wage and Social Insurance Policies activity aiming to enhance the capacity and effectiveness of ILSSA to conduct policy-oriented analysis through providing timely and effective analytical inputs to MOLISA’s Policy Departments. The grant will also aim to strengthen two-way link between ILSSA’s analytical work and MOLISA’s decision making in relation to wage policies and pension issues.

For countries attempting to reach the last 10 percent to 15 percent of children not enrolled in primary education, addressing the needs of children with disabilities is particularly important, since they are often the last considered. However, due to a lack of data, governments are unsure about how to identify and scale up best practices.

This project, part of the Netherlands partnership program, will help build local capacity for collecting real-time data on children with disabilities that can be used to monitor education services and evaluate the impact of interventions intended to improve them. Ongoing disability data collection that is built into countries’ own Education Management Information Systems is needed because survey data – which is usually scarce and of poor quality – is too expensive and generally not suitable for monitoring and evaluation in national programs for a relatively small, hard to identify group.