Paper prepared by Dr. Sadiq Ahmed, Vice Chairman, Policy Research Institute (PRI) of Bangladesh Email Address: [email protected]. Social Protection.

Paper prepared by Dr. Sadiq Ahmed, Vice Chairman, Policy Research Institute (PRI) of Bangladesh

Email Address: [email protected].

Social Protection StrategiesPresent Status and Future

Issues

Contents

• Background

• Progress with Poverty Reduction

• Current Social Security Programs in Bangladesh• Proposed Reform Strategy for Social Security

• Poverty Impact of the Reformed SSS

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1. Background

Bangladesh has made impressive progress in poverty reduction;

Since independence, Government of Bangladesh has initiated various social safety net programs which have helped the poor and near-poor to address the downside risks and shocks that affect their well-being;

Household Income and Expenditure Surveys (HIES) suggest that the coverage of these programs for the poor and vulnerable households has increased. But data also suggest that a large proportion of the poor and vulnerable households do not have any access to these programs;

The average benefit of safety net programs is low and falling in real terms. There is considerable leakage of allocated funds and a substantial percentage of household beneficiaries are non-poor;

As a result, the impact on poverty reduction from the amount of money spent in safety net programs is much less than is possible with a better Social Security system.

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2. Progress with Poverty ReductionPoverty Reduction 2000-2010: •There has been a rapid decline in the rate of poverty measured in terms of the percent of population falling below the upper poverty line (UPL). •Poverty incidence declined from 48.9% in 2000 to 40% in 2005 and 31.5% in 2010. Commensurately, the percent of the extreme poor, defined as population below the lower poverty line (LPL), fell from 34.3% in 2000 to 17.6% in 2010.

Figure 1: Trend in Poverty Reduction, 2000-2010

Source: Bangladesh Bureau of Statistics, HIES 2000, 2005, 2010

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Progress has also been made in reducing the depth of poverty. Figure 2 shows the depth of poverty and the consumption gap (measured by the ratio of the depth of poverty and the total headcount poverty rate). There has been a continuous narrowing of this consumption gap between 2000 and 2010. Thus in 2000, the poor on average consumed 26 percent lower than the basic needs consumption basket defined by the poverty line. This gap narrowed to 23 percent in 2005 and 21 percent in 2010.

2. Progress with Poverty Reduction (cont.)

Figure 2: Depth of Poverty and Consumption Gap (%)

Source: Bangladesh Bureau of Statistics, HIES 2000, 2005, 2010

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Poverty Reduction during the Sixth Plan : The Sixth Plan sought to reduce head-count poverty from 31.5 percent in 2010 to 22.5 percent by 2015.

Since there is no survey based evidence on what has happened to poverty since 2010, projections are made based on the relationship between GDP growth and poverty reduction during the two most recent years for which HIES data are available: 2005-2010. A similar conclusion is reached independently by the World Bank in their 2013 Poverty Report (World Bank 2013).

2. Progress with Poverty Reduction (cont.)

YearPoor (Head Count Poverty with

Upper Poverty Line (%))Extreme Poor (Head Count with

Lower Poverty Line (%))

2011 30.1 16.5

2012 28.7 15.4

2013 27.4 14.4

2014 26.1 13.4

2015 24.9 12.6

Table 1: Projected Reduction in Poverty during the Sixth Plan Period (%)

Source: GED estimates based on 2005-2010 GDP-Poverty Relationship

The above record of progress with poverty reduction is a major achievement which reaffirmation that the development strategy is appropriate and on track. Nevertheless, the poverty challenge moving ahead remains enormous for several important aspects, bearing in judging the adequacy of the Social Security System. First, some 25 percent of the population (42 million) in 2015 is still living below the poverty line. The estimated proportion of extreme poor is 12.6 percent (21 million).Second, and very importantly, a sizeable population is consuming barely above the UPL. For example according to HIES 2010 an additional 18.6 percent of the population was consuming at less than 1.25 times the UPL. This population is highly vulnerable because a large shock, such as a major illness, a natural calamity or other external events, could cause a substantial part of this population to fall back into poverty. Third, the disaggregation of the poverty profile by location in terms of rural and urban and by Divisions show substantial variations. Finally, there is growing evidence that, as a result of transformations to the economy and society, traditional forms of care for vulnerable populations is breaking down.

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2. Progress with Poverty Reduction(cont.)

Determinants of Poverty:•Growth in employment, labor productivity and real wages: •Male-Female wage gap in agriculture: •Spatial wage differential: •Remittances: •Expansion of microcredit:

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2. Progress with Poverty Reduction(cont.0

3. Current Social Security Programs in Bangladesh• Bangladesh has a long history of formal Social Safety Net Programs, which, in part, has shaped the

nature of the current Social Security system.• Government’s commitment to Social Security, budgetary allocations have grown in absolute terms as

well as a share of GDP. • The allocation for Social Security Programs (SSPs) increased from 1.3 percent of GDP in 1998 to 2.5

percent in FY2011. Since then, it has stabilized around 2 percent of GDP and accounting for 12 percent of total government spending.

Figure 3: Social Security Expenditure as % of GDP and Total Expenditure

9Source: Ministry of Finance

• Bangladesh’s current Social Security system is complex, comprising a large number of programs and managed by many ministries. According to a comprehensive official compilation prepared by the Ministry of Finance, there are 95 programs under the Social Security system currently financed through the budget. The total amount allocated to these programs in FY2013 was Tk 231 billion, which is equivalent to 2.2 percent of GDP

• A review of the SSPs also indicates that there are serious overlaps among the various programs and many are too small to have any significant impact on the target groups. About 58 percent of programs (55 of the 95 programs) have an annual budget of less than Tk. 500 million (US $6.3 million) and collectively account for only 4 percent of Government’s total Social Security spending.

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3. Current Social Security Programs in Bangladesh(cont.)

Impact of Social Security Programs on PovertyThe impact of SSPs on poverty reduction is shown in Table 2. It is important to note that the simulation results are done in the context of the HIES 2010 data and use the 30 SS programs reported in the HIES 2010. These 30 schemes are a subset of the 95 SS programs.

Table 2: Poverty Impact of Current SSP Spending

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Simulations Poverty rate (HCI)

Depth of Poverty

Poverty Gap

HIES 2010 Outcome 31.5 6.5 21

Outcome without SSP 33.0 7.4 22.5

Outcome with SSP benefits concentrated on the extreme poor

32.0 5.8 18.2

Outcome with SSP benefits targeted to the poor

29.0 6.0 20.7

3. Current Social Security Programs in Bangladesh(cont.)

Source: HIES 2010 and Simulations

Issues and Challenges for the Social Security Reform•The SSS is an important element of the Government’s strategy to fight hunger and poverty. Evidence suggests that this has been very helpful for fighting hunger and has also helped lower poverty. Even so, there is tremendous scope to strengthen the SSS and improve its effectiveness. •The multitude of programs (95), most of which are very small in terms of resources they provide and have low coverage of the poor, and the number of agencies involved in administering these schemes (30) suggest that this fragmented system is not an efficient way to proceed forward. Consolidation of the programs to a manageable few and implementing them in a coordinated way based on a strong management information system (MIS) would yield significant efficiency gains by lowering administrative costs and reducing leakages.•Programs for addressing pregnancy and early childhood and old age risks have low coverage and low-levels of funding (excluding the Government service pensions). Similarly, programs for addressing the disability challenges are very small. •In the context of a very tight budgetary envelope, the Government has done well to gradually enhance the budget allocated to SSPs. While this is a laudable effort, the very low coverage of the poor and vulnerable suggests that even with efficiency improvements in the use of funds the current level of funding may not be adequate for the Social Security needs of a middle income country.

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3. Current Social Security Programs in Bangladesh(cont.)

Issues and Challenges for the Social Security Reform

• Simulations indicated that there is significant room for improving the effectiveness of present SSS in terms of poverty impact. In addition to consolidation and simplification of programs noted earlier, a careful approach to program design and beneficiary selection that aims to increase the participation of the poor and vulnerable and exclude the non-poor will be an important challenge for the new national SSS.

•A major shortcoming of the present SSS is the absence of a monitoring and evaluation (M&E) system. Except for a few donor-supported one-off reviews of selected programs, there is no formal mechanism for reviewing the performance of the SSS either at the national level or by individual programs at regular intervals.

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3. Current Social Security Programs in Bangladesh(cont.)

Spending on Social Security Schemes in Selected Upper-Income Countries vs Bangladesh

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• The proposed reforms build on the past rich experience of Bangladesh and seek to streamline and strengthen the existing safety net programs with a view to better addressing the life cycle risks faced by the poor and vulnerable, and achieving better results from money spent.

• It also broadens the scope of Social Security from the narrow safety net concept to include employment policies and social insurance to address the emerging needs of a middle income Bangladesh in 2016 and ahead.

• By broadening the scope and coverage and by improving program design the reformed social security system will help lower income inequality and contribute to higher growth by strengthening human development.

• The suggested reforms reflect the realities of Bangladesh, to the extent relevant it also draws on good practice international experience.

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4. Proposed Reform Strategy for Social Security

Life Cycle Risks

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Programme Consolidation

A. Consolidated Life Cycle based Core Social Security Programmes: 1. Children’s Programme (age <1-4)2. Programme for School Age Children3a. Programmes for Working Age (19-59)3b. Programmes for Women (Age 19-59)4. Comprehensive Pension System for the Elderly5. Programmes for People with Disability

B. Consolidate Risk Mitigation SSPs 6. Strengthen Programmes for Managing Covariate Risks

C. Small and Special Programmes 7. Innovative Special Programmes (including Special Programme for

the Freedom Fighters)

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Summary of Proposed Social Security Programmes

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A. Consolidated Life Cycle based Core SSPs Mapping into Current SSP1. Children’s Programme (age <1-4)--Child Benefit ( max. 2 persons)--Strengthen immunization, child healthcare, nutrition, water and sanitation and outreach programmes

--Maternal, child and reproductive health--Community healthcare initiative

2. Programme for School Age Children--primary and secondary school stipend ( age 5-18)--Primary school feeding--Orphans Programme--Child Maintenance Payment for Abandoned Children

-Primary school stipend--Secondary school stipend-- Primary school feeding--Orphans programme

3a. Programmes for Working Age (19-59)--Strengthen education and training--Develop legislation for unemployment, accident, sickness and maternity insurance--Consolidate workfare programmes

--Economic empowerment of the poor--Food assistance for Chittagong Hill Tracts--Employment generation programme for the ultra poor--Food for work--Social development foundation--Rural employment and road maintenance programme--One household one farm--Ashrayan project 2

3b. Programmes for Women (Age 19-59)--Consolidate into one VWB programme on a cash basis.-- Provision of Childcare across all formal employment -- Maternal Health Voucher Schemes (MHVS)-- Maternity insurance for new mothers in employment

--Vulnerable Group Development--Allowances for widow, deserted and destitute women--Maternal Health Voucher Schemes (MHVS)

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A. Consolidated Life Cycle based Core SSPs Mapping into Current SSP4. Comprehensive Pension System for the Elderly--Citizen’s Pension ( age 60 plus) --Government Service Pension (unchanged)--Introduce Legislation for National Social Insurance Scheme (contributory/privately funded)-- Explore Option for Private Voluntary Pensions

--Old age allowance--Construction of residence for landless and poor freedom fighters-- Honorarium for insolvent freedom fighters--Government Service Pension

5. Programmes for People with Disabilities--Child Disability Benefit ( age <1-18)--Disability Benefit (age 19-59)

--Allowance for financially insolvent people with disabilities

B. Consolidate Risk Mitigation SSPs Mapping into Current SSP6. Strengthen Programmes for Managing Covariate Risks-- Strengthen OMS to serve food security needs.-- Align Disaster Management with Social Security

--Vulnerable Group Feeding--Test Relief Food--Gratuitous Relief --Open Market Sales (OMS)

C. Small and Special Programmes Mapping into Current SSP7. Innovative Special Programmes -Line Ministries will design special programmes to address emerging risks-Freedom Fighters Programme -Addressing social excluded people for various reasons like indigenous, dalits, transgender, tea garden, HIV affected people, etc.

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Summary of Proposed Social Security Programmes

A. Proposed Consolidated Life Cycle based Core SSPsProgrammes for the Children

Proposed consolidation suggests two core programmes for children:1. Children’s Programme (age <1-4): A child grant for children of poor and vulnerable family up to age 4. The child grant will be limited to a maximum of two children per family to avoid any adverse implications for the population management policy.2. Programme for School Age Children: A school stipend for all primary and secondary school going children belonging to the poor and vulnerable households. •The children will also have the disability benefit, the school meals programme, the orphans programme and the legal provision to ensure that abandoned children get the financial support from the responsible parent.

Programmes for Working Age (19-59 years) •Strengthening education and training programmes to motivate the youth to complete education and to acquire required skills.•Implementation of a strengthened workfare programme for the unemployed poor. •Introducing unemployment, accident, sickness, maternity insurance under National Social Insurance Scheme (NSIS).

Programmes for Working Age (with special focus on women)•A programme of financial support to vulnerable women (widows, divorced, destitute, single mother, and unemployed single women) and facilitate their participation in the labour market. •Additionally, in recognition of the special difficulties faced by vulnerable working age women, the strategy advocates a consolidated income transfer under a reformed Vulnerable Women’s Benefit (VWB) programme. •In addition, the strategy provides for expansion of the Maternal Health Voucher Scheme (MHVS) administered by the Ministry of Health and Family Welfare •A range of policy measures to facilitate the entry of women in the labour market.

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A. Proposed Consolidated Life Cycle based Core SSPsProgrammes for the Working Age

A three-tiered pension system is proposed:•Tier 1: Public Expenditure-Financed Citizen’ Pension - a public expenditure-financed benefit that provides senior people (60 years +) that belong to the poor and vulnerable group with a minimum income guarantee.

– The Government Service Pension will be continued with no change at this time. •Tier 2: a mandatory contributory pension scheme for the formal sector workers- Introduce legislation to establish a National Social Insurance Scheme (NSIS), to be managed under the Insurance Development & Regulatory Authority (IDRA), which makes it obligatory for all private enterprises in the formal sector to offer a contributory pensions programme for all employees.

– The NSIS will provide pensions as well as address other contingencies (such as disability, sickness, unemployment and maternity).

•Tier 3: voluntary pension schemes–managed by the private sector (often employment-based schemes) – into which people can opt if they desire an additional income in old age), which are open to all citizens irrespective of occupation or formality of employment.

A. Proposed Consolidated Life Cycle based Core SSPsComprehensive Pension System for the Elderly

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• A Child Disability Benefit for all children with a disability, up to 18 years of age;• A Disability Benefit for all adults with severe disabilities, aged 19-59 years;• At 60 years, people with severe disabilities will transition to the Citizens’ Pension.• These schemes will be complemented by a disability pension that will be available

to members of the NSIS.

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A. Proposed Consolidated Life Cycle based Core SSPsProgrammes for People with Disabilities (Cont….)

• The transfer of food during and after disaster will continue as a disaster management response under the management of the MoDM&R.

• The scope of the Open Market Sales (OMS) and Food Card managed by the Ministry of Food will be expanded as necessary to tackle hunger and food affordability. The OMS will remain self-targeted as presently.

• Food distribution through OMS and as disaster relief will be coordinated with the Government’s Food Stock Policy and Fair Price Policy as appropriate.

• Nutrition programmes (like school feeding and therapeutic feeding for children suffering from extreme nutrition) will continue.

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B. Proposed Consolidated Risk Mitigation SSPs Strengthen Programmes for Managing Covariate Risks

The small and special schemes are adding value in terms of innovative ideas with prospects for scaling up and joining up. Under the proposed programmes:•Some small programmes are recommended to be consolidated. The GED will, on the basis of the business cases, make proposals to Cabinet on which schemes should continue. •The programmes for freedom fighters will be maintained and consolidated under one scheme called the Freedom Fighter’s Benefit Programme.•Line Ministries will design special programmes to address emerging risks.•Addressing social excluded people for various reasons like indigenous, dalits, transgender, tea garden workers, HIV affected people, etc.

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C. Small and Special Programmes Innovative and Special Programmes

• The full financing of the reformed social security system program should be based on cost- sharing arrangements between the government and the private sector.

• The tax-financed component is only one part of the financing; the other part dealing with social insurance and employment based regulations should be largely financed by the private sector.

• One fundamental policy question is whether the tax-financed component of the reformed program is affordable in terms of available budgetary resources.

• Illustrative costing exercise shows that the proposed reform is consistent with available resources.

• The first task is to tailor the average benefits of the reformed programs to fit the available resources (2.2% of GDP).

• The second task is to phase the implementation of the revised programme over a 3-5 year period in line with the resource envelope.

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Financing the Social Security System

Strengthening the Delivery of the Social Security System

• Establishing a vastly simplified institutional arrangement that allows proper planning, implementation and M&E of the SSS.

• The professionalization of staff so that there is a group of public servants who are experts in the delivery of Social Security schemes at both national and local levels.

• Effectiveness in identifying recipients for Social Security schemes.• Up-grading the MISs so that they are able to underpin the effective and

efficient delivery of transfers and promote cross-governmental coordination and monitoring of performance.

• Strengthening payment mechanisms to minimize leakage and to use the Social Security system to promote financial inclusion, in particular among poor and vulnerable families.

• Establishing an effective grievance and complaints system so that all citizens have recourse to appeal decisions on selection and can notify the competent authorities about instances of misconduct and failures in the delivery of the promised benefit.

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Implementation Arrangement Implementation Arrangement Administrative Reorganization of the Delivery of SSPsAdministrative Reorganization of the Delivery of SSPs

Administrative reorganization for better SSPs delivery will need to gradually carried out in three phases.•Phase – I : Initial Consolidation and Coordination (2015 – 2020)•Phase – II : Coordination and Implementation (2021 - 2026)•Phase III : Implementation of Life Cycle Programmes Approach (2026 onwards)[Each Phase has described in the paper]Along with the SSPs implementing Ministries, following Ministries/Divisions will be need to play cross-cutting but important roles in all phases:•Implementation Monitoring and Evaluation Division: Monitoring and evaluation of implementation of programmes.•Statistics and Informatics Division: develop, maintain and update the beneficiary database.•General Economics Division: results-based M&E, five-year plans, & other national strategies, additional Secretarial support for the CMC.•Ministry of Finance: approve and disburse public-financed Social Security budget and track financial delivery.•Local Government Division: help identify beneficiaries, support to grievances and disputes, and assist in the M&E efforts. To the extent necessary, LGIs will also assist ministries in the delivery of programmes.

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Implementation Arrangement : Additional Features

Establishing a single registry MIS: Establish a national Single Registry that uses the database from the national identity system and is based on building scheme-specific MISs and deliver comprehensive information across government. The SID will take the lead in establishing the Single Registry in coordination with other concerned Ministries/Divisions.

Strengthening G2P payment systems: An initiative to transform G2P payment systems so that they promote financial inclusivity and prevent leakages. M/O Finance will undertake a comprehensive review of current G2P payment mechanisms.

Reaching Out to the Socially Excluded Population: Government will need ensure that these groups have similar access as the rest of the population to all Social Security programmes and to all publicly provided basic services in education, health, nutrition, population planning, water supply and sanitation.

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Implementation Arrangement : Additional Features

Strengthening Process for selecting recipients of SP Schemes: Recently the SID has taken an endeavour to establish a Bangladesh Poverty Database using the PMT scorecard approach. Combination of PMT, support from LGI, and NGOs will need to be employed to identify the poor and vulnerable population.

Engagement with DPs on SP: Government welcomes the interest of the development partners to engage on Social Security and will explore possible technical assistance to help the implementation of the NSSS and its M&E framework

Engagement with NGOs: Government will need to continue, and where necessary, deepen the partnership with NGOs in the area of delivering social security services based on the NSSS.

Appeals Mechanism: Ministry of Social Welfare in consultation with SID, LGD & selected ministries will develop a nationwide complaints and grievance redress mechanism.

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5. Poverty Impact of the Reformed SSS

• The simulation results of the likely poverty impact of the redefined life cycle programs are reported in Table 3. The predictions suggest that the restructured programs are likely to result in significantly better poverty outcomes when compared with the present programs.

• The better outcomes happen because by minimizing leakages and wastages, by refocusing programs from non-poor to the poor and vulnerable population, and by reducing administration cost, a substantially larger number of poor households are benefitting from a better defined and higher average value yielding SSS.

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Simulation TypeHead Count Poverty

(%)Depth of Poverty

(%)

No SSPs 33.0 7.4

Using 2010 SSPs reported in HIES 31.5 6.5

Using NSSS life-cycle programs 28.3 4.8

Table 3: Poverty Impact of the Redefined Life Cycle Programs

Source: NSSS Simulations using 2010 HIES data