Technical Assistance Consultant’s Report

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.)

Project Number: 44152 Regional — Capacity Development Technical Assistance (R–CDTA) August 2012

The Lao People’s Democratic Republic: Updating and Improving the Social Protection Index (Cofinanced by the Republic of Korea e-Asia and Knowledge Partnership Fund)

Prepared by Inthasone Phetsiriseng

For Asian Development Bank

CURRENCY EQUIVALENT

Exchange Rate 2009: US$1 = 8,450 LAK (Lao Kips)

ABBREVIATIONS

ADB – Asian Development Bank BOD – Board of Directors FDI – Foreign Direct Investment FFW – Food for Work GDP – Gross Domestic Product GOL – Government of Laos HDI – Human Development Index ILO – International Labour Office LECS – Lao Expenditure and Consumption Survey MLSW – Ministry of Labor and Social Welfare NGO – Non-Government Organisation NSEDP – National Socio-Economic Development Plan SASS – State Authority for Social Security SDED – Skills Development and Employment Department SP – Social Protection SPI – Social Protection Index SSD – Social Security Department SSF – Social Security Fund TVET – Technical and Vocational Education and Training UNDP – United Nations Development Program WB – World Bank

CONTENTS

Page I.  INTRODUCTION 1 

A.  Background 1 B.  Definition of Social Protection 1 C.  Report Structure 2 

II.  COUNTRY OVERVIEW 3 A.  Geography 3 B.  Demographic Profile 3 C.  The Economy 4 D.  Poverty Profile 4 E.  Labour and Employment 5 F.  Education 5 G.  Health 6 

III.  CURRENT SOCIAL PROTECTION PROGRAMS AND ACTIVITIES 7 A.  Data Collection 7 B.  Labour Market Programs 7 C.  The Food-for-work Program 8 D.  Labour Exchange Program 8 E.  Vocational Training and Skills Development Program 8 F.  Social Insurance Programs 9 G.  Social Insurance Scheme for the Public Sector 9 H.  Social Insurance Scheme for the Private Sector 11 I.  Social Assistance and Welfare Programs 15 J.  Child Protection Programs 16 K.  Food Allowance for Primary School Children 16 

IV.  THE SOCIAL PROTECTION INDEX AND ITS DISAGGREGATIONS 16 A.  Basic Statistics 17 B.  Social Protection Expenditure 18 C.  Social Protection Beneficiaries 19 

V.  ANALYSIS OF COUNTRY RESULTS 19 A.  Disaggregation by Social Protection Category 20 B.  Disaggregation by Depth and Breadth 20 C.  Disaggregation by Poverty 20 D.  Disaggregation by Gender 21 

VI.  CONCLUSION AND RECOMMENDATIONS 21 

I. INTRODUCTION

A. Background

1. Asian Development Bank’s (ADB) development of the social protection index contributed to the strengthening of social protection programs in developing member countries (DMCs). ADB will continue its work on updating and improving the Social Protection Index (SPI). The SPI’s update will address and incorporate lessons learned from two technical assistance projects1 that developed the SPI for 36 countries in Asia and the Pacific and introduce new components and institutional arrangements to sustain the effective use of social protection indicators in policy analysis and formulation in the DMCs. 2. These initiatives are implemented under the ADB commissioned regional technical assistance project2 that seeks to (i) improve the methodology in defining social protection for each DMC in order to ensure comparability among DMCs; (ii) improve data gathering for statistical analysis on social protection; and (iii) develop capacity of DMCs in monitoring the SPI and allow comparisons between countries and over time on implementation performance. 3. This country study provides updated information and data on social protection programs and calculates the SPI for Lao People’s Democratic Republic (PDR) in view of the revised SPI methodology. The SPI can be updated periodically to assess progress in social protection arrangements in the country and analyze deeper aspects of targeting, coverage and expenditures on various social protection programs; for example, on the breadth (coverage) of social insurance versus social assistance or labor market programs, or on the depth (size of benefit) of various categories of social protection. The revised SPI methodology also provides scope to measure the gender responsiveness of programs, and poverty targeting of programs.3 4. The primary objective of the Lao PDR Country Report is to present the results of the research on social protection programs and policies in Lao PDR from all related ministries, particularly the Ministry of Labour and Social Welfare and the Ministry of Planning and Investment; and, summarize quantitative information on these activities to enable the formulation of a national Social Protection Index (SPI). This is the first study to gather information on social policy and programs in Lao PDR in the formulation of a social protection index. B. Definition of Social Protection

5. Social protection is defined as the set of policies and programs designed to reduce poverty and vulnerability by promoting efficient labor markets, diminishing people’s exposure to risks, and enhancing their capacity to protect themselves against hazards and interruption/loss of income. 6. This definition categorizes all programs under the traditional components of social protection as social insurance, social assistance and labor market programs. Microfinance as a

1 ADB. 2003. Technical Assistance for Social Protection Index for Committed Poverty Reduction. Manila (TA 6120-REG); ADB. 2006. Technical Assistance for Scaling Up of the Social Protection Index for Committed Poverty Reduction. Manila (TA 6308-REG).

2 ADB. 2010. Technical Assistance for Updating and Improving the Social Protection Index. Manila (TA 7601-REG). 3 To be able to calculate with relative accuracy the poverty-targeting rate of programs, household surveys need to

contain a social protection data. However, the data of the survey was not available at the time of writing this report.

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form of social protection is excluded from the calculation of SPI since it does not involve a transfer in cash or kind and beneficiaries incur loans or debt instead of transfers. Thus, by eliminating microfinance from the coverage of social protection programs, three major programs are left: (i) social insurance (i.e. the categories of old-age insurance, programs for the disabled, and health expenditure on insurance and pensions; (ii) social assistance (i.e. the categories of non-contributory health insurance, conditional cash transfers, child protection, and unconditional cash transfers; and (iii) labor market programs as shown in Table 1.

7. There is no formal definition of social protection for Lao PDR. The Ministry of Labor and Social Welfare (MLSW) is considered the main social protector for the Government of Laos along with its respective departments: (i) Skills Development and Employment Department (SDED), (ii) State Authority for Social Security (SASS) for civil servants; (iii) Social Security Organization (SSO) for the private sector; (iv) Department of Social Assistance (DSA) for vulnerable groups including disaster victims and beneficiaries of food-for-work programs; and (v) Department of Pension, Invalid and Disability. It is envisioned that the public sector will not be the sole source of social protection in the future. C. Report Structure

8. The Lao Report is structured as follows:

• Chapter II contains a brief overview of the social and economic development in Lao PDR.

• Chapter III describes the current social protection activities and programs in the country using ADB’s typology.

• Chapter IV provides an overview of the derivation of SPI and its disaggregation. • Chapter V presents the analysis of the country results. • Chapter VI discuses policy assessment and implications.

Table 1: Social Protection Categories and Types of Programs

Social Protection Category Type of Program Social Insurance Programs Pensions

Unemployment Benefits Health Insurance - but not universal health insurance Other social insurance (maternity, disability benefits)

Social Assistance

Assistance for the elderly (e.g., non-contributory basic

allowances for the elderly, old-age allowances) Health assistance (e.g., reduced medical fees for vulnerable

groups) Child protection (school feeding, scholarships, fee waivers,

allowances for orphans, street children initiatives) Family allowances (e.g., in-kind or cash transfers to assist

families with young children to meet part of their basic needs) – excluding any transfers through the tax system

Welfare and social services targeted at the sick, the poor, the disabled, and other vulnerable groups

Disaster relief and assistance Cash/in-kind transfer (e.g., food stamps, food aid)

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Social Protection Category Type of Program Temporary subsidies for utilities and staple foods - only if

imposed in times of crisis and if targeted at particular vulnerable groups. General subsidies are excluded even if their rationale is to assist the poor

Land tax exemptions Labor Market Programs

Direct employment generation through public works

programs – including food for work programs Direct employment generation through loan-based

programs – included if loans are subsidized and/or job creation is an explicit objective of the program

Labor exchanges and other employment services – if distinct from social insurance and including retrenchment programs

Unemployment benefits – if distinct from social insurance and including retrenchment programs

Skills development and training – included if targeted at particular groups (e.g., the unemployed or disadvantaged children. General vocational training is excluded).

Source: ADB. 2011. The Revised Social Protection Index: Methodology and Handbook. Manila.

II. COUNTRY OVERVIEW

9. This chapter presents a brief overview of the socio-economic characteristics of the Lao People’s Democratic Republic, main features of the country’s current developmental situation and recent trends.

A. Geography

10. Lao PDR is a landlocked country in the Southeast Asia at the heart of the Greater Mekong Subregion, with a total land area of 236,900 km bounded by China on the north, Cambodia on the south, Vietnam on the east, Thailand on the west, and Myanmar on the northwest. It is a mountainous region with majority of the population concentrated in the lowlands, nearer the Mekong River. The country lies in the tropical belt of the northern hemisphere. B. Demographic Profile

11. Based on the Population and Housing Census 2005 of Lao PDR’s Ministry of Planning and Investment, the population is 6,127,910 or 6.13 million. The crude birth rate, which indicates the number of live births occurring during the year (per 1,000 population estimated at mid-year), declined from 34.7 per thousand in 2005 to 30.7 per thousand in 2009. There is also a declining trend for crude death rate from 9.8 per thousand in 2005 to 8.4 per thousand in 2009. The life expectancy at birth in 2009 is 63.9%. Women have a higher life expectancy by an average of 4 years than men. It is a characteristically young population with roughly half of the population younger than 20 years. The country’s total fertility rate is 4.8 children and one of the highest in Southeast Asia.

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C. The Economy

12. Lao PDR is moving from a low-income country to a middle-income economy by 2020. Lao PDR is abundant in mineral resources such as copper and gold and holds hydropower potential that has contributed significantly to Lao PDR’s economic growth. Other growth sectors in the economy include agricultural exports such as coffee and rice, and ecotourism. The Gross Domestic Product (GDP) for fiscal year 2008-09 is 47,225 billion Kip, with GDP growth at 7.6%4. In order for the country to graduate from a low-income country by 2020, the economy of Laos needs to grow at a minimum of 7.5% a year5. The country’s exports include garments, wood products, processed foods, handicrafts, international tourism, and agricultural exports that contribute directly to human development. Lao PDR’s Human Development Index (HDI) is 0.619 in 2007, giving the country a medium human development index.

D. Poverty Profile

13. The Lao Expenditure and Consumption Surveys (LECS), the largest and comprehensive survey conducted in Lao PDR undertaken by the Department of Statistics (DOS), formerly the National Statistics Centre (NSC), forms the basis of official poverty estimates. The 2007-2008 LECS shows the incidence of poverty or percentage of the population with consumption below the national poverty line6 dropping from 33.5% to 27.6% during this period.

14. Although poverty reduction in the country as a whole has been rapid, certain geographic regions and groups have lagged behind and continue to phase significant development challenges, despite efforts by the government and donors. Lao PDR’s population is spread unevenly across the country and much of the variation in socioeconomic conditions is related to geography and ethnicity. Urbanization and road access have expanded with development. Despite the increase in urban population, the proportion of urban households living in poverty has fallen rapidly, to just over 17% in 2007/8. Households living in rural areas have different livelihood options open to them and progress there has been slower. Poverty in rural areas was 32% in 2007/8, almost twice the rate of urban areas. Although rural areas made up of 71% of the population they accounted for 82% of the poor. However, it is the most remote rural villages that have lagged farthest behind. In villages that are cut off from markets and other infrastructure poverty remains at 43%; a fall of just 5 percentage points since 2002/37.

15. During the same period, inequality as measured by the Gini index, increased in Lao PDR from a relatively equitable 32.6 to 35.4, as shown in Table 2. As the economy continues to grow, poor households in Lao PDR face the risk of falling into a poverty trap given that households without human capital8 lack the resources to invest in their future and tend to lag behind wealthier households.

4 UNDP and Ministry of Planning and Investment. 2009. The 4th National Human Development Report: Employment and Livelihoods. Lao PDR, Vientiane.

5 World Bank. Lao PDR Development Report 2010. 6 $1.25 based on Lao Statistics Bureau, Ministry of Planning and Investment (MPI) data. 7 Poverty in Lao PDR 2008, Lao Statistics Bureau, MPI. 8 Human capital in this context refers to level of education, health status, ownership of land, equipment and/or other

means of production, etc.

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Table 2: Poverty Indicators 2002-03 and 2007-08 2002/03 2007/08 Diff. Household Expenditure per month (1,000s Kips) 1,089.4 2,170.7 1,081.3 Poverty Headcount 33.5 27.6 -5.90 Poverty Gap 8 6.5 -1.50 Poverty Severity 2.8 2.3 -0.50 Gini Index 32.6 35.4 2.80 Source: Poverty in Lao PDR 2008, Lao Statistics Bureau, Ministry of Planning and Investment.

E. Labour and Employment

16. The results of the Labour Market Survey in 8 provinces of Lao PDR in mid-2010 highlighted that there is a high demand of workers in the areas of automotive mechanics, furniture industry, construction and basic secretarial jobs. Demand for workers in the mining industry is expanding rapidly and employers are establishing on-the-job training schemes to ensure the constant supply of well-trained workers in the industry.

17. According to the report of the Ministry of Labour and Social Welfare (MLSW), there are currently 2,578 enterprises employing 103,804 staff9. Employment in the agriculture and forestry industries declined from 78.5% in 2005 to 75.1% in 201010. The proportion of work force in the industry and construction sectors slightly increased from 4.8% to 5.5% along with the service sector from 16.7% to 19.5%. The rate of movement from agriculture to non-agricultural sectors is at 0.7% annually.

18. The magnitude of labour migration to Thailand is still significant according to the MLSW 2010 report, with 120,871 Lao migrant workers abroad, majority (120,580 workers) of which are in Thailand. Only 61,929 of these migrant workers obtained their work permit. On the other hand, there are about 250,000 foreign migrant workers in Lao PDR. Only 40,992 of these foreign workers from countries such as Viet Nam, China and Thailand have work permits.

19. The absence of an overall, consistent, and updated labor market data on the skill needs of enterprises in Lao PDR has been a continuing constraint on both national planning in general, and on the planning and implementation of the Technical and Vocational Education and Training (TVET) system. The absence of labor market information points to a continuing lack of significant and ongoing linkage between TVET and the private enterprise sector. It also acts to reinforce a training system ill-equipped to enforce training decisions on current and future skills needs of the industry and the employment opportunities for graduates. Thus, the main problem of the country’s labor market remains a mismatch between labor demand and supply.

F. Education

20. The Ministry of Education and Sports (MOES) had just accomplished Phase I of Lao PDR’s National Education System Reform Strategy 2001-2005 (NESRS). The major achievement in general education system reform is having an additional year in lower secondary school increasing the 11-year general education system to a 12-year system. The

9 Report on MLSW 2nd 5 Years Plan 2006-2010 and the 3rd 5 Years Plan 2011-2015, 2009-2010 Annual Report and 2010-2011 Annual Plan, October 2010.

10 Ministry of Planning and Investment, Lao People’s Democratic Republic. The Seventh National Socio-Economic Development Plan (2011-2015).

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issue of good quality education in the general education system still needs to be improved despite having a new system in place. The MOES is currently in its second phase of the reform agenda, focusing on technical vocational education and training (TVET) as well as improving and strengthening higher education.

21. The educational network is improving, with schools being built in remote areas and poor districts. The numbers of childcare centres and kindergartens have increased from 1,087 in 2005/6 to 1,283 in 2009/1011 The enrolment rate of children between 3-5 years of age increased to 22.1% from 8.2%; and the enrolment rate of children between ages 6-10 years old increased from 84.2% in 2005 to 92.7% in 2009-2010. Table 3 shows the key indicators in general education.

Table 3: Key Indicators (General Education) Key Education Indicators 2007/08 2008/09 2009/10 Pre-School NER 3-5 years old (%) 15.4 19.7 22.1 NER girls (%) 15.7 19.9 22.3 NER boys (%) 15.1 19.6 1.01 Gender Parity Index (GPI) 1.04 1.02 Primary NER 8-10 years old (%) 89.2 91.6 92.7 NER girls (%) 87.0 90.4 91.7 NER boys (%) 91.4 92.7 93.7 Gender Parity Index (GPI) 1.0 0.98 0.98 Lower Secondary LS GER (%) 59.2 62.7 60.2 LS GER Female (%) 53.8 57.7 55.5 LS GER Male (%) 64.3 67.3 64.6 Gender Parity Index (GPI) 0.84 0.86 0.86 Upper Secondary US GER (%) 37.2 36.8 33.9 US GER Female (%) 32.6 32.5 30.4 US GER Male (%) 41.6 41.1 37.3 Gender Parity Index (GPI) 0.78 0.79 0.82

Sources: National consultant calculations based on Ministry of Education and Sports Education Management Information System (MOES EMIS) 2005-2010. G. Health

22. People have been increasingly receiving basic healthcare services. The average life expectancy in Lao PDR is an estimated 63 years; 64 for women and 62 for men. The number of health practitioners have increased; with 9,861 doctors and nurses practicing in the country, 2,897 more than 2005.

23. Vaccination for mothers and children reached about 71% of the national health plan target; and health education and nutrition are receiving increasing attention. Clean water is available to 78% of the total population, with hygienic latrines available to 52% of the population.

11 Ministry of Education and Sports Education Management Information System (MOES EMIS) 2005-2010

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HIV/AIDS is being controlled and prevented by ensuring 80% of target risk groups, especially sexual workers, have access to HIV/AIDS prevention services. HIV/AIDS infection rate is reduced to an estimated less than 1%. Also, 92% of tuberculosis cases received treatment and the prevalence rate of malaria has significantly reduced. A surveillance and early warning system for epidemic alerts has been established. The country has also successfully overcome the bird flu epidemic twice12 in the past five years.

III. CURRENT SOCIAL PROTECTION PROGRAMS AND ACTIVITIES

24. This chapter presents an overview of the data collection process, objectives, and current social protection activities in Lao PDR including challenges and difficulties encountered during the course of the study. The two-fold objectives of this chapter is to present the main features of the social protection programs in the country and provide quantitative information that will serve as the basis for the formulation of the Social Protection Index.

A. Data Collection

25. Accordingly to the ADB revised definition of SP categories and types of programs, the existing social protection programs in Lao PDR are classified into three major SP components: (i) labour market programs; (ii) social assistance; and, (iii) social insurance. Only government programs or government-supported programs are covered in the study.

26. Social protection information was obtained from reports of government and public organizations, and in some cases from interviews with relevant agency representatives such as the Department of Social Security and Department of Social Welfare of Ministry of Labour and Social Welfare and the Department of Planning and the Lao Statistics Bureau of the Ministry of Planning and Investment. Other information collected were generated from the Ministry of Education, the Population and Housing Census and the Lao Expenditure and Consumption Surveys under the Lao Statistics Bureau, IFIs, government financial reports and other published documents on social protection programs.

27. The lack of a formal definition for social protection in Lao PDR and inadequate social protection data management infrastructure were some of the difficulties encountered during data collection. The main problem with the data is the number of beneficiaries was not disaggregated by sex and or by poverty incidence. Therefore some of the data for the SPI calculation were generated by the consultant through well informed assumptions and justifications.

B. Labour Market Programs

28. There are three major social protection programs by the Ministry of Labour and Social Welfare, Ministry of Education and Sports (MOES) and the National Committee for Rural Development and Poverty Reduction. These three programs are food-for-work, labour-exchange program, and vocational and skills development.

12 Ministry of Planning and Investment, Lao People’s Democratic Republic. The Seventh National Socio-Economic Development Plan (2011-2015).

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C. The Food-for-work Program

29. The Lao PDR government actively promotes food-for-work programs that generate direct employment through public work programs. The World Food Program (WFP) in collaboration with MLSW and MCTPC, UN agencies and other international non-governmental organizations is implementing the Protracted Relief and Recovery Operation (PRRO) assistance to food-insecure households affected by multiple livelihood shocks in 11 provinces in Lao PDR. This relief assistance includes a food-for-work and food-for-training program that aims to improve physical and human asset creation, prevent deterioration of nutritional status, and provide food assistance to some 270,000 vulnerable and food-insecure households13.

D. Labour Exchange Program

30. In 1995, the Lao State Employment Enterprise (LSEE) was established as an autonomous unit under the Ministry of Labour and Social Welfare to serve as a link between supply and demand for labour. As of 2011, there are currently 11 private recruitment agencies in Lao PDR. The Employment Promotion Division (EPD) of the MLSW is responsible for providing the link between employers and workers by registering domestic job seekers and requesting foreign workers. The EPD monitors recruitment through a work permit system for Lao migrant workers abroad and foreign workers in the country.

31. The new recruitment and employment process to send Lao workers to Thailand under the terms of the MOU began in January 2006.14 Despite the high demand for Lao migrant workers by Thai employers, recruitment agencies have been unable to meet labour needs due to unattractive level of wages for workers15, high cost of service fees charged by recruitment and employment agencies, and long turnaround time in documentation processing for legal migration.

32. Both the Lao and Thai Governments are taking measures to improve and simplify the administrative formalities in regularizing irregular migrant workers currently registered and working in Thailand. Both parties are seeking fast and efficient migrant worker selection procedures and standards to speed up the process for migrant work abroad. In 2009, there were 120,580 Lao migrant workers in Thailand; only 61,929 migrant workers obtained a work permit.

E. Vocational Training and Skills Development Program

33. The Ministry of Education is responsible for vocational education and the Ministry of Labour and Social Welfare provides skills development that responds to actual labour market needs. The ministries provide guidance and leadership in improving and diversifying the delivery of training through its Department of Vocational Education (DVE) and Non-Formal Education (NFE). The Technical and Vocational Education and Training (TVET) system of Lao PDR is composed of both government formal training institutions and a small number of private institutions, although largely dominated by government-run institutions. There are presently 12

13 5 Years Report, MLSW, 2010 14 The process of sending potential Lao migrant workers under the MOU started in January 2006 after the Thai MOL

(Ministry of Labor) approved the quotas for Thai employers to recruit Lao migrant workers and is based on a case by case approval. It took more than 3 years of negotiations to agree on the recruitment system.

15 Most of the Thai employers will base the minimum wage on an average of 130 per day, as provided by Thai law and mentioned in the MOU. Thus, the salary of potential migrant workers proposed in the contracts will not exceed 4,000 to 5,000 Baht maximum.

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public vocational schools, 20 public technical schools, and 5 private technical schools. Most are located in the central part of the country and in the capital city.

34. The Skills Development and Employment Promotion Department (SDED) of the Ministry of Labour and Social Welfare has a direct role in developing skills and promoting employment. SDED works with other ministries such as the Ministry of Industry and Handicraft; Ministry of Health; Ministry of Education and Sports; Ministry of Agriculture and Forestry; Lao Youth Federation, Lao Women’s Union; and other international agencies that have their own skills development institution. The target group for skills training is mainly unemployed out-of-school youth. The duration of the courses range from 3 weeks to 1 month. There are also one-year courses for those with higher level education. Since 2008, the government has been providing a block grant of 1,000,000,000 Kips to the Ministry of Labour and Social Welfare for vocational training of out-of-school youth. The block grant covers living allowances and scholarships for 22,000 out-of-school youth; 55% of which are specifically targeted for orphans and 25% for poor students.

F. Social Insurance Programs

35. In Lao PDR, less than 10% of the population is employed under formal arrangements and eligible for social insurance coverage. Currently, social insurance schemes cover the majority of the formally employed workers through two schemes - the social insurance scheme for the public sector, covering the civil servants, military and police; and the social insurance scheme for the private sector, covering private sector workers employed in enterprises with 10 or more employees.

G. Social Insurance Scheme for the Public Sector

36. The national social insurance system operates throughout Lao PDR, covering only civil servants, soldiers and police employed at the local and national levels. Before 1990, the Government of Lao PDR provided subsidized social insurance policies for government officials, soldiers and police officers, covering their retirement pensions; and invalidity, maternity, medical care, death and survivor’s benefits. In 1993, a semi-funded social security scheme was established with funds derived from 6% of the civil servant’s basic salary and the rest of the amount provided by the Government of Lao PDR. The Lao PDR Prime Minister promulgated a decree to reform the social security scheme in 2007, featuring a new contribution rate of 8% of the civil servant’s salary. The Government as employer will also contribute 8.5% of the civil servant’s scheme to the social security fund, including 0.5% for compensation fund.

37. The Fund is managed by the State Authority for Social Security (SASS), with the Board of Directors’ consisting of line ministry representatives. The Social Security Department (SSD) formerly fund manager, subsequently assumed the policymaker role of inspecting social security policies. The following programs listed in Table 4 outlines the insurance benefits currently available to civil servants and their dependents, as stipulated in Prime Minister Decree No. 70.

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Table 4: Type of Public Sector Social Insurance Schemes Benefit Type Benefit Provisions Exceptional Cases 1. Medical benefit Medical benefit provides medical service

for the insured in times of sickness as well as for spouse and children under 18 years old.

The benefits could not be clarified due to the following: 1. Regulation for the payment of

occupational disease and work accident for civil servants has not yet been defined because still lacking information reflecting the types of work that would be categorize as hazardous.

2. Lack of physicians who can diagnose and certify occupational diseases.

3. Early retirement pension or invalidity benefit which is included in the old age and invalidity pension budget will be received by beneficiaries who are unhealthy or unfit for work

2. Maternity benefit Insured women on maternity leave for pregnancy, child birth, miscarriage and chid adoption is entitled to receive a maternity benefit, including a child birth grant.

3. Work injury and occupational disease benefit

Benefit is paid during injury, disability, or death of government officials in the course of duty. Occupational diseases include all types of mental and physical diseases that occur during the course of duty.

4. Invalidity benefit Benefit is paid monthly to the insured in case of loss of bodily functions and work incapacity mentally or physically. This mental incapacity is not related to working conditions and has to be certified by medical doctor.

5. Sickness benefit Benefit is paid monthly to reimburse salary in case of work inability. The employer pays a sickness benefit to an insured person for 30 days as provided by the Labor Law.

6. Pension benefit Monthly payment will reimburse salary of retired officials that have reached the age of 60 and have fully contributed for 5 years to the SSF.

7.

Survivor’s benefit

Cash benefit is paid to persons under the care of the insured person or pensioner. There are 2 types - lump-sum payment and monthly payment for the widow/widower, orphan, and surviving parents.

8. Funeral Grant Covers the funeral cost of the insured, the spouse and the children.

Source: SASS Manual and Procedure, 2006.

38. The SASS fund has been attempting to become a self-financing body similar to the Social Security Organization (SSO). The Ministry of Labour and Social Welfare (MLSW) appointed a drafting committee on Social Security Law that will merge the existing schemes for better fund administration. Over the last 4 years, subsidies from the government exceeded members’ contribution, increasing year by year. Table 5 presents the SASS expenditure from 2007-2010.

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Table 5: SASS Expenditure (2007-2010)

Source: SASS Report, 2007-2008, 2008-2009, 2009-2010 H. Social Insurance Scheme for the Private Sector

39. Since 2001, the Social Security Organization (SSO) is responsible for the social insurance scheme of the private sector, including state-owned enterprises. The SSO is administered as a self-financing judicial entity under the supervision of the Ministry of Labour and Social Welfare. The social insurance scheme for the private sector is a contributory and compulsory scheme wherein both employer and employee have to pay a monthly contribution to the Social security Fund (SSF) at an equal rate of 4.5 of insurable earning16, with the employer paying an additional 0.5 for compensation fund. The Government of Lao PDR does not contribute to the fund but provides a guarantee from bankruptcy and supervises fund management. The Government’s social insurance package consists of benefits such as health insurance, sickness and maternity benefit, funeral allowance, invalidity and old age pension, and occupational disease and work accident grants to insured persons and dependents.

40. The main health insurance benefits include outpatient services, in-patient services, emergency services, and medical care in case of employment injury of occupational disease. SSO pays the contracted hospital for each beneficiary an advanced amount or capitation for possible treatment cost according to the number of patients that have chosen them as their hospital of treatment. The capitation payment is negotiated on an annual basis between SSO and the contracted hospitals. Key information is presented in Table 6.

Table 6: Health Insurance Coverage and Expenditure

No Category 2008 2009 2010

1 Out-patient & Emergency Cases (person) 70,312 77,277 84,364

2 In-patient (person) 3,866 4,513 5,241

3 Occupational Disease & Work accidents (person) 107 157 143

4 Expenditure (million Kip) 5,811 7,196 8,934

Source: SSO’s Ten Years Report, 2011.

16 Insurable earning is approved by SSO’s Board of Directors to determine the highest share of total insured employee for contribution rate calculation. The benefit provided is based on insurable earning not on total salary i.e. those who earn more than 1.5 million kips shall pay their contribution based on the ceiling of 1.5 million kips only.

Beneficiaries Amount USD Beneficiaries Amount USD Beneficiaries Amount USDMedical & Work Injury 103,430 772,681 239,168 2,692,426 433,035 797,646Maternity 766 26,145 3,651 115,909 938 28,330Sickness 2 608 2 608 12 1,928Invalidity 17,306 1,353,889 18,993 5,386,267 13,426 2,103,345Pension 20,021 4,760,221 20,277 18,683,013 20,365 5,458,884Pensioners' Child allowance 15,365 91,046 15,365 370,552 11,082 79,703Survivor’s 10,193 262,672 10,425 1,009,724 8,120 210,147Funeral Grant 481 1,218,336 1,786 4,966,027 424 1,334,082Total 167,564 8,485,598 309,667 33,224,524 487,402 10,014,065

Benefit Type 2007-2008 2008-2009 2009-2010

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41. The sickness benefit includes insurance for temporary incapacity at work or loss of income due to illness or injury with SSO paying 60% of the insured employee’s salary. The maternity benefit equal to 100% of insured earnings is applicable for a period of 3 months after childbirth or miscarriage resulting in an injured person’s inability to return to work for medical reasons. Also, in case of work injury, SSO members are entitled to financial compensation for accidents occurring in the course of their job performance. Moreover, the ‘occupational disease benefit’ can be redeemed for all covered health and mind diseases registered in the Ministry of Health. If a particular disease is not included in the list, the SSO Medical Board can issue a certificate that the employee acquired the disease in the course of his/her duties. Lastly, SSO can also provide financial contribution to funeral costs with a benefit equal to 2 months (death of child), 3 months (death of spouse). or 6 months (death of insured person) of an employee’s insured earnings. Table 7 shows the type and benefit payments for work injury and occupational disease.

Table 7: Type and Benefit Payments for Work Injury and Occupational Disease Type of Benefits Reason for Payment

and BeneficiaryDescription of Payment Calculation and

Benefit AmountMedical Care Coverage of expenses

for medical treatment of illness or injury caused by industrial accidents

Medical care benefits under workplace-related benefits such as work injury and occupational disease benefits i.e. lose of physical and mental working capacity.

Insured employee wounded by work accident or occupational diseases will receive free medical care. If medical costs are paid from other sources, SSO will pay the balance between payment made and actual cost of medical care.

Temporary loss of work

If the insured person's health status has not improved within 6 months, the sickness benefit will be reduced to 60% of the salary for a period of another 18 months. Thereafter, entitlement will switch to a benefit for permanent loss of working capacity.

SSO will pay the equivalent of 100% of the insured salary or wage of the insured person for a period of 6 months. However, the first 7 days will always have to be paid by the employer. Payment will be made until employee can resume work.

SSO will pay the equivalent of 100% of the salary or wage payable to the insured person for a period of 6 months. Upon the expiry of the 6-month period, if the insured person’s health status has not improved, the benefit will be reduced to the equivalent of 60% for a period of 18 months. Thereafter, SSO will switch to a benefit for permanent loss of working capacity.

Partial Return to Work

In case the employer refuses to comply without sufficient justification, the

If the new job is on a part-time basis with less income, SSO will pay the previous and current wage

The employer has the duty to seek alternative work for beneficiaries whose health has not

13

Type of Benefits Reason for Payment and Beneficiary

Description of Payment Calculation and Benefit Amount

employer must be responsible for the sickness benefit for the employee concerned during his sickness leave.

difference.

yet fully normalized. If the new job is on a part-time basis with less pay, SSO will pay the wage differential.

Caretaker Benefit In case an employee with loss of working capacity is unable to move alone, SSO will provide benefits to caretakers.

Benefits are assessed on an hourly basis according to the time spent by the caretakers in looking after the person sustaining a loss of working capacity. This is based on the minimum salary or wage set by the Government.

Amount paid as benefits related to work injury and occupational diseases could not be broken down is available in Table 7.

Funeral benefit In case the employee dies due to a work accident or occupational disease

SSO will pay a funeral benefit equivalent to 6 months of the insured person's earnings. Thereafter, the insured person’s spouse and dependents are entitled to receive a survivors' benefit.

Survivor Benefit In order to be eligible for survivor’s benefit, the spouse of dead insured person has to fulfil at least one of the following conditions: (1) The surviving wife has reached 44 years of age or more; (2) The surviving wife is disabled or without working capacity; (3) The surviving wife has at least one child under the age of 18; (4) The surviving husband is disabled or unable to work.

Surviving spouse or parent benefit equal to 50% of the average insured earnings over a period of 12 months. Surviving children’s benefit equal to 15% of the beneficiary’s average earnings during 12 months of insurance. In case there is no surviving spouse or parents, each child will receive benefits equal to 20% In cases of several children, insurance benefits must not exceed 60%. The maximum survivors' benefit will not exceed the benefit payable for assumed permanent loss of working capacity. Children and widows remarrying within one year can receive payment.

Source: SSO Manual and Procedures, 2005.

42. Table 8 shows that the working injury and occupational disease insurance received minimal claims during the last three years ranging from 54 in FY2008 to 86 in FY2010. The 2009 expenditure shows limited coverage of $25,585.

14

Table 8: Working Injury and Occupational Disease Insurance: Coverage and Expenditure

Working Injuries and Disease Insurance

Beneficiaries 2008 2009 2010

Temporary Loss of Work 26 33 45 Unemployment Benefit 4 13 12 Caretaker Benefit 1 2 2 Funeral Benefit 4 1 7 Survivors Benefit 19 13 20 Total Beneficiaries 54 62 86 Total Premium Paid (Kips) 162,359,488 204,677,431 290,751,749 Total Premium Paid (USD) 20,295 25,585 36,344 Source: SSO Ten Years Report, 2011.

43. In 2010, SSO featured 579 member enterprises with 47,584 insured employees and 529 voluntary insured persons17. Medical Insurance, based on a risk pooling system18, uses prepaid mechanism to 18 contracted state-owned hospitals (i.e., 3 central hospitals, 5 provincial hospitals and 10 district-level hospitals). Healthcare beneficiaries consisting of insured persons, spouses and dependent children up to the age of 18, who are registered annually, receive treatment and drugs at their chosen hospital. SSO beneficiaries can access health care abroad through approval of SSO’s Medical Board. A list of short-term benefits available to beneficiaries and paid premiums is shown in Table 9.

Table 9: Beneficiaries of Short Term Benefits and Premium Short Term Benefit

Categories Beneficiaries

2008 2009 2010 Sickness Benefit 632 640 592

Maternity Benefit 1,713 1,546 1,662

Funeral Benefit 126 163 165

Total Beneficiaries 2,471 2,349 2,419

Total Premium Paid (Kips) 3,194,299,168 3,973,259,331 4,378,147,691

Total Premium Paid (USD) 399,287 496,657 547,268

Source: SSO Ten Years Report, 2011.

44. There are three types of beneficiaries provided by long-term insurance funds in the private sector: (i) old-age pension; (ii) invalidity pension; and (iii) survivor’s pension. Old-age pension provides regular income to insured persons once they reach the age of 60. Pension will increase 0.5% per month according to the number of years worked beyond the age of 60. Insured persons opting for early retirement at 55 years will have 0.5% deducted from the monthly pension in proportion with the outstanding years before reaching the age of 60. Insured persons will only receive a pension if SSO contributions have been paid for a minimum period of

17 To be a voluntary person, one must be a former insured person and pay contribution to SSF on behalf of oneself and their employer.

18 Social health insurance is based on the capitation fee method wherein all SSO beneficiaries can receive medical care during illness regardless of the amount of contribution.

15

5 years or 60 months. The invalidity benefit is also eligible to employees with paid contributions of a minimum of 5 years or 60 months. Eligibility will cease upon reaching the age of 60 and convert into a retirement pension. The SSO system also provides benefits for the survivor’s family members – adaptation beneficiaries, widows and orphans.

45. Table 10 shows that the small number of claimants to long-term insurance programs more than doubled since 2004. However, the amount of expenditure incurred by SSO to cover these claims is erratic and reflects the various programs from retirement pensions to caretaker allowance.

Table 10: Long-Term Benefit Coverage and Expenditure Long Term Benefit Categories Beneficiaries

2008 2009 2010 Old Age Pension 177 290 391

Resignation Bonus* 25 26 49

Invalid Pension 7 10 13

Caretaker Allowance - 1

Survivors Benefit (not related to work injuries)

12 19 42

Adaptation to survivor Benefit 28 39 72

Total Beneficiaries 249 384 568 Total Premium Paid (Kips) 661,852,376 1,181,761,274 1,791,353,546 Total Premium Paid (USD) 82,732 147,720 223,919 * Insured persons who are not eligible to monthly old age pension can receive a lump sum resignation bonus Source: SSO Ten Years Report, 2011. 46. Administrative costs for the SSO in 2008 amounted to 3,351,889,813 Kips, gradually increasing to 3,515,065,877 Kips in 2009 and 3,875,036,329 Kips19 in 2010. With the continued expansion of insurance scheme, the administrative costs increases. The objective of the organization is to lower the administrative costs and to increase the number of memberships. The SSO is working with the enterprises to join in the scheme and will enforce in the Labour Protection Law which is being revised for the endorsement of the National Assembly in December 2011.

I. Social Assistance and Welfare Programs

47. The Social Welfare Department, MLSW, is responsible for the policy development and management of social assistance and social welfare. There are 3 major social assistance programs: (i) community-based health insurance (CBHI); (ii) child protection; and (iii) food allowance programs. Community-Based Health Insurance

48. In 2002, the Ministry of Health initiated a pilot project called the Community-Based Health Insurance (CBHI), with support from the World Health Organization. The pilot project is

19 SSO 5 Years Report.

16

implemented in five locations: the Sisathanak and Hatxaiphong district of Vientiane Capital, and the Nambak district in Luang Prabang, Champassak and Vientiane Province.

49. The CBHI aims at providing better access to health services through regular pre-payment of small amounts in exchange for free health services. CBHI is a voluntary, not-for-profit program for the population. Contributions are paid monthly and the rates are set based on family size. Each CBHI scheme has its own CBHI management committee. The management committee pays monthly contributions to the contracted hospital with the MOH agreeing to a capitation fee of 42,000 Kip with public hospitals. In exchange, the hospital agrees to provide health services, excluding a limited number of medical conditions, to the insured members. The Management Committee also monitors the quality of the services and reports complaints to MOH.20

50. MOH envisages CBHI as the third pillar in health insurance, next to the health insurance schemes for the public sector and the private sector. It targets communities who can afford to pay for their own health services. MOH adopted regulations in line with health insurance schemes for the private sector.to facilitate integration of the CBHI with the SSO and mitigate possible confusion amongst the members and staff providers regarding different insurance schemes. In April 2006, membership totalled 3,359 families or 15,707 persons, with total member contributions totalling 63,324,917 Kips.

J. Child Protection Programs

51. The MLSW is collaborating with UN agencies and NGOs in implementing child protection programs such as: (i) Protection of Women and Children against Trafficking, (ii) Rehabilitation of Trafficked Victims from Thailand; and (iii) Child Protection in Rural Communities. Aside from bilateral and multilateral programs, the MLSW is also in charge of regional orphanage schools throughout the country.

K. Food Allowance for Primary School Children

52. The food allowance program operates in rural Laos and implemented by the Ministry of Education and Sports and World Food Program. The overarching objective is to achieve universal primary education by 2015 and achieve the MDG goals. The project is a continuation of the rural feeding program that lasted five years and will be operating for a minimum of five years.

IV. THE SOCIAL PROTECTION INDEX AND ITS DISAGGREGATIONS

53. The revised Social Protection Index (SPI) is a unitary indicator that can be disaggregated for analytical purposes. 54. The revised SPI is calculated by Total Social Protection Expenditures per Total Potential Beneficiaries by 25% of the GDP per capita (representing average poverty line expenditures). In other words, the total social-protection expenditures spread across all potential beneficiaries are compared to poverty-line expenditures in each country.

20 MOH/WHO. 2002. Regulations for the Pilot Project Community-Based Health Insurance. Vientiane.

17

55. The revised SPI index can be disaggregated into two components, one for the ‘depth’ of coverage and the other for the ‘breadth’ of coverage of social protection programs. The first indicator is the Total Social Protection Expenditures divided by the Total Actual Beneficiaries (i.e., the average size of benefits actually received or ‘depth’). The second indicator is the Total Actual Beneficiaries divided by the Total Potential Beneficiaries (i.e., the proportion of potential beneficiaries actually reached or ‘breadth’). 56. The revised SPI can also be disaggregated by the major categories of social protection programs: social insurance, social assistance and labour market programs. When the total expenditures per total potential beneficiaries for each major program are weighted in population terms, the program SPIs add up to the total SPI. 57. Furthermore, the revised SPI can also be disaggregated by expenditures per potential poor and non-poor beneficiaries. Finally, gender-wise data allows the disaggregation of expenditure by gender. 58. The derivation of the SPI for poor and non-poor and the SPI women and men used poverty and gender targeting rates. The rates are based on the results of household surveys; administrative reports of social protection implementing agencies; and in some instances, on the professional judgment of the consultants. A. Basic Statistics

Table 11: Lao PDR Basic Statistics for 2009

Statistic Unit 2009 Value Source of Data Notes GDP (current prices) Millions 47,225,000 7th NSEDP 2011-

2015, MPI Fiscal Year

GDP per capita (current prices)

Units 7,700,000 7th NSEDP 2011-2015, MPI

Fiscal Year

GNI (current prices) Billions … Total Population Millions 6.0 Statistical Year Book

2008 Mid-year population estimate

Number of unemployed/underemployed

Millions 0.8 Labour Force Survey

Migrant workers millions 0.1 Population aged 60 years and over

Millions 0.3 Statistical Year Book 2008

Mid-year population estimate

Employed Population Millions 3.1 Labour Force Survey Population living below national poverty line

Millions 1.6 7th NSEDP 2011-2015, MPI

Disabled population Millions 0.5 MPI estimate from MSW Children aged 0 to 14 years Millions 2.3 Statistical Year Book

2008 Mid-year population estimate

Disaster affected population Millions 0 MLSW Per capita poverty line income (annual)

Units 3880000 MPI USD 1.25 per day

Average household size persons 6 MPI Exchange rate US$1= 8514 Central Bank calendar year GDP = gross domestic product, GNI = gross national income

Source: Country Sources, 2011

18

B. Social Protection Expenditure

59. The total expenditure spent by the Government of Lao PDR is approximately 444,365 Kips (in millions) on social protection activities in 2009. Table 12 shows social protection expenditure by category. Social insurance expenditure goes entirely to health insurance constituting 64.4% of the total social protection expenditure. Social assistance expenditure account for 35.3% while labour market programs expenditure is very minimal at 0.3% of the total expenditure.

Table 12: Social Protection Expenditure by Social Protection Category 2009 Annual

Expenditure (million Kips)

Percent (%)

Health Insurance 286,316 64.4 ALL Social Insurance 286,316 64.4 Assistance for Elderly 40,499 9.1 Child Protection 7,889 1.8 Disaster Assistance and Relief 19,361 4.4 Other Social Assistance 89,050 20.0 ALL Social Assistance 156,799 35.3 Labor Market Programs 1,250 0.3 Total SP Expenditure 444,365 100

GDP (million Kips) 47,225,000 SP Expenditure Indicator 0.9%

Source: Country Sources, 2011

60. The largest share of the total SP expenditure is on Social Protection of Government Staff.. Second largest share is spent on the UXO clearance, mainly funded by UN agencies and International donors. Thirdly, SP expenditure was spent on Cash and in Kind transfer for veterans and the elderly. The funding for the first and third largest programs is 100% from the government budget. Table 13 shows the details on expenditure on social protection programs.

Table 13: Expenditure on Social Protection Programs

Social Protection Program Implementing

Agency Detailed Category

Expenditure (Million Kips)

Cash & in kind transfer for veterans and elderly (Decree 343/PM)

MLSW

AE 40,499

Disaster Relief (Food Security) MLSW DA 2,461 Protection of Lao Migrant Workers in Thailand

MLSW LMP 50

Protection of Foreign Migrant Workers MLSW LMP 200 Vocational Training for Out of School Youth MLSW LMP 1,000 Orphanage Schools MLSW CP 3,290

Protection from Unexploded Ordnance (UXO Clearance)

MLSW OSA 53,050

Protection of Women and Children against Trafficking

MLSW CP 1,490

Rehabilitation of trafficked victims from Thailand

MLSW CP 905

Child Protection in Rural Communities MLSW CP 1,985

19

Social Protection Program Implementing

Agency Detailed Category

Expenditure (Million Kips)

Tracing of Trafficked Victims (Children Trafficking)

MLSW CP 219

Social Protection for Government Staff MLSW HI 265,796

Social Protection for Workers in Private Sector

MLSW HI 20,520

Disaster Relief and Assistance (Flood victims)

MLSW DA 16,900

Poverty Reduction MPI OSA 36,000 Total 444,365

Note: AE-Assistance to elderly; DA-Disaster Assistance; CP-Child Protection programs; OSA-Other Social Assistance; HI-Health Insurance; LMP- Labour Market Programs Source: Country Sources, 2011 C. Social Protection Beneficiaries

61. One component of the Social Protection Index is the coverage of Social Protection Programs. Table 14 presents available information on the number of beneficiaries of the SP programs listed in Table 13.

Table 14: Beneficiaries of Social Protection Programs

Social Protection Program Detailed Category

Beneficiaries (000s)

Social Protection for Government Staff HI 4.1 Protection from Unexploded Ordnance (UXO Clearance) OSA 64.0

Cash & in kind transfer for veterans and elderly (Decree 343/PM) AE 121.0

Poverty Reduction OSA 41.0

Social Protection for Workers in Private Sector HI 23.0

Disaster Relief and Assistance (Flood victims) DA 25.0

Orphanage Schools CP 390.4

Disaster Relief (Food Security) DA 3.4

Child Protection in Rural Communities CP 0.2

Protection of Women and Children against Trafficking CP 96.8

Vocational Training for Out of School Youth LMP 0.2

Rehabilitation of trafficked victims from Thailand CP 309.7

Tracing of Trafficked Victims (Children Trafficking) CP 86.3

Protection of Foreign Migrant Workers LMP 340.9

Protection of Lao Migrant Workers in Thailand LMP 1,082.0

Total 2,588 Note: AE-Assistance to elderly; DA-Disaster Assistance; CP-Child Protection programs; OSA-Other Social Assistance; HI-Health Insurance; LMP- Labour Market Programs Source: Country Sources, 2011

V. ANALYSIS OF COUNTRY RESULTS

62. This Chapter presents the results of the study on the overall SPI and its disaggregation by social protection category. Discussion is also made on further disaggregation by poverty status and gender.

20

A. Disaggregation by Social Protection Category

Table 15: Disaggregation by Category Social

Insurance Social

Assistance Labor Market

Programs All SP

Programs Total SP Expenditure (Million Kips) 286,316 156,799 1,250 444,365 Beneficiaries (000s) 396 2,007 185 2,588 Reference Population (000s) 3,440 4,404 895 8,739 25% of GDP per capita 1,925,000 1,925,000 1,925,000 1,925,000 SPI 0.017 0.009 0.0001 0.026

Source: Consultant estimates, 2011

63. The total SPI for Lao PDR is 0.026, indicating that the average per capita social protection government expenditures is about 2.6% of the poverty line expenditure (set at 25% GDP per capita). SPI for social insurance is the highest at 0.017 followed by social assistance at 0.009 while it is 0.0001 for labour market programs. The overall SPI is dominated by social insurance due to high expenditures on health insurance whose share to total GDP is about 64%.

B. Disaggregation by Depth and Breadth

64. The SPI depth is the average benefit per actual beneficiary; as a percent of poverty line expenditures while SPI breadth is the percent of actual beneficiaries who received some form of social protection in relation to the target beneficiaries. Table 16 indicates that overall depth is 0.091 while the breadth is 0.290. The SPI depth indicates that in 2009, the average amount of benefits received by beneficiaries are about 9.1% of the poverty line expenditures. The depth, on the other hand indicates that about 29.0% of the target beneficiaries actually received benefits. The depth for Social Assistance is highest at 0.223, which means that among the three categories social assistance programs reach the most beneficiaries.

Table 16: Disaggregation by Depth and Breadth Social

Insurance Social

Assistance Labor Market

Programs All SP Programs

Depth 0.376 0.041 0.004 0.089 Breadth 0.045 0.230 0.021 0.296 SPI 0.017 0.009 0.000 0.026

Source: Consultant estimates, 2011

C. Disaggregation by Poverty

65. The SPI for poor represents the amount of expenditures that goes to poor beneficiaries in reference to the poverty line expenditures. The calculation of this indicator involves drawing up assumptions on poverty targeting rates of the social protection programs based on the results of household surveys and other government reports.

21

Table 17: Disaggregation by Poverty Status Poor Non-Poor

SP Expenditure (Million Kips) 99,558 344,807 Reference Population (000s) 8,739 8,739 25% of GDP per capita 1,925,000 1,925,000 SPI 0.006 0.020

Source: Consultant estimates, 2011 66. The SPI for poor in Lao PDR is 0.006 while the SPI for non-poor is higher at .020. The indices imply that the government social protection expenditures for poor is about 0.6% of the poverty line expenditure, which is much lower that the average for non-poor with 2.0%. This suggests that the social protection resources are usually diverted to the non-poor. D. Disaggregation by Gender

67. Similar to the SPI for poor/non-poor, the SPI for women/men indicates the average expenditures received by a female beneficiary as a percent of the poverty line expenditure. In the absence of gender-specific data on beneficiaries, the gender targeting rates were based on the proportion of females in the respective population group.

Table 18: Disaggregation by Gender Women Men

SP Expenditure (Million Kips) 165,956 278,409 Reference Pop (000s) 8,739 8,739 25% of GDP per capita 1,925,000 1,925,000 SPI 0.010 0.017

Source: Consultant estimates, 2011

68. The SPI for females (0.010) is slightly lower than the SPI for males (0.017) in Lao PDR. The figures are indicating that the average expenditures on women are about 1.0%, while for men is 1.7% of the poverty line expenditures. This indicate also that there is gender disparity in the targeting of SP programs in the country.

VI. CONCLUSION AND RECOMMENDATIONS

69. The total social protection expenditure in Lao PDR is Kips 444.36 billion or 0.9% of GDP.

70. Social insurance has the largest share (64.4%) of social protection expenditure while labour market programs have the lowest share (0.3%) of total government spending.

71. Having SPI depth of 0.089, the benefit received per beneficiary of social protection is about 8.9% of regional poverty line (set at 25% of GDP per capita) and social protection expenditure reached 29% of targeted beneficiaries, at SPI breadth of 0.296.

72. Social protection programs in Lao PDR benefited more non-poor than poor beneficiaries, with each poor beneficiary receiving a per capita benefit of only 0.6% of the regional poverty line, and non-poor with 2.0%.

22

73. The total social protection expenditure in Lao PDR benefited slightly more men than women, with each female beneficiary receiving only 1% of the regional poverty line, while men received 1.7%

74. The total SPI of Lao PDR is relatively low, indicating a low level of social protection for target groups like the unemployed, children, and elderly population.

75. The size of benefits and coverage of actual beneficiaries are also low. The high depth of social insurance relative to social assistance and labour market programs does not assure high benefits for public and private sector employees. The low amount of benefits for social assistance and labour market programs should be considered.

76. Coverage of programs shows that less than one third of the target beneficiaries receive a form of social protection. Social insurance programs cover only formal sector workers and attention must be given to those who form part of the informal sector who are prone to economic setbacks.

77. Despite the poverty program that benefits the poor, social protection programs spend only one fifth on the poor. This may be due to the big chunk that goes to social insurance programs which most likely do not cover poor beneficiaries. Focus must therefore be given on the expansion of the programs on unemployed, elderly, and children. 78. Disparity on spending for females and males though not huge should still be considered. As noted above, the results on gender focus should be taken with caution since these are based on assumptions made from the results of surveys and reports.

Appendix 1 23

SOCIAL PROTECTION CATEGORIES AND TYPES OF PROGRAMS IN LAO PDR

Social Protection Category/Types of Program Name of Program1 Social Insurance Programs Pensions Social Protection for Government Staff

Social Protection for Workers in Private Sector Unemployment Benefits

Health Insurance Other Social Insurance (maternity, disability benefits) Social Assistance Assistance for the elderly (e.g. non-contributory basic allowances for the elderly, old-age allowances)

Cash & in kind transfer for veterans and elderly Decree 343/PM

Health assistance (e.g. reduced medical fees for vulnerable groups)

Health Fund for the Poor (3 Pilot provinces)

Child protection (school-feeding, scholarships, fee waivers, allowances for orphans, street children initiatives)

Orphanage Schools Protection of Women and Children against Trafficking Rehabilitation of trafficked victims from Thailand Child Protection in Rural Communities Tracing of Trafficked Victims

Family allowances (e.g. in-kind or cash transfers to assist families with young children to meet part of their basic needs).

NA

Welfare and social services targeted at the sick, the poor, the disabled and other vulnerable groups

Protection from Unexploded Ordnance (UXO)2

Disaster relief and assistance Disaster Relief (Food Security) Disaster Relief and Assistance (Flood victims)

Cash/in-kind transfers (e.g. food stamps, food aid) Poverty Reduction Temporary subsidies for utilities and staple foods Poverty Reduction Land tax exemptions NA Labour Market Programs Direct employment generation through public works programs NA Direct employment generation through loan based programs NA Labour exchanges and other employment services Protection of Migrant Workers in Thailand

Protection of Foreign Migrant Workers Unemployment benefits NA Skills development and training Vocational Training for Out of School

Youth Source: Adapted from Ortiz ed, Defining an Agenda for Poverty Reduction - Proceedings of the First Asia and Pacific Forum on Poverty, Volume 2, p. 57, ADB, Manila, 2002; ADB, Social Protection Strategy, pp. 14–22, Manila, 2001.

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ents the totals, both poor

derived as

ditures on th(Total Non-p).

represented

ed in the eq

e numerator d by the Tota

poverty-line

componentsweight, all

(SA) + SPI

of Expend

gated by exp

)

s follows:

expenditureth poor and

he Poor dividActual Bene

by the follow

Poor)

expenditurer and non-po

e Non-poor poor Actual B

by the follow

uation

represents al SPI Potent

expenditure

s’ expendituthree are ad

(LMP)

itures on P

penditures o

es per poor anon-poor. T

ded by the Teficiaries divi

wing equatio

es per non-poor.

divided by TBeneficiaries

wing equatio

the proportiotial Beneficia

es.

ures per potdded togeth

Poor and No

on poor and

actual benefThe index is

Total Poor Aided by Tota

on:

poor actual b

Total Non-pos divided by

on:

on of SI, wharies.

tential beneer. The res

on-Poor Be

non-poor be

ficiaries as acomputed a

ctual Benefial Potential B

beneficiaries

oor Actual BTotal Poten

ich is the

eficiaries (SIsulting total

eneficiaries

eneficiaries.

a ratio to all as:

ciaries) Beneficiaries

s as a ratio to

eneficiaries)ntial

, SA, is the

s

s).

o all

)

22. Wcountry.

When SPI (Pooor) is multipplied to SPI

(Non-Poor), the product

A

t represents

Appendix 2

the SPI of t

27

he