ABSTRACT
There are five factors which Vietnam needs to consider as it aspires towards substantial progress in its socio-economic change toward greater social protection. Vietnam’s rapid integration into the global economy could be affected by these five factors. First, ongoing rethinking of the pace and type of future globalization. Second, adjusting to the rapid ageing of the population, creating social protection structures, including for healthcare for those above 75 years of age. Third, Vietnam’s economy had remained largely informal – without formal employer-employee relationships, where 4 out of 5 workers are not covered by social insurance schemes for pensions. Health care coverage is around 70 percent, but relies primarily on government subsidies. The challenge of designing, implementing, and financing social protection schemes for informal sector workers will continue to be formidable. Fourth, relatively high and variable inflation rates in Vietnam complicate the task of maintaining the real value of various pension and other benefits. Between 2010 and 2015, the official inflation rate ranges from a low of 0.6 percent in 2015 to a high of 18.9 percent in 2011.5 Fifth, Vietnam’s population remains especially vulnerable to climate change as most of the population lives in low-lying river basins in coastal areas.
The main gaps in Vietnam’s SPF are the unequal access to health care among the population; continuing high out-of-pocket health care costs (48 percent); low coverage for health care, social insurance, and other programs; and implementation inefficiencies. Generating employment opportunities is also proving to be a challenge, especially with subdued growth and global trade prospects, and lower employment intensity due to disruptive technologies.
The projections for implementing SPF in Vietnam, for the broadest set of selected options (Option 3), is estimated to put additional costs at 1.43 percent of GDP in 2015, while its tax-to-GDP ratio is around 20 percent. For expanding fiscal space, it is suggested that the government should increase the number of taxpayers, increase the number of citizens contributing to social insurance, increase the government retirement age, reform government expenditure, and improve performance of the banking sector and state enterprises.
