Ndihma Ekonomike in Albania Key Challenges and Opportunities

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1 Ndihma Ekonomike in Albania Key Challenges and Opportunities Ufuk Guven World Bank, Europe Central Asia Region Social Protection Team ABCDE Albania Conference June 2, 2010

2 Social Protection Main Poverty Targeted Social Assistance Benefit NDIHMA EKONOMIKE Assessment of Performance Equity Efficiency Transparency

3 MIXED PERFORMANCE OUTCOMES

4 Efficiency Transparency Two-Tier Targeting

5 Russia CA Latvia GMI + dwelling Uzbekistan SA for low income Serbia CA Bosnia-Herzegovina CSW Kyrgyzstan UMB Macedonia SFA Poland SW benefits Montenegro FMS/MOP Armenia FB Prog Albania NE Azerbaijan TSA Georgia TSA Hungary Regular SA Lithuania S. Benefit Kazakhstan TSA Estonia MT Benefits Croatia S. Allowance Kosovo SA Serbia MOP Bulgaria GMI Ukraine XP program Share of Benefits Received by Poorest Quintile Romania GMI Efficiency Transparency Respectable Targeting Accuracy Targeting Accuracy of NE Targeting Accuracy of Specific Poverty Focused Benefits % 0.0 Q1 Q2 Q3 Q4 Q

6 Equity but low coverage:22% of poor (1) Not eligible for NE Yes 0.8% Yes 1.3% Yes 5.0% Yes 18.4% Yes 39.6% Yes 92.1% Total Percentage of Individuals, Bottom Decile, Urban 100% (=122,172 individuals) Have rental income? No 99.2% Receive Survivor Pension or Special Merit Pension or Supplementary Pension? Own a car? Receive Remittances from Abroad? Receive Old-Age Pension? No 98.7% No 95% No 81.6% No 60.4% Have family member employed in the LM? Percentage remaining as eligible for NE after applying all filters 7.9 % No

7 low coverage:22% of poor (2) Equity

8 Efficiency Spending in Albania in line with ECA average Social Assistance Spending (% GDP) Hungary 06 Croatia 08 Bosnia 08 OECD 05 Belarus 08 Uzbekistan 07 Ukraine 08 Serbia 08 Russia 06 Albania 08 Romania 07 Estonia 06 Lithuania 08 Kosovo 08 Poland 07 Moldova 08 Kazakhstan 07 Bulgaria 08 Kyrgyzstan 08 Georgia 07 Montenegro 08 Armenia 08 Macedonia 08 Latvia 08 Azerbaijan 08 Turkey 07 Tajikistan 08 Average SA spending = 1.6% of GDP 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% Source: ECA Region, Social Protection Database, World Bank

9 Equity Efficiency but relative importance of NE & disability spending shifted Albania Social Assistance Spending (% GDP)

10 Concerns about the expanding disability benefit Outdated medical eligibility criteria Scattered legislation Conflict of interest in players who determine disability

11 Equity Efficiency Resulting in low benefit adequacy for NE (generosity) No indexation of benefit thresholds Contraction in spending (squeezed by expansion in disability spending) As a result average Ndihma benefit: Ndihma household benefit value = one-third of disability benefit per person 4% of minimum wage 14% of the post transfer consumption of poorest quintile

12 Efficiency Transparency Challenges with Benefits Administration Inadequate registries and MIS No national database of applicants or payroll beneficiaries Paper based: no automaticity for information management, crosschecks, verification, etc Complex eligibility processes Require applicants to provide numerous documents for verification purposes (high burden) Excessive frequency of recertification Limited capacity for monitoring, oversight & controls Employment & social assistance programs disconnected

13 Equity Efficiency Transparency Principles for Reform Improve Targeting & Coverage: Equity, Efficiency & Transparency Geographic Targeting : Use objective poverty based criteria from an updated poverty map Family Assessment: Use objective weighting across different eligibility criteria (filters) Introduce Indexation: Equity & Efficiency Index eligibility thresholds to inflation Strengthen Benefits Administration: Efficiency &Transparency Automate databases and create a national registry Simplify and standardize intake and application procedures Improve monitoring, oversight and controls to reduce fraud & error Re-evaluate disability programs: Equity, Efficiency &Transparency -eligibility rules, certification, spending Reduce work disincentives: Efficiency Activation :Build effective bridges between social assistance and employment programs Reconsider employment filter in Ndihma Ekonomike