INTERNATIONAL LABOUR ORGANIZATION DEVELOPMENT COOPERATION PROJECT DOCUMENT TEMPLATE (PRODOC) ASEAN countries (focus on Indonesia and Viet Nam)

INTERNATIONAL LABOUR ORGANIZATION DEVELOPMENT COOPERATION PROJECT DOCUMENT TEMPLATE (PRODOC) Cover page XB Symbol: Project title: Country: P&B Outcomes: RAS/16/03/JPN Promoting and building social protection in Asia (3rd phase): Extending social security coverage in ASEAN ASEAN countries (focus on Indonesia and Viet Nam) Flagship global programme on social protection floors Outcome 3: Creating and extending social protection floors RAS 126: Increased knowledge and capacity in the region to promote coherent policies in support of decent work for all women and men DWCP Outcome: VNM151 - Strengthened national capacities and knowledge base for the effective implementation of social security policies and strategies. IDN103 - Government and social partners have greater capacity in designing and implementing social protection policies and programmes. Technical field: Administrative unit: ILO Responsible Official: Technical Backstopping Unit: Collaborating ILO Units: External Implementing Partners: Social Protection Department (SOCPRO) ILO Regional Office for Asia and the Pacific Ms Tomoko Nishimoto, Assistant Director General and Regional Director for Asia and the Pacific ILO Decent Work Technical Support Team for East and South-East Asia and the Pacific (ILO DWT-Bangkok) Country Offices for Indonesia and Viet Nam ASEAN Secretariat, ASEAN SLOM and SOMSWD Indonesia: Ministry of Manpower and Transmigration, BPJS Ketenagakerjaan, Bappenas, Indonesian workers and employers organizations; Viet Nam: Ministry of Labour, Invalids and Social Affairs of Viet Nam, Viet Nam Social Security, Viet Nam workers and employers organizations; Japan Federation of Labour and Social Security Attorney Association Time frame: March 2016 to March 2019 Budget requested: Evaluation requirements: US$ 1,839,000 (2016: US$ 664,017; 2017: US$ 384,487; estimated 2018: US$ 790,495) Final external evaluation 1

EXECUTIVE SUMMARY There is globally and in the Asia Pacific region a growing consensus that the establishment of social protection floors is a key element of the policy framework to reduce poverty and inequalities and achieve inclusive and sustainable development. It is at the core of the Sustainable Development Goals by 2030. During the past decade, ASEAN countries have made progress in extending social protection, with the emergence of statutory schemes in all ASEAN countries. However, coverage and level of protection across the population and across countries remain unequal and insufficient. There is still a need for improving policy and institutional framework for the effective and efficient delivery of social protection. In October 2013, ASEAN Heads of State adopted a Declaration on Strengthening Social Protection, pledging for the completion of social protection floors as a priority to achieve growth with equity. The Regional Framework for Strengthening Social Protection and its Plan of Action, adopted by the ASEAN Heads of State in November 2015, includes among its priorities the extension of social security coverage among informal economy workers, selfemployed and micro, small and medium enterprises (MSME) workers. Building on the achievements of the past two phases of the ILO/Japan Project on Promoting and Building Social Protection in Asia (2011-2013 and 2014-2016), and the solid partnership with ASEAN Member States, 1 a third phase of the Project is here proposed, as a component too of the ILO s Global Flagship Programme on Building Social Protection Floors for All. The new phase aims specifically at fostering knowledge, capacity and expertise for extending social security coverage in ASEAN. The project intends to generate better knowledge, understanding and expertise on extension of social security, and stimulate South-South cooperation across ASEAN Member States. The project provides direct support to Indonesia and Viet Nam for increasing social protection coverage. Lessons learnt, experiences and good practices from the two countries will be disseminated across the ASEAN Member States and worldwide. 1. BACKGROUND AND INFORMATION 1.1. Extension of social protection, a global priority Today nearly 73 per cent of the world s population lacks access to adequate social protection coverage. 1 A majority of the world s economically active population do not benefit from any protection in cases of unemployment (88 per cent of unemployed have no unemployment benefits), work-related injury (61 per cent are not covered in case of work-related accidents and diseases), or maternity (72 per cent of working women have no access to maternity cash benefits). Nearly half (48 per cent) of all people over pensionable age do not receive a pension, and for those who do, pension levels are often inadequate. In recent years, social protection has become an increasingly prominent priority in international agreements and development plans. Since its adoption in 2012, the ILO s 1 Source: ILO. 2014. World Social Protection Report 2014-15: Building economic recovery, inclusive development and social justice 2

Recommendation on Social Protection Floors, No.202 (2012) has served as an accelerator of social protection extension while providing concrete guidance to countries. The importance of social protection to reduce poverty and inequalities and achieve inclusive and sustainable development is also at the core of the Sustainable Development Agenda adopted by the United Nations General Assembly in September 2015. In 2015 too, the ILO Governing Body adopted a Global Flagship Programme on Building Social Protection Floors for All, as part of its overall Development Cooperation Strategy (2015-2017), thus fostering the role of the ILO in promoting social protection. 1.2. ASEAN s commitment to create and extend social protection floors and progressively build more comprehensive social security systems Box 1: ASEAN s commitment to extend social protection ASEAN Human Rights Declaration (2012) Article 30(1): Every person shall have the right to social security, including social insurance where available, which assists him or her to secure the means for a dignified and decent existence. ASEAN Socio-Cultural Community Blue Print, 2025 B.3. Promotion and Protection of Human Rights: Support accelerated implementation among ASEAN Member States to extend coverage, accessibility, availability, comprehensiveness, quality, equality, affordability and sustainability of social services and social protection. Source: ASEAN Socio-Cultural Community Blue Print (2015) (http://www.asean.org/storage/2016/01/ascc- Blueprint-2025.pdf ), ASEAN Human Rights Declaration, 2012 (http://aichr.org/documents/ ). The fundamental human right to social security remains only partially fulfilled for the large majority in the region. Five ASEAN countries have statutory schemes covering at least six out of nine social security risks (see table below). One Member State Thailand has a comprehensive legal scope with statutory programmes in every social security policy area. Table 1. Overview of national social security system. Existence of statutory programme Country Medical care Sickness (cash) Maternity (cash) Old-age Work injury Invalidity Survivors Family allowances Unemployment Brunei Darussalam Ω Σ Σ None None Cambodia None Σ None Σ Indonesia Σ Σ None Σ Lao PDR None Malaysia Ω Σ Σ None Σ Myanmar Philippines None Σ Singapore Σ Σ None Thailand Viet Nam None None: No statutory programme anchored in national legislation. At least one programme anchored in nakonal legislakon. Ω Medical benefit in kind without statutory programme anchored in national legislation. Σ Limited provisions via employer s liability under national labour code (includes company sick leave and severance pay provisions). Programme has yet to be implemented. 3

Sources: C. B, Ong; C. Peyron Bista, 2015: The state of social protection in ASEAN at the dawn of integration, ILO, Bangkok. Legal coverage rates of work injury schemes most of which are social insurance-based range from a low 6.7 per cent to a high 88.0 per cent among nine ASEAN countries (excluding Myanmar) with a regional average of 46.2 per cent. For those of old age, only 30 per cent receive a monthly pension from both contributory and tax-funded schemes. Even when oldage pension exists, the level of benefit is often inadequate. Effective coverage is far lower due to lack of voluntary coverage, compliance enforcement, and exemptions in compulsory social insurance coverage that can be used as legal loopholes for employers and employees to avoid social contributions. On the other hand, social assistance programmes across the ASEAN countries are still limited in coverage and level of benefits, which limits their capacity to complement the limited protection offered by social insurance schemes. Extension of ASEAN s social protection coverage is becoming more urgent as the deeper integration brought by the ASEAN Economic Community (AEC) approaches. According to a recent International Labour Organization (ILO)-Asian Development Bank (ADB) report, the AEC could spur growth of 7 per cent in the ASEAN economy and create 14 million additional jobs. However, these overall gains will not be distributed evenly; while some sectors will flourish, others are likely to see job losses. Workers without the right skills may not be able to seize these new opportunities. Social protection will play a crucial role of compensating for any short-term loss of income and will facilitate access to education, skills, and decent employment. This will ultimately increase productivity and economic growth. In October 2013, ASEAN Heads of State adopted a Declaration on Strengthening Social Protection as one of the key priority areas to achieve growth with equity. It specifically states: Extending coverage, availability, quality, equitability and sustainability of social protection should be gradually promoted to ensure optimal benefits to the beneficiaries, ASEAN Declaration on Strengthening Social Protection, Brunei Darussalam, 9 October 2013. 2 The Declaration represents a clear commitment by ASEAN member States to establish social protection floors and systems across the region. On 21 November 2015, in Kuala Lumpur, Malaysia, ASEAN Leaders adopted a Regional Framework and Action Plan to implement the Declaration 3 which dedicates one component on advocacy for extension of coverage to informal workers, including but not limited to self-employed, micro-entrepreneurs, small farmers, and fisher folks, as defined in the Framework. Box 2: Definition of informal economy: All economic activities by workers and economic units that are in law or in practice not covered or insufficiently covered by formal arrangements (Recommendation 2015, No. 204). 2 The ILO Department of Statistics distinguishes between employment in the informal sector, i.e. employment in informal enterprises, and informal employment, including employment in informal jobs both in the formal and informal sector (ILO, 2012a), thus referring to all employment arrangements that do not provide individuals with legal or social protection through their work, whether or not the economic units they work for or operate in are formal or informal enterprises or households (ILO, 2013d). http://www.asean.org/images/archive/23rdaseansummit/5.%20asean%20declaration%20on%20social%20prot ection_final.pdf 3 http://www.asean.org/images/2015/november/27thsummit/ascc_documents/asean%20framework%20and%20action%20plan%20on%20social%20protectionado pted.pdf 4

Social protection coverage in ASEAN currently excludes a large proportion of its population, not enrolled in contributory social security schemes, and have limited access to tax-funded social protection benefits and social services. Even for those who will be legally covered by social insurance schemes, enforcement of social security laws remain a challenge in countries where over 65 per cent of the workers are in the informal economy (Vanek et al. 2014), where business is dominated by small and medium enterprises and own-account workers and unpaid family workers still represent nearly half of the work force (WESO 2015, ILO). Figure 1: share of employment by status and sex in ASEAN Source: World Employment and Social Outlook, ILO, 2015 1.3. Building on the achievements of the ILO/Japan Project on Extending Social Protection in Asia (2011-2015) 4 The Ministry of Labour, Health and Welfare of Japan, through the ILO/Japan Multi-bilateral Programme, has supported the extension of social protection in the Asia-Pacific region since 2011. In particular the ILO/Japan Project on Promoting and Building Social Protection in Asia 5, through capacity building and awareness raising, has influenced the adoption of the ASEAN Declaration on Strengthening Social Protection. The Declaration reflects the principles included in the ILO Recommendation on Social Protection Floors, No.202 (2012). The Project also achieved to engage regional and national workers and employers representatives in the definition and now implementation of the Regional Framework on Strengthening Social Protection and its Plan of Action. At country level, the Project helped improving the legal framework and implementation of the unemployment insurance scheme in Viet Nam; 4 Phase I (2011-2013) Promoting and building unemployment insurance and employment services in ASEAN (ASEAN and focus country, Viet Nam); Phase II (2014-2016): Promoting and building income security and employment services for vulnerable groups in Mongolia, learning from ASEAN (ASEAN and focus country Mongolia). 5 Factsheet: ILO-ASEAN Partnership on social protection 5

developed a solid knowledge on unemployment protection; and finally, contributed to the extension of old-age pension to herders, informal workers, self-employed, and the national strategy for increased income security (social protection and business development) of young herders in Mongolia. The third phase (2016-2018) builds on achievements, expertise and good practices of the past five years of the ILO/Japan Project and the solid partnership on social protection with ASEAN Member States. The ILO/Japan project is now recognized as a key partner to discuss social protection at the ASEAN level, with the confirmed engagement of workers and employers organizations. Thanks to continuity in ILO/Japan support to the region Asia-Pacific in the area of social protection, long-term and sustainable impact is now visible. The new phase aims at specifically fostering knowledge, capacity and expertise for extending social security coverage in ASEAN. Across ASEAN countries, social security systems and reforms are at different stage of development. Among countries with already several years of social security implementation (Indonesia, Malaysia, Philippines, Singapore, Thailand, Viet Nam), Indonesia and Viet Nam have recently adopted major reforms mainly aimed at extended coverage, respectively in 2015 and 2014. Among ASEAN countries that are still at the early stage of implementing a broader social security system that will cover those outside civil service (Cambodia, Lao PDR, Myanmar),.Reforms in these two countries respond to pressuring needs for extending and strengthening social protection. In additional to the regional component, the project proposes to add country interventions specifically in these two countries. 1.4. Background and problem analysis in Indonesia Since its amendment in 2002, the Indonesian Constitution recognizes the right of all people to social security, and the responsibility of the State in the development of social security. The progressive implementation of the National Social Security Law (Law No. 40/2004) and the Social Security Service Providers Law (Law No. 24/ 2011) aims to extend social security coverage for the whole population in the areas of health, work injury, old age, and death of the breadwinner. The National Social Security Law follows a staircase approach with noncontributory schemes for the poorest people, contributory schemes (with nominal and subsidized contributions) for the self-employed and informal economy workers, and statutory social security schemes (with contributions set at a percentage of wages) for formal sector workers and their dependents. The implementation of the National Social Security System Law, the social insurance branch in particular, has been slow since its enactment in 2004. From 2014, social security schemes before managed by four State-owned limited liability companies are undergoing consolidation to become two public social security administering bodies: BPJS Kesehatan (Health) and BPJS Ketenagakerjaan (Employment) 6. The new BJPS Ketenagakerjaan (Employment) was launched on 1 July 2015, replacing the former PT Jamsostek, previously managing the private companies provident fund for old-age lump sum, employment injury, and funeral benefit. BPJS Ketenagakerjaan (Employment) will also absorb the old-age pension and old-age lump sum scheme for the civil servant by 2029. 6 BPJS Kesehatan is the social health insurance branch of the social security system in Indonesia; while BPJS Ketenagakerjaan, that can be translated by Employment, provides benefits for old-age and survival (under a defined benefits scehme and provident fund), and employment injury insurance. 6

In addition, a pilot mechanism for extending social security coverage to workers of the informal economy (the government subsidizing the workers contribution) has been tested in the Capital Region of Jakarta and in several districts across Indonesia, by the Ministry of Social Affairs (Askesos programme) and Ministry of Manpower and Transmigration (TKLHK programme) 7. However, due to the absence of proper monitoring and evaluation mechanism and some governance issues, the Ministry of Manpower and Transmigration decided to suspend this subsidized contribution to informal workers programme in 2014. With the full operationalization of BJPS Ketenagakerjaan (Employment), the Government of Indonesia and social partners are joining efforts in designing innovative measures aimed at extending social security coverage in small and medium enterprises, self-employment and informal economy. The project proposes to address the following major issues that can explain the law enforcement of social security laws in Indonesia: 1. Weak enforcement of social security compliance mechanisms resulting in a low participation in the social insurance system, including among the formal sector As per April 2015, the social security branch (BJPS Ketenagakerjaan) covered around 16 million workers or less than 10 per cent out of its 128.3 million labour force 8. Insured under BPJS Ketenagakerjaan are 14.8 million 9 registered as regular worker" under the compulsory scheme and 1.2 million insured as casual worker" under the voluntary scheme out of the estimated 62 million. Overall 53.4 per cent of the employed (115.3 million) are found in the informal economy as per February 2014 10. Such results demonstrate a lack of compliance across the formal economy, in particular among small and medium enterprises with significant disparities across provinces, as shown in the figure 2. Figure 2. Number of BPJS Ketenagakerjaan Active Participant by Province as of October 2014 Source: BPJS Ketenagakerjaan, 2014 7 See Report of the Assessment Based National Dialogue, Towards a Social Protection Floor in Indonesia, ILO, Jakarta, 2013 8 Source: Labour force as of February 2015, Badan Pusat Statistik: Indikator Pasar Tenaga Kerja Indonesia Februari 2015 (Jakarta, Badan Pusat Statistik, 2015). http://www.bps.go.id/publikasi/view/id/1019 9 14,774,304 registered as regular worker" under the compulsory scheme and 1.172.382 insured as casual worker" under the voluntary scheme. 10 ILO, 2014: Indonesia: Labour and social trends update August 2014 (Jakarta, 2014) 7

Reasons for the low participation are multiple: recent reform and lack of information among employers and beneficiaries on the new regulations, low attractiveness because of inadequate benefits level, lack of trust in public institutions especially to manage financial and fiscal risks, unappropriated institutional frameworks and procedures to expand and sustain regular contributions from MSMEs, self-employed and informal workers and. 2. Weak enforcement of social security compliance mechanisms According to the Social Security Providers Law (No.24/2011), registration to the five social insurance schemes (Health (BPJS Kesehatan), old-age pension and provident fund, employment injury and survivors benefit (BPJS Ketenagakerjaan)) is compulsory for all formal workers. Article 11 of the Law provides for administrative and criminal sanctions for noncompliance. 11 Administrative sanctions apply to employers and employees as well as those receiving subsidy that do not register properly, while criminal sanctions concern employers only, under the Law 8/1981 on Criminal Procedure Code (KUHAP). Despite legal provisions sanctioning non-compliance with social security laws (partial compliance or full compliance), enforcement remains low. The low level of registration among micro, small and medium enterprises question either the adaptation of the sanctions and application conditions to these groups or the inspection mechanism. Unlike Jamsostek (the private sector workers social security agency), BPJS Ketenagakerjaan (Employment) has full authority to undertake inspections for social security compliance and make recommendations to the respective authority (Provincial government, district municipality) for sanctions. There is a need to reinforce the capacity of the recently established supervising unit under BPJS Ketenagakerjaan (Employment) and the coordination between this unit and the general labour inspection functions of the Ministry of Manpower and Transmigration. 3. Low coordination between actors and insufficient incentives for the coverage of workers from the informal economy The assessment based national dialogue on social protection, concluded in 2013, identifies gaps in the implementation of social protection programmes at national and sub-national levels. Among the issues are the uncoordinated planning and budgeting process, fragmented and un-coordinated programmes, non-existence of integrated monitoring and evaluation mechanism, and excessive number of liaison officers working at the local level for the same targeted household. The Ministry of Social Affairs has been traditionally responsible for the coverage of informal economy workers. Its main programme, Askesos, has been merged with BPJS Ketenagakerjaan (Employment) to reduce duplication. However, improving efficiency of these interventions requires a better coordination between the Ministry of Social Affairs and BPJS Ketenagakerjaan. Efforts for improving policy and programmes coordination in order to increase impacts on poverty reduction, linkages between social protection and employment programmes, and bridges between social assistance and social insurance, are taking place but remain limited. Beneficiaries of social security programmes, for instance, do not benefit from any specific access to employment services that can help in improving their employability. 11 Administrative sanctions are in the form of written warning, fine, and/or deprived from public service for business registration; exempted from government project; driving license; land certificate; passport; vehicle registration number; and penal sanctions in the form of fines and imprisonment up to eight years 8

Conversely, beneficiaries of employment programmes, such as the community empowerment programmes (PNPM), are not systematically enrolled in health or other social protection schemes even though social protection schemes targeting informal sector workers do exist. 4. Insufficient reach-out and unclear administrative procedures for registration, payment of contributions and benefits claims The National Social Security System Law (No. 40/2004) and Law on Social Security Providers (No. 24/2011) set a good foundation for extending social security coverage; however new BPJS Kesehatan and BPJS Ketenagakerjaan will need to find effective ways to reach out to informal sector workers, the majority of whom have never been part of any social security scheme. Access to social security services remains a challenge, with significant disparities in availability of social security offices among provinces districts and sub-districts. In order to address this issue, BPJS Ketenagakerjaan is now testing registration points installed at retailer shops and is developing e-services (online registration, mobile application). The increased use of these technologies and innovative approaches to deal with MSMES and self-employed and for workers in rural zones and remote areas with limited connection to internet are key to effectively reach the maximum of Indonesians. The assessment based national dialogue on social protection (2013) recommended integrating the delivery of all social protection programmes under one stop service and a single registration system, called the single referral system. The State Ministry of National Development Planning (Bappenas) is currently examining several design option of the implementation of such Single Referral System. 1.5. Background and problem analysis in Viet Nam The term social protection was first officially introduced in the Communist Party s documents in 2001. It has then evolved over time and now encompasses active labour market policies, social assistance, social insurance, and basic social services. The Social Insurance Law passed in June 2006, and amended in 2014, covers public and private employees (in establishments with at least one employee, since amendment of 2009) in the event of disability, sickness, maternity, work injury, and old-age on a compulsory basis. Amidst the global financial crisis in 2008-09, an unemployment insurance (UI) scheme was introduced to replace the existing severance pay system in 2009. Under the Social Insurance Law, since 2008, informal sector workers are only eligible for the voluntary retirement and survivor pension scheme. Extending the coverage of social protection provisions, particularly social insurance to informal economy workers; improving the enforcement of the SI Law and related regulatory framework are among the priority areas. In particular, the Party Central Committee s Resolution No. 15-NQ/TW dated 1 June 2012 sets a target of 50 per cent of the workforce covered by social insurance; and 35 per cent covered by unemployment insurance by 2020. While commending the Party s acknowledgment of the need to reform social insurance system, many commented this was a too ambitious target. Despite a rapid expansion of the social insurance coverage in the last decade, as of November 2015, at most 12 million and 0.23 million workers are respectively covered by the compulsory and voluntary social 9

insurance schemes 12, which accounts for a merely 20 per cent of the total labour force; and 10.2 million workers contribute the unemployment insurance scheme 13. The coverage remains particularly low among small and medium enterprises and workers with short-term contracts. Informal economy workers, administratively identified as those holding a contract of less than three months (one month from 1 January 2018), self-employed and rural workers, are still largely excluded from social insurance coverage except for the voluntary retirement and survivor pension scheme introduced in January 2008. Out of 52.2 million workers, 32.7 million are either own-account or unpaid family workers. It means six out of ten jobs in Viet Nam are vulnerable or informal; that is without or very limited social protection. Even among enterprises due to register on a mandatory basis, enforcement of the social security laws remains a challenge, especially among the small and medium enterprises representing the large majority of establishments. Among all registered private enterprises, less than 50 per cent contributed to the Viet Nam Social Security fund (VSS) in 2010. 14 To achieve the target on social security coverage and increase financial sustainability in light of an ageing population and economic slowdown, Vietnam reformed its Social Insurance Law in November 2014. The amendment came into effect as of 1 January 2016 and aims to tackle key issues of the social security system: coverage, adequacy and long term financial sustainability. Key adjustments include extending the scope of application of the law to all employees with contracts of at least one month of duration, improving voluntary participation among self-employed and workers with atypical forms of labour, allowing more flexibility to payment schedules, lowering the minimum contributions, matching voluntary contributions with government subsidies, and strengthening labour and social insurance inspection Past operations show that impediments to extending social security coverage in Vietnam are complex and inter-related. Reforms in policy and legal framework, institutional capacity and governance are needed to translate the recent law amendments to an effective increase in workers coverage. The project proposes to address the following major issues. 1. Low capacity in policy formulation and implementation The Government and social partners play a very important role in formulating policies and mechanisms to encourage individuals and enterprises to participate in the social insurance system, including in the voluntary scheme. There is a shortage of analysis on the formulation of regulations, laws and policies on social protection among the Government s officials and social partners. When there is, the quality of the analysis is weak, thus hindering the coherence and effectiveness of laws and regulations. For instance, limited emphasis has been put on qualitative impact analysis that are nevertheless crucial to formulate measures to improve the social security system in Viet Nam. 12 Vietnam Social Security, 12/2015: VND 187,000 Billion Collected in 11 Months from social insurance and health insurance contributions, http://www.baohiemxahoi.gov.vn/?u=nws&su=d&cid=384&id=13880, accessed on 8/1/2016 13 Ibid 14 S. Lee, N. Torm, 2015: Social security and firm performance: the case of Vietnamese SMEs (in: International Labour Review, Available at: http://onlinelibrary.wiley.com/doi/10.1111/j.1564-913x.2015.00054.x/epdf.) 10

At the implementation level, lack of coordination and information between central and local levels, insufficient staff resources and training, hinders the proper implementation of the laws and policies. 2. Low capacity of social security inspection and weak coordination between social insurance inspection and labour dispute settlement administration In Viet Nam, intentional evasion from social security responsibilities persist and takes the form of unregistered business and/or employees working without contracts, unregistered employees to VSS (full non-compliance), and employees registered with lower salaries (partial non-compliance). Delay and default in payment of social insurance contributions on the part of employers is widespread. According to VSS s report, social insurance debt amounted to 8,600 billion Viet Nam Dong as of 31 October 2015 15. Social security inspection plays a crucial role to identify and report those cases and to settle dispute between employers and employees concerning social security compliance. In Vietnam, the inspection force satisfies only one fifth of the needs. As of end of 2014, there were 492 inspectors and inspection employees nationwide. The ratio of inspectors and workers in Vietnam is 1 inspector every 100,000 worker. According to ILO's recommendations, as for developing countries, there should be 1 inspector for every 15,000-20,000 workers 16. In terms of quality, the number of trained and officially appointed principal inspectors and senior inspectors is low (i.e. approximately 10.4 per cent of the inspection force) 17. Many inspectors have not attended basic professional training for the inspection work. The amended Social Insurance Law adopted in 2014 gives the power of inspecting social security contribution to VSS. It is unclear as whether VSS is taking measures to expand its inspection capacities. Also modalities for coordination between labour inspection/labour dispute settlement administration and social security inspection for an improved enforcement of social security laws have not been defined yet. 3. Low awareness and lack of incentive to contribute to the social insurance system Some employers are not convinced of the benefits of social security to protect their employees and business and do not fully understand the concept and principles of insurance. There is a common miss-conception among employers that social security is a cost to the business. However, an ILO s unpublished study estimates, Based on enterprise census data covering all registered firms across the 63 Provinces of Vietnam from 2006 to 2011, that enterprises which increase the social security coverage by 10 per cent, experience a per worker revenue gain of between 1.1-2.6 per cent and a profit gain of around 1.3-3.0 per cent. Such study can be very valuable to promote social protection among employers. 18 Another reason for low enforcement can be lack of awareness among employers on the recent amendment in the law and expansion of the scope to workers with less that threemonth contracts and all enterprises. 15 Vietnam Social Security, 12/2015: VND 187,000 Billion Collected in 11 Months from social insurance and health insurance contributions, http://www.baohiemxahoi.gov.vn/?u=nws&su=d&cid=384&id=13880, accessed on 8/1/2016; 16 Van, Nguyen Thi 2015, Labour Inspection Training: Policies, Practices, and Future Vision, ILSAT 17 Ibid. 18 S. Lee, N. Torm, 2015: Social security and firm performance: the case of Vietnamese SMEs (un-published, 2015) 11

In addition, complex and time-consuming processes for registration, payment and claim are deterrent to increasing social insurance participation. A solid analysis of these implementation and administration shortcomings as well as reasons for low incentive in participating in the system is missing and nevertheless needed to improve the delivery mechanisms of social services and benefits. Also, the insufficient protection provided by the short-term benefits (sickness leave, maternity leave, working injury and occupational disease, and unemployment benefits 19 ), due to implementation and management shortcomings, do not create incentive among workers to contribute to the system. Lack of trust in public institutions and uncertain sustainability of the social insurance fund may also result in low incentive to contribute to the social insurance system may among employees and informal economy workers. 1.6. Stakeholders and target groups The direct recipients and partners of the project are: The ASEAN Secretariat; Policy makers, managers and technical staff of Ministries in charge of policy development and implementation of social protection (Ministries of Labour, Social welfare, Health, Rural Development, etc.), in charge of decentralization and local administration (Ministries of Interior, Planning), in charge of planning and finance (Ministry of Finance, State s Budget Bureau) as well as their technical and implementing departments (Social security offices); ASEAN Trade Unions Council (ATUC) and national workers representatives of ASEAN countries; ASEAN Confederation of Employers (ACE) and employers representatives of ASEAN countries; Civil society organizations and academic institutes; Japan Federation of Labour and Social Security Attorney Association. In Viet Nam, Ministry of Labour, Invalids and Social Affairs (MOLISA) (in particular Social Insurance Department (SID)); Viet Nam Social Security (VSS) and its Provincial Social Insurance offices; Viet Nam General Confederation of Labour, Viet Nam Chamber of Commerce and Industry; National Assembly Commission on Social Affairs (NAC-SA). In Indonesia, Ministry of Manpower and Transmigration (in particular the Directorate General for Industrial Relations and Social Security), Ministry of Social Affairs, Ministry of National Planning and Development (BAPPENAS), sub-national government; and 19 In November 2013, the adoption of the Employment Promotion Law transferred the unemployment insurance benefits from the Social Insurance Law to the new Law, with effective implementation of the new provisions from May 2015. 12

BPJS Ketenagakerjaan- Employment; National Social Security Council (DJSN); Employers association (APINDO), The Confederation of Indonesian Prosperity Trade Unions (KSBI), The Indonesian Trade Union Confederation (KSPI), The Congress Alliance of Indonesian Labor Unions (KASBI) and All-Indonesian Workers Union Confederation (KSPSI). The final beneficiaries are women and men in the working age, with a special attention to: own-account workers and unpaid contributing family workers; wage earners working in micro, small and medium enterprises; employees without contract and sub-contracted workers; casual, seasonal and short-term workers; and migrant workers (undeclared by their employees or falling into the gaps of the system). The project limits its intervention related to labour dispute settlement and industrial relations only to issues related to social security. A reason is because if the scope of industrial relations is to be expanded, then the final beneficiaries would be different to the one listed above. Another reason is limited resources available that requires prioritization and focus of the interventions as to ensure better results and impact. The decision for prioritizing on social protection is justified by the positive and visible results achieved during the past two phases. Indirectly the United Nations regional offices and country teams, as well as other development actors on social protection, are also implementing partners, as the project constantly seeks to create synergies with other technical cooperation projects rather than favouring uncoordinated interventions and duplication of efforts. During the past phases, the project has worked together with FAO, UNDP, UNESCAP, UNFPA, UNICEF, WHO, and UNWOMEN in promoting social protection both at regional and national levels. 2. STRATEGY AND LOGICAL FRAMWORK 2.1 Description of the Project Strategy Project s strategic fit as a contribution to global and regional commitments ILO Social Protection Floors Recommendation, No. 202 (2012) and Recommendation on the Transition from the Informal to the Formal Economy, No. 204 (2015) At the 101th International Labour Conference (ILC) in 2012, the ILO constituents committed to improve social protection coverage among informal and vulnerable workers by establishing nationally defined social protection floors as part of their progressively comprehensive social security systems (ILO Social Protection Floors Recommendation, 2012 (No. 202)). More recently, in 2015, the 104th ILC adopted a new Recommendation on the Transition from the Informal to the Formal Economy, thus reiterating the importance of guaranteeing access to social protection to informal economy workers and facilitate transition to the formal economy. Recognizing the linkages between social protection gaps, poverty and vulnerability, and informality, the Recommendation advocates that in promoting the transition to the formal economy, governments should take actions to progressively extend, both legally and effectively, social security, maternity protection, decent work conditions and a minimum wage 13

to informal economy workers (Art. 18). Building social protection floors will provide at least minimum protection and income security to the entire population. The extension of social protection coverage to the informal economy will require a comprehensive policy strategy that includes an appropriate policy mix of non-contributory and contributory schemes, the reduction of barriers to the formalisation of small and medium enterprises, and strong linkages with national employment policies. Those objectives are also at the core of the ASEAN Declaration on Strengthening Social Protection (October 2013). ILO Global Flagship Programme on Building Social Protection Floors for All In 2015, the ILO Governing Body adopted a Global Flagship Programme on Building Social Protection Floors for All, as part of its overall Development Cooperation Strategy (2015-2017), thus reinforcing the role of the ILO in promoting and supporting the development and implementation of nationally defined social protection floors, as part of comprehensive systems of social protection. Among the 21 target countries of the ILO Global Flagship Programme on Building Social Protection Floors for All, five are ASEAN Member States (Cambodia, Indonesia, Lao PDR, Myanmar and Viet Nam); and the two focus countries of this flagship countries are target countries. Box 3: ILO Flagship Programme on Social Protection Floors This programme contributes to making social protection floors a national reality in countries whose social protection systems are fragmented or do not cover the entire population. It aims to improve social protection for the three-quarters of the world s population which is not adequately covered at present and to help achieve SDG target 1.3 on creating social protection floors. The programme brings together governments, social partners, civil society organizations, social protection scheme administrators and the UN system in coordinated and comprehensive SPF interventions. These include carrying out assessments of social protection systems and schemes and providing recommendations to build nationally defined social protection floors. It supports the design of new schemes or reforms of existing schemes, as well as supporting their effective implementation and improving their operations. Country-level interventions are supported by a global campaign to raise awareness, educate policy-makers and ultimately establish universal social protection. Source: Based on ILO Governing Body, 325 th Session, Geneva, 29 October 12 November 2015, Document GB.325/POL/7 Document http://www.ilo.org/wcmsp5/groups/public/---ed_norm/---relconf/documents/meetingdocument/wcms_413765.pdf As part of the ILO s flagship programme on social protection, and in coordination with other UN agencies, the ILO is developing a number of global tools and research products. 14

Box 4: ILO Global campaign for knowledge development and sharing on social protection floors The Flagship programme on SPFs includes an important component of knowledge development and sharing. The Global Campaign on Knowledge on SPFs comprises four areas of interventions: - Knowledge development: documentation of innovative country experiences, good practices guides, costing and impact assessment tools; - Knowledge sharing: through regional and global publications, the platform on social protection extension; - Multiplier effects: through global alliances with UN agencies and UNDG Secretariat, as well as other development partners, and South-South exchanges; and - Promotion and education: communication and awareness raising activities, policy positions, participation in major events to promote ILO s approach; Source: Based on ILO Global flagship programme: Building social protection floors for all. http://www.social-protection.org/gimi/gess/ressourcepdf.action?ressource.ressourceid=51737 The most relevant knowledge products for this project are: the global guide on how to draft social protection laws; the global guide on how to extend social protection to workers in the informal economy and its link with the global initiative conducted by the ILO s INWORK department in this area; and the global guide on how to improve social services delivery. The project makes use of these knowledge products and tools. At the same time the project s activities contribute to further developing these global knowledge products and tools, by sharing experiences and practices developed in the region. The global programme is also organizing the participation of the private sector and workers to the development of social protection through the Global Business Network for Social Protection Floors and the mobilizing workers support for SPFs initiative respectively. Both initiatives will inform and contribute to the project when relevant. As part of the global programme, a Get in communication campaign for promoting social protection is organized, to which the present project will contribute (e.g. knowledge products developed by the project will be spread through the Get in campaign). Finally, the project will coordinate with headquarters for the use of the measurement and monitoring tool that is developed as part of the global programme to further document the short, medium and long term impacts of the ILO s support for the extension of social protection. In particular, the project represents an opportunity to improve the global guide on how to draft social protection laws, the global guide on how to extend social protection to workers in the informal economy by learning from similar activities implemented at country-level. In addition, the cost/benefit argument to convince employers and workers to participate in social security schemes links with the work of Global Business Network for SPFs. Through the flagship programme and its Global campaign on SPFs, the results and good practices generated by the project are not only documented but also shared with other countries worldwide beyond the ASEAN borders. 15

The Sustainable Development Agenda by 2030 Furthermore, the Sustainable Development Goals (SDG), recently adopted by the United Nations General Assembly, recognize the increasing importance of social protection to reduce poverty and inequalities and achieve inclusive and sustainable development. Specifically, the SDG 1 identifies the establishment of Social Protection Floors (SPFs) as a target (No. 1.3) to eradicate poverty. Research and evidence have also shown the role of social protection in achieving food security and eradicating hunger (SDG 2). SDG 3 acknowledges the role of social protection in achieving health, while SDG 5 mentions social protection policies (No. 5.4) as one of the tools to value unpaid care and domestic work to ultimately achieve gender equality and women s empowerment. Social protection is also accounted for in SDG 8, as it is one of the four pillars of decent work. Finally, SDG 10 acknowledges the role of social protection in reducing inequality. These developments translate the momentum social protection has gained globally in the last decades. The Social Protection Floor Initiative (SPF-I) launched by the United System Chief Executives Board (UNCEB) in 2009 and the ILO Social Protection Floors Recommendation adopted in 2012 have further prompted the UN-wide efforts to support countries to build and maintain social protection floors and systems. Project s overall strategy With this backdrop, the project promotes the implementation of nationally defined social protection floors aiming at providing income security to vulnerable workers and those in informal employment, and progressively covering them under more comprehensive social security systems comprised of social insurance and social assistance schemes. Also, an increased registration to social protection systems already constitutes an initial step towards more formalization of the informal economy and definitely towards more protection of informal economy workers. The project s strategy to extend social protection coverage is through tackling the low enforcement of social security laws, in particular among the micro, small and medium enterprises, self-employed and informal workers. In general, and in Indonesia and Viet Nam in particular, social insurance laws and the institutional framework of social insurance institutions are more adapted to the coverage of the formal economy. The project promotes the extension of social security benefits for all through the search for innovative measures, administrative adaptations and incentives to increase social insurance coverage among informal economy workers and self-employed, towards higher level of social protection. The project also intends to provide information and improve understanding of government officials, but also as importantly, workers and employers representatives on social protection issues to more actively engage in dialogues around social policy reforms and take informed decisions. Therefore, the overall objective of the project is to improve performance (e.g extension of coverage and enforcement) of the social security systems in ASEAN, with a focus on Indonesia and Viet Nam towards the implementation of nationally defined SPFs, and progressively more comprehensive social security systems. By increasing participation to social protection systems, also, the project also aims at providing better protection to and gradually formalizing the situation of those working informally. 16

A regional project with complementary country-level interventions The project strategy builds on achievements, expertise and good practices generated over the past five years of the ILO/Japan Project on Promoting and Building Social Protection. One of the good practices of the past two phases is the strategy of learning by implementing country level - technical assistance and disseminating at regional level. It brought credibility to the project s interventions at both national and regional levels. Project s strategy at the regional level and contribution to ASEAN Member States commitment to social protection Extending social protection has been recognized as a priority for the ASEAN Member States in major official documents (see section 1.2). The Regional Framework and Action Plan to implement the Declaration on Strengthening Social Protection 20 includes the following priority action: Advocate strategies that promote coverage, availability, comprehensiveness, quality, equality, affordability and sustainability of various social protection services including: a) Social insurance for informal workers: Where appropriate and allowing for domestic policy consideration, provide for a mechanism so as to institute government subsidies/loans as an incentive for to contribute to the voluntary social insurance system; or explore the possibility of having a voluntary social insurance system if none was created [ ] c) Explore measures to promote greater access to social protection programmes and services d) Where appropriate, encourage the participation of workers organizations and employers organizations, and explore possible partnership with the civil society to raise awareness of and better reach the informal workers The ASEAN SLOM Work Programme (2016-2020), now being finalized, includes the following key result: 4. Expanded social protection Expansion of coverage of social protection to all workers [ ] Expanding coverage of social insurance to informal sector At the regional level, the project directly contributes to support these interventions, as ASEAN Member States have already expressed interest in working with the ILO in this specific areas. The project strategy consists in developing and disseminating knowledge, and facilitating exchange of experiences and South-South cooperation across ASEAN countries. In that sense, the project focuses on the following regional priority interventions: 20 http://www.asean.org/images/2015/november/27thsummit/ascc_documents/asean%20framework%20and%20action%20plan%20on%20social%20protectionado pted.pdf 17