MITIGATING VULNERABILITIES & PROMOTING RESILIENT GROWTH

Sequencing, cost-efficiency and fiscal-sustainability of social

protection– Policy Dialogue

Yos Vajragupta

Senior Researcher

Thailand Development Research Institute

November 1-2, 2012

2

Outline

Thailand’s basic data 1.

Social protection in Thailand 2.

o Social assistance o Social insurance o Social service

Social investment 3.

Future challenges 4.

Fiscal sustainability 5.

Thailand’s Basic data (2011)

3

0.1% (2011) and 4.2% (Q2/12) GDP growth

67.6 Million Population

$ 4,972 GDP Per Capita

12.9% Dependency ratio

39 Million Labor force

0.7% Unemployment

rate

0.37 (2012) Gini

6.3% (2012) Poverty

Social Protection in Thailand

4

Social Protection

Social Service

Social

Assistance

Social

Insurance Healthcare Education

Social Assistance

5

• Social assistance programs in Thailand started in 1941. • Target groups are disadvantaged people such as children, seniors,

disabled individuals, women, low-income persons, and people suffered from natural disaster.

• Social assistance programs focus on cash transfer,

counseling, training, in-kind assistance, and emergency accommodation.

• Cash benefits are provided to elderly, disabled person, and HIV infected

person (500 baht or $14.5 per month).

Social Assistance

6

• Before 2009 and 2010 the cash assistance programs for elderly and disabilities are not universal respectively. The decision for providing benefits was decentralized and selected by local government.

• Since October 2011, elderly pension changed to graded or progressive

pension

Age range Amount

60-69 600 baht per month

70-79 700

80-89 800

90 and older 1,000

Social Assistance

7

• Funeral allowance of 2,000 baht ($58) for senior citizen aged 60+

years.

• Monetary assistance has been low since the Ministry

of Social Development and Human Security received small budget

(less than 1% of government budget).

• Besides the cash transfer, government also provides assistance

through government-run nursing homes,

elderly care centers, care home for disabilities and disadvantage

children.

Social Insurance

8

• A retired government officials who started their job with government

before March 1997 can choose between receiving a lump sum

payment or a pension from the government.

• After March 1997, new government officials must be a membership of

the Government Pension Fund (GPF).

• GPF: 2nd pillar under the World Bank’s Multi-Pillar system.

• GPF member can contribute between 3 to 12 percent of salary while

government contributes only 3 percent plus another 2% for post-

reform compensations.

Pension for Government Official

9

• The SSF was setup under the Social Security Act in 1990.

• 1st pillar under the World Bank’s Multi-Pillar system.

• There are three types of insured persons: article 33, 39 (formal workers) and

40 (informal workers).

• Since 2008, the SSF provides seven types of benefits, i.e. sickness, maternity,

invalidity, unemployment, death, old-age benefits, and child allowance.

• The SSF for article 33 is financed through employer (5%)

, employee (5%), and government (2.75%) contribution. While article 39 is

contributed by employee (288 baht) and government (120 baht). Article 40 is

paid solely by employee amount 3,360 baht per year.

Social Security Fund (SSF)

Social Insurance

10

• Provident Fund Act 1987.

• 3rd pillar under the World Bank’s Multi-Pillar system.

• Objectives: to encourage long-term saving for private employee

and state-enterprise employee and to provide income security for

retired employees.

• The provident fund is financed by employer and employee

contribution.

• Employee’s contribution rate must be between 3 to 15 percent of

salary and employer pays not less than employee.

Provident Fund

Social Insurance

Healthcare

11

• Three healthcare schemes are Civil Servant Medical Benefit Scheme

(CSMBS) , Universal Healthcare Coverage (UC) and Social Security

Scheme (SSS).

• The first two schemes are non-contributory while SSS are copayment

by employee, employer, and government.

• Although the government contribute to all schemes but the quality of

CSMBS is a lot better than the rest.

• Government has spent tremendous expenditure on CSMBS for

government officials and their dependants. The scheme covers about

5 million people (10%), but consumes 62 billion baht ($1.8 billion) in 2009, which was about 30% of total healthcare expenditure.

Social Service

12

Thailand healthcare system

Social Service

Scheme CSMBS UC SSS

Start 1960s 2001 1990s

Target beneficiaries

Government employee, dependents and retirees

Everyone does not

covered by CSMBS nor UC

Private sector employees

Coverage 10% 74% 12%

Funding Government budget Government budget Tri-parties

Payment to health facilities

Fee-for-service Capitation Capitation

Source: Reproduced from National Health Security Office’s Presentation and Chalermpol Chamchan .

Education

13

Social Service

• The education system in Thailand covers the kindergarten level (early

childhood education), the primary and lower-secondary level (compulsory

education), the upper-secondary level (basic education, both in general and

vocational), and the university level and above (higher education).

• On August 2009, 15 years free education policy (kindergarten to high school)

was initiated with the aim to lessen the financial burden of parents. Other

than the education fee, the policy also cover expenses for books, utensils,

uniform, school equipment, and extra-curricular activities.

• Besides free education policy, government also subsidies school lunch and

milk expenses for kindergarten to elementary school and provides loan for poor family for upper secondary/vocational.

14

Social Investment

800

900

1,000

1,100

1,200

1,300

1,400

1,500

2010 2011 2012 2013 2014 2015 2016 2017

Billion B

aht

15

GDP and Government Revenue

0

2

4

6

8

10

12

14

16

18

1500

2000

2500

3000

3500

4000

2011 2012 2013 2014 2015 2016 2017

Tri

llio

n B

aht

Billion B

aht

Government revenue GDP

16

Social Investment (% of GDP and Government revenue)

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

0%

10%

20%

30%

40%

50%

60%

2011 2012 2013 2014 2015 2016 2017

% of Gov. revenue % of GDP

Future Challenges

17

Moving to Ageing society

• more dependent people

• less labor force

Coverage: Universal vs. Targeting

Quality of welfare

Financial constraint

• more social expenses

• source of fund: less tax payers

• SSF: defined benefit

Fiscal Sustainability

18

Tax reform

• Increase VAT (from 7% to 10%)

• Expansion of income tax base

• Property tax

• Reduce tax privilege

• incentive from Board of Investment

• tax allowance on stock investment (LTF, RMF)

Welfare society

• CSR, Social enterprise

• informal safety net (community, social network)