MANAGING SOCIAL SECURITY MANAGING SOCIAL SECURITY ORGANIZATIONSORGANIZATIONS

PRESENTATION DURING INTERNATIONAL SEMINAR

FOR COUNTRY HEADS OF

SOCIAL SECURITY ORGANIZATIONSOF ASIA-PACIFIC AND AFRICA

NEW DELHI-INDIA 29TH-30TH OCTOBER 2007

PRESENTED BY COMPILED BY

B.N.SOM DR.MAHENDRA RAJU

“ IF A FREE SOCIETY

CAN NOT HELP THE MANY

WHO ARE POOR, IT CAN NOT SAVE THE FEW WHO ARE VERY RICH ”

- JOHN F. KENNEDY

THIS IS WHERE ANY GOVERNMENT HAS TO PROVE ITS EFFICACY IN ADMINISTERING SOCIAL

SECURITY INSTITUTIONS. THAT’S WHERE WE ARE TALKING TODAY ON THIS SUJECT.

MANAGING SOCIAL SECURITY MANAGING SOCIAL SECURITY ORGANISATIONORGANISATION

Governance and AdministrationGood governance is the key to an effective social security scheme

Good Governance also embraces the process of consultation and decision

making to determine the structure of the scheme

the institutional arrangement for its administration

implementation and supervision of social security schemes

There is interrelationship between national policy national management and scheme management

OBJECTIVES OF GOOD GOVERNANCEOBJECTIVES OF GOOD GOVERNANCEStrategic and macro policy objectives Analyze the choices which determine the overall structure of the social protection The respective roles of Govt/public and private players The type of schemes to be introduced  Establish a process of policy formulation Balance the full range of social protection needs against

national resources Create a balance amongst national policy, public social

security schemes and individual private provisions Ensure widespread coverage and adequate benefits Achieve the desired level of income redistribution. Enact legislation to give effect to the policy decisions and

subsequent changes

 Institutional arrangements

Establish institutional arrangements which are accountable for the implementation of social security programs

Ensure that contributors and beneficiaries have an opportunity to influence the decision-making process and to monitor the administration of social security schemes

Establish financial control mechanisms to monitor the allocation and management of resources

Administrative obligationsAdministrative obligationsMaking the structure workMaking the structure work

Ensure that contributions are collected and accounted for and that benefits are paid promptly

Minimize the cost of administration within the desired level of service

Ensure that contributors and beneficiaries are aware of their rights and their obligations

Establish a mechanism for monitoring and reviewing administrative performance.

When policy makers develop a strategy to provide When policy makers develop a strategy to provide effective ‘income replacement’ in respect of the effective ‘income replacement’ in respect of the contingencies of old age, invalidity and death, the contingencies of old age, invalidity and death, the policy process should address fallowingpolicy process should address fallowing

1.What is the most appropriate scheme for the 1.What is the most appropriate scheme for the country?country?

2.What are the most suitable institutional 2.What are the most suitable institutional arrangements?arrangements?

3.How can efficiency at the operational level be 3.How can efficiency at the operational level be maximized?maximized?

The stakeholdersThe stakeholders

The following groups have an interest in social security The following groups have an interest in social security and thus should be involved in the governance of those and thus should be involved in the governance of those social systems:social systems:

·    the state·    the state·     social security institutions (both public and private),·     social security institutions (both public and private),·     employers and workers as contributors·     employers and workers as contributors·    beneficiaries·    beneficiaries

Social security institutionsSocial security institutions

Governance of social security:Governance of social security:

Institutional division of responsibilityInstitutional division of responsibility -   Formulation of national policy-   Formulation of national policy-- Monitoring at macro level Monitoring at macro level -          -          Determines major policy issuesDetermines major policy issues-          -          Finalizes legislationFinalizes legislation-          -          Overall financial supervisionOverall financial supervision-          -          General oversightGeneral oversight  

THE FUNDAMENTAL GOVERNANCE THE FUNDAMENTAL GOVERNANCE QUESTIONSQUESTIONS

The fundamental governance questions are:

what is the most appropriate social security pension

scheme for the country?

what problems are typically experienced in strategic planning?

what are the most suitable institutional arrangements for the administration of social security?

What is the most appropriate social security What is the most appropriate social security pension scheme for the country?pension scheme for the country?

Governance at the strategic or macro policy level

The design and implementation of a social security pension scheme is a major step in the socioeconomic development of any country and the process requires careful planning.

There will inevitably be both short-term and long-term

implications for economic and fiscal performance as well as for the Labour market and, more directly, for the overall level of social protection and living standards.

What Problems are typically What Problems are typically experienced in strategic planning?experienced in strategic planning?

Fragmented developmentLack of coordinationInadequate planningRigidity in the legislative processConceptual rigidity

Fragmented development In many countries social protection schemes have

developed on a piecemeal basis often in response to particular issues or problems rather than as part of a national long-term strategy

Such as : Ministry of Labour may be responsible for the direct

administration of a workers’ compensation scheme, Social insurance pension scheme

The ministry of Health may supervise a health insurance scheme

The Ministry of Defence may administer a pension scheme for members of the armed forces

Civil Service Department may administer a pension scheme for public servants.

There may be many occupational or private pension arrangements supervised by

the Ministry of Finance or a regulatory body

Achieving policy coherence and consistency in this situation will be difficult

Among several government departments and public agencies

There may be an overall lack of policy cohesion resulting in inconsistencies between the different provisions

It may be difficult to determine the respective roles of the employees, employers and beneficiaries in the financing and provision of social protection

There may be overlaps at the operational level between the various sub-systems

Lack of coordination results in :

The absence of a national mechanism for monitoring the overall performance of the social protection

Problems and proposals for reform in the broader context Coordinating policy development at the macro level Coordinating policy implementation at the micro level

The problems of fragmentation and lack of coordination have been evident form ILO technical cooperation activities in many countries for example in

India, Indonesia, Malaysia and the Philippines in Asia Nigeria, Tanzania and Zambia in Africa etc

Inadequate planning :

Increased levels of social protection may be desirable but can they be sustainable who will bear the burden ? Policy making often takes place under pressure without adequate consultation or preliminary study and evaluation The process of reform is difficult to manage indeveloping countries and countries in transition, where the decision-making process is often

determined by political considerations without adequate regard to the

technical/actuarial implications

Rigidity in the legislative processRigidity in the legislative process The social security legislation often represents a major

obstacle to ensure that social security provisions remain valid in changing circumstances

It may prove difficult to ensure that the fallowing critical

aspects remain valid if the process for legislative change is cumbersome and the system is overburdened viz.,

coverage contribution rates compliance benefit parameters minimum benefit etc

Conceptual rigidityConceptual rigidity

The development of most social security schemes is influenced by experience elsewhere

This may be based on the emergence of new concepts or reactions to new problems, or it may reflect political or economic influence

Experience thus illustrates the need for each country to develop a social protection which reflects its particular national circumstances and to take advantage of foreign experience and expertise with caution

What are the most suitable institutional arrangements for What are the most suitable institutional arrangements for the administration of social security?the administration of social security?

Institutional arrangements have a direct bearing on the effectiveness of that governance

But what works in one country does not necessarily do so in another

Just as the scheme must be designed to suit the circumstances of the people, the institutional arrangements will reflect the level of development ,the political situation in the country

In many countries these institutional arrangements were devised to administer a scheme for a particular occupational group, such as civil servants, the armed forces, teachers and lawyers etc

The subsequent development of social security and the extension of coverage has sometimes been built around these initial schemes

PROBLEMS WITH ADMINISTRATION PROBLEMS WITH ADMINISTRATION AT THE OPERATIONAL LEVELAT THE OPERATIONAL LEVEL

Lack of transparencySchemes may not be accessibleLimited coverageMaintaining accurate recordsDelays in processing benefit claims

Problems with administration Problems with administration at the operational levelat the operational level

In many countries the degree of autonomy accorded to the social security institution in the legislation does not exist in practice

This reflects a lack of confidence in the management of the institution

But both the structure and the performance of

the scheme should reflect a broad consensus :

in favor of its objectives and in support of the way that it is administered

In this context, where do problems arise?

Lack of transparency :Lack of transparency :

There is often a lack of transparency in the administration of social security provisions

This weakness applies to the failure to explain adequately the broad concepts and objectives of the

scheme to the failure to advise the insured persons how their pension

records are progressing or what is happening to the contributions that they have paid.

The problem of lack of transparency applies particularly acute in the case of pensions

since the contribution rates are the highest benefit may not be payable for 30 years-on retirement People inevitably wonder what is happening to their contributions

Schemes may not be accessibleSchemes may not be accessible

Many schemes are also too inaccessible to their contributors and beneficiaries.

This may be because the Organisation is highly centralized

Because it has not yet been possible to establish a network of branch offices or To make their systems technology driven

This feeling may be compounded both By the attitude of the staff to the public and By the lack of facilities for public information and

reception

Limited coverageLimited coverage

The coverage of many schemes is very limited often only a minority of the Labour force being insured Even when the legislation prescribes mandatory coverage,

problems arise in achieving this Many schemes experience difficulty in:

Identifying and registering both employers and insured persons.

In allocating a social security number and in ensuring that this number is applied to that individual regardless of change of employment.

Maintaining accurate recordsMaintaining accurate recordsMost social insurance schemes require

employers to regularly submit details about the employment and earnings of insured persons to provide the basis for determining entitlement to a pension

This depends on the continuous cooperation of employers and workers and on efficiency within the social security administration.

Delays, omissions and mistakes in the information create bottlenecks, often compounded by administrative problems such as the shortage or breakdown of computer processing.

Delays in processing benefit claimsDelays in processing benefit claims

Possible reasons for delays Inefficient data gathering Inaccurate data compilation Improper data processing

Delays in benefit claims result in Irritating enquiries by both employers and insured persons seeking information Even though which has already been provided But not satisfactorily And basing on data not properly recorded or Basing on data which cannot be found or not verifiable

Bureaucratic proceduresBureaucratic procedures The administrative mechanisms may pose obstacle to the

attainment of the overall objectives Because they involve excessive supervision/checking and

limited delegation. There is a tendency in some schemes to develop

procedures which are designed to reduce all risk of error abuse or internal fraud where the overall level of service suffers and

even the introduction of computerization may only serve to provide another layer of bureaucracy in which records and procedures are duplicated

Making Public Social Security institutions Making Public Social Security institutions more effectivemore effective

Whether the structure of the social security scheme is private or public, the state must play a major role in ensuring that it meets its objectives.

Where the administration is entrusted to the private sector, significant supervision will be needed by a public sector body.

Social security schemes financed by employers’ and workers’ contributions should safeguard the interests of their contributors and beneficiaries

They should have the opportunity to participate in the

supervision of their scheme.

Nevertheless there are no clear indications that large-scale privatization would result in more effective systems

Instead it may be more appropriate, in the reform process, to give priority to addressing the weaknesses in the public institution which limit their effectiveness.

THE UNIFICATION OF SOCIAL THE UNIFICATION OF SOCIAL SECURITY SCHEMESSECURITY SCHEMES

The unification approach is the reverse of

the specialization approach and derives its appeal from fallowing arguments:

Where the social security system is fragmented between different sections of the population or different risks with duplicated functions and inconsistencies

From the viewpoint of employers and insured persons it may be

argued that there should be one point of contact form social security obligations and entitlements

ConclusionsConclusions Issues of governance lie at the heart of the debate on how to

best provide more effective social protection. But the debate is distorted by arguments and counter

arguments for and against a firm adherence to the role of the state

There are many systems of administration in the spectrum between reliance on private insurance and direct administration by central government

It is difficult, and probably inappropriate, to try to reach any general conclusion as to which system is best.

To some extent the debate about the relative merits of private and public management is a false one:

There is only good management and bad management.

conclusions But it has to be conceded that much needs to be done to

achieve the right balance and too provide the right basis for effective governance

Where public accountability systems exist with a sophisticated democratic framework of public scrutiny the objectives of a social security system can be achieved through direct public management

It is difficult to restructure social security institutions once

they have been established The exception is where there is a climate of radical reform,

such as has existed in recent years in central and eastern Europe.

conclusionsconclusions

In any event many of the weaknesses in the governance of social security would not necessarily be solved by privatization, specialization or unification

They may only appear in another form or be replaced by different problems

For many countries, therefore, the most realistic and

effective approach would be to seek improvement within the present structure with a balanced middle level path.

“ The best government is not

that which renders men the happiest, but that which renders the greatest

number happy ” - Duclos

This maxim applies specially relevant now for every government to extend social security benefits

to all and see that they are administered efficiently so that all

the people of the country are happy

Sarve janah sukhino bhavanthu

This is an ancient Indian wisdom from Vedas which only means

“ Let all Human Beings live in Happiness”

Thank You

THANK YOU