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p. 9 of 17 BACK | NEXT I. Introduction II. Overview of Social Protection III. Priorities for Social Protection A. Identifying Country Priorities B. Strategic Principles for Social Protection Interventions IV. Operational Implications

Social Protection Strategy : III. Priorities for Social Protection

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A. Identifying Country Priorities

40. Social protection strategies will vary from one country to another as a result of differences in needs, institutions, and available resources. Country preferences will also be influenced by the political support and social consensus needed to implement reforms. An analysis of these four factors determines the social protection priorities of a country.

1. Country Needs

41. The main objective of social protection is to reduce poverty and vulnerability. A summary vulnerability and risk profile will help to determine the country-specific social protection needs. A description of major risks to the population, demographic structures, levels of urban-rural population, poverty, and the size of the formal sector influence the type of social protection mechanisms that are feasible and appropriate. Where population projections¹⁵ show a significant number of children and new entrants into the labor market in the near future, social protection should address the needs of the young. Where population growth rates are low or negative, there is a rapidly aging population and the child/adult dependency ratios are low, social protection systems should address the priorities of the elderly. Where the most acute problems may be others—i.e., migrant workers, victims of disasters, or any other vulnerable population group—social protection planning should accommodate the specific country needs. The results will differ from one DMC to another.

42. A summary labor market analysis should further help determine country priorities, not only in social protection but also in the selection of other development interventions, by revealing employment patterns. The size of the formal and informal sectors; the sectoral distribution (population engaged in agriculture, industry, and services); rural and urban active population; evolution of real wages; the role of women in the labor force; working conditions; compliance with national and international labor laws and standards including the reported existence of child or bonded labor and violations to other Core Labor Standards—all will provide additional information to help determine the country priorities. In some countries, the priority attention will be to assist unemployed or underemployed working age population to find employment opportunities; or to fight child labor. In others, the rural areas may have been forced to shoulder a disproportionate burden of the country’s social problems, and strengthening rural systems may be a priority. Labor absorption is essential to avoid poverty. The country labor market analysis should evaluate which sectors/subsectors and geographical areas have a demand for labor and identify which areas may have an unmet supply of labor, to identify the right mix of public policies. Labor market analysis is a key element in the strategic link between economic growth and poverty reduction, and the analysis should provide recommendations to ensure efficient and inclusive development patterns.

43. A summary vulnerability profile, supported by a summary labor market analysis, are essential to determine country-specific needs. The country social protection needs assessment with a rational prioritization of the country’s top social protection needs, based on quantitative evidence gathered in the vulnerability profile and labor market analysis, to ensure a rational and well-demonstrated prioritization of possible development interventions. Collaboration with other agencies—including ILO, World Bank, UNICEF, World Health Organization (WHO), United Nations High Commission for Refugees (UNHCR), and the Red Cross/Red Crescent—is essential to ensure coherent views and avoid repetition of surveys, profiles, or analyses.

2. Available resources

44. The level of resources available for social protection will also influence a country’s social protection choices. Many existing social protection systems and programs are underbudgeted, receive random funding, or have mistargeted benefits. Where allocated public funds are limited and the country needs large, public programs should be targeted to those most in need. An evaluation of the effectivity of current programs and resources to reduce poverty and vulnerability in the country will immediately point the need for reforms (see paras. 57-59). If a country lacks the fiscal resources to achieve the development of a comprehensive social security system with significant coverage, it should opt to concentrate on poverty reduction and improvements in the labor force through the combination of labor market policies and programs, child protection, micro and area-based schemes, social assistance, and minimal social insurance benefits.

45. Social expenditures reviews are a key instrument to determine fund allocations intra and intersectorally, showing the administrative costs of social protection, the relative weight as compared to other social expenditures, the distribution of funds among social protection programs; the benefit incidence and effectivity in reaching vulnerable and poor populations; and last, but not least, distribution issues—who is paying and who benefits. The matching of the social expenditure review with the country needs assessment will provide the key to the needed social protection reforms. Social expenditure reviews, in line with the public expenditure reviews developed by governments and aid agencies, particularly ILO and World Bank, will thus be critical in assessing the effectivity of current allocations to reduce poverty and vulnerability and discussing the options for social protection reform.

3. Existing institutions

46. Where social protection programs already exist, conscious decisions will have to be made about whether reform efforts should build on the existing institutions or whether new institutions should be created. Societies almost always have at least some form of formal social protection institutions, but the institutions that exist may be very weak or cover only an extremely small fraction of the population. Where the existing institutions are neither very large nor very important, they may not impose serious constraints on the reform process. Where they are large, however, their influence cannot be ignored. Existing institutions influence policies about the structure and philosophy of social protection in several ways. They form a point of reference for comparing alternatives. Where the current approaches are generally viewed favorably among the population, the political path of least resistance will be to build on and extend them. The country’s institutional history, including the relative credibility of the public and private sectors and the extent of previous government social protection commitments, inevitably affects the scope and character of any new intervention. Given that existing institutions have staff and stakeholders who are likely to protect themselves, large government bureaucracies are not dismantled easily and private concerns that are profiting from the existing arrangements will resist change. A good stakeholder analysis of old and new providers and recipients of social protection may facilitate discussions during country programming and project design, by making the trade-offs transparent. Reforming social protection policies is likely to be easier—and the odds of success are correspondingly higher—if the new approach preserves an important role for the existing institutions.

47. The decision whether to invest in social protection will require an understanding of the country-specific institutional capacity to deliver reforms, including (i) the efficiency and coverage of existing social protection programs, and (ii) the possible roles and risks involved in using public, market-based, and civil society/NGO mechanisms for new social protection programs. Before embarking on reforms, the institutional prerequisites of different social protection approaches need to be taken into account. The risks involved in engaging the public and private sectors need to be assessed to ensure that the proposed reforms will effectively reduce poverty and vulnerability, the main objective of a social protection system. For instance, market-based companies often find disincentives to serving the poor; unless a proper public-private arrangement is envisaged, the poor will likely remain uncovered. Pension reform projects often involve development of privately funded mechanisms to encourage the development of sophisticated financial market institutions, but they can function effectively only if the domestic capital market has already reached a minimum level of development; where the preconditions for advance funding are absent, provident funds or basic pay-as-you-go approaches may be important transition measures to ensure that the objectives of a social protection system are accomplished. Targeted poverty and social assistance interventions that rely on formal means-testing operate on the assumption that institutions have the sufficient capacity to collect, process, and store information; investments should ensure that either this capacity is built or other institutional arrangements are found. Paragraphs 60-67 provide more details on different institutional options.

4. The political economy of reform

48. The potential gains must be balanced against the likely losses from reforming a social protection system. This will involve a careful review of the conditions under which benefits are provided and the ways in which subsidies are constructed or abolished, the relationship between the value of the assistance offered and prevailing wages or prices, the affordability of the services provided, the incentives established in the program for delaying taking benefits and/or returning to work as quickly as possible, and the balance between the costs and benefits of new regulations. Reforms that may encounter large resistance need more intense consultations with relevant stakeholders.

49. Successful programs are those supported by the serious political commitment of the country’s leadership. Social protection systems normally reflect the country’s social architecture. To be effective, social protection strategies should be articulated in an integrated manner and discussed with all relevant social players as reforms are an opportunity to rethink the country’s social contract. This, however, is often not the case, and reforms are precipitated by crises that have exposed or exacerbated flaws in existing policies. The experience of the transition economies and countries affected by the Asian crisis has shown that governments should not be asked to pursue policies that will require a consensus that has not yet formed within the society. A social protection agenda should be framed taking into account DMCs national policies and priorities as well as ADB’s overarching goal of reducing poverty, ensuring that social protection is integrated with other development activities and into ongoing country dialogue.

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