Theoretical financing options Results of cost estimates 1. The baseline social expenditure level

3 6 V ie t N a m -E E S P a p e r N 3 2 .d o c - 6 ; :?5 A :?5 B -,C ;D?5 DD ;D?5 DD ,, :?5 DD ;D?5 :?5 ? DD ;D?5 :?5 B DD ;D?5 B :?5 B DD ;D?5 B Total population 14.5 12.2 12.2 3.6 8.3 7.2 2.6 6.9 0.5 3.5 Children 0–15 20.8 18.5 18.5 2.2 12.2 10.9 1.7 11.2 0.3 6.6 Children 5 23 20.4 20.4 5.1 15.3 13 4 13.6 0.8 7.4 Children 6–10 22.1 19.7 19.7 1.2 12.7 11.6 0.9 12 0.1 7.4 Children 11–15 18.2 16.2 16.2 0.6 9.4 8.8 0.6 8.9 5.4 Elderly 14.4 3.9 3.9 7.3 9.2 11.5 0.7 1.9 0.4 1.2 Working age 12.1 10.7 10.7 3.8 6.7 5.3 3.1 5.9 0.5 2.5 Disabled 25.8 22.9 22.9 10.6 15.6 9.4 7.5 12.4 1.9 4.4 Rural 18.8 15.9 15.9 4.8 10.8 9.5 3.4 9.1 0.6 4.6 Urban 3.3 2.5 2.5 0.7 1.7 1.3 0.4 1.3 0.1 0.4 HH without working age 18.1 0.4 0.4 14.7 15.5 17 0.1 0.1 Viet Nam-EES Paper N 32.doc 37 - Source: Calculations based on VHLSS, 2008. Poverty measures based on consumption expenditure. The options presented for the elderly in table 5.1 have the same impact in terms of poverty reduction since the additional reduced benefit provided to pensioners already covered by the contributory scheme is de facto not benefiting a poor population. The main objective of this option is to take a step towards a universal pension and not necessarily to achieve an additional impact on poverty reduction. In the case of the two targeted options for children, it appears that limiting the provision of benefits to a maximum of two children per household has important implications as the number of children in poor households is significantly higher than average. The probability that a poor child will be in a household with a maximum of two children is lower than 50 per cent, but close to 80 per cent in the case of non-poor children. Figure 5.2 shows poverty rates according to the number of children aged 0–15 per household. In addition to these moral and equity issues, additional difficulties with regard to implementation must be taken into account. The total cost of the alternative targeted child benefit is lower a maximum of 0.43 per cent of GDP in 2016 against 0.78 per cent in the absence of a limitation on the number of poor children benefiting. Nevertheless, the poverty reduction is also significant. The poverty rate after the benefit is 8.3 per cent for the total population 12.2 per cent among children compared to 3.6 per cent for the total population and 2.2 per cent for children when targeting all poor children. This latter benefit targeting all poor children has the highest absolute impact on the overall poverty rate. These results show an important redistribution effect on other age groups, in particular on the working-age population. Another way to demonstrate poverty effects is through a “spider radar graph” where the original poverty rates are represented by the “largest circle” and smaller circles represent the various post-benefit poverty rates figure 5.3 and poverty gaps figure 5.4. The centre of the graph represents a poverty rate or a poverty gap of zero. As said before, the individual benefit resulting in the highest impact on poverty reduction is the one provided to all poor children cash allowance and benefits in kind, the closest to the centre of the 38 Viet Nam-EES Paper N 32.doc graph, followed by the working-age benefit. In both cases, perfect targeting is assumed for the simulation. - Source: VHLSS, 2008. - Source: Calculations based on VHLSS, 2008. Poverty measures based on consumption expenditure. Viet Nam-EES Paper N 32.doc 39 - + Source: Calculations based on VHLSS, 2008. Poverty measures based on consumption expenditure. A set of additional indicators makes the link between the impact including reduction of the total poverty gap and total cost including an assumed level of administrative costs of 15 per cent of benefits. Figure 5.5 presents the size of the total poverty gap before and after the provision of benefit. The initial total poverty gap corresponds to the cost of eliminating poverty by perfectly targeted transfers to the poor. This total poverty gap can be related to GDP or broken down in sub-poverty gaps e.g. by age groups to analyse its composition. Finally, the comparison between expenditure to provide the benefit and the reduction of poverty gap provides an indication of the relative target efficiency of the various benefits. The total initial poverty gap as a proportion of GDP represents less than 0.7 per cent of GDP with more than 95 per cent of this gap being from poor people from rural areas. As shown by figure 5.5, over 50 per cent of the gap concerns the working-age population. In this age group the general poverty rate is slightly lower than the average national poverty rate but it represents two-thirds of the total population. In relative terms the situation for children is more problematic, as their relative share of the total poverty gap is higher than their proportion in the total population.