20.12.2023

Social Security in Vietnam – What to learn from Germany

The Fourth Industrial Revolution has created many impacts on all aspects of life, especially the employment issues of workers. The Federal Government of Germany has been making changes in social security policies to adapt to the new context. These are valuable experiences that the Communist Party and the State of Vietnam should take into account to build a sustainable, progressive and equal social policy system.

So, what problems does Vietnam's social security system currently have? What can Vietnam learn from Germany's social security system?

Firstly, coverage of the social security system to the entire population should be implemented. This is an outstanding point in the social security system that helps Germany not to have too much disparity between social groups. The German insurance system covers about 90 percent of the population, for everyone from birth (child allowance), through adulthood (health insurance, unemployment, maternity, sickness, disability insurance, etc.), and upon retirement (pension insurance). Vietnam social security system is trying to obtain this coverage. According to a report of Vietnam Social Insurance Agency, in 2022 there were about 17.5 million people participating in social insurance, reaching 38 percent of the labour force; about 14.3 million people participating in unemployment insurance, or 31 percent of the labour force. This ratio shows that the level of social insurance coverage increased compared to previous years but has not reached the expected level. Resolution 42-NQ/TW dated 24 November 2023 of the Communist Party of Vietnam has set a target that by 2030, 60 percent of the people of working age will participate in social insurance, and 45 percent will participate in unemployment insurance.

Secondly, privatization of the supply of the social security system should be encouraged. In addition to the role of the state, the German government emphasizes the participation and responsibility of employers, employees, communities, and society in implementing social security policies, especially in contributing financial resources to social security benefits. This has created abundant financial resources for the social security system, an important basis for redistribution, ensuring balance in life of the whole population. In Vietnam, the Unemployment Insurance Fund is formed from: contributions of employees and employers; state support from the central budget; fund investment profits; and other sources. The rate of spending on social security in Vietnam is 5 percent of gross domestic product (GDP) - significantly lower than the averages globally (about 13 percent of GDP), and for South-East Asia and the Pacific region (about 8 percent of GDP). This low rate, along with weakness in social insurance management, low self-awareness and sharing of businesses and people, leads to limitations in revenue sources for social insurance. This will affect the distribution of social security policies to each beneficiary.

Thirdly, a transparent and effective management mechanism should be built. Germany has built a control mechanism of "legislative - executive - judicial" power branches in promulgating and implementing social security policies. Social insurance funds are managed independently and transparently, being independent of the state budget. Social organizations also have an important role in providing and monitoring social security services. This helps the process of implementing social security policies be more effective and cover more people. The German government's experience in preventing insurance abuse, exploitation, and improper use of insurance resources is very valuable to Vietnam. Vietnam can and must study Germany’s experience in managing insurance funds (health insurance, unemployment insurance, etc.), especially financial management process and process of identifying violations in the financial management of insurance funds. In Vietnam, insurance policies and implementation in general still have not fully demonstrated the principles of contribution and benefit; fairness, equality; share and sustainability. These are the limitations that Resolution No. 28-NQ/TW dated 23 May 2018 of the Communist Party of Vietnam on insurance policy reforms pointed out.

Finally, modernization of the administrative management should be implemented following the achievements of the Fourth Industrial Revolution. As a pioneer country in developing a modern social security system, the Government of Germany sees digitalization as an opportunity to improve the efficiency of state management and to improve people’s access to public services. Since winning the Chancellery in September 2021, the Social Democratic Party (SPD) has emphasized the need for stronger social protection by introducing the Bürgergeld, or “citizen’s money”, which replaced two previous payment systems for those seeking work and those unable to work, and raised both payment levels and eligibility thresholds. The current party line also favors raising the contribution assessment limits for social security contributions resulting in a stronger contribution from those on higher incomes. In general, modernization and digitalization activities in state administrative management in all fields will drastically reduce bureaucracy and save many people's waiting time. This is not only a choice of the Federal Republic of Germany but also a global trend that Vietnam must change and apply to its system.

Vietnam has outlined a Vision to 2045, to achieve a social policy system with comprehensive, sustainable, progressive and equal development, ensuring social security and welfare for the people, and a high human development index (HDI). For this to become a reality, it is important to research and learn from successful experiences from developed countries, especially Germany, which has one of the world’s oldest and most comprehensive national social security systems. This is an indispensable and urgent need, which requires political efforts, sharing and consensus of the entire political system.

Nguyễn Thị Thanh Dung is the principal lecturer at the Institute of Politics, Ho Chi Minh National Academy of Politics. Dung has 20 years of experience teaching leaders and managers in the Vietnamese political system, and researching Vietnam's political system and international politics on topics including labour, employment, and social governance. She has chaired and participated in research projects at the state, ministry, and grassroots levels, and has published hundreds of research articles in Vietnamese and internationally.

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