INTRODUCTION

1. Objective and significance of the study

Since 1995, the Vietnam Social Security System - established officially in 1962 - has been reformed in accordance with the transforming to a market economy. As a result, its coverage now is extended but still excludes farmers and most of rural population. Developing the country in the direction of industrialization and modernization, of development of rural economy, it is necessary to make good this shortcoming of the current national Social Security System and eliminate the present picture of rural people living in misery and uninsured. So, policy-makers and research specialists have paid more attention to designing and implementing a social security scheme to Vietnamese rural population, especially a pension scheme for rural workers. In fact, the issue is in debate.

In the common concern, the thesis attempts to answer the very difficult question of ability of introducing a pension security scheme for Vietnamese farmers. In the scope of a master degree, my research, however, focuses mainly on assessing the demand for and willingness of Vietnamese farmers to pay for pension security as well as gets useful lessons from external and internal models of farmer's pension security to the case of Vietnam with the following sub-questions:

2. Methodology

The thesis applies a descriptive and comparative analysis based on data from MOLISA and the survey conducted by the author. It introduces a model of pension security for farmers based on the analyses and experiences from other countries, especially from developing countries such as China, Malaysia, Indonesia, etc. and from pilot programs conducted in some provinces in Vietnam.

3. Structure of the thesis

Besides of sections of introduction and conclusion, the thesis in organized into three chapters:

Chapter I:      Theoretical framework

Chapter II:    Review of Vietnam's Social security system and pension scheme

Chapter III:   Ability of introducing pension scheme to farmers in Vietnam

CHAPTER I: THEORETICAL FRAMEWORK

I. Pension scheme as a program of Social Security System

I.1 Concepts and objectives of pension schemes

The main ambition of social security is to help its members to avoid falling under the acceptable living standards. Social Security System widely consists of social insurance, social assistance, and benefits from national revenue, family benefits, and provident funds. Among these programs, Social Insurance (SI) could be considered as the first important one in SSS.

In consideration of benefit, social security may be divided into two categories: short term and long term. The long-term benefits play a very important role in almost formal national Social Security Systems in all over the world (ILO, 1997). They are normally in the form of pensions (so-called pension security or pension schemes). Long-term pension security is constituted of three branches: old-aged, invalidity (or disability), and survivors' benefits.

Old age pensions

Old age pension benefits are organizationally established to maintain the standard of living of the elderly. With respect to this benefit, it should be concerned the difference between two terms of pensionable age and retirement age. These two concepts may overlap but they are different.

Invalidity pensions

As regarding invalidity benefits, it should be made a distinction of three different concepts:  Physical invalidity, occupational invalidity and general invalidity.

Survivors' pensions

Survivors' benefits are paid to the dependants of the worker - the breadwinner - when he/she died.

Among three types of pensions, old age pensions are the most important. Many of the provisions given in old age pensions are applicable to another schemes i.e. invalidity and survivors' pension schemes.

I.2 Coverage of pension scheme

Among the different concepts, coverage is defined as the percentage of the labor force affiliated with or registered in a public pension scheme. When using these various definitions, however, a distinction between membership and contributors must be kept in mind (Mukul G. Asher, 1999). 

I.3 Types of pension scheme

Lump sum vs. pensions

Most long-term social security payments normally take the form of pensions (i.e. the amount is paid periodically). In some cases, these payments are lump sum such as death grants, benefits from old age provident funds or benefits from some private schemes.

Public vs. private schemes

Primarily, many pension schemes are publicly organized. They may be contributory, non-contributory or provident fund. The most prevalent contributory pension scheme operates based on social insurance principles. Thus, when mentioning pension schemes, it is normally understood as pension insurance schemes.

Private firms may offer pension schemes based on some social insurance principles. In general, these schemes have operated relied mainly on pooling risks by contributions that usually being shared between employer and employee.

Private schemes have established as either a supplement to or a substitute for current public pension schemes.

Funded vs. non-funded schemes

In funded pension schemes, individual contributions are capitalized and produce income. By being funded fully, or at least partially, the funds are ensured sufficient to cover future liabilities, avoid financial pressures.

Pay-as-you-go (PAYG) scheme give an example of non-funded pension schemes. The basis of PAYG says that today's workers are taxed to pay the pension benefits of those who have already retired.

Mandatory vs. voluntary schemes

Mandatory or voluntary pension schemes are determined based on whether becoming a member of the schemes is a voluntary decision by participants themselves or mandatory by law and legislation.

I.4 Financial aspects of pension schemes

To ensure the solvency of pension benefits when they fall due and administration expenses as well, the funds must be financed adequately. In principle, employees (insured persons) and employers are required to contribute to the pension funds. In the case of that only the employers and the workers are contributors, the pension scheme is said to be self-financing. In some cases, the Government may also make a considerable contribution. Other financial sources of pension fund could be invested incomes, receipts of donation, penalties, etc.

The expenditures of pension schemes may be divided into benefit payments, investment expenses and administration expenses.

I.5 Roles of Government

Government plays an important role in establishing and implementing pension schemes for some rationales:

-         Limitations of private insurance markets including unfairly determining insurance premium, adverse selection, moral hazard, and under-insurance;

-         Problems of myopia rises from consumer's perception of provided goods;

-         Income redistribution is an important Government function. While, pension schemes, to some extent, could be seen as a program of income redistribution in the society.

Based on these rationales, the roles of Government in pension scheme:

-         Enforcing the participation in private or public pension schemes;

-          Significant financial supports to the pension funds;

-          Assisting in different ways to encourage the development of the pension scheme: tax incentives, a full and strict frame of law, assistance related to infrastructure etc.

II. Pension scheme for farmers

II.1 Rationales for the extension of pension scheme to farmers

Weakness of current public pension scheme in coverage

Many existing pension schemes have till now excluded some social groups from their coverage: workers outside the formal sector, minorities and other disadvantaged groups (see Box 1 in the thesis). It is striking in developing countries where farmers and agricultural workers hold a majority of the population (approximately 80-90%). Uncovering a large number of populations by a public SSS could be its right weakness.

Income instability of farmers may lead to vulnerable life

Farmers' levels of income are both low and unstable. The farmers' life therefore, cannot be stable with such income levels, especially when they face bad contingencies namely illness, accidents, old age etc. Weak health with poor working and living conditions are other causes of the vulnerability of farmers' life.

Dismantling traditional mechanisms to protect elderly in rural areas due to social and economic changes.

The traditional mechanism has been dismantling by social and economical changes day by day due to the processes of industrialization, modernization and globalization: (1) Migration of the young workers from rural to urban areas; (2) Narrowed rural as well as urban family size; (3) Increase in dependency ratio of old people on working people.

National policies related to population control

National policies related to the control of population force some Governments to give out several programs that conflict to the “son preference” of farmers. Thus, pension schemes for farmers become a good provision to reach a universal coverage of social security and enhance the effectiveness in implementing compliantly the population policies.

II.2 Determinants of farmer's participation in the pension scheme

a. Income

This is one of the most important factors has positive effect on farmer's participation in a pension scheme.

- The higher income levels the more individual's paying much more attention to being protected against contingencies, so larger demand for participating to the pension schemes;

- Financial ability to contribute to the pension fund is enhanced when incomes increase.

 b. Education

The education effect can go through two channels: indirectly of income and directly of perception of risks and individual self-respect.

- Higher education could lead to a higher level of income (WB 1995; Jowes 1990; Dominique H., J. Haughton and Nguyen Phong, 2001), thus a greater possibility of contributing to farmer pension funds;

-  Higher educated person is able to determine more clearly the risks related to old age etc. that they will face.

- Well-educated people, in general, think further of their own life in the future when they become older at right now.

c. Traditional features

It may be difficult to quantify the effect of this factor. However, if analyzing from the aspect of psychology, that traditional care among generations (especially the care of the elderly by young people) is gradually looser will create a psychological mechanism enforcedly finding out alternatives, for example a formal pension scheme for farmer.

d.  Assistance from their children and relatives

Financial assistance from these children or relatives becomes a positive factor affect the possibility of contributing to the farmer pension schemes.

e. Demographic characteristics

When workers become older, they know more of their decreased working ability, thereby decreased earnings they get for their family. Therefore, they perceive the necessity to have a means of protecting their life, for example pension schemes in the old age.

The number of children a family may affect negatively the probability of farmers' contributing to the pension fund. It can be that rural parents will not attend to the provided pension schemes when they expect in a number of children.

While, the more number of the elderly in the household will lead to a reversal impact.

III. Farmers pension schemes in some countries

III.1 In OECD

In general, developed countries, i.e. OECD, do not have a problem of whether farmers are protected or not. With a universal system of social security, their farmers and other self-employed persons can receive pension security from State or private organizations like many other citizens. These pension schemes are mandatory or voluntary.

Primarily, financial sources of farmer pension benefits in OECD came mainly from Government. However, there is a shift towards financial mechanism addressed insured person's contribution now.

III.2 In developing countries

There are not any striking models of farmers' pension schemes for developing countries. In reality, some only countries were in the process of setting up a nation-wide pension scheme for farmers (rural population). While many other developing countries have not yet implemented such schemes for many reasons including economic constraints, managerial problems or without necessarily a priority to rural population. Several pension schemes for farmers, in other cases, has provided a thin coverage (Indonesia, China, India)

Being a member of farmers' pension schemes may be compulsory (Indonesia, Albania) or voluntary (China).

Contributing to the funds is mainly by schemes' members, i.e. rural workers. Other sources of farmer's pension fund may come from employers' (co-operatives) contributions; and Government supports. Contributions vary in the range of many levels from the very low (China) or different based on geographical areas; preferred and non-preferred (Albania).

III.3 Lessons

a) Farmer pension schemes - a national long-term prudent strategy to implement

b) A mandatory farmer's pension scheme has been asserted to be reasonable. However, in the outset of the pension schemes for farmers, it would better to choose a voluntary one (Albania, China).

c) The financial contributions could encourage the effectiveness of the schemes. However, because farmer's income is low and not homogenous, contributions are determined in many levels flexibly and appropriately (China, Turkey, and Argentina) or in different levels depending on economic conditions of different rural areas (Albania). Time of contributing depends on the choice of farmers. It may be once a year or several times per year. From the experience of countries, financial source from state budget is great and seem to be necessary and worth expecting. Investment income has been interested in many both developed and developing countries.

d) The best way of collecting contributions and making benefit payments is to utilize the existing networks of agents in rural areas: Government institutions, village authorities, bank branches, post offices, co-operatives, etc.

Normally, the national social security institution is responsible for the management.

e) In the cases of undeveloped security markets, lacking financial tools, the Government could have methods to encourage and assist the investment (preferred rate of interest; national feasible projects).  

f) Improving the farmer's perception of social security and pension schemes. Beside education, moral persuasion is a method to make farmers more belief in the existence of the pension schemes.

CHAPTER II: REVIEW OF VIETNAM'S SOCIAL SECURITY SYSTEM AND PENSION SCHEME

I.  Social Security System in Vietnam

I.1 Overview of the evolution

Vietnam Social Security System (VSSS) was established based on the Decree 218/CP issued on December 27, 1961 on Provisional Regulations of Social Security.

 Since 1995, Vietnam's SSS has come to a new period with many important changes and improvements:

- Two forms of social security are compulsory and voluntary;

- The coverage has been extended to all the employees in different economic sectors, where a labour contract exists.

- Financing the fund is based on a contributory mechanism by both the employer and the employee.

- The Vietnam's social security fund has become independent of the State budget and self-financing.

- The management has been unified with the establishment of Vietnam Social Security Institution (VSSI).

II.2 Current situation of pension schemes in Vietnam

Vietnam pension schemes now are based on financial principle of PAYG. In general, financial ability of pension fund in Vietnam now can meet all present cost of long-term benefits, even in some next years (Patrick Wiese, 1999). Long-term benefits in Vietnam at the current time include old age pension, survivors' pension. Under the new Decree No. 12/CP of the Government on social security, disability benefit is eliminated and in fact merged with the old age pension. In some circumstances, it is called as an early retirement benefit.

The most concern when reviewing the pension schemes in Vietnam is its coverage. The coverage of the national formal pension schemes has been rather limited until now. According to ILO's report (ILO, 1998-a) the national pension schemes in Vietnam has covered only 11-14% of labor force under statute.

II.  Pilot programs on pension security for farmers in Vietnam

II.1 Rationales to introduce farmer pension schemes in Vietnam

The first rationale is an unequally incomplete coverage under the current National Social Security System in Vietnam.

Young and large number of rural labor could become a good rationale for the Vietnamese Government to concern a policy of farmer pensions.

Farmer's works are very heavy and strenuously indeed, and their income is low and unstable.

Many changes due to transforming to a market economy make the aged people become reluctant to the new life. Some figures, although not many, has indicated a signal of loosening the cohesion among family generations.

The vigorous family planning program has influenced the traditional social security to old people. A nuclear family model has gradually replaced the traditional one from the urban to the rural areas. The rate of growth of the total population is slowing dramatically. Accordingly, the average number of the elderly per family will increase, especially in the rural areas of Vietnam.

II.2 Review pilot programs

In Nghe An province

Nghe An province has shown a successful case of establishing experimentally pension schemes for farmer in Vietnam.

Provincial People' Committee decide to establish a Social Security System for Farmers on April 28, 1998. The System, firstly of Pension Security, has been experimentally implemented in 44 villages and a ward. Most of them belong to Quynh-luu district.

Labors participate voluntarily in the system and can choose one of three levels of contributions: 10,000VND/month; 20,000VND/month; and 30,000VND/month. Time of contribution may be into twice a year or four times per year. The least number of contributory years is 20. Besides, the funds have been financed about 1% out of the provincial state budget.

Ha-tay province

In 1998, the provincial Government had directed Phu-xuyen district to implement a pilot social security service, mainly pension also, for farmers.

Participants comprised local farmers at the age from 16 to 60 for male and from 16 to 55 for female. Phu-xuyen farmers contributed in paddy instead of by cash as the case of Nghe an. After completing a total contribution of 80 kg of paddy and reaching the pensionable age, farmer can get benefit. However, benefit level is not determined specifically but based on the accrued fund, around 4-6 kg of paddy per month. It seems to be low for the needs of farmers.

Bac- ninh province

Pension scheme has started in pilot in Bac Ninh province since 1991. However, it is not commodious pattern of perform as in Nghe An. There have been 2,622 farmers in 4 villages of Bac Ninh province participating in the provincial pension scheme while inhabitants in 119 villages do farming.

Rural labors aged 18-60 for male and 18-55 for female can make contribution of 100 kg of paddy in total by three levels (1) Farmers aged from 60 upward can be paid pensions after completing 100 kg of paddy; (2) Farmers in the 48-59-age group have to complete 5 years of contribution with 20 kg of paddy per year; (3) The youngest group of farmers (from 18 to 47), has to complete 10 years of contribution with 10 kg of paddy per year.

The benefit has been too low of 10,000VND monthly in terms of physical value for living cost at present.

Some remarks:

- All these pilot pension schemes were established spontaneously and locally depending on different demands of farmers and socio-economic conditions in each province.

- Farmers in three provinces have contributed variously in the forms as well as in the levels. Contributions can be paid by cash (Nghe An) or in kind (Ha-tay and Bac Ninh). The fact shows that contributing in kind seems hardly to maintain the financial sustainability of the funds. Such low value of contributions as that in Bac Ninh and Ha-tay cannot make sustainable the long-term financial capacity of the funds.

- In the case of Nghe An, the government plays a significant role to maintain the farmers' pension fund with a financial support of 1% out of the provincial state budget.

- In general, benefit is small proportionate to a low level of contribution. The payment of 10,000VND per month in Bac Ninh or 4-6 kg of paddy per month in Ha-tay could not become a replacement of income due to old age or/and disability for farmer indeed. Accordingly, these schemes are not convincible for farmer and rural labors to participate voluntarily and actively.

- Time of contributing in three pilot programs of pension security is based on characteristics of rural labors and seasonal agricultural production. In general, determining contributory time is reasonable.

- One of the biggest difficulties in implementing the farmers' pension scheme relates to the issue of management: unclear functions of management; lack of staffs with good managerial skills; without an agreement in determining the body responsible for collecting contributions and paying benefits (though Provincial Farmers' Union is entitled to do that as the case of Nghe An).

- Pilot pension schemes have drawn much attention and a lot of encouraging priorities from local governments.

- In effect, there are a lot of farmers not yet having gotten enough information of pension schemes. People, who are in charge of informing and propagating the schemes, though enthusiastically, seem also not to understand and master the funds fully and exactly in order to do well. 

II.3 Lessons

a) The unity of implementing and managing the pension scheme in nationwide is a necessity to manage the fund strictly and securely. It seems that farmers believe more in a national pension security scheme.   

b) The pension funds were established on the basic of contributions from farmers. However, local governments have supported in order to encourage the existence of the security schemes for farmers.

c) To maintain the adequate value of the fund, thus its solvency in the future, contributions should be made by cash and so high for a sustainable long-term fund. Of course, they must be acceptable high levels for Vietnamese farmers.

d) Farmers may contribute twice a year.

e) Benefits should be determined so high that to ensure farmers' living standards at present.

f) To get successes in implementing the pension scheme for farmers, it is essential to determine an organization with clear functions and skilled staff to take this responsibility.

g) Another very important experience that can be deduced here is full information to farmers and rural labors to make them aware of pension schemes and their rights also.

CHAPTER III: ABILITY OF INTRODUCING PENSION SCHEME TO FARMERS IN VIETNAM

I. Analysis of socio- economic conditions in Vietnam

I.1 Economic growth and poverty reduction

The Doimoi policies have brought benefits to all Vietnamese, especially to the poor. There are also some good assessment on Vietnam's achievements in 2001 and also optimistic observations on its trend of economic development in next years from foreigners.

Rural development

In fact, the results in developing rural economy and reducing poverty have composed much in achievements of reforming process in Vietnam. Due to series of policy issued, growth rates of rural agriculture are higher and higher.

I.2 Population

The aged-structure population shows that at present, Vietnam population now is very young.  The number of people in actively working age is high, while the number of aged people is low. The proportion of rural population in the age from 15-59 makes up over 51% (29.8 million), while the rural population aged 60 and above composes of about 6.35%. As the judgments in the Report of Human Development in Vietnam (2001), these figures of Vietnam population can show a long-term potential of the nation.

I.3 Industrialization

In 1991, industrializing the economy has been referred in the Seventh Communist Party Congress of Vietnam and affirmed in the Eighth Communist Party Congress of Vietnam (1996). In Vietnam, the strategy of developing the economy in the direction of industrialization and modernization has shown some good results. In many rural areas, concentrated agricultural production has connected to manufacturing step by step. Agricultural products are more and more diversified. That investment in rural areas has increasingly created more opportunities for farmers to approach social infrastructure and services. Despite low living standards of farmers compared with those of urban people, improvement in rural transportation and communication has caused many advanced changes in the country.  The Ninth Communist Party Congress of Vietnam in 2001 continues to affirm the economic development in the direction of industrialization and modernization in order to achieve national made-up objectives.

I.4 Education

With respect to education, Vietnam has achieved some considerably higher results than that in other low-income countries. Literacy rate of adult is around 93.1% in 2001. Gross enrollment rate is 67% in 2001. The development in quantity of education has also indicated rather clearly. The number of class as well as the number of pupil continues go up.

In April 2001, the Ninth Communist Party Congress of Vietnam passed “Strategy of Socio-economic Development in ten years 2001-2010” in which:

+ Increase GDP in 2010 double higher GDP in 2000.

+ Continue eliminate hunger and reduce poverty.

+ Universalize basic secondary education.

 II. Data collection.

-         Data source comes from the Report of Survey on “Vietnamese rural laborers' demand for and ability of participating in social insurance” that conducted by MOLISA in 1999.

-         Author's survey focuses on “ Vietnamese farmers' demand for and ability of participating pension schemes”.

-         Some data could be taken from VLSS 92-93 and VLSS 97-98 and other relevant materials in terms of living standards of rural population.

Due to the limitations of the data, the method of analyzing in this section is mainly descriptive statistics.

III. Determinants of The Vietnamese farmers' demand for and ability of participating in pension schemes.

Farmers' demand for pension benefits.

According to the information showed in the Figure III.1, a large number of interviewed rural laborers expect social security. Most of them have played an importance on two long-term benefits: 91.1% choose old age benefit and 40% choose survivors' benefit. According to my survey in Nghe An and Bac Ninh in June 2001, about 64.2% interviewed rural laborers expressed their demand for a pension scheme (See The Table A.4, Appendix 4).

Figure III.1: Farmers' demand for different social Insurance benefits in Quang Ninh, Nghe An, Thua Thien Hue, and Binh Duong, 1999

Table III.3: Farmer's demand for participation in Social Insurance by benefits and by professions in Quang Ninh, Nghe An, Thua Thien Hue, and Binh Duong, 1999

III.1 Income and expenditure

In the context of developing the economy and policies in order to encourage people enrich legally; eliminate hunger and reduce poverty, farmers' incomes tend to be clearly improved. There is a portion of farmers, who become richer and have ability to save.

If average income of rural household was 187,000 VND/month in 1996, then it increases to 207,000 VND/month in 1998 (VFU, 1999). It can be said that, one of the reasons for strongly believing increasing income levels is the development of farming economy (See Box 2). Particularly, some farmsteads in Khanh hoa, Lam dong and Dong nai provinces have had rather high incomes (Mac Tien Anh, 2000).

Expenditure per capita of rural household, however, is about 184,000 VND per month. So, after deducting all spending on production and on daily life, rural people in general and farmers in particular can save at a certain level. Such financial conditions may allow farmer participate in pension schemes.

Box 2: Farming economy in Vietnam        

As surveyed by MOLISA in 1999 in Quang Ninh, Nghe An, Thua Thien Hue and Binh Duong, average income of a laborer is rather high at 554,000 VND monthly, while expenditure per laborer is 267,000 VND monthly (Table III.4). So, the laborers in all rural professions have more or less ability of saving. It is very important that allow them to contribute if they demand social insurance.

Table III.4: Farmers' income and demand for Social Insurance by professions in Quang Ninh, Nghe An, Thua Thien Hue, and Binh Duong, 1999

 As data from my survey, in 76 people from Hung hoa, Hung tien (Nghe An) and Tu son (Bac Ninh) said “no” for the question “Do you contribute to farmer pension fund if it exists?” (After preliminarily explaining the pension schemes for farmer), 68.4% explained “low income” (See the Table III.5). If farmers' income increases, the total demand for pension benefits by farmers in Nghe An and Bac Ninh go up to 92% rather than 64.2%. It may be concluded that income affects strongly the farmers' ability of participating in the pension scheme.

III.2 Education

Data from the MOLISA survey in 1999 indicates that if farmers do not understand or conceive clearly pension benefits, they can decide do not participate even though their income is rather high.

In Nghe An, most of farmers only chosen prudently low level of contribution though they are able contribute at higher levels. Many farmer participated in the pilot scheme due simply to other neighbors have done or to the suasion of village officers and Farmer Group. Even, some of them have taken part in the scheme but still wonder that whether they can receive their benefit.

II.3 Traditional features

There are not few people in surveyed rural areas, especially young laborers, who say that they want their children leave the village to study and earn money. Beside of the fact, improved living standards and constrain of  “two children for every family” have induced rural people to think of “boy or girl” not the same as before. Therefore, they have conceived more a life without their children next to them.

III.4 Helps from children and relatives

The higher the incomes of children, the more often and the higher the level of remittance they can send their parents and other relatives in the villages (Bui The Cuong, 1998). Among few interviewed farmers in Nghe An who receiving remittances from their children and relatives, most said that they have ability to contribute and are willing to participate in pension scheme.

III.5 Some demographic features

Analyzing the farmers' expectation in social insurance policy by age, laborers in the age 41-55 expect to participate with the highest percentage (92.1% of interviewees in the same age group). Reasons may be (1) These laborers are more aware of their own health on the ages; (2) They may have an accumulated fund along working time.

IV. Some other choices of farmers related to pension schemes

IV.1 Forms of participation

There are 98.7% of rural laborers having demand for social insurance said that the Government should establish a voluntary scheme for farmers (See the Table III.7). If farmers aware a real benefit from pension schemes, they will take part in these schemes voluntary without any enforcement. 

IV.2 Levels of contribution

In the survey 1999, MOLISA gave four chosen levels of contribution: 10 000 VND; 15 000 VND; 20 000VND and 25 000VND per month. Most of farmers pick the lowest contributing level (54.39%). At the given highest level, 30.99% of laborers planting annual trees, who have demand for social insurance can contribute. It is reasonable to infer that such choosing levels of contribution correspond to their different income levels depending on various professions.

IV.3 Times of contribution

Table III.7 indicates that laborers in various professions want to contribute in quite different time. Generally, a large portion of laborers likes to contribute by quarter (every three months).

IV.4 Means of contribution

The majority of laborers like contribute in cash (94.98% of interviewees having demand). These people think it easily to manage and control contributions in cash.

IV.5 Managerial organization

When asking about organization of management, about 75.96% of demander chooses VSI. Among 717 laborers who want to have a farmers' SI scheme or pension scheme, only 43 persons (5.91%) choose the co-operative. 

Table III.7: Farmer's choices related to participation in Social Insurance in Quang Ninh, Nghe An, Thua Thien Hue, and Binh Duong, 1999.

V. An applicable model of farmers' pension scheme to Vietnam

V.1 Assumptions

(a) Establishing and implementing farmers' pension schemes are considered as the national strategy of rural development. It means that (1) paying an appropriate attention to the scheme from Government, other related institutions and organizations. Also, there have made appropriate policies in order to manage and assist the schemes to operate successfully; (2) setting out regulations for nation-wide establishing and implementing the farmers pension scheme under united and synchronous direction; and (3) coordinating harmoniously with programs that to develop rural infrastructures such as HEPR, etc.

(b) National economy in general and rural economy in particular tends to develop stably and sustainably.

(c) The process of industrialization, modernization and globalization is going on as well in Vietnam.

(d) Intellectual and socializing standards of the Vietnamese people are increasing more and more.

V.2 Recommending a model of farmers' pension scheme to Vietnam

A voluntary scheme

As analyzed already, Vietnamese farmers' incomes now are low and not the same in various professions. They also do not have habit of deducting their meager income to contribute social insurance premium. Therefore, a relevant form of participating is voluntary, at least in the first stage of implementing the pension scheme.

Coverage of the scheme

To be appropriate to voluntary model as suggested above and to make the pension scheme more favourable when being started also, the coverage firstly should concentrate in farmers with rather high income. These farmers' contributions will step by step create plentiful and stable to the fund.

Contributions and the financial sustainability of funds

In fact, solving the problems related to financial sustainability of the pension fund for Vietnamese farmers is extremely hard now. My model should mention some aspects:

+ Recommendations of contribution levels are based on Vietnamese farmers' income and experiences from pension schemes, especially the pilot one in Nghe an. Levels of contribution may be as follows:

Table III.8:  Some suggestions of contribution levels

                                                                                                Units: VND

+ As experience from Hungary and some other countries, the Government should direct and make favourable to invest the pension fund for farmers in Vietnam in national feasible projects.

+ Financial supports from government and social organization are necessary to the fund.

Management

Pension scheme for farmers in Vietnam should be united nationwide on general regulations. Each provincial government can rely on these standard regulations to implement the scheme in accordance with its socio-economic condotions. Personally I think this suggestion is very relevant at least, in beginning years of the scheme. Then, in the next years the implementation can be amended one by one to achieve complete unity.

(1) Contributing management

- Means of contribution should be in cash because contributing in kind will not ensure the unity of implementation and will make more difficulties in accounting and managing the pension fund as well.

- Contributions could be divided every three months or six months per year.

- Organizing and managing collection should be decentralized in some level. In Central and provincial level, the management could learn from the social insurance for formal labors in Vietnam now. Collecting contributions from farmers could depend on colleting agents. These agents can be Groups of farmers, co-operatives, and village officers, post offices, etc.

(2) Paying management

Monthly payments are the best way to ensure monthly income for farmers in the years of their old age.

(3) Organization of management

The highest authority should be best a Committee including representatives of Vietnam Social Insurance, Vietnam Farmer Union, MOLISA, and Government. These organizations should go together closely, to assist each other to implement the policy and ensure farmers' interests also.

Staff of the farmer's pension scheme should be really good at specialty as well as professional skills in pension insurance. They may be officers of VSI because of their advantages in present job.

(4) Implementing steps

Implementing the pension scheme for farmers should be prudent and step-by-step. It can be divided into two stages of implement action. First stage may long from five to ten years. In this first stage, pension scheme for Vietnamese farmers could be run by the basic “doing and learning”. The Government may also direct to point areas with rather high living standards to implement in the first stage.

VI. Policy implications

(1) Social insurance is an extremely important Social policy for each nation. Completing and making perfect the national Social Insurance policy, thus has been always concerned in Vietnam. Pension security for Vietnamese farmers, as a part of the national Social Insurance policy, should be implemented. First of all, national policy of social insurance will become more perfect and complete, ensuring interest fairly to all Vietnamese laborers in both formal and informal sectors. It also helps to decrease the gap between rural and urban areas in terms of living standards. More importantly, the policy of pension security for farmers in Vietnam now will meet legitimate aspiration of rural laborers.

(2) Other Government policies will affect positively the existence and development of the pension fund for Vietnamese farmers. Although farmers demand much in pension scheme, only 10% of them belong to a group of rich farmers who can have ability of contribution. Prior economic policies to support this pension fund will be very necessary, especially in the stage of beginning the scheme and for poor rural laborers.

(3) Success of pension scheme for farmers in Vietnam, as mentioned in Part V.1, goes with some certain favorable conditions. These conditions are closely related to nation policies to develop the economy, including rural economy in terms of infrastructure; farming production; opportunities of accessing public communication, etc.

CONCLUSION

The development of Vietnam has always connected closely to the development of rural areas. Establishment of pension scheme for farmers in Vietnam not only is to meet urgent farmers' demand, but also to help the national development.

After reviewing all related theoretical literature, this paper goes on to examine real conditions in Vietnam whether or not to allow a pension scheme for farmers or not. The main examined approach comes from the demand of Vietnamese farmers and their ability to take part in the scheme.

The research has shown that the demand for Social insurance in general and for pension schemes in particular is especially large in Vietnam's rural areas, especially by poor people. Despite this fact, it is far from identifying practical solution to bring demand and supply into equilibrium. It may be a new venture when establishing a pension scheme for farmers in Vietnam now, but it cannot be ignored. Much more information on the demand side is needed in order to formulate useful and practical policy recommendations.

The question of an “optimal” design of a pension scheme for farmers in Vietnam has been answered in this thesis after comparing some case studies. It should be voluntary and, very important, should received active financial supports as well as prior attention from government in all levels.