MANAGING SOCIAL SECURITY ORGANIZATIONS

PRESENTATION DURING INTERNATIONAL SEMINAR FOR COUNTRY HEADS OF SOCIAL SECURITY ORGANIZATIONS OF ASIA-PACIFIC AND AFRICA NEW DELHI-INDIA29TH-30TH OCTOBER 2007 PRESENTED BYCOMPILED BY B.N.SOMDR.MAHENDRA RAJU MANAGING SOCIAL SECURITY ORGANIZATIONS

“ 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 ORGANISATION Governance and Administration Good 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 GOVERNANCE Strategic 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 obligationsMaking 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 effective ‘income replacement’ in respect of the contingencies of old age, invalidity and death, the policy process should address fallowing1.What is the most appropriate scheme for the country?2.What are the most suitable institutional arrangements?3.How can efficiency at the operational level be maximized?

The stakeholdersThe following groups have an interest in social security and thus should be involved in the governance of those social systems:· the state· social security institutions (both public and private),· employers and workers as contributors· beneficiaries

Social security institutionsGovernance of social security:Institutional division of responsibility- Formulation of national policy- Monitoring at macro level - Determines major policy issues- Finalizes legislation- Overall financial supervision- General oversight

THE FUNDAMENTAL GOVERNANCE QUESTIONS 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 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 experienced in strategic planning? • Fragmented development • Lack of coordination • Inadequate planning • Rigidity in the legislative process • Conceptual 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 in developing 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 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 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 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 AT THE OPERATIONAL LEVEL • Lack of transparency • Schemes may not be accessible • Limited coverage • Maintaining accurate records • Delays in processing benefit claims

Problems with administration at 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 : 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 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 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 records Most 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 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 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 more 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 SECURITY 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

Conclusions • 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.

conclusions • 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

MANAGING SOCIAL SECURITY ORGANIZATIONS