Global social protection fund must for low-income countries

2021-06-28, 11:14am Finance

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Human rights Logo. Predrag Stakic. Wikimedia Commons.

Geneva, 25 Jun (Kanaga Raja) – A global fund for social protection needs to be established to increase the level of support to low-income countries, in order to help them both to establish and maintain social protection floors in the form of legal entitlements, and to improve the resilience of social protection systems against shocks, a UN human rights expert has said.
In a report to the UN Human Rights Council (A/HRC/47/36), Mr Olivier De Schutter, the Special Rapporteur on extreme poverty and human rights, said that such a fund is affordable, whether funding comes from official development assistance (ODA) or from other sources, including unused or new special drawing rights (SDRs).
“Moreover, social protection should be seen as an investment with potentially high returns, since it leads to building human capital, has significant multiplier effects in the local economy, and contributes to inclusive growth and to resilience in times of crisis,” he said.
The global fund can be established building on the already existing structures that have developed on an ad hoc basis to provide support for the universalization of social protection floors, he added.
“The challenge now is to strengthen those structures – not to weaken or duplicate them – in order to ensure that they work more effectively with one another, and to scale up the level of support while ensuring that such support is also adaptive to future shocks.”
The UN Human Rights Council is currently holding its forty-seventh regular session from 21 June to 13 July 2021.
According to the report by Mr De Schutter, all States have committed to guarantee income security throughout people’s lives.
However, that pledge remains unfulfilled, at a huge human cost to their populations, said the Special Rapporteur.
“One reason for that failure is the insufficient level of support going to developing countries, in particular, low- income countries, which remain unable to overcome the financing gap for the establishment of social protection floors.”
The Special Rapporteur underlined that the right of everyone to social security is firmly established in international law.
The commitment to ensure basic income security and access to health care throughout people’s lives was reiterated in the International Labour Organization (ILO) Social Protection Floors Recommendation No. 202, adopted unanimously by the Governments and social partners at the 101st session of the International Labour Conference, held in 2012.
The Special Rapporteur said that commitment forms part of the Agenda 2030 for Sustainable Development.
Target 1.3 of Sustainable Development Goal 1, on poverty eradication, is aimed at implementing national social protection systems, and target 3.8 of Goal 3, on good health and well-being, is aimed at achieving universal health coverage.
According to the Special Rapporteur, a considerable gap remains between those pledges and the realities on the ground.
Before the onset of the COVID-19 pandemic, only 29 per cent of the global population was covered by the full range of guarantees referred to in ILO Recommendation No. 202, excluding health care, he said.
The majority of people – 55 per cent, or 4 billion people – were without any form of social protection whatsoever, while another 16 per cent, or 1.2 billion people, enjoyed only partial protection.
Only 35 per cent of children, approximately one in three, benefited from child allowances enabling them to receive childcare, nutrition, and education.
Those global figures hide important differences between the kind of benefits examined and between regions, said Mr De Schutter.
At the global level, 67.9 per cent of the older population is covered by some form of old-age pension, whereas only 21.8 per cent of unemployed workers are eligible for unemployment benefits.
At the regional level, the Special Rapporteur said that in the regions of Africa and Asia-Pacific, 29.6 per cent and 55.2 per cent of the population, respectively, are covered by old-age pensions, whereas unemployment benefits are available to 5.6 per cent and 22.5 per cent of the population, respectively.
In contrast, in the region of Europe and Central Asia, where coverage is in general the most advanced, a total of 95.2 per cent of the population is covered by old-age pensions.
However, he said, even in that region, gaps remain: for instance, only 42.5 per cent of the population is covered by unemployment benefits.
“The overall picture is nevertheless clear: too little was invested in social protection in the past,” said the Special Rapporteur.
The COVID-19 pandemic therefore caught countries off guard and the emergency responses of countries to the social impacts of the pandemic remained largely insufficient, he added.
A total of 2.7 billion people worldwide have not received any support to face the crisis and, as a result, the World Bank estimates an additional 88 million to 115 million people have been pushed into extreme poverty by the COVID-19 crisis in 2020 alone, with an additional increase of between 23 million and 35 million expected in 2021.
“This is the lesson from the crisis: in order to strengthen the resilience of societies against shocks, we need to do more to fulfil the right to social security,” said Mr De Schutter.
In addition to the lack of sufficient political will, a range of causes explain the lack of progress in the realization of the right to social security, he added.
Because informal work remains predominant in many low-income countries, contributory schemes only provide protection to a small proportion of the workforce.
The rights expert said the capacity of national administrations, in particular social security and tax administrations and labour inspectorates, is in many cases insufficient.
The large gaps that exist in population registries constitute a major obstacle in many low-income countries, said the Special Rapporteur.
“These obstacles are real. They affect the ability of low-income countries to mobilize domestic resources in order to finance social protection, and their ability to deliver social protection effectively to their populations,” he added.
“International solidarity should play a greater role in overcoming these obstacles. International solidarity, however, is not a substitute for domestic reforms, or for increased mobilization of domestic resources. Rather, it is a pre-condition for both,” said Mr De Schutter.
He underlined that low-income countries should be supported in their efforts to establish social protection floors, and a new international mechanism should be set up to that effect.
“The proposal for a global fund for social protection is not that taxpayers from rich countries pay for social protection in poor countries. It is, rather, to kick-start a virtuous cycle in which international support matches domestic efforts and contributes to capacity-building in low-income countries.”
The question is not simply whether low-income countries can afford to build social protection floors.
Instead, the question is whether those countries should remain locked in a “low-cost, low-human development” model of growth, or whether they should instead opt for an inclusive model of growth, said the Special Rapporteur.
CLOSING THE FINANCING GAP
According to the Special Rapporteur, the effort to achieve universal social protection floors is affordable.
For developing countries as a whole, the total cost of providing social protection benefits in 2019 was estimated by the ILO to represent $792.6 billion, or 2.4 per cent of their gross domestic product (GDP).
These costs are calculated on the basis of the four main social protection benefits: child allowances, maternity and disability benefits, and old-age pensions, but excluding unemployment benefits and health care.
Among low-income countries, defined as the 32 countries with an annual per capita gross national income (GNI) of less than $1,026, the cost was $31.1 billion, or 6.4 per cent of their GDP.
According to the report by the Special Rapporteur, the financing gap – defined as the difference between the cost of the four social protection benefits considered and the baseline spending on social assistance – was estimated at $527.1 billion, or 1.6 per cent of GDP for all developing countries.
However, only 5.6 per cent of the amount of this gap, representing $26.8 billion, concerned low-income countries.
The most recent ILO estimates now take into account the impacts of the COVID-19 crisis and include the financing needs for health.
The rights expert said that a total sum of $77.9 billion, including $41.8 billion for health care, would be needed to allow low-income countries to guarantee income security to their population of 711 million, as pledged in the ILO Recommendation No. 202.
While that represents 15.9 per cent of their GDP – an altogether un-affordable amount for low-income countries – it is a modest sum for rich countries collectively, he added.
Indeed, it represents less than half of the $161.2 billion provided in official development assistance (ODA) by the 30 OECD countries that are members of its Development Assistance Committee in 2020, representing 0.32 per cent of their combined GNI.
If only half of that amount went to support the establishment of social protection floors in low-income countries, that would practically cover the financing gap, said Mr De Schutter.
He added that if rich countries were to fulfil their pledge, initially made in 1970 and reiterated in the Sustainable Development Goals, to raise their ODA levels to 0.70 per cent of their GNI, the additional financing provided would be sufficient to fill the gap.
In addition, he said, funding sources other than ODA could be explored.
In this context, the Special Rapporteur noted that both the United Nations Conference on Trade and Development (UNCTAD) and the Commission on Global Economic Transformation have advocated for expanding the fiscal space of developing countries in order to help them alleviate the impacts of the COVID-19 pandemic by a new allocation of special drawing rights, for the equivalent of $1 trillion to $3 trillion, compared with the equivalent of $288 billion currently in circulation.
Mr De Schutter said even a relatively modest amount of 655 billion special drawing rights ($931 billion), which could be issued immediately without requiring parliamentary approval at the national level, would allow low- income countries to better meet the urgent social needs of their populations without having to fear for the effects on their external balance, and to alleviate the burden of servicing their foreign debt.
SOCIAL PROTECTION AS AN INVESTMENT
Mr De Schutter said that social protection plays a stabilizing role in times of economic downturn because of its poverty-alleviation impacts and its ability to raise consumption levels of low-income households.
Social protection also allows households to increase their savings, protecting them from having to sell productive assets in times of crisis and from being driven into destitution because of catastrophic health payments.
“It is also critical to ensure inclusive and sustainable growth, favouring a form of development that is more equally shared, with more significant poverty-reduction impacts,” he said.
Perhaps even more significant, social protection contributes to a more competitive economy and has significant multiplier effects.
Social protection leads to increased school enrolment and success, improved health outcomes and higher labour market participation rates, thus benefiting local economies at large.
“Providing income support to people throughout their lives is therefore not only a human rights obligation. It makes economic sense as well,” Mr De Schutter explained.
According to the report by the Special Rapporteur, at the individual and household levels, social protection allows families to invest more in the education of children.
For instance, said Mr De Schutter, cash transfers reduced child participation on family farms in Ethiopia, Kenya, Lesotho and Zimbabwe, while school enrolment rates for girls increased significantly in countries such as Ecuador, Lesotho, Pakistan and Turkey.
In Latin America and Africa, conditional cash transfer programmes have also been found to reduce the probability of school absenteeism and grade repetition, increasing attendance and educational attainment among boys and girls alike, including in Brazil, Colombia, Ghana, Mexico and Nicaragua.
The contribution of social protection to food security is also well-documented, said Mr De Schutter, pointing out that while the Bolsa Familia Programme in Brazil is perhaps the most studied example, many other cases have shown increases in caloric intake, number of meals per day and food production as a result of social assistance schemes.
For instance, in Ethiopia, the Social Cash Transfer Pilot Programme decreased by 0.24 the number of months in which households suffered from food shortage and increased by 0.6 the number of times children and adults ate per day.
“It has been estimated that for every dollar transferred to households in African countries, $0.36 is used on food expenses, which illustrates the contribution of cash transfers to improved food security.”
Moreover, contrary to a common prejudice, social protection does not discourage the search for employment, said Mr De Schutter.
Instead, it increases labour market participation, particularly among women. This has been shown for conditional cash transfer programmes in Latin American countries, including Mexico, and in Uganda.
“Social protection is therefore an investment, which in the medium and long term can not only pay for itself, but also deliver high dividends,” said the Special Rapporteur.
“A virtuous cycle can thus emerge, in which international support through the global fund provides an incentive for beneficiary countries to invest more in social protection, leading in turn to more inclusive growth and more resilient economies, allowing over time for the increased mobilization of domestic resources.”
The Special Rapporteur said that the instruments provided by the global fund for social protection can facilitate that in three ways: by providing technical assistance, encouraging domestic resource mobilization, and supporting increased investments in social protection.
Mr De Schutter summarized that a number of levers exist that could be used to expand the fiscal space available to fund social protection, including as a result of strengthened international cooperation.
“Such possibilities could be explored in the context of the preparation of country proposals submitted as part of a request for support from the global fund,” he said.
While the global fund should not compete with, nor develop as a substitute to, existing forums where obstacles to resource mobilization for the financing of social protection are discussed, its inclusive nature and its role as a platform connecting financing for development to the universalization of social protection floors can help mobilize action and encourage progress, he added.
GLOBAL FUND GOVERNANCE
According to the Special Rapporteur, the global fund for social protection should build on the existing mechanisms that support country efforts to establish social protection floors, and should neither replace such mechanisms, nor duplicate ongoing efforts.
“The governance structure of the global fund should also bring together a range of others beyond Governments, in order to increase the legitimacy of the initiative, facilitate coordination, and improve accountability.”
In this context, Mr De Schutter proposed that the governance of the global fund for social protection could include five bodies: a high-level political alliance, a board, a secretariat, a multi-partner trust fund and an independent accountability unit.
The role of country-level coordination should also be emphasized, he said.
Published in SUNS #9375 dated 28 June 2021
-    Third World Network