VIETNAM: ADAPTING TO AN AGING SOCIETY VIETNAM: ADAPTING TO AN AGING SOCIETY © 2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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Cover photo: Golden Sky Inside photos: Shutterstock Cover design: Golden Sky ii VIETNAM: ADAPTING TO AN AGING SOCIETY CONTENTS List of Acronyms............................................................................................................... xiii Acknowledgments.............................................................................................................. xv Executive Summary............................................................................................................xvi PART I................................................................................................................................10 Chapter 1: VIETNAM’S DEMOGRAPHIC TRANSITION..........................................................12 1.1 Introduction and Summary................................................................................................................ 12 1.2 The “Demographic Window of Opportunity” and Patterns and Drivers of Aging in Vietnam........ 12 1.3 Key Demographic Patterns Across Sub-Groups.............................................................................. 16 1.4 References.......................................................................................................................................... 20 Chapter 2: AGING AND WELFARE........................................................................................22 2.1 Introduction and Summary................................................................................................................ 22 2.2 Poverty and Economic Mobility......................................................................................................... 22 2.3 Ownership of Assets and Living Conditions..................................................................................... 29 2.4 Education and Employment Patterns............................................................................................... 32 2.5 Living Arrangements and Access to Informal Support.................................................................... 39 2.6 Assess to Public Programs............................................................................................................... 40 2.7 Social Assistance............................................................................................................................... 41 2.8 Health Insurance................................................................................................................................ 42 2.9 Contributory Pensions....................................................................................................................... 44 2.10 Annex Key Definitions....................................................................................................................... 45 2.11. References........................................................................................................................................ 47 VIETNAM: ADAPTING TO AN AGING SOCIETY iii  OTENTIAL MACROECONOMIC AND FISCAL IMPACTS OF RAPID AGING IN Chapter 3: P VIETNAM..........................................................................................................49 3.1 Introduction and Summary................................................................................................................ 49 3.2 Demographic Trends and GDP.......................................................................................................... 49 3.3 Fiscal Policy Challenges of an Aging Population............................................................................. 57 3.4 Healthcare.......................................................................................................................................... 59 3.5 Education............................................................................................................................................ 60 3.6 Social Assistance............................................................................................................................... 62 3.7 Pensions............................................................................................................................................. 63 3.8 Aggregate Fiscal Impact.................................................................................................................... 63 3.9 Conclusions and Policy Implications................................................................................................ 65 3.10. References........................................................................................................................................ 68 PART II. .............................................................................................................................70 Chapter 4: LABOR MARKET FOR AGING VIETNAM.............................................................72 4.1 Introduction........................................................................................................................................ 72 4.2 Key Features of Vietnam’s Labor Market.......................................................................................... 74 4.2.1 High Employment Rates and the Changing Nature of Jobs.................................................. 74 4.2.2 Rising Education Level of the Prime-Aged Workforce and High Demand For Skilled Workers................................................................................................................................... 75 4.2.3 Concentration of Younger Workers in Wage Occupations in Urban Areas........................... 76 4.2.4 The Rise of Wage Work in Rural Areas.................................................................................... 78 4.2.5 Age-Based Segmentation of the Rural Labor Market............................................................. 81 4.2.6 The Rise..................................................................................................................................... 82 4.2.7 Persistent Inequalities in Labor Market Outcomes by Ethnicity and Gender........................ 82 4.2.8 Restrictive Employment Protection Legislation...................................................................... 84 4.2.9 Early Retirement/Pension Policies Discourage Labor Market Participation......................... 85 4.2.10 Vietnam’s Permanent Registration System Ho Khau........................................................... 87 4.3 Policies to Prepare for an Aging Workforce and to Improve Labor Market Outcomes................. 88 4.3.1 The Central Role of Human Capital (Education, Skills, Innovation and Health) for Vietnam’s 21st Century Economy....................................................................................................... 89 iv VIETNAM: ADAPTING TO AN AGING SOCIETY 4.3.2 (Higher/Tertiary) and TVET Education Sector Reform for the Future Workforce................ 93 4.3.3 Extending Productive Working Lives with Comprehensive, Cross-Sector Policies.............. 96 4.3.4 Effective, Demand-Driven Lifelong Learning (LLL)............................................................... 100 4.3.5 Support to Improve Ethnic Minority Outcomes and to Segmented Rural Workforce......... 101  Comprehensive Approach to Improve Ethnic Minority Outcomes, Including Through Supporting Their Migration Prospects................................................................................... 101  Support for a Segmented Rural Workforce............................................................................ 102 4.4 References........................................................................................................................................ 104 4.5 Annex: Vietnam Socialization Policies.......................................................................................... 110 Chapter 5: THE ROLE OF PENSIONS IN AN AGING VIETNAM............................................ 112 5.1 Introduction...................................................................................................................................... 112 5.2 Vietnam’s Current Pension System in International Perspective.................................................. 113 5.3 Options for Addressing the Coverage Gap..................................................................................... 123 5.4 Options for Improving Long-Run Financial Sustainability in the Contributory Scheme............... 127 5.5 Way Forward..................................................................................................................................... 132 5.6 References........................................................................................................................................ 136 5.7 Annex: VSS Scheme Rules and WB (PROST) Assumptions on Projections for VSS................. 138 5.8 Annex: Evolution of Vietnamese Social Insurance Legislation.................................................... 140 Chapter 6: HEALTH CARE TO ACHIEVE HEALTHY AGING IN VIETNAM......................... 142 6.1 Introduction...................................................................................................................................... 142 6.2 Epidemiological Transition.............................................................................................................. 143 6.3 Health Service Delivery.................................................................................................................... 150 6.4 Health Financing.............................................................................................................................. 157 6.5 Challenges for Health Service Delivery and Health Financing...................................................... 166 6.6 Government Current Policy and Strategies, and Vision for Health Aging..................................... 172 6.7 Recommendations for a Re-Configured Service Delivery Platform for Healthy Aging................................................................................................................................... 178 6.8 References........................................................................................................................................ 185 VIETNAM: ADAPTING TO AN AGING SOCIETY v Chapter 7: BUILDING A SYSTEM OF ELDERLY CARE FOR VIETNAM.................................. 188 7.1 Introduction and Rationale for State Intervention in Elderly Care................................................. 188 7.2 Vietnam: Legislation and Institutional Structures Governing and Supporting Elderly Care................................................................................................................... 191 7.3 The Current Landscape of Provision and Financing...................................................................... 194 7.4 Good International Practice Guiding Principles for Developing an Elderly Care System............ 205 7.5 Recommendations for the Future................................................................................................... 214 7.6 References........................................................................................................................................ 218 7.7 Annex: Laws and Policies Related to the Rights of Older Persons in Vietnam, 2009-2018......................................................................................................................................... 222 vi VIETNAM: ADAPTING TO AN AGING SOCIETY List of Tables Table 1.1. Vietnam: Projections of Life Expectancy...................................................................................... 16 Table 1.2. Vietnam: Selected Demographic Indicators by Region, 2016...................................................... 19 Table 2.1. Vietnam: Poverty Headcount Rate by Age and Cohort, 2010-2016............................................ 23 Table 3.1.Vietnam: Projected GDP Growth.................................................................................................... 52 Table 3.2.Vietnam: Projected Coverage Rates and Unit Cost, by Program.................................................. 58 Table 4.1. Vietnam: Job Distribution, 2012 and 2016 (in Percent)............................................................... 75 Table 4.2. Vietnam: Retirement-Aged Worker Employment Trends, 2016................................................... 86 Table 4.3. Vietnam: Socio-Economic Characteristics of Pension Recipients, 2016.................................... 87  ublic and Private Funding for Tertiary Education as a Share of GDP for Table 4.4. P Selected Countries, 2017............................................................................................................... 94 Table 5.1. Accrual Rates in Vietnam are High Compared to Other Countries............................................ 116 Table 5.2. Official Retirement Ages in Selected Countries, 2016................................................................ 118 Table 5.3. Incentives to Retire Early are Strong in Vietnam........................................................................ 118  ension Contribution Rates in the East Asia and Pacific and Latin America Regions, Table 5.4. P Latest Year in Percent.................................................................................................................. 119 Table 5.5. Poverty Impact of Hypothetical Social Pension in Vietnam...................................................... 124 Table 5.6. Baseline and Reform Scenarios Modeled in Figure 5.13........................................................... 131 Table 6.1. Top Ten Causes of Disease Burden in Vietnam, 1990-2017...................................................... 144 Table 7.1. Constitutional Provisions on the Rights of Older Persons in Vietnam...................................... 191 Table 7.2. Advantages and Disadvantages of Different Financing Approaches to Aged Care................. 212 List of Figures Figure 1.1. Vietnam: Demographic Projections, 1950-2100*........................................................................ 14 Figure 1.2. Vietnam: Total Fertility Rate......................................................................................................... 15 Figure 1.3. Vietnam: Population Projections, 2014-2049.............................................................................. 17 Figure 1.4. Vietnam: Projected Proportion of “Oldest Old” (80 Years Old and Older) Among Population Aged 60 Years Old and Older, 1979-2049....................................................................................................... 17 Figure 1.5. Vietnam: Projection of Elderly Share of the Population, Urban and Rural Areas, 2014-2049... 18 VIETNAM: ADAPTING TO AN AGING SOCIETY vii Figure 1.6. Vietnam: Projection of Aging Index, by Region, 2010-2035....................................................... 19 Figure 2.1. Vietnam: Poverty Rates, 1993-2014............................................................................................. 23 Figure 2.2. Vietnam: Poverty Rates by Age Group and Urban vs. Rural Areas, 2010-2016......................... 24 Figure 2.3. Vietnam: Economic Class by Cohort and Age Group in Urban Areas, 2010-2016.................... 26 Figure 2.4. Vietnam: Economic Class in Rural Areas by Cohort and Age Group, 2010-2016..................... 26 Figure 2.5. Vietnam: Economic Mobility in Urban Areas, 2014-2016........................................................... 27 Figure 2.6. Vietnam: Economic Mobility in Rural Areas, 2014-2016............................................................. 28 Figure 2.7. Vietnam: Living Conditions Indicators by 2010 Cohort in Urban Areas, 2010 vs. 2016........... 29 Figure 2.8. Vietnam: Trends in Nonmonetary Welfare Indicators by Age Group and Cohort, 2010-2016......31 Figure 2.9. Vietnam: Education Attainment by Age Group in Rural and Urban Areas, 2016....................... 32 Figure 2.10. Vietnam: Tertiary Completion Rates by Age Group and Cohort, 2010-2016........................... 33 Figure 2.11. Vietnam: Employment Share in Urban and Rural Areas, 2016................................................. 34 Figure 2.12. Vietnam: Gender Disparities in Labor Market Outcomes by Age............................................. 35 Figure 2.13. Vietnam: Men’s vs. Women’s Reasons for Not Working, by Age.............................................. 36 Figure 2.14. Vietnam: Retirement-Age Worker Employment Trends, 2016.................................................. 37 Figure 2.15. Vietnam: Composition of Income by Cohort in Urban and Rural Areas, 2016........................ 38  ietnam: Living Arrangements Among the Elderly, 65-79 Years Old and 80 Years Old and Figure 2.16. V Older, Urban Areas, 2010-2016................................................................................................... 39  ietnam: Living Arrangements Among the Elderly, 65-79 Years Old and 80 Years Old and Figure 2.17. V Older, Rural Areas, 2010-2016.................................................................................................... 40  ietnam: Access to at Least One Social Assistance Program (Broad*) by Age Group and Figure 2.18. V Cohort 2010-2016....................................................................................................................... 42 Figure 2.19. Vietnam: Access to Social Health Insurance by Age Group and Cohort, 2010-2016............. 43 Figure 2.20. Vietnam: Access to Contributory Pension Programs by Age Group and Cohort, 2010-2016....44 Figure 3.1. Productivity and Labor Force Growth, Selected Countries......................................................... 50 Figure 3.2. Vietnam: Average Labor Force Growth........................................................................................ 50 Figure 3.3. Vietnam: Projected GDP Growth Rate, in Percent, by Scenario, 2019–2050............................ 51  ecomposition of 2018 GDP per Capita into Product of Employment Rate, Labor Force Share Figure 3.4. D of Population, GDP per Employed Worker (Labor Productivity), Selected Countries................ 53 Figure 3.5. Vietnam: Productivity by Ownership............................................................................................ 54 viii VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 3.6. Vietnam: Productivity by Sectors................................................................................................. 54 Figure 3.7. Vietnam: Coverage Rates for Social Programs, Projections...................................................... 58  ietnam: Health Expenditures for the Elderly Population, Additional Fiscal Costs Figure 3.8. V (Percent of GDP), by Scenario (2020–2050)............................................................................... 59  ietnam: Health Expenditures for the Non-Elderly, Additional Fiscal Costs (Percent of GDP), Figure 3.9. V by Scenario (2020–2050)............................................................................................................. 60  ietnam: Primary Education Expenditures, Additional Fiscal Costs (Percent of GDP), Figure 3.10. V by Scenario (2020–2050)........................................................................................................... 61  ietnam: Secondary Education Expenditures, Additional Fiscal Costs (Percent of GDP), Figure 3.11. V by Scenario (2020–2050)........................................................................................................... 61  ietnam: Tertiary Education Expenditures, Additional Fiscal Costs (Percent of GDP), Figure 3.12. V by Scenario (2020–2050)........................................................................................................... 62  ietnam: Expenditures on Age-Related Social Assistance Programs, Figure 3.13. V Additional Fiscal Costs (Percent of GDP), by Scenario (2020–2050)..................................... 63 Figure 3.14. Vietnam: Aggregate Age-Related Fiscal Costs, by Cost Driver (Percent of GDP)................... 64 Figure 3.15. Vietnam: Aggregate Age-Related Fiscal Costs, by Social Program (Percent of GDP)............ 65  ietnam: Distribution of Education Across the Working Population, Figure 4.1. V by Cohort and Total, 2017............................................................................................................. 76 Figure 4.2. Vietnam: Returns to Education, 2011-2014................................................................................. 77 Figure 4.3. Vietnam: Employment Share in Urban Areas, 2010 and 2016.................................................... 78 Figure 4.4. Vietnam: Job Growth Trends by Sector and Ownership............................................................. 79 Figure 4.5. Vietnam: Top Rural Non-Agricultural Jobs, 2016 (in Percent).................................................... 80  ietnam: Trends in Rural Wage Jobs by Share of Rural Employment and Figure 4.6. V Sector-Specific Wages, 2013-2018.............................................................................................. 80 Figure 4.7. Vietnam: Employment Share in Rural Areas, 2010 and 2016..................................................... 81 Figure 4.8. Vietnam: Growth in Employment by Occupation, 2013-2015..................................................... 83 Figure 4.9. Vietnam: Gender Disparity in Monthly Wages by Age................................................................. 84 Figure 4.10. Windows of Opportunity in Workforce Skills Development...................................................... 90  odel for Transition of Student Financing Results-Based and Figure 4.11. M then Demand-Based System...................................................................................................... 96 Figure 5.1. Vietnam’s Pension Coverage Gap.............................................................................................. 114 Figure 5.2. Pension Coverage in Vietnam is in Line with Global Patterns.................................................. 115 Figure 5.3. Major Differences in Replacement Rates for Public and Private Sector Workers.................. 116 VIETNAM: ADAPTING TO AN AGING SOCIETY ix Figure 5.4. Life Expectancy at Retirement Age, Vietnam and Selected Countries Compared.................. 117 Figure 5.5. Public Pension Spending as a Share of GDP, Selected Asian Countries Circa 2015.............. 120 Figure 5.6. Pension Spending in Vietnam, Taking into Account Demographic Aging............................... 121 Figure 5.7. Social Pensions in Vietnam Cover Few and Have Low Benefits.............................................. 121 Figure 5.8. Incidence of Social Pension Receipt by Age of Household Member, 2010-2016................... 122 Figure 5.9. Actual Versus Required Contribution Rates for Public Pension Schemes.............................. 127 Figure 5.10. Project Number of Contributors and Pensioners in VSS 2019-2080..................................... 128 Figure 5.11. Projected Spending, Revenues, and Deficits in VSS 2019-2080............................................ 129 Figure 5.12. Contribution Rates Across Countries Compared.................................................................... 130 Figure 5.13. Projection of Pension Expenditure (Surplus/Deficit) Over Time............................................ 131 Figure 5.14. Alternative Approaches to Wider Financial Protection Coverage for the Elderly.................. 135 Figure 6.1. Burden of Disease as Percentage of DALYs, 1990-2017.......................................................... 143 Figure 6.2. Age and Sex Distribution of Burden of Disease by Broad Cause, Vietnam 2017.................... 144 Figure 6.3. DALYs within NCDS by Age Group, Vietnam 2017.................................................................... 145 Figure 6.4. Top 10 Causes of BOD Among People Age 65 and Older, Vietnam 2017............................... 146  ge-Sex Distribution of Broad Risk Factor Categories for Burden of Disease, Figure 6.5. A Vietnam 2017.............................................................................................................................. 147 Top 10 Risk Factors for Burden of Disease of Population under Age 65 and Age 65 And Figure 6.6.  Older, DALYs, Vietnam 2017........................................................................................................ 148 Figure 6.7. Disability Prevalence by Broad Age Group Among Adults, Vietnam 2016.............................. 150 Figure 6.8. Structure of Health Service Delivery in Vietnam....................................................................... 151 Figure 6.9. Rate of Forgoing Care When Facing Severe Illness by Age Group, Vietnam 2016................. 154 Figure 6.10. Healthcare Service Utilization by Living Standards Quintile, Vietnam 2016......................... 154  igh and Increasing Share in the Use of Hospital Care for Outpatient Visits, Figure 6.11. H Vietnam 2004-2016................................................................................................................... 155 Figure 6.12. Specialist and Primary Healthcare (PHC) Service Utilization, Vietnam 2016....................... 156 Figure 6.13. Average Visits per 100 Population by Type of Facility and Type of Care, Vietnam 2016..... 157 nternational Comparison of Share of GDP Spent on Health and Share of Figure 6.14. I Government Expenditure Spent on Health, 2016.................................................................... 158 nternational Comparison of Public Versus Private Sources of Figure 6.15. I Current Health Expenditure, 2016............................................................................................ 158 x VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 6.16. Trend in Current Health Expenditure as a Share of GDP, Vietnam 2000-16........................... 159 Figure 6.17. Trends in Sources of Current Health Expenditure, Vietnam 2000-2016................................ 160 Figure 6.18. Trends in Sources of SHI Revenues, Vietnam 2000–2016.................................................... 161 Figure 6.19. Trends in SHI Revenues and Expenditures per Member, Vietnam 2010-2017...................... 162 Figure 6.20. Health Insurance Coverage Trends, 2000-2016...................................................................... 163 Figure 6.21. Coverage of Health Insurance by Health Insurance Type, 2016............................................ 164 Figure 6.22. Level of Out-Of-Pocket Spending on Health by Wealth Quintile, 2016................................... 165 Figure 6.23. Catastrophic and Impoverishing Health Spending, 1992-2016.............................................. 166 Figure 6.24. OOP Spending for Inpatient and Outpatient Care by Age Group, Vietnam 2016.................. 170 Figure 6.25. Differences in OOP or Health Care by Age and Insurance Status, Vietnam 2016................ 171 Figure 6.26. Vision of People-Centered Integrated Health Care to Support Healthy Aging...................... 177 Figure 7.1. Vietnam: Main Caregivers of the Elderly by Age Group and Gender, 2018.............................. 189 Figure 7.2. Vietnam: the Landscape of Elderly Care Provision................................................................... 195  ietnam: Mechanism for Establishment of Residential Elderly Care Facilities Figure 7.3. V (Public, Private Enterprise, Charity)............................................................................................ 200 Figure 7.4. Vietnam: Price for Residential Long-Term Care........................................................................ 202 Figure 7.5. Vietnam: Average Health Costs Paid by Elderly, by Health Insurance Coverage, 2014.......... 202 Figure 7.6. Vietnam: Elderly Care Workforce, Paid vs Unpaid, and Formal vs Informal............................ 203 List of Boxes Box 1.1. Key Definitions and Assumptions.................................................................................................... 13 Box 3.1. Transitioning Out of Aid and the End of the Demographic Dividend.............................................. 55 Box 4.1. The Myth of Less Productive Older Workers................................................................................... 72 Box 4.2. Skills for Future Workforces............................................................................................................. 91  eforming Vietnam’s Nationally Targeted Programs to Close the Gaps in Human Capital Box 4.3. R Disparities for Ethic Minorities......................................................................................................... 92 Box 4.4. Aging, Technology, and Labor Market.............................................................................................. 97 Box 4.5. Seniority Wage Systems................................................................................................................... 98 Box 4.6. The Myth of “Crowding Out”............................................................................................................. 99 VIETNAM: ADAPTING TO AN AGING SOCIETY xi  ermany’s Model for Ergonomics and Adaptive Technology in the Adaptive Technology In Box 4.7. G The Workplace................................................................................................................................... 99 Box 4.8. Adapting Learning Programs for Adult Learners.......................................................................... 101 Box 5.1. Chile’s Solidarity Pillar: Integrating Non-Contributory Pensions................................................... 124 Box 5.2. Achieving Universal Coverage: Lessons From Health Insurance................................................. 126 Box 6.1. Healthcare Provisions in the Law on the Elderly (2009)............................................................... 173 Box 6.2. The Vietnam Health Program - Measures to Address Health Care of Older Persons................. 175 Box 7.1. What is Elderly Care?....................................................................................................................... 188  Socialization” in Vietnam: Policy and Practice for the Provision of and Payment for Box 7.2. “ Essential Public Services................................................................................................................ 192 Box 7.3. Intergenerational Self-Help Club (ISHC)........................................................................................ 197 Box 7.4. Private Nursing Home Models in Vietnam and Japan.................................................................. 199 Box 7.5. Private and Foreign Companies in the Elderly Care Sector in China............................................ 207  easibility and Use of Private Insurance to Finance Long Term Care: Box 7.6. F Review of Experiences.................................................................................................................... 212 xii VIETNAM: ADAPTING TO AN AGING SOCIETY List of Acronyms ACFI Aged Care Funding Instrument HCI Human Capital Index ADB Asian Development Bank HCMC Ho Chi Minh City ADL Activities of daily living HIC High-income country AI Artificial intelligence IADLs Instrumental activities of daily living AI Aging index ICT Information and communication technology ALMP Active Labor Market Policy IHME Institute for Health Metrics and Evaluation ASEAN Association of Southeast Asian ILO International Labor Organization Nations AT Assistive technologies ILSSA Institute of Labour Science and Social Affairs BMI Body mass index ICT Information and communication technology BOD Burden of disease IHME Institute for Health Metrics and Evaluation CCT Conditional cash transfer IMF International Monetary Fund CHE Current health expenditure IMR Infant mortality rate CHS Commune health station InterRAI International Resident Assessment Instrument CIT Corporate income taxes IPD Implicit pension debt CPI Consumer Price Index ISHC Intergenerational Self-Help Club CPR Cardiopulmonary resuscitation JAHR Joint Annual Health Review DALY Disability-adjusted life years JICA Japan International Cooperation Agency DB Defined benefit LFS Labour Force Survey DFAT Department of Foreign Affairs and LIC Low-income country Trade (Australia) DOLISA Department of Labor, Invalids and LLL Lifelong learning Social Affairs EAP East Asia and Pacific LMICs Low- and middle-income countries ECA Europe and Central Asia LTC Long-term care EPL Employment protection legislation LTGM Long-term Growth Model FDI Foreign direct investment MCG Management Consulting Group FINDEX Global Financial Inclusion Database MDB Multilateral development bank (World Bank) FSA/FSAM Financial Sustainability Analysis MDC Matching defined contribution Model G20 Group of Twenty MICS Multiple Indicator Cluster Survey VIETNAM: ADAPTING TO AN AGING SOCIETY xiii GBD Global Burden of Disease Study MOH Ministry of Health (Vietnam) GDP Gross domestic product MOLISA Ministry of Labor, Invalids, and Social Affairs (Vietnam) GSO General Statistics Office of Vietnam MOOC Massive open online course MPSARD Master Plan for Social Assistance TDR Total dependency ratio Reform and Development NCD Non-communicable diseases TFR Total fertility rate NGO Nongovernmental organization TVET Technical and vocational education and training NTP Nationally Targeted Program UHC Universal Health Coverage OADR Old age dependency ratio UN United Nations ODA Official development assistance UNFPA United Nations Population Fund OECD Organization for Economic UNICO Universal Health Coverage Study Cooperation and Development Series OOP Out-of-pocket USD United States Dollars PCIC People-centered integrated VAE Vietnam Association of the Elderly healthcare PHC Primary health care VAT Value-added tax PISA Program for International Student VHLSS Vietnam Household Living Assessment Standards Survey PPP Purchasing power parity VHWs Village health workers PROST Pension Reform Options Simulation VNAS Vietnam Aging Survey Toolkit (World Bank) ROK Republic of Korea VNCA Vietnam National Committee on Aging RR Replacement rate VND Vietnamese Dong RT Robot technologies VSS/VSSF Vietnam Social Security Fund SDGs Sustainable Development Goals VWU Vietnam Women’s Union SHA Social Health Insurance WB World Bank SI Social Insurance WDI World Development Indicators SMS Short message service WHO World Health Organization SOM Serviceable Obtainable Market YDR Youth dependency ratio SP Social protection YLD Years lived with disease/disability SRB Sex ratio at birth YLL Years of life lost SSB Sugar-sweetened beverage STEPS National Survey of Risk Factors for Non-Communicable Disease (Vietnam) xiv VIETNAM: ADAPTING TO AN AGING SOCIETY ACKNOWLEDGMENTS This report is part of a process of supporting the Government of Vietnam in developing policies and charting an implementation path to prepare for the aging of its society, led by the World Bank with significant contributions from JICA. The process included this report, a learning visit to Thailand to study Thai provision of health and social care for the elderly, and a series of workshops on various aspects of aging. The World Bank’s engagement was led by Elena Glinskaya, and JICA’s engagement was led by Nozomi Iwama. The Overview of this report was written by Elena Glinskaya and Annette De Kleine Feige. Chapter 1 was written by Lan Vu Thi, with inputs from Giang Thanh Long. Chapter 2 was written by Tien Hoang, Cuong Nguyen Viet, and Elena Glinskaya. Chapter 3 was written by Bradley Larson and Annette De Kleine Feige. Chapter 4 was written by Shonali Sen, drawing on inputs by Obert Pimhidzai. Chapter 5 was written by Robert Palacios. Chapter 6 was written by Sarah Bales and Emiko Masaki. Chapter 7 was written by Elena Glinskaya, Nga Nguyet Nguyen, and Shonali Sen. At various stages of report preparation, Deepak Mishra, Philip O’Keefe, Keiko Inoue, Obert Pimhidzai, Caryn Bredenkamp, Giang Tam Nguyen, Giang Thanh Long, Helle Buchhave, and Sharon Benzoni provided valuable inputs, comments, and suggestions. The report authors are particularly grateful to Shintaro Nakamura who continuously provided inputs, guidance, and advice on multiple aspects of this report. The peer reviewers are Xubei Luo and Ralph Van Doorn. Professor Eiji Tajika and Taichi Ono were engaged by JICA to serve as outside reviewers of the report and provided extensive comments on the macro-fiscal, pension, and elderly care chapters of the report. The report authors are very grateful to them. This report was prepared under the oversight of Philip O’Keefe, Daniel Dulitzky and Ousmane Dione. The team received valuable guidance at the later stages of report preparation from Carolyn Turk, Steffi Stallmeister and Christophe Lemiere. Nga Nguyet Nguyen spearheaded various interactions with the government and local partners, and Nga Thi Nguyen supported these interactions. Kyoko Takashima and Chu Xuan Hoa supported these interactions from the JICA side. Van Cam Nguyen, Hoa Thi Thanh Nguyen and Corinne Bernaldez provided outstanding logistical support. Various engagements by government counterparts with the World Bank was led by Mr. Nguyen Van Hoi, Director of Social Assistance Department; Mr. Dao Quang Vinh, Director of Institute of Labor Science and Social Affairs; and Ms. Le Minh Giang, Office Head of the Vietnam Aging Committee, Ministry of Labor- Invalids and Social Affairs. Ms. Bui Thai Quyen actively facilitated engagement from various government agencies and academy through technical meetings and workshops. VIETNAM: ADAPTING TO AN AGING SOCIETY xv EXECUTIVE SUMMARY Vietnam is a young country on the cusp of a While Vietnam currently enjoys a demographic dramatic aging of the population that is taking “window of opportunity,” this window is starting place at a faster pace and at an earlier level of to close as population aging accelerates. Vietnam development than most other countries in the has a young population, with a median age of 26 world. With falling fertility rates and rising life years, and its largest age cohort is between 20-34 expectancies, Vietnam became an aging society years old. The falling youth dependency ratio that in 2015 and is projected to become aged in 2035, started in the 1970s supported a rapid increase in making Vietnam one of the fastest-aging countries the working-age population and a decline in the in the world (World Bank 2016). Notably, it is overall dependency ratio. The demographic window going through this transition at an earlier stage of opportunity will remain open until 2042, but the of economic development and lower level of per working-age population share peaked in 2014 and capita income than other countries. Vietnam’s is projected to decline in the coming decades. The per capita income is only 40 percent of the global process of aging that already started is projected average, and it has long way to go to catch up with to accelerate (Figure 0.1 for data and definitions). its aspirational peers in the region and to achieve The number of older persons (65 years and older) upper middle-income status by 2035. The sheer reached 6.31 million (6.7 percent of the population) speed of Vietnam’s population aging means that in 2014, and projections under a medium-fertility Vietnam will have less time to adapt policies to a scenario show that by 2049, the number of older more aged society than many advanced economies persons will increase sharply to 19.6 million—more have had. than tripling compared to 2014—and will account for approximately 18.1 percent of the population. Figure 0.1 Vietnam: Key Demographic Indicators 110% 100% 90% Population Bonus 80% Lowdependency rate 70% (2007-2042) Aged 60% population Aging 50% 40% 30% 20% 10% 0% 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 00 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 21 0-14 (%) 15-64 (%) 65 or over (%) Dependency ratio Young Dependency ratio Old Dependency ratio (0-14) (65 or over) Notes: The total dependency ratio (TDR) is the ratio of the number of dependents 0 to 14 years of age and over the age of 65 to the total population 15 to 64 years of age. The demographic window of opportunity, also called the population bonus, describes a demographic situation in which the working- age population—between ages 15 and 64—is greater than that of the children and the elderly. Put differently, it is when the number of working-age people is double that of dependent people and the total dependency ratio is below 50 percent. An aging population is a population in which the elderly (65 years of age and above) account for 7 to 9.9 percent of the total. See Cowgill and Holmes (1970) (as quoted in Andrews and Philips, 2006). An aged population is a population in which the elderly account for 10 to 19.9 percent of the total. A population in which the elderly account for 20 to 29.9 percent of the total is called very aged, and a population in which the elderly account for more than 30 percent of the total is called hyper aged. Source: Authors, based on UN and GSO. VIETNAM: ADAPTING TO AN AGING SOCIETY 1 Though Vietnam’s favorable demographic in the dependency ratio, contributing an estimated window of opportunity is still open, this report about one-third of Vietnam’s growth during this argues it should take key actions with immediate period. Increases in productivity—supported by effect to prepare for a rapidly aging society. Our the far-reaching Doi Moi reforms—accounted for Long-term Growth Model projects that without the remaining two-thirds of the increase in GDP. reforms, long-term growth will slow down over During the period 1985-2018, per capita income the period 2020–2050 compared to the last 15 increased eight-fold in Vietnam, compared to only years by 0.9 percentage points, largely due to the 2.5-fold and 1.7-fold average increases in low- aging of Vietnamese society. While calling for and middle-income countries (LMICs) and high- immediate actions, this report promotes the view income countries (HICs), respectively. Vietnam’s that while aging brings challenges, good policies stellar growth record supported its graduation can mitigate—and in some cases even reverse— from a low-income country (LIC) to an LMIC in their effects. The report aims to help inform the 2011 and brought a remarkable decline in the government’s development strategy through prevalence of poverty—e.g., from a 52.9 percent an integrated narrative and policy options to poverty headcount of the total population in 1992 address the country’s most pressing development to 2 percent in 2016 (at USD 1.90/day PPP 2011 challenges in the face of a rapidly aging society. It international dollars). highlights the main challenges Vietnam faces as a result of its near-term demographic transition, and Growth and poverty reduction have been broad- also presents key reforms that the government based to-date, and between 2010 to 2016, older can already begin implementing to address these generations benefited the most relative to the challenges. The proposed policies discussed here other age groups from poverty reduction.1Absolute dovetail with existing policy dialogue and sectoral poverty has fallen sharply in Vietnam over the last engagement. Part I, Chapter 1 starts with a brief two decades and has benefited all generations. description of the demographic situation in Vietnam, Data from successive Vietnam Household Living while Chapter 2 describes current patterns and Standards Survey (VLHSS) rounds indicate that trends in key socioeconomic indicators (poverty, older generations benefited the most relative to welfare, labor market participation) across other age groups: while the national poverty rate different population cohorts. Chapter 3 builds on fell from 20.6 to 9.3 percent during 2010-2016, this analysis and describes the macro implications the rate among older people dropped even further, of aging, presenting model-based forecasts from 14.7 to 4.9 percent for those 65-69 years linking growth and fiscal trends with demographic old, from 18.6 to 6.7 for those 70-79 years old, trends and potential reform options. Part II then and from 23.3 to 8.5 percent for those age 80 and focuses on a few areas that are most affected as above.2 The more rapid decline in poverty among a consequence of rapid aging, and where tackling older groups compared with other age groups issues effectively will require strong cross-sectoral occurred in both urban and rural areas. Moreover, coordination and proper sequencing: the labor there is no evidence that other indicators of market (Chapter 4), pensions (Chapter 5), health living conditions in Vietnam are lagging for older (Chapter 6), and elderly care (Chapter 7). 1 Poverty and welfare analyses presented in this report are based on the 2010, 2012, 2014, and 2016 VHLSS. Poverty Growth, Demography, and Welfare rate is calculated based on the National GSO-WB definition of poverty line. Economic vulnerability is defined based on the international poverty line. Economically vulnerable Vietnam has achieved vibrant economic growth have per capita consumption between US$3.2-$5.5 per day, and poverty reduction over the past few decades, economically secure consume US$5.5-$15 per person per day, and middle-class live on more than US$15 per person thanks in large part to favorable demographic per day. See Chapter 2 and World Bank. 2018. Climbing the trends along with strong productivity growth. The Ladder: Poverty Reduction and Shared Prosperity in Vietnam. for further information. falling youth dependency ratio supported a rapid 2 World Bank. 2018. Climbing the Ladder: Poverty Reduction increase in the working-age population and a decline and Shared Prosperity in Vietnam. 2 VIETNAM: ADAPTING TO AN AGING SOCIETY groups. Access to piped water, improved toilets, the low starting base. For example, Vietnam’s labor and phones all improved both in urban and in productivity is low (estimated at $11,142 in 2011 rural areas. Other indicators also show improved PPP adjusted to 2018) compared to selected Asian living conditions and increased accumulation of countries (with an average productivity of $47,070 assets, a particularly important indicator because in 2011 PPP in the same period). older adults tend to spend down their assets and savings. Ownership of concrete or brick homes, air Productivity can be raised both by accelerating conditioners, washing machines, and computers the movement of workers from low to higher all increased for most age groups, while living area productivity sectors as well as through boosting also increased. human capital. Two out of five working Vietnamese toil in the relatively low-productivity agricultural Aging population, labor force, and GDP sector, but younger workers are less likely than their parents to work on farms. Output per worker Looking ahead, Vietnam’s labor force is projected in this sector is only about half that of the national to contract by almost one percent per annum average, suggesting considerable scope to boost over the next 3 decades, creating headwinds total GDP by shifting labor resources to higher to sustaining high economic growth rates. value-added sectors—a trend that is already The effect of population aging on GDP growth evident. Vietnam’s current employment structure is depends on how population aging affects the heavily biased toward sectors in which productivity size and productivity of the labor force, capital diminishes with age (such as construction and intensity and returns to capital, consumption, agriculture), but in the medium term, it is likely to and assets accumulation (Lee 2016). From 1990 change. Younger workers are now more likely than to 2018, almost 25 million Vietnamese reached older workers to be employed in sectors in which working age, translating into average annual labor productivity does not decline sharply with age and force growth of about 2.5 percent and an almost output per worker is higher (e.g., services and high doubling of Vietnam’s workforce. Over the decade value-added manufacturing). through 2018, the annual average real GDP growth rate of 6.2 percent reflected 0.9 percent growth in Evidence suggest Vietnam’s youth are already the labor force and 5.3 percent growth in output investing more in human capital than their elders. per worker. While the working-age population and While Vietnam appears to have relatively low overall labor force are projected to continue to expand in percentages of well-trained labor, educational absolute numbers for about two decades, the rate achievement differs considerably across age of increase is projected to decelerate to a markedly groups. The 2017 Vietnam labor force survey data lower pace, to about half of the recent historical show that 77 percent of the labor force (ages 15- average. Indeed, relative to aggregate population, 64) had no more than a lower secondary education, the size of the working-age population has already and the share of the workforce with university peaked. education or higher was only 9.6 percent.3 However, such low percentages of well-trained labor are Increased productivity and labor force largely the consequence of older segments of the participation can help to mitigate the adverse workforce having left the education system some impacts of a shrinking working-age population. years ago. Younger workers, by contrast, have Vietnam is currently benefiting from a relatively considerably higher rates of university degrees large labor force as a share of the total population and lower rates of less than secondary degrees (70 percent) and a relatively high participation rate (Demombynes and Testaverde 2018), so the labor (84 percent). While Vietnam has experienced rapid force’s level of training is changing rapidly under productivity growth over the past two decades, the more modern education system. labor productivity is still relatively low because of 3 GSO 2018, Vietnam Labor Force Survey. VIETNAM: ADAPTING TO AN AGING SOCIETY 3 Encouraging people to continue working even (e.g. favorable increase in human capital) are when they grow older can also help compensate not enough to overcome the drag exerted by the for the shrinking labor force. While the overall shrinking labor force. labor force participation is high, many in urban areas withdraw from work relatively early, and in Projections based on the Fiscal Sustainability case of urban women in formal jobs retirement Analysis model indicate that aging and the is very early. Availability of a pension and (and evolution of associated government programs its generosity) has a strong association with could potentially add 1.4–4.6 percent of GDP in lower labor force participation at older age and, additional government expenditures. To analyze therefore, an increase in retirement age could help possible impacts of aging on public expenditures significantly extend productive working lives of on education (disaggregated by primary, urban people and mitigate the impacts of aging, secondary and tertiary), pensions, healthcare, provided that complementary policies in the and social protection, the FSA model considered areas of child and elderly care are put in place. three scenarios, which indicate that Vietnam’s Individual labor market behaviors tend to adjust aging society—and the evolution of government to the new reality of a longer life expectancy (Lee programs to accommodate it—are projected and Mason 2017), and the same is likely true for to add 1.4 – 4.6 percent of GDP in additional Vietnamese workers also. If increased longevity expenditure.4 For example, in the next three has been achieved by adding healthy years, as the decades, annual expenditure for healthcare for the life cycle lengthens, individuals might increase elderly is projected to increase four- to five-fold as their participation in employment and retire later. a share of the economy. Spending on education They can save more or invest more in education is also expected to increase, with the expansion as returns to education increase, with positive of coverage and improvements in service quality repercussions on productivity. Policy interventions driving future growth in fiscal costs. Vietnam’s will need to respond to the structural change extra-budgetary contributory pension, VSSF, is induced by population aging to stimulate positive projected to become cash-flow negative between behavioral responses and prevent potentially 2028 and 2034, depending on the scenario, and adverse impacts on socioeconomic well-being. exhaust its reserves between 2036 and 2042. An inability to balance the various fiscal needs could Model-based projections of long-term GDP growth translate into rising deficits and debts—putting and public finances upward pressures on interest rates, potentially crowding out much-needed domestic and The report uses two WBG modeling frameworks foreign investment and threatening the country’s to generate various scenarios to analyze potential macroeconomic stability. impacts of aging trends in macroeconomic growth and the fiscal budget: the Long-Term Growth Model The impacts of an aging population will be felt in (LTGM) and the Fiscal Sustainability Analysis terms of both fiscal revenues and expenditures, model (FSA), respectively. and pressure public finances in the absence of timely reforms. As an increasing share of the The World Bank’s Long-term Growth Model population enters retirement—and hence no longer (LTGM) projects that long-term growth will slow earns an income—there will be a commensurate by 0.9 percentage points over the period 2020– 2050 compared with the last 15 years, due in 4 The projections presented in this report do not take into account the impacts of the global COVID-19 health crisis, large part to population aging. The main driver of which hit during report preparation, and which could have the slowdown is Vietnam’s shrinking labor force. implications for Vietnam’s GDP growth going forward. For more details on the possible fiscal impact of the COVID Long-term growth falls under each of the other pandemic, please see the WBG COVID-19 Policy Update scenarios considered: this is because the impacts (Morriset et al. 2020. Taking Stock: What will be the New Normal for Vietnam? - The Economic Impact of COVID-19 of even the most favorable scenario considered (English). Vietnam Taking Stock Washington, DC.) 4 VIETNAM: ADAPTING TO AN AGING SOCIETY impact of revenues generated from personal what will drive Vietnam’s comparative advantage. income tax. An aging population will also place Other developmental challenges include the increased demands on public (and private) health- need to expand social protection, rising demand care and pension systems. Additionally, with a for human capital development, infrastructure, need to boost productivity, there will be pressures climate change action, and ongoing modernization to increase government expenditures on education of Vietnam’s institutions. As one of the most open and infrastructure—exacerbated by Vietnam’s economies in the world for trade, Vietnam also status as a developing country, vulnerable to the faces headwinds currently tied to a slowing global impacts of climate change. Combined, these economy, along with rapidly evolving shifts in factors would add to existing strains on Vietnam’s global value chains and the growing digitization of public finances. production. Managing Aging Supporting productivity outturns in Vietnam— including through policies supporting inter- The Government of Vietnam has stated the sectoral employment shifts—will be critical for ambitious goal of achieving HIC status by 2045, sustaining high growth in the face of a rapidly and with the country’s current demographic aging population. The modeling exercises show trajectory, Vietnam faces a “now or never” policy that with a waning of the demographic dividend, challenge. Vietnam already faces challenges future growth trends will increasingly depend on associated with being an LMIC, such as avoiding human capital and productivity growth. The biggest the “middle-income trap.” Many countries fall potential for boosting productivity is from inter- into the so-called middle-income trap, in which sectoral employment shifts, such as the movement many years of strong growth are followed by an of labor from agriculture to higher value-added extended period of relatively stagnant per-capita sectors in export-oriented manufacturing and income growth. While each country faces unique services which is already underway. To support challenges, one common characteristic is the this reallocation, a broad set of policies is needed difficulty in transitioning from input-driven growth across a wide range of policy domains. (such as labor supply), with limited areas of output, to a more broadly-based output structure, Rising labor productivity will require significant driven by increased competitiveness and higher investment in human capital and a supporting domestic value-added and powered by domestic policy and regulatory environment. In addition to consumption. Increased productivity will require a stable macro-economic environment, investment greater investments in physical and human capital and productivity would benefit from improvements from the public sector as well as domestic private to financial intermediation and the business and foreign investors.5 Currently, low wages environment. The extent to which rising productivity attract foreign investment, but as wages increase growth can buffer the Vietnamese economy from with rising incomes (and productivity), it is unclear demographic headwinds—and the policies needed to support productivity growth—will be some of the 5 The recent Vibrant Vietnam report highlights 4 key areas for most important macroeconomic questions facing improving the pace and quality of Vietnam’s growth to take the country in the medium to long term. advantage of the remaining demographic dividend: (i) better allocation of resources from low to highly productive firms and removal of obstacles in the business environment; Faced with a rapidly aging society, Vietnam (ii) improving the efficiency of spending on infrastructure needs to continue investing in people along the and broadening its financing; (iii) “greening the economy” through improved pricing mechanisms for public services lifecycle to address emerging needs. Vietnam’s to cover environmental externalities, as well as direct track record of investing in the human capital of government interventions (i.e. better coordination across jurisdictions, adopting explicit rules for environmental its people is remarkable, but human capital gaps management, and making information and data available continue to persist across ethnic groups and for decision-making processes),and (iv) is upgrading skills and boosting opportunities for jobs for all. between rural and urban populations. Investments VIETNAM: ADAPTING TO AN AGING SOCIETY 5 in the earliest years of life are often most critical Lifestyle changes will increasingly be needed to and cost-effective, and Vietnam can take the promote healthy, active, and dignified aging. Some opportunity to close human capital gaps among key actions in this area include effectiveness in the young with effective nutrition interventions tobacco control, interventions to ensure a healthy and behavioral changes through conditional cash diet to curtail obesity, and prevention of excessive transfers (CCTs). Investing in human capital does alcohol consumption. To ensure dignified aging, it not stop at youth, and continuous lifelong learning will be vital to take the approach of “aging in place,” has a special place in the arsenal of labor market most urgently in urban planning and development. policies in Vietnam, as obsolete skills continue to Aging in place—as opposed to people moving to pose a major problem for the Vietnamese labor institutional settings when they become older force. Technology will play an important role in and frail and require care—is both sustainable extending productive working lives. It will also be and contributes to quality of life. As Vietnam is important to improve labor market outcomes of now planning the footprint of many cities, it is groups of workers who are not faring as well as important to design this footprint to allow for aging the majority in the labor market—notably, ethnic in place. Numerous international good practices minorities and both younger and older individuals can provide useful examples in this regard.6 in the rural workforce. Given the rapid pace of aging and at such a relatively The most economically and demographically low-income, Vietnam will need to intensify efforts advanced countries employ a mix of strategies to strengthen its service delivery while meeting to extend the productive working lives of older rising demands. Vietnam needs a major shift in workers who wish to work. Such initiatives include its pension policy to expand the pension system job search services focused particularly on older to cover a majority of the population, including workers, vouchers for employers who hire older those in the informal sector, which will be possible workers, retraining schemes targeted at those only through a diversified system. Its health care whose formal education took place significantly system requires a fundamental reorientation far in the past, provision of wage subsidies that too, shifting toward more emphasis on primary effectively lower the cost of employing older care and reduced reliance on hospital care while workers, and subsidies or grants to encourage at the same time building stronger coordination training to raise older workers’ productivity and help among health providers and strengthening health them acquire new skills. A range of measures at the promotion and illness prevention measures. At firm level can also help, such as: reducing seniority- the same time Vietnam will need to respond to based wage setting mechanisms (which make the increasing demand for elderly care, as the older workers less attractive and are typically not traditional informal family-based (familial) care linked to worker productivity); promoting flexible model is increasingly strained by urbanization, work arrangements such as part-time, flexi-work, migration and demography, by developing its own and job sharing; and introducing adjustments in the vision for formal provision and financing, which workplace to make them more suited to the physical will most certainly have to rely on private providers capacity of older workers, which can be very cost- under government stewardship. effective. Extending productive working lives has often required comprehensive interventions in many areas, with technology playing an important role. Another reform for extending working life in the formal sector is appropriate retirement reform, notably gradually increasing the retirement age and equalizing it for men and women. 6 See, for example, Center for Policy on Ageing (2016); Epstein, Ann S. and Boisvert, Christine (2006); and Garcia, Sergio and Marti, Pablo (2014). 6 VIETNAM: ADAPTING TO AN AGING SOCIETY The table below summarizes some key policy recommendations made in this report to increase labor productivity and improve public service delivery so Vietnam can take advantage of the remaining window of opportunity and prepare for its aging society. Summary of policy recommendations Objective Action Enhancing Growth Human capital Improve human capital among the Ensure early childhood nutrition and access to health services and young and close the gaps between sanitation. ethnic groups and urban and rural Strengthen and expand conditional cash transfers combined with populations. behavioral change counseling to stimulate demand for maternal and child health services. Promote skills development for ethnic minorities, including entrepreneurship skills, technical skills for wage employment, and life and soft skills to promote the pursuit of livelihoods. Encourage labor market transitions Provide skills development for workers to move up the rural value chain to sectors that show increasing into the knowledge economy. productivity over the lifespan. Support the rural-urban migration of ethnic minorities by reducing costs. Build worker skills for today’s and Increase resources to tertiary education with results-based targets for tomorrow’s jobs. improvements in access, equity, relevance, research and innovation, and technology transfer. Allow equal access to private tertiary education institutions to compete for government-funded service and/or research contracts. Establish the institutional conditions for a well-regulated market of private and public training services providers with the close cooperation of employers. Incentivize and facilitate expanded on-the-job training and individual learning schemes. Employment policies Facilitate the labor force participation Promote life-long learning and retraining schemes targeted at those with of older workers. formal education significantly in the past. Pilot subsidies and grants to encourage training to raise older workers’ productivity and help them acquire new skills. Incentivize firms to promote flexible work arrangements and to introduce adjustments in the workplace that make them more suited to the physical capacity of older workers. Develop job search services focused on older workers. Reform retirement and hiring policies Increase the retirement age and equalize it for men and women. to lengthen productive working lives. Ensure the enforcement of laws preventing discrimination against older workers. Deploy awareness campaigns to address negative attitudes regarding the capacity of older workers and use examples of initiatives in other countries that provide tools and information for managing an older workforce. Close gender gaps in labor market Implement policies to reduce the burdens of childcare and elderly care for outcomes. working-age women by improving/subsidizing childcare and elder care services. VIETNAM: ADAPTING TO AN AGING SOCIETY 7 Objective Action Support a segmented rural workforce. Continue agricultural restructuring to maximize productivity and returns for farming. Extend and support Intergenerational Self-Help Clubs to increase economic development and income generation among older workers in rural communities. Other productivity-enhancing policies Integrate technology into multiple Encourage growth of biotech to automate diagnosis, surgery, and solutions for aging labor markets and therapies. improved growth. Automate and increase use of AI, machine learning, and cloud computing in the workplace. Transform labor market function via remote and virtual education/ training, cloud-based matching services, and ergonomic/human function aiding devices in workplace. Build on the post-COVID “new normal” of using technology in work. Support the boom in e-commerce by enhancing digital payments. Promote a healthy workforce. Strengthen tobacco control policies, including large relative cigarette taxes and comprehensive smoke-free air laws in indoor spaces. Encourage consumer demand for healthy food with complementary policies in trade, food, and agricultural policies to incentivize producers and retailers; tight regulation of good marketing; and clear standards of healthy dietary practice throughout the life span. Prevent obesity by taxing sugar-sweetened beverages and ultra-processed foods and requiring labeling and nutrition profiling. Reduce the burden of disease from alcohol consumption by raising prices via excise taxes and other pricing policies. Improving efficiency of fiscal spending Pensions Increase pension coverage to provide Gradually lower the age for social pension eligibility to 70 years of age. an income floor for those without contributory pensions. Reform the formal sector contributory Gradually increase the official retirement age and close the retirement age system. gap between men and women, beginning as soon as possible. Reduce financial incentives for early retirement by applying an actuarially fair reduction (e.g., 6 percent per year). Equalize benefits between public and private sector workers on a more accelerated basis. Make rules for indexation and valorization of past wages more predictable by automating price indexation. Move from discretionary or ad hoc indexation to automatic price indexation of pensions. Reform the existing matching Create mechanisms for informal workers to interact with the system contributory scheme to better suit conveniently, with a focus on digital solutions. the needs of informal workers Provide stronger financial incentives for workers to contribute toward and increase coverage of social their pensions. insurance. Simplify contribution rules to accommodate irregular incomes. Design the system to include behavioral nudges to encourage participation. Rely on common platforms to identify participants and manage their accounts and track them throughout their lives. 8 VIETNAM: ADAPTING TO AN AGING SOCIETY Objective Action Health Prioritize and support intersectoral Ensure policy linkages between health care and other policies affecting cooperation. the health of older persons. Emphasize primary care and reduce Scale up effective models of primary health care. reliance on hospital care. Create essential primary care packages focused on patient needs including curative, preventative, social, and financial interventions. Integrate and streamline the healthcare delivery system. Build the capacity of health workers and caregivers to more effectively respond to the needs of older persons. Increase the scale and effectiveness of public health communication to increase health literacy. Develop more effective disease screening and primary health care, including clear technical guidance accounting for cost-effectiveness and targeting high-risk groups. Improve health financing. Strengthen the legal and regulatory framework for PPPs. Improve accountability and oversight mechanisms. Shift budget allocation mechanisms and health worker remuneration. Lower financial barriers to care for older workers. Prioritize financing decisions based on data and provide a guaranteed voice for affected communities. Empower individuals and households Target reforms to promote healthy choices. to ensure their health. Implement programs encouraging the population to seek early care for health programs. Increase knowledge of disease symptoms. Emphasize participation in screenings and health checkups. Aid caregivers to increase their knowledge of the needs of aging individuals. Elderly Care Promote “aging in place” in urban Draw on international best practices to design cities that allow for aging planning and development. in place. Build a well-functioning market for Develop a strategy for aged long-term care (LTC) and a plan to diversify elderly care services. types of available care (including home-based, community-based, and institutional). Start developing sustainable financing mechanisms. Strengthen government regulatory and oversight capacity. Encourage private sector participation by both opening existing welfare homes to self-paying patients and developing concessional arrangements for use of government buildings. Prepare a well-trained cadre of volunteers and professionals to staff and manage the LTC delivery network. Engage in a continuous dialogue on government responsibilities. Help ensure for realistic choices for Continue developing ISHCs and support community-based care. families in care decisions for elderly Start piloting provision of subsidies for care to eligible beneficiaries with persons. the option of respite care. VIETNAM: ADAPTING TO AN AGING SOCIETY 9 PART I. Part I of this report has three chapters which set forth the main trends and implications of aging in Vietnam. It starts with a brief description of the demographic situation in Chapter 1, characterizing the dual factors of lower fertility and higher life expectancy driving the trends that will soon make Vietnam the fastest-aging country in the world and the implications of these trends along the lines of age group, gender, geography and ethnicity. It also dives into other important patterns that influence demography, such as the prominence of internal migration, demographic trends of non-majority ethnic groups, and life expectancy outcomes of males versus females. Chapter 2 describes current patterns and trends in key socioeconomic indicators (poverty, welfare, economic mobility, education, labor market participation) across different cohorts of the population, highlighting differences between older, middle-aged and younger groups. It examines the distribution of benefits from the country’s recent economic growth along age group and demographic lines and characterizes the sources of support for the elderly population. Chapter 3 build on these trends and patterns and describes the macroeconomic implications of aging, presenting model-based forecasts that link growth and fiscal trends with demographic trends and potential reform options. In particular, the situation of Vietnam as a middle-income country entering a phase of rapid aging is characterized in terms of labor productivity and the potential consequences of projected fiscal commitments. A policy approach that best positions Vietnam for the future with an aging workforce is then briefly described. VIETNAM: ADAPTING TO AN AGING SOCIETY 11 Chapter 1: VIETNAM’S DEMO- GRAPHIC TRANSITION 1.1. Introduction and Summary 1.2. The “demographic window of opportunity” and patterns and drivers Vietnam now is experiencing the “demographic of aging in Vietnam window of opportunity,” but it will close in two decades. Aging will be fast and severe. Not only Vietnam has been experiencing a demographic will the proportion of elderly in the population window of opportunity since 2007, which it is and the numbers of the elderly increase, but the projected to enjoy until 2042 (Box 1.1). The prime-aged population will be older, and the elderly total dependency ratio (TDR) in Vietnam started population will be older. Increasingly, the elderly will declining in late 1970s and has been declining be living in rural areas and in the poor provinces. rapidly, dropping from 0.78 in 1989 to 0.64 in 1999 And, increasingly, children will be born in the poor and to 0.45 in 2009. The decline has been driven provinces. by the decline in youth dependency ratio (YDR). The total dependency ratio reached its minimum The age structure of the ethnic minorities groups between 2009 and 2016 and started to increase. is considerably more balanced compared with the This increase is driven by the increase in Vietnam’s majority group. This means that ethnic minorities old age dependency ratio (OADR). OADR is will be overrepresented among the young and projected to double from 0.11 in 2019 to 0.22 in prime-aged population for years to come. 2039. At the same time, the YDR is projected to continue its half-century-long decline. These trends Women will continue being overrepresented mean that the rapid increase in the dependency among the elderly, although these differences ratio toward the middle of the 21st century is will somewhat diminish over time. Women (girls) due to an increase in the proportion of elderly, in are increasingly underrepresented in the age 0-4 contrast to the rapid increase in the dependency population group, which is driven by the differences ratio in middle of the 20th century which was due in sex ratio at birth (SRB). This is a very worrisome to an increase in the share of youth. trend and to reverse it requires concerted action on the part of all stakeholders. The share of prime-age adults peaked in 2014 and is now declining as well, although at a rate slower Overall, aging is a major population trend in than the rate of decline in the youth population. Vietnam, which together with urbanization and As an example of these demographic changes, in high internal mobility will continue to reshape the 1990, there were 0.7 people under the age of 15 and society for years to come. over the age of 64 for every person 15 to 64 years of This chapter is organized as follows. The age. This means that, on aggregate, each working- first section characterizes Vietnam’s current age individual had 0.7 people as dependents. This demographic “window of opportunity,” elaborating dependency ratio declined to 0.44 by 2015 and will on the population trends behind it and how they are start increasing again in 2020. By 2049, the ratio is expected to shift in upcoming decades. It further projected to reach around 0.56.7 discusses the driving factors behind population aging. It then breaks down demographic trends 7 General Statistics Office of Vietnam “Vietnam Population more finely into important sub-categories along Projection 2014-2019”, available at https://vietnam. unfpa.org/en/publications/viet-nam-population- lines of age group, gender, geography and ethnicity. projection-2014-2049 12 VIETNAM: ADAPTING TO AN AGING SOCIETY Box 1.1. Key Definitions and Assumptions The demographic window of opportunity, also called the population bonus, describes a demographic situation in which the working-age population—between ages 15 and 64—is greater than that of the children and the elderly. Put differently, it is when the number of working-age people is double that of dependent people and the total dependency ratio is below 0.5. An aging population is a population in which the elderly (65 years of age and above) account for 7 to 9.9 percent of the total. See Cowgill and Holmes (1970) (as quoted in Andrews and Philips, 2006). An aged population is a population in which the elderly account for 10 to 19.9 percent of the total. A population in which the elderly account for 20 to 29.9 percent of the total is very aged, and a population in which the elderly account for more than 30 percent of the total is hyper aged. The total dependency ratio (TDR) is the ratio of the number of dependents 0 to 14 years of age and over the age of 65 to the total population 15 to 64 years of age. The old age dependency ratio (OADR) is the ratio of the number of persons aged 65 and over (ages when they are generally economically inactive) to the number of persons 15 to 64 years of age. The Aging Index (AI) refers to the number of elderly per 100 persons below 15 years of age in a specific population. The total fertility rate (TFR) is the average number of children born to a woman during her reproductive years (ages 15 to 49). Source: Authors based on UN Commission on Population and Development, https://www.un.org/development/ desa/pd/ Between 1980 and 2015, Vietnam’s elderly Projections under the medium-fertility scenario population increased at a much faster rate than show that by 2049, the number of older persons the other demographic groups, albeit from a will increase to 19.6 million and will account for low base. The country’s population increased approximately 18.1 percent of the population, from 54.3 million in 1980 to 93.5 million people turning Vietnam into one of the fastest-aging in 2015. At the same time, the number of older countries in the world. In 2012, these trends persons (65 years and older) more than doubled, already placed Vietnam in a group of countries increasing from less than 3 million (5.3 percent of classified as having an “aging population.” Vietnam the population) to 6.31 million (6.7 percent of the is projected to become “aged” in 2026. This pace population). The number of prime-age adults (15 to of aging is one of the fastest in the world (World 64 years) increased from 29.25 to 65.65 million (in Bank 2016 and others). France needed 115 years percent terms, from 53.8 percent to 70.1 percent), to move between the same points, the United while the number of children declined, from 22.2 States 69 years, and Japan and China 26 years. In million to 21.6 million (40.9 percent to just 23.1 contrast, Vietnam will need only 20 years (Kinsella percent).8 and Gist, 1995; U.S. Census Bureau, 2008; GSO 2010). 8 Data from GSO projection in 2014. GSO did not provide historical data for 1979. All data are available since 2009. This is based on UN data. VIETNAM: ADAPTING TO AN AGING SOCIETY 13 Figure 1.1. Vietnam: Demographic Projections, 1950-2100* 100% Population 90% Bonus 80% Aged Ageing population 70% 60% Low dependency rate 50% (2007-2042) 40% 30% 20% 10% 0% 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 00 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 21 0-14 (%) 15-64 (%) 65 or over (%) Dependency ratio Young Dependency ratio Old Dependency ratio (0-14) (65 or over) *Figure 1.1 shows that overall dependency ratio (yellow squares) increased until 1970, reaching its peak (of 97 percent), then declining steeply to a nadir (of 43 percent) until 2015, after which it has increased and is project to increase steadily into the future. The youth dependency ratio (light blue circles) drove the patterns of the overall dependency ratio until 2015, increasing until 1970 when it reached its peak (of 86 percent) before declining steeply until 2015 to a value of 32 percent, after which it continued to decline, but more gradually, and is projected to level out around 26 and 29 percent in the future. The old dependency ratio (purple triangles) increased slightly until 1970 to 10 percent, after which it remained steady until 2015, after which it began to rise sharply, which is projected to continue until 2060 when it reaches around 46 percent, after which it is projected to rise more gradually. These trends are mirrored in relative population shares of each age group. The percent of the population aged 0 to14 (dark blue circles) started at 32 percent in 1950, rising to a peak (of 43 percent) in 1970 before declining steadily; the decline is projected to level off gradually to about 15 percent beginning around 2040. The percent of the population aged 15 to 64 (orange x-es) declined from 64 percent in 1950 to a nadir of 51 percent in 1970 before rising to a peak (of 70 percent) in 2015, after which it began a gradually decline project to reach about 54 percent by 2100. The percent of the population aged 65 and older (green diamonds) hovered between 4 percent and 7 percent until 2015, after which it began to increase, which it is projected to continue into the future; the proportion of this age group in the general population is projected to overtake the proportion of the youth age group (0-14) in the early 2040s. This extremely rapid aging is the consequence of the high fertility rate of that period. Third, because a number of factors. First, the level of the old-age fertility fell rapidly in the 1990s, the cohort of people population (and thus the OADR) has been low in entering the working age is quite small.9 Both the Vietnam for a long period of time. This is due to the population bonus and aging reflect socioeconomic low birth rate and high child mortality during the trends, public policies, and individual responses, famines that took place from 1940 to 1945, as well which have led to declining fertility rates, a drop as the high adult mortality rates during ensuing in age-specific mortality rates for all age groups, conflicts. Second, the post-1945 birth cohorts, who and an increase in life expectancy. Each of these are just now reaching old age, are quite large due to aspects is described in more detail below. 9 UNFPA Vietnam. Towards a Comprehensive National Policy for an Ageing Viet Nam. Available at https://vietnam.unfpa. org/en/publications/towards-comprehenstive-national- policy-ageing-viet-nam 14 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 1.2. Vietnam: Total Fertility Rate 7 6.3 6 Average number of births to a woman during her reproductive years (15-49) 4.8 5 4 3.8 3 2.3 2.1 2.1 2 1.9 1 0 1960 1979 1989 1999 2009 1914 1917 Source: based on General Statistics Office of Vietnam (GSO) 2014 Declining fertility rate. The total fertility rate (TFR) fertility pattern in 2020.12 In terms of the resulting was between 6 and 7 children per woman until TFR, GSO projects that under the medium-fertility the early 1960s and began to decline gradually in scenario, the trend of decline will continue until mid-1960s. Specifically, the TFR came down from reaching 1.85 in 2044 and thereafter remain 6.3 in 1960 to 4.8 in 1979 and continued declining, unchanged to 2049. reaching near-replacement fertility levels at the turn of the century (Figure 1.2). The TFR fell below Increasing life expectancy. Life expectancy at birth the fertility replacement level in 2006 and has was 73.4 in 2016, representing an increase of 5.2 continued to fall. Within this overall decline, the rate years since 1999 and 8.6 years since 1989. Life experienced some fluctuations, slightly increasing expectancy for males was 70.8 years, lower than between 2001 and 2004 to 2.23 and between that of females at 76.1 years. The largest drops in 2011 and 2010 to 2.10. The latest available data age-specific mortality among the population that for 2016 shows the TFR standing at 2.09.10 This drove these trends occurred with respect to infant circular decline in the TFR is linked to general mortality and mortality among those 64 years old economic development and urbanization as well and above (GSO 2016). In fact, the infant mortality as implementation of the 2001-06 population and rate (IMR) declined from 45 infant deaths per 1,000 family planning strategy,11 which aimed to drive live births in 1988-89 to 36.7 in 1999. In 2005, the the TFR below the replacement level (World Bank IMR was 17.8 and subsequently declined further 2016). to 14.5 in 2016. The Millennium Development Goal of an IMR of 14.8 was achieved in 2015. GSO projects that the fertility pattern will change, GSO projections indicate that life expectancy will shifting from an early fertility pattern to a late continue to rise, driven by access to better health services.13 10 General Statistics Office of Vietnam. Major findings of the 1/42016 Time-point population change and family planning survey. Available at https://www.gso.gov.vn/default_en.asp x?tabid=515&idmid=5&ItemID=18742 General Statistics Office of Vietnam. Vietnam Population 12  11 Target 1 of the 2001-2010 Population Strategy: “Maintaining Projection 2014-2019. Available at stably the trend on fertility decline in order to achieve the General Statistics Office of Vietnam. Vietnam Population 13  fertility replacement in average for the whole country as of Projection 2014-2019. Available at https://vietnam. 2005 in general, for the isolated/remote or poor areas as of u n f p a . o rg / e n / p u b l i c a t i o n s / v i e t - n a m - p o p u l a t i o n - 2010 in particular, aiming at the population size, structure projection-2014-2049 and UNFPA Vietnam. Towards a and distribution appropriately with the social economic Comprehensive National Policy for an Ageing Viet Nam. development as of 2010.” (Vietnam Commission for Available at https://vietnam.unfpa.org/en/publications/ Population, Family and Children 2003.) towards-comprehenstive-national-policy-ageing-viet-nam. VIETNAM: ADAPTING TO AN AGING SOCIETY 15 Table 1.1. Vietnam: Projections of Life Expectancy 2014-2019 2019-2024 2025-2029 2029-2034 2035-2039 2039-2044 2045-2049 Male Vietnam 70.6 71.1 71.6 72.1 72.6 73.1 73.6 Urban 73.3 73.8 74.3 74.8 75.3 75.8 76.3 Rural 69.5 70.5 71 71.5 72 72.5 73 Female Vietnam 76 76.5 77 77.5 78 78.4 78.8 Urban 78.7 79.1 79.5 79.9 80.3 80.7 81.1 Rural 74.9 75.4 75.9 76.4 76.9 77.4 77.9 Source: General Statistics Office of Vietnam. Vietnam Population Projection 2014-2019. (GSO 2016), available at https://vietnam. unfpa.org/en/publications/viet-nam-population-projection-2014-2049 1.3. Key demographic patterns across population will start to increase again in 2029, and sub-groups by 2049, about 15.9 percent of the population age 60 and above will be in their eighties. 1.3.1. Aging among specific population age groups 1.3.2. Gender differences Vietnam’s working-age population is aging over Increasing gender differences can be seen in time. According to the GSO 2014, most of the demographic outcomes, particularly at the younger working-age population (15-64 year old) in 2014 end of the age distribution. While the overall ratio was in the younger prime-age group, which is below of males to females in Vietnam is 97.3 males per 30 years old. In fact, 39 percent of the prime-aged 100 females, deeper differences can be seen at the cohort were less than 30 years old, and 28 percent two tails of the age distribution. For children 0-4 were over 45 years of age. GSO estimates that years old, the ratio has been increasing and now the working-age population will be aging steadily stands at 111.2. While the ratio varies considerably, over time so that by 2029 the young prime-aged out of 63 provinces and cities, 24 had a high sex group will make up 30 percent of the entire prime- ratio above 110 for children 0-4 years of age. This aged cohort while share of the age 45 and over will relatively recent demographic phenomenon has increase to 36 percent. These trends will continue been caused primarily by an imbalanced sex ratio and by 2049 the share of workers aged 45 and at birth (SRB). This is a very troubling trend, which over will increase to 41 percent and more than 70 some observers link to the steadily increasing percent of the working-age workforce will be above access to affordable sex-determination and sex- 30 years old. selection technology that allows couples to pursue their desire for one or more sons.15 Among the elderly, the fastest growth in unfpa.org/en/publications/viet-nam-population- population is projected to occur among the oldest projection-2014-2049 and UNFPA Vietnam. Towards a old. The percentage of those age 80 and above Comprehensive National Policy for an Ageing Viet Nam. Available at https://vietnam.unfpa.org/en/publications/ among the population age 60 and above increased towards-comprehenstive-national-policy-ageing-viet-nam from 7.8 percent in 1979 to 19.8 percent in 2014. 15 UNFPA. Recent Change in the Sex Ratio at Birth in Viet The share peaked in 2014 and is projected to Nam. Available at: https://www.unfpa.org/publications/ recent-change-sex-ratio-birth-viet-nam. The newly released decline in the next 15 years, a trend which can results of the 2019 Population and Housing Census (see be explained by the conflict that occurred during https://vietnam.unfpa.org/en/news/results-population- the late 1960s and early 1970s.14 The oldest old and-housing-census-2019) show that the SRB remained high with 111.5 boys per 100 girls. The SRB in the Red River Delta was the highest (115.3 boys per 100 girls) while the 14 General Statistics Office of Vietnam. Vietnam Population lowest SRB was in the Mekong River Delta (106.9 boys per Projection 2014-2019. Available at https://vietnam. 100 girls). 16 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 1.3. Vietnam: Population Projections, Figure 1.4. Vietnam: Projected Proportion 2014-2049 of “Oldest Old” (80 Years Old and Older) Among Population Aged 60 Years Old and Older, 1979-2049 (in percent) 100% 25 90% 28 32 34 80% 36 38 41 41 41 20 70% 60% 15 33 50% 34 36 34 31 28 29 31 40% 10 20 17 16 30% 14 12 13 20% 39 5 10 10 11 34 30 30 31 31 30 8 9 9 28 10% 0% 0 2014 2019 2024 2029 2034 2039 2044 2049 1979 1989 1999 2009 2014 2019 2024 2029 2034 2039 2044 2049 <30 30-45 45 over Source: GSO 2016. Source: GSO 2016 Greater gender differences can also be seen at the highest among the ten ASEAN countries in 2000 older end of the age distribution. The proportion and 2010.18 This pattern is explained by the higher of females in the population age 60 and older is male mortality from the conflict that occurred higher than males, and this discrepancy increases over 35 years ago. This is particularly true for the with age. In 2019, the percentage of females in population age 80 and above, which had a sex ratio the population age 60 and older was 58.3, while of 52 in 2014. GSO projects that the percentage of the percentage was 69.2 in the population age females among the older population will decline 80 and older.16 An increase in the ratio between after 2020.19 elderly females and males with age is a common observation elsewhere in the world, as well. It 1.3.3. Geographic and ethnic differences is driven by the higher mortality rate for males Vietnam’s significant internal migration affects compared to females of the same age for the the geographic patterns of aging. International population over 65 years old, and discrepancies in migration is negligible compared to the size of life expectancy increase with age. The 2015 GSO the national population and therefore is not a shows that life expectancy at 60 years of age is significant contributor to the population change 19.3 for males and 24.8 for females.17 in Vietnam. Instead, internal migration from rural Notably, the proportion of females among the to urban areas and from less- to more-developed elderly is relatively high in Vietnam compared to areas are the key factors affecting Vietnam’s other countries. The proportion of females in the population trends. Notwithstanding a higher TFR population age 60 and older in Vietnam was the 18 UNFPA Vietnam. TOWARDS A COMPREHENSIVE NATIONAL POLICY FOR AN AGEING VIET NAM. Available  eneral Statistics Office of Vietnam. Vietnam Population 16 G at https://vietnam.unfpa.org/en/publications/towards- Projection 2014-2019. Available at https://vietnam. comprehenstive-national-policy-ageing-viet-nam. u n f p a . o rg / e n / p u b l i c a t i o n s / v i e t - n a m - p o p u l a t i o n - 19 UNDESA. (2017). World Population Prospect: The 2017 projection-2014-2049 Revision. New York. The newly released results of the 2019 General Statistics Office of Vietnam. Major findings of the 17  Population and Housing Census (see GSO 2019) show 1/42016 Time-point population change and family planning the following female-to-male ratios for the 60-69 year old, survey. Available at https://www.gso.gov.vn/default_en.as 70-79 year old, and 80+ year old were 124, 146, and 191, px?tabid=515&idmid=5&ItemID=18742 respectively. VIETNAM: ADAPTING TO AN AGING SOCIETY 17 and lower life expectancy in rural areas,20 the persons in rural areas will surpass those of urban proportion of older persons in the population is areas (See Figure 1.5). The higher proportion of relatively similar in urban and rural areas.21 GSO older population in rural areas can be explained projects that from 2030 to 2049, the proportion of by the large number of young adults moving older persons will triple in rural areas and double in out of rural areas to pursue education or better urban areas compared to the levels today,22 which employment opportunities. will mean that the proportion and number of older Figure 1.5. Vietnam: Projection of Elderly share of the Population, Urban and Rural Areas, 2014-2049 35% 30% 25% 20% 15% 10% 5% 0% 2014 2019 2024 2029 2034 2039 2044 2049 Urban 60+ Urban 65+ Rural 60+ Rural 65+ Super_aged threshold 65+ Super_aged threshold 60+ Source: GSO 2016 Demographic outcomes vary across different population age 65 and older (6.5 percent and 7.8 regions of the country.20The Southeast region percent, respectively). The North and South-Central has the highest share of the population ages 15- Coast region has had a high level of outmigration, 64 (at 72.8 percent), and it has a large migration resulting in a very high proportion of the population inflow of young people.21The Northern Midlands that is age 65 years and above (up to 7.2 percent). and Mountains and the Central Highland regions have the highest fertility rates as well as the Nguyen Dinh Cu (2009) report that there appears highest proportion of children ages 0 to 15 (28.4 to be a U-shaped relationship between the aging and 29.5 percent, respectively).22The Mekong River index and provincial GDP. Poorer provinces tend to Delta and the Red River Delta have experienced have a lower aging index, which is related to the low fertility and a large migration outflow, and higher fertility rates in these provinces, which in these regions have the highest proportion of the turn are also related to the lower urbanization levels as well as limited labor market opportunities and 20 A  verage TFR in rural areas of 2.21 compared to 1.88 in access to sexual and reproductive health services urban areas (GSO 2016). and other societal factors. Wealthier provinces General Statistics Office of Vietnam. Major findings of the 21  1/42016 Time-point population change and family planning tend to have relatively low proportions of seniors, survey. Available at https://www.gso.gov.vn/default_en.as with sources relating this to the higher rates of in- px?tabid=515&idmid=5&ItemID=18742 22  General Statistics Office of Vietnam. Vietnam Population migration, predominantly by young people.23 Projection 2014-2019. Available at https://vietnam. u n f p a . o rg / e n / p u b l i c a t i o n s / v i e t - n a m - p o p u l a t i o n - 23 https://mpra.ub.uni-muenchen.de/81825/1/MPRA_ projection-2014-2049 paper_81825.pdf 18 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 1.6. Vietnam: Projection of Aging Index, by Region, 2010-2035 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Northern Midlands and Mountains Red River delta North and South Central Coast Central Highlands Southeast Mekong River delta Source: GSO 2016. Differences in demographic outcomes are also lowest TFR at 2.02. The proportion of children under pronounced across ethnic groups.24 The Mong 15 years old among this group was 23.1 percent in ethnic group has the highest TFR, which stood 2009. In terms of patterns of mortality, the Mong at 3.65 in 2010. The Mong ethnic group also has ethnic group has the highest mortality rate and the the highest proportion of children under 15 years lowest proportion of people age 65 and above at of age in the population—in fact, this age group 3.2 percent. The Kinh ethnic group has the lowest accounted for 42.5 percent of the total Mong mortality rate and the highest proportion of people population in Vietnam in 2010. At the opposite end age 65 and above at 7.5 percent. of the spectrum is the Kinh ethnic group, with the Table 1.2. Vietnam: Selected Demographic Indicators by Region, 201624 Share of Aging Total Infant 65 years old 15 -64 Crude Life Region index Fertility mortality and older in years old death rate expectancy (percent) Rate (TFR) rate 2016 2016 Northern Midlands 5.6 28.35 35.4 2.63 7.56 21.46 70.9 and Mountains Red River Delta 7.8 25.59 62.5 2.23 7.42 11.46 74.6 North and South Central Coast 7.2 25.89 54.8 2.37 7.53 16.05 72.8 Central Highlands 4.0 29.49 28.4 2.37 5.18 24.01 70.1 Southeast 4.7 22.50 44.7 1.46 5.04 8.49 76 Mekong River Delta 6.5 24.19 54.4 1.84 7.04 11.18 74.7 Source: Authors, based on GSO 2016 24 This is based on UNFPA 2011 “Ethnic Groups across Vietnam: An analysis of key indicators form the 2009 Vietnam Population and Housing Census” , https://vietnam.unfpa.org/sites/default/files/pub-pdf/Ethnic_Group_ENG.pdf. At the same time new data will become available soon, as the General Statistics Office (GSO) in coordination with the Committee for Ethnic Minority Affairs (CEMA) is preparing for the 2019 Survey on the Socio-economic Situation of 53 Ethnic Minority Groups. VIETNAM: ADAPTING TO AN AGING SOCIETY 19 1.4. References Andrews, Gavin J. and Phillips, David R., eds. 2005. Ageing and Place: Perspectives, Policy, Practice. Routledge. General Statistics Office of Vietnam (GSO). 2019. The Viet Nam Population and Housing Census of 00:00 Hours on 1 April 2019: Implementation Organisation and Preliminary Results. Hanoi. General Statistics Office of Vietnam (GSO). 2017. Major Findings: The 1/42016 Time-Point Population Change and Family Planning Survey. Statistical Publishing House. General Statistics Office of Vietnam (GSO) and United Nations Population Fund (UNFPA). General Statistics Office of Vietnam (GSO). 2016. Vietnam Population Projection 2014-2049. Viet Nm News Agency Publishing House, Hanoi. General Statistics Office of Vietnam (GSO). 2014. The Viet Nam Intercensal Population and Housing Survey: Major Findings. Viet Nm News Agency Publishing House, Hanoi. General Statistics Office of Vietnam (GSO). 2010 The 2009 Vietnam Population and Housing census: Major findings https://www.gso.gov.vn/default_en.aspx?tabid=515&idmid=5&ItemID=9813 Kinsella, Kevin and Yvonne J. Gist. 1995. Older workers, retirement, and pensions. A comparative international chartbook.  Washington, DC: United States Census Bureau.Nguyen, Cuong. 2016. “The Ageing Trend and Related Socio-Economic Issues in Vietnam.” Munich Personal RePEc Archive (MPRA). doi: https://mpra.ub.uni-muenchen.de/81825/ Nguyen, Dinh Cu. 2009. “Nhung dac diem dan so cao tuoi o Vietnam” (Characteristics of the Old-age Population in Vietnam” (unpublished manuscript). United Nations Department of Economic and Social Affairs (UNDESA). 2017. World Population Prospect: The 2017 Revision. New York. United Nations Population Fund (UNFPA) Vietnam. 2011. Ethnic Groups in Viet Nam: An analysis of key indicators from the 2009 Viet Nam Population and Housing Census. United Nations Population Fund, Hanoi. United Nations Population Fund (UNFPA) Vietnam. 2009. UNFPA. Recent Change in the Sex Ratio at Birth in Viet Nam: A Review of Evidence. UNFPA Vietnam, Hanoi. United Nations Population Fund (UNFPA) Vietnam and Vietnam National Committee on Aging. 2019. Towards a Comprehensive National Policy for an Ageing Viet Nam. UNFPA Vietnam, Hanoi. US Census Bureau has issued reports entitled “An Aging World” 2008: https://www.census.gov/ prod/2009pubs/p95-09-1.pdf Viet Nam Commission for Population, Family and Children. 2003. “Vietnam’s National Population Strategy for the period 2001-2010.” Viet Nam Commission for Population, Family and Children. 20 VIETNAM: ADAPTING TO AN AGING SOCIETY Vietnam Women Union (VWU). 2012. Vietnam Aging Survey (VNAS): Key findings. Hanoi, Women’s Publishing House. Vietnam Women Union (VWU). 2011. Vietnam Aging Survey (VNAS): Key findings. Hanoi, Women’s Publishing House. World Bank. 2016. Live Long and Prosper: Aging in East Asia and Pacific. World Bank East Asia and Pacific Regional Report. World Bank, Washington, DC. VIETNAM: ADAPTING TO AN AGING SOCIETY 21 Chapter 2: AGING AND WELFARE 2.1. Introduction and Summary reflect rural-urban migration trends among younger groups. Meanwhile, public support has become The demographic window of opportunity increasingly significant as expanded social contributed to the spectacular growth which in protection programs have benefitted all groups. turn has both been broad-based and led to reduced Access to contributory pension, social pension and poverty in Vietnam. During this transition, Vietnam other social assistance programs are high among is managing to protect its elderly, as evidenced older groups, with important differences between by the fact that poverty among the elderly has rural and urban areas, while access to social health declined continuously over a number of years. insurance has increased significantly across the During the time period considered in this report, board, especially benefitting the youngest and older generations benefited the most relative to the oldest age groups. other age groups. There is also no evidence that older people are left behind in other, non-monetary This chapter is structured as follows. The next indicators of welfare, such as access to water and section discusses patterns of poverty and trends sanitation and ownership of assets. Individuals, in economic mobility in Vietnam, describing families and the state have all contributed to patterns among subsections of the population. The improvements in the welfare of older people. following section looks at examining non-monetary indicators of welfare and asset accumulation While the overall progress in improving the welfare patterns across age groups. Then the chapter of older people is significant, some groups have examines patterns of educational attainment been left behind: the oldest old, especially in rural and employment across the population, including areas; the elderly with little education; and the distinctions between genders and ethnic groups, elderly without children. Vietnam is experiencing as well as post-retirement income. The discussion significant economic mobility, and the middle class then moves to examine living arrangements is growing, but unevenly, with faster growth in urban and informal support for the elderly in Vietnam, areas and with both younger and older groups being followed by patterns of access to social support, underrepresented in the middle class. Economic including pensions and health care insurance. stability is highest among prime-age adults, who also accumulate the most assets, especially in 2.2. Poverty and economic mobility25 urban areas. Access to clean water and improved sanitation, meanwhile, has increased across the Absolute poverty has fallen sharply in Vietnam board, with especially significant improvements in over the last two decades, benefiting all rural areas and no evidence that older adults have generations. As shown in Figure 2.1, poverty been left behind. rates in Vietnam have been declining for several Sources of support among the elderly include Poverty and welfare analyses presented in this report are 25  instrumental and financial support from family, based on 2010, 2012, 2014 and 2016 VHLSS. Poverty rate with co-residence remaining an important social is calculated based on the National GSO-WB definition of poverty line. Economic vulnerability is defined based on structure for providing such support. However, the international poverty line. Economically vulnerable elderly co-residence in Vietnam has declined over have per capita consumption between $3.2-$5.5 per day, economically secure consume $5.5-$15 per person per time as families become smaller, incomes rise, day and middle-class live on more than $15 per person per and children migrate elsewhere. Higher rates of co- day. See Vietnam Poverty Update Report 2018. Climbing the Ladder: Poverty Reduction and Shared Prosperity in residence in urban areas probably at least partially Vietnam. World Bank. for further information. 22 VIETNAM: ADAPTING TO AN AGING SOCIETY years. This progress has been broad-based and 32.6 in 1993 to 34.8 in 2014, a low rate compared achieved with only a modest increase in measured to other countries in the region, such as China or inequality. Vietnam’s Gini coefficient rose from Thailand, which have rates in the mid- to high-40s. Figure 2.1. Vietnam: Poverty Rates, 1993-2014 80% $3.10/day $1.90/day 70% GSO-WB Porverty 60% MOLISA Poverty 50% 40% 30% 20% 10% 0% 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Source: Vietnam Poverty Update Report for 2018 (World Bank, 2018) During the first half of the 2010s (between 2010 percent for those age 80 and above (Table 2.1). By to 2016), older generations benefited the most 2016, the poverty rate for prime-age adults (those relative to the other age groups. While the national between 15-34 years of age) was significantly poverty rate declined from 20.6 to 9.3 percent, the higher than the rate for older groups. (See Annex rate among older people dropped even further, 2.1 for a definition of the national poverty rate for from 14.7 to 4.9 percent for 65-69 years old, from Vietnam.) 18.6 to 6.7 for 70-79 years old, and from 23.3 to 8.5 Table 2.1. Vietnam: Poverty Headcount Rate by Age and Cohort, 2010-2016 Change, 2010 2012 2014 2016 2010-2016 (in percent) Vietnam 20.6 17.3 14.3 9.3 55  Urban 6.2 5.3 4.0 1.8  71 Rural 26.3 22.1 18.6 12.5  52 Age 15-34 26.7 27.6 23.1 19.1 -28 35-54 16.7 12.7 10.1 7.3 -56 55-59 11.4 10.5 7.1 4.7 -59 60-64 13.1 13.0 8.9 5.2 -60 VIETNAM: ADAPTING TO AN AGING SOCIETY 23 Change, 2010 2012 2014 2016 2010-2016 (in percent) 65-69 14.7 13.2 9.8 4.9 -67 70-79 18.6 15.2 12.0 6.7 -64 80+ 23.3 21.1 17.3 8.5 -64 Cohort (in year 2010) 20-30 28.7 30.7 27.4 24.5 -15 31-40 23.1 18.7 15.6 12.5 -46 41-50 15.4 11.7 8.5 6.9 -55 51-60 12.1 10.5 8.0 4.6 -62 61-70 14.5 13.1 10.1 5.3 -63 71+ 19.6 17.8 13.9 7.3 -63 Source: Authors’ calculations from VHLSS 2010, 2012, 2014, 2016. Incidence of poverty across cohorts of individuals the second-lowest declines in poverty, while the for the 2010 to 2016 time period shows similar mature prime-age cohort (51-60 years of age in patterns of a greater decline in poverty among 2010) had the lowest incidence of poverty and older cohort. The older cohorts (61 years and older was also among those experiencing the fastest in 2010) experienced the most significant decline declines in poverty. The cohort that was over 71 in poverty rates, while the younger cohort (20-30 years of age in 2010 experienced rapid declines in years of age in 2010) had the smallest decline in poverty but overall remained among the poorest poverty through 2016. The younger prime-age cohorts. cohorts (31-50 years of age in 2010) experienced Figure 2.2. Vietnam: Poverty Rates by Age Group and Urban vs. Rural Areas, 2010-2016 Consumption-based poverty rates by age, urban, 2010-16 Consumption-based poverty rates by age, rural, 2010-16 10% 40% 9% 35% 8% 30% 7% 6% 25% 5% 20% 4% 15% 3% 10% 2% 1% 5% 0% 0% 2010 2010 2014 2016 2010 2010 2014 2016 15-34 35-54 55-59 60-64 65-69 70-79 80+ 15-34 35-54 55-59 60-64 65-69 70-79 80+ Source: Authors’ calculations from VHLSS 2010, 2012, 2014, 2016. 24 VIETNAM: ADAPTING TO AN AGING SOCIETY Poverty among older groups has declined Extreme poverty is low in both urban and rural relatively rapidly both in urban and rural areas, areas, and the risk of being in extreme poverty is narrowing there the differences in poverty rates higher for younger adults than for older adults. between those below age 65 and those age 65 Across urban and rural areas, extreme poverty is and above. In urban areas, the gap in poverty rates very low, while moderate poverty and economic between older (over age 65) and younger (below vulnerability are more prevalent in rural areas age 65) groups virtually disappeared between 2010 (Figure 2.3 and Figure 2.4). In urban areas, the and 2016, thanks to a sharp reduction in poverty percentage of people in extreme poverty is below among the older group. It actually reversed in rural 1 percent, except for the youngest cohort and age areas, with the older group’s 28 percent poverty group. In rural areas, 5.1 percent of the youngest rate in 2010 dropping to 9 percent in 2016, while cohort still experiences extreme poverty, about the younger group’s 18 percent rate in 2010 only 3.5 times more than the rate in urban areas. The fell to 11 percent in 2016. Moreover, in rural areas, gap between urban and rural outcomes is also the oldest old (age 80 and above) experienced the staggering among the moderately poor, with most significant decline in poverty between 2010 differences up to a factor of 6, and the economically and 2016 (Figure 2.2), although its overall poverty vulnerable classes, with differences up to a factor rate remained second-highest after the youngest of 2. age group (ages 15 to 34). In both urban and rural areas, poverty is now concentrated among younger These results are consistent with earlier studies adults and the “oldest old.” showing that older people are not among the groups at the highest risk of extreme poverty. The rural-urban difference in poverty remains Giang Thanh Long and Wade Donald Pfau (2009) significant and is more prevalent among younger and Giang Thanh Long and Phi Manh Phong and older adults than for prime-aged adults. (2016) used various definitions and measures While the gap in poverty rates between rural and of poverty, such as poverty thresholds to show urban areas has decreased considerably—from 20 poverty status, poverty vs. near-poverty, and GSO percent in 2010 to around 11 percent in 2016—it versus Organization for Economic Cooperation remains large. The gap between urban and rural and Development (OECD) measures to examine poverty rate for those below age 65 was 12.94 the relative position in the poverty distribution of percent in 2010, the gap for those age 65 and older people in Vietnam. The authors used the above was 21.23 percent. By 2016, the urban-rural Vietnam Household and Living Standards Survey gap for those below age 65 decreased to 9.78 (VHLSS) 2002-2014 and 2012 Vietnam Aging percent, and it decreased to 7.72 percent for those Survey (VNAS) to show that older people are 65 and above. Within each year, the rural-urban under-represented among the extreme poor and divide is most extreme in the two tails of the age poor and are over-represented among the better- distribution: the younger cohort (ages 15-34) and off (VWU 2012). (See note 2 in the 2.10 Annex for the oldest old (age 80 and above). further information about VHLSS data collection.) VIETNAM: ADAPTING TO AN AGING SOCIETY 25 Figure 2.3. Vietnam: Economic Class by Cohort and Age Group in Urban Areas, 2010-2016 Source: Authors’ calculations from VHLSS 2010, 2016. Economic vulnerability in urban areas is more extremely poor. The youngest adult group (ages prevalent among younger adults compared to older 15-34) has the most extreme poverty and the adults, while economic vulnerability in rural areas most economically vulnerable. Cohorts around is more prevalent among both younger adults and retirement age (those ages 51-60 and 61-70) are the “oldest old.” In urban areas, the probability of the most economically secure while also having being economically secure is high for those near the least percentage of population in extreme retirement age (ages 55-64) and the “mature” old poverty. (See 2.10 Annex for information about (ages 65-69). These groups also have the lowest how economic class is defined and calculated in percentage of economically vulnerable as well as Vietnam.) Figure 2.4. Vietnam: Economic Class in Rural Areas by Cohort and Age Group, 2010-2016 Source: Authors’ calculations from VHLSS 2010, 2016. 26 VIETNAM: ADAPTING TO AN AGING SOCIETY Vietnam’s middle class is growing in both Similar to the patterns presented above, there is urban and rural areas, although growth in urban evidence of significant upward economic mobility areas is significantly faster. Younger adults are in Vietnam, yet, overall, in both urban and rural underrepresented among the urban middle class, areas, the majority of people across all cohort while among the rural middle class, young adults and age groups remained at the same economic and the oldest old are underrepresented. The near- level in the 2014-2016 period. (Figure 2.5 and retirement age cohort and group have the highest Figure 2.6). Across all age groups, about half of percentage reaching the middle class. While rural the population remained in the same economic areas experience a gap of about 3 percent in having categories (the “stayers”) between 2014 and 2016, the middle-class status across different age groups while the percentage of population moving up the and cohorts, urban regions have a gap that is up to economic ladder (the “climbers”) ranged from 24.8 four times larger, with up to a 12 percent difference to 52.0 percent in urban areas and from 34.0 to between the middle-class status across different 43.9 in rural areas. The population groups who fell age groups. Although the probability of being in the to lower rungs of the ladder (the “sliders”) ranged middle class for younger urban adults increased from 1.1 to 7.5 percent in urban areas and from dramatically between 2010 and 2016, this group is 6.4 to 13.5 percent in rural areas. Overall, similar to still underrepresented. the patterns presented above, all cohorts in urban areas are faring better than those in rural areas. Figure 2.5. Vietnam: Economic Mobility in Urban Areas, 2014-2016 Source: Authors’ calculations from VHLSS 2014-2016 panel households’ data. VIETNAM: ADAPTING TO AN AGING SOCIETY 27 Figure 2.6. Vietnam: Economic Mobility in Rural Areas, 2014-2016 Source: Authors’ calculations from VHLSS 2014-2016 panel households’ data. In terms of economic mobility, both in urban There is also no evidence that the older cohorts and rural areas, prime-age adults are the are at a disadvantage in terms of downward most economically stable group. The degree movement. Most older adults, like other age of economic stability and mobility among the groups and cohorts, remain at the same economic different age groups vary between urban and rural level. At the same time, comparing the economic areas. In urban areas, economic stability peaks mobility of older adults across urban and rural with the 60-64 age group. Economic mobility areas, older cohorts (age 61 and above) in rural progressively increases for groups younger and areas experience economic setbacks 3 to 7 times older than this group, with the youngest adults more often than their counterparts in urban areas. and the oldest adults showing the most upward These overall results are broadly consistent with mobility. At the same time, downward mobility the 2011 Vietnam Aging Survey (VNAS) data, which (shown by the “sliders”) is also more prevalent showed that about 50 percent of individuals over among younger cohorts as well as mature prime- age 60 living in urban areas and about 42 percent age adults. In rural areas, the 41-50 age group is of those living in rural areas thought that their life the most economically stable, with downward had not changed. About 26 percent of older adults mobility more prevalent among younger prime-age thought that life was worse or somewhat worse groups and upward mobility more prevalent among (VWU 2012). mature prime-age groups. One group that has less upward mobility and more Importantly, comparing economic mobility of downward mobility is the younger rural cohorts. older adults with that of other age groups, there Given the high out-migration from rural areas, it is no evidence that the oldest cohorts are left is possible that those younger people who stay behind. In fact, both in urban and rural areas, do not have the nessesary skills or other means the oldest cohorts showed the highest upward to migrate, or they may have family obligations to movements compared to the other age groups. stay. 28 VIETNAM: ADAPTING TO AN AGING SOCIETY 2.3. Ownership of Assets and Living spend down their assets and savings. As shown in Conditions Figure 2.7, middle-aged cohorts tend to have more valuable assets. For example, living area for these Vietnam has achieved an overall improvement cohorts increased by 25 to 35 percent in both rural in important welfare indicators, including the and urban areas, compared to around 20 percent accumulation of assets. Trends in poverty for the country as a whole. Similar trends are reduction and economic mobility are mirrored in observed for ownership of concrete houses and patterns of assets ownership. These improvements other assets. have benefited all and underscored the country’s progress in improving the quality of life in both Some evidence also points to spending down of urban and rural areas. (See 2.10 Annex for assets at older ages, although the evidence is further information about the calculation of living mixed. Figure 2.7 shows that for the oldest cohorts condition indicators and asset owernship.) (age 71 and above) in urban areas, the living area was at the same level as the country average in Consistent with the life-cycle theory, the 2010 but was below average in 2016. The trend accumulation of assets between 2010-2016 was is similar in rural areas, with the living area for faster for the age 20-30 and age 31-40 cohorts the oldest cohort not too far below the national compared to older cohorts. Asset accumulation average in 2010 but significantly less than the typically follows the life cycle, and the ability to average in 2016. This holds true for the percentage accumulate assets is very important during the of older households with air conditioning, as well. working lives of individuals, as older adults tend to Figure 2.7. Vietnam: Living Conditions Indicators by 2010 Cohort in Urban Areas, 2010 vs. 2016 Source: Authors’ calculations from VHLSS 2014-2016 panel households’ data. VIETNAM: ADAPTING TO AN AGING SOCIETY 29 While urban and rural areas show similar patterns phones. In contrast, in terms of air conditioners, of asset accumulation over the life cycle, the washing machines, and water heaters, asset overall level of assets is lower in rural areas. In ownership reaches its peak at prime-working age both areas, prime-age adults (ages 35-64) have and declines slightly thereafter. the largest incidence of asset ownership. In particular, adults in the age 41-50 cohort in rural Patterns of access to safe water and sanitation areas and the age 51-60 cohort in urban areas have also demonstrate Vietnam’s progress in improving the largest living areas, better houses, and more quality of life, while simultaneously underscoring air conditioners, washing machines, and heaters. the gap between urban and rural areas. There is (Although individuals in rural areas have less assets no evidence that older cohorts are left behind. in general.) Younger cohorts in rural areas also Overall access to improved sanitation and seem to have accumulated less assets from 2010 improved drinking water has risen significantly. to 2016 than their counterparts in urban areas. (See Figure 2.8). While rural areas have enjoyed the boom in better living standards with more In both urban and rural areas, age-related access to piped water, improved water, toilet, and consumer tastes can be seen in the patterns of telephone service, the changes vary across ages assets ownership, with younger people more likely and cohorts. The rate of change is faster among than their older counterparts to own “technology younger age groups and cohorts compared to - intensive” assets. In particular, younger people older ages, but not compared to the very old more likely to own computers and telephones as groups. While access to water and sanitation has compared with their older counterparts. Since improved for both urban and rural households, the younger cohorts have more access to technology gaps between them have widened over time. For from a young age, and given the fast-growing example, the gap in access to improved toilets adoption of technology in Vietnam, a higher share between rural and urban households widened by of the younger age groups owns computers or around 20 percentage points. 30 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 2.8. Vietnam: Trends in Nonmonetary Welfare Indicators by Age Group and Cohort, 2010-2016 Source: Authors’ calculations from VHLSS 2010, 2012, 2014, 2016. VIETNAM: ADAPTING TO AN AGING SOCIETY 31 2.4. Education and Employment education completion. Looking across age Patterns groups, younger adults (15-34 years of age) have the highest rate of tertiary completion in rural and The massive investments in education that Vietnam urban areas. Compared to the extremely old group has made over the last 30 years is manifested in (age 80 and above), younger adults had almost differences in educational attainments across 12 times more people attaining tertiary education age groups. By 2016, the rate of young people 15- in rural areas and 5 times more in urban areas in 34 years of age with higher secondary education 2016. The rate of increase in tertiary education and above was near 80 percent in both rural and completion differs between rural and urban areas, urban areas. By contrast, the rates of completion with an approximately 8 percent increase in rural of only primary education are increasing by age. areas and a 5 percent increase in urban areas in the Over 60 percent of those over age 80 have only 2010-2016 period. Cohort groups show a similar completed primary education, compared to less pattern: the tertiary completion rate of the younger than 10 percent of those between 15-34 years of cohort (ages 20-30) increased faster in rural than age. The lower secondary education completion urban areas (10 percent versus 5 percent change) rate is comparable across all age groups. (See from 2010 to 2016. Similarly, the percentage of the Figure 2.9). younger cohort holding tertiary degrees was 10 times higher than that of the extremely old cohort Both in urban and rural areas, younger workers in rural areas and almost 4 times higher than the have considerably higher incidence of tertiary extremely old cohort in urban areas in 2016. Figure 2.9. Vietnam: Education Attainment by Age Group in Rural and Urban Areas, 2016 Education Attainment in Urban area, 2016 Education Attainment in Rural area, 2016 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 15-34 35-54 55-59 60-64 65-69 70-79 80+ 15-34 35-54 55-59 60-64 65-69 70-79 80+ Primaty Education Low Secondary Education Primaty Education Low Secondary Education High Secondary Education Tertiary High Secondary Education Tertiary Source: Authors’ calculations from VHLSS 2016. Notably, even prime-age workers (the 35-54 age in the 2010-2016 period. Similarly, among the age group and the 31-40-year-old cohort) continue 31-40 cohort, tertiary education completion rates to pursue tertiary degrees. The rate of tertiary increased by approximately 7 percent in rural areas completion among prime-age workers increased and by 9 percent in urban areas over the same steadily from 2010 to 2016. (See Figure 2.10.) timeframe. However, the change was more significant in urban areas than rural areas. In particular, among the 35- Earlier studies showed that there are significant 54 age group, tertiary degree completion increased correlations between lower rates of poverty by only about 1 percent in rural areas, compared among the elderly and education and family size to an increase of about 3 percent in urban areas (Giles and Huang 2015, World Bank 2015). Authors 32 VIETNAM: ADAPTING TO AN AGING SOCIETY showed that poverty among the elderly in Vietnam employment before the economy’s structural is negatively correlated with education and number transformation began, have worked in farming all of children. As expected, those with a high school their lives and were still principally employed in education or above are less likely to be poor in old agriculture in 2016 (Demombynes and Testaverde age, particularly in rural Vietnam. Elderly people 2018). Thus, agriculture employment remained with more children and more educated children high among older cohorts, while wage jobs were are also less likely to be poor. With household size more common among younger groups. As shown declining, there may be a concern that having fewer in Figure 2.11, informal employment (wage children may cause more elderly parents to be poor. earnings without formal contracts) was the most However, the positive effect of children being more common source of jobs for the very young (ages educated is expected to more than compensate 15-19), followed by wage jobs with contracts. Both for the decline in the number of children. Indeed, farming and non-farming self-employment were while family size has fallen noticeably in Vietnam, small but still significant sources of employment the average education level of adult children for younger workers. For workers in their twenties, has increased, corresponding to a decline in the however, wage jobs with contracts accounted for likelihood that parents will be poor in old age. a larger share of employment, while farming made up a tiny share. As Vietnam prepares to enter its Employment differs across age groups, reflecting aging phase, these patterns show that “future older patterns similar to those in educational attainment. workers” are different from “current older workers.” A large share of older workers, who entered Figure 2.10. Vietnam: Tertiary Completion Rates by Age Group and Cohort, 2010-2016 Source: Authors’ calculations from VHLSS 2010, 2012, 2014, 2016. VIETNAM: ADAPTING TO AN AGING SOCIETY 33 Figure 2.11. Vietnam: Employment Share in Urban and Rural Areas, 2016 Employment Share in Urban, 2016 Employment Share in Rural, 2016 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 9 4 9 4 9 4 9 4 9 4 9 4 9 + 9 4 9 4 9 4 9 4 9 4 9 4 9 + -1 -2 -2 -3 -3 -4 -4 -5 -5 -6 -6 -7 -7 -1 -2 -2 -3 -3 -4 -4 -5 -5 -6 -6 -7 -7 80 80 15 20 25 30 35 40 45 50 55 60 65 70 75 15 20 25 30 35 40 45 50 55 60 65 70 75 Farming self-employment Non-farm self-employment Farming self-employment Non-farm self-employment Wage with contract Wage without contract Wage with contract Wage without contract Source: Authors’ calculations from VHLSS 2016. The share of informal sector workers remains high. generally show no relationship in Vietnam, in either Overall, around 76 percent of all workers and 55-60 urban or rural areas, between poverty status and percent of non-agriculture workers are employed the number of elderly employed or the total hours in the informal sector (Cunningham and Pimhidzai they work (Giles and Huang 2015). 2018). In part, this reflects the fact that Vietnam remains a predominantly rural country, with 65 Gender disparities in the labor market are very percent of the population living in rural areas in prominent in Vietnam, with notable differences 2017 (WDI). However, such high non-agriculture in the employment patterns of men and women. informality rates—especially following a time Overall, the employment rate of men is higher of rapid urbanization—suggest that informality than that of women, although the differences are is high even among the urban population and not large, (See Figure 2.12, Panel a). At the same that the urbanization process is not significantly time, women are more likely to have formal jobs, contributing to bringing down these rates. Informal thus receive contributions toward their pensions. employment has a number of implications for This holds true for younger women and could be workers, including lower wages on average relative potentially explained, in part, by higher rates of to contracted workers (Cunningham and Pimhidzai female enrollment in secondary and tertiary school, 2018). Furthermore, government social protection with women under age 30 having completed (SP) programs that are attached to formal college at significantly higher rates than their male employment—such as unemployment insurance or counterparts, even as completion rates have risen pensions—by default exclude the vast majority of for both genders (Panels b and d). Middle-aged the population that is informally employed. and older women, however, are at a disadvantage in this respect and also in terms of employment in Earlier studies did not find any strong evidence of wage jobs, where men’s advantage is present for a relationship between employment and poverty middle-aged and older women, but not for younger among older people. Older people may work to women (Panel c). Gender wage differences are keep out of poverty, or they may be poor even if they more prominent for mature workers, as compared continue working. Results from regression models to their younger counterparts. 34 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 2.12. Vietnam: Gender Disparities in Labor Market Outcomes by Age (a) Employment Rate (b) Employment Rate in Formal Jobs 120 45 40 100 120 35 45 80 30 40 100 120 45 25 35 60 40 Percentage Percentage 80 100 20 30 35 40 15 25 60 80 30 Percentage Percentage 10 20 20 25 40 60 5 15 Female Percentage Percentage 20 Female 0 0 10 20 40 15 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 5 Female Age Age 10 Female 0 20 0 5 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 Female 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 Employment Rate in Wage (c)70 Age Jobs (d) College 35 0 CompletionFemale Rate Age 0 60 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 30 70 Age Age 35 50 25 60 70 30 40 35 20 50 25 Percentage 60 30 Percentage 30 15 40 50 20 25 10 20 Percentage Percentage 30 40 15 20 5 10 Percentage 20 Female 10 Female Percentage 30 15 0 0 10 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 5 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 20 10 Female Age Female Age 0 0 10 5 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 Female Female Age 0 Age 0 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 Monthly wage (e) 5000 Age Age 4000 5000 VND 3000 VND Thousand 4000 5000 VND 2000 3000 4000 Thousand 1000 2000 3000 Female Thousand 0 1000 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 2000 Female Age 0 1000 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 Female 0 Age 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 Age Source: VHLSS 2014 and 2016 VIETNAM: ADAPTING TO AN AGING SOCIETY 35 Women face notable disadvantages in terms of recent World Bank study, Drivers of Socio-Economic housework requirements and wages. Women’s Development Among Ethnic Minority Groups responsibilities for housework are a significant in Vietnam, concludes that societal prejudices contributor to their lower employment rates internalized by women themselves—particularly relative to men. Indeed, the overwhelming majority their traditional housewife role—affect their of women between ages 20-49 who do not work participation in non-agricultural economic sector cite housework responsibilities as the reason activities, for example by lowering their propensity why they don’t work (Figure 2.13). For men, the to seek work in cities or abroad. Furthermore, primary reason for not working between ages 35- Nguyen (2018) and Le (2015) have shown that 49 are disability and inability to find employment. gender stereotypes affect households’ economic Meanwhile, the gender wage gap (Figure 2.12, decision-making, with the bulk of agricultural Panel b above) is largely a function of differences in labor falling on women. Along with a lack of the types of work that men and women pursue. By transportation, this means that women, already post-secondary school, women tend to cluster in burdened with childcare, are not able to establish fields of study such as management, education, and and maintain social networks to the same extent health, whereas men pursue education in higher- as men, especially outside the village. Furthermore, earning fields such as IT and science (Cunningham young couples working far from home often leave and Pimhidzai 2018). Furthermore, men are more their children under the care of grandparents. likely to reach management positions than women, This situation creates unpaid care work that often compounding the wage disparity within industries. falls on women over age 45, thus depriving them of nonagricultural work opportunities in the labor Unpaid care work appears to be a critical market outside their locality. impediment to economic opportunities for women, particularly among ethnic minorities. A Figure 2.13. Vietnam: Men’s vs. Women’s Reasons for Not Working, by Age Source: Authors, based on VLSS 2010-2016 36 VIETNAM: ADAPTING TO AN AGING SOCIETY The labor supply of the retirement-age population ages 55-59, whereas the share of men working in is consistent with the hypothesis that the formal formal jobs drops from 13.3 percent among those pension system affects workers’ decisions to ages 55-59 to 4.8 percent among those ages 60-64 leave the labor force early. Workers in formal (Figure 2.14). Notably, the share of men working jobs retire much earlier and at higher rates than in formal jobs is almost unchanged between workers who do not receive a pension, as seen ages 50-54 and 55-59, even as the employment by the substantially lower employment rates of rate of their female co-workers drops as they hit formal workers when they hit retirement age. retirement, reflecting the lower retirement age The employment rate for men continues to be for women. These patterns also suggest that the higher than that of women for all age groups, statutory retirement age in formal jobs for both and employment rates for both genders drop men and women for both men and women is a consistently as workers age. Although 90.5 significant driver of their decision to stop working. percent of workers were still employed at ages 50- At the same time, the data do not capture the 54 in 2016, the share dropped to 57.6 percent for share of people employed in formal jobs who workers ages 65-69 (Figure 2.14). Similarly, wages shift to other forms of employment, such as self- and number of hours worked also decline for older employment, after retirement. This, coupled with workers. the fact that employment rates remain high in the informal sectors (where there is no retirement age The share of older workers in formal jobs is lower or pension to encourage retirement), demonstrates than that of middle-aged workers. The share of that many retirement-aged men and women are women working in formal jobs drops from 10.1 capable of continuing to work past their respective percent of those ages 50-54 to 2.4 percent of those retirement ages. Figure 2.14. Vietnam: Retirement-Age Worker Employment Trends, 2016 Source: Calculations based on VHLSS 2016 VIETNAM: ADAPTING TO AN AGING SOCIETY 37 Employment patterns among the population are Business income is highest among prime-age reflected in the structure of income in households. workers (31-50-year-old cohort) in both urban In urban areas, wages are the main source of and rural areas. While wage income is the primary household income for all age groups, although source of income across all cohorts, business the importance of wages as a household income income varies by cohort and is largest for prime- source declines as workers age (Figure 2.15). The age workers. In urban areas, prime-age urban same pattern is observed in rural areas. Wages are cohorts derive a larger share of their income from also a significant source of income in rural areas business income compared to those in rural areas. and similarly become less important as workers At the same time, households with individuals in age. In both urban and rural areas, labor income— older cohorts (71 and older) continue to derive which excludes transfers such as remittances income from business activities, with almost 20 and pensions as well as investment income— percent of income derived from business activities represents about 70 percent of total income. for this group in urban areas. Figure 2.15. Vietnam: Composition of Income by Cohort in Urban and Rural Areas, 2016 Source: Authors’ calculations from VHLSS 2016. Private and public transfers are considerably These results are broadly consistent with data more important for older groups, with private from the 2011 VNAS. Self-reported data from 2012 transfers being significantly larger than public VNAS provides information on the most important transfers. The role of transfers, both public and sources of income for daily expenses among the private, is relatively small in Vietnam, although elderly (VWU 2012). About 32 percent of older private transfers are larger in rural areas. Across people said that support from children was the all cohort groups, the oldest cohort (age 71 and most important source, 29 percent said income above) experiences the highest rate of transfers in from work, 16 percent said retirement benefits, 9 the form of pensions payments and also in terms percent said social assistance allowances, and 14 of private remittances receipt. The percentage percent said other support (such as savings and that pension transfers contribute to total income support from family and friends). According to the is higher in rural areas at more than 10 percent, VNAS 2011 data, only 10.4 percent of older people compared to less than 5 percent in urban areas. have savings. Approximately 68 percent of those Private transfers or remittances are highest in the who save do so for emergencies such as sickness oldest cohort. The share of remittances is similar or disease, about 10 percent save money for across urban and rural areas, at almost 20 percent children, and about 8.5 percent save in order to take of income among the oldest cohort (age 71 and care of themselves. One-third of older households above). have debts, which are primarily due to business 38 VIETNAM: ADAPTING TO AN AGING SOCIETY investments. Additional important sources of years and older, reflecting higher mortality among debt include building a house and health care older age group. loans. Very few older households borrow money to purchase housing equipment or to hold a wedding Evidence from VHLSS 2010-16 shows that this or funeral. decline continued in the first half of 2010s for both 65-79 years old and 80 and above age group both in urban and rural areas. In fact, in urban areas, 2.5. Living Arrangements and Access the incidence of living alone among the 65-79 age to Informal Support group doubled from 4 to 8 percent between 2010 and 2016. The incidence of living alone among the A number of studies showed that elderly co- 80 years old and above age group increased only residence in Vietnam has declined significantly slightly over this time period, but their incidence of over time as families become smaller, incomes living with spouses increased as the share of the rise, and children migrate elsewhere (i.e., see Giles total. In rural areas, the incidence of living alone and Huang, 2015, IPS 2016, and MOH and HPG increased slightly for both 65-79 and 80-years old 2018). Notwithstanding this decline, in Vietnam as age groups. Overall, co-residence in Vietnam is in other East Asian and Pacific countries, rates of slightly more common in urban as compared to co-residence are considerable both for 65-79 and rural areas and is more common among women 80 and above age groups (Figure 2.16 and Figure than men in rural areas (not presented here). The 2.17). Co-residence for the older age group (80 and relatively lower rates of co-residence in rural areas above) is greater than that for 65-79 age group, as may reflect the large-scale migration of Vietnam’s living with adult children can provide the elderly with young people to the cities, reducing the number instrumental and financial support. At the same of adult children in rural areas with whom older time co-residence with spouses is more prevalent people can live. among 65-79 age group as compared with the 80 Figure 2.16. Vietnam: Living Arrangements Among the Elderly, 65-79 years old and 80 years old and older, Urban Areas, 2010-2016 Living Arrangements among 65 to 79, Urban, 2010-2016 Living Arrangements among 80 and above, Urban, 2010-2016 100% 2.35% 2.39% 1.33% 2.04% 1.18% 1.91% 4% 3.27% 100% 2.06% 2.87% 3.03% 3.23% 7.65% 5.74% 4.44% 2.92% 2.03% 2.39% 1.40% 90% 8.16% 4.63% 5.24% 6.22% 8.15% 90% 12.94% 14.83% 15.11% 80% 17.55% 80% 24.19% 24.66% 23.29% 25.56% 70% 70% 60% 60% 50% 50% 40% 40% 75.88% 75.12% 75.11% 68.98% 66.21% 65.20% 65.07% 30% 30% 61.66% 20% 20% 10% 10% 0% 0% 2010 2012 2014 2016 2010 2012 2014 2016 Living with children Living with spouse Living alone Living with children Living with spouse Living alone Living with grandchildren Living with others Living with grandchildren Living with others Source: Authors’ calculations from VHLSS 2010, 2012, 2014, 2016. VIETNAM: ADAPTING TO AN AGING SOCIETY 39 Figure 2.17. Vietnam: Living Arrangements Among the Elderly, 65-79 Years Old and 80 Years Old and Older, Rural Areas, 2010-2016 Living Arrangements among 65 to 79 years, Rural, 2010-2016 Living Arrangements among 80 and above, Rural, 2010-2016 100% 1.28% 2.34% 2.13% 1.83% 2.34% 2.20% 1.67% 100% 1.63% 0.36% 0.68% 3.21% 1.40% 2.27% 4.47% 4.71% 3.88% 90% 8.77% 8.93% 10.03% 9.87% 90% 8.74% 13.22% 14.02% 10.54% 80% 80% 28.50% 18.90% 15.22% 15.88% 15.50% 70% 33.03% 30.38% 31.15% 70% 60% 60% 50% 50% 40% 40% 66.26% 66.49% 66.22% 68.68% 30% 59.11% 55.42% 55.10% 30% 53.65% 20% 20% 10% 10% 0% 0% 2010 2012 2014 2016 2010 2012 2014 2016 Living with children Living with spouse Living alone Living with children Living with spouse Living alone Living with grandchildren Living with others Living with grandchildren Living with others Source: Authors’ calculations from VHLSS 2010, 2012, 2014, 2016. Overall, the absence of co-residence does not The Vietnam Government’s Social Policy and imply that the elderly do not receive assistance Social Protection has four pillars. The pillars are: with daily tasks. VWU (2012) reports that about (i) social assistance, including regular allowances, 36 percent of older people needed and received social care centers, and emergency assistance; (ii) assistance, while about 27 percent needed but did social insurance, including pensions and health not receive assistance. Spouses are the primary insurance; (iii) employment; and (iv) minimum basic providers of assistance, followed by daughters, services, including housing, energy, and education daughters-in-law and granddaughters. allowances. In 2017, the Government approved the Master Plan for Social Assistance Reform 2.6. Assess to public programs and Development (MPSARD), which identifies strategies for making the social assistance system The expansion of social protection programs over more comprehensive and effective at addressing the last 15 years has benefited all age groups, vulnerability and exclusion. The Government including older people. Significant coverage also set out specific goals for expanding the expansion—primarily through a broadening of coverage of existing social assistance programs, coverage to the elderly, people with disabilities, including expansion of benefits for the elderly, and orphans—has been undertaken in response to people with disabilities, children in need (orphans, the “Socialization” policy drawbacks and lowered abandoned children, severely disabled children, income support related to the privatization of and specially disadvantaged children), and people energy and changes in pricing.26 The social facing emergencies or difficult circumstances. In protection system has begun to transition from a addition, the Government proposed the phased last-resort source of income support for people introduction of a policy to provide cash transfers who cannot work and do not have family support benefiting infants and young children below the toward a system that provides a broad safety net age of four. Three of the largest programs are to the wider Vietnamese population. discussed below. (See note 6 in the 2.10 Annex for further information about how access to each of these programs is defined.)  ee Chapter 4, Annex 4.1 and Chapter 7 for more 26 S information on “Socialization” policy. 40 VIETNAM: ADAPTING TO AN AGING SOCIETY 2.7. Social Assistance reduction. Some evidence indicates that public transfers crowd out private transfers in Vietnam, The rate of access to social assistance programs but only significantly among poor households is highest among the oldest age groups (above with adult children who are migrants (Giles and age 80) and cohorts (above age 71) and is higher Huang 2015). Governments seeking to expand in rural areas compared to urban areas. Across public transfers to the elderly should consider all age groups, the share of population receiving how such transfers might displace, or crowd out, some social assistance benefits is greater in private transfers from adult children and other rural areas than in urban areas. This is especially family members. In general, the elasticities of pronounced among rural children ages 0-14 and private transfers to increased transfers from other rural adults ages 60-64, who received some kind of sources (including social pensions) suggests that social assistance program at rates more than three the evidence of crowding out is fairly weak. In times those of their counterparts in urban areas. Vietnam private transfers typically decline by 15 (See Figure 2.18.) percent or less in response to higher transfers from other sources, especially for households above the The receipts of social assistance more than poverty line. This holds true regardless of whether doubled from 2010 to 2016 for most age groups the adult children are migrants or not (adult children age 65 and above. Almost half of the oldest old who are migrants tend to offer significantly higher (age 80 and above) received some form of social support to elderly parents than adult children who pension payment both in urban and rural areas in are non-migrants). However, in Vietnam (and to a 2016. These results are driven by the inresese in lesser extent in Thailand), a very different pattern the receipt of social pensions and are consistent is observed for households below the poverty line. with Giang and Pfau (2009b) and Giang and Hoang Among poor households with migrant children, (2013).27 (See Figure 2.18) higher transfers from other sources lead to a nearly 40 percent decline in private transfers. Among Earlier studies showed that poverty among the households without migrant children, the decline is elderly in Vietnam is negatively correlated with much less but still significant. Such findings reflect receipts of transfers or social pensions and the important role that remittances from adult despite their relatively small size, both public and children play in supporting the elderly.28 private transfers are important drivers of poverty Giang and Pfau (2009b), Giang and Hoang (2013) provided 27  ex-ante evaluations, while ILSSA (2015) provide ex-post evaluations on the impact of social pension on the poverty of OP households. Their analyses showed that social pension was limited to those aged 60-79 due to strict means-testing regulations, while that for those aged 80 and over was almost universal. For the ex-ante evaluations, the studies implied that (i) social pension played a significant role in reducing poverty for older people, (ii) expanding social pension coverage (lowering eligible age, Indeed, in Vietnam, private transfers from adult children 28  and increasing benefit level) would help to reduce elderly who are migrants are more than double the level of poverty substantially, and (iii) focusing on rural OP would transfers from adult children who are not migrants (Giles reduce poverty at the highest rate, given limited budget. and Huang 2015). VIETNAM: ADAPTING TO AN AGING SOCIETY 41 Figure 2.18. Vietnam: Access to At Least One Social Assistance Program (Broad*) by Age Group and Cohort 2010-2016 * “Broad” definition includes social pensions and other transfers to vulnerable groups (Decree 136), cash transfers to mitigate the rise of electricity prices on poor households (Decision 28/60), education-related cash transfers poor students and ethic minorities. Source: Authors’ calculations from VHLSS 2010, 2012, 2014, 2016. 2.8. Health Insurance rise of SHI among older age groups appears to have been driven primarily by increases in participation Access to social health insurance (SHI) expanded in rural areas. Nonetheless, urban coverage rates significantly between 2010 and 2016, with the remained slightly higher overall than rural coverage highest rates of increase among the youngest and across all age groups. Cohort groups also show a oldest age groups. By 2016, access to SHI reached trend toward increased participation in SHI in both about 95 percent for the 0-14 age group as well urban and rural areas, with the highest coverage as for the 80 and above age group, an increase among the oldest old. (See Figure 2.19) of about 10 percent and 22 percent, respectively. With the exception of the prime-working age These results are consistent with the analysis groups (ages 35-54) and the youngest age group of SHI participation rates in Giang and Phi (ages 0-14), almost all age groups experienced an (2017). Overall, Giang and Phi (2017) found that increase of about 20 percent in SHI access. The the participation rate of the older population has 42 VIETNAM: ADAPTING TO AN AGING SOCIETY increased significantly over the second half of having a higher rate of participation than the latter. 2010, with the eldest older age group showing The most frequently mentioned explanation for the fastest increase in coverage. Such results this trend is that those living in rural areas have less demonstrate the success of recent policies and ability to afford insurance, coupled with barriers programs promoting older people’s participation in created by participation restrictions related to the SHI scheme. Giang and Phi (2017) report that household size that especially affect those living the participation rate of older ethnic minorities in large households. The participation rate of older also increased substantially, reaching about 90 people living in poor households was higher than percent in 2014, primarily due to policy efforts to for those living in non-poor households, a result of provide free health insurance to ethnic minorities. the rapid expansion of SHI to poor people in recent Participation rates of both urban and rural older years (Giang and Phi 2017). groups increased significantly, with the former Figure 2.19. Vietnam: Access to Social Health Insurance by Age Group and Cohort, 2010-2016 Source: Authors’ calculations from VHLSS 2010, 2012, 2014, 2016. VIETNAM: ADAPTING TO AN AGING SOCIETY 43 2.9. Contributory Pensions in the 60-64 age group in urban areas received contributory pension payments in 2010, and this Contributory pension receipts are high among incidence dropped quite perceptibly to a third older groups and differ considerably between rural in 2016. At the same time, contributory pension and urban areas as well as across age groups. In receipts for the age group 70-79 age group 2016 about one-quarter of people in the 65-69 and increased substantially, from 30 to 40 percent of 70-79 age groups received contributory pensions the individuals in the age group. These trends, and pension receipts were highest among the 65- together with the fact that there were some 79 age group. (See Figure 2.20) increases in the incidence of contributory pension receipts in the 51-60 cohort and a slight decline There appears to have been a precipitous drop in the 61-70, suggest that some individuals who in the incidence of contributory pension receipts reached retirement age between 2010 and 2016 among the 60-64 age group, and an equally were less likely to retire from formal jobs with precipitous increase among the 70-79 age group contributory pensions. between 2010 and 2016. Almost half of people Figure 2.20. Vietnam: Access to Contributory Pension Programs by Age Group and Cohort, 2010-2016 Source: Authors’ calculations from VHLSS 2010, 2012, 2014, 2016. 44 VIETNAM: ADAPTING TO AN AGING SOCIETY 2.10. Annex Key Definitions  oderately poor: consume $1.9-$3.2 per -M person per day National Poverty Rate. The poverty rate is  conomically vulnerable: consume ranges -E defined at the household level but presented at from $3.2-$5.5 per person per day the individual level for individuals with particular characteristics (i.e. individuals in a particular age  conomically secure: consume $5.5-$15 per -E range). Specifically, poverty rate for a particular person per day group (i.e. individuals in a particular age range) is  iddle-class: who live on more than $15 per -M defined as the number of individuals in this group person per day living in households defined as poor divided by the total number of individuals in the group (weighted VHLSS longitudinal panel data collection. The by household size). This statistic is calculated for VHLSS data collection protocol includes a rolling each year. Households are defined as poor if their panel of households, in which 50 percent of the per capita household expenditure is below the households in one round (e.g. VHLSS 2014) are poverty line defined by GSO-WB for that year. revisited as part of the sample for the next (the VHLSS 2016 in this case). This survey is a rooftop Under the definition used by GSO-WB, the poverty survey, without any tracking of individuals or line in Vietnam was as follows: split households. The test for the existence of • In 2010: 7,836,000 VND per person per year attrition bias due to migration patterns looks at key outcomes for the panel sample against the full • In 2012: 10,456,000 VND per person per year sample and finds no evidence of attrition bias. • In 2014: 11,565,000 VND per person per year Assets. Assets and living conditions indicators • In 2016: 11,630,000 VND per person per year such as size of living space, housing material, and ownership of private bathroom and kitchen, Economic Class. Economic Class is defined computers, air-conditioning, water heaters, and at the household level but presented at the washing machines are defined at the household individual level for individuals with particular level, and measured and reported at the individual characteristics. Households are classified as level for individuals with particular characteristics extremely poor, moderately poor, economically (i.e. individuals in a particular age range). The vulnerable, economically secure, or middle class resulting statistic is a share of people in an age based on their daily per-capita expenditures group living in households with the ownership of in 2011 Purchasing Power Parity (PPP) terms. these assets. Then, the number of individuals with particular characteristics (i.e. individuals in a particular age Non-monetary welfare indicators. Non-monetary range) living in households belonging to a particular welfare indicators such as access to piped water, classification group (extremely poor, moderately improved water, toilet and telephone service are poor, economically vulnerable, economically defined at the household level and measured and secure, or middle-class) is divided by the number reported as the percentage of people living in of individuals with these characteristics living in all households which own these amenities. Improved households. The resulting ratios are weighted by water is defined by the main drinking water supply household size. of the household being from tap water reaching the house from one of three sources: public tap water, The economic classification is determined on a drilled well, or a protected dug well. Improved the basis of households’ per capita household toilet is defined by a household having a septic/ expenditure as follows: semi-septic tank, suilabh, or improved toilets with  xtreme poor: consume less than $1.9 per -E vent. person per day VIETNAM: ADAPTING TO AN AGING SOCIETY 45 Social Protection Programs students studying (up to high school) in a poor household or living in P135 or in remote areas The VHLSS asks either the head of household or (Code c and d, question 2, section 8 in VHLSS any household member with the most information 2014) about the household. This information is reported • Electricity support: Poor households (Code a, at the household level. question 2a, section 8 in VHLSS 2014) • Social Health Insurance (SHI) access is defined • The “Broad definition” of access to social as the percentage of an age/cohort group that assistance programs is defined for households which has had a health insurance card or a with any one of the following programs: free healthcare booklet/card/certificate in the past year. The VHLSS gathers this information - Decree 136: Households with member aged for every individual in the household, including 80 or older without pension or social security children. Information for all household payment; orphans who are studying; single members is reported in section 3, question 9 in parents raising under-16-year-old children VHLSS 2014. in poor households (Code 106, question 1, • Pension (contributory) access is defined as the section 4d in VHLSS 2014) percentage of an age/cohort group that has received pension, unemployment allowances, - Food aid (Code k, question 2, section 8 in and one-off severance payments in the past VHLSS 2014) year. The VHLSS applies this question to only - Housing support for poor households (Code respondents aged 15 or older. The VHLSS f, question 2, section 8 in VHLSS 2014) asks for this information for either the head of household or any household member with the - Electricity subsidy: Poor households (Code most information. Information for all household a, question 2a, section 8 in VHLSS 2014) members aged 15 and above is reported section 4a, question 27 & 28 in VHLSS 2014. - Education aid (including food, • The “narrow definition” of access to social accommodation, travel, textbooks, and assistance programs (not presented) is defined uniforms): include reduction of and as that any member of a household received at exemption from tuition fees for the poor least one of the government subsidies below: and policy-based scholarships for students studying (up to high school) in a poor • Decree 136: Households with member aged household or living in P135 or in remote 80 or older without pension or social security areas (Code c and d, question 2, section 8 in payment; orphans who are studying; single VHLSS 2014) parents raising under-16-year-old children in poor households (Code 106, question 1, section - Health support: include support in 4d in VHLSS 2014) purchasing health insurance cards and • Education aid (including food, accommodation, reduction of and exemption from costs travel, textbooks, and uniforms): include of medical checks/treatment for the poor reduction of and exemption from tuition fees (Code a and b, question 2, section 8 in for the poor and policy-based scholarships for VHLSS 2014) 46 VIETNAM: ADAPTING TO AN AGING SOCIETY 2.11. References Cunningham, Wendy and Obert Pimhidzai. 2018. Vietnam’s Future Jobs: Leveraging Mega-Trends For Greater Prosperity. World Bank Group, Washington, D.C. Demombynes, Gabriel and Mauro Testaverde. 2018. “Employment Structure and Returns to Skill in Vietnam: Estimates Using the Labor Force Survey.” Background paper. World Bank. General Statistics Office of Vietnam (GSO). 2016. Intercensal Population and Housing Survey. General Statistics Office of Vietnam (GSO). 2016, 2014, 2012, 2010, 2008, 2006, 2004, 2002. Results of the Vietnam Household Living Standards Survey (VHLSS). Long Thanh Giang & Cuong Viet Nguyen. 2017 “Aging population and the sustainability of the pension scheme: Simulations of policy options for Vietnam”, Journal of Economics and Development, Vol. 19, No. 3 (December 2017): 40-51 Giang Thanh Long and Phi Manh Phong. 2016. “Thuc trang va cac yeu to tac dong toi ngheo cua nguoi cao tuoi o Vietnam” (Current situation and determinants of poverty among older people in Vietnam). Tap chi Kinh te va Phat trien (Journal of Economics and Development), 233, November 2016. Giang Thanh Long and Wade Donald Pfau. 2009a. “The Vulnerability of the Elderly to Poverty: Determinants and Policy Implications for Vietnam.” Asian Economic Journal, 23(4): 419-437. Giang Thanh Long and Wade Donald Pfau. 2009b. “Aging, Poverty, and the Role of a Social Pension in Vietnam.” Development and Change, 40(2): 333-360. Giang Thanh Long and Hoang Chinh Thon. 2013. “Cash Transfers for The Most Vulnerable and Poor Elderly People in Vietnam: An Ex-Ante Impact Evaluation.” Journal of Economics and Development, 15(3): 22-35. Giles, John and Yang Huang, 2015. Are the Elderly Left Behind in a Time of Rapid Demographic and Economic Change? A Comparative Study of the Poverty and Well-Being East Asia’s Elderly. Mimeo, World Bank, Washington D.C. Institute of Labour Science and Social Affairs (ILISA). 2015. “Evaluation of social pension in Vietnam.” Background paper for the Master Plan for Reform and Development of Social Assistance System (MPSARD) in 2018-2025 with a Vision to 2030. Ministry of Health (MOH) of Vietnam and Health Partnership Group (HPF). 2018. Joint Annual Health Review 2016 - Towards Healthy Ageing. Medical Publishing House, Hanoi. Pimhidzai, Obert. 2018. Climbing the ladder: poverty reduction and shared prosperity in Vietnam (English).  World Bank Group, Washington, DC. VHLSS, see General Statistics Office of Vietnam. Vietnam Women Union (VWU). 2012. Vietnam Aging Survey (VNAS): Key findings. Women’s Publishing House, Hanoi. VIETNAM: ADAPTING TO AN AGING SOCIETY 47 Vietnam Women Union (VWU). 2011. Vietnam Aging Survey (VNAS): Key findings. Women’s Publishing House, Hanoi. World Bank. 2019. Drivers of Socio-Economic Development Among Ethnic Minority Groups in Vietnam (English).  World Bank Group, Washington, D.C. World Bank. 2018. Climbing the Ladder: Poverty Reduction and Shared Prosperity in Vietnam. World Bank Group. World Bank. 2017. World Development Indicators 2017. World Bank Group, Washington, D.C. World Bank. 2015. “Macrofiscal Implications of Achieving Universal Health Coverage in East Asia and Pacific.” In Adjusting to a Changing World, 61–77. World Bank, Washington, DC. doi:10.1596/978-1- 4648-0618-6. 48 VIETNAM: ADAPTING TO AN AGING SOCIETY Chapter 3: POTENTIAL MACROECONOMIC AND FISCAL IMPACTS OF RAPID AGING IN VIETNAM 3.1. Introduction and Summary mitigate the projected impacts on Vietnam’s fiscal situation. The growth and fiscal implications of Vietnamese society “becoming old before becoming rich” are 3.2. Demographic trends and GDP likely to be substantial. Vietnam’s demographic transition will occur in a fraction of the time and Vietnam has posted vibrant economic growth over at a fraction of the income level as countries that the past few decades, which is attributable in part preceded it, including the advanced industrial to favorable demographic trends, along with strong countries. Without reforms, long-term growth productivity growth. During the period 1985–2018, is projected to slow over the period 2020–2050 per capita income increased eight-fold in Vietnam. compared to the last 15 years by 0.9 percentage It benefited from a rapid increase in the working- points, largely due to the aging of Vietnamese age population and a decline in the dependency society. Vietnam’s aging society could result in ratio. This demographic dividend is estimated to major fiscal deficits in the long run, and additional have contributed to about one-third of Vietnam’s fiscal costs could total 4.6 percent of GDP by 2050 growth during this period, with increases in if the coverage of social programs is expanded productivity—supported by implementation of the and service delivery is improved as expected. The far-reaching Doi Moi reforms—accounting for the best avenue for mitigating the fiscal impacts of remaining two-thirds of the increase in GDP (World an aging society is instituting early reforms that Bank and Ministry of Planning and Investment would allow controlling the anticipated increase of Vietnam 2016). Over the same period, LMICs in per-beneficiary costs while not sacrificing (low- and middle-income countries) and HICs improvements in service quality. (high-income countries) experienced 2.5-fold and 1.7-fold average increases in per capita income, This chapter examines the macroeconomic respectively (Figure 3.1). Vietnam’s stellar growth and fiscal impacts of Vietnam’s aging society. It record supported its graduation from a low-income presents five growth scenarios, projected using country (LIC) to a LMIC in 2011 and a remarkable the World Bank’s Long-Term Growth Model decline in poverty rates, from 53 percent of the (LTGM): a baseline and alternatives assuming total population in 1992 to 2 percent in 2016 (at higher and lower values for the labor participation $1.90/day PPP 2011 international dollars). rate and growth in human capital. The rest of the chapter details the five scenarios for age-related These positive trends in demography and expenditures, drawing heavily on the World Bank’s productivity were intricately linked to the structural Fiscal Sustainability Analysis (FSA) model. The transformation of Vietnam’s economy. Agriculture chapter concludes with a discussion of how to production as a share of GDP declined from 40 VIETNAM: ADAPTING TO AN AGING SOCIETY 49 percent in 1985 to 15 percent in 2018. Agricultural Vietnamese reached working age, translating employment as a share of total employment also into average annual labor force growth of about declined, from 72 percent in 1985 to 40 percent 2.5 percent and an almost doubling of Vietnam’s in 2019. The decline in agrarian employment was workforce. While the working-age population and more than offset by an increase in employment in labor force are projected to continue to expand in the industry and services sectors, which led to a absolute numbers for another two decades, the net increase in total jobs and facilitated absorption rate of increase is projected to decelerate to a of new entrants into Vietnam’s labor force as the markedly lower pace—to about half of the recent working-age population grew. historical average (Figure 3.2). Relative to the aggregate population, the size of the working-age While GDP growth in Vietnam continues to benefit population has already peaked. From around 2035, from its “demographic dividend,’’ the positive the working-age population is projected to begin to impetus to growth is abating and is projected to contract slightly through the 2050 time horizon of turn negative during the forecast horizon through the study. 2050. From 1990 to 2018, almost 25 million Figure 3.1: Productivity and labor force growth, Figure 3.2. Vietnam: average labor force growth selected countries (in percent) Sources: World Bank, WDI, and International Labor Organization (ILO). *LMIC=Low- and middle-income countries The World Bank’s LTGM was used to estimate is projected using a higher labor participation rate, five growth scenarios for the period 2019–2050. such that the size of the labor force in 2040 as a The model’s parameters include the deprecation share of the total population is roughly the same rate, labor share of income, human capital index, as it was in 2018, effectively offsetting the decline total factor productivity, labor market participation, in the working-age population. The unfavorable external balance, net foreign direct investment demographics scenario (S3) is projected using (FDI), and demographics. The baseline scenario a lower labor participation rate. This scenario (S1) projects growth by setting the parameters is probably more likely than the favorable equal to Vietnam’s average values for the most demographics scenario. Vietnam’s participation recent 15 years of data or extrapolating historical rate is already high, for both men and women, and trends. The favorable demographics scenario (S2) labor participation typically falls as incomes rise. 50 VIETNAM: ADAPTING TO AN AGING SOCIETY The favorable human capital scenario (S4) sets the There is limited scope to moderate the shrinking growth rate for the Human Capital Index 50 percent workforce by increasing the participation rate. higher than its current value by 2030. Finally, the This path was taken by many members of the unfavorable human capital scenario (S5) halves OECD, which implemented policies to encourage Vietnam’s growth rate on the Human Capital Index. the population—particularly women—to seek work. However, Vietnam already has one of the highest Long-term growth falls under the baseline participation rates in the world (Figure 3.4) for scenario and in each of the scenarios. The main both males and females.28 This is reflected in the driver is Vietnam’s shrinking labor force, which LTGM scenarios—increasing or decreasing the exerts too much drag for even the favorable participation rate has little long-term impact (Figure scenarios to offset. The baseline shows that long- 3.3). As the economy develops, participation rates term growth is projected to slow down over the are more likely to fall than rise as a greater share period 2020–2050 compared to the last 15 years of the young working-age population remains in by 0.9 percentage points, largely due to the aging education (and thus out of the labor force), people of Vietnamese society as mentioned earlier. move out of the agricultural sector, and social insurance coverage increases. Figure 3.3 Vietnam: projected GDP growth rate, in percent, by scenario, 2019–205029 Source: World Bank staff analysis using data from PWT 2020; UN 2019; WDI 2020. 29 The participation rate is artificially high for Vietnam because the numerator (labor force) includes those over the age of 65, while the denominator (working-age population) does not. This discrepancy is pronounced, given the large share of employment and the propensity of farmers to work into old age in Vietnam. VIETNAM: ADAPTING TO AN AGING SOCIETY 51 Table 3.1.Vietnam: projected GDP growth GDP growth and GDP per capita growth (percent annual), by scenario Scenario 2020 2025 2030 2035 2040 2045 2050 GDP S1 Baseline 5.9 5.8 5.7 5.6 5.5 5.3 5.0 growth S2 Higher participation 6.0 5.9 5.9 5.8 5.7 5.4 5.1 rate S3 Lower participation 5.8 5.6 5.6 5.5 5.3 5.2 5.0 rate S4 Higher human 5.9 6.0 6.1 6.1 6.0 5.9 5.7 capital growth S5 Lower human 5.8 5.6 5.3 5.1 4.9 4.6 4.4 capital growth GDP per S1 Baseline 4.9 5.0 5.1 5.2 5.1 5.0 4.9 capita S2 Higher participation 5.0 5.1 5.3 5.4 5.4 5.1 5.0 growth rate S3 Lower participation 4.8 4.9 4.9 5.0 5.0 5.0 4.8 rate S4 Higher human 4.9 5.2 5.5 5.7 5.7 5.7 5.6 capital growth S5 Lower human 4.8 4.8 4.7 4.7 4.6 4.4 4.2 capital growth Vietnam could increase the size of the workforce aging society to some degree. The United Nations to some extent by increasing the retirement (UN) estimates that labor productivity in Vietnam age. The government already plans to raise the increased by an annual average rate of 5.3 percent retirement age from 60 to 62 years for men and 55 over the period 2001–2012, of which 2.8 percentage to 60 years for women, effective in 2021. Delayed points could be ascribed to improvements in intra- retirement would expand the size of the working- sectoral labor productivity and 2.5 percentage age population and have fiscal benefits for points to structural inter-sectoral shifts in pension financing as people live longer, assuming employment. Nonetheless, productivity remains it correlates with healthy aging. However, raising low relative to other economies in East Asia (Figure the official retirement age would not affect the 3.4), and productivity varies markedly by ownership agricultural sector, which accounts for a large (Figure 3.5) and sector (Figure 3.6). This suggests share of the workforce and where the tendency is that there is room for improvement. Given the to continue working well past the retirement age. limited scope for increasing the participation rate, focusing on productivity is also likely to be the best Improving labor productivity could help offset means of counteracting the deleterious impacts of changes to the labor supply and the impacts of an Vietnam’s aging society. 52 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 3.4. Decomposition of 2018 GDP per capita into product of employment rate, labor force share of population, GDP per employed worker (labor productivity), selected countries GDP per capita = employed/labor force X labor force/total population X labor productivity Sources: World Bank (WDI) and Flochel, et al. 2014. To improve labor productivity, the government economy. Vietnam’s output structure is already of Vietnam should prioritize the structural changing following a well-established trend in transformation of the economy away from middle-income countries. Employment in higher agriculture and toward higher value-added value-added sectors, particularly services, is sectors. Today, around 40 percent of the skewed toward younger employees. In addition to population is employed in agriculture. Unlike in generally reflecting higher labor productivity, these other sectors, productivity falls as workers age are often jobs in which age benefits rather than due to agriculture’s heavy physical labor demands. hinders employee output given the positive returns This, in turn, drives down productivity for the entire to experience. VIETNAM: ADAPTING TO AN AGING SOCIETY 53 Figure 3.5. Vietnam: productivity by ownership Figure 3.6. Vietnam: productivity by sectors Sources: General Statistics Office of Vietnam (GSO) and World Bank staff calculations. Structural transformation is not smooth or their younger colleagues. Increases in human automatic. Many countries fall into the so-called capital development—including lifetime learning— “middle-income trap,” in which many years of strong can play a key role in offsetting the decline of growth are followed by an extended period of labor inputs by boosting labor productivity and relatively stagnant per capita income growth. While addressing skills gaps that business surveys each country faces unique challenges, the central indicate are a key bottleneck. theme is a struggle to move from accumulation- led growth—which relies on increasing the supply Improving human capital and expanding of labor and capital—to a growth model driven educational attainment could have multiple by innovation and increasing productivity. Future benefits. Higher educational attainment is growth will depend on increased investments in correlated with higher productivity. Education physical and human capital from both the public can also provide individuals the incentive to seek and private sectors. higher-paying work, which could boost labor force participation. In addition, education could indirectly In light of the importance of productivity, more support longer, healthier lives, as it is associated formality in the economy should be encouraged with better health outcomes and lower mortality. regardless of what other policies are pursued. Firms in the formal sector are almost four times as Going forward, higher human capital growth productive per employee as those in the informal presents the best prospects for Vietnam, with sector. Increased formality would have the added medium-term growth projections higher than near- benefit of supporting revenue mobilization to help term growth projections (Table 3.1 and Figure 3.3). offset the pressures of age-related expenditures. Scenario 1 assumes that Vietnam can continue improving its education system and that the Human capital development will also be critical for results are reflected in economic performance. improving labor productivity. The largest share of However, this level of human capital growth is the working population in Vietnam is between ages not likely. Vietnam has already posted impressive 30 to 45, when labor productivity tends to peak. This human capital growth and increasing it to such a has the potential to support productivity growth degree would rank it far above any other country in if it induces firms to invest in new technologies, the world. Yet even in that scenario, growth in 2050 particularly automation. However, older workers is projected to be lower than growth today (Table tend to adapt to new technology more slowly than 3.1). The lower human capital growth scenario is 54 VIETNAM: ADAPTING TO AN AGING SOCIETY more in line with the rest of the world and would (Box 3.1). New sources of financing might come be expected from mean reversion. Just to keep from increased savings or additional FDI, which growing at its high historical rate, Vietnam would depend on various factors detailed below. In need to increase its investments in education. advanced industrial economies, aging populations have been associated with capital deepening—a Expanding investments in physical and human higher capital-output ratio. This would suggest capital will require new sources of financing diminishing returns to investment, and hence and more capital per worker. The problem will diminishing incentives to invest and save. However, become acute as Vietnam approaches the so- Vietnam is still a lower middle-income country and called “missing middle,” when concessional may escape that pattern. The marginal returns to financing and development assistance dry up capital may still be high enough to induce further before alternative sources can be fully mobilized profitable investments. Box 3.1. Transitioning out of aid and the end of the demographic dividend Vietnam is transitioning out of official development assistance (ODA) from multilateral development banks (MDBs), which will put additional pressures on public finances. The country will need to adjust to the changing financing conditions that accompany its recent MIC status—notably, an increased reliance on non-concessional (market-based) financing terms. This fall-off in ODA will compound the demographically driven fiscal challenges faced by Vietnam. At early stages of development, countries rely heavily on international public sector funds—primarily from MDBs or bilateral donors—which usually have a large concessional component. As per capita income levels rise, access to grants and below-market rate loans falls. The so-called “missing middle” dilemma emerges: as countries graduate to middle-income status and lose access to concessional financing, total public financing generally falls as a share of national income until per capita incomes reach high income levels. This reflects the inability of tax revenues and external private resources—remittance flows and FDI—to offset the fall in ODA. The transition away from ODA manifests over the medium term and is not a sudden event. Based on the experiences of other countries, Vietnam is likely to experience broad-based changes in its financial flows, including a gradual shift toward higher interest rates and shorter grace periods. There is also a concurrent shift in the composition of financing toward loans and fewer grants—both of which imply a greater debt burden. Transitioning out of aid is typically accompanied by a shift in the allocation of remaining aid flows among sectors, toward infrastructure projects that can generate revenues (with financing on harder terms) and away from social sector projects like health and education, which can lead to increased demands on public service delivery. Vietnam’s public debt is relatively high as a share of GDP for an LMIC and would be worse without the highly concessional terms it has received. This points to the need to carefully manage the process of transitioning to non-concessional terms. Furthermore, in the context of high and rising demands on Vietnam’s public finances, there is a risk that interest rates—currently at historic lows—will rise again. Increased spending pressures and higher borrowing costs could lead to higher fiscal deficits in the absence of efficiency gains in public spending or greater tax revenue mobilization. Vietnam will want to maintain a prudent fiscal policy to ensure that public sector borrowing does not crowd out private sector investment and to ensure enough fiscal space so the government can invest in its development objectives. To sustain GDP growth and avoid the middle-income trap in the context of slowing labor force growth, productivity will need to rise in Vietnam, which in turn requires increased investment in higher value-added activities such as manufacturing and in human capital. Source: Kharas et al. (2014). The impact of an aging population on savings is The compositional effect is derived from well- primarily determined by two offsetting effects: established life-cycle theories that posit that compositional and behavioral (Velamuri 2015). young adults borrow, middle-aged adults save, and VIETNAM: ADAPTING TO AN AGING SOCIETY 55 senior citizens live off their savings (dis-save).30 participants. Supporting financial inclusion through This suggests that an aging population will lead enhanced access to finance and pension coverage to a lower savings rate. However, the behavioral could help counteract the dissaving associated effect suggests that in anticipation of a longer life, with aging. individuals in an aging society will boost savings during their working lives to finance consumption In addition to the impact on investment (and hence in an extended old age. This suggests that an the current account), the domestic savings rate aging population will lead to a higher savings rate. will affect patterns of consumption. Extending The net impact of an aging population on savings the retirement age would boost consumption in an LMIC economy is unclear. On the one hand, a through an extended period of wage earning, shrinking workforce would lead to a higher capital- while enhancing the reserves of state pension to-output ratio and diminishing returns on capital, schemes—both of which would reduce incentives thus reducing the incentives to invest. On the other to save in middle age (Flochel et al. 2014). There hand, an aging population could provide incentives is a general consensus, particularly in times of for firms to invest in new technologies. slowing global demand and rising trade tensions, that as countries like Vietnam transition to upper The government can help meet the economy’s middle-income status, an emphasis on investment financing needs by liberalizing rules related to and export-led growth will need to shift to domestic foreign investment. As Vietnam is a small, open demand as the primary engine of sustained GDP economy, the future path of its interest rates—and growth.31 Still, export- and domestic demand-led hence the return on capital—will be determined growth need not be incompatible (Felipe 2003). primarily by global market trends. Given rapid aging in the G20 countries, the IMF (2019) argues that Finally, the incentives for precautionary savings global real interest rates are likely to remain low for will reflect both the generosity and security of the foreseeable future. This would allow Vietnam government-provided pensions (Amaglobeli et to tap international capital markets, supplementing al. 2019). Generous and well-funded pensions FDI and domestic savings and further boosting systems would provide workers with confidence aggregate capital formation. that they will not live their retirement years in poverty—although overly generous and under- Expanding financial inclusion, along with funded pension and social insurance systems can increased pension coverage, would support exacerbate fiscal pressures associated with an financial intermediation and help channel savings aging population. In addition, an aging population into investment. Access to finance remains will have greater healthcare needs, which will put relatively low in Vietnam, which hampers financial pressures on both public expenditures and private intermediation. Increasing access to finance retirement savings. Investments in public health through bank and non-bank institutions supports can assuage fears that retirement funds will be financial intermediation through more efficient devoured by medical bills and, if translated into resource allocation. Similarly, expanding coverage healthy aging, can allow older workers to extend of Vietnam’s contributory pension system, which their years of employment—which in turn benefit is also relatively low, could help boost savings and household incomes, tax revenues, and household strengthen financial intermediation—in addition consumption patterns.32 to providing for a steady retirement income for 31 For example, ADB (2011). The Global Economic Crisis and Trade and Growth Prospects in East Asia. ADB Working Paper No 242. 32 Research on China by the IMF notes that fear of age-related  .g., Modigliani (1954 and 1970, etc.) posits that an 30 E health care costs can drive precautionary savings and individual’s consumption in any given period is not calculate the for every yuan spent by the government on determined by their current income stream but rather by healthcare, household consumption was increased by 2 their expected cumulative income over their entire life. yuan (Barnett and Brooks 2010). 56 VIETNAM: ADAPTING TO AN AGING SOCIETY 3.3. Fiscal policy challenges of an The following projections draw heavily on the aging population World Bank’s FSA model and illustrate the impact of aging on four broad expenditure categories: The aging of Vietnam’s population will have healthcare, education, social assistance, and significant fiscal implications when relevant pensions. Except for pensions, three variables programs expand coverage and improve the determine the costs of age-related expenditures. quality of service delivery. Starting in 2035, fewer The first variable is demographic changes, taken workers will mean less revenues generated from from the UN’s World Population Prospects standard personal income taxes, assuming no changes to projections, which are broken down by age cohort. the tax code or formalization rate. At the same The second variable is coverage rates, which time, a larger elderly population will increase represent the percentage of the age cohort that demands on public (and private) healthcare benefits from a given program. The third variable and pension systems. To offset a decline in the is the cost per beneficiary. The total cost of each quantity of labor, the government will need to program is the product of the population cohort, invest in education and infrastructure to raise coverage rate, and cost per beneficiary. Pensions quality, thereby boosting productivity growth and are treated differently than all other expenditure economic competitiveness. Less revenues and categories. Given the long vesting period, future more expenditures are projected to increase the trajectories are more rigid, and only one scenario is fiscal deficit and public debt as a share of GDP. presented, reflecting assumed changes in program Lower GDP growth and a shrinking labor force participants and costs to participants. could increase the government’s debt service costs and limit its capacity to borrow if investor For the healthcare, education, and social confidence is eroded. assistance categories, projections for coverage rates and costs per beneficiary are based on As Vietnam’s demographic transition accelerates, historical trends and the experiences of similar policymakers will have to juggle multiple and countries. The specifics vary by program (Table often conflicting fiscal objectives. Given the more 3.2). Projected growth in coverage rates is equal to limited fiscal space implied by rising age-related the average growth rate over the last seven years. expenditures, the government will need to balance Growth plateaus at coverage rates determined the relative costs and benefits of various spending, by Vietnam’s policy goals or rates comparable to such as building a new airport versus expanding the historical experience of countries with similar pensions to the elderly. In addition to investing in characteristics. Growth in the cost per beneficiary education and infrastructure to boost economic is determined by setting a premium over GDP per competitiveness, the government will also need to capita growth. Primary, secondary, and tertiary meet the healthcare and social assistance needs of education cost premiums are set at 0.5, 0.75, an aging population. An inability to balance these and 1.0 percentage points, respectively, above fiscal needs could translate into rising deficits and GDP growth. All other expenditure categories debts—putting upward pressure on interest rates, grow larger premiums over GDP growth each potentially crowding out much-needed domestic decade—0.5 percentage points for years 2021– and foreign investment and threatening the 2030, 1.0 percentage points for 2031–2040, and country’s macroeconomic stability. 1.5 percentage points for 2041–2050.33 Coverage rates and costs per beneficiary for the war merit, 33  electricity, and social policy programs are calculated separately for the non-elderly and elderly populations but are summed, by program, for presentation because of their relatively small fiscal costs. VIETNAM: ADAPTING TO AN AGING SOCIETY 57 Table 3.2.Vietnam: projected coverage rates and unit cost, by program Cost growth Coverage limit Program (percentage point premium over (percent of cohort) GDP growth) Primary education 100 0.5 Secondary education 97 0.75 Tertiary education 40 1.0 Elderly healthcare 95 Non-elderly healthcare 95 0.5 (years 2021–2030) War merit 6.5 1.0 (2031–2040) Electricity 3 1.5 (2041–2050) Social policy 25 Source: World Bank staff projections. Using these variables and parameters, three scenario incorporates the projected changes scenarios are projected for each expenditure (mostly increases) in coverage rates (Figure 3.7). It category: demography only; demography is meant to show the fiscal cost implications of an and increased coverage; and demography, increase in the quantity of beneficiaries. Finally, the increased coverage, and increased unit cost. The increased coverage and cost scenario incorporates demography-only scenario holds coverage rates both the projected changes in coverage rates and and costs per beneficiary constant. The change costs per beneficiary. It is meant to show the fiscal in total costs is therefore completely driven by cost implications of an increase in the quantity of demographic changes. The increased coverage beneficiaries and the quality of services delivered. Figure 3.7. Vietnam: coverage rates for social programs, projections Health, non-elderly Health, elderly Education, primary Education, secondary 100 100 110 100 90 108 95 90 106 80 90 80 104 70 85 102 60 70 100 80 2010 2030 2050 2010 2030 2050 2010 2030 2050 2010 2030 2050 Education, tertiary War merit Electricity Social policy 40 6.5 10 25 35 6 8 20 5.5 30 6 15 5 25 4.5 4 10 20 4 2 5 2010 2030 2050 2010 2030 2050 2010 2030 2050 2010 2030 2050 Demography Demography and coverage Demography, coverage, and unit cost Source: World Bank staff projections using data from the Vietnam Household Living Standards Survey (VHSS), UN World Population Prospects, and World Development Indicators. 58 VIETNAM: ADAPTING TO AN AGING SOCIETY The fiscal costs associated with each scenario Given the projected lack of fiscal space, the are presented by program in the following Government is looking for complementary private subsections. They are shown as additional costs, sector solutions. In addition, in line with the long- above those prevailing in 2019, as percent of GDP. standing trend of fiscal decentralization, sub- In other words, they are the additional fiscal burden national governments are being required to take that Vietnam faces as a result of demographic on greater responsibility for financing health changes, expanded coverage, and higher-quality programs. public services. Total fiscal costs across programs are presented in section 3.7. Annual expenditure for healthcare for the elderly is projected to increase significantly under all scenarios, driven mostly by demography (Figure 3.4. Healthcare 3.8). In 2019, the latest year for which budget An aging population will generate fiscal estimates are available, Vietnam allocated 5.0 pressures from rising demand for health care percent of the state budget to health, population, services. Healthcare expenditures in Vietnam are and family planning—roughly 1.4 percent of GDP. comparable to countries of similar income levels, The dispersed nature of Vietnam’s health system both as a share of GDP and in per capita terms. and the paucity of data make it difficult to make Social Health Insurance (SHI) covers 87 percent of definitive projections. However, using the best the population, including most poor and vulnerable available data, elderly healthcare is projected to groups. Public demand for healthcare will rise over add nearly 0.4 percent of GDP in fiscal costs by the next decades, reflecting an aging population, 2050 under the most benign scenario, in which only an increase in non-communicable diseases, and demography is considered. Expanding coverage to the rising expectations of a growing middle class. 95 percent of the population will add another tenth of a percent. When expanded coverage and better- In the context of fiscal space for health, external quality services (reflected in higher unit costs) are financing is no longer a sustainable and reliable considered, the full impact is almost double at source of funds for health spending in Vietnam. more than 0.7 percent of GDP. Figure 3.8. Vietnam: health expenditures for the elderly population, additional fiscal costs (percent of GDP), by scenario (2020–2050) Scenario 1 Scenario 2 Scenario 3 .8 .8 .8 .6 .6 .6 Percent of GDP .4 .4 .4 .2 .2 .2 0 0 0 2020 2035 2050 2020 2035 2050 2020 2035 2050 Scenario total Demography Coverage Unit cost Source: World Bank staff projections using data from the Vietnam Household Survey (VHSS), UN World Population Prospects, and World Development Indicators. VIETNAM: ADAPTING TO AN AGING SOCIETY 59 Annual expenditures for non-elderly healthcare costs for the non-elderly is therefore uncertain are also projected to increase significantly when over the projection period. Instead, costs are all potential cost drivers are considered (Figure driven by expanding coverage in the near term and 3.9). The contrast with healthcare for the elderly by higher unit costs in the long term. All told, non- is immediately clear. The non-elderly population elderly healthcare could consume an additional 0.6 will shrink as a share of total population, and the percent of GDP by 2050. contribution of demography to future healthcare Figure 3.9. Vietnam: health expenditures for the non-elderly, additional fiscal costs (percent of GDP), by scenario (2020–2050) Scenario 1 Scenario 2 Scenario 3 .6 .6 .6 Percent of GDP .4 .4 .4 .2 .2 .2 0 0 0 2020 2035 2050 2020 2035 2050 2020 2035 2050 Scenario total Demography Coverage Unit cost Source: World Bank staff projections using data from the UN World Population Prospects and World Development Indicators. 3.5. Education percent of GDP. Without increases in unit costs, primary education expenditures are expected to Vietnam’s school-age population will shrink, but fall over the projection period (Figure 3.10). The the need to boost human capital will likely lead to main driver is a shrinking primary-age population. increases per-student costs, with the net result Yet, unit costs are expected to increase in line with that these increased unit costs will offset savings improving educational quality to deliver better from the decline in the school-age population. In human capital outcomes, so overall, expenditures 2019, Vietnam allocated 15.1 percent of the state are projected to grow if all cost drivers are budget to education and training—roughly 4.1 considered. 60 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 3.10. Vietnam: Primary education expenditures, additional fiscal costs (percent of GDP), by scenario (2020–2050) Scenario 1 Scenario 2 Scenario 3 Percent of GDP .2 .2 .2 0 0 0 -.2 -.2 -.2 -.4 -.4 -.4 2020 2035 2050 2020 2035 2050 2020 2035 2050 Scenario total Demography Coverage Unit cost Source: World Bank staff projections using data from UN World Population Prospects, and World Development Indicators. Secondary education costs are expected to percent of the cohort was enrolled in secondary increase significantly over the projection period, school, and this is projected to reach 97 percent if all cost drivers are considered (Figure 3.11). by 2041. The biggest cost driver is the cost per Demography will initially increase costs, but the student. When all three drivers are considered, secondary-school age population will begin to additional secondary education costs will peak at shrink in 2030, and the net impact will be negative nearly 0.9 percent of GDP in 2036 before falling before the end of the projection period. Coverage again to roughly 0.7 percent of GDP in 2050. is projected to increase significantly. In 2017, 85 Figure 3.11. Vietnam: secondary education expenditures, additional fiscal costs (percent of GDP), by scenario (2020–2050) Scenario 1 Scenario 2 Scenario 3 .8 .8 .8 .6 .6 .6 Percent of GDP .4 .4 .4 .2 .2 .2 0 0 0 -.2 -.2 -.2 2020 2035 2050 2020 2035 2050 2020 2035 2050 Scenario total Demography Coverage Unit cost Source: World Bank staff projections using data from UN World Population Prospects, and World Development Indicators. VIETNAM: ADAPTING TO AN AGING SOCIETY 61 Tertiary education costs are also projected to expected to grow faster than for either primary or increase significantly (Figure 3.12). Demography secondary education, reflecting the experience of will have an ambiguous effect. Increased coverage other countries approaching upper middle-income and higher unit costs will contribute roughly status. If Vietnam is to sustain growth, it must equally to additional fiscal costs of nearly 0.6 increase productivity. Investing more in higher percent of GDP by 2050. In 2017, 28 percent of education will be necessary to sustain Vietnam’s the relevant age cohort was enrolled in tertiary human capital growth and achieve its productivity education. That number is projected to reach 40 goals. percent by 2042. At the same time, unit costs are Figure 3.12. Vietnam: Tertiary education expenditures, additional fiscal costs (percent of GDP), by scenario (2020–2050) Scenario 1 Scenario 2 Scenario 3 .6 .6 .6 .4 .4 .4 Percent of GDP .2 .2 .2 0 0 0 -.2 -.2 -.2 2020 2035 2050 2020 2035 2050 2020 2035 2050 Scenario total Demography Coverage Unit cost Source: World Bank staff projections using data from UN World Population Prospects, and World Development Indicators. 3.6. Social Assistance social assistance programs. The impact of demography reflects the steady growth in Vietnam’s The social assistance expenditure category total population even as it ages, since that is the includes three types of age-related social relevant cohort for each of the programs. Coverage assistance programs: war merit payments, is expected to increase slightly for war merit electricity subsidies, and social policy allowances. payments, decline slightly for electricity subsidies, The programs are projected separately but and nearly double for social policy allowances, from presented together because of the relatively small 13 percent to 25 percent of the population (Figure fiscal impact of war merit payments and electricity 3.13). The initial cost per beneficiary for war merit subsidies. payments is nearly 3.5 times higher than for social policy. However, the latter will account for most Expanding participation, followed by increasing of the additional fiscal costs related to increased unit costs, are the biggest cost drivers for the participation in the next decades—even with fixed 62 VIETNAM: ADAPTING TO AN AGING SOCIETY costs—given how rapidly it is expected to expand. costs attributed to social assistance programs. Unit costs are expected to grow more slowly, but When all three cost drivers are considered together, by 2050, they will contribute almost as much as they amount to an additional fiscal cost greater expanded participation to the additional fiscal than 0.8 percent of GDP. Figure 3.13. Vietnam: Expenditures on age-related social assistance programs, additional fiscal costs (percent of GDP), by scenario (2020–2050) Scenario 1 Scenario 2 Scenario 3 .8 .8 .8 .6 .6 .6 Percent of GDP .4 .4 .4 .2 .2 .2 0 0 0 2020 2035 2050 2020 2035 2050 2020 2035 2050 Scenario total Demography Coverage Unit cost Source: World Bank staff projections using data from the Vietnam Household Survey (VHSS), UN World Population Prospects, and World Development Indicators. 3.7. Pensions issues pertaining to VSS and the potential methods for controlling costs.34 Vietnam faces significant and simultaneous challenges to providing sustainable incomes 3.8. Aggregate fiscal impact to its elderly population given its rapidly aging population, increasing elderly dependency In total, Vietnam’s aging society—and the evolution ratio, and high benefits relative to contributions. of government programs to accommodate it— Vietnam’s extra-budgetary contributory pension, are projected to add 1.4–4.6 percent of GDP in Vietnam Social Security (VSS), operates on a additional expenditure. Perhaps unexpectedly, pay-as-you-go basis and does not take in enough Vietnam will experience a net decline in expenditures contributions to sustain its long-run obligations. if demography alone is considered and pensions The VSS is projected to become cash-flow are excluded. That is because the programs that are negative in 2034 and exhaust its reserves in 2042. expensive today, namely education, are those for It has a projected long-run deficit of 2.5 percent which the relevant age cohort will shrink between to 3.0 percent of GDP for the period 2043–2050. 2020 and 2050. However, this view ignores upward Moreover, it receives a poor rate of return on the trends in coverage rates and the probable increase government securities it holds. If the government in unit costs as Vietnam develops, the middle class does not resolve the VSS’s structural issues before it exhausts its reserves, it will create contingent  he additional fiscal costs for VSS cannot be decomposed 34 T liabilities for public finances. Chapter 5 discusses by demography, participation, and unit costs due to the special nature of the program. VIETNAM: ADAPTING TO AN AGING SOCIETY 63 grows, and demands increase for higher-quality pensions, and the rest from expanded coverage services. in the health and social assistance categories. Under the scenario that incorporates all three Expanding coverage and improving service cost drivers—demography, expanded coverage, quality will be the real drivers of future growth in and higher unit costs—Vietnam will experience a fiscal costs. Projections under the scenario that significant increase in fiscal costs to nearly 4.6 incorporates demography and expanded coverage percent of GDP above current levels. Almost half show that Vietnam will experience a moderate of that additional cost is expected to come from increase in fiscal costs by 2050 to more than 2.4 increased unit costs, mostly in the health and percent of GDP above current levels. More than tertiary education sectors (Figure 3.14 and Figure half of this increase is expected to come from 3.15). Figure 3.14. Vietnam: aggregate age-related fiscal costs, by cost driver (percent of GDP) Sources: World Bank staff projections using data from the Vietnam Household Survey (VHSS), UN World Population Prospects, and World Development Indicators. Note: Additional costs related to pensions cannot be decomposed by demography, coverage, and unit cost, so the total is presented in each scenario. 64 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 3.15. Vietnam: aggregate age-related fiscal costs, by social program (percent of GDP) Sources: World Bank staff projections using data from the Vietnam Household Survey (VHSS), UN World Population Prospects, and World Development Indicators. Note: Additional costs related to pensions cannot be decomposed by demography, coverage, and unit cost, so the total is presented in each scenario. 3.9. Conclusions and policy support productivity growth—will be some of the implications most important macroeconomic questions facing the country in the medium to long term. Vietnam is reaching a demographic turning point, as the growth in the labor force that has As a share of the total population, the workforce helped drive GDP growth over the last three peaked in 2013, although the labor force will decades—the demographic dividend—is waning continue to grow in absolute terms over the next rapidly. The unwinding of Vietnam’s demographic couple of decades, albeit at a slower pace than in dividend will have significant medium- to long- recent decades. As noted earlier, Vietnam already term macroeconomic implications. Labor force has one of the highest labor force participation dynamics will affect both GDP growth prospects rates in the world, suggesting limited scope to and fiscal revenues, while the need to improve offset a decline in the working-age population with human capital and support an aging population will a higher participation rate. However, there is scope increase demands for government expenditures. to increase the available labor force by raising the The extent to which rising productivity growth can retirement age or through immigration. The fastest- buffer the Vietnamese economy from demographic growing segment of the Vietnamese population is headwinds—and what policies are needed to those aged 65 or older, which has important fiscal VIETNAM: ADAPTING TO AN AGING SOCIETY 65 implications. Slower labor force growth will have a impacts of climate change. Combined, these dampening impact on both GDP and fiscal revenue factors would add to existing strains on Vietnam’s growth, while an aging population will raise public finances. demands for government expenditures, notably for pensions and the provision of health and elder Vietnam will need to intensify efforts to strengthen care. The relative changes to the demographic growth outcomes and its service delivery, while profile translate into a rising dependency ratio, meeting rising demands. A wide range of policy albeit from a relatively low level. options can be pursued to support strengthened growth outturns, public financial management, Improvements in labor productivity, public and public service delivery to help mitigate the financial management, and public service delivery potential negative impacts tied to aging. These will be critical in addressing Vietnam’s rapidly include policies to (i) strengthen human capital aging population. Improvements to productivity development and labor market reforms; (ii) are more likely to be driven by changes to the enhance productivity and capital formation; (iii) output structure of the economy (i.e. inter-sectoral improve the business environment; (iv) enhance shifts in employment) rather than intra-sectoral revenue generation and tax policy, institutional labor productivity gains. A key driver will be the capacity, and efficiency in expenditures; and (v) release of agricultural workers into higher value- sustain and strengthen the macroeconomic policy added sectors (which should facilitate increases framework to facilitate growth. A number of policy in formality, which is higher in the manufacturing options are discussed in Part II of this report with and services sectors than in the agricultural respect to public sector spending, in particular for sector). This, in turn, will require greater private pensions, health, and elderly care. These should and public investments in human capital. Rising be complemented by reforms that support human capital intensity (corresponding to a shrinking capital development to buoy labor productivity and share of the labor force) should lead to stronger growth, which would in turn boost revenues. Policy wage growth which, along with a higher retirement reforms to enhance revenue mobilization will also age (assuming this is introduced), could support be critical, such as through broadening the tax further increases in the labor force participation base, increasing formality, and shifting to greater rate. reliance on consumption taxes. Expenditure and revenue reforms should also be complemented by The impacts of an aging population will be felt in measures to strengthen institutional capacity and terms of both fiscal revenues and expenditures efficiency in public sector financial management. and will put pressure on public finances in the absence of timely reforms, particularly in the Greater liberalization of Vietnam’s laws on foreign context of already high public debt. As discussed investments could help raise productivity growth earlier, as an increasing share of the population and living standards. This would allow Vietnam to enters retirement—and hence no longer earns an tap international capital markets, supplementing income—there will be a commensurate impact FDI and domestic savings and further boosting on revenues generated from personal income aggregate capital formation. More broadly, good tax. An aging population will also place increased institutions and a sound policy framework will boost demands on public (and private) healthcare both foreign and domestic investor confidence and and pension systems. Additionally, with a need spur investment growth. They are also needed to to boost productivity, there will be pressures to facilitate productivity growth by supporting an increase government expenditures on education enabling environment to boost human capital and infrastructure—exacerbated by Vietnam’s development and by facilitating technological and status as a developing country, vulnerable to the entrepreneurial-driven productivity growth. 66 VIETNAM: ADAPTING TO AN AGING SOCIETY Greater financial inclusion and increased could help counteract the dissaving associated pension coverage would support financial with aging. Increasing access to finance through intermediation and help channel savings into bank and non-bank institutions supports financial investment, boosting productivity and growth intermediation through more efficient resource outcomes (Caprio et al 2001). As discussed allocation, while expanding coverage of Vietnam’s earlier, supporting financial inclusion through contributory pension system could boost savings enhanced access to finance and pension coverage and strengthen financial intermediation. VIETNAM: ADAPTING TO AN AGING SOCIETY 67 3.10. References Amaglobelli, David, Hua Chai, Era Dabla-Norris, Kamil Dybczak, Mauricio Soto and Alexander F. Tieman. 2019. The future of Savings: The role of pension design in an aging world. IMF Staff Discussion Note: 19/01. International Monetary Fund. Barnett, Steven A. and Ray Brooks. 2010. “China: Does Government Health and Education Spending Boost Consumption?” IMF Working Paper, WP/10/16. International Monetary Fund. Caprio, Gerard and Honohan, Patrick. 2001. Finance for Growth: Policy Choices in a Volatile World. World Bank, Washington, DC. Felipe, Jesus. 2003. “Is Export-Led Growth Passe? Implications for Developing Asia.” ERD Working Paper Series, No. 48. Flochel, Thomas, Yuki Ikeda, Harry Moroz, and Nithin Umapathi. 2014. Macroeconomic Implications of Aging in East Asia Pacific: Demography, Labor Markets and Productivity. World Bank, Washington, DC. General Statistics Office of Vietnam (GSO). 2012. Vietnam Household Living Standards Survey (VHLSS). Groningen Growth and Development Centre (GGDC) Faculty of Economics and Business. 2020. Penn World Tables. https://www.rug.nl/ggdc/?lang=en International Monetary Fund (IMF). 2019. Group of Twenty Macroeconomics of Aging and Policy Implications. International Monetary Fund. Kharas 2014 “Financing for Development: International Financial Flows After 2015.” (https://www. brookings.edu/research/financing-for-development-international-financial-flows-after-2015/) Modigliani, Franco and Richard H. Brumberg. 1954. “Utility Analysis and the Consumption Function: An Interpretation of Cross Section Data.” Journal of Post Keynesian Economics, January 1954. Modigliani, Franco. 1970. “The life-cycle hypothesis of saving and intercountry differences in the saving ratio”, in W.A. Eltis, M.F.G. Scott and J.N. Wolfe eds, Induction, Growth, and Trade: Essays in Honour of Sir Roy Harrod, Clarendon Press, Oxford, pp. 197-225. PWT, see Groningen Growth and Development Centre (GGDC). United Nations (UN). 2019. World Population Prospects 2019. Volume 1: Comprehensive Tables. United Nations, New York City. United Nations (UN) Population Division. 2019. World Population Prospects 2019. https://population. un.org/wpp/Download/Standard/Population/ Velamuri, Malathi. 2015. “Aging and Savings in Asia: Current Trends and Future Prospects.” Background paper for the East Asia and Pacific regional report on aging, World Bank, Washington, DC. VHLSS, see General Statistics Office of Vietnam. 68 VIETNAM: ADAPTING TO AN AGING SOCIETY World Bank. 2019. World Development Indicators (WDI). http://databank.worldbank.org/data/home.aspx. Accessed October-November 2019. World Bank. 2018. Human Capital Index. http://www.worldbank.org/en/publication/human-capital. Accessed August 2, 2019. World Bank and the Ministry of Planning and Investment of Vietnam. 2016. Vietnam 2035: Toward Prosperity, Creativity, Equity, and Democracy. Washington, DC: World Bank. VIETNAM: ADAPTING TO AN AGING SOCIETY 69 PART II. Part II focuses on the areas that are key for managing the effects of aging: labor market (Chapter 4), pensions (Chapter 5), health care (Chapter 6), and aged care (Chapter 7). Each chapter analyzes the salient features of the sector in question and presents directions for reforms. Chapter 4 characterizes the increasingly knowledge-intensive labor market in Vietnam, highlighting key factors such as high levels of informality and the age distribution of workers across different sectors and between rural and urban areas. It then dives into important challenges facing the labor market including demand for sophisticated knowledge, gender and ethnic disparities, legal structures, and market incentives, concluding with the outline of a human capital-centered approach to prepare Vietnam’s workforce for strong growth. Chapter 5 examines the pension system and the two major challenges it faces: a deep coverage gap and unsustainable finances. It describes the structure of the current pension system and which segments of the population receive pension benefits, and as importantly, which do not. The chapter then delves into expected fiscal challenges to the pension system and introduces policy changes to rebalance the system and address the critical coverage gap. Chapter 6 describes the implications of population aging on the healthcare system, describing how rapid changes in demography, epidemiology and health financing are expected to influence future healthcare demand, health spending and health outcomes. It then describes the political and legal commitments the Vietnamese government has made in the realm of health care and characterizes the strengths and weaknesses of the current health care system in terms of hospital resources and primary care availability and quality. Finally, it describes Vietnam’s strategy for health financing and provides an analysis of the distribution and burden health care expenditures. Chapter 7 examines the elderly care system in Vietnam and proposes ways to strengthen the system to meet the country’s future needs. The chapter describes the current status and landscape of Vietnam’s elderly care system, including legislation and policies that govern the sector, institutional structures, coverage, and financing of elderly care services. It further discusses the role and challenges of informal caregivers, public sector care facilities, and private sector care facilities, both for-profit and non-profit. The chapter outlines good international practice guiding principles for building a comprehensive, efficient, and sustainable system of elderly care, and concludes by providing policy options for Vietnam. VIETNAM: ADAPTING TO AN AGING SOCIETY 71 Chapter 4: LABOR MARKET FOR AGING VIETNAM 4.1. Introduction The number of potential workers (ages 15-65) in Vietnam is projected to reach 69.45 million, and The broad demographic trends described in Part I of its share will fall from 69 percent in 2015 to 64 this report show that Vietnam is still experiencing percent by 2049,34 thanks to a combination of low a demographic window of opportunity. Vietnam birth rates resulting in a rapid decline in fertility has benefited strongly from the “demographic in the 1980s and 1990s as well as increased life tailwind” since Doi Moi, and although the share of expectancy. Vietnam will have the largest potential the working population began to decline in 2014, workforce in the developing East Asia region after in absolute terms, the size of the labor force will China and Indonesia, allowing Vietnam to expand continue to grow until 2042. These trends are in its jobs and output. The size of the labor force will contrast to neighbors such as Thailand or China. decline thereafter. Box 4.1. The Myth of Less Productive Older Workers35 The widespread assumption that older workers are less productive implies that population aging will have a negative effective on overall productivity, with profound impacts on firms’ personnel policies and employment choices and countries’ labor policies. However, recent robust studies by labor economists have produced important evidence that contradicts this myth, leading to the conclusion that while younger and older workers differ, productivity differences seem to even out. Historically, relating productivity and age has posed several major methodological challenges, including how to measure productivity, how to account for non-age-related factors bearing on productivity such as firm selection processes, and how to determine the appropriate level of analysis. A number of studies using plant-level econometric analysis effectively minimize these challenges. Those with the most convincing methodologies (Aubert 2003; Aubert and Crépon 2007; Malmberg et al. 2008; Göbel and Zwick 2009) have consistently found age-productivity profiles increasing until the age of 50-55 and then flattening off, directly contradicting the myth of decreasing productivity with age. Moreover, those studies using more sophisticated methodologies suggest that relative productivity of older workers is actually higher, though with less confidence. Another significant study by Börsch-Supan et al. (2006, 2010) used a methodology allowing for more precision. They examined a German truck assembly plant comprised of small teams of workers in highly tailored production process typical of manufacturing, with many tasks requiring significant physical strength and agility. Measuring productivity by the inverse of the number of mistakes made in the assembly of a product over a fixed time, they found that overall productivity does not decline for older workers. At the individual level, furthermore, productivity actually consistently increased. This suggests that characteristics such as experience and the ability to work well with a team in tense situations compensate for the loss of physical strength with age. Source: based on Börsch-Supan, A. 2013. “Myths, scientific evidence and economic policy in an aging world,” The Journal of the Economics of Ageing 1-2 (2013), pp. 3-15.  he size of the population 15-59 years of age is projected to reach 62.1 million in 2049, and its share will fall from 65 percent 35 T in 2015 to 57 percent by 2049. The number of people 60 years of age and above is projected to increase to 26.9 million and account for approximately 25 percent of the population. 72 VIETNAM: ADAPTING TO AN AGING SOCIETY However, rapid aging will become a reality in jobs depends on the human capital stock and the very near future and will make Vietnam’s the extent to which a country can upgrade it to demographic picture more complex, with optimize labor market preparation for the needs implications for the labor market and growth. of a technology-intensive economy. Globally, the Aging affects the labor market through pathways rise of the industrial sector in East Asia has more such as the quantity of labor available and through than compensated for the loss of industrial jobs in its impact on the productivity of the workforce. advanced economies. But not all Asian countries (Box 4.1) Although empirical evidence on the have benefited equally. While Vietnam has seen effect of aging on growth is not fully conclusive, an increase in the share of industrial employment on aggregate, aging in advanced economies has (rising from 9 percent in 1991 to 25 percent in led to a decline in per capita product. For example, 2017), in many other countries, it remains stable. in the United States, a 10 percent increase in the The main difference for Vietnam is that the country population share of those age 60 and above is is credited with bringing highly skilled young estimated to have led to a 5.5 percent decline in the workers into the labor market, who—together gross domestic product (GDP) per capita growth with new technology—upgrade manufacturing rate, based on data from 1998 to 2010. One-third production. of this decline is due to the decreased size of the workforce, while the rest is explained by slowed This Chapter addresses the question of how growth in labor productivity. While several other Vietnam can take advantage of its remaining studies show that a higher share of senior people demographic window and prepare to mitigate the in the workforce leads to lower productivity,36 effects of aging on the labor market. Vietnam’s key Börsch-Supan and Weiss (2016) challenged these economic priority today is to continue to capitalize findings with strong results indicating increased on the demographic window of opportunity. productivity linked to older workers’ characteristics Policies needed to achieve growth are described in such as their experience and noncognitive abilities. the World Bank 2020 Vibrant Vietnam, Forging the Although the global evidence is inconclusive, it is Foundation of a High-Income Economy. The World clear that for Vietnam, proactive policies will be Bank 2018 Vietnam’s Future Jobs: Leveraging Mega- needed to mitigate these effects. Trends for Greater Prosperity (Cunningham et al. 2018) provided a compelling outline of how labor Aging of Vietnam’s workforce coincides with market and related policies can harness global other major trends affecting labor markets across trends, and the World Bank 2019c Making Growth the world. First, labor markets are being affected More Inclusive report focused on the potential for by changing terms of trade. As one of the most Vietnam to speed up the accumulation of human open economies in the world (World Bank 2017), capital. This chapter reiterates and expands on Vietnam is expected to be affected. Second, the these points, with a particular focus on human development of technology has multi-faceted capital accumulation and labor market reforms. impacts on the labor market, affecting both the demand for and the supply of labor. The effect This chapter is structured as follows. The first of technology on aggregate employment and section describes key features of the current labor market in Vietnam, including its very high 36  For example: Tang and MacLeod 2006, Gordon 2016 and employment rates, increase in knowledge-intensive Wasiluk 2014. jobs, rising education levels, and high demand J. Tang and C. MacLeod. 2006. Labour Force Ageing and Productivity Performance in Canada. Canadian Journal of for better trained workers. It then examines Economics. 39(2) pp 582-603. market segments more closely, starting with R. Gordon. 2016. The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War. Princeton: Princeton characteristics of the urban labor market, which University Press. has high informality and large numbers of younger K. Wasiluk. 2014. Technology Adoption and Demographic Change. University of Konstanz Department of Economics workers, and the rural labor market, which has been Working Paper Series. No. 2014-05. massively reorganized in recently decades with VIETNAM: ADAPTING TO AN AGING SOCIETY 73 the growth of manufacturing jobs, resulting in age- and 93 percent of adults ages 25-49 work. The based segmentation of the market. Challenges gap between women’s and men’s labor force for the current labor are then discussed, including participation rates is low by global standards. the rise of jobs requiring sophisticated knowledge Except among ethnic minority women, female and skills, gender and ethnic disparities in the labor force participation rates are high: 79 percent labor market, restrictive employment legislation, of adult women in Vietnam work, compared to a a pension system that discourages older workers global average of 49.6 percent and the East Asia from participation in the labor market, and the and Pacific (EAP) regional average of 61.1 percent continued legacy of the ho khau system. The second (see the World Bank 2018 Vietnam’s Future Jobs: section moves on to policy recommendations Leveraging Mega-Trends for Greater Prosperity). focused on positioning Vietnam to best shape its labor force for the strongest possible growth. It The nature of jobs in Vietnam has changed describes an approach centered on human capital significantly in recent decades, as workers development and focused on higher education and move steadily into higher-productivity sectors vocational and technical education sector reform, and forms of employment. Whereas 80 percent extending productive working lives, promoting of the Vietnamese labor force was employed in effective and demand-driven lifelong learning. It agriculture in 1986 (at the start of the Doi Moi also highlights the importance of and specific reforms), this share had dropped to 40 percent policies for improving ethnic minority outcomes by 2015. The manufacturing and services sectors and a segmented rural workforce. have been significant contributors to job creation, with 1.6 million new jobs in manufacturing between 2009-2015. During this same time, 4.7 million more 4.2. Key Features of Vietnam’s Labor workers found jobs in wage employment, moving Market out of self-employment on their own farms or household enterprises (Cunningham and Pimhidzai Features of Vietnam’s labor market described below 2018). The export sector—and especially foreign- attest to the unique profile of its opportunities and owned firms—are also important and growing challenges. Today, the Vietnamese labor market sources of employment, especially for women is in an enviable position, both within Asia and (Table 4.1). globally. On balance, Vietnam is well-placed to face the future. 4.2.1. High employment rates and the changing nature of jobs Vietnam enjoys high employment rates, including high female labor force participation. The absolute numbers of workers are still increasing, 74 VIETNAM: ADAPTING TO AN AGING SOCIETY Table 4.1. Vietnam: Job Distribution, 2012 and 2016 (in percent) 2012 2016 Men Women Total Men Women Total Industry Agriculture 41.4 48.1 44.7 39.5 45.3 42.4 Manufacturing, mining 16.5 18.2 17.3 16.7 18.7 17.7 Construction 13.2 1.6 7.4 13.6 1.6 7.6 Automotives 10.3 14.4 12.4 10.6 14.8 12.7 Tourism and transportation 7.7 6.6 7.1 8.4 7.3 7.9 Services 11.0 11.2 11.1 11.2 12.2 11.7 Total 100 100 100 100 100 100 Employers Work for own household 50.64 56.99 53.78 45.13 49.44 47.25 Work for other household(s) 25.26 21.92 23.61 29.04 25.35 27.23 Private sector 11.65 8.08 9.89 13.64 10.51 12.1 Public sector 10.48 9.02 9.76 9.49 8.75 9.13 Foreign sector 1.97 3.98 2.96 2.71 5.95 4.3 Total 100 100 100 100 100 100 Main Occupation Leaders/Managers 1.5 0.5 1.0 1.8 0.5 1.2 Professionals/Technicians 7.7 8.9 8.3 7.6 9.6 8.6 Clerks/Service Workers 11.9 19.3 15.5 12.6 20.7 16.6 Agriculture/Forestry/Fishery 44.0 50.0 47.0 32.5 38.3 35.4 Skilled Workers/Machine Operators 25.6 12.6 19.2 36.2 22.3 29.4 Unskilled Workers 9.3 8.7 9.0 9.3 8.7 9.0 Total 100 100 100 100 100 100 Source: Authors, based on VHLSS 2012 and 2016. 4.2.2. Rising education level of the prime- percentages of well-trained labor are largely the aged workforce and high demand for skilled consequence of older segments of the workforce workers having left the education system some years ago. At the same time, as Figure 4.1 shows, there are While Vietnam appears to have relatively low major differences in educational achievements overall percentages of well-trained labor, major across age groups, with younger workers having differences in educational achievements can be considerably higher rates of university degrees seen across age groups. Based on 2017 Vietnam and lower rates of less than secondary degrees labor force survey data collected by GSO, 77 percent (Demombynes and Testaverde 2018, using 2014 of the Vietnamese labor force (ages 15-64) had no GSO LFS). This means that the labor force’s level more than a lower secondary education, and the of training is changing fast under the more modern share of the workforce with university education education system. or higher was only 9.6 percent.37 But such low 37 GSO, Vietnam labor force survey, 2018. VIETNAM: ADAPTING TO AN AGING SOCIETY 75 Figure 4.1. Vietnam: Distribution of Education across the Working Population, by Cohort and Total, 2017 100% % of employed population by highest level of educaiton 80% 60% 40% 20% 0% 25-34 35-44 45-54 55-64 65+ all Less than secondary Short-term training Higher secondary Vocational College University of higher Source: Calculations based on the 2017 Vietnam Labor Force Survey. Note: The sample is the working population. The age cohort 15-24 years was not included since those in the sample are, largely, necessarily school dropouts, thus not well representing the behavior of their cohort. This demand is reflected in labor market returns. 4.2.3. Concentration of younger workers in From the labor demand side, a 2015 survey of wage occupations in urban areas Vietnamese firms found that more than 20 percent of firms believed that the “education level” of The differences in educational attainment across the labor force was an obstacle to their firm’s younger and older workers are reflected in operations—more than three times higher than differences in types of employment. For urban in comparable countries in the region. Today’s workers in their 20s and 30s, wage jobs with employers are looking not only for job-specific contracts make up the largest share of employment, technical skills but also for socio-behavioral skills followed by informal wage employment, non-farm such as problem solving, communications, ability self-employment, and a tiny share in farming. to work independently, and teamwork skills.38 Informal employment, or wages without contracts, Continuous expansion and an increase in quality are the most common source of jobs for the very of education would imply that future cohorts of the young (ages 15-19), followed by wage jobs with labor force will be better equipped to meet labor contracts. Both farming and non-farming self- market demand compared with the current cohort. employment are small sources of employment Hourly earnings of university-educated workers for younger workers. The employment patterns and college-educated workers are 66 percent of older workers who entered employment before and 43 percent,39 respectively, higher than those the economy’s structural transformation began of workers who never reached upper secondary are very different, as a large share have worked school (Figure 4.2). This wage gap could reflect in farming all their lives and are still principally the higher productivity of university workers but employed in agriculture (Demombynes and given that employers complain of skills gaps in Testaverde 2018). As Vietnam prepares to enter its occupations that university workers should hold, it aging phase, these patterns attest to the fact that is more likely due to a scarcity of workers with even “future older workers” are different from “current limited university education. older workers.” 38 Bodewig et al. (2014) and Cunningham and Villaseñor (2014). 39 Demombynes and Testaverde 2018. 76 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 4.2. Vietnam: Returns to Education, 2011-2014 70% % change in hourly wages relative 66% to lower secondary education 60% University 50% College 43% 40% 34% Professional Vocational 30% 29% 20% 20% Secondary Vocational 10% 10% Basic vocational 0% 2011 2012 2013 2014 Source: Demombynes and Testaverde 2018 The share of informal sector workers remains Having an informal job has several implications high. There seems to be some evidence that for workers. Informal sector workers have lower the share of employment in urban areas in jobs wages on average compared to contracted without contracts, has increased between 2010 workers (Cunningham and Pimhidzai 2018). and 2016, while the share of wage employment Furthermore, the social protection (SP) programs with contract slightly declined. These patterns are that are attached to formal employment—such as especially pronounced for younger and mature unemployment insurance and pensions—by default workers (Figure 4.3). Overall, around 76 percent of exclude the vast majority of the population that all workers, and 55 to 60 percent of non-agriculture remains informally employed. Although rates of workers, remain in the informal sector (World informality are expected to fall gradually with time, Bank 2018). Such high non-agriculture informality social protection programs, if they are to achieve rates, especially following a time of more rapid their purpose successfully, must be designed to be urbanization, suggests that informality remains cognizant and inclusive of informal workers. high even among the urban population and that the urbanization process is not significantly contributing to bringing down these rates. VIETNAM: ADAPTING TO AN AGING SOCIETY 77 Figure 4.3. Vietnam: Employment Share in Urban Areas, 2010 and 2016 A. Employment Share in 2010 B. Employment Share in 2016 Source: Authors, based on VHLSS 2010 and 2016. 4.2.4. The rise of wage work in rural areas40 workforce peaked in the second quarter of 2014 and has consistently declined since then. By the The rural economy has been transformed in first quarter of 2018, close to 4 million people had recent decades. Four remarkable shifts have taken left their rural agriculture jobs. In just five years, the place: (i) a decline in the rural labor force; (ii) an rural agriculture sector lost more than 17 percent absolute decline in employment in agriculture, of its workforce, equivalent to an average 3.9 both in rural areas and nationally; (iii) a rise in percent annual decline. rural wage work; and (iv) a new predominance of non-agricultural incomes, mirroring a decline As a result, the rural labor market has experienced a in agriculture’s contribution to rural incomes. A massive reorganization. Off-farm employment has massive reorganization of the rural labor market expanded rapidly and continues to expand, while is underway, with reallocation of labor from agricultural employment is in decline. Agriculture agriculture to non-agriculture activities. The employed an average of 22 million people at its agriculture sector has been consistently losing peak in 2013, when non-agricultural employment an average of 4 percent of its workforce annually averaged 14.4 million people. By the first quarter since 2013 (World Bank 2019a). of 2018, almost as many people in rural areas were employed in non-agriculture sectors (18.1 Employment in agriculture is declining rapidly, million) as in agriculture (18.7 million). It shows with workers who left the sector being primarily a significant transformation in the composition of absorbed into other, non-agriculture sectors rural economic activity within five years. within rural areas. The size of the agricultural Growth in rural manufacturing jobs largely drove  his section heavily draws from World Bank 2019 Better 40 T Opportunities for All: Vietnam Poverty and Share Prosperity this transformation (Figure 4.4-A). Employment in Update. 78 VIETNAM: ADAPTING TO AN AGING SOCIETY the manufacturing sector expanded at an average the services sector made up the other 25 percent. of 7.3 percent annually between 2013-2017, Employment growth in services was driven by non- contributing to more than half of the net increase retail sub-sectors such as transport, hotels, and in rural non-agricultural jobs in that period. The catering. While employment in the wholesale and industry sector as a whole accounted for 75 retail sector has been highly volatile, it too has percent of the net increase in jobs, with additional grown consistently since the beginning of 2017. jobs coming from the construction sector, while Figure 4.4. Vietnam: Job Growth Trends by Sector and Ownership A. Trends in Non-Agricultural Jobs by Sector, B. Net Job Creation by Ownership, 2014-2017 2013-2018 1.200 10.000 9.000 1.000 8.000 800 7.000 6.000 600 5.000 400 4.000 3.000 200 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 - 2013 2014 2015 2016 2017 2018 2014 2015 2016 2017 (200) Industry Manufacturing Services Wholesale State Non-State FDI (400) Source: GSO Statistical Database and quarterly labor force survey reports. All of this job growth was driven by the private and garment processing, and machine operators sector. This was partly a result of accelerating are the major occupations, accounting for over 80 foreign direct investment (FDI) in rural areas, percent of jobs in the industry sector. Two-thirds bringing 11 percent average annual growth in of all rural non-farm jobs are in the secondary employment in the FDI sector in rural Vietnam sectors, such as manufacturing (38 percent) and since 2012. Employment in the FDI sector started construction (26 percent) (Figure 4.5). The other from a low base, so net job creation in the sector one-third of jobs are scattered among various has contributed to around 25 percent of rural non- services areas, such as education and health (10 agricultural jobs growth. The domestic private percent), wholesale and repair (7 percent), and sector therefore contributed the lion’s share of the Communist Party and political services (6 new non-agricultural jobs (Figure 4.4-B). despite percent). Within the tertiary sector, educator is growing at an average of 4 percent. Meanwhile, the most prevalent occupation (18 percent of all employment in state-owned entities broadly services sector jobs), followed by sales staff (10 declined. percent) and employees in the transportation system (9 percent). Most jobs are still in low-skilled occupations. Construction workers, factory workers in food VIETNAM: ADAPTING TO AN AGING SOCIETY 79 Figure 4.5. Vietnam: Top Rural Non-Agricultural Jobs, 2016 (in percent) Processing and manufacturing 38.1 Construction Education, health, social Wholesale, retail trade and repair services Communist party and public work Transport and warehouse 25.6 Food and accommodation Other services Hosuehold generated Production and distribution of utilitities Finance, insurance, real estate Arts and entertainment Information and communication 9.9 Administration and support services 6.7 6.2 Technology and science services 3.6 2.7 1.2 1.1 0.9 0.7 0.7 0.6 0.6 0.4 Source: Authors’ calculations from the VHLSS, 2016. The number of rural wage workers is expanding in rural areas. The share of wage workers in rural rapidly, while unpaid work is on the decline. areas thus increased by around 10 percentage Rural wage employment increased from around points to around 37 percent at the beginning of 10 million people in 2013 to more than 13 million 2018. This trajectory suggests that paid work will by the start of 2018 (Figure 4.6). The number of become more common than unpaid work within people in unpaid work declined commensurately, the next decade. indicating a direct shift from unpaid to paid work Figure 4.6. Vietnam: Trends in Rural Wage Jobs by Share of Rural Employment and Sector-Specific Wages, 2013-2018 A. Trends in Rural Wage Jobs and Their Share in B. Trends in Rural Real Monthly Wages by Sector, Rural Employment, 2013-18 2013-18 (VND ’000) 5.000 15.000 40% Agric Industry 14.000 38% Services Rural 36% 4.500 13.000 34% 12.000 32% 4.000 30% 11.000 28% 10.000 26% 3.500 24% 9.000 22% 3.000 8.000 20% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2.500 2013 2014 2015 2016 20172018 Number of paid jobs ('000) 2.000 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Share of wage employment (%) 2013 2014 2015 2016 2017 2018 Source: GSO quarterly labor force survey reports 80 VIETNAM: ADAPTING TO AN AGING SOCIETY Real wages have increased across sectors. Real the younger generation. Households are holding wages in rural areas increased by 21 percent in the onto their farms, as farming remains integral period 2003-17 (Figure 4.6-A), about 2 percentage for food self-sufficiency and as a diversification points faster than the increase in the national strategy. This has resulted in farm work being average wage rate. Wages in the industry sector assigned to the older generation, most of whom increased by 26 percent and the services sector have no education, while younger family members by 12 percent, partly due to slower wage growth seek non-agricultural jobs (World Bank 2019a). of state employees of 7 percent compared to 25 Thus, agriculture will remain the only source percent for the FDI private sector and 27 percent of employment for a significant population for the domestic private sector (Figure 4.6-B). This demographic. At lower levels of education, workers increase has been maintained. Rural wages grew above 45 years old are 20 percentage points less by more than 6 percent in 2017 across all sectors. likely to be in a wage job than 26-35 year old, with 54 percent of the labor force over age 45 with low 4.2.5. Age-based segmentation of the rural education employed in non-wage work (Figure labor market 4.7). The gap only narrows to about 10 percentage points for those with tertiary qualifications (World Age-based segmentation of the rural labor market 2019a, based on VHLSS 2016). This is consistent in Vietnam is significant, with the agriculture with the life-cycle theory of labor supply, which sector being dominated by older people and a expects the young to be more proactive than the fast-growing non-agriculture sector employing old (MaCurdy 1981). Figure 4.7. Vietnam: Employment Share in Rural Areas, 2010 and 2016 A. Rural Employment Share, 2010 B. Rural Employment Share, 2016 Employment Share in Urban, 2010 Employment Share in Rural, 2016 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 9 4 9 4 9 + 9 4 9 4 9 4 9 4 9 4 9 4 9 4 9 4 9 4 9 4 9 + -5 -6 -6 -7 -7 -1 -2 -2 -3 -3 -4 -4 -5 80 -1 -2 -2 -3 -3 -4 -4 -5 -5 -6 -6 -7 -7 80 45 50 55 60 65 70 75 15 20 25 30 35 40 15 20 25 30 35 40 45 50 55 60 65 70 75 Farming self-employment Non-farm self-employment Farming self-employment Non-farm self-employment Wage with contract Wage without contract Wage with contract Wage without contract Source: Authors VIETNAM: ADAPTING TO AN AGING SOCIETY 81 The changing demographics of the rural labor force exports, and proactivity by rural municipalities will could lead to sharp declines in land utilization. form the basis for significant jobs upgrading in Older age groups remaining in agriculture are rural zones. unlikely to be able to fully utilize the land but will likely hold onto it to keep their land user rights 4.2.6. The rise of new occupations with more in the absence of other forms of land security. sophisticated skills profiles Agriculture potential will likely be undermined The top-growing occupations overwhelmingly further by sub-optimal land use choices among belong to high-skilled categories, especially those (mostly poorer) households41 remaining professionals. Among professionals, a variety in agriculture. Land ownership structure and of health specialties are represented in the top security,42 along with agriculture financing,43 drive 10 percent. Paramedical practitioners, nursing/ agricultural land-use patterns. midwifery, and traditional/complementary The outflow of youthful labor has immediate medicine professionals doubled over the period consequences for agriculture. First, the reduction 2007-2014. However, high growth was still of disguised unemployment boosts labor observed among tasks that experts expect to productivity in the sector as redundant workers become automated: secretaries increased by 48 leave agricultural labor. Soon, however, labor percent, and certain categories of elementary shortages in the sector are expected to become workers grew by 49 percent over three years. a constraint. Since there will be fewer people, it (Demombynes and Testaverde 2018, using 2014 will be necessary for existing workers to do more, GSO LFS). creating strain on an already overworked working- Among the declining occupations, three age population and putting pressure on some categories of associate teaching professionals workers, such as women with young children, to experienced significant negative employment withdraw their labor from non-agricultural wage growth. These professions are specific to the employment to agriculture instead. Vietnamese labor market and are not defined at Meanwhile, rural off-farm jobs will likely the associate professional level in the International continue to diversify into manufacturing and Standard Classification of Occupations. This trend services. Limited geographic mobility has led to may suggest a move toward more specialization a diversification in the employment portfolios of in the teaching profession at the primary level and rural households such that wage earnings—not for special needs students. No other professionals agricultural earnings—are the main source of appear to be in the list of the top declining income for rural households, with the exception occupations, which—with exception of the of ethnic minorities. The relaxation of ho khau associate teaching professional job categories— regulations may speed up urbanization, but existing is dominated by low-skilled occupations food chains, significant agricultural product (Demombynes and Testaverde 2018, using 2014 GSO LFS). In most cases, poor households do not allocate their land 41  for different agricultural purposes in line with the suitability of the land in their areas. Differences in agricultural 4.2.7. Persistent inequalities in labor market incomes between poor and non-poor households in outcomes by ethnicity and gender mountainous areas, for example, can be explained by the poor making far less income from perennial crops than the non-poor. The disadvantages of ethnic minorities start Households with land-user certificates and those with 42  early on and continue into the labor market. larger amounts of land are much more likely to cultivate industrial and perennial crops. When that land is These groups still fare rather poorly on a range of fragmented, households opt instead to use it mostly for educational indicators and for all of the indicators cereals. 43  Households tend to rely more on their current incomes to at higher levels of education. Ethnic minorities finance agricultural activities, which then determines how are also less likely than people of Kinh or Hoa much of their land they devote to non-traditional crops. 82 VIETNAM: ADAPTING TO AN AGING SOCIETY ethnicity to hold wage-paying jobs. In 2014, only 2014 GSO LFS). Female ethnic minorities are 29 percent of working women who do not self- particularly disadvantaged, as they are clustered identify as the dominant Kinh or Hoa group held in lower-paying and less-stable agricultural self- wage-paying jobs, compared with 33 percent of employment roles. In 2014, 59 percent of ethnic Kinh or Hoa women. More worryingly, disparities minority women were self-employed in agriculture, between ethnic minorities and the majority compared with 33 percent of women from the appear to have increased slightly between 2007- majority groups. 2014 (Demombynes and Testaverde 2018, using Figure 4.8. Vietnam: Growth in Employment by Occupation, 2013-2015 Source: Demombynes and Testaverde (2018) and Cunningham and Pimhidzai (2018) Inability to migrate long distances due both to or region. Poor access to services for people with social factors and ho khau policies restricts temporary registration in cities is a discouraging labor mobility both into and out of low-density factor (Demombynes and Vu 2016). Married ethnic economies, thus reducing off-farm opportunities minority women are most likely to move for a job for ethnic minorities. In 2016, only 3 percent of if they can bring their spouses and families (World ethnic minorities had recently migrated, and those Bank 2019a). who moved mostly stayed within the same province VIETNAM: ADAPTING TO AN AGING SOCIETY 83 Figure 4.9. Vietnam: Gender Disparity in Monthly Wages by Age Source: VHLSS 2014 and 2016 In terms of differences in labor market outcomes market work time, and in addition offer new job by gender, despite their high participation rates, opportunities. women are not faring well in several other aspects of the labor market. The gender wage gap 4.2.8. Restrictive employment protection persists: women earn 12.6 percent less than men legislation with the same education, ethnicity, and age profile Vietnam’s current employment protection (Demombynes and Testaverde 2018) (Figure 4.9). legislation (EPL) is considered to be restrictive. The gap can be explained by a number of factors With the passage of the Labor Code and Trade including occupational segregation (women and Union Law in 2012, Vietnam moved from being a men are clustered into different occupations), country with moderately stringent restrictions on women’s preferences that allow for a better work- temporary forms of employment to one that is life balance, the burden of unpaid family care, very restrictive (Schmillen and Packard 2016).44 traditional discrimination in the workplace, and In East Asia, Vietnam is second only to Indonesia labor laws that limit women’s careers options in the restrictiveness of its EPL (ILO 2015). Strict (Demombynes and Testaverde 2018). In addition, employment protection rules are one of the Chowdhury (2018) showed that gender-specific primary reasons identified by the OECD that make preferences in non-monetary job characteristics employers reluctant to hire or retain older workers play a key role in occupational sorting. (OECD 2006), and it appears to hold true for many developing Asian countries. In the near future, the demand for women’s unpaid work in eldercare of family members will Vietnam’s strict EPL regime could be one of the rise. Vietnamese women, who already have high primary reasons why so many workers remain workforce participation rates and spend significant outside the regulated labor market. While time on housework (Chapter 2), will also likely soon quantifying the effects of very restrictive EPL is be pressured to provide unpaid eldercare services difficult, a growing body of evidence from the East for family members at higher rates, thus crowding Asia and Pacific (EAP) region and beyond shows out market work time. If the development of the that they are often associated with lower levels of aged care industry, as is occurring in China, moves employment, especially of women, new entrants to forward, it will stem the crowding out of women’s 44 Schmillen and Packard 2016. 84 VIETNAM: ADAPTING TO AN AGING SOCIETY the labor market, and unskilled workers (Heckman (Demombynes and Testaverde 2018, using 2014 and Pages 2004; OECD 2004; Perry et al. 2007; GSO LFS).45 Koettl, Montenegro and Packard 2012; World Bank 2014). These same groups tend to be among the Workers in formal employment retire earlier and at first to be laid off or blocked from entry altogether higher rates than other workers. Employment rates when labor costs rise (Lustig and McLeod 1996). of workers in formal jobs drop substantially when Evidence from countries around the world also they hit the age at which they can claim pensions— demonstrates that more restrictive EPL raises age 60 for men and age 55 for women, according to the share of self-employment and decreases Article 54 of the Law on Social Insurance. The share dependent employment in low- and middle-income of women working in formal jobs drops from 10.1 countries (Addison and Teixeira 2001; Betcherman, percent of those ages 50-54 to 2.4 percent of those Luinstra, and Ogawa 2001; Haltiwanger, Scarpetta, ages 55-59, whereas the share of men working in and Vodopivec 2003). formal jobs drops from 13.3 percent among those ages 55-59 to 4.8 percent among those ages 60- 4.2.9. Early retirement/pension policies 64 (Table 4.2). These observations suggest that discourage labor market participation the retirement age for men and women in formal jobs is a significant driver of their decision to stop Employment rates, hours worked, and wages working. However, these data do not capture the decline as workers age. While over 90 percent of share of people formerly employed in formal jobs individuals ages 50-54 are employed, this share who shifted to other forms of employment, such drops to below 60 percent for workers ages 65-69 as self-employment, after retirement. This, coupled (Table 4.2). While the employment rate for men with the fact that employment rates remain high in continues to be higher than that of women for all informal sectors where there is no retirement age age groups, employment rates for both genders or pension to encourage retirement, suggests that drop consistently as workers age. The number of a large share of retirement-aged men and women hours worked and wages also decline for older are largely capable of continuing to work past their workers. In 2014, the median hours worked in a respective retirement ages. normal week were 35 for farming and 48 for non- farm self-employment and wage employment In urban Vietnam, hours of work for elderly still working 45  (primarily the self-employed) tend to decline little then drop off sharply at age 65, in contrast to the more gradual decline in hours worked in other EAP countries. In rural Vietnam, the decline in work hours exhibits a steeper slope, and hours worked tend to be well below those of other countries. These trends are to be expected as workers succumb to sickness and disability, as reflected in the growing share of workers of both genders who reported those factors as their primary reasons for not working as they get older (World Bank 2016). VIETNAM: ADAPTING TO AN AGING SOCIETY 85 Table 4.2. Vietnam: Retirement-Aged Worker Employment Trends, 2016 Age 50-54 Age 55-59 Age 60-64 Age 65-69 Women 87.5 78.1 67.4 53.3 Employment Rate Men 93.6 87.3 75.5 63.3 Total 90.5 82.5 71.1 57.6 Women 10.1 2.4 0.7 0.3 Formal Employment (percent of workers) Men 13.7 13.3 4.8 1.5 Total 11.9 7.9 2.7 0.9 Women 170.8 152.9 130.8 116.4 Hours Worked in Past Month Men 183.8 168.5 146.2 125.5 Total 177.3 160.8 138.3 120.7 Women 4,385.1 3,134.4 2,371.0 2,075.8 Monthly Wage (thousand VND) Men 5,203.0 5,176.7 4,218.4 3,069.3 Total 4,903.1 4,604.2 3,583.8 2,666.4 Source: Authors’ calculations based on VHLSS 2016. These trends indicate that the current pension The socio-economic profiles of pension recipients laws encourage skilled workers to leave the show that they are overrepresented in urban areas labor force before their productive work lives and are significantly better off compared to others have ended. High labor participation rates among in their age groups. Pensions recipients make up workers age 65 and above in Vietnam suggests that high shares of the highly educated retirement-aged many people are well able to work beyond the low population. For example, among women ages 65- retirement ages of 60 years for men and 55 years 69 in 2016, 70 percent of those with a technical for women. However, workers who are eligible for degree are pension recipients, as are 92.6 percent pensions tend to retire when they are eligible for of those with a post-secondary degree (Table 4.3). pension receipt, even though they tend to work in Pension recipients are also more urban, with 40 more knowledge-intensive, less physically taxing percent of men and 38.1 percent of women ages sectors. Thus, the existing retirement age policy in 65-69 in urban areas receiving pensions, compared Vietnam is likely pushing people out of the labor to 16 percent of men and 9 percent of women of force when they are still productive participants. this age group in rural areas. Finally, the share of pensioners is also higher among the Kinh ethnicity relative to ethnic minorities (Table 4.3). 86 VIETNAM: ADAPTING TO AN AGING SOCIETY Table 4.3. Vietnam: Socio-economic Characteristics of Pension Recipients, 2016 Women Men Aged 55-59 Aged 60-64 Aged 65-69 Aged 60-64 Aged 65-69 Ethnicity Kinh 12.3 13.1 20.9 17.6 25.2 Ethnic minorities 5.4 7.0 8.3 9.5 9.8 Highest education level < Primary 0.2 0.6 2.0 0.8 2.0 Primary 1.4 3.7 8.2 2.5 4.2 Lower-secondary 5.6 8.4 21.3 8.3 18.1 Upper-secondary 16.4 24.6 33.4 20.2 24.4 Technical degree 51.6 59.6 70.0 41.7 58.7 Post-secondary 71.7 80.4 92.6 70.8 83.5 Urban/rural Rural 4.4 5.9 9.0 9.3 16.0 Urban 25.6 25.3 38.1 31.4 40.0 Total 11.5 12.5 19.7 16.9 23.7 Source: Authors’ calculations based on VHLSS 2016. A low retirement age has several important retirement age can create disparities in lifetime negative consequences. The first is the direct earnings, pension benefits, and retirement savings expense of pension payments over an average of (Levine, Mitchell and Phillips 1999). Lifetime 15-20 years to a greater share of the population. earnings differences are aggravated when wage Indeed, the social insurance program, under which gaps between men and women are significant to both pensions and survivor benefits are funded, begin with, as is the case in Vietnam. However, will face revenue shortfalls by 2023, according to extending working lives for women may prove the Ministry of Labor, Invalids and Social Affairs difficult if care for grandchildren and elderly (MOLISA). The second cost is the lost output of parents is viewed as their responsibility and no skilled working-age workers who have ceased market-based solutions are available. work while they remain productive contributors to the economy. This is especially problematic Vietnam’s 4.2.10. permanent registration since workers who are eligible for pensions are de system Ho Khau facto employed in formal enterprises, which often The ho khau household registration system comprise the most productive segments of the was designed at a time when the state played a economy. stronger role in economic and social management. Furthermore, the lower retirement age for women The system was designed as an instrument for results in a faster decline in the female workforce public security, economic planning, and control of than in the male workforce. Early retirement for migration. During 1975-1986 when the economy women can also cut short their careers, decreasing was centrally planned, ho khau was instrumental their prospects for training for and promotion to in distributing the national in-kind production to senior management positions (Adams et. al. 2002; individual households. The use of ho khau also World Bank 2012). Gender-based differences in expanded to many public services relating to VIETNAM: ADAPTING TO AN AGING SOCIETY 87 citizenship, health, education, and registration of public services will be more accessible for all business, land and property, vehicles, etc. regardless of the place of permanent residence registration. Although the system has become more flexible over time, it remains a major determinant of labor 4.3. Policies to Prepare for an Aging mobility, a source of inequality of opportunity, and an effective tax on internal migration (World Workforce and to Improve Labor Bank and Ministry of Planning and Investment Market Outcomes of Vietnam 2016). Concerns persist that ho khau As Vietnam’s population ages, it is the shift to limits the rights and access to public services for higher value-added output—rather than increased those who lack permanent registration in their place output based on current output structures—that of residence, which has important implications is likely to drive Vietnam’s medium- to long-term for the country’s socioeconomic development growth potential. In other words, the primary risk and modernization. More than 5 million internal to Vietnam’s future productivity is the current migrants do not have permanent registration structure of Vietnam’s labor force, which is heavily where they live, and as a result, they face barriers deployed in occupations requiring physical labor. in accessing employment opportunities, social About two-fifths of the active labor force is protection, education, and other public services. employed in physical-labor-intensive agriculture. For those who wish to move, less access to urban services and lower wages for people with Vietnam’s output structure is already changing, temporary registration in cities are discouraging following a well-established trend in middle- factors (Demombynes and Vu 2016; World Bank income countries, with younger workers leading and Ministry of Planning and Investment of the way. Major shifts in the labor force include Vietnam 2016). Without local ho khau, migrants the fact that younger workers are more likely to face numerous difficulties in applying for jobs, work outside of agriculture and that employment accessing credit, registering businesses and in higher-value sectors such as services is skewed vehicles, buying or renting housing, and signing toward younger workers. In addition to generally up for medical insurance. The World Bank 2018 reflecting higher labor productivity, these are often Vietnam’s Future Jobs: The Gender Dimension jobs in which experience benefits employee output. report (Cunningham et al. 2018b) identified ho Furthermore, in both urban and rural areas, younger khau, which restricts family migration, as one workers are concentrated in wage occupations, of the reasons for poor labor force participation while older workers are overrepresented in informal of ethnic minority women, who prefer to migrate jobs and in agriculture as discussed earlier. In with their families. The risks and uncertainty for general, younger workers start out in the informal migrants to urban areas created by the ho khau sector, but by middle age, their participation in the system is also a reason why they may hesitate to formal labor market increases. This is important, transfer agricultural land-use rights to other farm as firms in the formal sector are almost four times households in the countryside. more productive per employee than in the informal sector (Demombynes and Testaverde 2018). The current government made a historic Increased formality also has the added benefit announcement in October 2017, saying it would of supporting revenue mobilization to help offset phase out the ho khau system over the next years. pressures on expenditures tied to aging. Relaxation of the ho khau is likely to facilitate increased urbanization and help ethnic minorities. It These trends, however, do not go far enough will be replaced by a new citizen registration system to create the strongest possible growth for which gives every citizen a unique identification Vietnam; in light of vulnerabilities created by number at birth. The announcement was positively its demographic features, responding to the received by the public, with an expectation that 88 VIETNAM: ADAPTING TO AN AGING SOCIETY challenges and opportunities posed by aging and insight from global experience is that labor market by technology and automation will be particularly policies to address rapid aging are not just about important. Not only is the share of older adults old people but require policy interventions across in the total population increasing, but so is the the life cycle. share of mature workers in the pool of working- aged adults. Between 2010-2016, the share of 4.3.1. The Central Role of Human Capital mature workers aged 40 to 55 years old rose from (Education, Skills, Innovation and Health) for 7.54 percent to 10.61 percent and is projected Vietnam’s 21st Century Economy to continue to increase. This trend has various A number of studies have shown that significant implications for the labor market, including more increases in human capital may be sufficient difficulty for this cohort to learn new technologies. to offset the effects of population aging on This makes Vietnam’s labor force particularly aggregate productivity. Human capital consists vulnerable, because once people have become of the knowledge, skills, and health that people unemployed, training is less likely to help them get accumulate over their lives that enable them to back into work unless it is linked to other strategies realize their potential as productive members such as work placements, and this is especially of society (World Bank 2019). Contemporary true for people in their 40s and 50s. literature emphasizes the centrality of human At the same time, the valuable skills offered by capital in sustaining long-term economic growth mature workers should be recognized. Mature and development (Romer 1990 and 1993). One workers are more likely to possess such skills seminal study found that differences in human as advanced cognitive skills (critical thinking, capital investment can explain up to 80  percent problem-solving), socio-behavioral skills (creativity, of cross-country variation in per capita GDP curiosity, teamwork), and skill combinations that (Mankiw et al. 1992). Bloom, Prettner, and Strulik are predictive of adaptability such as reasoning and (2013) show that under plausible production self-efficacy. Globalized and automated economies function specifications, increases in education and put a high premium on human capabilities that health investments, in part spurred by declines in cannot be fully mimicked by machines, including fertility rates, raise worker productivity enough to abilities such as persistence and determination compensate for declines in labor supply. This is which have economic returns often as large as bolstered by findings from Lee and Mason (2010), those associated with cognitive skills. The steadily who show that the effect of spending on education increasing demand for nonroutine cognitive and is strong enough to offset the adverse effects of interpersonal skills suggests that they are highly population aging. valued in the face of technological changes, Vietnam has already made important progress in globalization, and structural changes. Such skills, building its human capital. The country is ranked unlike narrow job-specific skills, are transferable 48th out of 157 countries and territories on the across jobs, and when possessed by large human capital index (HCI),46 second in ASEAN segments of a workforce, create an aggregate behind Singapore. Vietnam’s success in creating labor force that is flexible and valuable to globally a quality primary and (lower) secondary education relevant firms. system is globally recognized, as demonstrated A range of policy measures and behavioral by its performance on internationally comparable responses can help prepare Vietnam for the standardized tests: Vietnamese 15-year-olds structural decline in the working-age population. These include measures to affect the quality of  he World Bank’s Human Capital Index (HCI) combines 46 T three components related to survival, learning, and health future workers and, to a lesser extent, the total into a measure of productivity. A Vietnamese child born size of the labor force because of the high labor today will be 67 percent as productive when he/she grows up as he/she could be if he/she enjoyed complete force participation of both men and women. A key education and full health. VIETNAM: ADAPTING TO AN AGING SOCIETY 89 outpaced the average OECD adolescent in the 2012 management schools, this is cause for concerted Program for International Student Assessment action. (PISA) tests of language, math, and science. More remarkably, nearly one in five Vietnamese students Human capital investments are most effective when from the most socioeconomically disadvantaged structured in sequenced “windows of opportunity” households were in the top quartile of test-takers during which specific skills are developed over worldwide. workers’ lifespans. This structure takes best advantage of optimal stages during which skills However, much more remains to be done. Evidence are most effectively acquired and of dynamic indicates that Vietnam’s educational quality may complementarities created between particular be slipping: its ranking for the perceived quality skills during their formation. In Vietnam, this will be of its higher education systems in the Global especially important given that much of the current Competitiveness Report 2017–2018 fell by one workforce does not have skills adequate to meet place to 84 out of nearly 140 countries surveyed. labor market demand trends and extending the Meanwhile, Vietnam ranked only 120 for the quality productive working lives of the current workforce is of its management schools, its lowest ranking an essential component of preparing Vietnam for its across all index subcomponents (ADB 2018). demographic transition. Equipping this workforce With the importance of higher education to future with skills to enhance their productivity into the workforces, and in particular the kinds of cognitive future even at older ages is critical. and socio-behavioral skills emphasized in Figure 4.10. Windows of Opportunity in Workforce Skills Development Rethinking skills development will thus mean both developing a broader range of skillsets (Box 4.2) and providing learning modalities over a lifetime. 90 VIETNAM: ADAPTING TO AN AGING SOCIETY Box 4.2. Skills for Future Workforces While countries may differ in the specifics, education and training systems need to ensure a range of skills for their future workforce, including foundational cognitive and socio-emotional skills, technical or job-specific skills, and higher order skills. Cognitive skills comprise functional literacy and numeracy—the ability to write, read, and comprehend text as well as perform basic math operations—as the foundation for learning and acquiring subject knowledge. They have been the traditional focus of school curricula and assessments of student learning and academic achievement. Socioemotional skills refer to beliefs, attitudes, and behaviors that allow individuals to manage themselves and to manage relationships with others, regulate emotions, set goals, accomplish tasks, and deal with frustration and conflict. Referred to variously as soft skills, life skills, noncognitive skills, and personality traits, this skillset is comprised of beliefs about intelligence, self-regulation, perseverance, pro-social behavior, empathy, and curiosity. There is growing evidence of their importance for success in school, work, and other life outcomes and of the need for interventions to teach them both in and out of school. Technical and job-specific skills are those required to perform specific tasks in jobs. Higher order skills include critical thinking and problem solving associated with thinking about thinking and learning about learning. Source: World Bank 2019b Vietnam’s current skills development model Investments in the earliest years of life are is centered around learning while young in an often most critical and cost-effective. Nutrition intensive school-based process. To expand beyond interventions, which are important because this its skills development system needs a larger proper early childhood nutrition shapes cognitive set of actors and mechanisms to support adult abilities for the entire lifetime, are most effective learning modalities over the course of the lifetime. during the first 1,000 days of life (from the If these issues are addressed, Vietnam’s labor first day of pregnancy until the child’s second force can develop the fundamental skills needed birthday). Undernutrition during this period to offset the soon-to-be shrinking labor force as could lead to extensive and largely irreversible the population ages. damage to physical and cognitive development. Ethnic minorities in Vietnam are at particular Aided by human capital development and by risk for inadequate early childhood nutrition. the generation and application of knowledge, Improving nutrition for ethnic minorities requires technological progress could prove to be the a multisectoral approach, involving access to a central driver of long-term productivity growth high-quality diet, effective maternal and childcare for Vietnam. As discussed above, a shrinking services, and access to water and sanitation and labor force amplifies the economic importance personal hygiene. Vietnam already has a good set of more knowledge-intensive work and high labor of policies, but stronger enforcement could make productivity. The falling size of the workforce may a difference, for example: (i) Decree 100/2014/ND- indeed encourage and help align Vietnam’s future CP on ban of advertising of breast milk substitutes jobs with labor-saving technology. If Vietnam’s for children up to 24 months and (ii) Decree workers can harness technology to do the low- 09/2016/ND-CP on food fortification regulating value added tasks, the smaller labor force can mandatory food fortification with micronutrients. focus on the higher-value tasks. VIETNAM: ADAPTING TO AN AGING SOCIETY 91 Box 4.3. Reforming Vietnam’s Nationally Targeted Programs to Close the Gaps in Human Capital Disparities for Ethic Minorities Closing the gaps in human capital disparities for ethnic minorities requires reforming the Nationally Targeted Programs (NTPs), investing in cost-effective human capital interventions, and facilitating transitions away from low-productivity farm work. Evidence suggests that smart human capital investments for ethnic minorities would focus on improving nutrition, access to quality secondary education and beyond, and transitions to good jobs. Under the current NTPs, provinces tend to allocate more spending to infrastructure. The next generation of NTPs can address this shortfall by ring-fencing budget for human capital interventions, while deepening synergies with infrastructure investments. To improve the efficiency of human capital investments for ethnic minorities, high-level champions and coordination across programs at different levels of government and pooling or integrating resources across line ministries and agencies should be encouraged. One specific recommendation to improve nutrition programming is to reconvene the high-level national intersectoral nutrition steering committee with appropriate representation by provinces with high stunting rates and/or designate specific agencies to monitor and evaluate nutrition- specific and nutrition-sensitive outcomes vis-a-vis allocated resources. Strengthening the incentive mechanisms for local decision makers to prioritize investments in poorer communes is important. The budgeting process should account for higher unit costs as well as lower capacity in remote and poorer communes and ensure that provinces targeting the poorest communes are rewarded with adequate financing. The worse-performing ethnic minority groups and the 16 very small minority groups comprising less than 10,000 people will require more resources to help them catch up to the others. A results-based funding mechanism, paired with more effective monitoring, would ensure a closer linkage between allocated budget and outcomes. Budget reporting and accounting requirements at the local level can be strengthened to ensure equitable distribution of resources and assess efficiency and effectiveness in achieving household-level outcomes. Over time, budget allocation should incentivize provinces to improve utilization of nutrition-specific and nutrition-sensitive interventions, enroll more students, offer full-day schooling to more children, rationalize the teacher/health workforce, and initiate administrative reforms to achieve human resource efficiency gains. Besides including poverty and income targets, the monitoring and evaluation framework for the NTPs should be strengthened by using more rigorous mechanisms for measuring not only outputs but also outcomes. This can be done by adopting external mechanisms for measuring such outcome impacts, for example through surveys by the Government Statistics Office (GSO). Critically, the MICS survey on which three of the sub-components of the HCI rely was last conducted in 2013/14, and now more than five years later, there are still no plans to implement another MICS survey (or Demographic and Health Survey, which could collect similar information). An immediate opportunity is the upcoming National Nutrition Survey 2019, which currently lacks funding to oversample ethnic minorities. A more reliable, comprehensive, and up-to-date tertiary education management information system is also needed. Data should allow for disaggregation not only by ethnicity, but also income, geography, and gender to ensure different dynamics can be analyzed. Importantly, ethnic minority communities should be consulted to ensure that programs are culturally and linguistically sensitive to their needs. Involving ethnic minorities in the design of interventions and including mechanisms for incorporating feedback during implementation increases the chances of success. In order for interventions to reach ethnic minorities, literacy constraints, language preferences, gender norms, and cultural values should be considered. Program managers and service delivery staff in health, education, and social assistance provision will need capacity building in cultural competencies to better serve the needs of ethnic minorities. Source: World Bank 2019, Making Growth More Inclusive. To build human capital, efforts should concentrate capital throughout the life cycle. Furthermore, on interventions with strong evidence of cost- human capital investment decisions should effectiveness. This includes consideration of account for disparities among groups, in part the factors that most significantly shape human because investments in the more disadvantaged 92 VIETNAM: ADAPTING TO AN AGING SOCIETY groups can lead to large marginal gains in human the current workforce. With rapid technological capital. development, job transitions throughout working lives will become the norm, requiring workers to Conditional cash transfers (CCTs) and behavioral learn new skills. A system of lifelong learning can change counseling to mothers and families are prepare adult workers for these expected impacts important demand-side interventions for building of technological changes on the labor market. human capital. Vietnam has already committed Adult workers needing to learn job-related skills to improving grassroots health service delivery, quickly will create higher demand for modular, including maternal and child health services. competencies-based training. Training providers, CCTs could be a complementary measure to in turn, will need to be more responsive to the help stimulate the demand side, incentivizing diverse age and experience profiles of workers households to utilize these services and providing experiencing job transitions. them with sufficient income to invest in the health of their children. Currently, registration and While Vietnam’s spending on education overall is enrollment for social assistance transfers that comparable to wealthier comparator countries, its include education and health remain relatively low contribution to tertiary education is insufficient for among ethnic minorities, while payments are not a country with ambitious goals. In 2015, excluding conditional and are often irregular (Dutta 2018). tuition fees, higher education received only 0.25 Providing cash to targeted, vulnerable families percent of GDP, 0.8 percent of total government while requiring them to enroll their children in spending, and 5 percent of total government school is likely to increase demand for better- spending on education. Today only 17 percent of quality education services. Demand-stimulating government spending in Vietnam went into tertiary programs such as CCTs should work hand-in-hand education, which is the least of all countries in the with improving the supply and quality of services, EAP region. The allocation to tertiary education which could be financed through a reformed is low because the government allocates a large Nationally Targeted Program (NTP) (Box 4.3). proportion of its budget to lower education levels. As a result, Vietnam’s public funding of tertiary 4.3.2. (Higher/Tertiary) and TVET Education education as a share of GDP is low while tuition Sector Reform for the Future Workforce47 fees (private contributions) as a share of unit cost in public institutions is high (Table 4.4). The high Building worker skills for today’s and tomorrow’s level of private spending on tertiary education jobs will require radical reforms to Vietnam’s reflects the government’s “Socialization” policy that higher education and training systems. A world- encourages cost-sharing as a student progresses class tertiary education system, comprised of through the education system (Annex 4.1 has technical and vocational education and training further information about the “Socialization” (TVET) institutions and universities, requires a policy). However, this effectively limits access to commitment to quality and relevance, a credible and availability of higher education and research accountability mechanism, the ability to leverage institutions. To help the economy and labor force technology to leapfrog in the areas of both learning transition toward more technological intensity and research, and sustainable, results-based and higher productivity, levels of public funding on financing. Tertiary education institutions will need par with competitor countries are needed at the to focus not only on the skills development of tertiary level. the pipeline of workers but also on upskilling of 47 This section draws from World Bank 2019 Making Growth More Inclusive. VIETNAM: ADAPTING TO AN AGING SOCIETY 93 Table 4.4. Public and Private Funding for Tertiary Education as a Share of GDP for Selected Countries, 2017 Public Funding as a share of GDP (in percent) <0.5 0.5-1 >1 Tuition Fees as Vietnam share of unit >40 Chile Mongolia cost in public institutions (in China, Indonesia, percent) 20-40 South Korea, Thailand Malaysia <20 Peru Argentina, Brazil, Colombia, Mexico Source: Salmi (2017) Increasing resources should therefore be a earn a wage premium of 34 percent compared to top reform goal to improve Vietnam’s tertiary 10 percent for those who only finish non-technical education system. Furthermore, reforms should secondary school. Even secondary vocational be designed to: (i) guarantee a minimum threshold school graduates earn more than standard of transferable cognitive skills, which are the best secondary school graduates, suggesting that the inoculation against job uncertainty; (ii) incorporate job market values low-skilled technical workers more general education in tertiary programs to more than low-skilled general education workers. increase the acquisition of transferable higher- Third, the employment rate of graduates from order cognitive skills; (iii) promote development TVET institutions is around 80 percent, with higher of universities as “centers of innovation”; and (iv) levels for secondary technical and professional bridge TVET with general tertiary (World Bank institutions (82 percent) and short-term vocational 2019). However, creating world-class research degrees (85 percent), compared to general college universities is an expensive endeavor, and institutions (VET Department General 2018). concentrating resources in these universities— which admit only a small share of the population— Greater efforts are needed to expand access to should not come at the expense of adequate TVET and improve quality. Expanding access support for others. The key is to ensure balanced to Vietnam’s TVET system will require further development of the entire education system. increases in funding, as the current supply of places offered in TVET institutions is inadequate Although TVET is generally not viewed very to meet the needs of the workforce. Investments favorably by Vietnamese students and parents, are also needed to improve quality and streamline neglecting it would be counterproductive. First, governance (ADB 2018). Another area of focus technical skills, which are emphasized in vocational should be in the upgrading, expansion, and co- training, still form the primary skillset desired by financing of technical short courses, which are one employers and remain the best skill level match of the most viable forms of adult learning for most for most jobs in Vietnam. Even in economies as of the workforce. developed as Germany and South Korea, more than half of the labor force has solid technical The public sector can play several roles in school training; Germany’s vocational training expanding and improving the current system. system is not only very highly respected worldwide First, the public sector should work with the but also a cornerstone of its economic strategy. private sector to identify market-demanded skills Second, Vietnam’s existing vocational education that the private training sector cannot fill and system already boosts earnings. Those who incentivize the provision of such courses. Second, complete post-secondary vocational education the public sector can incentivize the creation and 94 VIETNAM: ADAPTING TO AN AGING SOCIETY maintenance of central platforms for storage of Given the high private and social returns to information about short-term training courses tertiary education, expansion of financing to post- for access by workers and firms. Third, the public secondary education is warranted. In accordance sector can provide monitoring information on short with the government’s “Socialization” policy agenda, course quality via the central platform. Fourth, some level of cost recovery can be implemented learning grants could be provided for people to while ensuring that tertiary education is expanded use throughout their lifetimes to upgrade skills, equitably, sustainably, and with quality. Tertiary drawing from the model provided by Singapore’s education student financing reform to optimize SkillsFutureCredit program. effectiveness and access requires a transition from input-based to output/outcome-based (especially A reformed tertiary education system should income-contingent student loans) and finally to have clear results-based targets. These targets voucher-based mechanisms (Figure 4.11). Income could include (i) for improvements in access diversification for educational institutions in the and equity: overall gross enrollment rate and form of continuing education modules, research equity index (including educational attainment of and consultancy contracts, production of goods highest versus lowest income quintiles as well and services, and fund-raising with alumni, firms, as tertiary education access rates of different and philanthropists should be considered. demographic groups); (ii) for quality: proportion of accredited programs internationally and nationally, Building a demand-driven system will require student satisfaction; (iii) for relevance: student establishing the institutional conditions for a employability, employer satisfaction, availability well-regulated market of private and public of shorter, module-based training programs that providers that deliver training services with the respond to reskilling needs; (iv) for research: close involvement of employers. Successful volume and impact of publications; and (v) for systems require a high degree of coordination and innovation technology transfer: volume of patents partnership between government agencies and and start-ups. the private sector, as well as giving businesses a strong voice in determining training policy. The To increase the overall coverage of tertiary government provides the oversight by monitoring education equitably, more diversification is data on program quality, encouraging autonomy needed within the education system. This includes and accountability, and ensuring efficiency and developing more cost-effective, non-university a results orientation in government financing. options (TVET institutions); promoting good Building demand-side buy-in from employers is quality private tertiary education institutions by a key challenge. The United Kingdom and some allowing equal access to compete for government- other European countries provide useful models funded service and/or research contracts; scaling via sector employer councils, while East Asian up cost-effective alternative modalities, including countries have established independent apex open university and massive open online courses training authorities with strong partnerships (MOOCs); promoting closer linkages with the world with employers and other stakeholders, such as of work; undertaking administrative reforms to Singapore’s Institute for Technical Education. implement the current incentives that are provided The government can contract private providers to by law for better tertiary education-private sector deliver training services to workers in transition. engagement; and articulating policies to build bridges and pathways to allow for transfer between VET institutions and universities. Figure 4.11. Model for Transition of Student Financing Results-Based and then Demand-Based System Source: World Bank 2019, Making Growth More Inclusive Importantly, the public tertiary education system harnessed to improve skills development itself—for cannot solve this problem alone; industry example, introducing more sophisticated adaptive involvement is needed to address workforce skills learning using big data to transition toward a model challenges. As of 2015, only 22 percent of firms of personalized learning that identifies a student’s reported that they provide formal training to their place in the learning process then progresses with employees,48 despite the fact that nearly half of the them as they gain more competencies. respondents said that skills shortages negatively affect their businesses. The respondents reported 4.3.3. Extending productive working lives with that when they do train, most instruction is comprehensive, cross-sector policies limited to job-specific technical skills. Industry Extending productive working lives requires development of formal skills development would comprehensive interventions in many areas and be an important way to close the gap between the technology will play an important role in this. demand and supply for skills within their existing Some older individuals who want to work are workforces (World Bank Group 2017a). too sick, while some face challenges such as Closer cooperation with the private sector can obsolete skills, shifting labor market, employer also incentivize technology transfer, by providing discrimination, and homecare burdens in caring for more dedicated funding for applied research frail elderly and grandchildren. ADB (2018) argues (e.g., matching grants), capacity building to set that there will be more technological solutions for up technology transfer and enterprise linkage aging labor markets which would play out through promotion offices within tertiary education such channels as improving health and longevity, institutions (and/or within relevant line ministries), transforming work and the workplace, and and clear definition of intellectual property and transforming the labor market function (Box 4.4) revenue distribution. Technology can also be 48 World Bank. 2016a. Enterprise Survey 2015:Vietnam, 2014-2016. https://microdata.worldbank.org/index. php/catalog/2664 96 VIETNAM: ADAPTING TO AN AGING SOCIETY Box 4.4. Aging, Technology, and Labor Market The first pathway for technological intervention is via health and longevity. Advances in medical science and biotechnology improve general physical health and provide more effective and affordable medical treatment for disease. Healthy workforces are more productive, and improved longevity with health extends working lives. One cross-country analysis found that a 1 percent improvement in adult survival translates to a 2.8 percent increase in labor productivity. Another study found that improved health status of seniors significantly improves work capacity, estimating that the equivalent of 11.1 million workers’ worth of untapped work capacity exists among people in Japan ages 60-79. Examples of these interventions include biotechnology, automated diagnosis, surgery and therapies; integrating wearable devices and medical equipment into the internet of things; and health-related big data analysis. The second pathway for technological intervention is in the transformation of work and the workplace. Automation and increased use of artificial intelligence, machine learning, and cloud computing shifts employments patterns in ways that allow more seniors to remain in the labor force and allow companies to retain talent over the retirement age. Routine, manual task-related jobs have decreased, and non-routine tasks have increased in workplaces where advanced technology is adopted. These shifts favor older, experienced workers less able to perform manual labor but require training to ensure that the workers can interact with technology effectively. Furthermore, collaboration tools and cloud platforms allow for flexible and remote work (which better suits the needs and preferences of older workers), with significant productivity gains. Examples of these interventions include industrial robots, automation, artificial intelligence, machine learning, and remote/telework platforms. The third pathway for technological intervention is in human resource development and labor market function. Innovative technology for improved delivery of education and skills training can help seniors prepare for new jobs and roles. Furthermore, significant scope for improvement exists in the areas of employment placement services, as labor market matching technology can make job placement more efficient. In addition, within the workplace itself, improved ergonomics in indoor air quality, acoustic quality, and adequate illumination adapted to seniors’ needs improve productivity. New technologies can go even further by augmenting physical strength as well as visual, hearing, dexterous, and cognitive capacities. Examples of these interventions include remote and virtual education and training, human resource and age diversity management, cloud-based matching services, and ergonomic and human function aiding devices at the workplace (adaptive technologies). Source: ADB (2018). The foundational policy for extending working refrain from further participation in the labor market lives is health improvements, as health status and increase the utility of leisure (Gameren 2010). In plays a central role in workers’ decisions about Vietnam, 53 percent of older people age 60 and over the optimal age to retire (Lumsdaine and Mitchell reported health issues as the main reason for not 1999; Stock and Wise 1990). Numerous studies working (Vietnam Women Union (VWU) 2012 using have demonstrated a strong empirical link between VNAS 2011). health (measured either as self-assessed status or with incidence of chronic illnesses and disability) To improve health of older workers and extend and withdrawal from the labor force among older their working lives, Vietnam will need to reorient adults (Aranki and Macchiarelli 2013; Alavinia and its health system toward coordinated long- Burdorf 2008; Kalwij and Vermeulen 2007) (Box term prevention and early treatment. A range of 4.5). Poor health makes job tasks more demanding interventions aimed at improving health of older (especially for manual workers) and decreases an workers is described in Chapter 6. Long-term individual’s productivity, which may result in lower prevention and early treatment are important earnings; therefore, the attractiveness of staying in because these interventions can also teach the labor force declines. Deteriorating health reduces individuals how to take responsibility for managing an individual’s expected remaining years of life and their own care, compared to scenarios in which results in higher time demands for resolving health they only contact with the health care system is in matters, both of which may stimulate the worker to times of emergency. Many disabilities associated VIETNAM: ADAPTING TO AN AGING SOCIETY 97 with old age are acquired over time, and if treated A range of public policy initiatives directly related early, their impact on the individuals’ function can to the labor market can also be implemented. The be minimized or delayed, see Chapter 6. most economically and demographically advanced countries employ a mix of strategies to extend the The gender gap in labor force participation is productive working lives of older workers who larger among mature workers and complementary wish to work. Such initiatives include job search interventions aimed at developing childcare and services focused particularly on older workers; elderly care will help to gradually close it. Such vouchers for employers who hire older workers; policies would be an effective measure to offset retraining schemes targeted at those whose the structural decline in Vietnam’s working-age formal education took place significantly far in the population. While the gender gap in labor force past; provision of wage subsidies that effectively participation is considerably lower in Vietnam lower the cost of employing older workers; than in EAP countries such as the Philippines and subsidies or grants to encourage training to raise Indonesia, women in urban areas, in particular, older workers’ productivity and help them acquire remain less likely to be in paid work outside the new skills; subsidies that incentivize employers to home (World Bank 2014). In addition to the direct make suitable workplace adjustments to improve efforts in the labor market such as efforts to close not just employability but also workability; financial the gender pay gap, it will be vital to improve the incentives to encourage appropriate wage-setting functioning of childcare and eldercare services, practices to reflect individual performance rather both of which have significant effects on female than age or seniority; and improved flexibility in labor force participation (Thevenon 2013). With jobs, including expanding part-time and home- respect to childcare, public investments are likely based work (see World Bank 2016). to be necessary, whether directly into subsidizing childcare services or through other channels such The appropriate wage-setting practices to reflect as extended-day kindergarten and primary school individual performance rather than age or seniority services (as Vietnam is already extending the could be contemplated now (Box 4.5). kindergarten day). Box 4.5. Seniority Wage Systems Labor costs that rise steeply with seniority or age are one of the main types of barriers identified in the OECD which make employers reluctant to hire or retain older workers. Under seniority-based systems, age or length of service— rather than level of performance—are the most important (if not the only) determinants of pay and promotion for employees. They are most often used in government and with unionized jobs. A pay scale based on seniority has some advantages over a performance-based scale: they are generally easy to administer since they are formula-driven with little variation and can eliminate any perceptions of favoritism since every employee is treated identically. They tend to produce a stable workforce of loyal employees with relatively low employee turnover and create a cadre of highly experienced incumbents in a job for those performing the same job over several years. The downside is that they are generally incompatible with a strategy to develop a high-performing workforce, as there is no financial incentive for an employee to do anything more than the minimum required for acceptable performance. Seniority-based pay can also encourage status quo and discourage innovative or creative thinking that might increase productivity by changing how a job is structured or how employees perform the job. The practice of seniority-based pay partly reflects collective cultural values. Performance-based compensation schemes are preferred in cultures that tend to be high on individualism. Reichel, Mayrhofer, & Chudzikowski (2009) find that collectivist societies concentrate on seniority-based promotion decisions, whereas individualistic cultures are considered to place a stronger focus on an employee’s potential for future promotion based on task performance. Vietnam tends to score low on the dimension of individualism (World Bank 20016). Source: Authors 98 VIETNAM: ADAPTING TO AN AGING SOCIETY Another reform for extending working life in the When reforms aim to extend the working lives formal sector that could be contemplated now is of older workers, it is important to address appropriate retirement reform, notably increasing the likely political fallout from fears that it will the retirement age and equalizing it for men and crowd younger workers out of the labor market. women. Increasing the retirement age has been This is commonly known as the “lump of labor” consistently shown to have a more positive impact fallacy—so called because it assumes a fixed on economic growth than raising contribution number of jobs exist—and has been refuted time rates or cutting benefit levels to reduce pension and again. One relatively inexpensive government scheme deficits (see Barrel, Hurst, and Kirby 2009; response could be the deployment of awareness Karam et al. 2010). Furthermore, as discussed and communication campaigns explaining that earlier, evidence comparing formal and informal greater participation of older workers does not labor force participation suggests that the formal lead to adverse outcomes with respect to either retirement age is a major driver of people leaving firm productivity or the employment of the younger the formal workforce. These interventions could generation. also delay retirement of spouses since retirement decisions are often taken jointly. Box 4.6. The Myth of “Crowding Out” An increasing body of work has shown that participation of the elderly does not crowd out employment of the younger cohort. The assumption of older and younger workers being substitutes might simply not hold given their varied skill sets. Therefore, having both in the labor force could increase productivity, further spurring demand for more workers. OECD (2011a) found a positive correlation between the employment rates of younger and older people across OECD members. Within countries, a strong positive correlation has been found between the employment of 55-64-year olds and 20-24-year olds (Gruber and Wise 2010, as cited in Schwarz and Arias 2014). National experiments in Denmark, France, and many others found no evidence that earlier exit from employment by older adults increases job opportunities for youth (Schwarz and Arias 2014). In China, labor force participation of the elderly increases the participation and wages of the young (Munnell and Wu 2013; Zhang and Zhao 2012). In addition, firms with an age-diverse workforce may have higher productivity than firms with a homogeneous age distribution, as in Denmark (see Grund and Westergaard-Nielsen 2008). Nonetheless, a large degree of unsubstantiated skepticism remains about policies that allow workers to phase or defer retirement. Source: WB (2016). Box 4.7. Germany’s Model for Ergonomics and Adaptive Technology in the Adaptive Technology in the Workplace Older workers tend to be a company’s most experienced and innovative workers, but companies fail to adapt to their specific needs, often resulting in demotivation that leads to early retirement. Germany has invested in prolonging employees’ working lives through a focus on ergonomics and tapping of expertise of older staff. For example, workers who must lift their arms repeatedly are aided by €5,000 exoskeletons (lightweight, metallic structures worn like backpacks that attach to the arms and provide support for repetitive tasks known to cause injuries). Investing in ergonomics is not just about diminishing the effects of a silver-haired workforce but capitalizing on them. Source: https://www.ft.com/reports/health-at-work Similar initiatives could be used to help political of the main barriers identified by the OECD that leaders and policymakers address negative make employers reluctant to hire and retain older perceptions about the adaptability and productivity workers (OECD 2006). Negative attitudes about the of older workers. These perceptions form one capacity of older workers affect their employment VIETNAM: ADAPTING TO AN AGING SOCIETY 99 prospects, but such concerns are often misguided. The significance of informal learning—particularly A study by Börsch-Supan, and Weiss (2011) shows on the job—is highlighted by new insights into how that the overall productivity of older people even the adult brain learns,49 but these findings need to increases slightly. Productivity at the workplace be incorporated into adult education and training is more closely related to the quality of working programs (both formal and informal) to make them conditions and the time over which an individual more impactful and cost-effective. Rather than is employed to do the same tasks. In that respect, focus on training courses within firms, on which it is not age but rather the quality of work and Vietnam’s employers are notoriously scarce, the monotony that make workers less productive with most effective measures are likely to be expanded time, even at younger ages. Ensuring good and on-the-job training—using learning-by-doing healthy working conditions as well as a variety of with the assistance of more skilled supervisors, tasks is therefore critical for preventing declining providing regular opportunities to learn something productivity (Box 4.5). Employers’ misperceptions new, and hands-on coaching (Box 4.8).50 Individual about the potential productivity of older workers learning schemes are another promising approach could be changed by disseminating this information that links training opportunities to individuals rather and encouraging age diversity in the workplace. than jobs, although design and implementation Potentially useful examples include initiatives are key to their effectiveness (OECD 2019) and in Australia, Finland, France, the Netherlands, will need to be adapted further to the unique ways Norway, and the United Kingdom (OECD 2006), in which older people learn. Better information where employers are not just being told that they on the availability of training opportunities and cannot discriminate against older workers through incentives to participate can enhance on-the-job the law, but they are also provided with tools and training. Finally, given the scarcity of data, better information for managing an older workforce. measurement of skills acquired on the job and their rates of return would provide firms with the 4.3.4. Effective, Demand-Driven Lifelong information needed to enhance their investment in Learning (LLL) skills development. Continuous lifelong learning has a special place in the arsenal of labor market policies in Vietnam, as obsolete skills are a major problem for the Vietnamese labor force even today. Learning outside school is an important source of skill formation, and a large share of workers learn something new in their jobs daily, particularly among more skilled professions (World Bank 2019). In the United States, post-school learning Because of neuroplasticity, the brain continues to 49  accounts for as much as one-third to one-half of change beyond middle age, and although some cognitive functions (such as working memory and mental speed) all skill formation (World Bank 2019). start to decline as early as age 40, compensation and reorganization of neural pathways can allow a person to maintain high overall functional performance. Indeed, emotional regulation and conscientiousness tend to increase beyond middle age, and the brain gets better at using prior experiences and knowledge to take shortcuts to find solutions. World Bank. 2019. Innovative China: New Drivers of Growth. Washington, D.C: World Bank Group.  odewig, Christian and Badiani-Magnusson, Reena with 50 B Macdonald, Kevin, Newhouse, David, and Rutowski, Jan. 2014. “Skilling Up Vietnam: Preparing the Workforce for a Modern Market Economy.” Directions in Development, World Bank. DOI: 10.1596/978-1-4648-0231-7 100 VIETNAM: ADAPTING TO AN AGING SOCIETY Box 4.8. Adapting Learning Programs for Adult Learners Adult learners face different challenges than children and youth learners. Challenges to adult learners include reduced neurological plasticity and increased entrenchment, which make adult brains less adept at noticing and learning from certain types of information, such as written letters or characters. However, these challenges can be addressed by learning strategies adapted to the needs of adults such as repeating new information across multiple sessions (spaced learning) or in different contexts (multimodal learning). Adult learners also respond well to lessons that are engaging, made relevant to their lives and based on their personal learning goals, and include rewards and positive feedback. Reviews of existing adult literacy programs have found that they are most likely to succeed when they target emerging literacy skills, while more research is needed on why programs struggle to succeed when they target higher literacy levels. The Mexican NEUROALFA program is a notable exception: the program utilized an understanding of adult neurology to design a curriculum that adjusted its teaching method as adult learners progressed and succeeded in advancing students beyond emerging literacy to full reading comprehension. Several countries in the East Asia and Pacific region have implemented adult literacy programs that are consistent with best practices for teaching adult learners. In Vietnam, Community Learning Centers offered literacy and “post-literacy” classes as part of a national pro-literacy campaign targeting women and ethnic minorities. Teachers in these programs were trained in adult learning methods, and clear goals were set for different learning levels. Furthermore, assessments were made of local community needs and individual participant aspirations, and classes were offered in both Vietnamese (Kinh) and ethnic minority languages. Oxfam supplied pink phones to rural women in Cambodia who attended adult literacy programs, in part to give them an opportunity to practice their literacy skills through SMS text messaging outside of the classroom. Source: Authors based on Bendini, Levin, and Oral-Savonitto (2019) as cited in World Bank 2019d. 4.3.5. Support to improve ethnic minority Pimhidzai 2018). However, these transitions outcomes and to segmented rural workforce are complicated by the physical remoteness of ethnic minority communities. The Vietnam Vietnam is experiencing a demographic window of Jobs Report identified three key entry points to opportunity and it is important to take advantage reduce economic distance: (i) integrate lagging of it and support groups of workers who are not areas into the network economy to expand their fairing as well as the majority in the labor market. market potential, (ii) create a secondary economy These are ethnic minorities and both younger and supporting industries based on regional absolute older individuals in the rural workforce. advantages, and (iii) reduce the cost of migration • Comprehensive approach to improve ethnic to increase long-distance migration domestically. minority outcomes, including through supporting Encouraging long-distance migration domestically their migration prospects will be important to increase access to off-farm Reducing the “economic distance” for ethnic opportunities, especially for ethnic minorities minorities is critical to enhance their access to and people in low-density economies. In Vietnam, good jobs as well as to maximize the productivity the most cited challenge faced by migrants was of the greatest possible proportion of the labor housing issues (43 percent), followed by lack of force. Higher fertility rates among ethnic minorities income (38 percent) and inability to find a job (34 mean that their share within the overall population percent) among migrants surveyed in 2015 (GSO is likely to grow in the context of an aging country. and UNFPA 2016). Housing issues are particularly Supporting ethnic minorities’ transition to higher- difficult for minorities. One set of interventions productivity jobs is key, and their transition into could be aimed at addressing the social barriers household enterprises and wage employment to people’s movement, namely unequal access holds particular promise (Cunningham and to public services for temporary residents and VIETNAM: ADAPTING TO AN AGING SOCIETY 101 inadequate elderly care services in rural areas. to migrate, if specific characteristics of ethnic (The need to take care of the elderly discourages minorities are leveraged in the design of ALMPs. migration for both men and women and Given the culture of strong social cohesion within contributes to reverse migration. Adult children some ethnic minority groups, ALMPs that rely on with elderly parents in rural Vietnam are less likely social networks—such as business development to migrate (Jiles and Huang 2018)). Another set loans to a group of individuals with joint of interventions should aim to bridge information repayment responsibilities—may be appropriate. asymmetry in labor markets, minimize the role For ethnic minority groups concentrated in of social networks, reduce job search costs, isolated areas, ALMPs will need to consider how and increase job matching. An important step to link ethnic minorities to markets. For example, would be to create a Labor Market Information transportation vouchers could facilitate seasonal System, using specific surveys to identify labor agricultural wage work in other provinces. Such an demand, and then produce and disseminate user- intervention was highly successful in Bangladesh oriented, regionally specific, gender-disaggregated (Bryan, Chowdhury, and Mobarak 2014). Digital information. Another possibility would be to design technologies can shorten the distance between an integrated job search strategy that builds ethnic minority communities and markets through on private initiatives, directing public resources apps and e-commerce platforms that allow those to incentivize employment of hard-to-employ living in remote communities to buy inputs and sell populations, including ethnic minorities. final products into local and even global markets. Women from ethnic minority groups, who tend to be Complementary interventions include skills more closely tied to home at a young age (Weimann- development for ethnic minorities, including Sandig et al 2020), may particularly benefit from entrepreneurship skills to help start new such opportunities. Such an intervention would businesses, technical skills to help succeed require connectivity, cell phones, and technical in wage employment, and life and soft skills assistance to help communities develop and to support the pursuit of these livelihoods. To implement business plans. promote improved skills development of ethnic minorities, TVET institutions and universities in Public employment support centers are another areas with large populations of ethnic minorities critical resource, particularly for ethnic minority will need to undertake broader tertiary education communities, and improving their quality should system reforms. Private sector support in the form be a policy priority. Compared to other job of guidance, technology transfer, and funding may searchers, ethnic minorities have particularly be weak for these tertiary education institutions, limited information about careers, how to prepare thus there is a strong rationale for more for careers, job vacancies, and their own and their comprehensive government support. Targeted children’s options. Public employment support support to institutions should go hand-in-hand centers can improve the quality of their databases with results-based accountability. As part of the on jobseekers, firms, and vacancies; consolidate changes to TVET institutions, reforms can include information about career, job, and educational leveraging new e-learning modules that can be opportunities in local areas; and provide career delivered remotely in addition to face-to-face planning and job search assistance services learning. A baseline level of internet connectivity in tailored to the language needs and cultural ethnic minority communities is required, although specificities of different ethnic minority groups. online/offline approaches are available where internet connections are unreliable. • Support for a segmented rural workforce Active Labor Market Policies (ALMPs) targeted The overall policies of continued agricultural at ethnic minorities could be important tools for restructuring, including building on reforms in both those who decided to stay and who decided land policies, will help maximize productivity and 102 VIETNAM: ADAPTING TO AN AGING SOCIETY returns for those reliant on farming.51 Such reforms chains or the creation of new, more lucrative include strengthening land security, reducing jobs in services such as assembly and logistics, agriculture land-use restrictions, broadening land skills development will be needed for a more consolidation beyond rice farming, encouraging a sophisticated rural workforce. shift toward more farm operator-based agriculture, and reducing reliance on self-financing, including In terms of the overall support for rural workers, introducing and incentivizing innovations for skills development in agriculture can help financing agriculture. improve earnings and job prospects as much as in any other industry. Skilled farmers are For those older rural workers who have difficulty the first to innovate in agriculture, capitalize on adapting to the new environment and experience emerging market opportunities, and adopt modern challenges in economic participation, the technologies. Investment in skills for rural people country’s Intergenerational Self-Help Club (ISHC) to move to better-paid occupations outside of pilot model has shown to be effective in increasing agriculture, including related industries such as economic development and income generation agro-processing, is also needed. Although food among older members of rural communities. industry jobs generally require relatively low- Income generation is one of the more important level skillsets such as literacy, numeracy, and of the activities supporting older people: a simple technical and managerial training, they revolving fund gives members access to cash or are higher-level than those required in agriculture. in-kind loans for economic activity. The ISHCs also The share of workers with good skills in the food provide education on activities appropriate for processing industry in Vietnam is estimated at 54 older people to increase their incomes, technology percent, compared to 30-40 percent in wage work training, study tours, and economic models. A 2015 in agriculture. The growing demand for technical, evaluation by UNFPA found that members of ISHC adaptable skills for a variety of new jobs requiring experienced an average annual income increase multitasking capacity in the food industry calls of 30.3 percent (UNFPA 2016). Although the scale for public investment in vocational training, as has been limited thus far, increased investment by discussed earlier. the state could increase their impact significantly (see Chapter 7 for more details on ISCHCs). The occupations that pay higher wages are in services and general management and are Younger rural workers who stay in rural areas also associated with higher levels of education. are more concentrated in off-farm wage work This implies trading out assembly for jobs that and would benefit from interventions to support manage logistics, marketing, design, and the many rural jobs upgrading that help them move up the knowledge-intensive before- and after- assembly value chain and into the knowledge economy. activities. Moving to the service segments of Existing food production chains, significant value chains and into more sophisticated value agricultural product exports, and proactivity by chains will require both greater mastery of some rural municipalities will form the basis for such of today’s skills as well as an emphasis on interventions, linking jobs to local, regional, and knowledge-intensive skills. Well-educated rural global value chains. As opportunities open for young workers with skills in business development more efficient linkages of current jobs to value and with vocational skills are likely to benefit from the increasing knowledge-intensity of the food Vietnam’s success in the agricultural sector has 51  system, with significant opportunities in high-value transformed the country from one suffering from chronic food deficits to the world’s second-largest agriculture and associated agro-processing (World rice exporter. Key policies introduced to tap the Bank Group 2017b). growth potential of rural Vietnam include farmland allocations to individual households in the early 1990s and market-based incentives such as commodity trade liberalization (Roberts et al 2006).. VIETNAM: ADAPTING TO AN AGING SOCIETY 103 4.4. 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The 2008 Circular (No. 135/2008/TT-BTC) gives priority Vietnam’s socialization policy is best understood in leasing necessary infrastructure to these as a set of incentives and guidance to non- establishments and instructs provincial-level state establishments, private investment People’s Committees to facilitate this through establishments, and state financing establishments building or upgrading State facilities to lease to them to undertake activities contributing to social at preferential rates and supporting infrastructure goals. Vietnam’s socialization policy mandates development costs. It offers guidance to People’s Provincial-level People’s Committees to prioritize Committees in assessing values for these facilities “the socialization of education-training, vocational and determining rental rates, and mandates that training, healthcare, physical training and sports, Committees make these procedures convenient environment, and judicial expertise” as subjects and clear. Similar guidance is provided for land of this policy. The examples include schools, lease to develop establishments undertaking hospitals, recreational centers, sports centers, socialization activities, giving provincial-level museums, libraries, etc. Vietnam’s socialization government broad authority to determine land policy was adopted in 2008 by Decree 69/2008/ allocation and lease structure, while providing ND-CP and amended in 2014 by Decree No. for land use tax relief for such establishments. It 59/2014/ND-CP; the policies are administered by also mandates that People’s Committees provide the Ministry of Finance. for refunds to investors who pay resettlement compensation in executing pre-approved schemes Ministry of Finance Circular No. 135/2008/TT-BTC and outlining conditions for land recovery in the issued guidelines for implementation of incentives event of improper use. related to the Decree. The scope and conditions specify that non-state establishments - including Income tax incentives include a flat preferential investment projects, limited liability companies, tax rate of 10 percent on income generated by private financing organizations, and some foreign establishments in the domains encouraged for direct investors - may obtain licenses and operate in socialization, and the 2008 Circular also outlines the pertinent domains, provided they meet criteria procedures for accounting and documenting delineated under the Prime Minister’s Decision No. such income for establishments. It furthermore 1466/QD-TTg. The principles for implementation delineates that full income tax exemptions shall be direct that such establishments conform with offered for new establishments for four years, and local planning law and be self-financed; direct 50 percent reduction for five further years. Existing that the State allot land for their construction and establishments are also eligible for further tax provide financial support for its clearance and relief and the Circular clarifies how tax law should necessary infrastructure development; provide for be applied in those cases. It also describes credit treatment of such private establishments as equal incentives available to these establishments in to state establishments; allow establishments the form of loans and post-investment support. to enter into associations to raise capital and Such credit incentives are covered by Decrees develop technology; and define how assets of 151/2006/ND-CP and 106/2008/ND-CP. such establishments are to be treated and how termination of establishments shall be conducted. Guidelines are also given by the 2008 Circular for capital raising by establishments and how Incentives for non-establishments to undertake loans may be accounted. It establishes that activities in the domains designated for establishments are raising capital have a socialization include preferential rates for the responsibility to economic efficiency and proper lease of buildings and land, financial support use of funds, and that their Board Chairmen/ School Councils should be responsible for capital 110 VIETNAM: ADAPTING TO AN AGING SOCIETY raising and use. Furthermore, the Circular outlines The Ministry of Finance’s Circular No. 156/2014/ procedures of handling of assets in the event TT-BTC offers more specific guidance for the an establishment closing or being transformed, prioritization of projects and calculation of allowed sources of income, as well as distribution incentivized rental lease fees and issuance of of financial revenues. It also outlines ongoing land use rights to socialization establishments. legal responsibilities of establishments in terms of The Circular lays out a specific formula to finances, operations and transparency, as well as calculate the range of rental rates, guides setting the responsibilities of State Ministries, branches rental time periods, how to conduct appraisals, and provincial-level People’s Committees. and division of responsibility for management. It also instructs relevant government offices The 2008 Decree and Guidelines were amended in to regularly publicize rental rate schedules and 2014. The scope of the Decree was expanded to encourage establishments’ participation. It further include physical training and judicial expertise in guides responsible agencies in determining addition to the initial domains for socialization. It whether an establishment is eligible to receive also revised provisions relating to the construction preferential land use allocation, rental rates of material facilities for activities in the domains and tax exemptions, how to choose between of socialization, land lease for socialization competing establishments. Finally, it mandates establishments, and tasks of Provincial-level that socialization establishments must be given People’s Committees. Specifically, it mandates certification of land use rights and guides the that relevant Ministries and local governments transference of socialization projects. prioritize investments in infrastructure and construction of facilities to lease to socialization Sources: Government of Vietnam Circular No. establishments, and guides the financing of such 135/2008/TT-BTC, Decree No. 59/2014/ND-CP, projects and calculating appropriate rental rates. Circular No. 156/2014/TT-BTC It further mandates that the State lease land to socialization establishments for construction of such facilities with land use tax exemptions, guides how to administer such contracts, and provides for regular review of these policies. Finally, it assigns supervisory and inspections roles to the appropriate government Ministries and provincial- level People’s Committees. VIETNAM: ADAPTING TO AN AGING SOCIETY 111 Chapter 5: THE ROLE OF PENSIONS IN AN AGING VIETNAM 5.1. Introduction central budget. While expanding coverage would improve finances in the short run, this would only Unless there is a major shift in pension policy, the postpone even larger deficits since the scheme’s contrast between the pension “haves” and “have parameters are inherently unsustainable. Relying nots” will become even starker in the coming on budget transfers would imply redistribution decades as Vietnam experiences unprecedented from the majority of the population that does not population aging. Since 1995, employees of participate in the pension system to the higher formal sector firms in Vietnam have joined their income, formal sector workers who do. The counterparts in the public sector as members of pressure on pension spending will coincide with the social insurance program managed by the increasing demands for health spending, which is Vietnamese Social Security agency (VSS), an also affected by population aging. extrabudgetary fund. The 20-year vesting period (the minimum number of years required to qualify Although the parametric reforms of the last few for a pension) meant that until 2015, retiring private years have moved in the right direction, they sector workers received a lump sum payment are far from sufficient to reduce future deficits rather than an annuity, and many continue to do so significantly. A significant reduction in future because they have not met the 20-year rule. One- deficits will require deeper changes of the kind quarter of the elderly in Vietnam are estimated seen in the richer countries of Europe or Japan. to have received a contributory pension in 2018. This reflects the combination of generous pension They are fortunate in that they have been able promises and the fact that Vietnam’s demographics to maintain their consumption to some extent are rapidly converging with the demographics of without continuing to work or relying heavily on those countries, albeit at a much lower level of their children. The opposite is true for more than income. three-fourths of the elderly, although those over age 80 and a small share of the elderly deemed to These two challenges—the coverage gap and be poor receive a small social pension funded by the unsustainable finances of the VSS pension the central government. scheme—are interrelated, and neither is a recent discovery. The imminent deficits of the VSS have Another challenge is that the contributory pension been discussed in reports by academics and scheme will soon start to run deficits in order to international organizations for more than a decade. pay what has been promised to those who have Much of the research on Vietnam’s pension system contributed. After years of surpluses, reserves will reflects the growing realization that some form of be drawn down and are expected to disappear in social assistance is the only viable policy option less than 15 years. With contribution rates already to address the needs of the majority of the elderly at relatively high levels, the options seem limited to who will not receive contributory pensions. The difficult parametric reforms or transfers from the introduction and expansion of the non-contributory 112 VIETNAM: ADAPTING TO AN AGING SOCIETY pension is a response, but the program in its traditional defined benefit scheme financed by current form is too small to have more than a contributions from workers and their employers. marginal impact. The contributory pension was expanded to private sector workers only in 1995, while the social The ratio of the average VSS pension to the social pension was introduced in 2006. In addition, pension is about 18:1, and more than half of the since 2008, Vietnam has a voluntary contributory elderly have neither type of pension. Currently, scheme aimed at the self-employed. In 2017, one-quarter of the elderly receive about 3 percent around 11.2 million workers contributed to the of GDP in pensions through VSS, while a small defined benefit scheme managed by the VSS, while share of needs-tested elderly among the other close to 2.8 million people received VSS pensions. 75 percent receive around 0.1 percent of GDP in Around 1.5 million elderly Vietnamese receive the social pension transfers. This situation is unlikely social pension. Only around 300,000 people in the to be socially or politically sustainable. Similar informal sector have signed up for the voluntary discrepancies have already led to large expansions pension program. Although favorable tax treatment of social pensions in other developing countries for private pensions was introduced in 2013, these including China, Korea, and Thailand. pensions have thus far remained peripheral. This chapter is structured as follows. The next Vietnam’s pension system has major gaps in section briefly describes the current pension coverage. The pace of coverage expansion has system and compares key indicators with other been slow and will increasingly struggle to keep up countries. Section III reviews the options for with aging. The people that this system does cover addressing the coverage gap. Section IV presents are heavily concentrated in the top 40 percent of long-term financial projections of the VSS pension the income distribution (because of the focus on scheme and reviews options for reform that formal sector workers), with the social pension would make it more sustainable. The last section protecting the poorest workers and those 80 summarizes. years old and above. The challenge, as depicted in Figure 5.1, will be to address the “missing middle” 5.2. Vietnam’s current pension system of people who remain excluded from any pension in international perspective scheme. In addition, the figure indicates that even those that do qualify for social pensions do not The pension system in Vietnam includes a receive benefits that meet an adequate minimum non-contributory social pension as well as a (floor in the figure). VIETNAM: ADAPTING TO AN AGING SOCIETY 113 Figure 5.1. Vietnam’s pension coverage gap 5.2.1. Mandatory contributory pensions levels. FINDEX survey data show a likely gender gap in coverage of about 24 percentage points Pension coverage in Vietnam appears to be (62 percent of those covered are men, 38 percent consistent with global patterns. Administrative are women), which is very similar to the average data shown in Figure 5.2 suggest that the share for developing countries.52 The same data also of the working-age population contributing to the show that covered workers are much more likely scheme is in line with other countries at the same to be found in the top two quintiles of the income income level as Vietnam—a function of the size of distribution. the informal sector and its correlation with income 52 See Majoka and Palacios (2018). 114 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 5.2. Pension coverage in Vietnam is in line with global patterns Source: World Bank pension database. As in other developing countries, coverage has accrues—is much higher than others in the region grown very slowly over the last two to three and globally. However, these numbers hide decades. Over the last 25 years, the share of the important differences between the generosity of labor force contributing to the VSS pension scheme pensions for public and private sector workers. has increased by only around 10 percentage points, These differences are due to another parameter in despite rapid economic growth and changes the formula, the reference wage to which accrual to statutory coverage. Even under optimistic rates are applied to generate the replacement assumptions, the growth of coverage will be much rate (the ratio of pension to wage). For private too slow to address the needs of the rapidly aging sector workers, the reference wage is based on Vietnamese population. an average over their entire contribution period, while for public sector workers it is based on the For those who are covered, target benefit levels final few years. Moreover, the historical wages of appear to be high by international standards, private sector workers are ‘revalorized’ or revalued although generosity levels differ considerably by the price index. In a context of positive real between the public and private sectors. Table 5.1 wage growth, this makes a huge difference in the shows that Vietnam’s accrual rate—the percent of public and private sector wages that are used to the reference wage that each year of contribution calculate the pension. VIETNAM: ADAPTING TO AN AGING SOCIETY 115 Table 5.1. Accrual rates in Vietnam are high compared to other countries Region/Country Average Annual Accrual Rate (in percent) East Asia and Pacific 1.8% Vietnam 2.25% (men) & 2.75% (women) China 1% Korea 1% Eastern Europe and Central Asia 1.7% Latin America and Caribbean 1.2% Middle East and North Africa 1.6% High-Income OECD 1.6% World Total 1.7% Currently, Vietnam’s public sector replacement difference over time, it is an extremely slow process rates are among the highest in the world and which, as shown in the Figure, results in parity only are twice those of private sector workers (Figure around 2060. 5.3). Although the 2014 reform will phase out this Figure 5.3. Major differences in replacement rates for public and private sector workers Source: World Bank (2018). Another important distinction between public and pension in Vietnam is 20 years, which meant that private sector workers is the impact of the vesting until 2015, private sector workers could only receive rule. As mentioned earlier, the minimum number of a lump sum payment. This continues to be the case years of contribution required to be eligible for a for workers who reach the mandated retirement 116 VIETNAM: ADAPTING TO AN AGING SOCIETY age of 60 years for men or 55 years for women sector workers will not have longevity insurance if they have not reached the minimum number of despite having contributed to the system. years of contribution for whatever reason. A very high proportion of private sector workers leave the While life expectancy at birth is often cited when scheme before qualifying for the pension, with an discussing retirement ages, what matters from estimated three-fourths leaving with only a lump the perspective of pension system design is life sum payment equivalent to 1.5 months of their expectancy at retirement age, which is relatively wage per year of contribution. Much of this may be high in Vietnam. Figure 5.4 A and B show that due to a desire for liquidity, but the lump sum these life expectancy at retirement age in Vietnam is workers receive is much less than the present high compared to other countries in the region as value of a pension if they were able to meet the well as to high-income OECD countries. This is minimum conditions. From a public policy point of especially true for women, who can expect to live view, it means that a significant number of private almost 29 years. Figure 5.4. Life expectancy at retirement age, Vietnam and selected countries compared Male Female Source: OECD (2013). Vietnam’s current retirement ages are quite low normal retirement age for both men and women to by global and regional standards (Table 5.2), age 65 by 2043. While other countries in the region especially as many countries have increased remain at or below age 60, most of these are or are increasing their retirement ages and considering raising these ages. A growing number harmonizing these ages between men and women. of OECD and other countries are also linking Nearly all Europe and Central Asia (ECA) transition retirement ages to the increase in life expectancy countries have increased their retirement ages at retirement, or in several cases are eliminating an to 63-65 years, and several OECD countries are official retirement age altogether outside the public already at 67 years or higher. In the EAP region, sector. An additional problem with low retirement economies such as Japan, Korea, the Philippines, ages is that they are quite inequitable when and Hong Kong SAR, China have already set official compared to the eligibility threshold of 80 years retirement ages at 65. Indonesia will increase its for the social pension scheme, since recipients of VIETNAM: ADAPTING TO AN AGING SOCIETY 117 the compulsory pension have significantly higher adjust for the longer duration of pension payment. incomes and benefit levels on average than do In the Philippines and Vietnam, retiring early social pension recipients. increases the present value of the pension because there is essentially no penalty. Amendments to the While Figure 5.4 is based on the normal retirement social insurance law in Vietnam in 2014 increase age, the actual average retirement age in Vietnam the early retirement penalty slightly, but not enough is lower due to the prevalence of early retirement. to offset the increase in pension wealth. Japan, Table 5.3 compares the incentives for early and which has the highest labor force participation late retirement based on the actuarial reductions rates in the region, has the recommended penalty or increases in each of five East Asian countries. and bonus for early and late retirement. It is The Table shows large negative figures for Korea actuarially fair, symmetric, and therefore neutral and Japan, reflecting significant reductions in the to whether someone retires one year earlier or one pension value for each year of early retirement to year later. Table 5.2. Official Retirement Ages in Selected Countries, 2016 Economy Official retirement age Economy Official retirement age Korea 65 Indonesia2 56, rising to 65 by 2026 Japan 65 Mexico 65 Singapore 62 Brazil 60 (women)/65 (men) Philippines 65 Lao PDR 60 Thailand1 60 civil servants/55 private Australia 67 Hong Kong SAR, China 65 New Zealand 65 50 and 55 (women)/60 China Malaysia 60 (men) Vietnam 55 (women)/60 (men) Source: World Bank pension database and WB staff updates. Notes: 1Thailand has announced that the civil servant retirement age will be raised to 65 years. 2Indonesia has legislated an increase in age for the private sector to 65 years, to be phased in by 2026. Table 5.3. Incentives to retire early are strong in Vietnam Normal Age Early Retirement Penalty Late Retirement Reward Vietnam 60 15% Not possible Thailand 55 Not possible 1% Korea 65 -22% 15% Philippines 65 18% -17% Japan 65 -23% 23% Note: Figures in last two columns refer to annual change in present value of pension payments from retirement until death for early and late retirement. Figures use national mortality rates at relevant ages. Source: World Bank (2016). 118 VIETNAM: ADAPTING TO AN AGING SOCIETY Table 5.4. Pension Contribution Rates in the East Asia and Pacific and Latin America regions, latest year in percent Country Employee Employer Total Indonesia 2.00 3.70 5.70 Thailand* 5.00 5.00 12.75 Mexico 1.70 6.90 8.60 Korea 4.50 4.50 9.00 Philippines 3.30 7.10 10.40 Malaysia 11.50 11.00 22.50 Vietnam 8.00 17.50 25.50 Brazil 7.65 20.00 27.65 China ** 8.00 16.00 24.00 Source: WB pension database. Note: *For Thailand 2.75 percent is contributed by the government. Note: **For China, this is the maximum rate, and some prefectures have lower rates. Vietnam also has relatively high contributions pensions (Figure 5.5). As discussed in World Bank for pensions, which could undermine its labor (2020), this can be attributed to a variety of policy cost competitiveness (Table 5.4). Until recently, differences in the region. Several countries such the only country in the EAP region with a higher as Malaysia, Singapore, and Sri Lanka have defined contribution rate than Vietnam was China, although contribution schemes or provident funds that do it made a significant reduction in employer not result in government spending but rather the contributions in 2019 and is now below Vietnam. drawdown of individual pension accounts. Other Most of Vietnam’s neighbors have significantly countries such as Bangladesh, Cambodia, Lao PDR, lower pension contribution levels—in some cases and Myanmar have not yet introduced mandatory helped by significant public subsidies for matching pensions for private sector workers. With the worker contributions—which poses a potential exception of Timor-Leste, which has a very large competitiveness issue for Vietnam in terms of social pension scheme, the countries spending labor costs. similar shares of GDP are mature defined benefit schemes—namely, China and Mongolia. They also Compared to its Asian neighbors, Vietnam face similar challenges due to population aging. spends a greater share of its national income on VIETNAM: ADAPTING TO AN AGING SOCIETY 119 Figure 5.5. Public pension spending as a share of GDP, selected Asian countries circa 2015 Source: World Bank (2020). Vietnam (as well as China) are spending at levels Figure 5.7 compares Vietnam’s social pension that are in line with their demography based on scheme to those of other countries on three global patterns, as the vast majority of countries dimensions. On the Y-axis, it compares coverage around the world that have chosen the same type using the number of beneficiaries relative to the of unfunded public defined benefit schemes. This number of persons age 65 and over. The X-axis is shown in Figure 5.6 below. However, in the measures the relative generosity of the benefit absence of reforms, the imminent maturation of by dividing it by income per capita. The size of the Vietnamese pension scheme will soon lead each bubble on the chart is proportional to the to much higher spending so that it will soon be cost of the program, which is the present value spending significantly above the predicted line. of a simple projection of spending through the year 2040 based on current coverage and benefit 5.2.2. Social pensions levels. Projected cost thus takes into account the differences in demographic aging in each country. With its relatively low coverage and low benefit The results suggest that Vietnam’s social pension level, Vietnam’s social pension plays a small role in plays a minor role in providing income support to providing income support to the elderly. Originally, the elderly, which is also reflected in the fact that the eligibility age for this categorical cash transfer current spending on the social pension is less than was 90 years, but it was reduced to 80 years in 0.1 percent of GDP.53 2010. In addition to this universal benefit, a strictly means-tested benefit is also provided to those between ages 65-79. The benefit is worth around 6 percent of income per capita and varies depending on certain health conditions.  ot surprisingly, there is no evidence of any significant 53 N impact on poverty among households receiving social pensions, although few rigorous studies exist. Giles and Huang (forthcoming) find that overall pension income (including contributory pensions) reduce poverty only among urban households. 120 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 5.6. Pension spending in Vietnam, taking into account demographic aging Source: World Bank pension database Figure 5.7. Social pensions in Vietnam cover few and have low benefits Source: HelpAge International and World Bank Pension database. Coverage has been growing as the eligibility increase was for households that had members conditions have been relaxed yet less than half age 80 and over, reflecting the change in eligibility of those aged 80 and above in 2016 reported for the universal social pension. These trends receiving them. Figure 5.8 shows the change were similar for urban and rural households. While between 2010 and 2016 in the share of households including other social benefits raises this figure to receiving social pensions with members age 60 about 64 percent, this result suggests that there and above. The figure shows a major increase are major gaps in implementation of the social in coverage between 2010-2016, especially for pension program, at least through 2016 when the the older cohorts age 70 and above. The largest latest data are available. VIETNAM: ADAPTING TO AN AGING SOCIETY 121 Figure 5.8. Incidence of social pension receipt by age of household member, 2010-2016 60 50 % receiving social pension 40 30 20 10 0 60-64 65-69 70-79 80+ Age of pension in receiving HH 2010 2016 Source: VHLSS (2010-2016). 5.2.3. Informal sector pensions the voluntary rural pension scheme, the combined central and local government contributions to the Attempts to expand coverage through special individual’s pension account have been estimated schemes for farmers can be traced back to the to be as much as 85 percent of the total. The social 1980s. In 1986, the Ha Tay farmers pension fund pension is linked to the voluntary contributions in was established, covering 67 communes in that that contributors’ parents qualify for the transfer. province. Another fund for farmers was started Thailand’s government also pays for part of the in 1999 in 305 of the 325 communes of Nghe An. premium for informal sector workers who sign Both attempts were largely unsuccessful, partly up for their pension scheme and has managed due to the high proportion of contributions needed significant increases in coverage. to cover administrative costs. To summarize, Vietnam’s overall pension system The Social Insurance Law of 2006 introduced the faces a number of problems. First, even though voluntary pension scheme at the national level. It the system consists of three different schemes, went into effect on January 1, 2008. It specified a the coverage rate of the system remains low, and contribution that would rise gradually from 16 to 22 it is not well prepared to support a rapidly growing percent of the minimum wage. This appears to be elderly population. Second, the system is facing a large amount for most informal sector workers, major challenges to being financially sustainable, and combined with the 20-year vesting rule, led to even though spending levels on pensions in low take-up.54 Vietnam are at the global average for its level of development. A third challenge is that Vietnam’s A growing number of countries are attempting relatively high contributions for pensions could to expand coverage to informal sector workers, undermine its labor cost competitiveness. The but in contrast to Vietnam’s approach, most next section looks at different ways to address offer some incentives in the form of matching these major challenges to the system. It starts contributions from the government. In China, with looking at different ways to expand coverage where more than half of the labor force has joined in Vietnam and provides some estimates of related costs. It then discusses options for improving the 54 Hoa (2010). 122 VIETNAM: ADAPTING TO AN AGING SOCIETY long-run financial sustainability of the contributory rates and income per capita shown in Figure 5.7 system. above is maintained and Vietnam’s current growth rate continues, it may could achieve coverage rates 5.3. Options for addressing the found in Europe and Japan in 30-35 years. By this time, one in three Vietnamese people would be coverage gap age 60 or over. Vietnam would have lost the race Generally, there are three ways to expand between coverage and population aging, and the coverage: bring more workers into the formal vast majority would still have to rely on transfers sector, expand social pensions, or encourage more from their children, their own savings, and social people to join the voluntary scheme for informal pensions. sector workers. The impact of each of these 5.3.2. Expanding social pensions paths is very different. Aside from the obvious differences in financing between contributory and Facing this dilemma, it is not surprising non-contributory schemes, a crucial difference that researchers and several international is that the two contributory options will produce organizations have recommended making social pensions only after several decades, while social pensions a more important part of the system pensions provide immediate impact and affect both in terms of coverage as well as the size of current cohorts of older people. Notably, the three the benefit.55 The table below shows the simulated approaches are not mutually exclusive. impact that an expansion of the existing social pension to a large proportion of the population 5.3.1. Expanding contributory pension age 60 and above would have on poverty and coverage inequality. Moving to a universal social pension for The recent history of developing country pension this population reduces the share of elderly below systems suggests that it is not likely that the poverty line from 7.1 to 5.3 percent. Vietnam’s labor market will formalize any time While expanding non-contributory pensions or soon. Coverage rates of contributory schemes social assistance for the elderly is the only way to over the last 25 years have increased only slightly address the coverage gap that is now inevitable in most low- and middle-income countries, with for the cohorts reaching old age in the next several a few notable exceptions such as Korea. In decades, it implies a large increase in spending. Vietnam, coverage rates appear to have risen a This increase in spending would be significant few percentage points during this period, partly relative both to the existing social pension and thanks to changes in the legislation that expanded even to overall social assistance spending on all the mandate to smaller firms and partly thanks to programs. Applying a means-test to the social better enforcement and compliance. Analysis of pension could increase the poverty impact of the the informal sector’s reasons for not registering same amount of spending or allow for the same in Cling et al. (2017) suggests that there is some impact with less spending.56 However, strict scope for improvement through better outreach. means-testing is likely to lead to exclusion error, While efforts should continue toward formalizing and higher non-contributory benefits could reduce and registering small firms and even self- incentives for contributing to the VSS pension employed people, a large portion of the labor force scheme. does not have a regular, monitorable source of income so that a new approach to covering them is needed. If the relationship between coverage See Castel and Tong (2012),, World Bank (2018b), ILO- 55  UNFPA (2014), Nguyen et al. (2012), and Giang (2011, 2014). 56 See Majoka and Palacios (2018). VIETNAM: ADAPTING TO AN AGING SOCIETY 123 Table 5.5. Poverty impact of hypothetical social pension in Vietnam Observed values Counterfactual Different scenarios: providing 270 thousand VND (social pensions) Indicators (estimated directly (No social for different age groups from VHLSS 2016) pensions) 60+ 65+ 70+ 75+ 80+ (1) (2) (3) (4) (5) (6) (7) Group Gini coefficient Total population 0.353 0.354 0.350 0.351 0.352 0.352 0.353 Elderly (60+) 0.356 0.360 0.345 0.348 0.352 0.354 0.356 Poverty line ratios % elderly in each group 0%-50% 0.8 0.9 0.3 0.5 0.7 0.7 0.8 50%-100% 6.3 6.9 5.0 5.2 5.5 6.1 6.3 100%-125% 7.0 7.5 6.1 6.6 7.1 6.9 7.0 125%-200% 25.8 25.5 24.1 24.8 24.9 25.4 25.7 200%+ 60.1 59.3 64.4 62.9 61.8 60.9 60.2 Total 100 100 100 100 100 100 100 Note: expenditure poverty line of WB-GSO Social pension is equal 270 thousand VND/month Source: Authrors. Such concerns led Chile to implement a targeted benefit as contributory pension benefits increased, pension offset scheme that included households the two schemes were integrated in a way that in the bottom 60 percent of the welfare kept disincentives to stay in the formal sector distribution. This ensured minimal exclusion manageable. This experience, which is described error, albeit at a greater cost. At the same time, in greater detail in Box 5.1, is relevant for many by withdrawing a proportion of the social pension countries facing similar challenges. Box 5.1. Chile’s solidarity pillar: integrating non-contributory pensions Chile introduced a non-contributory (“solidarity”) pension in 2008 that would complement the existing contributory pension system. In 1981, it had replaced its traditional defined benefit (DB) pay-as-you-go pension system with a defined contribution (DC) system with individual accounts managed by specialized private firms. Two types of non-contributory benefit existed: (a) a social assistance pension targeted at the lowest income quintile of the population, with eligibility precluded if a person had any other source of pension, and (b) a minimum pension guarantee for pension fund contributors who had attained only low balances after at least 20 years of contributions. By 2006, it was clear that although the system had been very successful in obtaining high real rates of returns for the pension funds, pension levels would not be adequate for a large portion of the population. Most members of the system did not contribute frequently enough to build a large balance. Although the proportion of the labor force that worked in the formal sector was relatively high at around 60 percent, only a minority held steady jobs in the formal sector. Berstein et al. (2006) estimated that around 50 percent of members would receive a pension lower than the minimum pension, and many would not reach the 20 years of contributions required for the pension guarantee. At the same time, many of these individuals would not be poor enough to qualify for the social assistance pension. As a result, low- to middle-income individuals fell into a “coverage gap.” 124 VIETNAM: ADAPTING TO AN AGING SOCIETY Box 5.1. Chile’s solidarity pillar: integrating non-contributory pensions (cont.) Design of Chilean pension system Total Pension APS PBS Self-financed Pension Chilean policy makers faced a trade-off between providing income protection and reducing incentives to save. The new solidarity pillar had to be designed to be compatible with incentives to contribute to individual accounts. Since neither the existing social assistance pension nor the minimum pension guarantee provided adequate income support to alleviate poverty in old age, policy makers decided that the new pillar would replace both programs. To maintain some incentives to contribute, the benefit was designed not as an absolute minimum floor guarantee but as a minimum pension for individuals with no contributions plus a top-up for individuals with contributions. The amount of the top-up would be reduced depending on the level of the contributory pension. The reduction was designed so that the total pension (the sum of the contributory and non-contributory pensions) would always be increasing along with the balance accumulated in the individual account. Operationally, the new solidarity pillar was composed of two benefits: (a) the basic solidarity pension for individuals with no contributions and (b) a solidarity pension supplement, which is the top-up for individuals with some contributory pension. In other words, the new solidarity pillar was designed as a minimum pension benefit with a clawback, see above. Source: World Bank (2016). 5.3.3. Expanding pension coverage for also appears to have a large and significant effect: informal sector workers individuals with bank accounts were much more likely to report having saved for old age. This Several analysts have identified features of the suggests that the low rate of financial inclusion current design of the voluntary pension that in Vietnam is likely to reduce saving for old age. discourage take-up by informal sector workers, Finally, there is clear evidence of a crowding out even if they have an interest in saving for old age. effect whereby higher public pension spending An analysis of the FINDEX survey data found that is associated with a lower propensity to save for only about 18 percent of Vietnamese adults chose old age. This finding, which is consistent with to save for old age in 2017, lower than the median the empirical literature on the impact of public for a sample of more than 140 countries but similar pensions on savings,57 suggests that reforms to to the median for non-OECD countries. A cross- reduce future spending and make the contributory country regression analysis revealed a strong scheme more sustainable could lead to higher correlation with income level, both within and rates of saving for old age. across countries. Interestingly, financial inclusion 57 For a review of the literature, see Karam et al. (2010). VIETNAM: ADAPTING TO AN AGING SOCIETY 125 A number of countries have attempted to convince who have some capacity to save for the long term informal sector workers to contribute to a pension will be the main beneficiaries of the policy, and the scheme. This is usually a stand-alone scheme lower-income groups will continue to be excluded. designed for this group of workers, and most offer a financial incentive, often in the form of a The recent experience with expanding health matching contribution from government. This type insurance coverage in Asia, including Vietnam, is of arrangement was implemented in India between instructive here. Lessons from this experience are 2009-2014 and is ongoing in China and Thailand. summarized in Box 5.2. Realizing that achieving The results have been mixed, with relatively low universal health coverage was not possible if take-up in India and somewhat more in Thailand. coverage depended on being in the formal sector, Only China, where the subsidy is very high, has had many countries have started paying the premium high rates of participation. Notably, the evidence for on behalf of the poor and sometimes for the near- India is consistent with the FINDEX survey analysis poor. Like Vietnam, China, India, Indonesia, and in that take-up is higher at the higher income levels. the Philippines all finance these premia from the This raises an important policy question: should central budget, allowing them to achieve very high the subsidy for contributions be targeted? If not, it coverage rates. is likely that those in the non-poor informal sector Box 5.2. Achieving universal coverage: Lessons from health insurance The experience with expanding health insurance coverage in East Asia holds lessons for pension policy and shows that universal coverage is feasible. The unprecedented increases were based on policies that recognized the futility of relying exclusively on payroll tax-based financing and eligibility. Instead, a large part of the population, typically starting with the poor, was subsidized—i.e. their premiums were paid by the government to the social insurance fund. Most countries with social health insurance systems covered here subsidize the contributions of select segments of the population, especially the poor and vulnerable, through transfers from general revenues to the health insurance fund. Referred to as progressive universalism, this approach provides coverage and integrates the poor (who might otherwise not have been able to afford premium contributions) into pooling arrangements. Indeed, the World Bank’s Universal Coverage (UNICO) series of 24 country case studies has shown that many countries have identified and integrated the poor and vulnerable as an early and critical step in their path to UHC. In the East Asia region, China, Indonesia, Philippines, and Vietnam combine social health insurance systems (with mandatory payroll deductions for civil servants and the formal sector) with general revenue financing of the insurance premiums of the poor. This approach is built upon the health insurance logic of pooling health risks and contribution payments, but by guaranteeing a defined benefit package to those who would not otherwise contribute, it effectively removed the link (found in contributory social insurance) between being able to contribute oneself and being entitled to a benefit package. This approach toward achieving universal health coverage has not yet been attempted for pensions. There are clear parallels but also important differences. The main common element is the use of general revenues to pay part of or the entire premium or contribution for a segment of the population. Decisions such as whether enrolment is automatic, the degree of subsidization, and the eligibility criteria are also common design choices. With pensions, it is possible to define a minimum benefit in monetary terms, while for health, a package of services and possibly co-payments would be specified. In some sense, determining the monetary amount is easier than the medical package and is much easier to cost. Source: World Bank (2020). A similar logic can be applied to pensions and the they worked in the formal or informal sector (or cost of following this approach can be estimated. worked at all).58 The contribution amount would In the extreme, a pension contribution could be made for every adult regardless of whether  ee Anton et al. (2013) for an example of this kind of 58 S proposal in the case of Mexico. 126 VIETNAM: ADAPTING TO AN AGING SOCIETY be calculated to achieve an acceptable minimum Options for improving long- 5.4. pension level.59 A more limited version would make run financial sustainability in the contributions only for informal sector workers contributory scheme or even just poor informal sector workers. The degree of the contribution subsidy could even be While expanding VSS coverage would temporarily differentiated between poor and non-poor informal improve the finances of the contributory sector workers.60 scheme by increasing contribution revenues, the actuarially fair contribution rate is much higher The amount of the subsidy would be calculated than the current payroll tax (Figure 5.9). In other based on a target benefit level, with the goal of words, the parameters of the scheme imply that providing a minimum consumption level in old contributions are less than what is needed to age. A young worker who accumulated 35 or 40 finance benefits. This is a common situation years of contributions in this way should receive among publicly managed, defined benefit schemes an actuarially fair benefit (unlike the relationship around the world. Almost all of them run surpluses between contributions and benefits for formal for a few decades while the scheme is maturing sector workers today) that corresponds to this but eventually move from partially funded status target. A worker that moved from the informal to to pay-as-you-go schemes. Currently, only about formal sector would still participate in the same 70 percent of contributions are required to finance scheme but would have a higher pension than a pension outlays. This, combined with budgetary worker who was always in the informal sector. The transfers and interest payments from the link between coverage and labor market status investment of reserves, results in surpluses for the would be broken as far as the first tier of the next few years. However, these surpluses will turn pension benefit is concerned into deficits within a decade. Figure 5.9. Actual versus required contribution rates for public pension schemes China Vietnam Philippines Actual contribution rate Korea Required Actual Japan 0 5 10 15 20 25 30 35 40 45 50 Percentage of wage Source: OECD (2013) for breakeven contribution rates. Note: The Japanese contribution rate refers to 2017. The ratio of pensioners to contributors is projected demographics of the pension scheme as it to increase rapidly in the next two decades.5960A matured, and these results have been updated to recent World Bank report61 projected the changing show the number of contributors and pensioners that would be expected over the next 60 years if 59 T  his can be seen as an ex ante mechanism for financing a coverage rates remain stagnant (Figure 5.10). The social pension. number of contributors remains relatively constant 60 See Palacios and Robalino (2020) for an illustration. 61 See World Bank (2018). and shrinks in the long run along with the working- VIETNAM: ADAPTING TO AN AGING SOCIETY 127 age population. The result is a steady increase in this ratio ultimately drives the finances of the the dependency ratio (the number of pensioners scheme into deficit.62 supported by each contributor). Without reforms, Figure 5.10. Project number of contributors and pensioners in VSS 2019-2080 Source: World Bank PROST projections (World Bank 2010). Projections indicate that cash-flow deficits wage for calculating replacement rates; would62arise very quickly (by around 2029), (ii) Using linear accrual schedules; and reserves would be exhausted by the middle of the next decade (Figure 5.11).63 In 30 years, (iii) Indexing pensions to changes in prices; the deficits would stabilize at close to 2 percent (iv) Having minimal vesting requirements; of GDP, as spending would rise to around four (v) Linking retirement age changes to life percent of GDP. Once the reserves are exhausted, expectancy; the ongoing pension expenditure would become a fiscal liability of the government and would need to (vi) Equalizing retirement ages for men and be funded through government revenues. women; and vii) Providing actuarially fair (neutral) incentives There is some consensus over desirable for early or late retirement. parametric reforms for existing pension systems. These measures have all been implemented in a Parametric reforms are not only needed for range of OECD and ECA countries over the last financial sustainability but are also important for two decades, but much less widely in EAP. Most moving toward the goal of equitable treatment apply to the current parameters in the Vietnamese across and within cohorts of contributors. For pension scheme: example, as life expectancy continues to increase (i) Moving away from final salary and toward in Vietnam, the ratio of benefits to contributions lifetime, revalued average wages as the base increases for future generations unless the retirement age rises. Similarly, the five-year  xpansion of coverage under current parameters would 62 E delay the deficits, but these deficits would eventually be difference between the retirement ages of men even larger as each member of the scheme contributes and women means that the latter will receive a less than he or she receives under current rules. 63  Using a different model and assumptions, Giang and pension for many more years despite paying the Nguyen (2017) project deficits beginning around 2034. 128 VIETNAM: ADAPTING TO AN AGING SOCIETY same amount of contributions.64 Those who retire differential between replacement rates for public early should not get a better deal than those who and private sector workers is another example of retire at the normal age or later. Finally, the huge how sustainability and equity are well-aligned. Figure 5.11. Projected spending, revenues, and deficits in VSS 2019-2080 Note: PAYG surplus/deficit includes investment return on reserve. Source: Authors, based on PROST projections. Another parameter that can be adjusted is the Raising contribution rates higher than 22 percent contribution rate. Compared to other countries, in Vietnam would further discourage participation this rate is already quite high in Vietnam as shown in the formal sector. While the evidence is mixed, a in Figure 5.12. At 22 percent, it is significantly shift away from payroll tax financing and a reduction higher than in Japan and much higher than in of rates has been associated with an increase in Thailand or Indonesia. In East Asia, only Malaysia, formal sector employment in some countries.65 Singapore, and China have higher contribution It may also have negative consequences for rates, and as mentioned earlier, the first two are international competitiveness. Finally, in the defined contribution schemes (provident funds) face of increasing concern about the impact of that do not face issues of financial sustainability automation on employment, there is growing since they are fully funded. The main reason that recognition that taxes on labor can exacerbate the the Chinese rates are relatively high compared to effects.66 In short, there does not seem to be much Korea, Indonesia, or Thailand is that pensions were scope for increasing the contribution rate in order introduced much earlier in China. China started to reduce the predicted deficits. its scheme in the 1950s, while Korea only started in 1988 and Thailand and Indonesia implemented The high replacement rates for public sector even more recently.64 workers relative to their private sector counterparts (as well as to workers in other countries) are 64 S  ee Castel (2009) for a detailed discussion of the rationale 65 See Pagés (2017). for equalizing retirement ages in Vietnam. 66 See ADB (2018). VIETNAM: ADAPTING TO AN AGING SOCIETY 129 another example of inequitable treatment, as equity and financial sustainability, the pace of this both types of workers contribute the same share reform and the convergence of replacement rates of their wages. While a transition is underway, it should be increased. is extremely gradual. Again, for reasons of both Figure 5.12. Contribution rates across countries compared Source: ILO (2018) The most important change would be to move for men would delay deficits by about 12 years. from the current system of periodically indexing While an increase to 65 years for both sexes pensions to changes in wages to automatic price would not delay the onset of deficits very much, it indexation. Almost every OECD country has moved would reduce the long-run deficits by almost a full to price indexation, with a few exceptions where percentage point of GDP. Finally, a combination of a combination is used. Price indexation protects the modest increase in the retirement age and a the real value of pensions in a sustainable way, mixed method of indexation (partly to wages and whereas wage indexation with relatively high partly to prices) would delay deficits until 2044. replacement rates leads to deficits in the long run. More ambitious reform options, such as moving to pure price indexation, penalizing early retirement, Figure 5.13 shows pension surplus/deficits as and linking normal retirement age to life expectancy well as the implicit pension debt under status quo would significantly reduce long-run deficits. These (baseline) and a few parametric reform options. simulations illustrate the difficult choices that lie The reform scenarios are described in Table 5.6. ahead for policymakers in Vietnam, but they also A gradual increase (three months per year) of the show that it is possible to change course in time to retirement age to 60 years for women and 62 years smooth the transition and avoid a crisis. 130 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 5.13. Projection of pension expenditure (surplus/deficit) over time Source: World Bank PROST projections. Table 5.6. Baseline and reform scenarios modeled in Figure 5.13 Revenue Reserves IPD67 in 2020 IPD in 2080 Scenario Description deficit in: exhausted in: % of GDP % of GDP Baseline68 Expenditure under no-reform 2034 2042 188 174 scenario Option 1a: Baseline Increasing retirement age 2037 2046 178 159 + retirement age from 60M/55F to 62M/60F, increase to 62M/60F at a rate of 3 months annually Option 1b: Baseline + Changing indexation of 2048 2063 128 123 inflation indexation of pensions from nominal pension wage growth to inflation indexation Option 1c: Baseline Converging public sector 2035 2044 172 17269 + convergence of pension formula with that valorization rules by of private sector (career avg 2048 with inflation valorization) Option 2: All the Increasing retirement age, 2075 2080 112 115 reforms above (Option changing indexation rule, 1a + 1b +1c) and converging valorization formula Note; Implicit pension debt is defined as the discounted present value of spending through the projection period. Note: All reform options assumed to start in 2020. See Annex 1.1. Source: World Bank PROST calculations. 67 Implicit Pension Debt (IPD) is calculated as the present value of all future spending. 68 See Annex for details on scheme rules and assumptions made for projections. The IPD in this scenario in 2080 is the same as that of baseline but expenditure in Option 1c. This is because under current rules 69  (baseline), new entrants to the public scheme are supposed to have the same rules as the private scheme. VIETNAM: ADAPTING TO AN AGING SOCIETY 131 5.5. Way forward In fiscal terms, the biggest risk will be financial sustainability of the pension system. The formal Without significant changes to pension policy, sector pension system is financially unsustainable. the unfolding reality of a Vietnam with pension While Vietnam undertook sensible reforms of “haves” and “have nots” will become inevitable. its Social Insurance Law in 2014, the measures Contributory pensions in the traditional form that do not go far enough or fast enough to bring the are linked to formal sector employment cannot win pension system into financial balance. As a result, the race between coverage and aging. The result the pension fund is still likely to enter cash flow will be two distinct trajectories for older people: deficit in the 2020s. Raising contribution rates the pension “haves” will retire early and live longer even further would likely have a negative impact on and happier lives70 with smaller declines in their labor markets just as pressures from technology lifetime consumption, while the pension “have and automation began to increase. Higher nots” will work as long as they can and will live taxes on labor are also not helpful in promoting on a combination of their labor income, transfers formalization of jobs. from children, and social pensions. To paraphrase the Vietnamese proverb, those with pensions will In the last decade, several policy changes have worry about their money, while those without will moved the Vietnamese pension system in the right worry about their bread. direction, but the magnitude of the changes is not commensurate with the unprecedented aging Unfortunately, Vietnam will not achieve its process faced by the country. The introduction ambitious goal of reaching 50 percent coverage and expansion of a social pension and the launch of its formal pension scheme by 2030. The current of voluntary pensions for informal sector began coverage of around 25 percent of the labor force to address a coverage gap in 2006-2008. In the broadly matches the share of formal sector wage case of the social pension, both the size of the employment, but it is well below the 38 percent transfer and the restrictive eligibility rules result share of those with wage employment of some in a program with marginal impact. Informal form in 2014 (World Bank, forthcoming). This sector workers have too little incentive to join the underscores the challenge of expanding social voluntary scheme so that it scales up and makes security participation to the large informal sector, a a significant contribution to the future of old age challenge shared globally by developing countries. income security in the country. Virtually no country has expanded coverage to the Reforms that reduce the cost of the VSS while informal sector through a pure contributory route, expanding social pensions and subsidized and Vietnam is unlikely to be an exception. The contributions for informal sector workers (much 2014 Social Insurance Law amendments allow in the same way social health insurance has been for a matching contribution approach for informal expanded in Vietnam) can help address these sector workers to incentivize their participation in challenges. Such reforms would rebalance the social security. This is a worthwhile approach, but role of the pension system and begin to address it is too early to say whether this will significantly the “missing middle” where neither contributory expand coverage given the modest matching nor non-contributory pensions currently reach. In contribution from government budget. A second doing so, however, careful consideration should strategy would be to gradually lower the age for be given to avoiding incentives to remain or move social pension eligibility from the current 80 years, to the informal economy. This can be achieved by which is very high. This strategy has already been integrating the non-contributory and contributory proposed but not yet financed. elements of the scheme. The reforms described in this chapter and summarized below envisage a pension system 70 Hoang (2015). 132 VIETNAM: ADAPTING TO AN AGING SOCIETY consisting of four parts and are aimed at often work well into their 60s and even 70s. expanding the budget-financed element of the Steadily raising (by 4-6 months per year) and pension system while making the contributory equalizing the retirement age also makes pension more sustainable. These reforms are sense for increasing equity between formal and linked, since the projected VSS deficits will reduce informal workers, as well as between working the fiscal space available to other elements of men and women. Global experience suggests the social protection system, including social that increases in the retirement age should be pensions. Options to pre-fund the contributory gradual but should implemented as soon as pensions of informal sector workers through possible. matching contributions would also require • Reducing the financial incentives for early additional financing. retirement. Recent reforms introduce procedures that make it harder for participants The proposed four parts are: (i) a reformed VSS to qualify for early retirement, but there has contributory pension for formal sector workers, been no change in financial incentives. The (ii) an innovative scheme for informal sector conditions for receiving these early retirement workers that draws on budgetary subsidies, (iii) pensions need to be reviewed carefully, and the a social pension providing an income floor to benefits for those who retire early should be those without sufficient formal pension benefits, reduced by at least 6 percent per year to reflect and (iv) an expanding private pension system for the longer period of time for which payments those who can afford to save more. While each will be made (rather than the current 2 percent). reform is important, sequencing will be essential. Simply expanding coverage of the current formal • Reforming the accrual, indexation, and system before making its design financially valorization rules. To overcome the challenge of sustainable may delay deficits in the medium term high average accrual rates despite low absolute but will only make them larger in the long run if pension values, recent measures expanding the the underlying system is not designed to achieve base for contributions beyond participants’ financial balance. The four elements of a future basic salary (to include allowances, bonuses, proposed pension system are discussed in more and other compensation) are a welcome step. detail below. In addition, annual accrual rates should be reduced further to levels more comparable with (1) Reform the formal sector contributory system regional neighbors, even as the absolute level (VSS) to make it financially sustainable. This must of benefits is either held constant or increased. be completed before the VSS can safely expand its Similarly, benefits for both public and private coverage, so as to avoid dramatically increasing sector workers should be equalized on a more long-run deficits. The GoV is planning to undertake accelerated basis than allowed for in the 2014 another round of pension reform to build on the reforms. Rules for indexation and valorization progress made in 2014. Attaining financial balance of past wages should also be more predictable. of the pension system can be achieved by: The vast majority of OECD countries have • Gradually increasing the official retirement shifted to automatic price indexation because ages and closing the retirement age gender it is simple to administer, relatively affordable, gap. With a rapidly aging workforce, the SP and protects the purchasing power of pensions system should be encouraging people to after retirement. continue contributing to the economy, rather (2) Reform the existing matching contributory than retire early. Most Vietnamese workers scheme to design a more subsidized and dedicated are more than capable of working past age pension scheme for informal workers, with an aim to 60, especially as life expectancy and healthy increase coverage of the social insurance system. life expectancy are rising. Rural people already Global experience suggests that it is very difficult VIETNAM: ADAPTING TO AN AGING SOCIETY 133 to mandate that informal workers participate in countries with matching defined contribution the regular formal sector social insurance scheme. (MDC) schemes require only flat contributions Global progress over recent decades in bringing annually to avoid having to measure incomes informal workers into fully contributory schemes of informal workers and to accommodate the has been very modest for the most part. While it seasonality of their incomes. Finally, the various is difficult to predict with precision, the maximum components of this system can be designed pension coverage rate Vietnam could expect if it to include behavioral “nudges” that encourage attempts to expand coverage without subsidizing worker participation and contribution. informal worker contributions would be around • Rely where possible on common platforms 35-40 percent of the workforce by the mid-2030s, to identify participants and manage their a period in which the share of elderly population accounts. This system would need to be able will increase sharply. In contrast to the current to track individuals throughout their lives. purely contributory VSS system, a more effective Furthermore, investments should be made at system for informal workers would use a matched scale to provide informal sector workers with contributory scheme. A successful system would: low transaction costs. • Create mechanisms for informal workers to conveniently interact with the system during (3) Expand the social pension scheme to younger enrollment, contribution collection, and ages to provide an income floor for those without pension delivery. Systems tailored to informal contributory pensions, especially from the informal workers are fundamentally different from those sector. Even if expansion of the purely contributory designed for the formal sector, and the points and matched contributory schemes is successful, at which they interact with the system have there will still be a large stock (and probably to be easily accessible and ubiquitous across future flow) of elderly who will not accumulate an the country. Digital technology will play an adequate contributory pension prior to retirement. important role in enabling facilitated, paperless To provide some old age financial protection to enrollment, among other functions. Other this group, it would be advisable to lower the countries that have created new informal sector age threshold for the social pension from the pension programs have either created new current 80 years to closer to 70 years. Defining the mechanisms for workers to interact with (India) fiscally affordable level of social pension requires or added these points of contact to existing modeling future demographics and different age networks, such as in retail outlets (Mexico). thresholds and benefit levels. If the social pension is not targeted beyond pension testing, one option • Provide stronger financial incentives for is tiered benefits depending on age (increasing workers to make contributions toward their benefit at certain ages as in India and Thailand, pension. Above all, it is imperative that channels for example). This could be universal (probably to collect contributions innovate beyond the excluding those receiving a formal sector pension, employer-mediated collection methods used as Thailand does with its social pension) or in the VSS system. Instead, a system targeting potentially widely targeted. informal workers should combine a number of financial incentives, including matching (4) Expand voluntary private pensions for those workers’ contributions using state budgetary able to save for old age above and beyond the VSS resources (a so-called matching defined contributory schemes. Since replacement rates for contribution approach).71 Contribution rules the VSS scheme will need to be reduced to achieve should also be simplified to acknowledge and fiscal balance, workers will need to be encouraged accommodate irregular incomes—e.g., several and incentivized to save additional funds for 71 S  ee Holzmann et al. (2014) and Holzmann et al. (2020) their own retirement. To make the current private for global reviews of matching defined contribution (MDC) pension pillar successful, a robust supervisory pension schemes. 134 VIETNAM: ADAPTING TO AN AGING SOCIETY model is needed ahead of the launch of the first risk-return profile and has well-defined operational pension plans. The existing system has some policies and procedures on fund management and good safeguards such as the use of custodians, oversight. It will be important to ensure adequate but strong supervision by the Ministry of Finance investment expertise and member representation is also essential. in governance arrangements and that a clear distinction is made between the tasks of setting (5) Improve government capacity to manage overall investment strategies and rules and of pension fund investments. Over time, VSS should managing day-to-day investments. be given the flexibility to invest in a wider range of assets in Vietnam, adding corporate bonds, high- Policymakers will have to decide how to strike a quality equity investments, and overseas assets balance among these four pillars of the pension to its portfolio to ensure that returns on assets system, as there will be trade-offs in how spending can best meet liabilities. As the national pension will be allocated among them. A particularly fund portfolio diversifies, it will be necessary to important decision will concern how best to use have an investment governance framework that the social pension and informal sector contributory emphasizes risk management, controlling costs, pension to support informal sector workers. There matching assets and liabilities, and maximizing is no one “correct” way to build this system, and long-term returns, and that is grounded in an agreed two alternatives are presented in Figure 5.14. Figure 5.14. Alternative approaches to wider financial protection coverage for the elderly Source: Giang (2014), based on Knox-Vydmanov (2012) and Galian (2014) In order to garner public support for a more to “provide a basic benefit to those elderly who are ambitious pension reform agenda, policymakers in financial need”—the lowest figure among nine will have to explain both the challenges as well as Asian countries. At the same time, the Vietnamese the urgency of reform. According to one study,72 62 respondents were the least likely among the nine percent of Vietnamese respondents thought that countries to support a retirement age increase. the government should bear primary responsibility These attitudes may help explain the slow pace for “providing income to retired people.” However, of reforms and point to the need for a concerted only 27 percent would be in favor of raising taxes public information campaign. 72 See Jackson, Howe and Tobias 2012. VIETNAM: ADAPTING TO AN AGING SOCIETY 135 5.6. References Antón, Arturo, Fausto Hernández, and Santiago Levy. 2012. The End of Informality in Mexico? Fiscal Reform for Universal Social Insurance. Inter-American Development Bank (IDB), New York City. Asian Development Bank. 2018. Tapping Technology to Maximize the Longevity Dividend in Asia. Asian Development Bank, Philippines. DOI: http://dx.doi.org/10.22617/TCS189330-2 Castel, Paulette. 2009. Women’s retirement age in Vietnam: gender equality and sustainability of the social security fund (English). World Bank Group, Washington, DC. Castel, Paulette and Minna Hahn Tong. 2012. Vietnam - Developing a modern pension system : current challenges and options for future reform (English). World Bank Group, Washington, DC. Cling, J, M. Razafindrakoto and F. Roubaud (2017) “Segmentation and informality in Vietnam: A survey of the literature”, Demirgüç-Kunt, Asli, Leora Klapper, Dorothe Singer, Saniya Ansar, and Jake Hess. 2018. The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. World Bank, Washington, DC. FINDEX, see Demirgüç-Kunt. Galian, Carlos. 2014. ‘Development of the voluntary social insurance system - International experience’. Unpublished draft mimeo. World Bank, Hanoi. Giang, Long. (2014). Expansion of Pension Coverage to the Informal Sector: International Experiences and Options for Vietnam. Technical Paper for UNFPA and ILO, Hanoi. Giang, Tanh Long. 2013. “Social Protection of Older People in Vietnam: Role, Challenges and Reform Options,” Malaysian Journal of Economic Studies, December 2013. Giang, Tanh Long. 2011. “Expanding Cash Transfer Program to Tackle Old-Age Poverty in Vietnam: An Ex- Ante Evaluation.” In Sothea Oum, Giang Thanh Long, Vathana Sann and Phouphet Kyophilavong, eds, Impacts of Conditional Cash Transfers on Growth, Income Distribution and Poverty in Selected Asean Countries, Chapter 1:1-24, Economic Research Institute for ASEAN and East Asia (ERIA). Giang, Tanh Long and C. Nguyen.2017. “The Aging Population and Sustainability of the Pension Scheme: Simulations of Policy Options for Vietnam”, Journal of Economics and Development, 19(3): 40-51. Hoang. 2015. “Modes of Care for the Elderly in Vietnam”, doctoral thesis, The Australian National University. Holzmann, Robert, Edward Palmer, Robert Palacios and Stefano Sacchi. 2020. Progress and Challenges of Nonfinancial Defined Contribution Pension Schemes : Volume 1. Addressing Marginalization, Polarization, and the Labor Market. World Bank, Washington, DC. Holzmann, Robert. 2014. “Global pension systems and their reform: Worldwide drivers, trends and challenges.” International Social Security Review, 66(2): 1-2.International Labor Organization. 2018. World Social Protection Report 2017–19. Universal social protection to achieve the Sustainable Development Goals. (Social Protection and Policy Paper No. 17.) International Labour Office Social Protection Department, International Labour Organization, Geneva. 136 VIETNAM: ADAPTING TO AN AGING SOCIETY International Labour Organization (ILO) and United Nations Fund for Population (UNFPA). 2014. “Income security for older persons in Viet Nam: Social pensions.” Policy Brief, August 2014. ILO Viet Nam and UNFPA Viet Nam, Hanoi. Jackson, Richard. Neil Howe and Tobias Peter. 2012. Balancing Tradition and Modermity: The Future of Retirement in East Asia. Center for Strategic and International Studies, Washington, DC. Karam, Philippe, Dirk Muir, Joana Pereira and Anita Tuladhar. 2010. Macroeconomic Effects of Public Pension Reforms. IMF Working Paper WP/10/297. International Monetary Fund. Knox-Vydmanov, Charles. 2012. ‘Social Protection Floors and Pension Systems: The Role of a ‘Citizen’s Pension’’. Pension Watch - Briefings on social protection in older age, Briefing No.9. HAI, London. Majoka, Zaineb and Robert Palacios. 2018. “Targeting versus Universality: Is there a middle ground?” Social Protection and Jobs, Policy and Technical Note, October 2019, No. 22. World Bank, Washington, DC. Booth. 2012. “Monetary Transfers from Children and the Labour Supply of Elderly Parents: Evidence from Vietnam, The Journal of Development Studies, 48(8): 1177-1191. Organization for Economic Cooperation and Development (OECD). 2013. Pensions at a Glance 2013: OECD and G20 Indicators, OECD Publishing. Doi: http://dx.doi.org/10.1787/pension_glance-2013-en Pagés, Carmen. 2017. “Do payroll taxes boost formal jobs in developing countries?” IZA World of Labor, March 2017. Palacios, Robert J. and David A. Robalino. 2020. “Integrating Social Insurance and Social Assistance Programs for the Future World of Labor.” IZA Discussion Paper Series, No. 13258. IZA – Institute of Labor Economics, Bonn. World Bank. 2020. “Regional Social Protection Report”, forthcoming World Bank. 2018a. “Policy note on pensions.” World Bank, Hanoi, mimeo. World Bank. 2018b. “Vietnam: Building an effective and sustainable social assistance system.” World Bank, mimeo World Bank. 2016. Live Long and Prosper : Aging in East Asia and Pacific. World Bank East Asia and Pacific Regional Report. World Bank, Washington, DC. World Bank. 2010. Modeling Pension Reform: The World Bank’s Pension Reform Options Simulation Toolkit. World Bank Pension Reform Primer Series, World Bank PROST Model. Washington, DC. https:// openknowledge.worldbank.org/handle/10986/11074 World Bank. Universal Health Coverage Studies Series (UNICO Study Series). https://openknowledge. worldbank.org/handle/10986/13083 VIETNAM: ADAPTING TO AN AGING SOCIETY 137 5.7. Annex: VSS scheme rules and WB (PROST) assumptions on projections for VSS PROST projections are based on administrative data provided by VSS as of 2015. Coverage assumptions have been informed by growth in coverage from data received subsequently. Scheme rules Private sector Public sector Contribution rate 22% (8% employee + 14% employer) 22% (8% employee + 14% government) Retirement age 60M/55F 60M/55F Accrual rate 2.3% for first twenty years for males, 2.3% for first twenty years for males, 2% for each year after 2% for each year after 2.8% for first twenty years for 2.8% for first twenty years for females, 2% for each year after females, 2% for each year after Maximum RR 75% 75% Vesting period to qualify for pension 20 20 Wage base for calculating pension Average lifetime earnings with New entrants have same benefit inflation valorization valorization rules as private sector; existing CS are scheduled to move to lifetime career avg with wage valorization by 2055 Indexation rules for pension Nominal wage indexation Nominal wage indexation Coverage assumption – The coverage of public and private combined in 2015 was 23.5 percent of employed and is assumed to go up to 26.2 percent by 2019 and 30.5 percent by 2035 and averages at 28 percent of total employed in the long run. Macroeconomic assumptions 2019 2020 2021 2024 2030 2040 2080 Real GDP growth 6.50% 6.50% 6.50% 6.50% 4.42% 2.00% 1.50% Productivity growth of minimum 4.50% 4.50% 4.50% 4.18% 3.68% 2.00% 2.00% wage worker Inflation Rate 3.60% 3.80% 3.80% 4.00% 3.05% 3.00% 3.00% Real investment return 1% 1% 1% 1% 1% 1% 1% *Real GDP and inflation until 2024 are taken from IMF Article IV, 2019 Options modelled in PROST average with wage valorization currently to career average with inflation valorization by I. Option 1a - Change from wage indexation of 2048 pensions to price indexation for public and private, starting from 2020 IV. Option 2 - all the above II. Option 1b - Increasing retirement age from The replacement rate (RR) of the public sector 60M/55F to 62M/60F, three months per year, at baseline is significantly higher than that of starting from 2020 the private sector owing to different wage bases III. Option 1c - Converge formula on wage base, for calculating pension benefit and differing i.e. move public sector formula from five-year valorization rules. Over time, the RR for the public 138 VIETNAM: ADAPTING TO AN AGING SOCIETY sector at baseline is expected to go down, as new the public sector), owing to changes in indexation public servants will have the same rules as the rules and the retirement age increase. However, private sector. The reform scenario that includes as can be seen in the Figure below, the RR of the Option 1a, 1b, and 1c will see a rapid decline in RR public and private sectors will equalize in the long for both the public and private sectors (sharper for run under the reform scenario. Figure 5.A1: Replacement rate for an average individual expressed as % of average wage VIETNAM: ADAPTING TO AN AGING SOCIETY 139 5.8. Annex: Evolution of Vietnamese Social insurance Legislation 1930s: Social insurance regime appears in Vietnam under French colonial rule, limited to cover only sickness, labor accident, and retirement insurance and applicable only to those working in the French administrative apparatus and army. 1961: Government Decree No. 218-CP of December 27, 1961, expansion of social insurance to workers and state employees. 1980s: Since Vietnam adopted the open-door policy, shifting to a market economy and strongly integrating itself into the international community, its social insurance law has been gradually and substantively improved. 1992: The 1992 Constitution: The State provides the social insurance regime for state employees and wage earners and encourages other forms of social insurance. 1993: On June 22, 1993, the Government issued Decree No. 43-CP (later institutionalized in a chapter of the 1994 Labor Code). This has laid legal grounds for the renewal and reform of the social insurance regime in Vietnam. 1995: The Government issued Decree No. 12-CP of January 26, 1995, together with the Charter on Social Insurance; Decree No. 45-CP of July 15, 1995, together with the Charter on Social Insurance applicable to officers and professionals in the army and police forces; Decree No. 19-CP of February 16, 1995, on the establishment of a system of social insurance agencies in Vietnam. - Expanding coverage of SI to all employers with more than 10 employees. 2003: The Government promulgates Decree No. 01-CP of January 9, 2003, amending a number of articles of the Charter on Social Insurance to suit the new situation after nearly 20 years of “doi moi” (renewal). 2006: On June 29, 2006, the National Assembly passed the Social Insurance Law which took effect on January 1, 2007 (the first SI law since Vietnam regained its independence in 1945): - Expand coverage of compulsory SI to all employees from the private sector with labor contracts of 12 month and longer - Expand coverage of UI to all employees with labor contracts of 12 month and longer - Expand coverage of UI to all employers with more than 10 employees - Allow for voluntary social insurance - Clarify long-term and short-term benefits - Pension indexing based on CPI and growth rate - Increase contribution rates gradually: the rate that employers were required to pay for social insurance was increased from 11 percent in 2009 to 12 percent in 2010-2011, 13 percent in 2012-2013, and 14 percent from 2014. The rate that employees were required to pay for social insurance was increased from 5 percent in 2009 to 6 percent in 2010-2011, 7 percent in 2012-2013, and 8 percent from 2014. From the June 1, 2016, employers and employees are required to pay 21.5 percent and 10.5 percent, respectively, for social security (including SI, UI, and HI) in Vietnam. The rate that self-employers were required to pay for voluntary social insurance was increased from 16 percent in 2009 to 18 percent in 140 VIETNAM: ADAPTING TO AN AGING SOCIETY 2010-2011, 20 percent in 2012-2013, and 22 percent from 2014. 2014: The SI Law was revised, with its changes becoming effective from January 2018. Several important changes in the 2014 law revisions include: - Social insurance applicable for foreign employees: foreign employees can participate in Vietnam’s Social Insurance from 2018, and this is compulsory according to the recent Decree 143/2018/NĐ-CP. - Expand coverage to employees with labor contracts from 1 month as of January 1, 2018. - Expand salary base for contribution to other extra payments (apart from base salary and allowances which have already been included). Such extra payments are broadly defined as payments to compensate for working process, working result of the employee (even if the amount of payment is not stated in labor contract, and may be paid regularly or irregularly). However, welfare and benefits such as bonus, innovative incentive, mid-shift meal allowance, and support for petrol, telephone, transportation, and housing for the employees shall be stated separately in the labor contract and accordingly not included as a basis to calculate the SI contribution. - Undertake some parametric reforms: change in accrual rate for women from 3 percent per year to 2 percent per year after the first 15 years of service. - A new rate of contribution to the occupational accident and disease insurance fund will be required from employers under Decree No. 44/2017/ND-CP passed on April 14, 2017. According to Decree No. 44/2017/ND-CP, from June 1, 2017, employers have to pay only 0.5 percent of employee’s salary instead of 1 percent for contributions to the occupational accident and disease insurance fund. - Reduction rate for early retirement changed from 1 percent to 2 percent per year of early retirement. - Reduction in accrual rate for me: each male participant will be entitled to 45 percent for the first 15 years of service. This number will be increased to 16 years if retired in 2018, 17 years if retired in 2019, 18 years if retired in 2020, 19 years if retired in 2021, and 20 years if retired from 2022 onward. - No lump sum payment for early withdrawal except in some special cases. - Change in number of most recent years in which salary will be used to calculate average salary for calculating pension (from the last five years to lifetime). - Change in volatizing past contribution. - Expansion to the private sector, voluntary scheme, social pension, and the various rounds of parametric reforms. - Pension fund investment: deposits, buying bank CDs, bonds, etc. in some commercial banks that are ranked as relatively safe by the State Bank of Vietnam. Under Vietnamese law, social insurance is understood as a substitute or partial compensation for employees’ incomes that are reduced or lost due to their sickness, maternity leave, labor accidents, occupational diseases, unemployment, retirement, or death, based on their contributions to the social insurance fund. The current social insurance regime covers: sickness insurance, labor accident and occupational disease insurance, maternity insurance, health insurance, unemployment insurance, retirement, and survivorship allowance. VIETNAM: ADAPTING TO AN AGING SOCIETY 141 CHAPTER 6: HEALTH CARE TO ACHIEVE HEALTHY AGING IN VIETNAM 6.1. Introduction The Government’s strong commitment to achieving Universal Health Coverage (UHC) for its Vietnam is undergoing rapid transitions— population can help protect and improve health demographic, epidemiological, and in health throughout the life cycle, but it requires substantial financing—that will have important implications change from the past focus on infectious disease for future healthcare demand, health spending, and acute hospital care. Vietnam’s recent and health outcomes. Although the country is still strategic reorientation toward prevention of NCD young, the rate of aging is high compared to other risk factors, early detection through screening and countries in East Asia,73 slower only than in China chronic disease management, efforts to increase and Thailand. Life expectancy at birth in Vietnam knowledge of the population about their own increased from 51 years in 1950 to 75 years in health and health care, and plans for investing 2016, but increased life expectancy does not in strengthening primary health care are all in always imply an increase in the number of healthy line with what is needed for the health system life years. In 2016, a person in Vietnam living to age to respond to population aging and to achieve 60 was, on average, expected to live another 22.7 healthy aging. However, the current configuration years but only remain healthy for 17.2 of those of expensive hospital-centric acute care and weak years.74 Much of the disability in older ages is due primary health care will require major reforms not to chronic non-communicable diseases (NCDs) only in the organization but also in human resource and disabilities associated with aging. Efforts are capabilities, financing, and accountability systems. needed to not only extend life but also to ensure Given the demographic and epidemiological health in older ages in a way that is feasible, transitions taking place, maintaining the status affordable, and sustainable in the Vietnamese quo is not an option. context. Financing of Vietnam’s healthcare system is undergoing multiple transitions, from This chapter analyzes the implications of a state budget to health insurance, from external growing elderly population on service delivery to domestic funding sources and from central to and financing, discusses service delivery and provincial sources. financing challenges in addressing the healthcare needs of older persons, and presents policy recommendations. The chapter looks specifically at the need for health services, including  OH (Ministry of Health) Vietnam, and HPG (Health 73 M preventive, promotive, treatment, chronic care, and Partnership Group). 2017. Joint Annual Health Review 2016: Towards Healthy Ageing. Hanoi: Medical Publishing care for disability. Using the available survey data, House. it assesses if these healthcare needs are currently WHO. 2019. Global Health Observatory Data Repository. 74  Healthy Life Expectancy (HALE) Data by Country. http:// being met. It also presents the current and future apps.who.int/gho/data/view.main.HALEXv. Accessed implications of aging on health expenditures to October 2019. 142 VIETNAM: ADAPTING TO AN AGING SOCIETY understand the likely pressure from a growing dominated by NCDs. The NCD share of the disease elderly population. The chapter draws heavily from burden (measured in disability-adjusted life years data and key findings from the Vietnam Household (DALYs) grew rapidly from 51 percent in 1990 to Living Standards Survey 201672 and the 2019 World 74 percent in 2017 (Figure 6.1). Burden of disease Bank study on Health Financing in Vietnam.73 measured in DALYs among the population age 65 and older accounts for 24 percent of total DALYs 6.2. Epidemiological Transition lost among all age groups.74 6.2.1. Patterns of epidemiological transition Vietnam’s burden of disease profile has changed rapidly in the past two decades and is now Figure 6.1. Burden of disease as percentage of DALYs, 1990-2017 1990 2000 2010 2017 12% 13% 12% 13% 14% 37% 24% 18% 51% 51% 63% 63% 69% 69% 74% 74% Non-communicable diseases Communicable diseases Injuries Source: Global Burden of Disease Collaborative Network. Global Burden of Disease Study 2017 (GBD 2017) Results. Seattle, United States: Institute for Health Metrics and Evaluation (IHME), 2018. The disease burdens from NCDs now occupy of disease burden are cardiovascular diseases and seven spots in the top ten ranking of causes of cancer, accounting for 30  percent of all DALYs in Vietnam’s disease burden,75and they are rapidly Vietnam’s population.7677 increasing in terms of share of the overall disease burden (Table 6.1). The two most common causes  eo, H.S., Bales, S., Bredenkamp, C., Cain, J. 2019. The 76 T Future of Health Financing in Vietnam: Ensuring Sufficiency, Efficiency, and Sustainability. Washington, D.C.: World Bank Group Global Burden of Disease Collaborative Network. Global 77  Burden of Disease Study 2017 (GBD 2017) Results. Seattle, GSO (General Statistics Office) Vietnam. 2018. Results 75  United States: Institute for Health Metrics and Evaluation of the Vietnam Household Living Standards Survey 2016. (IHME), 2018. Available from http://ghdx.healthdata.org/ Hanoi: Statistical Publishing House. gbd-results-tool. VIETNAM: ADAPTING TO AN AGING SOCIETY 143 Table 6.1. Top ten causes of disease burden in Vietnam, 1990-2017 Rank in (percentage) Category 2017 1990 2000 2010 2017 1 Cardiovascular diseases NCD 11.7 14.5 15.9 17.0 2 Neoplasms NCD 6.9 9.4 11.2 13.1 3 Musculoskeletal disorders NCD 3.6 5.1 6.3 6.9 4 Diabetes and kidney diseases NCD 3.3 4.3 5.1 6.2 5 Neurological disorders NCD 3.5 4.7 5.3 5.4 6 Other non-communicable diseases NCD 7.8 6.7 5.9 5.0 7 Unintentional injuries INJ 6.7 6.3 5.6 5.0 8 Mental disorders NCD 3.4 4.5 4.9 4.9 9 Transport injuries INJ 4.2 4.8 5.6 4.9 Respiratory infections and 10 CD 11.1 7.1 5.5 4.4 tuberculosis DALYs per 100,000 population 33,766 26,510 25,785 25,809 Source: Global Burden of Disease Collaborative Network. Global Burden of Disease Study 2017 (GBD 2017) Results. Seattle, United States: Institute for Health Metrics and Evaluation (IHME), 2018. Note: NCD = Non-communicable disease, INJ = Injuries, CD = Communicable disease Causes of morbidity and mortality change over the than men at these ages. Fewer men survive to older life cycle and are substantially different between ages in good health due to the burden of disease men and women. Figure 6.2 shows that in the oldest they face in injuries, communicable diseases, and age groups, the burden of disease in women is NCDs while in younger age cohorts. higher, largely due to the higher number of women Figure 6.2. Age and sex distribution of burden of disease by broad cause, Vietnam 2017 Male Female 95 plus 90 to 94 85 to 89 80 to 84 75 to 79 70 to 74 65 to 69 60 to 64 55 to 59 50 to 54 45 to 49 40 to 44 35 to 39 30 to 34 25 to 29 20 to 24 15 to 19 10 to 14 5 to 9 Under 5 1500 1000 500 0 500 1000 1500 Thousand DALYs Communicable Non-communicable Injury Source: Global Burden of Disease Collaborative Network. Global Burden of Disease Study 2017 (GBD 2017) Results. Seattle, United States: Institute for Health Metrics and Evaluation (IHME), 2018. 144 VIETNAM: ADAPTING TO AN AGING SOCIETY The patterns of disease burden also vary by age than disability does, and men have higher burden group, with the NCD share increasing from only than women (Figure 6.4). Among persons age 65 about 25 percent of DALYs in children to nearly 90 and older, only 24  percent of DALYs were due to percent in older age groups (Figure 6.3). Cancer years lost living with illness, with the remainder and cardiovascular disease predominate as being years lost to premature mortality.79 However, causes of burden of disease as early as the ages musculoskeletal and sense organ disorders are 35-54 cohort, but they account for 40 percent or less likely to be fatal, instead burdening older more of DALYs lost among the groups age 55 people with disability over long periods of time. and older. Just four disease categories (cancer, Among people age 65 and older, women have a cardiovascular disease, diabetes, and chronic lower burden of disease than men for almost every respiratory diseases) contribute to about 60 disease category in the top ten causes of burden of percent of burden of disease for the groups age disease, the exceptions being diabetes and kidney 55 and older.78 Co-morbidity and multimorbidity disease and neurological disorders for which are increasingly common among older age groups, women have slightly higher burden of disease which require integrated care delivery models and than men. However, because there are many more more resources. women than men living to the oldest age groups, they have a larger absolute need for care to treat Among older people in Vietnam, premature these conditions. mortality contributes more to burden of disease Figure 6.3. DALYs within NCDs by age group, Vietnam 2017 DALYs-NCDs Non-NCDs 100% Other NCDs including skin disease 90% Sense organ diseases 80% Mental disorders and 70% substance abuse disorders 60% Neurological disorders 50% Digestive diseases 40% Musculoskeletal disorders 30% Chronic respiratory diseases 20% 10% Diabetes and kidney diseases 0% Cardiovascular diseases Under 15 15-34 35-54 55-59 60-64 65-69 70-79 80+ Neoplasms Source: Global Burden of Disease Collaborative Network. Global Burden of Disease Study 2017 (GBD 2017) Results. Seattle, United States: Institute for Health Metrics and Evaluation (IHME), 2018. The main risk factors affecting burden of disease not yet determined what risk factors lead to the among older cohorts vary considerably by sex.78In particular medical condition.79 many types of disease, multiple risk factors are involved, while in other cases, scientists have The main risk factors affecting burden of disease among older cohorts vary considerably by sex. Global Burden of Disease Collaborative Network. Global 78  Burden of Disease Study 2017 (GBD 2017) Results. Seattle, In many types of disease, multiple risk factors United States: Institute for Health Metrics and Evaluation (IHME), 2018. Available from http://ghdx.healthdata.org/ Premature mortality is measured in relation to average life 79  gbd-results-tool. expectancy for people in the age cohort. VIETNAM: ADAPTING TO AN AGING SOCIETY 145 are involved, while in other cases, scientists have is related more to secondhand smoking than not yet determined what risk factors lead to the firsthand smoking and ranks 7th among the older particular medical condition. Figure 6.5 shows that and 10th among the younger cohort. For women, behavioral risk factors predominate in explaining the number one risk factor for both older and burden of disease among men, while metabolic younger women is high fasting plasma glucose, risk factors are the main factor affecting women’s a risk factor for diabetes. Dietary risks rank third burden of disease. Among men, the top five risk for both men and women in the older cohort and factors for NCDs are tobacco, high systolic blood for men in the younger cohort but rank second pressure, dietary risk factors, high fasting blood for women in younger cohorts. Dietary risks are glucose, and alcohol use. For women, tobacco and related largely to a diet high in sodium but low in alcohol use are not in the top five, but high body fruit, whole grains, nuts, and seeds. High systolic mass index and impaired kidney function are. blood pressure ranks second in the older cohort and fourth in the younger cohort for both men and The top ten risk factors for burden of disease women. The top environmental risk factors are air vary substantially not only between men and pollution and occupational risks for younger and women but also across generations (Figure 6.4). older cohorts of men and younger women, while Tobacco is the number one risk factor of burden for older women, the only environmental risk factor of disease for older men but ranks second among among the top ten is air pollution. younger men. For women, the tobacco risk factor Figure 6.4. Top 10 causes of BOD among people age 65 and older, Vietnam 2017 Source: Global Burden of Disease Collaborative Network. Global Burden of Disease Study 2017 (GBD 2017) Results. Seattle, United States: Institute for Health Metrics and Evaluation (IHME), 2018. Available from http://ghdx.healthdata.org/gbd-results-tool. Note: YLD: Years lived with disease/disability, YLL: Years of life lost. 146 VIETNAM: ADAPTING TO AN AGING SOCIETY The key modifiable behavioral risk factors for the most important factors leading to NCDs. chronic NCDs are tobacco, alcohol, diet, and In Vietnam in 2015, 57.2  percent of adults had physical exercise. Smoking prevalence in Vietnam inadequate fruit and vegetable consumption in 2015 remained high at about 22.5  percent of according to WHO recommendations. Only adults age 15 and older, but 45.3  percent among about 10  percent of adults reported frequent men and only 1.1 percent among women. Trends consumption of high-salt processed foods, but indicate that between 2010-2015, smoking most did report adding salt to food while cooking. prevalence went down in all age groups.80 Alcohol Physical exercise is an important protective factor consumption among adults 18-69 years of age is for many health problems. In Vietnam, about more prevalent among men (77.3  percent) than 20.2  percent of men and 35.7  percent of women women (11.1 percent), with similar differences for ages 18-69 reported levels of exercise not meeting daily alcohol consumption and binge drinking.81 WHO recommendations.82 Dietary risk factors are assessed as among Figure 6.5. Age-sex distribution of broad risk factor categories for burden of disease, Vietnam 2017 Male Female 95 plus 90 to 94 85 to 89 80 to 84 75 to 79 70 to 74 65 to 69 60 to 64 55 to 59 50 to 54 45 to 49 40 to 44 35 to 39 30 to 34 25 to 29 20 to 24 15 to 19 10 to 14 5 to 9 Under 5 800 600 400 200 0 200 400 600 800 Thousand DALYs Environmental Behavioral Metabolic Source: Global Burden of Disease Collaborative Network. Global Burden of Disease Study 2017 (GBD 2017) Results. Seattle, United States: Institute for Health Metrics and Evaluation (IHME), 2018. Available from http://ghdx.healthdata.org/gbd-results-tool.808182 Van Minh, Hoang, Kim Bao Giang, Nguyen Bao Ngoc, Phan Thi Hai, Doan Thi Thu Huyen, Luong Ngoc Khue, Nguyen Tuan Lam, 80  Pham Thi Quynh Nga, and Nguyen Thi Xuyen. 2017. “Prevalence of Tobacco Smoking in Vietnam: Findings from the Global Adult Tobacco Survey 2015.” International Journal of Public Health, Vol. 62, no. 1, pp. 121-129. Ministry of Health, General Department of Preventive Medicine. 2016. National Survey on the Risk Factors of Non-communicable 81  Diseases (STEPS) Viet Nam 2015. Hanoi. Ministry of Health, General Department of Preventive Medicine. 2016. National Survey on the Risk Factors of Non-communicable 82  Diseases (STEPS) Viet Nam 2015. Hanoi. VIETNAM: ADAPTING TO AN AGING SOCIETY 147 Metabolic risk factors associated with NCDs 2016, about 4.5 percent of men and 3.6 percent of include overweight, high fasting blood glucose, women had raised blood glucose or were actually high blood pressure, and high cholesterol, many being treated for this condition, rising to 7.7 percent of which can be detected early and controlled to of people ages 50-69. High blood pressure is an reduce risk. Overweight and obesity are a growing important risk factor for cardiovascular disease problem in Vietnam. Overall, 13.9 percent of adults and other medical conditions. Overall, 23.1 percent are overweight, and an additional 1.7  percent are of men and 14.9  percent of women have raised obese. These rates increase with age, with 19.6 blood pressure or are under treatment for this percent of people ages 50-69 being overweight condition, rising to 40.2  percent among people or obese.83 Raised blood glucose is an important ages 50-69.84 risk factor and sign of diabetes. In Vietnam in Figure 6.6. Top 10 risk factors for burden of disease of population under age 65 and age 65 and older, DALYs, Vietnam 2017 Population age 65 and older Male Female 1 Tobacco 1 High fasting plasma glucose 2 High systolic blood pressure 2 High systolic blood pressure 3 Dietary risks 3 Dietary risks 4 High fasting plasma glucose 4 Air pollution 5 Alcohol use 5 Impaired kidney function 6 Air pollution 6 High body-mass index 7 High LDL cholesterol 7 Tobacco 8 Impaired kidney function 8 High LDL cholesterol 9 High body-mass index 9 Alcohol use 10 Occupational risks 10 Low bone mineral density Population under age 65 Male Female 1 Alcohol use 1 High fasting plasma glucose 2 Tobacco 2 Dietary risks 3 Dietary risks 3 Child and maternal malnutrition 4 High systolic blood pressure 4 High systolic blood pressure 5 High fasting plasma glucose 5 High body-mass index 6 Drug use 6 Air pollution 7 Air pollution 7 Occupational risks 8 Child and maternal malnutrition 8 Alcohol use 9 Occupational risks 9 Impaired kidney function 10 High body-mass index 10 Tobacco Note: Blue indicates metabolic risks, orange represents behavioral risks, and green represents environmental risks. Solid line indicates same or higher ranking among women than men, while dashed line indicates ranking is higher among men than women. Source: Global Burden of Disease Collaborative Network. Global Burden of Disease Study 2017 (GBD 2017) Results. Seattle, United States: Institute for Health Metrics and Evaluation (IHME), 2018. Available from http://ghdx.healthdata.org/gbd-results-tool.8384  inistry of Health, General Department of Preventive Medicine. 2016. National Survey on the Risk Factors of Non-communicable 83 M Diseases (STEPS) Viet Nam 2015. Hanoi.Ibid. Ministry of Health, General Department of Preventive Medicine. 2016. National Survey on the Risk Factors of Non-communicable 84  Diseases (STEPS) Viet Nam 2015. Hanoi.Ibid. 148 VIETNAM: ADAPTING TO AN AGING SOCIETY Mental health, neurological, and cognitive underestimates. Victim characteristics associated issues are particularly important and particularly with being abused include cognitive impairment, neglected issues for older persons in Vietnam. being an ethnic minority, and having a history Alzheimer’s disease, dementia, stroke, and other of being a perpetrator of violence. Mental and disorders that adversely affect the cognition of neurological disorders and caregiving burdens older persons make it difficult for them to remain are associated with caregivers perpetrating elder independent and also make them particularly abuse. Older persons living with others are less at vulnerable to elder abuse, loneliness, and risk of being a victim compared to those who have depression. Around 48 percent of older persons poor relationships with other people. 87 reported having problems with their memory, and 69 percent reported decline in memory over the past 6.2.2. Aging leading to progressive or sudden 12 months. These problems increase substantially onset of disability with age and are more prevalent among rural Rapid aging in Vietnam will increase the share of than urban residents. Around 36 percent of older the population affected by disability and difficulty persons reported difficulties sleeping most of the in performing activities of daily living. The rate of time, 16 percent reported frequent lack of appetite, disability among people under age 40 is about two about 10 percent reported being depressed or to three percent then increases dramatically beyond lonely most of the time. About one-third of older that age (Figure 6.7).88 In the group aged 41-64, the persons reported having no one with whom to proportion of people with disability increases to share their feelings about being sad.85 6.8 percent, then in the age 65 and older group, it With growing dependence on others in older goes up to 40.7  percent having any disability and ages, older persons are vulnerable to elder abuse. 24 percent having multiple disabilities. 89 This age In Vietnam, elder abuse is estimated to affect pattern has not changed dramatically over the 11.6 percent (2012) of older persons.86 Globally, past decade, despite changes in the definitions of it is estimated that elder abuse affects about 16 disability.90 The most prevalent forms of disability percent of older persons (age 60 and older), but among people age 65 and older are disabilities both the global and Vietnam figures are likely to be in lower and upper mobility, cognition, vision, and capacity for self-care. 87 https://www.who.int/ageing/projects/elder_abuse/en/ Based on the Washington Group Extended Set covering 88  all major domains of disability plus additional domains related to upper body mobility and psychosocial issues, particularly anxiety and depression. See Washington Group on Disability Statistics. 2011. “Washington Group – Extended Question Set on Functioning (WG ES-F).” Version 9, November 2011. http://www.washingtongroup-disability. com/washington-group-question-sets/extended-set-of- Vietnam Women Union (VWU). 2012. Vietnam Aging Survey 85  disability-questions/ (VNAS) 2011: Key Findings. Hanoi: Women Publishing GSO (General Statistics Office) Vietnam. 2016. Vietnam 89  House. National Survey on People with Disabilities 2016. Hanoi: Ministry of Culture, Sports and Tourism. 2013. Key Findings 86  Statistical Publishing House. from the Viet Nam Domestic Violence Survey 2012. Ha United Nations Population Fund (UNFPA). 2011. People 90  Noi. Cited in Vietnam National Committee on Ageing and with Disabilities in Viet Nam. Key Findings from the 2009 UNFPA. 2019. Towards a Comprehensive National Policy Viet Nam Population and Housing Census. Hanoi: UNFPA for an Ageing Viet Nam. Hanoi. Vietnam. VIETNAM: ADAPTING TO AN AGING SOCIETY 149 Figure 6.7. Disability prevalence by broad age group among adults, Vietnam 2016 Source: General Statistics Office. 2016. Vietnam National Survey on People with Disabilities 2016. Hanoi. Disability from multiple conditions/illnesses is 6.3. Health Service Delivery prevalent among older persons. About 38 percent of older persons (age 60 and over) report at least 6.3.1. How health services are organized one difficulty with activities of daily living (ADL), including getting up from lying down (31 percent), Vietnam has a strong political commitment to toileting or eating (15 percent), and getting Universal Health Coverage (UHC) and primary dressed and bathing (13 percent). The majority of health care, as seen in international commitments caregivers supporting older persons with ADLs are to the sustainable development goals (SDGs) family members, with less than 1 percent of older and in top-level strategic documents. Ensuring persons reporting care by non-relatives.91 management of the health and healthcare services for all people are elements of the overall objectives Disability in old age is not an inevitable part of of Resolution 20 from the Sixth Plenary Session of aging. Surgeries or rehabilitation after injury or the 12th Party Central Committee on the protection, illness can help prevent or lessen disability and care, and improvement of the people’s health. help older persons learn how to perform ADLs Vietnam has committed to achieving the SDGs, independently. Appropriate supportive devices can including those on health. These objectives are to also mitigate the effects of long-term disability for be attained in a mixed public-private healthcare older persons if they can access them. In 2011, system that prioritizes prevention over treatment while 66.5 percent of older persons reported and considers the local health system as the difficulty with vision, only 46 percent reported foundation for providing UHC. using eyeglasses. Around 33 percent reported being hard of hearing, but only 4.5 percent of them Vietnam has an extensive network of government had hearing aids.92 and private curative care facilities in all provinces, districts, and communes (Figure 6.8). These consist of about 40 central hospitals, 165 provincial general hospitals, 160 provincial specialist 91  Vietnam Women Union (VWU). 2012. Vietnam Aging Survey hospitals, 679 district hospitals, and about 11,000 (VNAS) 2011: Key Findings. Hanoi: Women Publishing House. commune health stations. The higher the level of 92 Vietnam Women Union (VWU). 2012. Vietnam Aging facility, the greater the scope of services provided. Survey (VNAS) 2011: Key Findings. Hanoi: Women In addition to the public system, there are about Publishing House. 150 VIETNAM: ADAPTING TO AN AGING SOCIETY 32,000 private specialist clinics and 240 private grassroots level. Vietnam has long relied on hospitals,93 although private facilities tend to be vertical, centrally managed preventive health more concentrated in urban areas than public programs for communicable diseases. In the facilities because purchasing power is higher. past decade, additional vertical programs have By 2018, nearly 100 hospitals at the central and been developed for prevention and control of provincial levels had a geriatrics department.94 cardiovascular disease, chronic lung disease, cancer, endocrinology, and mental health. While Preventive and promotive healthcare services intervention design and guidelines for specific for all ages are largely provided by and funded diseases remain highly centralized, responsibility by the public sector in Vietnam. Provincial for and financing of interventions have been centers for disease control are responsible for devolved to the provinces. In most provinces, NCD running preventive health programs throughout screening, prevention, and management activities their provinces and often also have clinics to are provided at district hospital and higher-level provide services directly to the people. District facilities and have not yet extended effectively to health centers and commune health stations the commune health station level. (CHSs) implement preventive programs at the Figure 6.8. Structure of health service delivery in Vietnam CURATIVE CARE PREVENTIVE MEDICINE PRIVATE PUBLIC CENTRAL General and Central agencies specialist hospitals and institutes PROVINCIAL Private General and Provincial Centers general specialist hospitals for Disease Control and specialist hospitals Preventive DISTRICT General hospital medicine centers Combined district health center COMMUNE Private Regional polyclinics and commune health clinics stations 9394 Le et al. 2020. Health Public Private Partnerships in Vietnam: Issues and Options. World Bank Group. 93  Office of the Government Announcement number 08/TB-VPCP dated 1 January 2019. Concluding comments of the Deputy 94  prime Minister Vu Duc Dam, Chairman of the Vietnam National Committee on Older Persons at the National Committee Conference reviewing 2018 performance and setting out the 2019 plans. VIETNAM: ADAPTING TO AN AGING SOCIETY 151 Social determinants of disease are addressed continuous, patient-centered, and prevention/ in Vietnam by multi-sectoral policies. Vietnam promotion-focused services for the population. imposes excise taxes on tobacco and alcoholic beverages, which reduce the affordability of these Rehabilitation is an important link within the products. Policies also restrict the ages at which health system, with great potential to facilitate alcohol and tobacco use are allowed, and strong recovery of functional capacity for patients drunk driving laws have recently been put into after hospitalization or help those who have lost place. Clean water and sanitation have long been function simply from old age. Rehabilitation can part of public health measures. Vietnam also has help prevent disability or help patients retain some occupational health and safety regulations as well independence as they cope with loss of function. as food safety regulations, although enforcement Vietnam has 44 rehabilitation facilities, mostly may not be optimal. located in provincial capitals. A community- based rehabilitation program was put in place Substantial efforts are being made to strengthen to provide rehabilitation services through the the primary healthcare system through capacity CHSs. Treatment guidelines for rehabilitation99 building and investments in CHSs and by cover many diseases of older persons such as promoting the family medicine model. Vietnam’s Alzheimer’s disease, Parkinson’s disease, gout, extensive CHS network reaches into the most osteoporosis, heart failure, myocardial infarction, remote areas of the country and is responsible stroke, musculoskeletal diseases, and post- for providing many primary healthcare services surgery recovery, especially after hip replacement. to the population, including immunizations, health education and communication, preventive services, Hospitals have been the focus of health sector curative care, and population and family planning.95 investments in both the public and private The Ministry of Health has recently introduced a sectors. Vietnam’s extensive network of general project to strengthen capacity building for CHSs to and specialist hospitals exists in all provinces, gain the skills needed to better meet the healthcare and general hospitals exist in nearly every needs of the population at all ages.96 Investment district. In the first decade of this millennium, funds have been mobilized to renovate or build the Government allowed issuing of Government new infrastructure for CHSs to meet national bonds to raise funds for major investments in benchmarks, and by the end of 2016, 76.2 percent this public hospital network. Private investments of all CHSs met these structural standards.97 include setting up of private hospitals as well as In addition, the family medicine model is being investments in equipment at public hospitals. promoted for use in primary healthcare facilities, Vietnam’s hospitals now have the capacity to including commune health stations and private perform transplant surgeries, open heart surgeries, clinics.98 Family medicine facilities are intended lithotripsy, gamma knife surgery, and many other to be the first place for receiving, managing, high-tech procedures. and providing primary health care, counseling, Nonetheless, overcrowding of central and prevention, health promotion, emergency, and provincial hospitals continues to be widespread. curative care following family medicine principles. Despite concerted efforts to solve this problem, Family medicine principles call for comprehensive, hospitals are still overcrowded. Hospital capacity 95  MOH Circular No. 33/2015/TT-BYT guiding the functions is highly concentrated in major cities. Tertiary and tasks of commune health stations. hospitals provide the full range of services from MOH Decision No. 1718/QD-BYT dated 8 May 2019 96  approving the project “strengthening training, technology primary care to highly specialized care. Chronic transfer and professional capacity building in commune- disease management is generally provided in level health facilities” for the period 2019-2025. 97  MOH. 2018. Health Statistics Yearbook 2016. Hanoi: hospitals, rather than at the primary care level. End Medical Publishing House. MOH Circular No. 21/2019/TT-BYT dated 21 August 2019, 98  guiding a pilot on family medicine activities. 99 MOH Decision No. 3109/QD-BYT in 2014. 152 VIETNAM: ADAPTING TO AN AGING SOCIETY of life care often also occurs in hospitals due to a women, urban residents, and people in the South. lack of alternatives such as hospice care or home- Only about 1 percent relied on a paid healthcare based medical care. worker, caregiver, or neighbor.101 Private healthcare provision is rapidly increasing In Vietnam, most people with severe illnesses and can play an important role in expanding service requiring medical care do seek some formal and meeting the growing healthcare demands healthcare services but forgo care for moderate of the population. However, without putting the and minor ailments. Overall, Vietnamese people right regulatory and financial structures in place, sought medical care for about 94 percent of private healthcare provision could potentially self-reported severe illness episodes.102 Among have a negative impact on equity in health access, the six percent of the population forgoing care quality of care, and financial protection. Therefore, when facing illness, the age pattern indicates the the role of government stewardship to harness lowest rate is found among children (under age public and private healthcare provision through 15) and people ages 64–69, with the highest rate effective regulation and management of the health among people age 80 and older (Figure 6.9). Lack market is critical to achieve overall health system of health insurance coverage may contribute to objectives and meet the growing healthcare needs forgoing care for severe illness among some age of the population.100 groups, as indicated by the orange portion of the bars representing the percentage uninsured in that 6.3.2. Where do older people from different age cohort. Forgoing care for less severe ailments age cohorts use health services? is much more common—overall, about 55 percent of persons age 60 and older reported not seeking Family plays a significant role in providing health treatment for their illnesses. Reasons given for not care to older persons in Vietnam. Around 95 seeking care included lack of money for treatment percent of ill older persons reported receiving care (52.5 percent), belief that they are not sick enough and support during their illness. The main providers for treatment (12 percent), and nobody to take of care for sick older persons were the spouse (26 them to treatment facility (11.5 percent). Financial percent), daughter (27 percent), son (22 percent), reasons for not seeking care are more prevalent or daughter-in-law (15 percent). Men relied more among 60-69 year olds and among women, in rural heavily on their spouse than women (55 percent areas, and in the South. Lack of transport is most versus 10 percent), largely due to men’s lower life problematic among the oldest group (age 80 and expectancy. Reliance on the daughter was very above), in rural areas, and in the Central region.103 high among people age 80 and over and among Vietnam Women Union (VWU). 2012. Vietnam Aging Survey 101  (VNAS) 2011: Key Findings. Hanoi: Women Publishing House. Source is VHLSS 2016. Severe illness is defined as illness 102  requiring that the patient stay in one place and be taken care of at the bedside or the patient had to take time off from work, studies or could not participate in other normal Nguyen MP, Wilson A. How could private healthcare 100  activities. better contribute to healthcare coverage in Vietnam? Int Vietnam Women Union (VWU). 2012. Vietnam Aging Survey 103  J Heal Policy Manag. 2017;6:305–308. doi: 10.15171/ (VNAS) 2011: Key Findings. Hanoi: Women Publishing ijhpm.2017.05. House. VIETNAM: ADAPTING TO AN AGING SOCIETY 153 Figure 6.9. Rate of forgoing care when facing severe illness by age group, Vietnam 2016 Share of severe illness episodes for which care was forgone 12% 10% 8% 6% 4% 2% 0% <15 15-34 35-54 55-59 60-64 64-69 70-79 80+ Insured Uninsured Source: Author’s calculation using VHLSS 2016. Use of health services is sensitive to people’s groups are at the CHS. Interestingly, the number ability to pay for services. Figure 6.10 shows of inpatient contacts does not vary substantially substantially lower numbers of outpatient across living standards, suggesting that when a contacts with health services among the poorer condition becomes serious and requires inpatient quintiles, suggesting that they are more likely to care, people are obtaining this care, regardless of forgo outpatient care than better-off groups. A their level of living standards. greater share of healthcare contacts among poorer Figure 6.10. Healthcare service utilization by living standards quintile, Vietnam 2016 Health care service utilization by quintile 35 30 MIllion contacts per year 25 20 15 10 5 - Poorest Second Middle Fourth Richest Quintile CHS Outpatient care at govt. hospital Outpatient care at private facility Inpatient care at govt. hospital Inpatient care at private hospital Source: Author’s calculation using VHLSS 2016. 154 VIETNAM: ADAPTING TO AN AGING SOCIETY Health services utilization in Vietnam relies continued growth in the number of private sector increasingly on hospitals for outpatient care, rather facilities and efforts to increase the capacity of than primary care clinics. Hospitals are generally a CHSs to provide curative care services paid by more expensive facility for providing services than health insurance. primary care and outpatient facilities. They are also generally less accessible for older persons, Analysis of the public-private mix indicates that who tend to have mobility issues. Vietnam’s health older age groups are more reliant on public facility system has been undergoing a disturbing trend services compared to cohorts age 54 and younger. toward increased reliance on state hospitals for If preferences for private services continue as outpatient care, with the share of outpatient visits these cohorts reach retirement ages, a substantial rising from 25 percent in 2004 to 45 percent in 2016 shift toward private services may be seen. (Figure 6.11).104 This trend has occurred despite Figure 6.11. High and increasing share in the use of hospital care for outpatient visits, Vietnam 2004-2016 Distribution of total outpatient visits by facility type, 2004-2016 100 90 Share of outpatient visits (%) 80 70 60 50 40 30 20 10 0 2004 2006 2008 2010 2012 2014 2016 State hospital CHS, regional polyclinic Private facility Other Source: General Statistics Office. Vietnam Household Living Standards Surveys 2004 to 2016. Healthcare use and reliance on hospital services year reached over 60 percent in the age groups 64 tends to increase with age.104Overall, only about years and older. The proportion of people using one in five people in the population used primary only hospital services without any primary care healthcare (PHC) facilities in the past year (Figure contacts also increases with age, reaching nearly 6.12). In 2016, the proportion of the population 40 percent of the population in the age groups 70 reporting use of healthcare services in the past years and older.  eo, H.S., Bales, S., Bredenkamp, C., Cain, J. 2019. 104 T The Future of Health Financing in Vietnam: Ensuring Sufficiency, Efficiency, and Sustainability. Washington, D.C.: World Bank Group. VIETNAM: ADAPTING TO AN AGING SOCIETY 155 Figure 6.12. Specialist and primary healthcare (PHC) service utilization, Vietnam 2016 Reliance on PHC facility 80+ 70-79 65-69 60-64 Age groups 55-59 35-54 15-34 <15 0% 20% 40% 60% 80% 100% Proportion of people Only use hospital services Use PHC (with or without also using hospital services) No use of services Source: Author’s calculation using VHLSS 2016. Compared to younger people, older persons have 25  percent of hospital-based outpatient visits, a higher frequency of using hospital services, and 25  percent of hospitalizations. Utilization of where they can access specialist care. For every outpatient care dips in the age group 80 years 100 people in the age groups 65 years and older, and older, similar to patterns found in Thailand there were 25-37 inpatient stays (Figure 6.13). On where it has been suggested that the dip may be average, older persons also had more than one due to problems in accessing care or in financial hospital outpatient visit in the past year but only protection for the oldest groups.105 Nevertheless, about one outpatient primary care visit. Because as the elderly population increases, if health- the older population cohorts are currently relatively seeking patterns do not shift, health facilities—and small (only 9  percent of the population), overall especially hospitals—will face a growing share of older persons (age 65 and older) only account clients in older age cohorts. for 16  percent of outpatient primary care visits, 105 World Bank. 2016. Closing the Health Gaps for the Elderly: Promoting Health Equity and Social Inclusion in Thailand, pp. 10-11. 156 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 6.13. Average visits per 100 population by type of facility and type of care, Vietnam 2016 200 150 Visits per 100 people 100 50 0 <15 15-34 35-54 55-59 60-64 65-69 70-79 80+ Outpatient at PHC facility Outpatient at hospital Inpatient at hospital Source: Author’s calculations using VHLSS 2016. 6.4. Health Financing Vietnam’s health financing strategy laid out in Resolution 20107 prioritizes use of state budget and 6.4.1. Trends in healthcare spending SHI, but it also envisages greater contributions from people who can afford to pay. The strategy Vietnam spends a relatively high share of GDP on prioritizes government budget spending on health care compared to other countries. In 2016, preventive medicine, grassroots health care, Vietnam spent about 5.9 percent of GDP on health insurance premiums for disadvantaged groups, (including capital and current spending), equivalent and support for hospitals in disadvantaged areas. to about USD 128.9 per capita (current 2016 USD). SHI is envisaged to be the key source of funding This amount is relatively high compared to regional for a basic package of curative care services, comparator countries, despite the fact that this is eventually extending to an essential set of primary an underestimate for Vietnam because private healthcare services. People are expected to capital expenditure information is not included in contribute to SHI and pay for part of the costs estimates. Health as a share of current government of their primary healthcare services and curative expenditure accounted for about 8.9 percent, care and for services exceeding the basic level of which is on the higher end among comparator care, including higher payments when bypassing countries (Figure 6.14). About half of Vietnam’s primary health care. The policy also envisages current health expenditure comes from public greater accountability and transparency among sources and half from private sources, indicating public providers and public-private partnerships heavier reliance on private funding compared to in terms of the services they provide and revenues countries like Thailand and China but lower than they collect. in Indonesia or the Philippines (Figure 6.15). A recent analysis found that prospects for additional public financing for health in Vietnam are limited in the short to medium term due to a tight fiscal context.106 Teo, H.S., Bales, S., Bredenkamp, C., Cain, J. 2019. The 106  Resolution 20 of the Sixth plenary session of the 12th 107  Future of Health Financing in Vietnam: Ensuring Sufficiency, Party Central Committee on the protection, care and Efficiency, and Sustainability. Washington, D.C.: World Bank improvement of people’s health in the new situation issued Group. on 25 October 2017. VIETNAM: ADAPTING TO AN AGING SOCIETY 157 Figure 6.14. International comparison of share of GDP spent on health and share of government expenditure spent on health, 2016 Share of GDP spent on health, 2016 Share of government expenditure spent on health, 2016 16 15.3 8 13.5 7 Capital expenditure 14 as % of GDP 12 6 Percent of GDP CHE as % of GDP 10 9.1 8.9 8.6 5 8.3 8.2 Percent 8 7.1 4 6.2 6 5.3 3 3.7 3.4 3.1 2 4 1 2 0 0 Thailand Cambodia Vietnam Malaysia South Korea Lao PDR Philippines Bangladesh Sri Lanka China Indonesia Thailand Vietnam Mongolia Malaysia India Cambodia Lao PDR South Korea China Bangladesh Sri Lanka India Philippines Mongolia Indonesia Source: WHO. “Global Health Expenditure Database, 2018.” Geneva: WHO. http://apps.who.int/nha/database/ViewData/Indicators/ en. Accessed August–November 2018. Figure 6.15. International comparison of public versus private sources of current health expenditure, 2016 Source of funds for current health expenditure, 2016 100 90 22 80 42 41 39 56 55 50.3 50 49 70 59 66 60 74 74 Percent 50 40 30 20 10 0 Philippines Bangladesh India Indonesia Cambodia Sri Lanka Vietnam Malaysia Lao PDR China South Korea Mongolia Thailand Public External assistance Private Source: WHO. “Global Health Expenditure Database, 2018.” Geneva: WHO. http://apps.who.int/nha/database/ViewData/Indicators/ en. Accessed August–November 2018. 158 VIETNAM: ADAPTING TO AN AGING SOCIETY Current health expenditure (CHE) has been GDP, rising to over 6.3 percent of GDP in 2012 and increasing at a rate slightly higher than the growth 2013 then declining to 5.8 percent in 2016 (Figure in GDP. In 2000, CHE reached almost 5 percent of 6.16). Figure 6.16. Trend in current health expenditure as a share of GDP, Vietnam 2000-16 Current health expenditure share of GDP 7% 6% 5% 4% 3% 2% 1% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: WHO. “Global Health Expenditure Database, 2018.” Geneva: WHO. http:// apps.who.int/nha/database/ViewData/Indicators/en. Accessed August–November 2018. Trends in sources of CHE from 2000 to 2016 85/2012) and upward adjustment of government indicate reduced dependence on public sources set user fees (Joint Circular number 4/2012/TTLT- of health spending and increased dependence BYT-BTC). Under the hospital autonomy policy, on out-of-pocket (OOP) spending. Government hospitals are gradually being weaned from state budget spending on health care remained stable subsidies and are expected to cover their costs at about 40 percent of current health expenditure from user fee revenues. The upward revision to until 2012 when it fell to below 30 percent, and it user fees is intended to ensure adequate revenues remained at this level until 2016, the latest year for to cover their recurrent operating expenditures, which data is available (Figure 6.17). This drop in and by 2018, was supposed to incorporate almost state budget spending on health can be explained all costs including depreciation on equipment and by revisions to the hospital autonomy policy (Decree buildings. VIETNAM: ADAPTING TO AN AGING SOCIETY 159 Figure 6.17. Trends in sources of current health expenditure, Vietnam 2000-2016 Trends in sources of current health expenditure 100% Enterprise financing schemes 90% 80% NPISH financing schemes (including 70% development agencies) 60% Household OOP payments 50% 40% Voluntary health insurance 30% schemes 20% Compulsory contributory health 10% insurance schemes 0% Government schemes 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: WHO. “Global Health Expenditure Database, 2018.” Geneva: WHO. http:// apps.who.int/nha/database/ ViewData/Indicators/en. Accessed August–November 2018. As health insurance coverage increased, the by the state (e.g., persons age 80 and older, children intention was for the insurance fund to bear the under age 6) or household members enrolling bulk of user fee increases, but the social health directly rather than through employment—the insurance (SHI) scheme did not fill in the gap premium is set at 4.5 percent of the basic wage left after the government health spending share (in 2018, the basic wage was 1.44 million VND declined. Instead, the health insurance share of per month), or equivalent to about 780,000 VND CHE remained steady at around 20 to 22 percent per year. For employed individuals, wages are of current health spending up till 2016. The gap substantially higher. In the public sector, the in health financing appears to have been met average monthly wage in 2018 was 6.69 million through an increased share of OOP spending, VND (basic wage times the average civil servant which increased from 37 percent of current health pay scale coefficient of 4.6). In the private sector, expenditure before 2012 to nearly 45 percent in many individuals have even higher monthly wages 2016. The data covered in this figure do not yet and therefore pay a higher premium. In 2016, include the further revisions to user fees occurring about 45 percent of insured members belonged in 2015 (Circular 37/2015/TTLT-BYT-BTC) and to the group whose premiums were paid by the subsequently in 2018 (Circular 15/2018/TT-BYT), state, while another 17 percent belonged to the so it is not yet known whether SHI has been able household insured group—this means a majority to improve performance in financial protection for of insured members are paying premiums at the households. lowest rates.108 Figure 6.18 highlights the problem, showing that while 45 percent of insured members Increases in SHI fund revenues are constrained have premiums paid by the state budget, the total by low contributions from a majority of members. amount of funds contributed in 2016 amounted to SHI premiums are currently set at 4.5 percent of only 12 percent of total health insurance premium wages. For the majority of insured individuals— revenues.109 including those whose premiums were subsidized MOH. 2018. Health Statistics Yearbook 2016. Hanoi: 108  Medical Publishing House. WHO (World Health Organization). 2018a. “Global Health 109  Expenditure Database, 2018.” Geneva: WHO. http:// apps. who.int/nha/database/ViewData/Indicators/en. Accessed August–November 2018. 160 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 6.18. Trends in sources of SHI revenues, Vietnam 2000–2016 Social health insurance revenues by source, 2000-2016 70 Nominal trillion VND 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Social health insurance contributions Transfers from government to social health insurance Source: WHO. “Global Health Expenditure Database, 2018.” Geneva: WHO. http:// apps.who.int/nha/database/ViewData/Indicators/ en. Accessed August–November 2018. The Government raising of official user fees leading to a fund deficit in 2017. As the SHI agency charged to the SHI fund (and patients) in recent tries to contain its spending by imposing caps on years was not accompanied by an increase in SHI payments to hospitals or imposing greater premiums to cover those higher fees, threatening conditionality on reimbursement of services or the SHI fund balance. Inflation rates for medical drugs, it is likely that the pressures are translating services and pharmaceuticals, which reached 18 into a greater share of services being provided to percent in 2012, 44 percent in 2013, 30 percent in patients outside of the health insurance package 2016, and 42 percent in 2017.110 Consequently, the or additional charges being imposed above what health insurance fund balance has been put at risk, health insurance will reimburse, leading to higher as seen in Figure 6.19 which shows that SHI fund OOP spending. expenditures have risen more rapidly than revenues, General Statistics Office. Consumer Price Index website. 110  https://www.gso.gov.vn/default.aspx?tabid=628. VIETNAM: ADAPTING TO AN AGING SOCIETY 161 Figure 6.19. Trends in SHI revenues and expenditures per member, Vietnam 2010–2017 Trends in SHI revenues and expenditures per member 1200 Th o u sa n d V N D 1000 800 600 400 200 0 2010 2011 2012 2013 2014 2015 2016 2017 Revenue per member Spending per member Source: GSO. Statistical Yearbook 2018 and earlier years. Hanoi: Statistical Publishing House. Growth in health spending in recent years has only local hospitals (excluding central, sectoral, been largely due to price escalation, volume and private hospitals and excluding outpatient increases, and increased intensity (technical clinics), the number of lab tests grew 8 times, services provided) of service provision. Current x-rays 6 times, and ultrasounds 10 times in the health spending in 2016 was 7.7 times higher same period. While part of this increase may be than in 2000,111 but the population grew only expansion to meet unmet needs, the current fee- 19  percent from 2000 to 2016.112 The private for-service financial incentives and high health sector has grown, but over the past decade, it still insurance coverage has led to overprovision of has not expanded beyond 30 percent of outpatient unnecessary services and drugs. Greater severity contacts and 5 percent of hospital beds, so these of disease and comorbidities of older persons are factors are unlikely to be driving cost escalation. likely to exacerbate these trends. One important cost driver is prices: from 2000 to 2016, consumer prices for health services and Implementation of provincial budget allocations pharmaceuticals increased 4.5 times.113 In addition, for primary health care, preventive medicine, and total inpatient episodes nearly tripled, reaching health checkups for older persons is not being 16,549 admissions per 100,000 people,114 which is monitored through a regular statistical indicator. higher than many OECD countries.115 Intensity of However, in a 2018 review of health care for older care has also increased rapidly in this period, with persons, it was revealed that many localities have total surgeries increasing 2.6 times and value of failed to allocate local budget funds for periodic drugs used per capita increasing 7 times. Intensity health checkups for older persons according to of diagnostic use has also increased—counting the Law.116 WHO (World Health Organization). 2018a. “Global Health 111  Expenditure Database, 2018.” Geneva: WHO. http:// apps.who.int/nha/database/ViewData/Indicators/en. Accessed August–November 2018. 112 General Statistics Office. 2019. Statistical Yearbook of Vietnam 2018. Hanoi: Statistical Publishing House. 113 General Statistics Office. 2019. Statistical Yearbook of Office of the Government Announcement number 08/ 116  Vietnam 2018. Hanoi: Statistical Publishing House. TB-VPCP dated 1 January 2019. Concluding comments 114 Ministry of Health. 2018. Health Statistics Yearbook 2016. of the Deputy prime Minister Vu Duc Dam, Chairman Hanoi: Medical Publishing House. of the Vietnam National Committee on Older Persons 115 OECD. 2019. Hospital discharge rates (indicator). doi: at the National Committee Conference reviewing 2018 10.1787/5880c955-en (Accessed on 17 September 2019). performance and setting out the 2019 plans. 162 VIETNAM: ADAPTING TO AN AGING SOCIETY While curative care is funded to a large extent by services, but it should be focused on cost-effective health insurance, preventive medicine and public preventive and promotive measures. health interventions are still predominantly funded by the state budget, including funds from external 6.4.2. Financial protection assistance. In 2016, the state health budget spent Vietnam’s strategy for health financial protection only about 21 percent on preventive care and target relies on a combination of health insurance and programs, compared to 34  percent on curative government budget allocations to ensure that the care, 21  percent on health insurance premiums, population can access and use essential curative and 22 percent on capital investments. In curative care services and benefit from public health, care facilities, only 30  percent of revenues are preventive medicine, and primary healthcare from direct state budget subsidies, with additional services. SHI is financed through premium revenues from health insurance and user fees, contributions to the SHI fund paid directly by some which are only a minor share of revenues for groups (e.g., employees, schoolchildren, non-poor preventive care facilities. With the high degree of working people), subsidized by the government current unmet demand for interventions to reduce budget for other groups (e.g., the poor, elderly age lifestyle and metabolic risk factors, changes will 80 and older, children under age 6), and paid from be required in the way state budget funds are the social security fund for others (pensioners). spent on health care toward greater spending on The Government has also stipulated that local preventive care. The more recent policy on hospital budgets are to be allocated to pay for annual health autonomy and reductions in state direct subsidies checkups for older persons, public health, health to hospitals should free up substantial state promotion, and preventive services.117 budget that could be reallocated to preventive Figure 6.20. Health insurance coverage trends, 2000-2016117 Trends in health insurance coverage by financing source 80 Million people 70 60 50 Voluntary including partially subsidized 40 Poor & other fully subsidized 30 benificiaries 20 Compulsory (co-contribute+VSS) 10 0 1993 1994 1995 1996 1997 1998 1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Author's calculations from MOH-supplied data. Most recent years from Health Statistics Yearbooks. Prime Ministerial Decision No. 1387/QĐ-TTg dated 13 July 2016 issuing the list of public services in the field of health and 117  population eligible for state budget funding. VIETNAM: ADAPTING TO AN AGING SOCIETY 163 Health insurance coverage has increased rapidly, employers to ensure coverage for their employees. reaching 90 percent in 2019. Figure 6.20 shows the rapid and steady rise in health insurance Health insurance coverage varies substantially coverage starting from 2009, reaching 76 percent by age (Figure 6.21) but reaches at least two- by 2016. While the jump in coverage in 2009 was thirds in every age group. Survey results in 2016 due largely to increases in the population whose indicate that health insurance coverage is very premiums were subsidized, in more recent years, high among children under age 15, thanks to coverage has increased mostly through household subsidized coverage among children under age 6 enrollment. In 2016, a large jump was seen in and partial subsidies for schoolchildren. Coverage members contributing through their employment, drops in the 15-34 age group, but a relatively large with a corresponding drop in coverage through share is covered by insurance for students, and household enrollment. By the end of 2018, health the proportion with private health insurance is the insurance coverage reached 87 percent of the highest in this age group (12 percent). The group population,118 with reports of coverage reaching 90 with the lowest insurance coverage is the group percent in 2019.119 The Government is prioritizing ages 35-54, with over one third lacking health efforts to increase the rate further to 95 percent by insurance coverage. Health insurance coverage 2025 through subsidizing vulnerable groups using increases steadily as age increases, reaching 94 local budgets and increasing enforcement for percent in the group age 80 and older. Figure 6.21. Coverage of health insurance by health insurance type, 2016 Main health insurance type No insurance coverage 100 Private HI 90 Other categories 80 Other voluntary 70 Students 60 50 Contributing employee 40 State policy beneficiaries 30 Free care card 20 Near poor 10 Poor 0 Children under 6 <15 15-34 35-54 55-59 60-64 64-69 70-79 80+ Source: Author’s calculations from VHLSS 2016. In the older age groups, a large share of people grey bands in Figure 6.21 above indicate groups have health insurance through household receiving health insurance due to poverty or living enrollment118(usually self-employed farmers), in disadvantaged areas. This group accounts for pensions, social assistance benefits, or benefits about 15 percent of health insurance coverage up from meritorious service to the nation.119The to age 64, then coverage increases to about 27 percent in the group age 80 and older. In principle, 118  Teo, H.S., Bales, S., Bredenkamp, C., Cain, J. 2019. The the implementing circulars for the Law on Health Future of Health Financing in Vietnam: Ensuring Sufficiency, Efficiency, and Sustainability. Washington, D.C.: World Bank Insurance entitles all people age 80 and older to Group. subsidized health insurance if they do not already 119 https://baohiemxahoi.gov.vn/tintuc/Pages/linh-vuc-bao- have coverage through their pension. Important hiem-y-te.aspx?ItemID=14026&CateID=0. 164 VIETNAM: ADAPTING TO AN AGING SOCIETY regional differences can be seen in health insurance pre-paid and pooled sources from state budgets coverage among older persons, with about one in and SHI funds is important because it means that five older persons (age 60 and older) in the three the risk of unpredictable and potentially costly southern regions lacking insurance coverage, healthcare expenditure is spread across the compared to only one in eight in the three northern population. regions.120 The share of household income that goes to health Ethnic minority people have higher insurance care has been increasing recently for all income coverage rates than ethnic Kinh people due to the groups except for the rich. Among all income policy of subsidizing the poor and ethnic minority groups, there was a prolonged downward trend in people in disadvantaged areas. People who report the share of household spending that went to health a severe illness in the past 12 months are also more between 2004 and 2012, from 7 percent to around likely to have health insurance coverage.121 5 percent on average. This trend then reversed between 2012 and 2016, with an increasing share Despite high health insurance coverage, OOP of income spent on health for 80 percent of the spending by households continues to be the population in the four lower quintiles but not in the largest source of health financing in Vietnam. 20 percent richest.123 The richest quintile spends The OOP share of current health expenditure has more than five times what the poorest quintile remained persistently high at just under 40 percent spends on health care and almost double what the since 2000, rising to 45 percent in 2016.122 Shifting second-richest quintile spends (Figure 6.22). the composition of health financing from OOP to Figure 6.22. Level of out-of-pocket spending on health by wealth quintile, 2016 Out-of-pocket health spending, 2016 60 Trillion VND 50 IP Care 40 30 OP Care 20 Devices 10 Drugs purchased at pharmacy 0 Poorest Second Middle Fourth Richest Quintile Source: Teo, H.S., Bales, S., Bredenkamp, C., Cain, J. 2019. The Future of Health Financing in Vietnam: Ensuring Sufficiency, Efficiency, and Sustainability. Washington, D.C.: World Bank Group.120121122123 120 Author’s calculations using VHLSS 2016. 121 Author’s calculations using VHLSS 2016. WHO (World Health Organization). 2018a. “Global Health Expenditure Database, 2018.” Geneva: WHO. http:// apps.who.int/nha/ 122  database/ViewData/Indicators/en. Accessed August–November 2018. Teo, H.S., Bales, S., Bredenkamp, C., Cain, J. 2019. The Future of Health Financing in Vietnam: Ensuring Sufficiency, Efficiency, 123  and Sustainability. Washington, D.C.: World Bank Group. VIETNAM: ADAPTING TO AN AGING SOCIETY 165 Increases in OOP spending over the past few years OOP health spending. Despite the persistence have been concentrated among higher-income of OOP spending as the predominant source of households, which have more ability to pay and financing at the system level and the rising share greater utilization of health services. Lower of health spending being borne by households spending among the poorer groups corresponds at the point of care, the health financing system to fewer contacts with health services (see Figure in Vietnam has provided significant protection to 6.10 above), possibly forgoing needed care and households against the financial risks associated relying more on CHS services, which are less able with healthcare costs. Catastrophic health to meet population healthcare needs. Inpatient spending has been declining, reaching 9.50 care accounts for a substantial proportion of OOP percent (using a threshold to define catastrophic spending across all income groups, with the richest spending as exceeding 10  percent of household quintile spending a relatively greater share of consumption) or 1.79 percent (using a 25 percent their health spending on inpatient care than other threshold) by 2016. Impoverishment due to groups. Middle-income groups spent relatively health spending has been nearly eliminated (1.33 more on outpatient care. Drugs purchased from percent) (Figure 6.23). This remarkable finding can pharmacies account for around 20 percent of OOP be attributed to the above-mentioned high levels of spending in all groups. OOP spending concentrated among the rich and lower access and utilization of healthcare services Vietnam has seen substantial improvement in the among the poorer groups. financial protection of households against large Figure 6.23. Catastrophic and impoverishing health spending, 1992-2016 Trends in financial protection outcomes, 1992 ~ 2016 25% Catastrophic 20% (10% threshold) 15% Catastrophic (25% threshold) 10% Impoverishment due 5% to health spending ($3.20) 0% 1992 1997 2002 2004 2006 2008 2010 2012 2014 2016 Source: Teo, H.S., Bales, S., Bredenkamp, C., Cain, J. 2019. The Future of Health Financing in Vietnam: Ensuring Sufficiency, Efficiency, and Sustainability. Washington, D.C.: World Bank Group. 6.5. Challenges for Health Service payments. Tobacco, alcohol, diet, pollution, food Delivery and Health Financing safety, and fitness require interventions and policies from multiple sectors, which may have 6.5.1. Key health service delivery challenges conflicting interests. Efforts to raise excise taxes on tobacco and alcohol have faced substantial Disease prevention, risk factor reduction, and resistance from industry, and those taxes remain health promotion activities are inherently multi- too low to have a substantial impact on tobacco or sectoral and difficult to fund through patient alcohol use. Pollution control requires substantial 166 VIETNAM: ADAPTING TO AN AGING SOCIETY enforcement efforts and incurs higher costs on accuracy using vignettes. It found that about enterprises, while the beneficiaries of clean air three-quarters of doctors diagnosed diabetes and are not organized in a way that can put competing hypertension correctly when provided with a history political pressure for enforcement. Food safety and clinical symptoms. However, doctors failed efforts have concentrated on industrial producers, to ask the full set of medical history questions or because regulating the large number of small perform the full set of clinical examination actions producers in agriculture and food processing is recommended. When prescribing treatment, only an impossible task. At the same time, preventive 2.1 percent prescribed the fully correct treatment activities often require behavior change on the for diabetes, while 28.7 percent actually prescribed part of individuals in the population, which may harmful treatment. For hypertension, only 4.8 go against habits, psychological factors, family, percent prescribed fully correct treatment, and preferences, or even economic incentives. 30.1 percent prescribed harmful treatment.124 The Therefore, it is important that the multisectoral specialty of geriatric medicine is still new, and interventions mutually support behavior change few practitioners have in-depth knowledge of the actions to increase effectiveness. particular challenges in diagnosing, treating, and caring for older patients. But more importantly, few Development of specialties in higher-level facilities doctors throughout the health system have any has been prioritized, while availability of basic professional training focused on the special needs services at grassroots facilities (CHS and district of their older patients.125 hospitals) remains limited. Considerable attention has been paid to expanding technical capacity for The only providers allowed to provide home high-tech services at the tertiary level, particularly in health care for homebound patients, palliative, specialist hospitals including oncology, cardiology, and end-of-life care are family medicine practices orthopedics, and endocrinology. Yet capacity and CHSs with a limited scope of services. The at the primary level is substantially weaker. family medicine specialty is still nascent, with A facility survey in six provinces representing few doctors having appropriate qualifications to six regions of Vietnam in 2015 found that CHSs provide this integrated and continuous model of had low availability of basic services to screen, care. While family medicine clinics are allowed diagnose, and treat diabetes and hypertension. to provide home-based health care, the scope More specifically, only 43 percent of CHSs in of services they are permitted to provide (in a the survey reported implementing a diabetes positive list attached to Circular 21/2019/TT- screening program, while 48 percent implemented BYT) is constrained, making it difficult to meet hypertension screening. Only 48 percent reported the healthcare needs of homebound, elderly, or management and monitoring of diabetes, and only end-of-life patients. For example, these clinics 16 percent reported dispensing diabetes treatment are allowed to provide cold compresses but not drugs. Similarly, only 54 percent of CHSs reported hot compresses. They can provide nasogastric managing hypertension, while only 35 percent tubes but not provide food through them. They reported dispensing hypertension drugs. The can provide support transferring to and from a report also noted that CHSs are only allowed to wheelchair, but not support toileting, washing, prescribe drugs for a very limited number of days, grooming, or eating. which is inappropriate for patients with chronic diseases requiring months of treatment. Practitioners often face overcrowded conditions and lack the time to fully inform their older patients A large number of practitioners and facilities and their caregivers about how to manage chronic at the primary care level still lack medical knowledge in line with national diagnostic and World Bank. 2016. Quality and Equity in Basic Health Care 124  treatment guidelines to screen for, diagnose, and Services in Vietnam: Findings from the 2015 Vietnam District and Commune Health Facility Survey. treat diseases common among older persons. Ministry of Health and Health Partnership Group. 2017. 125  The facility survey in 2015 assessed diagnostic Joint Annual Health Review 2016. Towards Healthy Aging. Hanoi: Medical Publishing House. VIETNAM: ADAPTING TO AN AGING SOCIETY 167 medical conditions and prevent exacerbations. back home, skipping the rehabilitation stage. The amount of time a doctor sees a patient is very limited and is inadequate to provide advice on Management of chronic disease, particularly disease management. Nurses, who have more time, hypertension and diabetes, remains relatively generally lack training in patient education to make weak as evident in analysis of the cascade sure they know what to do to prevent exacerbations of care.127 A substantial share of Vietnam’s and to manage their NCD conditions. population has metabolic risk factors for NCDs that have not been diagnosed and are not under Vietnam does not have regulations on provision of treatment. Among people with raised blood hospice care at end of life or advance directives pressure (measured in the STEPS survey in 2015), for people at end of life. In many countries, when only 43.1 percent have been diagnosed by a doctor, treatment no longer benefits the patient and the while only 13.6 percent report that their condition is prognosis is not promising, patients can switch to being managed at a health facility. Similarly, among hospice care to alleviate pain and suffering during people with raised blood glucose measured in the the process of dying. However, Vietnam has no survey, only 31.1  percent reported that they have regulations on this type of practice. In association been diagnosed, and 28.9 percent reported being with hospice care, one would generally have advance on treatment. While both these diseases could be directives, which allow patients to decide in advance managed at the primary care level, only 19 percent what care they would like to have or refuse in the case of people with hypertension and 6.2  percent of that their health is declining and they may no longer people with raised blood glucose reported that the be in a position to make their own health decisions. facility providing their NCD care is the CHS, while For example, people can decide that if there is no 37.2  percent reported seeking hypertension care chance they will recover, they wish to refuse artificial and 49.2 percent of people reported seeking care means to keep them alive, such as any kind of for raised blood glucose at a provincial or central- treatment, CPR, artificial feeding, ventilation or other level facility.128 measures aimed at resuscitation. Vietnam has not put such policies in place yet. 6.5.2. Key health financing challenges Despite efforts to ensure rehabilitation services, As the population ages, the growing number of coverage remains low. In 2015, the delivery of older persons with higher frequency of curative community-based rehabilitation for older persons care service use and higher tendency to use was very limited, to an estimated only 46,000 hospitals is likely to increase overall health people due to lack of funding for training. In the first spending and the share of GDP spent on health. six months of 2016, the number of older persons A recent analysis by WHO using public health with disability, post-trauma sequalae, accidents, expenditure data from EU countries to estimate the stroke, chronic diseases, occupational diseases, resource needs for scaling up the health system to etc. receiving community-based rehabilitation meet the increased needs of an aging population was 114,918.126 The guidelines developed for concluded that the resources needed were community-based rehabilitation mainly focus on significant but attainable.129 For countries with less rehabilitation after accidents or for people born with disabilities, rather than the rehabilitation The cascade of care, sometimes called the “treatment 127  cascade,” is a term that has typically been used for needs of older persons. In addition, the professions infectious disease detection and treatment (especially for of physical and occupational therapy remain HIV and tuberculosis) but has also recently been applied to NCDs and chronic conditions. underdeveloped in the training system. The patient Ministry of Health-General Department of Preventive 128  referral system tends to neglect the importance of Medicine. 2016. National Survey on the Risk Factors of post-hospitalization rehabilitation interventions, Non-communicable Diseases (STEPS) Viet Nam 2015. Hanoi. instead discharging patients directly from hospital 129 Williams, G., Cylus, J., Roubal, T., Ong, P. and Barber, S. 2019. Sustainable health financing with an ageing population. Will population ageing lead to uncontrolled health expenditure Ministry of Health. 2016. Báo cáo công tác người cao tuổi 126  growth? Kobe: WHO Centre for Health Development, Kobe, 6 tháng đầu năm 2016. Hanoi. Japan. 168 VIETNAM: ADAPTING TO AN AGING SOCIETY developed health systems, the authors estimated health promotion and disease prevention activities health spending growth using Indonesian can eventually help relieve the strain, but there will population projections as an example of countries be a substantial lag before their effects are seen. with a relatively younger population experiencing rapid aging while increasing health spending to OOP spending and the financial burden of health achieve UHC. The projections show that the health care for older persons give cause for concern. spending share of GDP in 2060 would increase at Average OOP spending peaks for the 70-79 age most by 1.7 percentage points in excess of the group at over 2.5 million VND per capita (Figure increase expected based on current expenditure 6.24). For households actually incurring health by age patterns.130 The projections also show the expenditure, the total amount they must pay importance of timely policy decisions. The impact is substantially higher. The large drop-off in of population aging can be mitigated if investments healthcare spending among the oldest cohort are made before a large share of the population is is likely associated with drops in utilization of at older ages, and if scaling up is spread out over outpatient services (see Figure 6.13 above), time. which suggests that these patients may not be getting needed care. OOP spending for outpatient This increased healthcare spending will put services accounts for a high share of overall OOP strains on different sources of funding. State spending in all age groups starting at 35 years budget spending will have to increase to cover the of age. These OOP spending figures include subsidized premiums for a growing population spending by individuals without health insurance, of older persons (age 80 and older). Premium and they reflect the 20  percent co-payment and rates will likely have to increase to avoid an SHI any additional extra payments made for items fund deficit, putting further strain on the state excluded from the health insurance package. budget. In addition, provinces are mandated to allocate health spending to pay for annual health Health worker remuneration is higher in curative checkups for older persons at the grassroots level care than in preventive care and in hospitals as stipulated in the 2017-2025 Project on Health compared to primary care facilities. Income of Care for the Elderly. The biggest strain will come staff in hospitals consists of official salary and from the expected increase in use of curative care supplements as well as redistribution to staff of services, which will be driving healthcare spending hospital revenue surplus in excess of costs. Many growth due to population aging and increased hospitals also have on-demand wards gathering use of health services. The sources of funding for additional revenues from higher-priced services, curative care include both SHI and OOP payments which helps boost staff incomes. Many curative from households. Controlling annual deficits in the care doctors also have after-hours private practices SHI fund will become more difficult with population to bring in additional income. In the preventive aging, unless premiums can be increased and care sector and CHSs, consisting primarily of patients can be induced to use more cost-effective government health facilities, the main income services at the primary care level. The household source is official salary, since few preventive financial burden is expected to increase unless medicine or primary care facilities can generate measures are put in place to ensure that health substantial income from providing preventive insurance provides adequate financial protection services. Not only does this inhibit people from from hospitals charging items outside of the choosing to work in preventive medicine fields, insurance package. Among poorer households, but it also means that there are few incentives these pressures will likely lead to increases in the for preventive medicine workers to work harder or share of people forgoing needed care. Effective more effectively beyond their own public service motivation and ethics. This projection considers the most unfavorable 130  assumptions regarding volume and intensity of services to older persons, higher per capita costs due to the shift to NCDs, as well as the inclusion of long-term care costs into the general health budget. VIETNAM: ADAPTING TO AN AGING SOCIETY 169 Figure 6.24. OOP spending for inpatient and outpatient care by age group, Vietnam 2016 3000 Thousand VND per year per capita 2500 2000 1500 1000 500 0 <15 15-34 35-54 55-59 60-64 65-69 70-79 80+ Outpatient-OOP Inpatient-OOP Source: Author’s calculations from VHLSS 2016. While health insurance does provide some a greater demand for high-quality health financial protection, it does not completely services will require significant expansion and eliminate the high costs of health care, and OOP strengthening of the current healthcare network spending in 2016 accounted for 45  percent of and greater efficiency in financing. total health spending.131 In almost every age group except people age 80 and older, people with Regulatory and health financing policies fail to insurance paid higher OOP than people without incentivize care delivery at lower levels. People insurance (Figure 6.25). It is likely that people who tend not to have a primary care provider who acts choose not to enroll in health insurance happen to as a care coordinator to guide them through the be healthier on average or choose not to use more system to get effective and appropriate care in line expensive hospital services because they lack with their needs. Despite higher co-payment rates financial protection. Analysis of service utilization at higher-level hospitals to discourage bypassing, confirms that insured individuals are using more the effect from difference in co-payments has services—particularly more hospital services— not been very strong because service prices have than uninsured individuals. Insured individuals been subsidized substantially. However, with user tend to pay a higher share of their OOP on inpatient fees now increasingly aimed at full cost recovery, care, while uninsured individuals pay a high disincentives to bypass are likely to be stronger than share on outpatient care. This strongly suggests in the past.132 Public hospitals are also encouraged that insurance serves more as an instrument to increase access to higher-level health services 132 In the case of bypassing from the district to higher- level facilities for outpatient care, health insurance than as a financial protection instrument. will reimburse nothing. In the case of bypassing to the central level for inpatient care, health insurance The pressure of population aging, the sharp reimbursement will cover 40 percent of the normal increase in disease burden from NCDs, and reimbursement share (e.g., for contributing members who receive 80 percent payment from insurance, 80 percent*40 percent=32 percent paid by insurance and 131 Teo, H.S. , Bales, S., Bredenkamp, C., Cain, J. 68 percent paid by patient). In the case of bypassing 2019. The Future of Health Financing in Vietnam: to the provincial level for inpatient care, insurance Ensuring Sufficiency, Efficiency, and Sustainability. will reimburse only 60 percent of the normal amount Washington, D.C.: World Bank Group. (e.g., 80 percent*60 percent=48 percent). 170 VIETNAM: ADAPTING TO AN AGING SOCIETY to raise capital from the private sector (including over-servicing. These factors create powerful from their own staff) to invest in new medical incentives for hospitals to offer expensive, high- technologies and can charge higher fees for use tech services, some of which may be medically of the private equipment. In addition, the financial unnecessary but are also interpreted by patients as autonomy policy allows hospitals to top-up staff a signal of quality, further exacerbating bypassing incomes from operating surplus, encouraging and overcrowding. Figure 6.25. Differences in OOP or health care by age and insurance status, Vietnam 2016 3500 1000 VND per year 3000 2500 2000 1500 1000 500 0 Insured Insured Insured Insured Insured Insured Insured Insured Uninsured Uninsured Uninsured Uninsured Uninsured Uninsured Uninsured Uninsured <14 15-34 35-54 55-59 60-64 65-69 70-79 80+ years years years years years years years years Outpatient Inpatient Source: Author’s calculations using VHLSS 2016. At the same time, the lower levels of care are not and treatment guidelines in close coordination yet sufficiently equipped—or enabled through with higher-level facilities. Another challenge is policy and financing—to tackle the shift in the that current provider payment arrangements do disease burden. On average, only 21 percent not provide the appropriate incentives to CHS of outpatient contacts are at CHSs or regional health workers. Staff are paid by salary, drugs are polyclinics.133 CHSs are better-utilized in more provided in-kind from the district hospital, and remote areas, for example in the mountainous health insurance reimbursement at the commune provinces where their share in outpatient contacts level is only for a small set of medical services and is well over 50 percent. However, the basic is paid on a fee-for-service basis. infrastructure, equipment, and competencies are often lacking: in 2016, only 69.8 percent of rural Fiscal space for health (i.e. the scope to increase communes met the 2014 national commune health government spending on health) is expected to be benchmarks.134 Moreover, those largely structural modest. Government spending in Vietnam already benchmarks do not provide any assurance that is high, compared to other countries at similar the CHSs are capable of appropriately dealing with levels of economic development. It has been specific medical conditions in line with diagnostic estimated that investments in health infrastructure funded by the government and donors combined GSO Vietnam. 2018. Results of the Vietnam Household 133  have only met about two-thirds of the actual need. Living Standards Survey 2016. Hanoi: Statistical Publishing House. 134  Central Steering Committee for the Census of Rural Areas, Private resources are considered to be critical Agriculture and Aquaculture, Vietnam. 2016. Preliminary Report of the Results of the Census of Rural Areas, for filling the investment gap in health care but Agriculture and Aquaculture. Hanoi: Statistical Publishing need to be better harnessed. While significant House. VIETNAM: ADAPTING TO AN AGING SOCIETY 171 expansion in the range of healthcare services on mobilizing private resources, improving quality provided and increased health service utilization of care, and addressing disparities. Resolution 21 have taken place thanks to the dramatic increase in begins to move population activities away from a services provided through private investments, the narrow focus on family planning toward improving fee-for-service payment mechanism has created the “quality” of the population, such as promoting incentives for a higher volume of services that are the adoption of healthier lifestyles, managing the directly translated into higher revenues and profits health of older persons to enhance their years lived for providers. These incentives for hospitals to in good health, and expanding the geriatric specialty offer a higher volume of expensive and high- in healthcare facilities. To operationalize these tech services may be resulting in care that is not ambitious strategic orientations, the Government necessarily medically appropriate and a potential of Vietnam has issued action plans (Government waste of health resources. To mitigate unintended Resolution 137 and 139 in 2017) which assign consequences from private sector investment concrete responsibility to relevant ministries and service provision, careful consideration is and to all provincial People’s committees for needed to create an enabling environment with a implementing the various solutions in the period strong oversight function of the government for 2018-2020. In turn, each ministry and provincial better harnessing private resources and for a more people’s committee issues decisions to implement strategic use of public-private partnerships (PPPs) the Resolution and Action plans. to finance healthcare needs in Vietnam. The health sector has been charged by the Government to place greater priority on primary 6.6. Government Current Policy and health care in its policies and strategies. In 2016, Strategies, and Vision for Health Aging the Prime Minister issued Decision 2348/QD-TTg approving a project to develop the grassroots 6.6.1. Government policy and strategy healthcare network in the new situation. This response to the aging population policy acknowledges the need to strengthen Vietnam’s Government and the Communist the professional capacity and the financial and Party are responding to the demographic and operating mechanisms of CHSs and district health epidemiological transition in high-profile and facilities in order to achieve universal health strategic policy documents. Resolution 20 and coverage more generally, as well as to more fully Resolution 21 (2017) of the Sixth plenary session implement other legal provisions on health care of the 12th Communist Party Central Committee for older persons. The project includes reforms provide the main strategic orientation for this to the organization, operations, and finances of response. Resolution 20 recognizes the need to the grassroots level as well as investments in address environmental and behavioral risk factors human resources development. The policy paints to health. The document also acknowledges a vision of comprehensiveness, continuity of care, shortcomings in preventive and primary health care coordination, and integration between prevention and in both the technical and service quality of health and treatment at the grassroots level and care. The orientation this Resolution provides in its integration with facilities at higher technical levels, long list of solutions includes strategies like raising while ensuring equity and effectiveness. people’s knowledge and awareness to change their Even before these policies, the government had behaviors and take responsibility for their own begun developing national policies on older health. It also includes strengthening of primary persons to respond to the upcoming challenges health care through a family medicine model, in multiple sectors, including long-term care and health management throughout the life cycle, and health care. A comprehensive Law on the Elderly strengthening of many elements of preventive came into effect in 2010, stipulating the rights of and promotive care. There is a strong emphasis older persons and defining the responsibilities of 172 VIETNAM: ADAPTING TO AN AGING SOCIETY their family and of the State towards them. Box 6.1 Action Program on Older Persons 2012–2020 describes the legal provisions in the Law related provides a more comprehensive, multi-sectoral specifically to health care for older persons. In framework for the current policy direction on older 2011, the Ministry of Health issued Circular 35 persons, with the current priority to bring into play guiding provision of health care for older persons, the role of older persons, improve quality of care and the Ministry of Finance issued Circular 21, for older persons, and mobilize all of society in the replaced by Circular 96 in 2018, on allocating state care of older persons appropriate with Vietnam’s budget funds to comply with this law. The National socio-economic situation. Box 6.1. Healthcare provisions in the Law on the Elderly (2009) Article 12. Medical examination and treatment 1. Prioritized medical examination and treatment for older persons shall be carried out as follows: a) Persons age 80 years and older shall be given priority for medical examination before other patients except for children under age 6, emergency cases, and severely disabled persons; b) Treatment beds shall be arranged appropriately for inpatient care. 2. Hospitals, excluding pediatric hospitals, have the following responsibilities: a) Organize a geriatrics department or set aside beds for treatment of older persons; b) After acute inpatient treatment episodes, rehabilitate health of older persons in the hospital or guide continued treatment and care in the family; c) Combine traditional and modern medicine during treatment, provide guidance for grassroots. Facilities to provide complementary and alternative medicine services for elderly patients. 3. The State encourages organizations and individuals to provide free medical services to older persons. Article 13. Primary health care at places of residence 1. Commune health stations have the following responsibilities: a) Implement health communication, disseminate basic knowledge common health care; guide older persons on preventing and treating disease and caring for own health; b) Create health management and monitoring records for older persons; c) Provide professionally appropriate examination and treatment services for older persons; d) Coordinate with higher-level facilities to organize periodic health checkups for older persons. 2. Commune health stations send health workers to provide examination and treatment services in the residence of older persons living alone who have severe illness preventing them from going to a medical facility. Commune people’s committee is responsible for supporting transport of such patients to a health facility following requests of the commune health station. 3. The State encourages organizations and individuals to provide examination and treatment services for older persons in their residence. 4. Funds for the implementation of tasks defined in a), b), and d) of Clause 1 and in Clause 2 of this article are to be covered by the state budget. To implement the National Action Program, the communication and improving awareness on care, Ministry of Health issued the project on health developing healthcare campaigns consolidating care for older persons for the period 2017–2025. the primary care and examination and treatment Its objective is to meet the healthcare needs of networks, developing a long-term healthcare older persons appropriate with various stages model, developing human resources for health, of population aging through strengthening refining policies on health care, and encouraging VIETNAM: ADAPTING TO AN AGING SOCIETY 173 society to participate in health care, all with a focus patient-centered curative care for older persons to on older persons. keep them healthy, to detect and treat or manage chronic diseases effectively close to home, and “Socialization” policy and autonomy have created to provide rehabilitation services to help them an environment favorable to the mobilization of recover more fully from illness or to mitigate the private resources for health and social services. adverse effects of reduced function in older ages Vietnam embarked on initiatives to encourage through rehabilitation services are also essential the mobilization of “all possible resources in to a healthy older population. However, the society” toward key public services to address fragmented, hospital-centric health system with its resource constraints since the 1990s as part little vertical integration and limited time allocated of the overall macroeconomic reforms. In theory, to teaching patients and caregivers how to manage this “Socialization” policy was intended to share their health will need substantial improvement to costs and responsibilities between the State become effective. and “society” for the provision and payment for services. In reality, the government reduced its In an effort to tackle the multiple risk factors for subsidies, allowing public institutions to collect NCDs and directly address the healthcare needs user fees for services and mobilize resources from of older persons, the Prime Minister has initiated the private sector and social organizations. Over the Vietnam Health Program for the period 2018- the subsequent decades, “Socialization” became 2030.135 This program moves away from disease- an increasingly important policy in the social specific interventions toward a more integrated life sectors, simultaneously filling a resource gap and cycle approach, focused on improving nutrition, expanding the services available to people. physical fitness, information campaigns, and behavior change communication to reduce tobacco The orientation of reforms to health service delivery and alcohol use and improve diet for the population are in line with many of the healthcare needs in all ages. The program also envisages disease for an aging population, but they are all at early screening, health maintenance for older persons stages and will require substantial investments at the grassroots level, and other measures (like and reforms for effective implementation. taxes) to nudge people toward healthier lifestyles The most important component is keeping the (Box 6.2). This program was approved by a Prime population healthy from early ages through healthy Ministerial Decision, in order to ensure coordination lifestyles and regular health checkups to detect of multi-sectoral interventions to tackle these risk and treat or manage disease early. Funding for factors more effectively. these interventions comes mainly from the state budget, with few incentives for practitioners to focus their efforts on these services. Providing Prime Ministerial Decision No. 1092/QĐ-TTg dated 2 135  September 2018 Approving the Vietnam Health Program. 174 VIETNAM: ADAPTING TO AN AGING SOCIETY Box 6.2. The Vietnam Health Program - Measures to address health care of older persons The Vietnam Health Program issued by Prime Ministerial Decision 1092 in 2008 includes interventions targeted at different age groups that focus on ensuring appropriate nutrition, increasing physical exercise, health care for preschool and school-age children, control of harm from tobacco and alcohol use, improvement in sanitation and the environment, food safety, early detection and management of NCDs (hypertension, diabetes, and some types of cancer), health care for the people in the community, and health care for older persons and workers. The program includes information campaigns and behavior change campaigns. It calls for localities to use existing resources in their annual budget appropriations and existing programs and projects and to mobilize contributions of enterprises, communities, and individuals to implement these activities. International expertise and resources are also to be mobilized for implementation, and the program is to be monitored and evaluated. The program includes some activities aimed specifically at promoting the health of older persons, including continuing development of geriatric care facilities nationwide and implementing health care for older persons at the grassroots level and in social assistance centers, nursing homes, and the community. Specific actions include: • Providing technical guidelines, strengthening training of healthcare workers at the grassroots and other caregivers. • Implementing long-term care integrated with management of NCDs for older persons in their family and in the community. • Developing a basic healthcare package for chronic disease and health care of older persons affordable to the health insurance fund and state budget. • Developing a network of family medicine doctors to provide services to manage chronic disease and provide long-term care for older persons. • Implementing management of health and periodic health checkups for older persons and ensure that older persons undergo periodic checks of blood pressure, blood tests, and other indicators. These policy documents lay out a vision and payment toward performance-based incentives a strategic orientation for addressing the that could enhance effectiveness. Assigning demographic and epidemiological transitions, financial responsibility to the state budget for but many challenges to implementation remain. behavior change communication, screening, and These challenges are discussed in greater detail other preventive interventions without a clear below. funding source and with vague calls for social mobilization is unlikely to lead to action. While the comprehensive Vietnam Health Program is only in the early period of implementation, The vision for strengthening primary health making it difficult to assess effectiveness, the care through family medicine models and health basic health system's preconditions for success management for the population at the grassroots are weak. The continued lack of intersectoral level has not been matched with the scale of cooperation and accountability for actions and investments needed to ensure capacity for outcomes may inhibit action by other ministries effective service provision. Studies have shown and localities, especially when they face special that CHSs and their staff lack technical capacity interests advocating against these interventions, to provide basic NCD care. The continuing medical particularly for alcohol, tobacco, and processed education system has not been prioritized, as foods. Inadequate monitoring of implementation efforts are focused on pre-service training. and outcomes makes it difficult to hold stakeholders Thinking about essential primary care services accountable and also hinders the ability to reform is not focused on the patient’s needs but rather VIETNAM: ADAPTING TO AN AGING SOCIETY 175 on individual service items and drugs, although patients or clients of preventive and promotive there are protocols for diagnosis, treatment, and health services do not have adequate mechanisms management of common medical conditions at to address their grievances or questions. Attracting the CHS level. As mentioned earlier, a large share the population back to using primary healthcare of the population continues to rely on hospitals for services at the primary care level requires really their primary health care, and hospitals have no listening to what the people want and expect from incentives to nudge patients back to the primary these services and taking action to ensure those care level or to support the capacity of primary wants are satisfied. In some localities, it may mean care providers and strengthen continuity of care contracting private providers rather than direct across levels of the health system. government provision. While very ambitious, the policies on health 6.6.2. Vision of people-centered integrated care for older persons have been criticized as healthcare (PCIC) model for Vietnam being quite general and even unrealistic.136 The policies stipulate interventions such as a long- For the development of a new medium-term term healthcare package and periodic healthcare strategic framework to respond to population checkups for older persons without concretely aging after 2020, the life-cycle approach as well defining them in a way that allows them to be as a rights-based policy should be considered operationalized at reasonable cost and for broad crucial. The vision to ensure continuous geographic and population coverage. The Law sets improvements in the quality of life of older people forth generous rights to state-funded health care requires a double focus on: (i) ensuring the social for older persons but does not include measures inclusion of older persons and opportunities to to ensure the funds are allocated to cover the lead a dignified, healthy, active, and independent costs, while payment norms for services such life free from poverty and abuse and (ii) preparing as home health care are unreasonably low. The the younger cohorts to enter their later ages in linkages between health care and other factors good health and with a stable financial position. that affect the health of older persons such as the Vietnam’s vision of a framework for healthy living environment, personal safety, support for aging will require actions not only within the family caregivers, and participation of older people healthcare system but also in the social and in society are not well-acknowledged in these living environment (Figure 6.26). Actions must policies. occur throughout the life cycle, from the antenatal The voice of the population—including younger period through youth and working ages up until the and older persons—to design an appropriate oldest-old ages. Some elements of this framework system to meet their needs and to hold the are needed at all ages, such as access to effective authorities accountable for delivering on this primary care, health management, and disease vision has not been adequately operationalized. prevention, as well as safe housing, hygiene and The resolutions, action plans, and projects are sanitation, personal safety, and proper nutrition. generally designed from a top-down perspective, Other services may be more relevant and need to with inadequate consultation with the population be emphasized for certain age groups. from diverse regions and groups. Dissatisfied Luan, T.D. 2016. The Policies on Elderly Care in Vietnam. 136  Vietnam Social Sciences, No.4 (174), pp. 9-14. 176 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 6.26. Vision of people-centered integrated health care to support healthy aging Social and living environment Health care system Exercise, diet, Specialist care, geriatric companionship, care, palliative and Water and support for ADLs, Primary sanitation, hospice care health care, Younger security ages safe housing, health Older poverty management, elimination, Early detection and continuity of ages management of chronic proper care, nutrition, Occupational health, disease, rehabilitation, integration, personal health promotion, effective medical public health, safety,… healthy lifestyle services disease prevention, health Safe pregnancy and birth, education,… baby and child health Safe from violence, early management, school childhood education, health, immunizations and nurturing environment nutrition The three main strategic pillars of health service through childhood and youth with health literacy delivery for healthy aging include: training in schools that teaches healthy habits and lifestyles in young ages. Stronger measures are • Keep people healthy and able/independent needed to bring smoking rates down and to reduce throughout the life cycle to ensure the substance abuse and mitigate its adverse effects. population remains healthy into older ages. Occupational health and safety measures could • Strengthen primary health care in the community be implemented more effectively and broadly to while shifting away from the specialist- and prevent disability and occupational disease, even hospital-centric model of service delivery. among self-employed individuals. Food safety and • Strengthen the capacity of providers to provide healthy diet can be improved further. Traffic and these new models of care and promote care community safety measures can reduce accidents integration to deal appropriately with the and injury, preventing eventual disability. complexities of disease in older people. Resolving most health problems of older persons Further improvements in the living and working at the primary care level has many important environment can improve health throughout the advantages compared to the current reliance on life cycle and increase the chances of remaining hospital care. Screening for NCDs usually requires healthy into older ages. Several decades of at least annual interactions with health services peace have allowed Vietnam to prosper and and monitoring of health indicators, but it does not have eliminated war as a major cause of death generally require extensive laboratories or imaging and disability among the population at all ages, facilities. Once chronic diseases are detected, but particularly among young men. Vietnam has they usually require daily medications and lifestyle been very successful at reducing poverty and changes which are not feasible, affordable, or undernutrition. Safe drinking water and sanitation convenient for most people to obtain in a hospital are widely available. However, substantial work setting. In addition, hospital settings are designed is still needed to ensure health from before birth, for acute disease care and do not have the systems in place to ensure continuity of care and integration VIETNAM: ADAPTING TO AN AGING SOCIETY 177 of treatment and preventive services (e.g., diabetes meeting an important share of the healthcare medication and diet change counseling). Primary needs of older persons but could become more healthcare providers need to have a clear scope integrated with public providers to ensure greater of services that they can effectively provide at continuity of care and integration of preventive and the primary care level, and when patient needs curative care services. exceed this scope of services, the provider needs to be able to coordinate care for their patients, 6.7. Recommendations for a Re- transferring patients and patient information to an configured Service Delivery Platform appropriate facility capable of providing needed services without undue delays. for Healthy Aging 6.7.1. Recommendations to support the Hospitals and other specialist care settings need vision for healthy aging to adapt to the complex needs of older patients, putting the patient’s needs at the center of In order for Vietnam to progress toward its care, rather than a specific medical condition. vision for healthy aging, the health service Geriatric specialists, nurses, and social workers delivery platform needs to be re-configured. Key working in general and specialist hospitals can recommendations include: (a) keeping people play an important coordinating role to ensure healthy and able, (b) detecting disease early and optimal care for older persons with complex mitigating harm from health problems or their health problems requiring services from multiple treatments, (c) appropriately dealing with the specialty departments. They can also help families complexities of disease in older persons, and (d) make decisions on whether treatment or palliative designing a health system that is responsive to the care may be the best option. After treatment, they population’s needs. can coordinate to ensure that appropriate follow- up care—including physical and/or occupational (a) Keeping people healthy and able/independent therapy—is provided to improve functioning and help maintain independence after discharge or to Keeping people healthy and independent in older manage chronic health conditions. ages requires actions throughout the life cycle to ensure proper nutrition, healthy lifestyles, Private sector players, including for-profit and safe workplaces, and a clean environment. non-profit entities, can fill important gaps in public These actions require multi-sectoral involvement, services to better meet the diverse needs of older because many of the risk factors for disease and persons and their families. Private family medicine disability are not within the jurisdiction of the health providers can help satisfy the growing demand sector to take action. Increasing health literacy for home healthcare services for bedridden or among the population is also crucial to achieving homebound older persons or for hospice care for this goal. patients at the end of their life in better-off families. Non-profit entities can play an important role in The Vietnam Health Program lays out a vision to finding community-based solutions at low cost, 2030 for actions needed to address risk factors. which could be replicated through community The design of this program is multi-sectoral and or mass organizations to meet the demands of addresses the internationally recognized major lower- and middle-income individuals. Private risk factors for NCDs. The main challenge is sector entities may also be able to provide training to ensure effective implementation of this very for family caregivers facing medical and other comprehensive program. Many of the preventive challenges in caring for their older persons or measures are not covered by health insurance, provide meals and companionship for older people and the providers incur costs rather than generate unable to perform these tasks. Private hospitals, revenues from service provision. As mentioned specialist clinics, and pharmacies are already earlier, many of the measures go against the 178 VIETNAM: ADAPTING TO AN AGING SOCIETY interests of enterprises and industries (tobacco, generally adequate to change practices. Additional alcohol, processed foods and sweetened complementary policies are needed. Trade, food, beverages, air pollution) who have big wallets to and agricultural policies can include increasing lobby against taxes and regulations. Increasing incentives for producers and retailers to grow and the awareness and knowledge of the population sell fresh fruit and vegetables and for the food about risk factors and healthy lifestyles may not be industry to reduce saturated fats, trans-fats, free enough to actually induce behavior change, which sugars, and salt through reformulation of food is why multi-sectoral measures to increase costs products. Measures can also be implemented to of use and restricting access are so important. more tightly regulate how foods and beverages are marketed to children and to establish standards of Effectiveness in tobacco control requires multiple healthy dietary practice in pre-schools and schools mutually supporting interventions.137 Large and in the workplace. Nutrition labeling policies can increases in cigarette taxes relative to initial prices be changed to increase consumer awareness of continue to be the most effective policy to reduce harmful and healthy nutritional components in food. cigarette consumption. Enforced comprehensive The food service industry can be encouraged to smoke-free air laws in indoor worksites, restaurants, offer affordable and healthy foods with appropriate and bars are the second most effective measure. portion sizes. Consumer demand for healthy High-level media campaigns can be effective if well- foods can be boosted by promoting awareness tested, implemented on multiple media platforms, of a healthy diet and by developing school of large enough scale, and sustained over time. policies and programs to encourage and educate These campaigns are more effective if combined children, adolescents, and adults on adopting and with other interventions that increase visibility and maintaining a healthy diet. Encouraging culinary reach. Combining these campaigns with tobacco skills and nutrition awareness for meal preparation cessation programs enhances effectiveness. can also contribute to healthy eating. Nutrition and Health warnings, marketing restrictions, and dietary counseling at primary healthcare facilities complete cessation policies (including financial helps raise awareness about diet linked to specific coverage of treatment, quit lines, and healthcare health problems. Dietary influences on health provider interventions) have slightly lower levels start young, so it is crucial to promote appropriate of effectiveness in reducing tobacco consumption infant and young child feeding practices through but are enhanced when combined with each implementing the International Code of Marketing other. The least effective measures are simple of Breast-milk Substitutes, promoting protection of interventions like healthcare provider interventions working mothers, and supporting breastfeeding in alone, active quit lines alone, or financial coverage health services and the community. of treatment alone. Maintaining Vietnam’s low levels of obesity Interventions to ensure a healthy diet include is crucial for reducing NCDs and other health creating coherence in national policies and problems, particularly diabetes.139 Besides investment plans to promote a healthy diet, measures related to a healthy diet, additional encouraging consumer demand for healthy foods, measures to prevent obesity could include taxing and promoting appropriate infant and young child of sugar-sweetened beverages (SSBs) and ultra- feeding practices.138 As with tobacco use, simply processed foods, taking into account extensive increasing the awareness of healthy diet is not global experience in taxation design. Front-of- 137  Levy, D.T., Tam, J., Kuo, C., Fong, G.T. and Chaloupka, F. package labeling and related nutrition profiling 2018. Research full report: the impact of implementing tobacco control policies: the 2017 tobacco control policy Popkin, B., Schneider, P. and Shekar, M. 2020. Chapter 139  scorecard. Journal of Public Health Management and 5: Addressing Overweight/ Obesity: Lessons for Future Practice, Vol. 24, No. 5: 448. Actions. In: Shekar, M. and Popkin, B., eds. Obesity: Health WHO. 2020. Healthy diet fact sheet. https://www. 138  and Economic Consequences of an Impending Global who.int/en/news-room/fact-sheets/detail/healthy- Challenge. Human Development Perspectives series. diet, accessed February 14, 2020. Washington, DC: World Bank. VIETNAM: ADAPTING TO AN AGING SOCIETY 179 and warning labels have been shown to shift disease management for a number of diseases. consumption away from ultra-processed foods For children, it includes screening of childhood and beverages. Removing SSBs from schools health and nutrition problems to be performed in feeding programs has been effective in some through schools and CHSs. For adults, the countries. While increasing physical activity is program envisages strengthening early detection important to maintain health, there is less evidence of high blood pressure, diabetes, cardiovascular about what measures work to effectively increase disease risk through monitoring of BMI, blood physical activity. pressure, and blood tests on an annual basis and early detection of some common types of cancer Alcohol is an important risk factor for burden of through screening exams at the grassroots level. disease in Vietnam due to accidents and disease, For working people, screening would take place at and measures to control this risk factor are the workplace and would also include occupation similar to those to control tobacco. 140 Among disease detection. For people whose diseases the most effective measures is raising prices on have been detected, the program intends to follow- alcohol through excise taxes and pricing policies. up with disease management and/or support at the Combination policies are also more effective than commune level nationwide. A major thrust of the individual policies and can include strengthening program is to manage the health of each individual restrictions on alcohol availability, enforcing at a school, workplace, or grassroots level health drinking age laws, enforcing bans on alcohol facility on a continuous basis, including annual advertising, and facilitating access to screening for health checkups. The program also envisages alcohol abuse followed by brief interventions and some communications activities to increase treatment. To reduce the risk of accidents, strong people’s awareness of the need for screening. enforcement of drink driving countermeasures are particularly effective, such as the new measures The orientation toward early disease detection included in Vietnam’s Alcohol Law. and continuous health monitoring at the primary care level is appropriate for achieving greater (b) Detecting disease early and mitigating harm access and greater efficiency, but there are from health problems or their treatments many challenges to achieving the intended outcomes. The population does not yet have the Screening people in different age groups or risk habit of seeking healthcare services while they are profiles to detect diseases and/or risk factors asymptomatic, and many are not aware of where early creates opportunities for reversing disease to seek effective screening services. Providers progression or managing it if appropriate lack training and supervision to ensure that they interventions and lifestyle changes are perform the full protocol for screening (including undertaken at all ages, but particularly for older history, clinical exam, lab tests, and imaging) ages with the higher burden of NCDs. This type of and that they ensure follow-up care and advice, screening is generally within the scope of health particularly during workplace health checkups sector activities but can also be provided through and checkups of older persons in the community. schools, the workplace, or even over the internet Lack of clear evidence-based guidelines to ensure (e.g., diabetes screening tool) or at non-health cost-effectiveness of disease screening protocols establishments (e.g., blood pressure or finger prick for many diseases and reliance on patients to blood tests in the community). pay out-of-pocket for disease screening (except for employer-paid workplace checkups and The Vietnam Health Program includes targets government-paid CHS annual checkups for and measures to ensure early detection and older persons) are likely to inhibit take-up of this 140 Siegfried, N. and Parry, C. 2019. Do Alcohol Control Policies important health intervention for many people. Work? An Umbrella Review and Quality Assessment of Systematic Reviews of Alcohol Control Interventions (2006–2017). PLoS one, Vol. 14, No. 4. 180 VIETNAM: ADAPTING TO AN AGING SOCIETY (c) Appropriately dealing with the complexities of from diverse regions and groups. Dissatisfied disease in older people patients or clients of preventive and promotive health services do not have adequate mechanisms The healthcare needs of older persons are more to address their grievances or questions. Attracting complex than those of most younger people. A the population back to using primary healthcare large share of older persons face NCDs, which services at the primary care level requires really require careful daily management and regular listening to what the people want and expect from contact with health services over long periods of these services and taking action to ensure those time. Some older persons face multiple chronic wants are satisfied. In some localities, this may diseases, some of which may be ignored by mean contracting private providers, rather than specialists focusing on only one. Prevalence of direct government provision. disability in older persons complicates access to care (bedbound, homebound) and may exacerbate 6.7.2. Specific recommendations for policy and other health problems. Neurological diseases (like implementation dementia and Alzheimer’s disease) make it difficult for older persons to manage their own health and The health service delivery and health financing daily life. Diseases, disability, pain, and loss of systems need to be reconfigured to implement basic functions (like incontinence) often adversely Vietnam’s vision of people-centered integrated affect the mental health of older persons. Medical healthcare systems. The specific recommendations treatment of older persons can often lead to presented below aim to address existing gaps and other medical conditions or disability, for example challenges in both policy and implementation muscular atrophy after long hospitalization, in order to achieve the vision for health aging in adverse drug interactions, or impairment of liver Vietnam. or renal functions. In the final stages of life, when Policy and Governance people become very weak, treatment of disease may not improve health and may in fact make In the area of policy and governance, important older persons weaker, face greater discomfort, and reforms include prioritization and legal support reduce quality of life. for multi-sectoral cooperation and public- private partnerships (PPPs), ensuring effective Vietnam’s health service delivery system is accountability and oversight, and ensuring policy expanding the network of facilities with training linkages between health care and related policy and expertise in geriatric medicine. By 2018, nearly areas. An important overarching reform includes 100 hospitals had a geriatrics department. Efforts changes to primary care delivery priorities and the are underway to develop the family medicine supporting legal framework. specialty and incorporate family medicine principles into CHSs and some private practices. First, intersectoral cooperation should be prioritized and supported, addressing issues such (d) Designing a health system that is responsive as pollution, prices on harmful/unhealthy goods to the population needs and products (such as tobacco, alcohol, and sugar- The voice of the population– including younger sweetened beverages), school and workplace and older persons–in the design of an appropriate health maintenance, health literacy education, system to meet their needs and to hold the and communication. Crucial to the success of authorities accountable for delivering on this such cooperation is strengthening the legal and vision has not been adequately operationalized. regulatory framework for PPPs in the health and The resolutions, action plans and projects are social sectors. A legal and regulatory framework generally designed from a top-down perspective for private sector engagement and PPPs should with inadequate consultation with the population be well-integrated into the national and provincial VIETNAM: ADAPTING TO AN AGING SOCIETY 181 health policies and strategies as well as the Caregiver capacity building should be tailored for national health sector development plan. the complementary roles of professional and non- medical caregivers. Capacity-building of health A second important priority is in accountability and workers (specialists, general practitioners, nurses, oversight. A stronger accountability mechanism occupational and physical therapists, and social should be designed that includes both government workers) should be prioritized so they can more oversight and patient/citizen oversight. The effectively respond to the healthcare needs of mechanism could have responsibility for older persons in a way that puts the older person at implementing actions like raising taxes on tobacco the center of care, including meeting their medical as well as for providing screening services to needs while not neglecting their financial, social, older populations. Another important step is self-care, and mental health needs. Meanwhile, ensuring effective monitoring of performance, caregiving skills of household members and other implementation, and outcomes across the board. non-medical caregivers should be strengthened. This also includes monitoring provincial and Support should include training these caregivers sectoral allocations for preventive and promotive to be more effective and giving them respite when interventions to track spending on key interventions the burden of caring for disabled elderly family and monitor how effective the interventions are. members becomes overwhelming. A third priority is ensuring policy linkages between Public communication is a crucial aspect of health care and other policies that affect the health effective health care. Reforms should boost health of older persons, such as the living environment, communication efforts at all ages and in multiple personal safety, support for family caregivers, and settings and channels to increase health literacy participation of older people in society. The law sets in the population, including elderly persons and forth generous rights to state-funded health care their caregivers, so they are best able to provide for older persons but does not include measures to the care needed by their elderly loved ones at low ensure the funds are allocated to cover the costs, cost and in the convenience and comfort of their while payment norms for services such as home own residence. health care are unreasonably low. The technical expertise and structure of the Finally, a critical overarching change in healthcare primary health care system must be prioritized and delivery entails creating essential primary care strengthened. One key intervention would be to set packages focused on patient needs, rather than clear technical guidelines for disease screening individual services or drugs. This may include a mix that takes into account cost-effectiveness and of curative and preventive and social and finance targets higher-risk groups. The guidelines should interventions. It may also require changes in other furthermore ensure appropriate follow-up for regulations, such as duration of a prescription that cases requiring further diagnostics or treatment. can be given at the CHS to fit better with the needs A second important intervention involves scaling of people with chronic disease. up effective models of primary health care that are being piloted at the CHS and regional polyclinics. Health Service Delivery This should also ensure availability of chronic disease management at the primary care level, In the area of health service delivery, building close to the patient’s home, to boost the chances capacity of health workers as well as non-medical of treatment adherence, supported by continuous caregivers, increasing the scale and effectiveness patient health management records. of public health communication, and creating more effective disease screening and primary health Integration and streamlining of the healthcare care are all essential steps. delivery system is a final critical area of priority. Upward and downward referral networks should be 182 VIETNAM: ADAPTING TO AN AGING SOCIETY organized to ensure that patients quickly get to the system should be reformed to reduce disparities most appropriate care, including post-discharge between incomes of workers in hospitals and those rehabilitation services. Second, the integration in preventive/promotive/public health and PHC of curative and preventive services should be positions. Another step would include measures improved, ensuring counseling is implemented to to reduce financial barriers that are preventing educate patients about their medical conditions older individuals, particularly poor individuals, and treatment and prevention of further episodes. from using needed health services. This includes Third, integrating palliative and end-of-life care prohibitions on extra billing and balance billing in into care delivery should be done by creating the use of insured health care services. models and ethics regulations for supporting older persons who choose to discontinue futile Overall improvements to health care service treatment, including support for their family and provision efficiency should be guided by using caregivers. Finally, programs should be prioritized in information in the detailed e-claims data held with a focus on interventions with the highest by Vietnam Social Security (VSS) to enhance the potential to improve health (NCD, disability focus), efficiency and effectiveness of medical services. and ensuring follow-up supervision and guidance Analysis of the data can reduce practice variation for implementation. and eliminate unnecessary services and medicines, saving money for both the insurance fund and Health Financing patients. What is affordable in terms of health care for older persons should be reconsidered Health financing priorities should include targeted and changes made to what is paid by the state reforms to promote healthy choices, overarching budget, health insurance, OOP or other sources. shifts in budget allocation mechanisms and Furthermore, entitlement packages should be healthworker remuneration, and lowering financial defined in an affordable and realistic way that can barriers to care for older individuals. Improving be provided and afforded at the CHS level. However, health care service provision efficiency should be it is important to guarantee communities a voice in guided by data, allocate financing appropriately, defining the services they want at their CHS and and guarantee effected communities a voice. implement a dialogue that includes explaining Finally, gaps in health financing can be filled what is feasible and realistic. through effective and transparent public private partnerships. Financial mechanisms rewarding efficiency are another area of intervention. One potential avenue One important reform is implementing financial could be introducing a financial mechanism to disincentives for consumption of products which reward hospitals that refer patients back to the CHS promote adverse health outcomes through and the community after hospital discharge, or for increased taxes on harmful consumer goods (like chronic disease management, rehabilitation in the tobacco, alcohol, sugar-sweetened beverages) to community and that help the primary care facilities increase their prices and discourage consumption provide the necessary follow-up. This could be for health purposes. coupled with designing stronger incentives and facilitating providers to provide key services and An important overarching change would be to help patients/clients adopt healthy lifestyles and reform mechanisms for allocating state budget comply with interventions. and holding localities and facilities accountable for use of funds, including possible pay-for- A final measure would include, expanding the performance modality for implementing disease scope of private sector engagement through PPP prevention, health promotion, and PHC services. in public service delivery. This should coincide with Furthermore, the health worker remuneration adapting the legal and regulatory framework and VIETNAM: ADAPTING TO AN AGING SOCIETY 183 create an enabling environment to promote PPP in encouraging the population to seek care early health and social services specifically targeted to for health problems and increase knowledge the elderly population. to recognize symptoms and disease in the households. It should furthermore emphasize Household and individual level participation in health care screening and health checkups for early detection of disease. Finally, it Government programs and reforms at a should aid caregivers to increase their awareness systemic level should be supported by programs and knowledge to effectively meet the changing empowering individuals and households to to needs of aging individuals. take actions to ensure their own health and that of their family members. These include programs 184 VIETNAM: ADAPTING TO AN AGING SOCIETY 6.8. 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Introduction and rationale for state intervention in elderly care Box 7.1. What is Elderly Care? Elderly care, or long-term care for the elderly (LTC), refers to the range of services designed to support people who are unable to perform physical and cognitive functions, measured through ability to perform activities of daily living (ADLs) and instrumental activities of daily living (IADLs), respectively (Norton 2000). ADLs encompass self-care activities that a person must perform every day, such as eating, dressing, bathing, transferring between the bed and a chair, using the toilet, controlling bladder and bowels. IADLs include activities that enable a person to live independently in a house or apartment, such as preparing meals, performing housework, taking drugs, going on errands, managing finances, using a telephone. Individuals may need LTC due to disability, chronic conditions, trauma, or illness which limit their ability to carry out basic self-care or personal tasks that must be performed each day. LTC refers to family-based care in the home and community as well as institutional care. It is quite distinct from health care in that while health care services seek to change the health condition (from unwell to well), LTC services seek to make the current condition (unwell) more bearable. Source: Authors An important driver of aging is longer life in ADLs, and this share went up to 50 percent in the expectancy, but a longer life is often accompanied age 80 and over age group. by prolonged periods of frailty and disability. In 2016, a person in Vietnam living to age 60 was, Worldwide, the majority of elder care is provided on average, expected to live another 22.7 years by informal caregivers, predominantly family such but only remain healthy for 17.2 of those years, as the spouse and adult children. This is also true implying high needs for personal care in those for Asian countries, including Vietnam, as these years of poor health (World Bank 2019 citing Xu countries are driven by the Confucian philosophy et al 2018). There are differences by gender: the and tradition of filial piety.142 Traditionally and average number of years lived with disability today, elder care has been provided by family (YLD)141 is 11 for women and 8 for men in Vietnam members. The VNAS 2011 showed that the main (World Bank 2019). During this time, difficulties persons providing care to elderly people when in performing activities of daily living (ADLs) and they needed support in their daily life were family instrumental activities of daily living (IADLs) are members, especially the spouse (over 80 percent very common (see Box 7.1). The Vietnam Aging of husbands were cared for by their wives, and Survey 2011 (VNAS 2011) found that more than nearly 30 percent of wives were cared for by their two-thirds of older persons experienced at least husbands) and female family members (Giang one mobility difficulty. Moreover, nearly 38 percent In Vietnamese society, filial piety manifests through co- 142  of older persons experienced at least one difficulty residency, strong family structures, close contacts and proximity to extended family, and family financial support The average number of years lived with disability (YLD) 141  and care for parents (Nguyen and Nguyen 2010). It is also is the difference between life expectancy and healthy life consistent with studies on aged care in Taiwan (Nguyen expectancy (HALE). and Nguyen 2010, citing Wang 2010). 188 VIETNAM: ADAPTING TO AN AGING SOCIETY 2012). More recent smaller studies suggest that proximity to elderly parents, which means that things have not changed considerably since then adult children are less likely to be well-informed (Figure 7.1). about the wellbeing and care needs of their elderly parents. The share of elderly who live together This traditional informal family-based with their children or grandchildren has steadily (familial) care model is increasingly strained by decreased from more than 80 percent in 1993, to urbanization, migration, demography, and other about 70 percent in 2008, to almost 60 percent in economic and social factors. Changes in living 2016 (Phong and Nam 2019 and Chapter 2). Global arrangements have led to declining rates of co- evidence from developing countries finds both residence, owing to a number of factors including declining co-residence as countries get richer and urbanization, migration of children for work, lower co-residence among richer elderly across declining fertility, the transition from nuclear to countries. The median co-residence (in a sample extended families, and shrinking family size. The of 61 developing countries in the mid-2000s) was average household size fell from 4.8 in 1989 to 3.6 over 83 percent for people age 60 and above in in 2016 (GSO 2016). All these factors reduce the the poorest quintile but fell to 64 percent for the likelihood that adult children live with or in close richest quintile (Evans and Palacios 2015). Figure 7.1. Vietnam: Main Caregivers of the Elderly by Age Group and Gender, 2018 100 99 98 97 Community-based 96 Other relatives 95 Family members 94 93 92 91 90 Total 60-69 70-79 80+ Male Female Source: MCG Management Consulting (2019) In addition to the familial model coming under and/or reconciling care and paid work. Multiple strain, such care provision has large private examples from OECD countries demonstrate costs which are borne mainly by women. Across how improvements in the affordability of formal cultures, in the absence of formal elderly care, elderly care contribute to women’s empowerment women in a family are more likely to be compelled by increasing their choices for market work and or coerced to provide family care. Across the leisure. Research has also found that the need to OECD, more than one in ten adults over age 50 provide long-term care to elderly parents carries a provides (usually unpaid) help with personal care high and potentially increasing opportunity cost for to people with functional limitations. Close to two- those planning to migrate (see Giles and Mu 2007). thirds of such caregivers are women (OECD 2011). Across the OECD, as well, high-intensity caregiving Since many family caregivers are of working age, without support is associated with a reduction in this poses daunting prospects of forgoing income labor supply for paid work (OECD 2011). Providing VIETNAM: ADAPTING TO AN AGING SOCIETY 189 formal elder care options could thus help promote, Public policies should not discourage the or at the very least not hamper, the labor market intergenerational social contract but rather participation of adult caregivers. provide a choice to families so they can decide whether to supply elderly care within the family If elderly care is not widely available, public and or buy it in the market. The provision of care by private costs are also incurred through increased family members is a feature of an intergenerational expenditures on medical/health care. Another social contract deeply rooted in cultural values, compelling economic argument for setting up a and public policies should not discourage it. What formal elderly LTC system is that savings could public policies should do is provide a choice so accrue from lower public and private expenditures families can decide whether elderly care will be on medical care, thanks to substitution of costly supplied within the family or whether they will seek medical care with less expensive social care. LTC to buy it in the market. For this, it is necessary to could also reduce injuries and thereby lower in- develop the elderly care market that is currently patient and out-patient admissions and hospital “missing” and strengthen government stewardship, stays, which can be substantial. In 1999, medical including financing models, to help attract quality costs for those over age 75 accounted for 30 private resources to the sector. When markets for percent of the total medical budget of Vietnam.143 elderly care do exist, they are characterized by The medical costs of treating caregivers could moral hazard and asymmetric information, in ways also be saved—across the OECD, high-intensity very similar to health care markets. Government caregiving without support is associated with a involvement in elderly care is therefore necessary, 20 percent higher prevalence of mental health primarily in the form of stewardship, including problems among family caregivers compared to subsidies to qualified recipients. The actual non-caregivers (OECD 2011). provision of care can be done by a combination of the private formal and “semi-formal” sectors as Access to elderly care is part of the social well as by family members. contract in virtually all societies. There are also non-economic, equity and social considerations Families with frail elderly will be weighing the for developing formal elderly care systems, costs of providing informal care, taking into including the need to support indigent poor elderly, account both the direct monetary cost of hiring help the elderly age with dignity, and enforce the care at home or placing elderly into a facility and social contract. Governments channel public the opportunity costs of migration and work. financing to LTC not only to relieve family members In OECD economies, formal private and public of informal care work to participate in the labor arrangements for provision of LTC emerged in market but also because long-term care services the middle of the 20th century with a shift in living are not affordable for the vast majority of elderly arrangements and an increase in female labor people in need of care, including indigent poor force participation. Having the choice and ability elderly. Considerations of being in need of care are to purchase care in the market is desirable and a critically important part of the social contract, conducive to the well-being of both care recipients because the availability of elderly care enhances and family caregivers. The government needs to the opportunities of the elderly to live with dignity. guide and foster the development of a system of Universally, societies direct public resources to formal care provision that offers meaningful and help those who do not have the ability to live affordable services to families. Vietnam’s system independently, including the ability to perform needs to keep pace with ongoing changes in activities such as bathing, dressing, self-feeding, demographic and co-residence patterns. attending to personal hygiene, and toileting. 143 Nguyen and Nguyen (2010), citing Nguyen (2009). 190 VIETNAM: ADAPTING TO AN AGING SOCIETY This chapter examines the elderly care system 7.2. Vietnam: Legislation and in Vietnam and proposes ways to strengthen institutional structures governing and the system to help meet the country’s needs supporting elderly care144 going forward. The chapter first describes the current status and landscape of Vietnam’s elderly 7.2.1. Constitution, Legislation, and Policies care system, including legislation and policies that govern the sector, institutional structures, Vietnam’s Constitution, starting from 1946 to coverage, and financing of elderly care services. the most recent amendment in 2013, recognizes It then presents good international practice the need for assistance to the elderly who have guiding principles for building a comprehensive, no support. While the 1946 Constitution first efficient, and sustainable system of elderly care, articulated this, amendments in 1980 recognized and provides some policy options for Vietnam, the explicit need for state support for those without including how to build a market for elderly care and family. The latest revisions in 2013 affirm the need the role played by the state in doing so. for the state to create equal opportunity and adopt supportive policies (Table 7.1). Table 7.1. Constitutional Provisions on the Rights of Older Persons in Vietnam Year Constitutional Provision 1946 Aged or disabled citizens who cannot work shall get support (Article 14). Older persons without family support and people with disabilities shall be supported by the state and 1980 the society (Article 74). Children and grandchildren have the duty to respect and look after their parents and grandparents (Article 64). 1992 Older persons without family support, people with disabilities, and orphans shall be supported by the State and the society (Article 67). The State shall create equal opportunities for citizens to enjoy social welfare, develop the social 2013 security system, and adopt policies to support older persons, people with disabilities, the poor, and other disadvantaged people (Article 59). Source: Phong and Nam (2019), citing Ministry of Health of Vietnam and Health Partnership Group (2016) and MOH & HPG (2017). The primary responsibility for welfare of the It mandates that those over age 80 will receive a elderly rests with their family and is codified in monthly allowance from the Vietnamese Social the law, with the government role being mainly Insurance fund, and disadvantaged individuals age to support vulnerable and disadvantaged elderly. 60 and over will receive special treatment from a The 2009 Law on the Elderly provides general policy social welfare fund. It also directs the government direction on various matters but also specifically to give budget priority to medical examination and states that primary responsibility rests with the treatment of aged people, see Nguyen and Nguyen family. Only the vulnerable and disadvantaged (2010), citing Vietnamese Parliament online elderly without family support are permitted to live 2009.144 in a government-operated and financed facility or alternatively choose to receive a monthly social At the same time, the law encourages allowance if someone in the community volunteers development of the market by setting parameters to care for them. The law also stipulates that for development of the private sector. The law all Vietnamese age 60 and above should be 144 This section draws extensively from JAHR (2016), provided with special treatment and health care. unless otherwise specified. VIETNAM: ADAPTING TO AN AGING SOCIETY 191 encourages organizations and individuals to invest “ensure full cost or no full cost fees in prices and in elderly care facilities and provides preferential charges, supported by the state budget.” They investment policies to encourage it. The 11th also recommend creating conditions to establish Central Executive Committee on social policy an equal and competitive operating environment, issues for the period 2012-2020 emphasizes the for organizations and individuals of all economic need to develop community-based models of care sectors to participate in the provision of public and encourages participation of the private sector non-business services.145 Under the “Socialization in implementing (especially residential models policy” social enterprises can receive preferential of) elderly care. Various decrees following the treatment in land allocation, taxes, and loans. This “Socialization policy” (Box 7.2), a regulation of policy has been applied to provision of education “revenue-generated public service entities” and and health services (among other services), but incentive policies for private sector involvement not to the provision of elderly care, so up to date have also been issued. They stipulate that services it is not clear whether private social protection provided by such units can be determined by centers can register as social enterprises and to the “market mechanism” in such a way as to receive preferential treatment (MCG 2019). Box 7.2. “Socialization” in Vietnam: Policy and Practice for the Provision of and Payment for Essential Public Services “Socialization in the Vietnamese context is best understood as a range of formal and informal policies and practices that have evolved around the provision and payment for and governance of essential services and whose ostensible aim has been to improve the coverage, quality, and efficiency of services.” Vietnam introduced the socialization policy in the 1980s, when the Government was significantly under-resourced to respond adequately to the acute levels of poverty and meet its commitment to universal provision of services. The lack of resources challenged the coverage and quality of public services, prompting the Government to mobilize resources from multiple sources including the private sector, families, individuals, and social organizations. The idea was to share the financial burden with the government and gain an initial footing in financing public services before a more sustainable resource base could be found. “Emanating from the ideals of social solidarity, mutual aid and collectivism, ‘socialization’ entails assumptions over idealized roles and responsibilities of the state and ‘society’ in the provision and payment for services.” The Government continued to sustain and deepen its socialization policy through new decrees, including those for specific sectors (Resolution No 05/2005/NQ-CP, Decree No 69/2008/ND-CP, Decree No 59/2014/NĐ-CP, Decree 10/2002/CP-N, Decree 43/2006/ND-CP). Source: UN SP JPG (2015). In the last decade, several policies/action plans important role played by the health sector in active to guide implementation of the laws related to aging.145The Project has undertaken to deliver the rights of older persons have been issued in healthcare to all older persons who are unable to Vietnam (summarized in Annex X.1). Vietnam’s take care of themselves by 2025. In order to do National Action Program for the Elderly for the so, the project proposes to, among other things, period 2012-2020 sought to raise the quality of care strengthen behavior change communication and for older people, develop the social mobilization raise awareness through a “health care for older of care activities, and enhance the roles of older 145 “Public non-business services” are those with high persons in accordance with their potential and level socialization conditions (see Box 7.2). Decree 141/2016/ of socio-economic development. The Health Care ND-CP. https://m.thuvienphapluat.vn/van-ban/bo-may- hanh-chinh/Nghi-dinh-141-2016-ND-CP-co-che-tu-chu-don- for the Elderly Project (2017-2025), promulgated vi-su-nghiep-cong-lap-linh-vuc-su-nghiep-kinh-te-325310. by the Minister of Health, recognizes the aspx (translated using google translate) 192 VIETNAM: ADAPTING TO AN AGING SOCIETY persons” campaign, reinforce and complete the hospitals to CHSs for continued treatment of primary health care and curative care delivery patients with chronic diseases who have achieved system for older persons, initiate and develop LTC a stable treatment regime at a higher-level facility. models for older persons, and promote human Fifth, legal documents do not provide a clear resources in elderly health care provision. definition of “unable to live in the community,” which is one of the criteria for priority admission JARH (2016) report that providers face policies to public and charitable social protection centers, and regulations, which are sometimes not see JAHR 2016. workable or consistent. For example, the Ministry of Planning and Investment regulations on 7.2.2. Institutions/Administrative Roles and conditions for business registration have not yet Responsibilities added the condition of a license required to provide care services to older persons, as stipulated in At the national level, the Social Protection legal documents under the Law on the Elderly. As a Department within the Ministry of Labor, result, many care settings that provide residential Invalids and Social Affairs (MOLISA) has prime care for older persons have completed their responsibility for matters relating to older persons, business registration and begun operations but do including drafting LTC and other related policies. not have a license for provision of care services It is also responsible for regulating professional for older persons. MCG (2019) identifies the need standards for service provision and training of for more consistent regulations for businesses caregivers, as well as regulations and standards providing healthcare to the elderly across different for residential facilities for older persons. In sets of laws (Law on Enterprises and Law on the addition to building competency standards for Elderly). staff working in social protection facilities (see below),146 MOLISA is responsible for supporting There are still areas where regulations/guidelines/ activities of the Association of Social Protection legal documents are absent. First, one area is Establishment Directors, which is responsible for home-based health services, including the gamut examining, inspecting, and resolving complaints of professional, service, and hygiene standards. related to the operation of social protection The existing Law on Medical Examination and establishments and submitting reports to the Treatment does not provide a legal basis for Government/MOLISA. MOLISA also stipulates the setting up private home-based healthcare services order, procedures, and dossiers for admission of to provide the range of medical services needed by older persons to social protection centers. the elderly at home. The Law only permits basic home health services or home-based care to be At the sub-national level, the Provincial Department provided by family doctors but fails to provide of Labor, Invalids and Social Affairs (DOLISA) a concrete list of approved scope of services to is responsible for implementation of national meet the comprehensive medical needs of older policies, including guiding and implementing the patients. Second, technical guidance is lacking for Vietnam National Action Plan and other relevant facilities providing daycare services for the elderly social protection projects/programs, aggregating who are able to care for themselves but just need data and quantifying the number of older persons to support in certain aspects of their lives or who be provided with social assistance, and organizing are suffering from mild dementia and cannot be the development of the network of social protection left alone (e.g., people with Alzheimer’s disease). establishments for older persons. The evaluation Third, there are no MOH policy documents guiding 146  Social protection center is the general term used in the functions, tasks, and organizational structure Vietnamese legislation to refer to residential long-term care facilities for older people, disabled people, orphans, of the geriatric departments, making it difficult and other groups, in the public, private charity, and private for health facilities to organize and run a geriatric business sectors. Some policy documents use the department that meets the needs of elderly. Fourth, term social assistance facilities, which includes social protection establishments (residential) as well as social another area is downward referral of patients from work centers (non-residential). VIETNAM: ADAPTING TO AN AGING SOCIETY 193 of applications for setting up social protection proposals for solutions, and directing related establishments and granting of licenses to non- organizations to provide care for older persons. public care settings for care of older persons is also the responsibility of DOLISA or District Labor, Vietnam has non-government/social organizations Invalids and Social Affairs Divisions, depending involved in developing and implementing LTC on the type of establishment to be established. At for older persons on a small, largely localized, the district level, District Labor, Invalids and Social scale. The Vietnam Association of the Elderly Affairs Divisions have the functions of guiding and (VAE) was set up in 1995 as a social organization examining the implementation of social protection- representing the aspirations, rights, and legal related regulations. interests of Vietnamese older people. The VAE is established on a voluntary basis, with a network The Ministry of Health (MOH) is the nodal agency in all provinces, districts, and communes/wards. responsible for health-related matters including The VAE has participated in various activities such delivering health care to older people, guiding and as development of policies, implementation of organizing health care provision for older persons social security, establishment and development of at health facilities and in the community, as well different types of clubs, and providing healthcare as guiding the management of chronic diseases. and healthcare insurance, all for older persons In the field of LTC, MOH is also responsible for (Nguyen and Nguyen 2010). The VAE has also providing the license to operate as a family doctor collaborated with other NGOs, including the Red clinic to an enterprise providing home-based Cross Society and Help Age, to experiment in medical services to older persons. In addition to developing care models for older persons. Some granting operating licenses, MOH is assigned to religious associations also engage in organizing guide the prevention of disease, provision of health charity activities and establishing social protection care, medical examination and treatment, and establishments to take care of older persons. rehabilitation for people living in social protection establishments. MOH is also responsible for The Current Landscape 7.3. of providing guidance on medical care, physical Provision and Financing therapy, and rehabilitation for people with disabilities and mental health problems in social The Vietnam System of Health Accounts (SHA) protection establishments. MOH is additionally classifies LTC as comprising long-term health responsible for granting practice certificates to care and long-term social care. The health health workers in establishments that provide component of LTC relates to health and nursing medical care for older persons. care for patients who need assistance on a continuing basis due to chronic impairments and The Ministry of Culture, Sports and tourism a reduced degree of independence. Long-term has an important role in helping older persons health care normally includes palliative care and access sports, cultural, performance, and tourism long-term nursing care. The social component of activities. LTC includes personal care services (assistance with ADL and IADL restrictions) and services in Another important institution at the national support of informal (family) care. level is the Vietnam National Committee on Aging (VNCA). Set up in 2004, VNCA is a multi- As described in the introductory section, most sectoral organization tasked with assisting the of LTC in Vietnam has been provided by family Prime Minister to direct and coordinate ministries, members/relatives. The small formal care sectors, mass organizations, and localities in provision that exists relies predominantly on dealing with issues relating to older people. In each home/community-based care and to a very limited province and district, a local working group on extent on residential care (Figure 7.2), as described elderly affairs is responsible for studying, making in detail below. 194 VIETNAM: ADAPTING TO AN AGING SOCIETY Figure 7.2. Vietnam: The Landscape of Elderly Care Provision Long-term care in the community Institutional LTC ISHCs Public Charity Social work Advice and social social Lower Volun- protection protection cost, teer service support for CHS center, elder care center center subsidized care- givers social model workers VHW High cost Private family Private eldercare Paid caregivers facility (enterprise) doctor, home health in the home care services Notes: Social protection establishments (centers) are residential long-term care facilities for older people, disabled people, orphans, and other groups. These could be run by public, private-charity, and private-business sectors. Social work centers are non-residential day centers that provide assistance during the day. The term “social assistance facilities” usually refers to social protection establishments (residential) as well as social work centers (non-residential). Source: Ministry of Health of Vietnam and Health Partnership Group (2016). MOLISA (2019) reports that, in total, Vietnam has Population and Family Planning in MOH, is the 418 social protection establishments, including largest provider of home and community services. 165 public and 223 non-public (private-charity Under this project, the physical and spiritual health and private-business) social assistance facilities. of older persons is supported through various This network caters to 42,000 social protection activities carried out by a network of volunteers beneficiaries. “Social protection beneficiaries” in the community. One set of activities focuses is a legal term in Vietnam, referring to older on training older persons living with their family persons from poor households, without any close who are still able to take care of their own health family members to care for them, unable to live but lack knowledge on how to do so, while others in the community, older persons with very severe are for the benefit of family members of older disabilities, and other disadvantaged categories, people. Services are provided by healthy older including orphans, widows. Among these social persons who have been provided with training protection beneficiaries receiving care from social and knowledge of health care for older persons. assistance facilities 10,000 were elderly. Around Other activities include providing home-based 2,000 elderly receive care at the residential public counseling and care, forming health care clubs social protection centers. for older people, undertaking social visits for companionship and encouragement, updating 7.3.1. Formal Provision of Elderly Care and recording information, and monitoring and Services reporting on health services for the elderly provided by local health service staff. Services are provided Home and community-based elderly care147 free of charge, and priority is given to those with minimal family support (beneficiaries are older The project for health care of older persons for persons living with their family, having difficulties the period 2017 – 2025 (7618/QD-BYT in 2016), in mobility, or bedridden and unable to hire home- run and coordinated by the General Office of based healthcare service providers). By 2016, the 147  This section draws extensively from JAHR (2016), unless model of counseling and care supported through otherwise specified. VIETNAM: ADAPTING TO AN AGING SOCIETY 195 activities of the volunteer network in the community Initial evaluations of ISHC suggest their had been implemented in 370 communes across positive impact on the health, social, and 32 provinces, see Ministry of Health of Vietnam economic participation of the elderly. A UNFPA and Health Partnership Group 2016. evaluation found that 84.58 percent of ISHC members surveyed reported improvements Home- and community-based care is also in their health (Ministry of Health of Vietnam provided through the Intergenerational Self-Help and Health Partnership Group 2016). An ISMS Club (ISHC). The Government is encouraging (2014) evaluation found: (i) improved economic the development of ISHC and started channeling conditions of club members and their families— public resources into their operations. ISHCs were among ISHC members supported with loans, initially started in 2006 with technical support from 75.6 percent reported an increase in income of HelpAge International and financing from various 30 percent or more; (ii) strengthened community international organizations (see Box 7.3). They support activities—over 90 percent participated in were gradually rolled out by the Commune People’s community activities within the past 12 months, Committees and managed/supported by a mass and the average participation in arts and cultural organization, usually the VAE or Women’s Union. activities of older persons in the intervention The MOH collaborates with ISHCs by providing group was double that of the control group; and annual health checkups and other health-related (iii) increased access to health services—periodic technical support to members. health examination at least one time in the past year in the intervention group was double that of the By the end of 2016, Vietnam had 1,056 clubs control group. Assessing the evaluation Ministry operating in 18 provinces with more than 55,000 of Health of Vietnam and Health Partnership elderly members (see Ministry of Health of Group (2016) recommended better links with local Vietnam and Health Partnership Group 2016). The authorities (especially the social protection and geographic spread of operationalization seems health sectors) to provide technical assistance consistent with the aging index and the distribution and financial support to paid care assistants in of the elderly population for Hanoi, Thanh Hoa, and delivering health care to older persons. They also adjoining areas, MOLISA (2019). At the same time, noted that the quality and academic rigor of future the other parts of the country, including notably evaluations need to be strengthened. Ministry of south and central Vietnam, seem to have less Health of Vietnam and Health Partnership Group coverage of ISHC. (2016) also pointed out that funding for ISHCs’ operations remains in question. 196 VIETNAM: ADAPTING TO AN AGING SOCIETY Box 7.3. Intergenerational Self-Help Club (ISHC) ISHC is a self-help organization with community-based intergenerational members who aim to care for and promote the role of older persons in the community. The ISHC movement in Vietnam was initially started in 2006 with technical support from HelpAge International and financed by various international organizations (e.g., HelpAge, EU, KOICA, UNFPA, Atlantic Philanthropies, Lottery UK) and then continued with Government support. Each club has five board members and about 50-70 members, with at least five volunteers trained to provide basic care for older persons. Among the 50-70 members, about 70 percent are older persons aged 55 years and older, 70 percent are women, and 70 percent are poor/near poor/with difficult circumstances. Volunteers deliver free-of-charge home-based care/assistance at least twice a week to older persons they support. These activities prioritize disadvantaged older persons with disabilities or illnesses and people without family caregivers. The jobs of volunteers include companionship, providing information, doing housework (cleaning up the house, gardening, washing the dishes, doing laundry, cooking), buying things in the market, helping older persons get dressed, or taking them out for a walk and depending on the status of the person being cared for, the clubs may send one or more volunteers to help. Some capable volunteers also help older persons in personal hygiene, simple exercises, and monitoring of weight and blood pressure. For needs beyond their abilities, the volunteers will report to the Club Management Board for further assistance. The clubs also facilitate access to health insurance and collaborate with health facilities to provide health check- ups for members twice a year. Some clubs are piloting the provision of home-based medical care services (e.g., guiding older persons to practice rehabilitation exercises and Tai Chi, monitoring of blood pressure, blood glucose, medication compliance). Some clubs have paid care assistants, who are usually retired health workers, funded by HelpAge International. In addition to personal care, ISHCs also aim to provide comprehensive support to older persons in the fields of income generation/livelihood, social and cultural activities, and lifelong learning. Source: Authors, based on Ministry of Health of Vietnam and Health Partnership Group (2016) Some important services for elderly who are communication activities to raise awareness. “social assistance beneficiaries” are provided in However, these services are focused on social the district social work centers by social workers assistance beneficiaries and long-term personal as well as social workers in health facilities care such as support for personal hygiene or and in the communes. Social workers who are eating/drinking is not provided. Thus, while social professionally trained, work in communes/ workers play an important role in the coordination wards, districts, and health facilities, in addition of care, they do not provide assistance for daily to district social work centers. Their work related personal care. 148 to older persons includes counseling, therapy for psychological crisis, physical rehabilitation and counseling, and search for and arrangement In addition, commune health staff (CHS) and village 148  of other care (e.g., through ISHCs). Social work health workers (VHW) provide primary health care (PHC) services for older persons. CHS tasks related to older centers also develop intervention and assistance persons include monitoring and prevention of NCDs, plans for older persons; take measures to prevent medical examination and treatment, and rehabilitation in older persons from falling into disadvantaged accordance with the authorized level of technical service delivery and scope of professional activities, (Circular No. circumstances, abuse, violence, or maltreatment; 33/2015/TT-BYT). VHWs are PHC service providers and and manage users of social work services. their services include community-based health education and communication; detection, surveillance, and reporting Their activities include developing community of NCDs; participation in the implementation of community support programs, establishing a network of health promotion campaigns; care for local patients of some common diseases; and provision of healthcare social workers and social volunteers, mobilizing guidance for older persons and people with disabilities, resources to assist older persons, and organizing social diseases, or NCDs at their residence (Circular No. 07/2013/TTBYT). VIETNAM: ADAPTING TO AN AGING SOCIETY 197 The high-end segment of the formal home-based estimate the total number of existing facilities elderly care market is developing rapidly with the because some social protection establishments provision of home-based health and social care for older persons are regulated by the Planning and services, available to those living in the larger Investment department through issuing a business cities. Some private organizations/businesses license, while others (i.e. those set up by religious provide home-based (predominantly medical/ organizations) are not. Therefore, no single agency health) care services in the larger cities, paid has a complete roster of non-public residential for out of pocket by those who can afford them. elderly care establishments. Examples include Vina Healthcare Center and Phuoc Thinh Service and Healthcare in Ho Chi Public and charitable residential centers prioritize Minh City (HCMC) and Vietnam-Australia Family the admission of (and pay for) social protection Health Services and Home Care, Medicviet Family beneficiaries, i.e. older persons from poor Doctor Center, Orihome Elderly Care Center, and households, those without any close family family doctor services of the Medlatec company members to care for them, those unable to live in in Hanoi. The service providers include physicians, the community, or older persons with very severe nurses, rehabilitation technicians, and staff trained disabilities. In addition, Decree No. 68/2008/ND- in the care for older persons. Similarly, a number CP allows people who are not social protection of private companies train and dispatch domestic beneficiaries but who are unable to live in the workers who also work as caregivers for older family and wish to live in centers to pay or have persons in the bigger cities. Examples include relatives/sponsors pay for their stay in such Phuong Nam Investment Development Ltd. and centers. At these centers, residential care services Nhan Ai Ltd. These domestic care workers often do include assessment of the initial state and needs of not have a medical degree but are trained in skills older persons, healthcare, physical rehabilitation, to provide basic care for older persons, including training of daily life skills, organization of cultural, support for ADLs and housework. Some such recreational and entertainment activities, and providers (Truong Son Youth Volunteer Vocational rehabilitation. Training Center, Tam Duc Ltd., and Hong Doan Non-public centers receive funding from charitable Domestic Workers Center) also provide training contributions, and fees paid by older persons’ to caregivers/family members, in addition to families, as well as from the state budget, if they providing domestic care workers for older persons have older persons who meet the criteria social (MCG 2019). protection beneficiaries. For older persons eligible Residential Care for admission, if they are cared for in non-public establishments (charity or enterprises), these Vietnam has three types of facilities: public, non-public centers will enjoy the same assistance private- charity, and private-businesses, the last of payments for their care as public ones (more on which are developing rapidly (see below). Ministry this below). Other operational expenditures may be of Health of Vietnam and Health Partnership Group covered by contributions from charities (e.g., from (2016) and MOLISA (2019) estimated that in 2017 businesses [e.g., VinGroup], religious organizations, Vietnam had about 50 public residential facilities Red Cross Society or other organizations), or for older persons nationwide, over 60 facilities families of older persons (this is the case in most run by charities (“non-public” small-scale social enterprise-type facilities), see Ministry of Health of organizations or religious organizations), and about Vietnam and Health Partnership Group (2016). 50 registered private facilities. Anecdotal evidence suggests that there are some private elder care Private providers of residential services are facilities which are not on the official list compiled mostly present in Hanoi and the provinces in its by the MOLISA Social Protection Department and vicinity and operate at the high end of the market. operate as “unlicensed” facilities. It is difficult to MCG (2019) reports that, roughly, about half of all 198 VIETNAM: ADAPTING TO AN AGING SOCIETY private residential facilities provide residential care to receive care while their family members are only, while the other half provide a fuller range of working. These services are provided largely by services including residential care, home-based nursing homes and are emerging in Hanoi, HCMC, care, day care, hour care, and other services such and some other big cities. They include Lotus as intensive medical care. Private residential Japan Nursing home in Binh Duong; Binh My in facilities also operate day care centers where older HCMC; OriHome, Thien Duc, Tuyet Thai, and Javi- persons are transported to various establishments Link in Hanoi (see Box 7.4) Box 7.4. Private Nursing Home Models in Vietnam and Japan Thien Duc Aged Care Centre is a private nursing home which opened in 2001 and is now in three locations with a combined area of 5.5 hectares in the suburbs of Hanoi. The company plans to expand further around Hanoi, Vung Tau, Da Nang, and Ho Chi Minh City with small facilities, each housing 20 to 30 seniors. It is currently taking care of 352 seniors, using Japanese expertise and rehabilitation programs. Lotus Japan Nursing home is a private nursing home and it was set up by Japanese conglomerate Tokyu Corp. in 2017 in Binh Duong province, southern Vietnam. The 2,321-square meter site is home to 25 senior residents and 13 nursing staff earning an average of VND 15 million a month (USD 642). Source: NNA Business News, 2019/5/16 “ Vietnam facing nursing home shortage amid slow government support,” https://www.nna.jp/english_contents/news/show/20190516_0006 With respect to residential facilities, private Planning and Investment is authorized to grant enterprises operating in the field of care for business licenses to enterprises engaged in the older persons must meet the same criteria as care of older persons (e.g., nursing homes or public establishments (Decree No.06/2011/ND- enterprises providing home-based caregivers CP). Chairpersons of local People’s Committees for older persons) (Enterprise Law and Decree (provincial and district levels) are responsible No.78/2015/ND-CP). However, before being for making decisions about the establishment of allowed to operate, the establishment must non-public establishments operating within the have additional licenses depending on the field province and public district-level social protection of business registration (Figure 7.3), Ministry of establishments (Decrees No.68/2008/ND-CP and Health of Vietnam and Health Partnership Group No.81/2012/ND-CP). The Business Registration (2016). Division under the Provincial Department of VIETNAM: ADAPTING TO AN AGING SOCIETY 199 Figure 7.3. Vietnam: Mechanism for Establishment of Residential Elderly Care Facilities (Public, Private Enterprise, Charity) MOLISA Red Cross; Religious Business owners/ MOH organiszations investors Develop standards Develop project Develop project Develop policy, Provincial planning standards DOLISA, district DOLISA, district and investment o ce labor o ce labor o ce Bussiness license License for Appraisal operating elder care DOH facility DOLISA, district labor o ce License for Professional Provincial people’s medical care certi cation Provincial or district facility committee License for people’s committee operating Decision for eldercare establishment Decision for Health facility establishment workers Public social Non-public (charity) Private (enterprise) employed Eldercare centers protection center social protection social protection in eldercare also providing center center facilities medical care services Source: Ministry of Health of Vietnam and Health Partnership Group (2016). 7.3.2. Current financing and costs provided to older persons who are social protection beneficiaries are covered by the state budget. It Currently, public financing for care is available also covers the costs of construction and initial only for social protection beneficiaries. For such procurement of equipment for Social Work Service persons, the state will pay the costs for screening Centers.149 Older persons who are eligible for and admitting them; assessing their needs for mid- admission to social protection establishments, if term or long-term care; providing health checkup they are cared for in non-public establishments and PHC; developing care plans; organizing the (charity or enterprises), these non-public centers implementation of care plans; providing shelters, will receive the same amount of assistance food, clothes and other necessities for living; payments for their care as public ones. managing beneficiaries; providing rehabilitation; organizing cultural, recreational and entertainment In addition, the government also provides 405,000 activities; and delivering healthcare. For those VND for individuals voluntarily accepting role of living in a residential facility, the government community primary caregiver for older persons provides the facility a monthly amount of without family support, in a poor household, 1,080,000 VND per beneficiary, in conformity with unable to care for themselves, and 270,000 VND to the prevailing cost norm for care and nourishment family caregivers of older persons with extremely (Decree No. 136/2013/ND-CP). This cost norm for In addition to support from the state budget, they 149  care and nourishment is considered low compared also have other sources of revenue such as contracts to the needs, and public social protection centers to provide services for domestic and international typically rely on additional financial support programs/projects, voluntary contributions from older persons, and support from local and foreign from communities. Finally, social work services organizations and individuals. 200 VIETNAM: ADAPTING TO AN AGING SOCIETY severe disabilities (Ministry of Health of Vietnam month for basic services (e.g., furnished bedroom, and Health Partnership Group 2016). shared living room, laundry, diet, daily acupressure massage, personal hygiene, daily health monitoring, For those who are not social protection physical activity). Additional services such as tube beneficiaries, the primary source of funding LTC feeding, endotracheal intubation, care of bedsores, is private OOP payments by those using care bladder catheterization, and rehabilitation incur services. The share of OOP spending for LTC costs additional costs of 5-8 million VND/month. In is even higher, as health insurance does not cover short, assuming care costs to be about VND 5.5 non-medical services and long-term social care, million/month, only those in the fifth quintile and and there is no LTC insurance in Vietnam.150 Around higher could possibly afford to pay. This is probably 90 percent of most residents’ nursing home costs why the occupancy rate for private business LTC are covered by their children, and the remaining 10 facilities is about 60-70 percent (MCG 2019). percent are paid for with retirement savings.151 Frail elderly who use private LTC are also The overall costs of formal social care—whether at facing considerable medical costs. MCG (2019) home, community, or in residential facilities—are estimates that the three main cities of Hanoi, considerable. MCG (2019) reports that the average Danang, and HCMC the expected annual costs for price for home-based (nursing and personal) care the elderly (inpatient and outpatient) are around services for the elderly is approximately 7 million VND 190 million. Home-based health care for the VND/month (8 hours/day for 30 days/month) and elderly is provided by family doctor clinics and higher for 24-hour care. (See Figure 7.4) Nursing CHSs152 but is seldom delivered. Private businesses homes can be either charities (0-3.5 mil VND/ providing home-based health care for the elderly month) or commercial (6.5-15 mil VND/month), are beginning to be developed in large cities, but the majority of which charge 8.0 mil VND and MCG (2019) reports that only for families who can above, depending on the degree to which the older afford this service. person can take care of himself/herself. In general, the prices range from 6 million to 13 million VND/ 150 MCG (2019). https://www.nna.jp/english_contents/news/ 151  show/20190516_0006. Vietnam facing nursing home shortage amid slow government support, NNA Business Only the elderly with no family are entitled to home-based 152  News, 2019/5/16 medical care by CHS staff. VIETNAM: ADAPTING TO AN AGING SOCIETY 201 Figure 7.4. Vietnam: Price for Residential Long-term Care 16 Price per month (in Mil. VND) JAPAN LOTUS Bình Mỹ Nursing 15 NURSING HOME home 14 CENTER 13 12 Javi link Hàm Nghi Centre 11 Thiên Đức Nursing 10 home 9 Orihome 8 7 Diên Hồng Nursing 6 home 5 4 Thị Nghè Nursing Thanh Loc Sponsoring 3 home - Caring Center for 2 Elderly & Disable 1 0 0 50 100 150 200 250 300 350 400 450 Capaccity (# of beds) Source: MCG (2019) based on data collected from 26 top-ranked nursing homes in 6 provinces Figure 7.5. Vietnam: Average Health Costs Paid by Elderly, by Health Insurance Coverage, 2014 Outpatient care costs Inpatient care costs 2 12 Million VND Million VND 10 1.5 8 1 6 4 0.5 2 0 0 60 - 69 years 70 - 79 years 80 years and older 60 - 69 years 70 - 79 years 80 years and older Insured Uninsured Insured Uninsured Source: Ministry of Health of Vietnam and Health Partnership Group (2016) Financing for health care for the elderly comes percent of GDP, Vietnam’s health financing system from several sources: the state budget, health still relies predominantly on out-of-pocket (OOP) insurance fund, out-of-pocket funds, and non- payments as discussed in Chapter 6. In 2018, OOP profit institutions serving households. Despite spending on health was about 43 percent of total the expansion of health insurance coverage (from health spending.154 In 2017, 3 percent of the elderly 13 percent in 2000 to 87 percent in 2017) and the increase in public spending on health153 to 6.1 The share of out-of-pocket expenditure on financing health 154  care was 66 percent in 2000, declining to 48.8 percent in Health spending has increased significantly over the past 153  2012, see World Bank 2019 “The Future of Health Financing 15 years (from 2000 to 2015, public spending on health in Vietnam” http://documents1.worldbank.org/curated/ increased from 12 to 109 trillion VND in nominal terms, en/222831563548465796/pdf/The-Future-of-Health- or almost threefold in per capita, inflation-adjusted terms. Financing-in-Vietnam-Ensuring-Sufficiency-Efficiency-and- World Bank (2018). Health Financing Study. Sustainability.pdf. 202 VIETNAM: ADAPTING TO AN AGING SOCIETY undergoing inpatient treatment were not covered 7.3.3. The Elderly Care Workforce by health insurance, and 16 percent of the elderly undergoing outpatient treatment were not covered In Vietnam, the elderly care workforce comprises by health insurance.155 (See Figure 7.5) family, volunteer and caregivers. As mentioned earlier, the majority of care is provided informally by Private businesses report that investing in elderly family, who form the main elderly care workforce. care provision entails high costs and high risks. Vietnam also has volunteer caregivers who provide They also report that the return on investment home and community-based care. The formal could take 7-15 years, depending on the size of (paid) professional elderly care workforce includes the business, which is not much of an attraction (paid) caregivers, social workers, collaborators, for Vietnamese investors, who still view death as well as health workers (e.g., nurses, VHWs, as bringing bad fortune. Companies are calling therapists), (Figure 7.6). for government subsidies in land leasing and the creation of health insurance for seniors.156 Figure 7.6. Vietnam: Elderly Care Workforce, Paid vs Unpaid, and Formal vs Informal155156 Assist older persons to implement: IADLs and ADLs Health care psycho-social support Doctor, physical therapist, occupational therapist Professionals Social workers Nurses (secondary and higher) Paid caregivers of older persons with secondary or junior college quali cations Paid caregivers of older persons with short-term training (2-12 month) VHWs Community volunteers Volunteers who care for older persons in their own home Laypeople People with responsibility to care for older persons (children, grandchildren) - The main workforce for LTC of older persons Source: Ministry of Health of Vietnam and Health Partnership Group (2016), and MOH and HPG (2018). 155 MCG (2019). https://www.nna.jp/english_contents/news/show/20190516_0006. Vietnam facing nursing home shortage amid slow 156  government support, NNA Business News, 2019/5/16 VIETNAM: ADAPTING TO AN AGING SOCIETY 203 The provision of care for older persons in social Responsibilities for social work collaborators protection centers or home-based care services include reception, collection of information, is not considered a formal specialized occupation. assessment, development of assistance plans, Instead, these caregivers are often regarded as counseling, advice, therapy, mediation, education, general domestic workers. Caregivers of older persuasion, prevention, implementation of support persons usually come from rural areas, do not have policies, monitoring, and evaluation. In addition to any degrees and learn care skills from experienced the MOLISA project, there is an MOH-led project caregivers, friends, and relatives. In 2009, MOLISA on development of the social work profession in issued a framework curriculum for training the health sector (2011-2020). This Project aims domestic care workers, which also covers skills to create a professional title for social workers in to care for older persons. The framework curricula the hospital personnel structure for provision of on domestic work for secondary and junior college social work services (e.g., counseling on treatment training programs last 1.5 years and 2.5 years, protocols or preventive measures, reassuring respectively, with most training time being spent patients) and deliver training in social work to on practice.157 The curricula fit well with needs, but community-based workers (VHWs, staff of mass very few technical training institutions use these organizations) who are implementing various curricula. In non-public social protection centers health programs. operating as businesses, the human resources are considered to be better qualified. Vietnam has a considerable training infrastructure to provide elementary, secondary, junior college, Social workers play an important role in the undergraduate, and graduate training programs coordination of care but do not provide assistance in social work.158 By the end of 2015, Vietnam for daily personal care. The MOLISA-led Social Work had 55 universities/colleges and 21 secondary Profession Development Project in 2010-2020 sets training institutions with specialized training in the protocol for building a contingent of social work social work, of which three provide master’s-level officials, public employees, staff, and collaborators. and two provide PhD-level training in social work, There are three main titles of personnel in the with a capacity to enroll 3,500 students per year. field of social work: principal social work expert, Hanoi University of Public Health under MOH social work expert, and social work officer. Social recently started a bachelor’s degree in social work. workers are responsible for screening, classifying, The aim is to train social workers who are capable and receiving social protection beneficiaries; of studying, detecting and assisting individuals/ assessing their psychophysiology and needs groups/communities to address social problems for services; and developing and implementing in the field of health and people’s healthcare at assistance plans. At the same time, they monitor hospital, community and policymaking levels. and review interventions, and support beneficiaries 159 In addition, the Social Protection Department to integrate in the community. They do not provide (MOLISA) has collaborated with universities and daily personal care but help older persons access colleges to organize training courses for senior government services and necessary support. social work managers. There are also short-term training courses for people who wish to take care The curricula cover psychological and physiological 157  knowledge by age, nutrition, and general health in service of people with disabilities and older persons. of healthcare for family members, handling of emergency Participants in these courses are very diverse, situations, and principles for and tasks to be performed in caring for older persons and sick persons in the family. The skills to be taught include developing menus that meet the The framework curricula on social work for undergraduate 158 nutritional needs of each age group, food safety, and caring and junior college degrees have been updated by Circular for older persons and sick persons (including bedridden 10/2010/TT-BGDDT to replace the ones developed in patients) upon request. For junior college training 2005. Their contents include general knowledge of social programs, the skills are extended to tube feeding, support work, psychology, human behavior, gender, community for bathing, dressing, toileting with a bed pan, change of development, and social work for special groups, including wound dressing, administering oxygen, sputum suction, a subject called “social work for older persons.” and rehabilitation for patients. 159 MOLISA (2019) (WB/ADB). 204 VIETNAM: ADAPTING TO AN AGING SOCIETY including family members, home-based/hospital- While regulations on ethical and professional based care workers for older persons, and some standards for health and social workers have health workers who have a university, junior been issued, none are available for volunteers college, or secondary degree or certificate and or professional caregivers. According to the Law want to learn more skills to care for older persons. on the Elderly 2009, MOLISA is responsible for developing professional standards for and training Manpower agencies that place care workers caregivers for older persons, in collaboration abroad developed their own training programs on with MOH for healthcare-related aspects. While care of older persons. A number of manpower regulations on ethical and professional standards agencies that operate in Vietnam to place for social and health workers have been issued caregivers in high-income countries (including by MOLISA and MOH, respectively, there are Germany and Japan) develop their own courses currently no plans or strategies on training, ethical, designed to meet the needs of the country that will and professional standards or other relevant receive workers. state management documents for volunteer or professional caregivers. There are regulations With regard to adequacy of human resources, on character requirements of caregivers but no “human resources are limited in both quantity and regulations on the qualifications required. Similarly, quality in public and charitable social protection while the government relies on civil society centers, and the organizational structure and organizations for provision of social care services, capacity for providing care to older persons does a systematic training plan for such community- not meet requirements.” The total contingent based organizations is minimal, affecting the of civil servants, officials, employees, and quality and standards of services and the ability to collaborators in social work currently is about respond timely to emerging issues (UN 2015). 200,000 people. This includes nearly 100,000 people working at associations and unions at all levels (civil servants, employees, and workers 7.4. Good international practice working in public and non-public social facilities) guiding principles for developing an and over 100,000 collaborators. There are also over elderly care system 8,000 officials, staff working in “social assistance institutions,” of which 1,474 and 919 are in HCMC Vietnam, unlike many of the OECD countries and Hanoi provinces, respectively. The government that aged slowly, is “getting old before getting has stipulated staffing norms for social protection rich.” Vietnam will become an aging society at an centers for older persons.160 income level that is one-tenth the level of the United States at a similar point. While Vietnam has strong Retention of staff is a big challenge for social/cultural principles of living by the Confucian organizations providing home-based care for principles of care for elderly by the family, this older persons. After being trained and gaining traditional informal family-based (familial) care skills, many caregivers leave companies or centers model is increasingly strained by urbanization, to work directly with their clients so they do not migration, demography, and other economic and have to pay the management fees. It is particularly social factors. difficult for not-for-profit centers which charge a low service fee and pay a low stipend to their With the government developing provision for staff. Therefore, the sustainability of this model for the vulnerable and poor and with the wealthy older persons with low income who cannot afford using their own funds to purchase services in expensive services is in question. the emerging private market, the main burden of familial care falls on the middle class. The situation is similar to that of the pension system in Vietnam, which is missing the middle—further 160 MOLISA (2019) (WB/ADB). VIETNAM: ADAPTING TO AN AGING SOCIETY 205 underscoring the strain placed on the middle class revealed private demand alone will not allow a (see Chapter 5). market to develop, as formal aged care services are expensive. There is a wedge between the For all of these reasons, Vietnam will need to private demand (also called effective demand) and develop models of provision and financing of the need (determined by the degree of individuals’ elderly care that are suitable for its particular disability or impairment) for care, with the latter economic, social, and cultural situation. It would usually exceeding the former. Without government be unwise, for instance, to adopt the LTC systems of subsidies, only high-income individuals will be high-income countries, which are characterized by able to afford purchasing services produced in the high prevalence of institutional care and relatively market. The poor who qualify are covered by public broad entitlements in terms of coverage and resources, and the rich are able to pay for privately benefits. It would also be unwise to leave provision produced services, but the broad middle class—in to the families alone, straining the shrinking labor the absence of government intervention—will not force with the responsibilities of providing elderly have access to the services they need and will care. This section provides broad principles based therefore have to rely on informal provision for on good international practices for Vietnam to use, aged care. Given the undesirability of this outcome, as it develops its elderly care system based on one of the government’s roles should be to foster Vietnam’s own strength. market development by subsidizing services more broadly to allow for a broad consumer base. The 7.4.1. Government stewardship and key is to design and administer subsidies that are increasingly private provision of elderly care efficient and equitable. Given the magnitude of aging in Vietnam, private The government has additional stewardship provision—with government stewardship— roles in the aged care market, because in most will need to play the main role in elderly care. countries, the providers of LTC services are International experience convincingly shows that primarily private entities, and public agencies a broad LTC market with private provision will not rarely provide services directly. This situation emerge in the absence of government stewardship, can be seen across most of the OECD countries, but that the benefits of such a market make with the exception of Sweden which has public government intervention and financial support provision of residential care. While government worthwhile. Stewardship functions, in addition to involvement in elderly care (primarily in the form financing, include determining who should have of stewardship) is necessary, the actual provision access to publicly supported services, deciding of care can be done through a combination of the what basket of services different groups should private formal and “semi-formal” sectors, including receive, and ensuring quality and safety standards not-for-profits (e.g., Australia, China), as well as of the services provided. by family members. In China, for example, the government is promoting private operation of both Some specific features of the aged care market government and privately built facilities (Box 7.5). pose additional challenges for government stewardship. In many countries, elderly care markets are “missing” because responding to the 206 VIETNAM: ADAPTING TO AN AGING SOCIETY Box 7.5. Private and Foreign Companies in the Elderly Care Sector in China Chinese private companies (including real estate and insurance companies) are actively entering the senior residential market, targeting seniors with mid to high incomes. Local governments are experimenting with various modalities of a “mixed model,” and a number of commissioning models are currently being developed in China (see below). At present, management contracts and leasing are the two most common types of public-private partnerships in institutional elder care in China. Types of Public-Private Partnerships in Institutional Care in China Types Description Procurement Local municipality purchases beds from the private nursing home. Management contracts Private nursing home operators assume management responsibilities (e.g., staffing, supplies, training) for public nursing homes. Leasing Operation and management of public nursing homes by private operators. Private operators bear all risks and retain profits but do not assume ownership of nursing homes. Service contract Public nursing homes outsource a set of services such as housekeeping, catering, and laundry to the private sector. Shareholdings The ownership structure of public nursing homes is changed by selling shares to a private investor. Aged care is an area with substantial private sector interest, attracting not only domestic but also large numbers of foreign companies to China’s market. To facilitate matters, China’s government, among other things, adopted a resolution allowing foreign companies to receive government contracts when they serve poor clients (“Resolution number 50”). Companies from the United States, Japan, and France have entered China’s institutional care market through partnerships with Chinese firms. Most for-profit providers focus on community care services commissioned by real estate developers, targeted at mid- to high-income seniors and their families. Foreign companies provide home-based care targeting mid- to high-income seniors, with a focus on major cities. For example, Singapore-based “Active Global Ageing” is providing home care delivered by trained nurses, U.S. “Right At Home” delivers caregiving and housekeeping services through university graduate caregivers, and Pinetree offers at-home skilled caregiving to seniors who are semi- or fully dependent. Source: Yu (2014) Stewardship is particularly important to help are available to elderly on welfare at prices equal attract private resources to address gaps in the to the cost of care, thus alleviating the need for the market. In China, the gap in skilled nursing facilities government to develop and manage new public for medium-income seniors was addressed aged care facilities. through a “mixed model.” The private sector’s engagement was encouraged in the mid-tier market Government stewardship is also vital for setting by outsourcing the operation of publicly owned transparent rules and standards that pertain to facilities to the private sector. In 2013, the national the services as well as accreditation of providers Ministry of Civil Affairs started a pilot reform of and public procurement procedures. One concern public aged care facilities, requiring at least one is that in the absence of effective regulatory public facility to be outsourced for private sector oversight, the shift of service provision to the operation in each province. In the reform, private private sector might compromise quality of care operators were selected to manage the public (Feng et al. 2014, Liu et al. 2014). As the role of facilities, following due procurement procedures. the government shifts from direct provider and Many localities also require that a number of beds supplier to purchaser and regulator, the government VIETNAM: ADAPTING TO AN AGING SOCIETY 207 will need to assume responsibility for fostering, complaints handling procedures and elder monitoring, and regulating the entire elderly care protection, management and administration, and market—public, private, and mixed, and all sub- services provided. sectors of this market (home-based, community- based, and all forms of residential care). 7.4.2. Eligibility Rules based on Functional Ability Needs Assessment and a ‘package’ of Most countries have established procedures elderly care services for those deemed eligible for service provider accreditation. This enables regulatory oversight of minimum standards for A system for functional ability and needs professional and organizational capacities and assessment is a cornerstone of government resources of care facilities, staff-client ratios, stewardship because it determines who should and skills requirements for care staff. Regular be considered for public support for their care inspections (scheduled or unscheduled) are also needs. An important field of regulation concerns a common practice. In the United States, nursing the processes of determining who is eligible for homes and home health agencies are licensed by support and how to assess care needs. Usually, the states but must comply with federal quality the national government defines the rules and standards in order to receive federal funding. standards and mandates local authorities, Federal regulatory requirements cover a wide government agencies, or medical doctors (general range of items, from inputs and structural capacity practitioners) to carry out the assessment with to care processes such as initial and periodic the individual person. For those who are deemed assessments for nursing home residents and in need through the needs assessment, the next home health consumers. In the United Kingdom, step has two basic options concerning eligibility: providers have to register with the national Care a universal system open to all, and a means- Quality Commission and meet minimum quality tested system in which only people below a standards in six key areas. The Care Quality defined income level are eligible. Accordingly, the Commission also conducts inspections of care assessment may take into account not only the providers. It has changed the practice of annual levels of disability and functional limitations but inspections and moved to a risk-based approach also income/asset levels. in which providers rated as requiring improvement Many OECD countries have developed and or being inadequate are inspected more frequently implemented systems of strict needs assessment than those with a good or outstanding rating. of levels of functional impairment (both physical Australia requires residential and home care and cognitive) and assessments of income/ providers to be formally accredited by the Aged wealth.162 Lack of such a functional ability and Care Standards and Accreditation Agency,161 which needs assessment can lead to difficulties in is also a condition for receiving public funding. targeting publicly financed or subsidized elderly There are five basic standards—management care to those who are most in need of it: those system, staffing and organizational development, who have physical and mental impairments and health and personal care, care recipient lifestyle, need assistance with their daily activities. This is and physical environment and safety—each with because in the absence of assessments, the public principles and expected outcomes. Accreditation system could tilt toward supporting residential of residential and home care providers is also accommodations for poor and lonely elderly, mandatory in Japan. The prefectures are entrusted regardless of their physical condition and care with certifying providers, and the municipalities needs. This stems from historical practices, as are in charge of supervision and auditing. The standards for certification relate to staffing, 162 In many high-income countries, the public provision of aged care services is delivered in the form of demand-side subsidies, which vary in level depending on the income level h ttps://www.aacqa.gov.au/for-providers/accreditation- 161  of the elderly, the severity of the functional limitations, and standards the household environment. 208 VIETNAM: ADAPTING TO AN AGING SOCIETY many governments (including Vietnam) fund and For scope, which care and services will be included operate “welfare homes” residential care facilities. in the basic package? For depth, what proportion of the care service cost will be publicly financed? There are several international practices to build upon while developing a systematic, universal 7.4.3. Aging in place as the main modality system of needs assessment. Several approaches and residential care as last resort have been used to measure functional and cognitive limitations, including the International Resident While well-organized home care is more cost- Assessment Instrument (InterRAI) in the United efficient than residential care, early developments States, the Aged Care Funding Instrument (ACFI) of private provision tend to focus on institutional or in Australia, and Easy Care in UK. Korea’s elderly residential care because of the high need for these are assessed through a standardized assessment services but also higher profit margins. Across using a 52-item questionnaire to classify them into countries and cultures, a universal preference for five levels. home- and community-based services rather than residential care can be seen. Those seeking elderly The next step is to define a “basic package” care should have access to services at home or of elderly care services, which is a basket in the community and should access residential consisting of a menu of services to be offered to facilities only when home or community care a target population, with an associated level of is no longer feasible. International experience subsidy. The list of services to be included cover suggests that the overarching goal should be social care and health care, delivered in all three to enable older people to remain independent tiers: home, community, and residential care. in their own homes for as long as possible to The level of subsidy varies from fully to partially prevent unnecessary healthcare utilization (such funded depending on the services, the results as potentially preventable hospitalizations and of the functional ability needs assessment, and emergency department visits). Home care systems the economic conditions of the elderly and their can also be adapted to changing needs and help households. contain long-term care expenditures by supporting informal caregivers and less cost-intensive home- In many countries, a basic package of elderly and community-based services. care services remains a novel concept. Where the basic package is on the radar, it is typically limited As part of the deinstitutionalization movement, to infrastructure (facilities and bed availability) policies in many countries now strive to transform because of the high share of public spending on care models from historically residential to home- such infrastructure. While home- and community- and community-based care. Across the OECD and based care are growing in emphasis, such services Asia, countries are addressing the growing need to are still in their infancy in rural areas. Furthermore, provide LTC to their rapidly aging populations by existing elderly care services focus mainly on enabling people to age in place, rather than providing meals and to a lesser extent on personal care, LTC in residential settings. OECD countries use a housekeeping, shopping, cultural activities, and range of policies to encourage home care, including wellness. Professional care services such as a mix of demand- and supply-side interventions respite services, nursing care, therapy services, such as direct expansion of home care supply rehabilitation, medical services, and hospices are (e.g., Canada, New Zealand, Sweden), regulatory also underdeveloped. measures, and financial incentives. Asia also offers many relevant examples. The ROK-ASEAN Formulation of the functional ability and needs Home Care Program, which builds on the success assessment and basic package should consider of a home care model involving volunteers in breadth, scope, and depth. For breadth, who is the Korea, has been implemented in ASEAN countries target population of the elderly with care needs? VIETNAM: ADAPTING TO AN AGING SOCIETY 209 with adaptations to the local context.163 Thailand under totally different regulatory frameworks, have has piloted a “home health care” scheme through different organizational structures, are provided by 26 local hospitals, targeted at older people living different professionals, and use different financing at home, with services including health promotion, and payment models. Among the few countries treatment, and rehabilitation.164 Finally, older that offer public long-term care insurance people’s groups (or “senior citizens’ clubs”) operate (Germany, Japan, and South Korea), long-term or are planned in Brunei, Japan, and Thailand care insurance is operated separately from the and offer support networks, health information health insurance system. The lack of coordination dissemination, and fitness activities.165 leads to fragmented care for older people for whom both types of care may be necessary. The 7.4.4. Continuum and coordination both fragmentation of programs, services, and benefits within LTC and across healthcare and LTC for long-term care recipients also often contributes to misaligned incentives such as cost shifting A common challenge in many countries’ between payers and providers and also increases healthcare and LTC delivery systems is the the cost to the individuals and to society. lack of integration of services across different programs or settings, both within LTC and across The concept of care coordination is often based acute medical care and LTC. As the needs of the on the strong role of primary care as the driver elderly change over time—either temporarily or of coordination functions, including gatekeeping. permanently—a care continuum with the proper Such a model anticipates and shapes patterns of mix of services is needed to meet these changing care according to the projected health and medical needs. Good international practices call for needs of the population while placing considerable developing a continuum of care. Services provided emphasis on strengthening the role and raising at home can range from domestic aid and personal the quality of primary care. It considers changing care to supportive services and health services demands such as the aging of the population, for bedridden elderly. Community-based services the rapid increase in chronic diseases, significant can include social and recreational services as strengthening of community-focused care, and well as rehabilitation and some nursing services. the vertical and horizontal integration of facilities Institutional care can include assisted living, food (physical, as well as in areas of information and accommodation, supervision of medical care, and communication) to provide comprehensive specialized care (e.g. dementia care), and hospice services along a continuum or chain of care, using services. Respite services that are critically primary care as the point of entry into the system. important for informal caregivers can be provided Care coordination consists of a mix of measures in any of these settings. Ideally, the continuum of that link professionals and organizations at all aged care services would be diverse enough to levels, emphasize patient-centered care integration, encompass an optimal and flexible service mix that manage patient referral through the delivery responds to the diverse needs and circumstances system, and promote follow-up care as well as the of the elderly and their families. continuity of long-term service provision. Coordinating social care and health care Care coordination has increasingly come to services is especially challenging because in dominate the service delivery landscape in many most countries (including Vietnam), the health OECD and Asian countries. In Japan, government care system is separate from the provision and efforts to integrate LTC and health care have placed regulation of LTC, even though the lines are not primary emphasis on community-based care, and always clear-cut. Health and social care are usually a general practitioner’s assessment is required as part of the LTC triage process. In Southeast Asia, 163 Rok-Asean Cooperation Fund (2013). Thailand has piloted service models that integrate 164 HelpAge (2013). health and social care—the “Bangkok 7 Model” 165 UNFPA and HelpAge International (2011). 210 VIETNAM: ADAPTING TO AN AGING SOCIETY and the “Community-Based Integrated Services an average of 1.8 percent. For social care alone, of Health Care and Social Welfare” for Thai Older spending ranges from 0.02 percent of GDP in Persons, which involve collaboration among local Latvia to 0.7 percent of GDP in the Netherlands.168 authorities, volunteers, and older people (Stefanoni and Williamson 2015). In Singapore, the Agency An important issue in the development of a for Integrated Care was created in 2009 to bring robust public financing system is the division of about a patient-focused integration of primary, responsibilities for financing among the different intermediate, and long-term care. It operates at all layers of government. In most countries, both local levels— patient, provider, and system—and it works and national governments are involved in financing to have providers at all levels coordinate their LTC, and funds are distributed from central efforts on behalf of the patient.166 government to sub-national levels in an effort to reduce disparities in the delivery of services to 7.4.5. Adequate and sustainable financing people with similar needs.169 An adequate and sustainable system of Users share responsibility for LTC costs by financing is an essential component of an elderly paying premiums for obligatory social security care system. The financing approaches vary contributions or cost sharing through OOP significantly across the OECD countries. Generally, expenditures.170 Private financing accounts for the main sources of financing for aged care one-third of total LTC expenditure in Germany, 22 services in OECD countries are general taxation percent in the United States,171 and 10 percent and obligatory social security contributions, as well in Denmark.172 The most frequent form is OOP as voluntary private insurance and OOP payments payment. Private insurance for elder care services directly made by users. In terms of spending, at is not very common due to a range of limiting one extreme is universal coverage within a single factors (Box 7.6), including adverse selection in program, in which long-term care coverage is which people at greater risk of needing care will provided through a single system (e.g., tax-based buy insurance while people with “good risks” will models in Nordic countries; public LTC insurance not, thus driving premium prices higher. models in Germany, the Netherlands, Japan, and South Korea; and personal care and nursing care through health coverage in Belgium). At the other end of the spectrum are means-tested safety net schemes in which strict income or asset tests are used to set financial thresholds for eligibility for publicly funded LTC services and benefits targeting the needy (e.g., England, United States). Public spending levels for elder care services vary greatly, with an OECD average of 1.7 percent of GDP. In China, public spending on LTC is less than 0.05 percent of GDP, much lower than both the average of 1.7 percent in the OECD countries and 168 European Commission (2013). 3.5–4 percent of GDP in some OECD countries.167 169 Joshua (2017). For medical and social care combined, public 170 Colombo et al. (2011). Kaiser Family Foundation (2013). Also in the United States, 171  spending in EU countries ranges from 0.2 percent over 75 percent of nursing home residents have their in Cyprus to 4.5 percent of GDP in Denmark, with care paid for by government-administered programs. The market price of full-time care for an elderly person in need (for example, someone who is bedridden or has dementia) 166 See the Singapore Agency for Integrated Care (AIC) 2015, in the United States is estimated to be around USD 80,000 https://partners.aic.sg/newsroom/fs per year. 167 World Bank (2019). 172 Joshua (2017). VIETNAM: ADAPTING TO AN AGING SOCIETY 211 Box 7.6. Feasibility and Use of Private Insurance to Finance Long Term Care: Review of Experiences Private insurance is challenging to develop and price for many reasons. One reason is that individuals tend to be myopic, and when they are young, they do not believe that they will need aged care in later years. There also exists moral hazard: if aged care insurance is private and voluntary, those who know that they are at a high risk of disability and needing care will be most likely to purchase insurance, making the pool comprised of high- cost individuals and increasing premiums for all. In addition, since the package of aged care services typically includes services that are valued generally (e.g., housekeeping, meal preparation), otherwise healthy individuals would also want to qualify for those services. LTC is subject to several forms of uncertainty on account of (i) longevity, as medicine progresses; (ii) the length and intensity of the periods of functional dependency that precede death, particularly the likelihood of developing dementia after age 80 (the costliest condition for which LTC is needed); and (iii) policy. These uncertainties have frustrated the expansion of market-based insurance and made LTC insurance very challenging to price due to the difficulties of assigning robust probabilities to various factors. As a result, as seen in the United States, LTC insurance policies tend to have premiums well above those justified by the expected benefits, while they cover relatively smaller shares of total expenditure risk (Brown and Finkelstein 2011; Cremer, Pestieau, and Roeder 2015). The inherent challenges of such uncertainty are reflected in the low share of total LTC spending accounted for by private LTC insurance. Across the OECD, this share remains under 2 percent, and it only reaches 5 percent or higher in Japan and the United States. Purchasers of private LTC insurance tend to be high-income, reflecting the overpricing noted above. In addition, private LTC insurance is often taken as a complement to publicly financed programs (whether financed through dedicated social LTC insurance or from general revenues), with people seeking supplemental services outside the public package (OECD 2011) Source: Joshua (2017) There is no “silver bullet” available to ensure sustainable financing of LTC. Each of the different approaches has its advantages and disadvantages (Table 7.2). Any discussion of the sustainability of LTC must also consider the need to influence the demand side (i.e. the needs of an aging population) through prevention, rehabilitation, and adaptations to the living environment.173 Table 7.2. Advantages and Disadvantages of Different Financing Approaches to Aged Care173 Approach Advantages Disadvantages Mandatory social insurance Entitlement to benefit Limited tax base (Germany, South Korea, Japan) Affordable contribution Rigidity in benefits awarded (if income-related) Implicit debt Tax-based, universal systems Broader tax base No direct link between revenues and (Nordic European countries) benefits Less transparency in benefit allocation Implicit debt Private insurance Theoretically neutral for the public If voluntary: (Japan, United States) budget • Not affordable for people with low, insecure income • Adverse selection (If mandatory, may require subsidies for people with low incomes) Source: European Commission (2014). 173 European Commission (2014) 212 VIETNAM: ADAPTING TO AN AGING SOCIETY 7.4.6. Strong Workforce domestic helpers in 25 percent of the countries.176 In Thailand, a training course over three months Workforce challenges, including maintaining an leads to formal qualification of care assistants. adequate LTC workforce, are common challenge across the OECD. In all countries, the majority of the 7.4.7. Latest technologies LTC workforce are frontline workers who provide hands-on help with basic activities of daily living Technologies—ranging from robotics and AI to such as eating, dressing, bathing, and toileting. They biotech and materials technology to ubiquitous are typically women who are certified nurse aides, computing and connectivity—are increasingly home health care aides, and home or personal care being applied to the LTC sector. Chomik and Piggott workers. They are generally low-skilled workers (2018) divide technical innovations in the LTC requiring minimal training in most countries. Many sector into three categories: assistive technologies countries face a chronic shortage of LTC workers, (AT); information and communication technology especially of well-trained and skilled workers.174 (ICT);177 and robot technology (RT).178 The impact Recruiting and retaining direct-care workers in LTC of all three depends as much on psychology as settings is particularly challenging due to many technology, because their successful application factors, including demanding working conditions, rests on the acceptance by older cohorts, who may low wages, low job prestige, few fringe benefits, be suspicious of or insecure about using them.179 and limited career options and career paths.175 Technologies are also likely to have impacts on the labor market (including of caregivers) in numerous From a policy perspective, potential solutions to ways. First, ICTs, ATs, and RT will relieve informal tackle the long-standing workforce issues in the caregivers of some of their burden, making mature LTC sector include establishing and enforcing caregivers more amenable to formal labor force occupational standards (job descriptions), participation. Second, if robots have the capacity ensuring adequate wages, and mandating initial 176 Feiler et al. (2016). and continuous staff training. Working conditions Blaschke et al. (2009) provide a comprehensive review of 177  assistive and ICT technologies, including those that assist may be improved by offering supervision with monitoring behaviors, performance of tasks, and (coaching) and making use of information and connectivity with other sources of support. For example, communication technology (ICT) tools to support smart home and monitoring devices could identify abnormal behaviour (e.g., falls) and alert caregivers of and supplement personal care (e.g, the use of potential dangers. Telehealth, on the other hand, allows telecare). For example, alarm systems are common older people to access health services easily and cheaply and also incorporates monitoring systems and exchanges in most European countries, where GPS tracking diagnosis data (e.g., blood pressure), in the process raising and video communications are also being tested in care quality and health decision making regardless of setting. Chomik and Piggott (2018). various aged care settings. Formalized initial and Several Asian countries have already invested heavily in 178  continuous training is in place for personal home robotics. In some cases, robots may be used to deal with routine manual tasks such as laundry or transport services, care in 60 percent of European countries and for freeing up staff to attend to non-routine caring tasks. A review of RT by Broekens et al. (2009) in the context of elderly care finds assistive social robots have aspects that are functional (as a form of user interface) and affective 174 In the OECD, between 1-2 percent of the total workforce in (raising quality of life—e.g., through companionship).. 2015 was employed in providing LTC, and the share is likely Flandorfer 179  (2012) finds that sociodemographic to more than double by 2050. Joshua (2017), citing OECD characteristics such as age, gender, and education matter and European Commission (2015). for user acceptance of RT, concluding that assistive devices 175 Stone & Harahan (2010). The LTC workforce also includes should be tailored to individual needs (Chomik and Piggott long-term care facility administrators and licensed health 2018). The research of Han and Braun (2010) focuses on professionals, including registered nurses, licensed practical assisting aged people in mastering digital technologies and or vocational nurses, social workers, physical therapists, enhancing their communication modes, leisure activities, occupational therapists, and physician assistants or aides. and social connectivity. They describe how to use digital Relatively few in number, these skilled professionals usually technologies to promote active aging, called ‘digital ageing’ assume supervisory or managerial responsibilities rather in Korea. Internet Navigator, a computer training program, than providing direct, hands-on care. In only a few countries Cyber-Family, and the 1080 Family Online Game Festival are such as the Netherlands, physicians are directly involved in components of their research at the Research Institute of the provision of LTC. Science for the Better Living (Nguyen and Nguyen 2010). VIETNAM: ADAPTING TO AN AGING SOCIETY 213 to substitute/replace formal caregivers, then significantly over the past 15 years and is now 6.1 the international movement of LTC workers may percent of GDP. Social health insurance coverage be reduced, and any predicted shortage of care has also increased rapidly such that 87 percent workers in developed countries may be mitigated. of the population has insurance coverage today, including most of the poor and vulnerable groups, Development of elderly care should take whose premium contributions are covered through advantage of technology advancements, government subsidies.182 especially as their use helps facilitate home- based care/aging in place and coordination of Self-help groups are envisaged as the backbone care.180 There is much to learn from China in this for care provision, and the government is respect, with its willingness to experiment in many committed and has set various targets for areas of provision and financing, including such their development. Given that Vietnam is aging difficult areas as caring for senior citizens with at a low level of income, promoting ISHCs is a dementia and in community settings. In addition, good strategy, as the community approach is a technology holds some promise for increasing cost-effective way to provide support and care. the value for money in elderly care, and China is ISHCs should be further developed through public positioning itself as a leader in this area. Assistive support. technology (including utilizing big data and cloud computing) and disruptive technology can be used At the same time, in line with increased needs to support service delivery, quality enhancement, and the growing middle class, the demand for and the public financial management of care. formal care will increase and is best met by private provision under government stewardship. In line with projected demographics, the effective 7.5. Recommendations for the Future demand for medical, nursing, and personal care In Vietnam, projections endorsed by MOLISA will also grow in the coming decades. MCG (2019) forecast that the number of elderly who will need estimates that the market size for medical, nursing, regular care due to difficulties in at least one and personal care service will grow rapidly in the physical or mental function, will be more than 10 coming decades, especially in the big cities of million by 2049, compared to 2.5 million in 2019 Hanoi, Danang, and HCMC. The projections based (MOLISA 2019). on Serviceable Obtainable Market (SOM) show that by 2030, the effective demand for nursing and Vietnam has strong foundations and prior medical care will increase by 2.7 times the existing achievements in social policy, a vibrant private demand in 2019. By 2040, the demand for medical sector, and also a strong self-help groups care will increase to 5.7 times the 2019 value, and community tradition and can capitalize on all demand for nursing care will be about 4.1 times three to meet the challenge of elderly care going the 2019 value. forward. The highest authorities in Vietnam have expressed a clear commitment to pursue the Vietnam’s experience with “Socialization Policy” Sustainable Development Goals, with concerted in the education and health sectors reinforces the efforts toward equitable and inclusive development need for government stewardship and regulatory to ensure that “no one is left behind” in Vietnam oversight of private provision of social services. today.181 The country has an excellent past record Since the “Socialization” policy was initiated in the of developing and implementing policies in the 1980s, Vietnam continues to advance the policy social sectors. Total health spending has increased through privatization and commercialization of selected public services. While the policy provides 180 Leichsenring and Alaszewski (2004). the appropriate framework for developing a model 181 United Nations (UN) Viet Nam. 2015. UN Joint Position and Advocacy Note on Socialization: A Call for an Equity-focus revisiting. Unpublished. 182 World Bank (2018). 214 VIETNAM: ADAPTING TO AN AGING SOCIETY of public-private cooperation in elderly care, To move in this direction, Vietnam should consider the benefits from socialization are likely to be the following actions. muted if governance gaps (e.g., weak regulatory mechanisms to monitor and enforce) and under- Develop a strategy for aged LTC. A strategy needs developed institutional mechanisms, common to spell out the respective roles of the state, in a low middle-income country like Vietnam, are nonstate providers (for-profit and not-for-profit), not addressed. Matters are further confounded communities, and households and should outline a by decentralization or “autonomization” (i.e. sustainable financing strategy. This report argues delegation of autonomy to the sub-national levels that aged care will most likely be an area where to manage personnel, financial resources, and financing is mixed, where provision is often outside public services). In the health sector, the cost of the public sector, and where clear policy is vital to service is reported to have increased and given avoid the problem of over-reliance on institutional rise to incentives to offer costly profit-generating care, which is costly and generally not preferred by and privately initiated services, including in older people. public facilities (UN-JPG 2015). Nurturing the Continue developing ISHCs and learning good government’s stewardship capacity will require— practice examples from neighboring countries of in addition to financing—building a regulatory community-based provision of care. This will be framework, ensuring availability and strengthening vital for reasons of both sustainability and quality capacity to deliver and monitor, and provide quality and will also be a way of taking the approach of assurance for all national and subnational levels. “aging in place,” where aged care is provided as This includes setting and enforcing transparent far as possible in home- or community-based rules and standards pertaining to the services settings. In terms of community- and home-based as well as accreditation of providers and public care, Older People’s Association branches and procurement procedures. With a regulatory ISHCs can be valuable assets in Vietnam. There framework, the government can control the are already many examples of ISHCs providing achievement of policy goals and the level of public community-based homecare and facilitating spending. health check-ups, exercise groups, and other Culturally, many spouses and adult children want preventive measures for older people. There are to care for their spouses and/or parents, and the also interesting examples from abroad, such as goal of public policy is to facilitate the elderly care Thailand’s “Friends Help Friends” Initiative, in market so there is adequate and affordable elderly which older people’s groups receive public funding care for consumers to exercise choice. This can to train volunteers to provide support for frail be done by building a well-functioning market for elderly people, with volunteers often from among elderly care services where individuals can find the “younger elderly.” China also has many pilots at services that satisfy their needs, preferences, and the subnational level and innovations such as “time resource constraints. What is important in terms banks” where the younger elderly provide care to of public policy is to give them options to choose older elderly, and the time provided is “banked” and what works best for them. Options include one or they have a credit for future care to be provided a combination of the following: (i) purchase care, when they are older elderly. if they have resources; (ii) use publicly subsidized/ Develop an action plan to diversify the types of free care, if they do not have resources; and (iii) available care services providers. First, greater provide informal care, with the option of respite private sector participation in the delivery of social care for caregivers. This will require many types/ care services is needed. These private actors levels of subsidies to be provided depending on should be encouraged to provide home-based, the degree of functional impairment/disability and community-based, and institutional care options income. to households of all income levels. Second, the VIETNAM: ADAPTING TO AN AGING SOCIETY 215 social care workforce will need pathways toward Encourage private sector participation, starting formalization to facilitate oversight that ensures with two specific models. One of these models the system can provide consistent levels of quality would be opening existing public welfare homes to services. This formalization should include frontline self-paying patients and providing these patients caregivers as much as healthcare professionals with enhanced quality services. These welfare and social workers. Finally, sustainable financing homes will continue to serve social protection mechanisms should be designed to make care beneficiaries their regular clients and receive services, and especially aged care services, government support to do so. This model is widely affordable for those who need it. A key decision used in China and has been implemented in several in the process of strategy formulation will be who facilities in Vietnam (i.e. Vu Thu District Social is prioritized for public subsidies. While the poor Protection Center in Thai Binh). Another model elderly should be a priority, it is important also to is utilizing government buildings and other fixed prioritize on the basis of degree of disability. assets to develop concessional arrangements with private providers that operate them as elderly Strengthen the government regulatory and care facilities. Providers will set prices, establish oversight capacity to guarantee that both public fees, and collect revenues from their patients. and private service providers supply a high and The government will use concession fees to consistent quality of social care. MOLISA and influence the pricing policies of these providers. related agencies will be responsible for setting and It is expected that these concessions will result enforcing clear “rules of the game” on such issues in the development of government assets as as service quality and mechanisms for coordinating institutional facilities with nursing, palliative, and/ with medical/health service providers. Licensing, or hospice services and that they would also accreditation, and oversight standards will need provide day-services and home-based services for to evolve, and performance monitoring will need to nearby communities. This model is widely used in prioritize service quality and client outcomes rather Singapore and is increasingly used in China. than the quantitative indicators of performance currently used. Fundamentally, this transition Strengthen coordination between the social care requires that the government go from being a direct system and other relevant government entities. supplier of social care services, albeit for a small First, the social care system will need to be well- fraction of the population, to being a purchaser coordinated with the health care system. Second, and regulator of services provided increasingly cooperation with MOF will be crucial on such in the private sector. The pillars of the regulatory issues as ensuring the taxation of and creation of framework are: tax incentives for non-profit and for-profit social care service providers. Finally, local governments, o accreditation of suppliers, ensuring that NGOs, and volunteers will also need to strengthen suppliers have the necessary managerial and their cooperation and coordination. technical capacity and resources; Prepare a well-trained cadre of volunteers and o public procurement rules and procedures; professionals to staff and manage the LTC o eligibility rules and systems of functional needs delivery network. Vietnam has already proposed assessment to determine the quantitative and measures to strengthen the legal framework for qualitative needs of clients; and tertiary education of social workers, and the implementation of these must be accelerated. o service standards and quality assurance; New models of training will also be needed to o qualification system for different types of care meet with emerging demand for new or adjusted workers; and skills across the delivery network, especially for case management. There is also a need to o reporting and monitoring system. build the capacity of families and community 216 VIETNAM: ADAPTING TO AN AGING SOCIETY volunteers who wish to provide home- and (e.g., civil service, social workers) is needed to community-based services. Human resources enforce the state-decreed standards of provision to deliver adequate and quality respite care of public services. services is another area that requires attention. Socialization is deeply intertwined with challenges Have a continuous dialogue on the government associated with institutional capacity, especially responsibilities for coverage and financing. This professionalization of civil servants, and human is a continuous process and political economy and resource planning. In order for the government to societal preferences are important. ensure oversight of the delivery and quality of vital social services, a critical cadre of government staff VIETNAM: ADAPTING TO AN AGING SOCIETY 217 7.6. 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Annex: Laws and Policies Related to the Rights of Older Persons in Vietnam, 2009-2018 No. Date Reference No Topic(s) Issued By 16 Jan 2002 10/2002/ND-CP Decree on socialization/financial regulation Government on revenue-generated public service entities 5 Aug 2004 141/QD-TTg Vietnam National Committee on Aging Prime Minister (VNCA) 18 Apr 2005 05/NQ-CP Resolution on enhancing socialization of Government education, health, culture, and sport 25 Apr 2006 43/ND-CP Decree replaced decree 10/2002 with an Government expanded scope of influence to all services, and orientation towards decentralization and fostering autonomy in public service entities and socialization 30 May 2008 69/ND-CP dated Decree on socialization/incentive policies Government of private sector involvement in education, vocational training, health care, culture, sports, and environment 30 May 2008 68/ND-CP MOH responsible for providing guidance MOH on medical care, physical therapy, and rehabilitation for people with disabilities and mental health problems in social protection establishments 30 Mar 2009 07/TT-BLDTBXH Decree outlining requirements for social MOLISA protection centers in relation to their environment and facilities to be licensed to care for older persons including aspects like ratio of caregivers to older persons 23 Nov 2009 39/QH12 Law on the elderly National Assembly 15 Jun 2009 23/TT-BLDTBXH Circular on a framework curriculum for MOLISA training domestic care workers, which also covers skills to care for older persons. 25 Mar 2010 32/QD-TTg Decision on the Social Work Profession Prime Minister Development Project (2010–2020) for the development of a system of social work service providers at all levels. 22 Mar 2010 10/TT-BGDDT Circular on professional standards for MOLISA commune/ward/township social workers, undergraduate framework curricula on social work 4 Apr 2011 04/TT-BLDTBXH Circular assigning social protection centers MOLISA responsibility for medical care, including treatment and rehabilitation 15 Jul 2011 2514/QD-BYT Decision on development of the social work Ministry of Health profession in the health sector in 2011-2020 25 Mar 2010 32/QD-TTg Decision approving the scheme on Prime Minister development of social work profession in the period 2010-2020 14 Jan 2011 06/ND-CP Decree providing detailed guidelines Government regarding implementation of the Law on the elderly 222 VIETNAM: ADAPTING TO AN AGING SOCIETY No. Date Reference No Topic(s) Issued By 19 May 2011 17/TT-BLĐTBXH Circular on procedures for getting monthly Ministry of Labor, social pension, burial cost and eligibility for Invalids and Social social security facilities. Affairs/MOLISA 15 Oct 2011 35/TT-BYT Circular on instructions for implementation of Ministry of Health health care for older persons 15/NQ-TW Resolution of the 11th Central Executive Committee on social policy issues for the period 2012-2020 8 Oct 2012 81/ND-CP Circular with requirements for social Government protection centers in relation to their environment and facilities to be licensed to care for older persons 22 Nov 2012 1781/QĐ-TTg Decision approving The Vietnam National Prime Minister Action Program for the Elderly for the period 2012-2020 15 Oct 2012 85/ND-CP Decree outlining roadmap to adjust elderly care services 29 Mar 2013 538/QD-TTg Decision on approving process for universal Prime Minister coverage of health insurance project for 2012- 2015/ 2020. 21 Oct 2013 136/NĐ-CP Decree on Social Assistance Government 24 May 2013 07/TT-BLDTBXH Circular about professional standards MOLISA for social work collaborators working in communes/wards/townships 8 Mar 2013 07/TTBYT Circular about Village Health Workers (VHW) Ministry of Health tasks under project of health care for older persons 10 Jun 2013 09/TTLT-BLDTBXH- Joint Circular on functions, powers, rights and MOLISA BNV organizational structure of public social work Ministry of Home centers Affairs 2 Oct 2015 37/TTLT-BLDTBXH- Joint Circular on functions, powers, rights MOLISA BNV and organizational structure of Provincial Ministry of Home Department of Labor, Invalids and Social Affairs Affairs and District Division of Labor, Invalids and Social Affairs 16 Jun 2014 59/ND-CP Decree amends decree no 69/2008/ND-CP to Government expand socialization in the area of verification 24 Oct 2014 29/TTLT-BLDTBXH- Circular on training for volunteer caregivers MOLISA BTC MOF 25 Jan 2014 197/QĐ-TTg Decision on Strengthening Vietnam National Prime Minister Committee of Aging 20 Apr 2015 524/QD-TTg Decision on strengthening and developing the Prime Minister network of social assistance facilities for the period 2016-2025 2 Aug 2016 1533/QD-TTg Decision on approving the Project for Prime Minister expanding intergenerational self-help club 2015 524/ QD-TTg Decision to guide the prevention of disease, MOH provision of health care, medical examination and treatment, and rehabilitation for people living in social protection establishments 27 Oct 2015 33/TT-BYT Circular about CHS tasks under the Project of Ministry of Health health care for older persons. VIETNAM: ADAPTING TO AN AGING SOCIETY 223 No. Date Reference No Topic(s) Issued By 19 Aug 2015 30/TTLT-BLDTBXH- Joint Circular about professional standards MOLISA BNV for public employees working in the field of social work 2 Oct 2015 37/ TTLT- Joint Circular to develop the network of social MOLISA BLDTBXH-BNV protection establishments for older persons 10 Oct 2016 141/ND-CP Decree regulating revenue-generated public Government service entities/socialization 30 Dec 2016 7618/QĐ-BYT Decision on Health Care for the Elderly Ministry of Health Project for the period 2017 – 2025 2 Feb 2017 01/TT-BLDTBXH Circular on ethical and professional standards MOLISA for social workers 12 Sept 2017 103/ND-CP Decree on the establishment, organizational structure, operation, dissolution, and Government management of social assistance facilities 29 Dec 2017 33/TT-BLĐTBXH Circular guiding the organizational structure, Ministry of Labor, staff norms, processes, and standards Invalids and Social of social assistance at social assistance Affairs facilities 18 Oct 2018 96/TT-BTC Circular on management and use of budget Ministry of for taking care of older persons, including Finance primary health care and access to preferential credit Source: Authors; Phong and Nam (2019); MOLISA (2019) (WB/ADB Report); Ministry of Health of Vietnam and Health Partnership Group 2016 (2016); UN SP JPG (2015). Publishing licence No: 899-2021/CXBIPH/48-27/TN and 411/QĐ-NXBTN issued on 19th March 2021 224 VIETNAM: ADAPTING TO AN AGING SOCIETY JICA Vietnam The World Bank in Vietnam A 11th Floor, 16 Phan Chu Trinh St., Hanoi A 8th Floor, 63 Ly Thai To St., Hanoi T (84-24) 3831 5005 T (84-24) 3934 6600 F (84-24) 3831 5009 F (84-24) 3935 0752 W http://www.jica.go.jp/vietnam/index.html W www.worldbank.org.vn