The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 1 VIETNAM FISCAL UPDATE THE DISTRIBUTIONAL IMPACT OF COVID 19 FISCAL POLICIES ON HOUSEHOLDS, WITH EMPHASIS ON DA NANG CITY @2021 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 and its Board of Executive Directors. The World Bank do not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations and other information shown on any map in this work do not imply any judgement on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of the World Bank, all of which are specifically reserved. All queries on rights and licenses should be addressed to the Publishing and Knowledge Division, the World Bank, 1818 H Street NW, Washington DC, 20433, USA, Fax: 202-522-2625; email: pubrights@worldbank.org. Cover picture: Tang Trung Kien/Shutterstock Contents Abbreviations 6 Acknowledgements 7 1. Summary 8 2. Social assistance background in Vietnam 10 3. Social assistance policy changes during COVID-19 12 4. The impact on households 16 5. Lessons and challenges from social assistance implementation during COVID-19 22 6. Recommendations 28 Annex II.1. Timeline of COVID-19 development and policies in Da Nang 31 Annex II.2. List of national and Da Nang policies (resolutions and decisions) 32 References 33 Tables Table II.1. Existing social assistance beneficiaries (pre-COVID) 13 Table II.2. Household COVID-19 relief (planned compared to implementation) 14 Table II.3. Share of the population receiving social assistance before and during 15 the COVID-19 outbreak (% of population) Table II.4. Spending on social assistance before and during the COVID-19 outbreak (% of 2019 GDP) 16 Table II.5. Social assistance (% of households) 17 Table II.6. The highest share of recipients of COVID-19 benefits targeted to new applicants 18 were in the Northern and Coastal Central region Table II.7. Simulated cash transfers – scenarios (in VND) 19 Table II.8. Summary of redistribution effects on poverty in 2020 22 Table II.9. Disbursement of Covid-19 income support package in Da Nang in 2020 25 Figures Figure II.1. Incidence of households by policy target groups 20 Figure II.2. Distribution of households receiving benefits, by decile and scenario 20 Figure II.3. Average benefit, by decile and scenario 21 Figure II.4. Mobility trends, February 2020–February 2021 24 6 Note II Abbreviations COVID-19 coronavirus disease 2019 DOLISA Department of Labor, Invalids and Social Affairs GDP gross domestic product GRDP gross regional domestic product GSO General statistics office SA social assistance VND Vietnamese dong WB World Bank The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 7 Acknowledgements This note on The Distributional Impact of Covid-19 Fiscal Policies on Households, with Emphasis on Da Nang City has been prepared as part of the Vietnam Fiscal Update 2021, a second report in a programmatic series. This report analyzes the impact of Covid-19 on Vietnam’s public finance. It consists of four notes that aim to provide timely and relevant information and policy recommendations to the development of the Ministry of Finance’s ten-year financial strategy (2021-30) and technical assistance to the Government to adopt good practices in fiscal policy and public finance management reforms. Key contributors to this note were Nguyễn Nguyệt Nga, Nguyễn Thị Nga, Harry Edmund Moroz, Judy Yang, Phạm Bảo Hà, Matthew Wai-Poi and Dorsati Madani. Quality review and assurance on earlier drafts have been provided by colleagues across the World Bank Group, including Arvind Nair (Senior Economist), Oleksii Balabushko (Senior Public Finance Specialist), Naira Melkumyan (Senior Country Officer), and Nguyễn Hồng Ngân (Senior External Affairs Officer). The report was also enriched by consultations with the government, development partners, and policy institutions. Comments were received from various departments of the Ministry of Finance (MOF); Da Nang Department of Finance; Ministry of Labor, Invalids, and Social Affairs (MOLISA). We would like to acknowledge the strong support and contribution from Mr. Nguyễn Minh Tân (Deputy Director, State Budget Department, MOF). The team is grateful for the overall guidance of Carolyn Turk (Country Director for Vietnam); Hassan Zaman (Regional Director, Equitable Growth, Finance and Institutions Practice, East Asia and the Pacific); Stefanie Stallmeister (Operations and Portfolio Manager for Vietnam); Deepak Mishra (former Practice Manager, Macroeconomic Trade and Investment Global Practice); Sebastian Eckhardt (Practice Manager, Macroeconomic Trade and Investment Global Practice); Fily Sissoko (Practice Manager, Governance Global Practice); Jacques Morisset (Program Leader); and Matthew Wai-Poi (Lead Economist). The report benefited from the administrative assistance of Le Thi Khanh Linh, and communications support from Nguyen Hong Ngan and Le Thi Quynh Anh of the World Bank Vietnam Country Office. 8 Note II The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 9 Summary This note will examine the distributional and efficiency issues associated with the fiscal response to the COVID-19 crisis in Da Nang city and nationally in Vietnam.1 More specifically, we look at the social assistance (cash transfer) programs. Did these programs efficiently reach people who were the most in need? Was the amount of support and the duration of programs sufficient? Based on the World Bank COVID-19 monitoring surveys, national-level results indicate that cash transfer programs may have ended prematurely and were not received by the poorest groups or by those who lost their jobs due to pandemic-related factors. Official data also show that the scope of the implementation was smaller than planned, both in the number of new beneficiaries who received access and in terms of the amount spent. While Viet Nam managed the first three waves of COVID-19 infection in 2020 well, the fourth wave that started in early 2021 has been significantly more complicated and led to acute negative impact on public health, livelihoods, and the economy. In response to the pandemics, the Government has issued the second support packages in July 2021 under the Resolution 68/ NQ-CP. The design of the second package has addressed some challenges faced by the first package in regard to adding new beneficiaries and further decentralization in targeting. Pregnant women, women with children, formal and informal workers working in a number of occupations including artists and tour guides are added to this package. Local authorities decide on criteria for identifying their eligible beneficiaries and mobilize local existing (contingency) budgets to cover the locally identified beneficiaries. However, challenges in the design and implementation of this package still remain, especially targeting new beneficiaries and budget constraints in poor provinces. This note covers the first year of the COVID-19 crisis, therefore its analysis stops at about March/April 2021 and does not examine the impacts of the second support package. This note will take a closer look at the following interconnected issues: (i) A review of the national social assistance system and the system’s policy response to the COVID-19 crisis. (ii) The impact of various social assistance scenarios on household welfare (fiscal incidence analysis) at the national level to shed light on potential policy options available to the national government. (iii) The impact of COVID-19 relief aid policies on households in Da Nang We find: (i) Vietnam’s social assistance system has evolved from one providing only basic, last-resort income support to people who are unable to work to one that seeks to address multiple challenges for different vulnerable groups. Significant coverage expansion has taken place driven by a broadening of coverage to the elderly, people with disabilities, and orphans, and by responses to “socialization” drawbacks and income support linked to privatization of energy prices. However, the system spends relatively little, benefit levels are low, and coverage is limited. The national level fiscal incidence analysis compares the targeting and welfare results of increasingly generous cash transfer scenarios. The first scenario emulates Vietnam’s program while the third assumes higher numbers of beneficiaries and benefits. The 1 This note covers the first year of the COVID-19 crisis, therefore its analysis stops at about March/April 2021. 10 Note II analysis finds minimal welfare impacts as the amount of cash support provided was small, even under the most generous scenario, where household incomes only increased VND 2 million on average for the year. The poverty reduction impact of the actual COVID-19 income support (Scenario #1) was mild and did not improve substantially under other two scenarios. (ii) Da Nang was relatively successful in rolling out two COVID-19 relief packages to its citizens. With lessons learned from the experience of the first rollout, the second support package was deployed more promptly. (iii) The Da Nang roll-out also faced challenges, including in the narrow definition of the beneficiary groups and with verifying the eligibility of applicants, as well as the complexity of application procedures and large number of processes and checks. Policy suggestions include: (i) Provide support based on periodic analysis of the economic crisis and its impacts on various sectors and groups. In this case, extending duration of support would have been warranted given the lingering COVID-19 effects. (ii) Increase the amount of benefits to those in need. The amount of benefits is small from a welfare or income loss perspective. From an income loss perspective, minimum wages are nearly 5 million VND per month, while benefits to informal workers who lost their jobs was 1 million VND per month. From a welfare perspective, simulated scenarios estimate a VND 500,000 per capita increase in household welfare for the entire year, or VND 41,667 per capita per month. This amount is small. For example, the World Bank $3.20/day 2011 PPP poverty line converts to just under VND 1 million cash support was small. (iii) Ensure timely and effective delivery of assistance in the immediate aftermath of a large shock, by simplifying targeting criteria and eligibility conditions to ensure most affected people can obtain assistance quickly and effectively. Alternatively, the support package can be disbursed on an “on-demand” and “no-targeting” basis or based on the simple the criteria of “losing one’s job. ” This recommendation is particularly relevant to informal workers, who are not traditional recipients of state assistance. Fine-tuning of targeting and eligibility criteria can be undertaken if the crisis is longer lasting and data on potential beneficiaries have been collected and beneficiaries later identified. (iv) Improve the intake and delivery system. In the short term/immediate future, leverage technology to facilitate self-registration/online registration to identify informal workers for assistance. In the longer term, establishing an integrated social registry—that is, a harmonized social protection information system that supports outreach, intake, registration, and eligibility determination for multiple programs— can be the foundation of an integrated social protection delivery network. (v) Improve delivery of social assistance benefits by digitalizing the payment mechanisms would help make payments more efficient, transparent, safe, and fast. Direct deposit into a checking account or cash card or provision of mobile banking to beneficiaries would be safe, more efficient, and transparent. The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 11 Social assistance background in Vietnam2 Viet Nam already has a fairly extensive set of social protection programs in place. They are social insurance schemes (mandatory for employees with contract over 1 month and voluntary for others) and Unemployment Insurance (compulsory for workers with contract above 3 months); a health insurance system which cover full subsidies of the premium for the poorest and children under 6, voluntary affiliation and partial subsidies for other categories); social assistance (cash transfer) programs (regular benefits and emergency relief); and a large number of programs targeted to specific vulnerable groups, areas and sectors including exemptions from education fees; preferential credit policies for livelihood; support for housing construction; migration programs to reallocate labor resources, etc. Vietnam’s social assistance system has evolved. It has developed from one providing only basic, last-resort income support to people who are unable to work to one that seeks to address multiple challenges for different vulnerable groups. In the 1990s, a basic social assistance system began providing direct cash transfers and in-kind support to those unable to work and without family support. In the 2000s and 2010s, the system matured with the introduction and expansion of a social pension for older people; programs to help poor and vulnerable households (including ethnic minorities) adjust to socialization reforms; education-related programs including scholarships, lunch subsidies, and tuition fee exemptions; health-related programs including subsidized premiums; and an electricity subsidy. These programs were complemented by several poverty reduction programs that incorporate social assistance such as the National Target Poverty Reduction Program’s lump sum payments for housing, production land, and clean water and other programs that provide cash or in-kind support to ethnic minorities. In the past 15 years, Vietnam’s social assistance system has become broader and somewhat more protective. Significant coverage expansion has taken place driven by a broadening of coverage to the elderly, people with disabilities, and orphans, and by responses to “socialization” drawbacks and income support linked to privatization of energy prices. This evolution has led to a social assistance system composed of the following main program categories. n “Regular” social assistance for poor and vulnerable individuals and households. These include social transfers for specific groups including the elderly, people with disabilities, orphans, and single parents; cash transfers to assist poor households with electricity prices; and cash transfers, fee exemptions, subsidies, and in-kind support to expand access to education and health care for poor and vulnerable households. n Irregular/emergency/post-disaster social assistance. This includes one-time support (cash or in-kind) for households affected by unforeseen circumstances or personal crises. n Social care for specific vulnerable groups. Care services are provided to groups including the elderly, people with disabilities, orphans, and single parents through an institutional care system of residential and nonresidential or community care services in partnership with civil society organizations. Benefits include monthly allowances, rice, and services including medical care, counseling, education, and training. 2 Phần này được soạn thảo dựa trên Dutta và Sen (2018). 12 Note II Most social assistance support is regulated under Decree 20. Following this decree, around 2.8 million people receive regular cash transfers, around 50 percent of whom are elderly. Decree 20, which was issued in 2021, replaced Decree 136 and increased the basic benefit level from VND 270,000 (US$11) to VND 360,000 (US$15), and expanded coverage to people age 75 to 80 and to children under age three in poor families living in ethnic minority and mountainous areas. Depending on financial viability, some provinces such as Hanoi and Ho Chi Minh City increase the level of support to beneficiaries. The Ministry of Labor, Invalids, and Social Affairs (MOLISA) has the mandate for social assistance. The social assistance system is highly decentralized, with social assistance budgets determined at the local level, and provincial authorities are entirely responsible for implementation, with little central oversight or monitoring. Provinces can introduce new programs and expand existing ones using their own resources (for example, changing benefit levels or eligibility). All the while they must cover the beneficiaries under the national program. As a result of these multiple centers of policymaking and implementation, programs have separate budgeting and delivery mechanisms. However, benefit levels are low, and coverage is limited. Benefit levels are quite low both overall and at the household level. They are also declining in value over time because they are not indexed to inflation. About 17.6 percent of households reported receiving a social benefit of some kind in the 2018 Vietnam Household Living Standards Survey.[1] In 2019, of 13.5 million elderly aged 60 and older, only 23.5 percent received monthly pensions and about 12 percent (for elderly aged 75 and above) received monthly social assistance benefits or a social pension. The social assistance system faces several challenges that have affected Vietnam’s ability to support vulnerable households during the COVID-19 outbreak. Despite the existence of many social assistance policies, programs are fragmented and there is no backbone social assistance program to provide strategic coherence. The ability to respond to crises is limited by the large informal workforce. In 2019, only 26.5 percent of the labor force was covered by social insurance, and much of the rest of the workforce is outside the social protection system and so is difficult to help in case of an emergency. Classification of beneficiaries is piecemeal, including more than 10 groups. Coverage is particularly low in the existing support programs that aid in the case of emergency. Eligibility and support are currently fixed by policy, which makes them difficult to adapt to new situations because time-consuming policy revisions are needed for adjustments to be made. The delivery system is fragmented in part because of the prominent role played by local authorities, and relies on manual, cumbersome, and time- consuming registration, enrolment, case management, and payment procedures. For instance, registration of new beneficiaries is paper based, requires several kinds of documentation, and involves submission of documents to multiple local authorities. Payments are done mostly in cash, which is more time-consuming than digital payments and increases the risk of theft. [1] Including social assistance, merit people (National Devotees), or disaster relief benefits. 3 There are at least 28 targeted programs that are implemented by the local government, and they are not well coordinated. The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 13 Social assistance policy changes during COVID-19 In 2020, the government responded swiftly by passing multiple resolutions to support people facing difficulties caused by the COVID-19 pandemic. As part of the COVID-19 household relief strategy, households already registered in social assistance programs (existing vulnerable groups) received “top-ups.” Estimates of the number of beneficiaries receiving social assistance pre-COVID nationally and in Da Nang city are shown in table II.1. Da Nang has improved living conditions; thus, the number of existing social assistance beneficiaries is small as a percentage of total beneficiaries in the whole country. Table II.1. Existing social assistance beneficiaries (pre-COVID) Categories of existing Estimated number of Average benefit amount vulnerable groups beneficiaries (monthly) Whole country People in poor and near-poor households (national poverty line) 7 million people VND 750,000 per person Social assistance beneficiaries 2.84 million people VND 1.5 million per person Merit people (National Devotees)a 1 million people VND 1.5 million per person Da Nang city People in poor and near-poor households (Da Nang’s poverty line 63,000 people VND 750,000 per person Social assistance beneficiaries 33,000 people (central policy) VND 1.5 million per person 5,000 people (city’s policy) VND 1.3 million per person Merit people (National Devotees) 20,000 people VND 1.5 million per person Note: a. Merit people (or National Devotees) are people who have contributed during “revolution and war times.” For pre-COVID spending, Dutta (2019) estimates for 2018 are used. Additional categories of households not already registered in the social protection system were identified that were eligible to receive payments, including informal and contracted workers (the new target groups). The original target of new beneficiaries was 5 million workers. However, due to the strict criteria4 and the lack of data on informal sector workers that could be verified or cross-checked against social insurance or other databases, the program was smaller in scale than originally proposed (table II.2). The most recent MoLISA’s report notes that around 1 million displaced workers qualified for the benefit. The government paid for the actual number of months of job loss, so most people only received VND 1 million for one month, as the closure started in April and ended in June 2020, though some workers received benefits for multiple months. The additional or horizontal expansion through this new program, therefore, would only cover about 1.12 percent of the population, one of the smallest increases in the East Asia and Pacific region. 4 These criteria are related to type of jobs, verification of employment, informal workers, and residency verification. The conditions in the government support package targeted informal workers in specific jobs including street vendors; garbage and scrap collection; carrying and transporting goods; driving two-wheel motorbikes for passenger and pedicab vehicles; retail sale of mobile lottery tickets; and self-employed or household catering, accommodation, tourism, healthcare, beauty, sports, and entertainment businesses that are difficult to verify. This becomes even more difficult as the whole process was implemented manually. 14 Note II Table II.2. Household COVID-19 relief (planned compared to implementation) Natinal Estimated Implementation No. of Amount/ Cost No. of Cost Spending persons month (billion VND) persons (billion VND) per person Income support to existing vulnerable groups Poor and near-poor households 9,200,000 250,000 6,900 7,001,991 5,374.15 767,517 SA beneficiaries 3,000,000 500,000 4,500 2,839,544 4,227.65 1,488,849 Merit people (National Devotees) 1,135,000 500,000 1,703 991,907 1,483.05 1,495,154 Income support to new target groups Contracted employees on temporary unpaid leave for at least 1 month, 1,000,000 1,800,000 5,400 139,180 141.76 1,018,508 or not qualified for UI benefit Informal sector employees affected 5,000,000 1,000,000 15,000 1.04 million 1.027 980,000 Tax-registered household 760,000 1,000,000 2,280 32,409 40.19 1,239,995 businesses with income VND <100 million per year Source: World Bank, Social Protection and Jobs. Note: SA = social assistance; UI = unemployment insurance. Comparison of Vietnam’s policy response to other EAP countries Vietnam’s assistance was of shorter duration than other countries in the region.5 Vietnam’s expansion of social assistance in response to the COVID-19 outbreak was in line with the introduction of new and/or expanded programs in most countries in the region. Unlike in Vietnam, many countries in the region including Cambodia, Indonesia, Malaysia, Mongolia, the Philippines, and Thailand, have extended cash transfers into 2021. Vietnam’s measures lasted between April and June 2020. Vietnam expanded coverage less than other countries in East Asia. Before the outbreak, Vietnam had the fifth-lowest share of population receiving social assistance benefits at 16 percent, significantly lower than Malaysia’s 64 percent and Thailand’s 71 percent (table II.3). All existing beneficiaries in Vietnam received top-ups. The share of the population added as new beneficiaries was also low at 11 percent, which is the third lowest among countries in East Asia that added new beneficiaries. As a result, the total beneficiaries receiving social assistance during the COVID-19 outbreak was 28 percent of the population, the third lowest in the region above only China and Cambodia. 5 This section is based on the World Bank EAP Social Protection and Jobs database. The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 15 Table II.3. Share of the population receiving social assistance before and during the COVID-19 outbreak (% of population) Country Pre-COVID Pre-COVID Pre-COVID bens New Total beneficiaries beneficiaries receiving new beneficiaries beneficiaries receiving top up payments Percentage of the population China 3.1 3.1 0 2.9 5.9 Cambodia 1.5 0 1.5 14.9 16.4 Fiji 34.0 34.0 0 14.1 48.1 Indonesia 13.3 13.3 0 51.7 64.9 Lao NA NA NA 0 NA Malaysia 63.5 0 63.5 24.7 88.2 Mongolia 84.8 84.8 0 13.5 98.3 Myanmar 3.4 3.4 0 45.9 49.3 PNG .52 0 0 0 .52 Philippines 35.3 17.1 18.6 46.7 82.4 Samoa 26.8 26.8 26.8 73.2 100.0 Thailand 71.3 21.1 50.2 10.4 81.7 Timor-Leste 66.0 0 66.0 27.4 93.4 Tonga 36.1 36.1 0 29.1 65.1 Vietnam 21.5 21.5 0 9.4 30.9 Source: World Bank Social Protection and Jobs database. Note: Estimates based on figures reported by the government in official documents or the media. The figure for China is a lower bound due to the lack of subnational data. NA = not available. Vietnam also spent less on COVID-19-related social assistance than other countries in the region. Prior to the outbreak, Vietnam spent the fifth-highest amount on social assistance as a percentage of 2019 GDP (table II.4). Vietnam spent about 0.09 percent of GDP on top-ups for existing beneficiaries during the COVID-19 outbreak, ahead of only Indonesia among countries that offered top-ups. Consistent with the low number of new beneficiaries described above, Vietnam spent only 0.11 percent of GDP on new social assistance beneficiaries (informal workers), the second lowest in the region among countries that extended social assistance to new beneficiaries and well behind Indonesia’s expansion of 0.67. As a result of the modest top-up spending and the low spending on new beneficiaries, Vietnam’s total spending on social assistance during the pandemic was 0.86 percent of GDP, one of the lowest in the region and significantly lower than Mongolia’s 4.2 percent, Thailand’s 3 percent, and the Philippines’ 2.1 percent. 16 Note II Table II.4. Spending on social assistance before and during the COVID-19 outbreak (% of 2019 GDP) Country Pre-COVID Pre-COVID Pre-COVID CNew Total spending beneficiaries receiving beneficiaries new beneficiaries COVID-19 top-up spending program spending spending spending China 1.56 NA NA 0.09 1.65 Cambodia 0.09 0.00 0.00 0.63 0.72 Indonesia 0.28 0.05 0.00 0.67 0.95 Lao 0.04 0.00 0.00 0.00 0.00 Malaysia 0.53 NA NA NA 1.40 Mongolia 1.77 1.79 0.00 0.60 4.16 Myanmar 0.08 0.09 0.00 0.53 0.62 Philippines 1.19 1.03 0.30 0.62 2.12 Thailand 0.77 0.15 1.70 0.40 3.00 Vietnam 0.66 0.09 0.00 0.11 0.86 Source: World Bank Social Protection and Jobs database. Note: Estimates based on bottom-up calculations. Other countries had more success than Vietnam in adding new beneficiaries and in creating more accessible payment mechanisms. Cambodia and Indonesia used existing lists of potential beneficiaries to expand coverage. Indonesia also created a new transfer that used both paper and online registration. Malaysia and Thailand created temporary new programs that used online applications and cross-checks of existing databases (for example, social insurance databases). Cambodia used the country’s largest mobile money operator to create a cash-out facility. Payments were generally made to transactional bank accounts in Malaysia, Mongolia, and Thailand. Annex II.2 provides a detailed list of policies and measures adopted in Vietnam, especially in Da Nang city, since April 2020. The impact on households Data from the World Bank COVID-19 household monitoring surveys confirm that many households applied for but did not receive any COVID-19 relief. In response to the negative economic impacts from COVID-19 experienced by households, the Vietnamese government implemented an income support program to supplement to existing social assistance (SA) programs—about 20 percent of households received some form of SA pre-COVID-19—and include three new groups including laid off informal workers and contracted workers not qualified for unemployment insurance, and household businesses.6 However, the benefit amounts were modest, initial program implementation was uneven, slow and poorly targeted. For instance, households were to receive VND 250,000 (US$10.80) per person for three months (table II.2). Benefits were generous relative to other countries in the region but were modest as income replacement for Vietnamese displaced workers. Beneficiaries of COVID-19-related social assistance support in Vietnam received larger benefits than those in several other countries in the region. The amount per beneficiary (normalized by GDP per capita) was higher in Vietnam The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 17 than in all other countries in the region except Mongolia and Thailand. Still, social assistance payments to displaced workers and wage subsidies were modest relative to their income levels. The flat rate of VND 1 million for displaced workers and of VND 1.8 million for wage subsidies was just 17 percent and 30 percent, respectively, of the average monthly income in Vietnam in the second quarter of 2020. Unemployment benefits were more generous with an average monthly benefit of VND 3 million per beneficiary. Wage subsidies and loans for payment of salaries were also modest relative to responses internationally. Wage subsidies were provided at a flat rate, regardless of salary, while loans covered only 50 percent of an employee’s wages. This contrasts with the experience in OECD countries where most, though not all, countries covered the full cost of hours not worked by idled workers (OECD 2020). In addition, disbursement of new COVID-19 relief packages was low at the time of the first round of World Bank COVID-19 surveys undertaken in June 2020. About 10 percent of households applied to the new COVID-19 relief programs. About 1 in 10 households that had applied for new relief received it.7 Urban areas had slightly higher rates of receipt: 13 percent of households in urban areas had received relief compared to 10.3 percent of households in rural areas. About 4 percent of households received in-kind food relief.8 The receipt of new COVID-19 relief was also relatively even across the income distribution (table II.5), which indicates that poor households were not necessarily prioritized in being granted relief. By July, the initial national “Wave 1” programs ended. Table II.5. Social assistance (% of households) In 2020... Since February… Classified as Received Received Received Applied for new Received new poor in your support for support from cash support COVID-19 relief COVID-19 relief commune purchasing any Vietnam or for existing programs programs health insurance int’l orgs vulnerable groups All 6.6 38.3 7.7 19.8 10.2 1.2 Urban 3.7 31.5 4.6 14.2 13.7 1.8 Rural 8.1 41.8 9.4 22.7 8.4 0.9 Top 60 2.4 31.7 4.7 13.1 11.4 1.4 Bottom 40 13.3 48.7 12.5 30.4 8.3 0.9 Kinh majority 4.8 33.3 6.9 18.5 10.8 1.3 Ethnic minority 16.8 66.1 12.5 26.7 6.8 0.7 Source: WB Round 1 Vietnam COVID-19 high-frequency results snapshot note, Poverty and Equity Global Practice. Note: Existing targeted social assistance programs include cash support for poor and near-poor households, social assistance beneficiaries, and merit people or National Devotees. 6 This is discussed in more detail in World Bank (2020). 7 Households in urban areas were slightly more likely to apply, reflecting that economic centers are harder hit: 13.7 percent of households in urban areas and 8.4 percent of households in rural areas applied. While the bottom 40 percent and ethnic minor- ities are the poorest groups, they were also the least likely to apply for new COVID-19 relief. 8 The adoption and use of Rice ATMs took off quickly. About 4 percent of households received in-kind food relief, which is highly likely related to the new rice ATMs. These semi-automated machines dispensed 1.5 kilograms to 2 kilograms of rice at a time. While these ATMs were initially installed in Ho Chi Minh City to support those experiencing job loss amid the pandemic, more were installed across the country in collaboration with private donors and sponsors. 18 Note II Data in late 2020 show that the region including Da Nang had a higher percentage of households receiving COVID-19 benefits for new target groups. Nationally, 1.5 percent of households received some benefits from COVID-19 relief targeted to new groups. In the Northern and Coastal Central region where Da Nang is located, the share was higher at 2.5 percent of all households (table II.6). The success rate of applicants was also higher than average in this region. Over half of all households that applied for COVID-19 relief for new target groups received benefits between July and September 2020. Round 3 of the survey was conducted in early September, so it is possible that even more applicants received benefits afterward. Table II.6. The highest share of recipients of COVID-19 benefits targeted to new applicants were in the Northern and Coastal Central region New target group relief July–September 2020 Applied Received All 3.2% 1.5% Urban 4.2% 2.2% Rural 2.7% 1.1% Top 60 3.9% 1.7% Bottom 40 2.1% 1.0% Kinh majority 3.4% 1.6% Ethnic minority 2.5% 0.8% Red River Delta 3.1% 1.4% Midlands and Northern Mountainous Areas 1.9% 0.9% Northern and Coastal Central 4.8% 2.5% Central Highlands 0.9% 0.1% Southeastern Area 4.0% 1.0% Mekong Delta 2.4% 1.5% Source: WB Round 3 VNM COVID-19 household monitoring surveys. The fiscal impact on households nationwide from COVID-19 relief9 To measure the impact of realized COVID-19 relief aid on household welfare, this next section discusses results from simulated cash transfers under various scenarios of benefits and targeting at the national level. The fiscal simulation measures the impact of COVID-19 policies on household welfare in a simple manner. First, a negative income shock based on COVID-19 growth impacts is applied to the universe of households under a distributional neutral method (income growth for poor and rich households decline by the same percentage). This sets a benchmark of poverty in 2020 on which to compare the results of targeting and welfare impacts between various scenarios of SA programs. 9 Household surveys used for simulating the fiscal impact of households are not representative at the provincial level. Thus, this section discusses results broadly for Vietnam at a national level, and not for the Da Nang region specifically. The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 19 The main purpose of this exercise is to compare the targeting and welfare results between cash transfer scenarios. Households are selected to receive income support under various scenarios described in Table II.7 below. Scenario #1 is based on the actual disbursements and number of beneficiaries (See Table II.2). Scenario #2 simulates benefits assuming a larger number of beneficiaries, and Scenario #3 considers a larger roll-out both in terms of the number of beneficiaries and the duration of benefits. The General Statistics Office (GSO) estimated that an additional 2.4 million informal workers lost their jobs in 2020 compared to 2019. However, households lost income even if they did not lose their jobs. The GSO estimates that by the first quarter of 2021, 32 million workers were affected by COVID-19, either through job, working hours, or income loss (GSO, 2021a). Beneficiary analysis for scenarios #2 and #3 use both statistics as benchmarks for the number of workers who could have benefitted from cash support. The total costs of these scenarios range from VND 13.49 to VND 208.2 trillion. Vietnam’s budget allocation in April 2020 for COVID-19 related relief to households and businesses was VND 62 trillion. Table II.7. Simulated cash transfers – scenarios (in VND) Scenario # 1 – Based on Scenario #2 – Assuming larger Scenario #3 - Longer actual (rounded) roll-out to more informal workers duration (6 months) No. of Spending per person No. of Spending per person No. of Spending per persons (3 months total) persons (3 months total) persons person Income support to existing vulnerable groups Poor & near-poor households 7 million 770,000 7 million 770,000 7 million 250,000 x 6 months Social assistance beneficiaries 2.8 million 1.5 million 2.8 million 1.5 million 2.8 million 500,000 x 6 months National Devotees 1 million 1.5 million 1 million 1.5 million 1 million 500,000 x 6 months Income support to new target groups Informal workers 1 million 1 million 2.4 million 1 million 2.4 million 1 million x 6 months OR OR OR All affected workers 32 million 32 million Total cost 12.09 trillion 13.49 trillion 30.6 trillion OR OR 43.09 trillion 208.2 trillion Results – Targeting There are two observations on beneficiary targeting worth noting related to the distribution of existing vulnerable groups (poor and SA recipients) and new target groups (informal workers) (figure II.1). The existing vulnerable population are those that are already receiving income support under poor, near-poor, SA, or merit (National Devotee) programs. Households that are classified as poor in their communes and receive SA represent most of the poor (figure II.1, panel A). The groups of National Devotees are people receiving other social protection benefits so are categorical target groups and are not related to poverty targeting. 20 Note II The main new beneficiary group for COVID-19 relief was informal workers. Informality is widespread. Twenty-one million households, or 81 percent of all households, have at least one household member who either has a wage job without a contract, is engaged in self-employed agriculture, or is engaged in self-employed business. Based on actual disbursements, it is clear that COVID-19 relief aid to informal workers reached only a very small segment of potential recipients in this group (table II.3). Actual disbursements also showed that very few households received income support for informal workers (table II.2). Khả năng gói hỗ trợ COVID-19 đến được hộ nghèo cao hơn do các nhóm dễ bị tổn thương hiện Beneficiaries from COVID-19 relief were more likely to be received by poor households since existing vulnerable groups were approved recipients. 48 percent of households in the poorest welfare decile received COVID-19 relief in the form of top-ups. However, the value of top-ups to Poor and Near-Poor households is lower than amounts provided to informal workers. Scenarios #2 and #3 considered program expansions to a larger number of informal workers from 1 to 2.4 million workers. However, this only marginally increased the incidence of beneficiaries. Nationally, the incidence of households receiving benefits in Scenarios #1 and #2/3 are 11.2 and 12.6 percent, respectively. Results by region show that increasing the target of informal workers has the largest improvement in poorer regions. For example, the share of households receiving benefits increases from 7.2 percent to 8.9 percent in the Central Highlands region (figure II.2). Figure II.1. Incidence of households by policy target groups Panel A Panel B Incidence of households receiving social benefits Incidence of households with informal workers Note: Merit or National Devotee income, social assistance, and social protection are based on declarations of income received in these categories. Poor households are those that were defined to be poor in their commune in 2018. Source: WB staff calculations using Vietnam Household Living Standards Survey 2018. The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 21 Figure II.2. Distribution of households receiving benefits, by decile and scenario Source: WB staff calculations using VHLSS2018. Results – Welfare The amount of cash support provided was small, even under assumptions of program expansion, which led to minimal welfare impacts. Under the most generous scenario, household incomes only increased VND 2 million on average for the year (Figure II.3). Since welfare is measured in per capita terms, this is at best a VND 500,000 per capita increase in household welfare for the entire year, or VND 41,667 per capita per month. This amount is small. For example, the World Bank $3.20/day 2011 PPP poverty line converts to just under VND 1 million cash support was small. Figure II.3. Average benefit, by decile and scenario Source: WB staff calculations using VHLSS2018. 22 Note II Due to the growth slowdown during COVID-19, 2020 poverty rate is estimated to increase by 0.68 percentage points compared to estimates made pre-COVID.10 Estimations show that an adverse growth effect increased poverty estimates in 2020 by 0.68 percent points (from 5.01 to 5.69 percent) (table II.8). These poverty rates serve as the baseline on which to compare the redistribution and welfare impact from cash transfer scenarios. The poverty reduction impact of the actual COVID-19 income support (Scenario #1) was mild. Under the lower-middle income poverty lines, the reduction in poverty rates were minimal from actual rollouts (Scenario #1). However, poverty reduction impacts are also not that much better under scenarios of expanded coverage to 2.4 million informal workers since informal workers are present across the entire distribution (Scenario #2 and #3). The expansion along the extensive margin by increasing the target number of informal workers to 2.4 million, was only marginal. Also, neither scenario #1 nor scenario #2 improved the welfare distribution adequately to achieve poverty reduction when considering only informal workers. The addition of the expansion along the intensive margin did yield some gains in welfare and poverty reduction, but these gains were still small when only considering expansions to 2.4 million informal workers (table II.8). Table II.8. Summary of redistribution effects on poverty in 2020 LMIC Poverty Line ($3.20/day 2011 PPP) Scenario #2 Baseline 2020 Scenario Larger roll-out to informal Scenario #3 poverty rates #1 or people who lost their Longer duration jobs Calculated Calculated Based 2.4 million 32 million 2.4 million 32 million pre-COVID after on actual informal workers informals workers COVID-19 (rounded) Red River Delta 0.62 0.99 0.97 0.97 0.94 0.97 0.81 Midlands and Northern Mtns 17.05 19.58 19.48 19.48 18.90 19.02 17.76 Northern and Coastal 4.52 4.93 4.79 4.79 4.79 4.63 4.32 Central Highlands 16.60 17.60 17.60 17.60 17.56 17.52 16.37 Southeast 0.24 0.36 0.36 0.36 0.36 0.36 0.24 Mekong Delta 1.12 1.39 1.34 1.34 1.29 1.19 1.10 Nationwide 5.01 5.69 5.63 5.63 5.53 5.50 5.09 Note: PPP = purchasing power parity. Source: World Bank staff calculations. Welfare impacts were low under the expansion scenarios since the extensive expansion was small (an additional 1 million workers) and did not fully compensate for income loss. Simulated benefits under the most generous scenario (Scenario #3), is VND 6 million per year per affected informal worker. Index projections using WB household surveys estimate that households on average had 10-20 percent lower incomes, these losses likely exceed VND 6 million over the entire year. Average annual wage income of workers without a contract is VND 48.3 million per year, just meeting the requirement of minimum wage regulations. However, the Labor Force Surveys detect no significant difference in nominal wage growth from 2019 to 2020. 10 World Bank Lower-Middle Income class (LMIC) poverty line (US$3.2/day 2011 purchasing power parity) The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 23 Lessons and challenges from social assistance implementation during COVID-19 Da Nang was chosen for this analysis because it experienced two rounds of COVID-19 lockdown and associated social assistance measures, first in April 2020 under the national lockdown, and again in late July–mid-August 2020, when it became a localized epicenter of an outbreak. During both lockdowns, the city experienced a sharp slowdown of mobility (figure II.4), which is a proxy for sharply lower economic activity. Da Nang is a well-managed and modern city that is heavily reliant on the services and tourism industries. The city has above-average socioeconomic conditions and is self-financed. The city has made significant progress in modernizing administrative management and standardizing and simplifying many administrative procedures (it is always in the top 10 of the Public Administration Reform index ranking of provinces). Leaders provide close direction and specific instructions from local government, and are proactive in planning, preparing budgets, and reviewing potential beneficiaries. The city is also equipped with databases of some social target groups (merit people or National Devotees, that is, people who have contributed during “revolution and war times”; poor and near-poor households; social protection beneficiaries) to facilitate targeting and enrolment. Arguably, given the city’s reliance on tourism, the COVID-19-related closures and social distancing measures, and the ban on international flights, had a stronger adverse economic effect in Da Nang than on rural areas or cities less reliant on the services and tourism industries. In the context of the first outbreak and national lockdown in April 2020, the government issued measures to support people facing difficulties caused by the Covid-19 epidemic (Resolution 42/NQ-CP dated April 9, 2020). A planned budget of about VND 62 trillion ( about US$2.7 billion) was set up to directly support certain target groups including National Devotees, poor and near- poor households, social protection beneficiaries, and certain groups of workers whose jobs were affected. Da Nang is the only city where there were two phases of social relief provided to households. The second relief package was funded solely out of the city budget and was implemented in August 2020, during the second large outbreak. In the case of Da Nang, the rollout of these two rounds of support programs was successful. The city has spent more than VND 304 billion (US$13.1 million or 1.5 percent of total expenditure in 2020 or 0.3 percent of RGDP in 2020) to support 325,454 beneficiaries across two outbreaks.11 Since the implementation of social assistance programs in Vietnam are highly decentralized, local capacity affected a locality’s ability to react swiftly and implement new COVID-19 relief policies. Da Nang is also an interesting case study precisely because the city experienced two waves of relief and was able to learn from the first implementation. Given the lack of precedence, the implementation of these support programs experienced some challenges. The policies required the identification and verification of those who were impacted by COVID-19, but not already enrolled in the social protection system. Due to the presence of informality and migration, verification was challenging in many cases. These challenges resulted in the number of beneficiaries and disbursements being lower than originally planned, especially for the group of noncontracted workers. There were varied reasons for this, as was discovered during a field visit. 11 Some beneficiaries may be the same across the two waves. 24 Note II Figure II.4. Mobility trends, February 2020–February 2021 Panel A Panel B Da Nang National Grocery & Pharmacy Retail & Recreation Workplaces Grocery & Pharmacy Retail & Recreation Workplaces Residential Transit Stations Residential Transit Stations Source: Google Mobility trends. The Da Nang Experience Da Nang city self-finances its operating budget and contributes to the central budget. Special attention is paid to social policies, and the city’s poverty line is higher than the national line. In 2020, the city’s economy declined sharply due to the COVID-19 pandemic, and the gross regional domestic product (GRDP) shrank by 9.26 percent. The average GRDP per capita by the end of 2019 had reached US$4,156. However, due to the impact of the pandemic, the GRDP per capita decreased to US$3,678 in 2020. However, the city still prioritized providing social security for its citizens. During the first national lockdown in April 2020, Da Nang city implemented support for people affected by COVID-19 under Resolution 42/NQ-CP, in addition to supplementing with local policies. The city implemented a local support program for Da Nang residents during the second wave in August 2020. The city has spent more than VND 304 billion (US$13.13 million) to support about 160,000 beneficiaries in each wave, with the coverage of the two waves likely overlapping to some extent (table II.9). The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 25 Table II.9. Disbursement of Covid-19 income support package in Da Nang in 2020 Wave 1 Wave 2 Type of beneficiaries Number of Total budget Number of Total payment beneficiaries (person) (million VND) beneficiaries (person) (million VND) Social protection package under Resolution 42/NQ-CP 164,413 172,036 161,041 132,770 dated 09/4/2020 (two rounds) Merit people (National Devotees), who had made 14,236 21,356.50 13,947 13,930.50 contribution during revolution and wartime Social assistance beneficiaries 28,383 42,307 26,898 26,898 Poor and near-poor households 52,770 39,578 52,772 26,386 Employees in the business who have postponed their 1,265 2,277 233 419 contracts or taken unpaid leave Contracted employees who were laid off or on temporary leave without pay due to the direct impacts of the COVID-19 pandemic, 413 408 95 94 and not qualified for unemployment insurance benefits Lottery seller 651 578 671 599 Informal sector employees affected 57,230 56,176 55,166 53,233 Closed down tax-registered household businesses with 1,243 1,233 1,172 1,160 annual income <100 million VND Haircutter, cleaning, housework 5,298 5,229 7,250 7,119 Teachers and employees with no labor contracts or 2,159 2,141 2,207 2,193 worked in the training institutions Teachers, employees whose labor contracts 765 755 630 740 have been postponed Source: Da Nang Department of Labor, Invalids and Social Affairs. Note: Beneficiaries across waves may be identical. Lessons from the field in Da Nang Key Successes Generally, policy implementation of COVID-19 relief packages in Da Nang was quite good, and the public recognized the considerable effort of the government to provide timely relief. The general consensus is that the policy was appropriate in times of difficulty, contributing positively to stabilizing household incomes. The policies were welcomed by all people and communities. Whether the level of benefit was high or low, the effort demonstrated the government’s concern for the people, and this had great value in boosting spiritual and community sentiment. Da Nang was the only province in the country that was impacted by two large waves of COVID-19 outbreaks, and this experience may have helped Da Nang quickly disburse relief aid in the second wave. On August 20, 2020, the People’s Committee of Da Nang city agreed to continue to support those in difficulty due to the COVID-19 epidemic (for two months in August and September 2020). The funding for both supports was financed from the city budget.12 12 Da Nang is a self-financed province, so according to Resolution 42, the funding to implement the supports is accounted in the local budget. 26 Note II The city proactively expanded the policy to support other target groups not defined by Resolution NQ42/NQ-CP issued from the central government. These expansions considered local definitions of poverty and impacted sectors not covered by central guidance. These additional target groups included: l The groups of poor and near-poor households that are below the city’s poverty line13 l National Devotees and social protection beneficiaries according to the city regulations l Some additional target workers without labor contracts as determined by the City People’s Committee, such as teachers and staff working at nonpublic educational institutions,14 workers in hair salons and barbershops, and those who perform housework and cleaning. With lessons learned from the experience of the first rollout, the second support package was deployed more promptly. Benefits in the second rollout reached all beneficiaries before October 30, 2020, about two months after direction of the City People’s Council. The list of beneficiaries for the second support was made based on the existing beneficiaries of the first support, which had been reviewed to remove non-eligible cases (that is, deceased, moved out of locality, out of poverty, graduated from regular SA programs, and so forth and included the newly affected. To simplify procedures and make decisions quickly for supporting all beneficiaries in time, the City People’s Committee authorized lower levels to approve the list of beneficiaries: the District People’s Committee approved the target groups of poor and near-poor households and social protection beneficiaries; and the Department of Labor, Invalids and Social Affairs approved the target groups of merit people or National Devotees, business households, and workers. Relief to households already registered in the social protection system was disbursed quickly and effectively. Since these households were already listed and registered in the social protection system, there were no issues in providing COVID-19 relief to them. Da Nang has a sophisticated data architecture that facilitated identifying groups of affected individuals and businesses. The city’s Department of Labor, Invalids and Social Affairs cooperated with the city’s Department of Information and Communications to deploy a channel to look up information. Specifically, Da Nang city has an integrated data system and information on four groups of beneficiaries, including workers and business households, social protection beneficiaries, National Devotees, and poor and near-poor households. Citizens and businesses can easily look up information about individuals and units belonging to these four target groups through the open city data portal at https://congdulieu.vn or https://opendata.danang.gov.vn/; the Zalo application for Da Nang Switchboard 1022; or via SMS phone messages. Available information includes name of the person receiving the support, date of birth, ID number, address (residential group, wards/communes, districts), type of beneficiary (one of the four categories of the above group), and amount of the benefit. 13 Số hộ nghèo theo chuẩn nghèo của quốc gia bằng khoảng 50% số người nghèo theo chuẩn nghèo của thành phố. 14 Đến 19/10/2020, giáo viên và người lao động làm việc tại các tổ chức giáo dục ngoài công lập được trung ương đưa vào chương trình hỗ trợ, theo quy định tại Nghị quyết số 154/NQ-CP. The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 27 Key Lessons and Challenges The swift rollout of the support program in April 2020 led to some timing and coordination challenges between central and local levels. During the first wave, guidance from central to local levels was passed via many channels. However, the Da Nang local government moved swiftly and already conducted trainings to villages and communes, and designed application forms before central guidance and paperwork and policy specifics were received. Thus, some efforts had to be redone. There were many challenges associated with verifying the eligibility of applicants under prescribed definitions for the new target groups. There were two verification challenges because of informality: l For the informal workers without labor contracts, their employment conditions must be verified, but evidence was difficult to confirm. l For household businesses, they must confirm their taxable turnover below VND 100 million per year through the Tax Division if they no longer keep tax receipts. l Employees were required to have employer verification that they had lost their jobs. This was sometimes difficult in large organizations, or employers would not assist with applications or providing necessary documentation for the applicants. Definitions of new target groups as defined by the central policy did not include everyone that may have been adversely impacted by COVID-19. Some groups that did not fit into the targeted beneficiary groups included employees not receiving a salary from the state budget in public education institutions; small business households selling nonessential items (clothes, shoes); and mechanics, builders, tailors, factory porters, self-employed workers in household businesses, and workers in agriculture. Location eligibility was residence-based rather than employment- based. For these reasons, Da Nang included some additional eligible groups under the resolutions issued at the local level. Some specific examples of ineligibility include: l The criteria for employees working in enterprises and educational institutions was very strict. These employees had to have lost their jobs and lost social insurance on exactly April 1, 2020. However, many establishments had already stopped operating before that date, while other businesses tried to maintain social insurance for employees after April 1. These employees were thus ineligible. l In Wave 2, migrants who worked in Da Nang and had household registration in another city were not eligible for Da Nang aid. Some applicants were discouraged by the complex application procedures. Challenges were expected since residents were unfamiliar with new registration and verification processes. These discouraged applicants did not attempt to follow up or complete applications. As a result, many potential cases who failed to register in phase 1 (due to paperwork) usually did not attempt to register in phase 2, even though they were eligible. Examples of some administrative challenges include: 28 Note II l Some households were eligible in multiple target groups, some others submitted their application at different locations, and these had to be checked to identify duplications. This was because some households reapplied while waiting for their application or attempted to receive aid by registering for a different group. l Many submitted applications were missing supporting documents, especially paperwork for identification (ID card, household registration) l In some cases, information declared in applications and supporting documents was incorrect, inconsistent, or missing. Due to the large volume of processes and checking, grass roots staff also faced difficulties and heavy workloads. The workload was mostly focused on commune/ward and village officials, including policy communications, guiding residents on registration and collecting supporting documents, checking applications, making the list of beneficiaries, organizing review and assessment, submitting completed applications to the district level, notifying results to applicants, and resolving feedback and complaints from people and communities. At the same time, staff in communes/wards and villages were also focused on anti-epidemic tasks, providing full support to all isolated areas, and ensuring social safety in each community. District-level staff performed verification and anti-duplication checking of all profiles submitted by the commune level (more than 10,000 cases per district). This is a huge amount of work, but only one member of the Department of Labor, Invalids and Social Affairs was assigned to directly perform this task. Recommendations An integrative approach to delivery of social protection would involve: n Adopting the policy response by identifying the channels of impact, timeline of shock, and impacted groups, and adjusting the timing and targeting of various support packages n Simplifying targeting n Improving intake and delivery systems I. Base provision of support on periodic analysis of the economic crisis and its impacts. In this case, extending duration of support would have been warranted. The impact of the COVID-19 crisis has persisted into 2021, while the provision of support was limited to three months (April to June 2020). While the impact of COVID-19 was most severe in the second quarter, some impacts lasted through the third quarter and even to the end of the year, when employment was still below levels a year earlier.15 The World Bank high-frequency surveys found that about 30 percent of households experienced job loss or knew of someone who was looking for a job in the first quarter of 2021. Many countries have introduced new support schemes, as the COVID-19 outbreak continues to impact the population. Among 142 cash transfers globally, the duration ranges between 1 and 12 months, for an average of 4 months. 15 World Bank 2021. The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 29 II. Simplify targeting criteria and eligibility conditions to ensure most affected people can obtain assistance quickly and effectively. This recommendation is particularly relevant to informal workers, who are not traditional recipients of state assistance. These workers were not identified or registered in existing social assistance databases and therefore are not easily traceable. In addition, the program targeted very specific jobs within the informal sector—such as street vendors, self-employed, household catering—while many others, such as in tourism and other services and in construction, were excluded. Finally, eligibility required multiple criteria and strict verification of documentation (on residency, jobs and unemployment, and proof of income threshold), which were difficult to satisfy in the informal sector and with many workers working without a contract. l To ensure timely and effective delivery of assistance in the immediate aftermath of a large shock, targeting criteria could be set more broadly and eligibility conditions should be reduced or simplified to ensure that all who need financial support have access to it. For instance: m Targeting criteria may be combined with income threshold to reduce inclusion errors but should not be as low as the income poverty line, which is insufficient for income replacement. Argentina has introduced a support program for informal workers in the tourism sector. Tunisia has provided support to households working in the informal sector who are not covered by any social assistance program and who are vulnerable to shocks (households registered in the social security system with a low-cost healthcare card). m Alternatively, the package can be disbursed on an “on-demand” and “no-targeting” basis, or based on the simple the criteria of “losing one’s job. ” These simple approaches may have been more appropriate as the benefit amount was small, while the intended coverage was quite large ( it was intended to cover about 13 million workers in the informal sector). l Fine-tuning of targeting and eligibility criteria can be undertaken if the crisis is longer lasting and data on potential beneficiaries have been collected and beneficiaries later identified. III. Improve the intake and delivery system. While Vietnam has done well in controlling COVID-19, it is still important to be better prepared for future pandemics/risks. l Improve intake: m In the short term/immediate future, leverage technology to facilitate self-registration/ online registration to identify informal workers for assistance. Several countries were more successful in reaching the informal sector by applying online registration, such as Indonesia, Malaysia, Thailand, and the Philippines. In Vietnam, one idea is to develop a phone application, like the health declaration that has been introduced by the Ministry of Health. Using this application, potential beneficiaries could fill in their information. Verification could also then take place electronically through cross-referencing with other administrative databases such as social assistance and poverty, National Devotees, and social and health insurance. Village officials can then act as the last verification step. 30 Note II Thailand approved around 23 million applications from informal sector workers and farmers—more than half of the working-age population. Within a few weeks, more than 6 million online benefit applications were validated in South Africa. Brazil registered about 27 million households in a matter of weeks through its online process. Vietnam, however, lacks a database on informal workers. m In the longer term, establish a single social registry system to act as a base for a more robust and integrated social protection system. During the pandemic, many countries have made use of existing social registries or taken the opportunity to build a social registry to implement and expand the program. Argentina and Peru were able to check persons did not work in the formal sector by comparing the social registry and social insurance databases. Vietnam could explore the creation of an integrated social registry—that is, a harmonized social protection information system that supports outreach, intake, registration, and eligibility determination for multiple programs—as the foundation of an integrated social protection delivery network. Different databases (for example, social assistance, poverty, social insurance, health insurance, tax) would be linked to enable more efficient data management and exchange across agencies. The recent announcement by the Ministry of Public Security of a plan to issue 50 million national IDs could provide an opportunity to create links across databases by using the national ID as a unique identifier. l Improve delivery of social assistance benefits: m Digitalizing the payment mechanisms would help make payments more efficient, transparent, safe, and fast. The implementation of the COVID-19 support program relied heavily on delivery of cash payments via face-to-face exchanges during the physical distancing and movement restriction periods. It was time-consuming and fraught with the possibility of error and corruption. Direct deposit into a checking account or cash card or provision of mobile banking to beneficiaries would be safe, more efficient, and transparent. Other countries had more success innovating delivery mechanisms in their COVID-19 responses by using mobile money operators as agents for cash out (Cambodia), while Malaysia, Mongolia, and Thailand made payments through bank accounts. The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 31 Annex II.1. Timeline of COVID-19 development and policies in Da Nang Near the beginning of 2020, Vietnam reacted early to COVID-19 with strict measures, closed its international borders, and responded swiftly with contact tracing when cases emerged. Over the last year, Vietnam has experienced only two national lockdowns and several severe localized lockdowns. Vietnam is considered to have controlled the epidemic very successfully. In March and April 2020, the number of cases increased rapidly due to the large number of people coming from European countries, and clusters of cases emerged. On March 22, 2020, Vietnam suspended entry of all foreigners and introduced quarantine for 14 days in all cases of entry for Vietnamese citizens. On April 1, 2020, Vietnam implemented a nationwide lockdown for 15 days. On the same day, the Prime Minister announced the nationwide outbreak of COVID-19. The drastic epidemic control measures were extremely successful, and the country did not confirm any new local transmissions from mid-April to the end of July. The country entered a second wave of infection when the Ministry of Health announced the 416th case in Da Nang, which was the first case with an unknown source of infection in 99 days. On July 28, the Da Nang authorities immediately locked down the city for 15 days. Hundreds of cases across the country with epidemiological factors related to Da Nang were detected, and the first death was also recorded on July 31. After two months, by using the same strategies that had been used in the first outbreak, Vietnam successfully contained the disease for the second time and has resumed almost all economic activities, including international commercial flights. The COVID-19 outbreak in Da Nang at the end of July 2020 led to the evacuation of over 80,000 people. While in total, only a few hundred people tested positive in this cluster outbreak, it was at the time the largest outbreak in Vietnam. Stringent lockdown restrictions quickly followed. The lockdown in Da Nang led to large declines in movement. The localized effect is evident when comparing the mobility trends in Da Nang to the national average. As a popular tourism city, the lockdowns and evacuation led to significant negative economic effects for workers and businesses. In the context of the first outbreak and national lockdown in April 2020, the government issued measures to support people facing difficulties caused by the Covid-19 epidemic (Resolution 42/ NQ-CP dated April 9, 2020). A planned budget of about VND 62 trillion (US$ 2.7 billions) was set up to directly support some target groups including National Devotees, poor and near-poor households, social protection beneficiaries, and certain groups of workers whose jobs were affected. Da Nang is the only city where there were two phases of social relief provided to households. The second relief package was funded solely out of the city budget and implemented in August 2020, during the second large outbreak. 32 Note II Annex II.2. List of national and Da Nang policies (resolutions and decisions) Vietnam COVID-19 relief policy review Policies are listed below that were put in place in Vietnam to respond to COVID-19, and especially in Da Nang city. Regulations on targeting and implementation processes will be analyzed, which are available in the legal documents as follows: Wave 1 (April 2020) l Issued by the central government m Resolution 42/NQ-CP dated 9/4/2020 of the Government on measures to support people facing difficulties caused by the Covid-19 pandemic m Decision 15/2020/QD-TTg dated 24/4/2020 of the Prime Minister on regulating the implementation of policies to support people facing difficulties caused by the COVID-19 pandemic m Resolution 154/NQ-CP dated 19/10/2020 of the Government on amending and supplementing the Resolution 42/NQ-CP dated 9/4/2020 of the Government on measures to support people facing difficulties caused by the Covid-19 pandemic m Decision 32/2020/ NQ-CP of the Prime Minister on amending and supplementing a number of articles of the Decision 15/2020/QD-TTg dated 24/4/2020 of the Prime Minister on regulating the implementation of policies to support people facing difficulties caused by the COVID-19 pandemic. l Issued by the local government (Da Nang city) m Plan 2918/KH-UBND dated 5/5/2020 of the People’s Committee of Da Nang city on implementation of supporting people facing difficulties caused by the Covid-19 pandemic under Resolution No. 42 / NQ-CP and Decision 15/2020/QD-TTg m Guideline 3423/HD-SLDTBXH dated 8/5/2020 of the Department of Labor, Invalids and Social Affairs of Da Nang city on guiding some contents of Plan 2918/KH-UBND m Resolution 298/NQ-HDND dated 22/5/2020 of the Da Nang City People’s Council on a number of solutions for the recovery and socioeconomic development of the city in the controlled Covid-19 pandemic m Decision 1711/QD-UBND dated 14/5/2020 and Decision 2408/QD-UBND dated 8/7/2020 of the Da City People’s Committee on additional approval of groups of employees who do not have employment contracts or who lost their jobs due to the Covid-19 pandemic m Official Letter 3521/UBND-LĐTBXH dated 2/6/2020 of the Da Nang City People’s Committee on the implementation of Resolution 298/NQ-HDND and Official Letter 5644/UBND-VHXH dated 24/8/2020 on amending conditions to support teachers and employees working according to the labor contract. The distributional impact of Covid-19 fiscal policies on households, with emphasis on Da Nang City 33 Wave 2 (August 2020) l Issued by the local government (Da Nang city) m Official Letter 1090/HDND-VHXH dated 21/8/2020 of the Da Nang City People’s Council on the announcement of the opinion of the Standing Committee of the City People’s Council on continuing to support people facing difficulties caused by the Covid-19 pandemic. m Official Letter 5945/UBND-LDTBXH dated 17/9/2020 of the Da Nang City People’s Committee on the implementation of support for people facing difficulties caused by the Covid-19 pandemic. References Dutta, P., and S. Sen. 2018. “Vietnam: Building an Effective and Sustainable Social Assistance System.” World Bank, Washington, DC. OECD, 2020. “Job Retention Schemes during the COVID-19 Lockdown and Beyond.” OECD, Paris. World Bank. 2020. “COVID-19 Policy Response Notes for Vietnam.” World Bank Group, Washington, DC, June. ———. 2021. “The Labor Market and the COVID-19 Outbreak in Vietnam: Impacts and Lessons Learned for Social Protection.” World Bank, Washington, DC. 36 Note II 63 Ly Thai To, Ha Noi Tel: (84-24) 3934 6600 Fax: (84-24) 39350752 Email: vietnam@worldbank.org Website: www.worldbank.org.vn