Promoting productive social protection

It is with great pleasure and keen interest that I associate myself with a wide range of distinguished stake holders in the inauguration of this workshop under the patronage of Institute of Policy Studies of Sri Lanka (IPS), World Bank and Department of National Planning.

It is expected through this consultation process to provide a feedback on to the development of an integrated social protection and labour strategy.

I consider this workshop as a positive encouraging exercise coinciding with our own effort in formulating a national human resources and employment policy for our country, in which many issues on social protection and labour strategies have been addressed.

This policy is now under submission to the Cabinet of Ministers. You will hear more about it, when Prof. W.D. Lakshman addresses you in the afternoon session.

As you all know, there are traditional common types of social protection programmes in force. They include:

1.Labour market interventions such as employment creation, promotion and protection of workers, etc.

2.Social insurance such as health insurance or employment insurance and

3.Social assistance (either cash or in kind transferred to vulnerable individuals)

In the context of modern social protection, such social protection is used as a policy approach to address issues of persistent poverty designed to lift the recipients out of such poverty, rather than providing passive protection contingencies.

In the context of Sri Lanka, it is my view that (of course it is common in many other countries) there is an imperative need for implementing successful labour market interventions in the informal sector of our economy, which is about 62 % of the employed.

This is a significant sector of our economy not covered by any social security schemes – occupational or safety or health or work related measures of social protection. This segment of the Sri Lankan society, I believe, is the most vulnerable and disadvantaged strata whose grievances have not received or are not receiving sufficient attention, unlike the workers in the formal sector (both private and public) who have the bargaining power to demand. Their purchasing power is the lowest.

The school dropouts, the less educated, the less skilled – all finally find their way to this huge informal sector. They are the voiceless majority who though disorganised can turn most vociferous at decisive turn of events.

It is therefore necessary to look forward to target a minimum level of basic capabilities of human resource that will impact their quality of life unlike in the case of public and private sectors of the formal economy. The schemes available for the informal sector workers areif at all voluntary or totally negligible.

Touching upon the informal sector, I wish to make some specific observations.

In our small economy of US$ 56 billion, as per Ministry of Finance and Planning reports, more than 73% of its enterprises in fact belong to domestic SMEs and micro-finance sectors which come under the informal economy.

These enterprises are effective instruments for reduction of rural poverty. However, the absence of a cohesive regulatory, supervisory system for the micro-finance sector has been one of the constraints to the growth of this sector. This is acknowledged by the Ministry of Finance and Planning.

It appears to me that the concept of micro-finance has not sufficiently penetrated into the informal sector.

While it is considered necessary and important to provide social protection to this sector of the economy or this segment of the society, it is equally necessary and more important to attempt to lift the workers in this sector from the present levels of poverty.

It is therefore necessary to strengthen this sector through a micro-finance network in order to lift these workers out of the present level of poverty. As otherwise, it will not be possible to ensure the sustainability of any possible scheme for providing social protection.

Even in the case of formal sector of our economy the existing social security system in Sri Lanka is fragmented – either well established schemes of old age pensions or lump sum payment at retirement. Those well established schemes of old age pensions are today barely adequate for the purchase of their basic needs, not even medicine. The lump sum payment at retirement is inadequate to generate a flow of adequate income after retirements.

In so far as unemployment is concerned, there is no protection at all at present. Sri Lanka being a fast ageing society, we may face formidable challenges on this front in the future, unless the issues of social protection are addressed well ahead.

Natural disasters, another factor which cause a huge impact on social and economic natural welfare. That is why climate change is given higher priority in our external and internal agendas.

It is in the context of these challenges that I do much appreciate the joint efforts by the IPS, World Bank and the Department of National Planning to have this workshop organised.

I wish to take this opportunity to highlight some of the recommendations we made in the formulation of our Human Resources (HR) policy.

1.Need for integration of these different schemes of the existing social protection.

2.Need to enhance the effectiveness efficiency and sustainability of the EPF & ETF of the formal sector. Fund management has become a controversial issue today. We have to consider seriously whether we have reached the point of diminishing returns in so far as the management of EPF & ETF is concerned. While we should appreciate the concerns of the workers and their sensitiveness to changes it is equally important to consider the long term sustainability of these funds. Perhaps, unilateral decisions give rise to suspicion and speculations leading to anarchy. We had that experience in the abortive private sector pension fund. I am not at all trying to underestimate the foresight of our Treasury officials. But the fact remains that the abortive private section pension fund needed a much more critical study, analysis and assessment by some professional actuaries. It is an extremely difficult and complicated exercise.

3.So we must reconsider the feasibility of establishing a Pension scheme for the workers in the formal private sector.

4.An unemployment benefit scheme is a major gap in the social security scheme in Sri Lanka.

5.The need for some security scheme for the informal sector has to be considered.

6.Action should be initiated for the establishment of a basic social protection floor to ensure access to basic health care income security.

I am sure that some of these issues spelt out would engage your deliberations in depth. I wish the workshop all success. Thank you.