Social protection:child-related cash transfers as an opportunity for transformation in post-conflict Nepal

Gabriele Köhler, UNICEF ROSA Marta Cali, Unicef Nepal

Mariana Stirbu, Unicef ROSA

International Conference “Child Poverty and Disparities: Public Policies for Social Justice”

Cairo, Egypt, 19th - 20th of January 2009

Outline

I. Key arguments for a child benefit proposal

II. The development context in post-conflict Nepal

III. Child poverty and disparitiesIV. The social protection

discussion in the post-conflict Nepal

V. Design issues VI. Financing social protection in

Nepal. Is it affordable?VII. Current challenges and policy

implications

I. The child benefit proposal – building the case for a universal and unconditional cash transfer for children aged 0-5

Rights-Based Argument

Obligation of the State to ensure that all children enjoy wellbeing and benefit from social protection

Maximizing benefits for the poor and the marginalised

Political-Symbolic Argument

“Peace ‘dividend’ preventing political disillusionment; a right for all children: commonality among families; building social cohesion

Economic Arguments

Reducing child poverty; building human capital

Promoting inclusive economic growth

Creating multiplier effects in local economies

past

Social fragmentation and exclusion 103 social groups divided in Hindu and Buddhist hierarchical caste groups,

indigenous groups (Janajatis), religious minorities (mostly Muslims). 92 languages. Many groups historically and systematically excluded.

Poverty and inequality GDP per capita US$324 (2005)

Poverty incidence 31% (45% in the remote and conflict affected regions) (2006)

Most unequal country in Asia: worst Gini (47.2).

138/177 HDI ranking

MDGs underperformance due to high and raising inequality

Socio-economic outcomes vary significantly in terms of social group.

Democratic Transition

II. Changing political, economic and social context …but inherited poverty, inequality and exclusion

Over ten years of conflict

Opportunity to work with a new Government to reshape the country’s socio-economic agenda

Nov 2006

Comprehensive Peace Accord

Apr 2008

First CA Election

Aug 2008

New Coalition Government

Sept 2008

CMP and 2008/09 Budget

III. Child poverty and disparities - MDGs underachieving and performing inequitably - unevenly

12.5 million children and young people

(45% of population)

13% of total population are under 5 years of age

Infant mortality rates among Dalit groups 1.4 times higher than for the general populations

Children in Dalit groups 1.6 times less likely to be attending primary school than the general population

2 million child labourers and some 5,000 boys and girls living in the streets of Nepal

…

Child poverty and disparity

Percentage of children uder five classified as malnourished according to three anthropometric indices of nutritional status by wealth quantile, Nepal

2006

61.6

54.9

50.4

39.8

30.9

11.515.2 15.2

12.8

7

41.7

31

18.8

47 46

0

10

20

30

40

50

60

70

Low est Second Middle Fourth Highest

Stunting: Height-for-age below -2 SD

Wasting: Weight-for-height below -2 SD

Underw eight: Weight-for-age below -2 SD

Source: Ministry of Health and Population (MOHP) [Nepal], New ERA and Macro International Inc. 2007, Nepal Demographic and Health Survey 2006 , Kathmandu, Nepal: Ministry of Health and Population, New ERA and Macro International Inc.

Early childhood mortality rates by wealth quantile for the 10-year period preceeding the syrvey, Nepal 2006

43

38

47

31

26

71

62

70

51

40

98

83

91

63

47

0

10

20

30

40

50

60

70

80

90

100

Low est Second Middle Fourth Highest

Neonatal mortality

Infant mortality

Under-five mortality

Source: Ministry of Health and Population (MOHP) [Nepal], New ERA and Macro International Inc. 2007, Nepal Demographic and Health Survey 2006 , Kathmandu, Nepal: Ministry of Health and Population, New ERA and Macro International Inc.

Child deprivation by income quintile…wide-spread poverty

In Nepal, 60% of children <18 experience absolute poverty (+2 severe deprivations)

Changes in the prevalence of severe child deprivation in Nepal, between 1990-05 and 2000-05, %

0

10

20

30

40

50

60

70

80

90

100

Shelter Sanitation Water Information Food Education Health Two severedeprivations

% o

f chi

ldre

n in

rele

vant

age

coh

ort e

xper

ienc

ing

seve

re d

epriv

ation

‘severe’deprivation, %,last availablebetween 1990and 1995*

‘severe’deprivation, %,2005 or latestsince 2000*

Severe deprivation of children by income quintile, most recent year available, Nepal

0

10

20

30

40

50

60

70

80

90

100

At least one severe deprivation, % At least two severe deprivations, %

% o

f chi

ldre

n ex

perie

ncin

g se

vere

dep

rivati

on

Poorest

Second

Third

Fourth

Richest

Key current social assistance interventions

1. Old-age pension Introduced in 1995, administered by municipalities and VDCs; Benefit at Rs 200 (3 USD) = 31% of the national

poverty line. (Improved to Rs 500 and retirement age reduced from 75 to 70 in 2008/2009 fiscal budget)

2. Survivor allowance Benefit: Rs 150 a month paid to “helpless widows” (Improved to Rs 500 in 2008/2009 fiscal budget)

3. Disability pension Benefit: Rs 200 a month to those who are fully incapacitated (Improved to Rs 1,000 in 2008/2009 fiscal

budget)

4. Scholarships Categorical for girls and disadvantaged groups at Rs 350 for 50% of primary level girl-students belonging to

economically weak and deprived communities as well as to all students of the Dalit community studying at the primary school level.

5. Health services Targeted free health services / free delivery introduced in 2009 Free drugs for all at sub-health post (S-HP) and health post (HP) level

6. “One Family One Employee” Scheme in Karnali Zone 100 days of paid work in public works schemes at minimum wage

7. Birth grant Rs 500 Terai, Rs 1,000 Hills, Rs 1,500 Mountains (started with donor support and gradually taken over by gov)

Increasing social protection allocations…but little for the youngest members of society

V. Design issues of the ‘package’

CHILD BENEFIT:– Universal – categorical by age: 0-5 yrs; 0-14 yrs; 0-18 yrs;

all children in the family– Calculated at different benefit rates: 100,160, 200 rupees

per month (based on 2006/07 poverty and fiscal budget data)

• Advantages: low administrative costs - no means testing, eligibility verification based on birth certificate, low leakage and rent seeking and incentive for birth registration; low inclusion but high exclusion error

• Disadvantages: as a new scheme, delivery modality and mechanisms to be explored; start-up time and costs

OLD AGE PENSION:– Universal – categorical by minimum retirement age starting

at 65– Calculated at different rates: 200, 320 and 400 rupees

(based on 2006/07 poverty and fiscal data)• Advantages: no start-up costs, low administrative costs (no

means testing; eligibility verification using proof of age; less leakage and rent-seeking); low inclusion but high exclusion error

• Disadvantages: senior citizens live with eldest son and therefore “spillovers” only in some households

Source: Michael Samson, Targeting options for social protection in Nepal, 2008, for DFID

Focus on children- predicted outcomes(representativity index: 100% = proportional to share of population)

Source: Michael Samson, Targeting options for social protection in Nepal, 2008, for DFID

Focus on older people - predicted outcomes(representativity index: 100% = proportional to share of population)

Source: Michael Samson, Targeting options for social protection in Nepal, 2008, for DFID

Combined Scenarios Expenditure, millions $US

% of GDP % of Gov expenditure

Combined Scenario I

I Universal child benefit of 200 rupees per month for all children aged 0-5

134.6 1.67 9.7

II Pension of 200 rupees per month to 65 and over and the disabled

35.9 0.45 5.2

Total 170.5 2.12 14.9

Combined scenario II

Universal child benefit of 100 rupees, 0-18 yrs

192.2 2.4 13.8

Pension of 400 rupees to over 65 and the disabled

71.8 0.89 5.2

Total 264 3.29 19.0

Proposed combined package comprising a universal old-age / disability pension, and a child benefit – an illustration

Source: based on ILO, Technical note on costing social protection for Nepal, 2007 / 08

VI. Financing social protection in Nepal. Is it

affordable?

• Social protection - an investment for pro-poor, inclusive economic growth and the MDGs– Estimated at 15-20% of fiscal budget, less than 3% of GDP– Needs to be “costed” as an investment– Quickstarted and kickstarted by donors– Predictably integrated into the fiscal budget– Help prevent far larger crisis-driven expenditures

• Possible financing options:– Budget restructuring (composition and nature of budget spending)– Efficiency of fiscal administration (tax evasion, inefficient spending,

implementation bottlenecks)– Progressive and innovative taxation (higher corporate income tax, capital

gains tax, property tax etc.; earmarked taxes - cess)– External grants and borrowing (emphasis on concessional loans in the short-

term; sovereign bonds)– Internal borrowing (government bonds) – International financing mechanisms (incl Solidarity Funds from new donors)– Other

Nepal: tax revenue potential

Tax revenues as percent GDP

0.0%1.3%2.5%3.8%5.0%6.3%7.5%8.8%

10.0%11.3%12.5%13.8%15.0%16.3%17.5%18.8%20.0%21.3%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

BGD BHU IND MDV NEP PAK LKA AVG

VII. Current challenges and policy implications

Financial competition among schemes and continued donor hesitancy

Need to build political will Win the argument on the unconditional approach Win the argument on the need for social protection transfers

for children

Implications for policy design and implementation Additionality of social protection Monitoring and evaluation: base line, data collection

and use for informing design improvements Empowering the poor to know and claim their rights