Vietnam will enter the stage of population aging shortly. Therefore, challenges for current policies and the following years to prevent the aging from becoming a burden for the national socio-economic development are a matter of concern.
Vietnam enters the population aging stage Over the past three decades, Vietnamese population has seen big changes in scale, speed and age structure. Total fertility rate (TFR) dropped from 5.25 in 1975 to 3.8 in 1989 and 2.08 in 2008. The population growth rate fell 2.4 per cent annually in the 1975-1989 period to 1.31 per cent in 2005 and 1.2 per cent in 2008. As a result, age structure of local population has seen big changes with the rate of children between zero and 14 years old has on the fall and the rate of people of working age (15-59) has increased. The rate of old people (from 60 years old and over) has also increased. Many recent forecasts showed that this trend will be maintained in the next decade.
According to the United Nations’ forecast, between 2010 and 2050, people of working age in Vietnam will sharply grow, accounting for 65 per cent of the total national population in the 2015-2025 period. Then, this rate will gradually drop and reach 57 per cent of the national population by 2050. Meanwhile, the rate of children will fall from 30 per cent in 2005 to 23 per cent in 2020 and 17 per cent in 2050. On the contrary, the rate of old people will drastically grow from 2015 and reach 26.1 per cent of the country’s total population by 2050. Dr. Giang Thanh Long from the National Economics University, Vietnamese population will develop in the two trends at the same time. That is the high rate of people of working age and the population aging period. “If taking advantages of the first trend, Vietnam will have many chances to prepare for the upcoming population aging mechanism”.
Local population will officially enter the stage of aging phase from 2010 when the rate of old people makes up some 10 per cent of its total population. Clearly, to adapt to this, the country needs to prepare for suitable policies and strategies.
The United Nations’ statistics indicated that Vietnamese old population has sharply increased among different groups of people. The local population’s longevity has also been on the rise from 62.9 in 2000-2005 period to 74.3 between 2005 and 2010. Besides, the rate of people aged over 75 will strongly grow in the coming time. However, Human Development Report 2009 of the United Nations Development Programme said a Vietnamese person has an average time of illness is 8.9 years, therefore their real longevity of strong health condition is just 66 years old.
With the fast growth of the elderly, many researches said that, Vietnam has more time to adapt to the population ageing than other nations. For instance, it took France 70 years to raise the rate of old population from seven per cent to 10 per cent. The US and Japan spent 35 years and 15 years respectively, while Vietnam is forecast to spend 20 years.
Economic risks for the elderly will become bigger when Vietnam may fall into the situation of population ageing before becoming rich. Compared to several regional countries with higher per capita income such as Malaysia, the Philippine and Indonesia, Vietnam has a higher rate of the elderly than these nations. This is a challenge for the country to face economic risks because its old people’s savings can’t catch up with the aging process. In addition, according to the United Nations’ forecast, the ratio of potential support (defined by the ratio of people aged 15-59 and number of old people) will quickly fall in the time to come, from 6.89 in 2007 to 5.8 in 2020. Thus, if Vietnam does not makes preparations for its policies from now, particularly taking advantages of “the structure of high rate of working population” in building a sustainable social security system, economic risk for the elderly will be very high.
Currently, around 44 per cent of Vietnamese old people is working, but the majority of this (over 70 per cent) are working in the agricultural sector or at households without receiving wages, therefore, their income is very low or unstable. Salary and social subsidy for old people account for a very small rate in the total income of households. Moreover, most of old people’s households income are from agricultural production household business, thus, it is often unstable due to natural disaster impacts.
The quick population aging will quickly destroy balance in social insurance fund. It will be difficult for retirement fund’s existence if the current system is still applied although the number of labourers joining the fund increases every year. In 2008, about 8.7 million labourers attended the fund, accounting for 20 per cent of the country’s work force and 10 per cent of population in 2009. Besides, the number of people getting pension reaches roughly two million, making up 25 per cent of Vietnamese old people.
Reforming retirement system
Vietnam will cope with many challenges as it enters the stage of population aging. The biggest challenge is ensuring balance between payers and receivers in the same generation or between generations in the retirement system as well as ensuring living condition among the elderly. Many researches showed that the population aging is a factor making instability in the retirement system become more seriously. The nature of PAYG DB system is the major cause. To avoid this situation, Vietnam needs to improve the system in line with the change of population ageing.
Dr. Giang Thanh Long, Vietnam needs to build a model suitable for turning the PAYG DB system into the system of individual accounts, in which “buffer” is symbolic individual accounts NDC-Notinal Defined-Contribution (NDC). NDC will ensure the relation of payment and enjoying, mitigate financial risks (latent pension loans) when moving from the current system to individual accounts and the conversion of the system adaptable to the system of the national economy.
Long also added that during the conversion process, the state should support low-income people to expand the coverage rate of the system and helps the group to reduce economic risks.
“The voluntary pension system needs to be re-designed to attract people’s attraction. Limiting the minimum payment of is not suitable because income of people who do not attend the current compulsory retirement system, people who work free jobs and rural people with low income.
To narrow the gap among the elderly and between them and the whole community, expanding of the pension system will be a priority solution in this condition in Vietnam. For instance, with the spending of 0.6 per cent in GDP in 2004, Vietnam can provide pension level equal to 50 per cent of the poor people in 2004 (equal to VND1.035 million/person/year ) for all the elderly from 70 years old and over. If providing the pension level equivalent to old people aged from 60 years old, costs only account for 1.2 per cent of GDP. The most important thing is the systems seen unequal improvement.
Mai Ngoc
Vietnamese
