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Developing a shock-responsive national social protection system to respond to the COVID-19 crisis in Lao PDR (July 2020)

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Beyond the tragic loss of human life, the COVID-19 crisis will likely inflict a tremendous human cost in other ways, increasing poverty and inequality, and affecting even more those who are already vulnerable. All over the world, the crisis is affecting the socially and economically vulnerable the most, as they have limited coping strategies at their disposal. This highlights the need for a strong and coordinated policy response.

Domestic and global measures taken to control the pandemic are impacting the economic situation in the country. . The economic shock and impact on employment are likely to be significant in 2020, and may even continue into the long term. Tourism, manufacturing, and state revenue collection are in decline. GDP is expected to contract in 2020. Some projections indicate contraction of GDP in 2021 as well. To mitigate the health, income and employment challenges, support livelihoods and cushion the impacts of economic downturns, social protection measures will be indispensable.

The existing social protection system leaves a large part of the population unprotected. Recent years have seen important developments in Lao PDR. Coverage of the National Health Insurance scheme has expanded significantly. Still, when the income protection component of social protection is considered, a large number of people, especially workers in informal employment and households dependent on agriculture, are not protected.
They have low incomes, poor income security and working conditions, and little to no social protection in case they lose their incomes or fall sick.

Many Lao households rely on family members seeking higher-paid employment in cities and centres of economic activity. As a direct impact of COVID-19, many global value chains have stalled, in turn affecting worker and household incomes. It can likely be assumed that the post-COVID-19 market demands will (at least initially) be lower than before, while the regional production networks and global value chains may change completely.

The impact of this situation is reinforced by the fact that many Lao households are dependent on remittances from cross-border migration. Lao migrant workers in Thailand are predominantly employed in low-paid jobs in the tourism, hospitality, domestic work, agriculture, and industrial sectors, and are less likely to be able to cope with the adverse impacts of the crisis. The lockdown in Thailand led to massive increases in unemployment, loss of income of the most vulnerable, and queues of returning migrants at points of entry.

The loss of livelihoods due to COVID-19 can push households into poverty and subject children and adolescents, especially from poor families and ethnic backgrounds, to multiple deprivations that can have long-term consequences for productivity and human capacity development. Women are also disproportionately represented among the poor and the vulnerable. They tend to be confined to more casual, insecure, and hazardous forms of work and self-employment, particularly in the informal economy, with no or limited access to social protection. With schools temporarily closed, many women had to take care of their children, further limiting their income generation ability.

Expansion of social protection coverage is increasingly recognized as a critical strategy for poverty reduction and inclusive growth. Allocating domestic resources to the establishment and expansion of social protection programmes, such as non-contributory cash transfers, can ensure that such programmes are sustainable and help people in need. Moreover, social protection can significantly help to stabilize the wider economy and instil social stability. This calls for swift action and strong economic and social policies, which can have a considerable positive effect on the economy, acting as a powerful economic and social stabilizer.

Lao PDR is undertaking a set of measures to deal with the crisis. An amount of 10 billion Lao kip (LAK) (slightly less than 1 per cent of GDP) has been allocated for prevention and control measures. In response to return of migrant workers in massive numbers, quarantine centres have been established in provinces where official points of entry are located. Free testing and treatment are provided to those affected by COVID-19 or displaying symptoms. The Government is also providing training for medical personnel and concerned officials, in addition to procuring medical and protective equipment.

The Government is planning to launch a cash transfer programme to cover expectant mothers and children under the age of 3 in poor districts. As mentioned in the National Social Protection Strategy 2025, the programme aims to ensure necessary nutrition during the first 1000 days of a child’s life. This can help the poorest from the negative effects of the crisis. Rapidly implementing this social protection measure as well as immediately providing a monthly allowance to informal economy workers would allow to limit the negative social impact of the crisis and protect those in need.

Unemployment insurance has been among the instruments used by the Government to support those who have lost their jobs. However, its coverage is limited to those working in the formal sector and unfortunately many of those working in sectors affected but not covered by the Lao Social Security Organisation (LSSO) do not have any form of protection.

This briefing note explores some social protection options to limit the social and economic impact of the COVID-19 crisis on Lao people and to support the economic recovery. Considering that the social and economic impact of the crisis is expected to continue into the long term, the options proposed largely build on existing programmes or focus on the development of programmes which are planned as key pillars of the social protection system, particularly those identified under the recently approved National Social Protection Strategy. The approach is to use the crisis response as an opportunity to reinforce the existing plans, instead of using the limited available resources in alternative or temporary plans, focusing instead on the principle of building back better.

The initial set policy options proposed by the UN Country Team are listed below. The objective of this briefing note and the list of policy options is to be a first step towards a detailed policy discussion. These options do not exhaust all the potential solutions and the team is aware that in order to ensure that no one is left behind other interventions might be required.

The UN team remains available to work with the Government and interested development partners and provide additional technical assistance to explore in detail some of the options in the list. The note also includes a preliminary costing. Likewise, the UN Country Team is available to further discuss with the Government and adjust the parameters of the policy options, and together support the Government in its resource mobilization efforts.