Just over two weeks ago, four amendments to the Social Security Bill were considered by parliament.
The four bills were proposed by four different groups: the cabinet; Democrat Party MPs Rawat Areerob and Nakorn Machim; unionist Wilaiwan Sae-Tia; and 14,264 public petitioners.
Unfortunately, parliament rejected the latter two, both of which called for a significant shake-up of the governance of the social security system.
In particular, they proposed to make the Social Security Office (SSO) an independent organisation, with thorough and effective checks and balances such as internal controls and effective audit mechanisms.
Both bills strongly called for the appointment of an independent audit committee to provide oversight to the SSO’s board of directors.
The rejection is understandably unwelcome by various labour groups and NGOs. To have rejected the labour-proposed bill, which took three years to prepare and which gathered nearly 15,000 supporters, is unacceptable. Some people, including Sunee Chaiyaros, the vice-chairwoman of the Law Reform Commission, called it an abuse of the legislative process.
The Thai Law Watch project, in which the Thailand Development Research Institute (TDRI) joined the King Prajadhipok’s Institute to analyse and track development of important bills, proposed four recommendations to increase protection of informal workers and reform the governance of the social security system.
First, the informal labour sector was not touched on in the proposed bills. We all know the significant size of the informal sector.
A survey by the National Statistical Office in 2011 has shown that over 64% of the workforce belongs to the informal sector, making up around 24.6 million workers. Excluding 15.1 million of these informal workers who are working in the agriculture sector and so are not entitled to the benefits offered by the social security system, there are around 9.5 million workers. About 590,000 of those workers joined the scheme, according to the SSO’s annual report in 2011.
Part of the reason for the low coverage (merely 6.21%) of informal workers in the social security system is due to the weak benefits packages.
Informal workers have the option to contribute 70 baht per month, and the government would contribute 30 baht for benefits in the event of sickness, disability or death.
Alternatively, if informal workers prefer to attain retirement pension benefits in addition to the three aforementioned benefits, they would have to contribute 100 baht per month. The government would add another 50 baht.
These benefits are unappealing and leave the majority of informal workers unprotected. It is proposed the government should increase its share of the contributions to match the amount paid by insured workers.
Second, and perhaps one of the more controversial issues, is the appointment of directors to the board of the SSO.
The proposed amendments did not include representation of the directors, as all of them only wanted to increase the proportion of the representatives of employers and insured employees under the existing system.
Social security experts Worawan Charnduaywit, of the TDRI, and Apichat Satitniramai, of Thammasat University, have argued that workers have been poorly represented on the SSO’s board of directors.
The current representatives are selected from two major labour unions which only comprise just over 300,000 members, constituting only 3% of the workforce in the social security scheme. This is because the current law does not require labour representatives to be elected. It is proposed that all workers in the scheme should be entitled to a one-person-one-vote system to allow each voice to be heard.
Third, the allowed administrative expenditure of the SSO should be more tightly capped. Under the current law, the SSO board can allocate up to 10% of contributed funds to administrative-related expenses.
While the SSO has never used up the allowed budget, the actual expenditure amounts to nearly 4 trillion baht a year _ still a very large amount to spend on administration. To put this into perspective, the administrative expenses as a proportion of the fund’s total expenses were 7.8% and 7.4% in 2010 and 2011 respectively, while the ratios for the US Social Security Office were only 0.8% and 0.9% for the same period.
This high expenditure is prone to inefficiency and abuse, given that there is no effective oversight. For example, overseas “study tours” for the board and management have produced little in terms of improving benefits for workers.
Furthermore, recent scandals in procurement practices decrease the credibility of the office.
We thus propose that the SSO’s administrative costs be lowered and more transparency should be provided regarding the fund’s expenses.
Finally, and perhaps the most urgently-needed SSO reform, is its governance.
The rejection by parliament of the bills proposed by Ms Wilaiwan and MP Nakorn has wasted an opportunity to reform the office’s governance. We urge that stronger oversight mechanisms be put back in place by the committee in charge of the vetting the bill to ensure that trillions of baht contributed by Thai workers is efficiently and honestly used.
Werapong Prapha is a researcher and manager of the public communications team at the Thailand Development Research Institute (TDRI).
First published: Bangkok Post website on April 10, 2013