income support schemes in pacific island countries

INCOME SUPPORT SCHEMES
IN PACIFIC ISLAND COUNTRIES:
A BRIEF OVERVIEW*
*
This paper has drawn largely from inputs provided by Manoranjan Mohanty, Associate
Professor, Faculty of Business and Economics, The University of the South Pacific, Suva, Fiji
Table of Content
Introduction ........................................................................................................................ 1
1. Background................................................................................................................... 3
1.1. Geographic overview......................................................................................... 3
1.2. Economic situation in Pacific island countries................................................. 4
1.3. Migration and remittances in Pacific island countries .................................... 5
1.4. Poverty and inequality in Pacific island countries .......................................... 7
1.5. Population dynamics and social challenges in Pacific island countries ...... 10
2. Income support schemes in Pacific island countries in the social protection system
of Pacific island countries.......................................................................................... 14
2.1. Overall social protection in Pacific island countries...................................... 14
2.2. Categories of income support schemes in the Pacific.................................... 16
2.2.1. Support for older persons ................................................................ 16
2.2.2. Support for persons with disabilities .............................................. 18
2.2.3. Support for children ......................................................................... 19
2.2.4. Support for the poor ......................................................................... 19
2.2.5. Other income support ...................................................................... 21
2.3. Governance and administration of income support schemes in the Pacific 22
3. Challenges and conclusions ...................................................................................... 24
3.1. Conclusions ...................................................................................................... 24
3.2. Recommendations............................................................................................ 26
References ......................................................................................................................... 28
Introduction
The food, fuel and financial crisis of 2008 has again illustrated the need for social
protection, and particularly income support schemes. Income support schemes are
often considered as an important tool not only as a response to crises, but
particularly as a tool to build resilience in populations. Basic income security,
especially for the most vulnerable groups, is an element of the United Nations social
protection floor, combined with universal access to health and education. A stable,
even if small, income helps people to invest in health and education and supports
their self-sustainability. It can protect people from unsustainable coping strategies in
times of crises, such as cutting expenditure on health and education.
While some Pacific island countries, namely those that are still associated with a
wealthier country such as France, New Zealand or the United States of America,
have inherited parts of those countries’ social protection system or have access to
them, formal social protection systems are still relatively underdeveloped in Pacific
island countries. Instead of formal social protection systems, societies in Pacific
island countries still have strong informal social protection systems, such as a system
of mutual exchange regulations within the kinship system.
However, the recent increase in food prices has hit many Pacific societies and
economies strongly. Access to land and subsistence farming, which serves as a
traditional social protection mechanism, has become increasingly difficult especially
for urban populations. The traditional system of exchange relations is increasingly
under strain in many Pacific island countries. The absence of formal social protection
systems in many Pacific island countries has become one of the biggest challenges as
a result of the food, fuel and financial crisis. Effective delivery of social protection
requires adequate policy infrastructures. Countries where adequate institutions are
already in place are better prepared for crises, as they would have the policy
infrastructure which is needed to be able to react to a crisis.
Certain vulnerable groups, often inadequately covered by formal social protection,
fall through the cracks of traditional social protection systems due to stigma and
discrimination. These include persons with disabilities, persons living with HIV and
AIDS, or victims of domestic violence. Formal income support should particularly
ensure that socially excluded groups are reached.
This paper seeks to discuss which formal income support schemes administered by
the state exist in Pacific island countries, especially with regard to vulnerable groups
such as persons with disabilities, older persons, children or the poor. The first part of
the paper assesses vulnerabilities by discussing the socio-economic environment in
1
Pacific island countries. The second part lists and briefly discusses existing income
support schemes and briefly assesses their adequacy in terms of coverage, access,
benefits, and targeting compared to needs in society. It concludes with a summary
and recommendations on the adequacy of existing income support schemes to build
resilience in societies and recommendations on policy interventions to move towards
universal coverage of social protection.
2
1.
Background
1.1.
Geographic overview
The Pacific subregion consists of 22 countries and territories. These countries are
grouped into three major cultural groups: Melanesia, Micronesia and Polynesia.
Melanesian countries include larger countries such as Fiji, New Caledonia, Papua
New Guinea, Solomon Islands and Vanuatu. Micronesian countries are: Guam,
Kiribati, Marshall Islands, Federated States of Micronesia, Nauru, Northern Mariana
Islands and Palau. Polynesian countries include: American Samoa, Cook Islands,
French Polynesia, Niue, Samoa, Tokelau, Tonga, Tuvalu and Wallis and Futuna
Islands.
Some countries are politically associated with former colonial powers or other larger
countries in the region. For example, American Samoa, Guam, and Palau have
affiliation with the United States of America. Cook Islands, Niue and Tokelau have
free association with New Zealand. Similarly, French Polynesia and New Caledonia
have close affiliation with France. Due to this political affiliation with larger and
wealthier countries, these Pacific island countries typically have higher standards of
living and partly benefit from better social protection.
The Pacific subregion exhibits wide socio-economic and cultural diversities and
numerous social challenges. Smallness, geographic dispersion, limited human and
natural resources, limited domestic markets, long distance from the global markets,
and vulnerability to natural disasters and extreme climate change events are the
main characteristics of the Pacific subregion. The Pacific island countries are at
different stages of development and thus have wide variation in their per capita
incomes. Rapid and varied urbanization in Pacific Island countries is posing social
challenges and putting pressure on their environment.
Several Pacific island countries have been ‘hit badly by the current global economic
crisis, with rising unemployment, loss of revenue from weakening terms of trade,
decreasing demand, delayed investment, high prices and currency fluctuations
affecting aid flows’ (Lowy Institute for International Policy, 2009 cited in Naidu and
Mohanty, 2009). With economic and environmental (climate) changes and crises,
globalization and urbanization, the social challenges are growing and the
vulnerabilities are expected to rise in Pacific island countries in future.
3
1.2.
Economic situation in Pacific island countries
Pacific island countries are a heterogenous group of countries with varying income
levels, ranging from low income and least developed countries such as Solomon
Islands with a per capita income of $ 1,130 in 2012 (see table 1) to high income
countries such as New Caledonia ($ 38,690 in 2011), French Polynesia ($ 26,290 in
2011) or Cook Islands ($ 13,478). The region also hosts four countries classified as
least development countries (LDCs), namely Kiribati, Solomon Islands, Tuvalu and
Vanuatu, on the basis of their income, economic vulnerability and low human
development. Samoa graduated from LDC status in 2010.
Table 1: Per capita income (in current $, Atlas method) in Pacific island countries,
2005-2012
Country or territory
American Samoa
2005
2006
..
2007
2008
2009
2010
..
..
..
..
2011
2012
..
..
..
Cook Islands*
9 409
11 895
13 478
Fiji
3 590
3 620
3 830
4 040
3 900
3 610
3 720
4 200
21 434
..
..
..
..
24 654
26 290
..
Guam**
..
..
..
..
13 089
12 864
..
..
Kiribati
1 780
1 780
1 820
1 920
1 820
2 040
2 060
2 260
Marshall Islands
3 560
3 620
3 760
3 770
3 720
3 750
4 080
4 140
Micronesia, Fed. Sts.
2 590
2 610
2 620
2 600
2 810
2 890
3 080
3 310
Nauru*
2 600
6 182
6 954
French Polynesia*
New Caledonia*
Northern
26 987
..
..
..
..
35 298
38 690
..
..
..
..
..
..
..
..
8 950
9 130
9 020
8 430
8 590
9 240
9 860
Mariana
Islands
Palau
Papua New Guinea
8 910
680
720
9 40
1 100
1 190
1 300
1 480
1 790
2 100
2 260
2 400
2 800
2 680
2 840
2 970
3 220
900
970
1 030
1 060
970
1 050
1 120
1 130
Tonga
2 550
2 780
2 860
3 210
3 330
3 470
3 800
4 240
Tuvalu
3 740
3 970
4 700
5 070
5 360
4 790
4 960
6 070
Vanuatu
1 780
1 990
2 120
2 510
2 590
2 700
2 870
3 080
Samoa
Solomon Islands
Data Source: World Bank, World Development Indicators database, no date (unless otherwise
indicated)
* World Statistics Pocketbook, United Nations Statistics Division, last update 2013, online
** Government of Guam, Bureau of Labor Statistics. Household and per Capita Income 2010,
available from http://www.dol.guam.gov/BLS/Household%20Per%20Capita%202010.pdf
Available data for American Samoa and Northern Mariana Islands displays a per
capita income of $ 11,199 in 2004 in the Northern Mariana Islands and of $ 8,638 in
American Samoa in the same year (Statemaster.com, no date).
4
While about half of the Pacific island countries are middle or high income countries,
all countries share the same vulnerabilities due to their small size, isolation from
foreign markets, high transport costs, limited natural resources and high
vulnerability to natural disasters. Limited scope for agriculture due to limited space
and in some Pacific island countries due to soil availability, combined with their
remoteness is also a cause for high food prices in some Pacific island countries.
Due to limited economic opportunities, economic growth has been relatively limited
in most Pacific island countries in recent years, with average annual growth not
exceeding 3 per cent in most Pacific island countries over the past ten years.
Exceptions are Papua New Guinea which, on average, grew at 4.9 per cent annually
between 2001 and 2011 and Solomon Islands, which grew at 5.4 per cent annually
over the same period (ESCAP, 2012a).
1.3.
Migration and remittances in Pacific island countries
For many Pacific island countries, migration and resulting remittances are part of a
development strategy. In some Pacific island countries, such as Samoa or Tonga, outmigration keeps population growth under control in spite of high fertility rates.
Through remittances, migration can be considered as a specific way of harnessing the
demographic dividend (Storey and Steinmayer, 2011). Net out-migration rates in
some Pacific island countries are particularly high, especially in Federated States of
Micronesia (-15.7), Tonga (-15.4), and Samoa (-13.4) in the period between 2010 and
2015 (see figure 1). Net migration rates are closely linked to opportunities to migrate,
which are higher for countries and territories in Poly- and Micronesia, but relatively
limited for Melanesian countries (Hayes, 2010). Pacific islanders from Kiribati,
Tuvalu and Vanuatu often work as seafarers on foreign vessels, which is sometimes
not recorded as out-migration in census data.
5
Figure 1: Out-migration rates in select Pacific island countries, 2010-2015 (per 1000
population)
Source: ESCAP (2013): Statistical Yearbook for Asia and the Pacific, Bangkok.
Although data on remittances are not available for many Pacific island and territories,
available data reflect the importance of remittances as a livelihood strategy in several
Pacific island countries. In 2011, remittances made up 21.9 per cent of GDP in Samoa,
16.7 per cent in Tonga, 4.1 per cent in Fiji and 2.8 per cent in Vanuatu, but only 0.2
per cent in Solomon Islands and 0.09 per cent in Papua New Guinea (World Bank, no
date). Large amounts of remittances are still transferred through informal channels
and thus remain unrecorded. Moreover, remittances sent as material goods are also
important, but are not recorded in balance of payments statistics.
Research has shown that in several countries, remittances are an important source of
income for many households. According to a study undertaken in Tonga, about 75
per cent of all households in the study year received remittances in cash and/or
material goods (Small and Dixon, 2004). In some villages in Samoa 80 to 90 per cent
of village households receive remittances (Connell and Brown, 2005). In Kiribati, the
2000 census reported that remittances from seamen were the primary source of
income for 30 per cent of households on South Tarawa. Remittances seem to be
particularly important for outer islands, as 55 per cent of all households receiving
remittances were located on outer islands. In Tuvalu, census data from 2002 revealed
that 34.2 per cent of all households received remittances from abroad (Abbott and
Pollard, 2004). Research has also shown that remittances serve as an informal social
protection mechanism and are often used to pay medical bills, fees for education and
to afford better nutrition (Brown, 2008). However, the majority of migrants from
Pacific island countries residing in OECD countries (which are mainly Australia,
6
New Zealand and the United States of America), are predominantly high-skilled
migrants. For example in the year 2000, 75.6 per cent of Tongans and 73.4 per cent of
Samoans living in OECD countries had a post-secondary degree (Docquier et al,
2008). It can thus be concluded that migrants mostly originate from families that
already had better access to education and are thus generally better-off families.
Although migration does contribute to reducing poverty, usually the poorest of the
poor are not able to migrate abroad.
1.4.
Poverty and inequality in Pacific island countries
Poverty is relatively complex to analyze in Pacific island countries. Several Pacific
island countries are middle or even high income countries. Some reports point out
that many Governments of Pacific island countries feel that poverty is not very
widespread in Pacific island countries. Moreover, Governments often point at strong
traditional values that serve as social protection mechanisms (AusAID 2012a). Yet,
some authors point out that poverty is relatively high in Pacific island countries
compared to small island countries in other regions of the world, such as the
Caribbean (Prasad, 2008).
Food poverty appears to be negligible in Pacific island countries. In fact, in many
Pacific island countries, obesity seems to be more of an issue than under-nutrition.
For example in Nauru, 71 per cent of the population are obese (see table 2). Noncommunicable diseases, which are often related to life-styles, such as diabetes are
also increasing in Pacific island countries. Yet, obesity is also a form of malnutrition,
as it is frequently found among the poorest population groups who often resort to
lower-priced high-calorie foods with limited nutritious value. Moreover, obesity can
lead to a number of non-communicable diseases, such as coronary-vascular diseases,
diabetes and finally result in disability, which increases healthcare costs for
households and creates new vulnerabilities. Stunted growth and malnutrition is a
concern among young children in some Pacific island countries.
Poverty data is not widely available in Pacific island countries and thus,
comparability is limited. However, available data gives an indication on the numbers
of vulnerable persons and needs for social protection. Poverty in Pacific island
countries is often characterized by poor access to services and limited opportunities.
Significant income and housing poverty also exists in the subregion (AusAID, 2012a).
National surveys also show that a relatively high percentage of the population is
under the basic needs poverty line. For example the percentage of the population
under the basic needs poverty line was estimated at 50 per cent in Kiribati in 2004, 28
7
per cent, 25 per cent in Fiji, and around 20 per cent in Marshall Islands, Samoa and
Tonga (World Bank 2006a). In Palau in 2006, the population under the basic needs
poverty line was estimated to be at 25 per cent (Government of Palau, 2006),
Table 2: Obesity (BMI ≥30) in select Pacific island countries (percentage of total
population, 2008)
Percentage
Cook Islands
64.1
Federated States of
Micronesia
42.0
Fiji
31.9
Kiribati
45.8
Marshall Islands
46.5
Nauru
71.1
Palau
50.7
Papua New Guinea
15.9
Samoa
55.5
Solomon Islands
32.1
Tonga
59.6
Vanuatu
29.8
Data Source: World Health Organization, Global Health Data Observatory
Some countries also use a national poverty line to measure poverty, which defines
relative poverty. The percentage of the population under the national poverty line
varies from 12.7 per cent in Vanuatu to 31 per cent in Fiji, among those countries
where data have been available (see table 3).
In Fiji, the national poverty line is defined at a level which is significantly higher than
the international definition of $1.15 per day. While only 5.9 per cent of the population
fall under the international poverty line, 28.4 per cent fall under the national poverty
line. The poverty gap is also relatively low in Fiji, and had improved over time
(Narsey, 2010). However, Fiji’s income and expenditure survey 2008-2009 estimates
revealed the poverty reduction had been uneven. While urban areas saw a reduction
in poverty from 28 per cent to 19 per cent between 2002 and 2008, poverty increased
in rural areas from 40 per cent to 43 per cent (Narsey et al., 2010).
In the Cook Islands, almost 15 per cent of the resident population received no income,
and 21 per cent had an income of less than $ 5,000 per year. The proportion of the
population without an income was much higher in the Southern (20 per cent) and
Northern islands (27 per cent) than in Rarotonga (12 per cent), reflecting the disparity
8
in income earning opportunities between Rarotonga and the outer islands
(Government of the Cook Islands, 2010a).
While income earning opportunities are already relatively limited in Pacific island
countries, there is also a relatively high percentage of working poor, due to low
wages. Available data shows that 34 per cent in Papua New Guinea, 21.5 per cent in
Solomon Islands and 18.5 per cent in Kiribati of those employed still live below $ 1.25
per day (see table 3).
Table 3: Key poverty indicators in selected Pacific island countries, 2011
Proportion
of
Proportion
Proportion
employed
of
of
people
population population
living
below
below
Poverty
below
national
$ 1.25
gap ratio
$ 1.25
poverty
(PPP)
at $ 1.25
(PPP) per
line (2011)
(2010)
(PPP)
day
…
…
Cook Islands
28.4* …
Fiji
31.0 1
Kiribati
21.8* …
…
…
Marshall Islands
20.0* …
…
…
5.9 1
1.11
18.5*
Federated States of
Micronesia
Nauru
Palau
Papua New Guinea
Samoa
29.9*
…
31.2*
16.3* …
…
…
…
24.9* …
…
…
281
35.8**
12.3
34.0*
26.9 …
…
Solomon Islands
22.7* …
…
Tonga
22.41 …
…
…
Tuvalu
26.32 …
…
…
Vanuatu
12.72
…
…
…
…
21.5*
Source: ADB (2013). Basic Statistics. Available from
http://www.adb.org/sites/default/files/pub/2013/basic-statistics-2013.pdf.
*Refers to estimates/preliminary figures or refers to periods before 2007.
1
2009
2
2010
9
Access to land is an important social protection mechanism and is often owned by
the community. It is estimated that for example in Vanuatu, 90 percent of the
population have access to land and thus to this informal social protection mechanism
(Ratuva, 2010). However, those who do not have access to any land are also those
most at risk of poverty and will be unprotected in times of crises. In Kiribati, poverty
has an urban face, largely due to the need for cash in urban areas, while rural areas
tend to rely more on traditional systems of exchange (AusAID, 2012b).
In Kiribati, the Southern Gilbert Islands are the poorest areas of the country. They are
the most remote and also the smallest islands with limited resources for their own
production, vulnerable to drought and experience periodic problems with shipping
and supplies. Due to limited income opportunities, people at working age typically
migrate to other areas of Kiribati. Thus, these islands have the highest proportion of
older persons and a higher dependency ratio. These islands also displays the highest
rates of child poverty, which is also attributed to the relatively high proportion of
children living in households headed by older persons, which stood at 28 per cent in
2010 (AusAID, 2012b).
1.5.
Population dynamics and social challenges in Pacific island
countries
Different Pacific island countries are at different stages of the demographic transition.
In spite of decreasing fertility rates, fertility is still high in most Pacific island
countries. This results in large percentages of child populations, ranging from 22.6
per cent out of the total population in French Polynesia to 40.2 per cent in Solomon
Islands. It is expected that the relative proportion of the child population will
decrease by 2030 in all Pacific island countries, then ranging from 20.1 per cent in
French Polynesia to 33.7 per cent in Solomon Islands (see table 4).
10
Table 4: Population of Pacific island countries by age group (percentage), 2013 and
2030
2013
2030
WorkingChild
WorkingChild
age
age
population population
Population
population population Population
(0-14)
+65
(0-14)
Fiji
(15-64)
(15-64)
+65
28.9
65.7
5.4
24.5
65.5
10.0
Polynesia
22.6
70.2
7.2
20.1
66.5
13.4
Guam
26.2
65.7
8.1
22.1
63.3
14.6
Kiribati
31.9
64
4.1
28.5
64.4
7.1
35.1
60.8
4.1
31
62.4
6.6
22.7
67.4
9.9
20
65.9
14.1
38
59.1
2.9
32.3
63.6
4.1
37.7
57.2
5.1
31.6
60.1
8.3
Islands
40.2
56.4
3.4
33.7
62
4.3
Tonga
37.2
56.9
5.9
30.8
61.9
7.3
Vanuatu
37.1
59.0
3.9
30.4
63.6
6.0
French
Micronesia
(F.S.)
New
Caledonia
Papua
New
Guinea
Samoa
Solomon
Source: ESCAP (2013): Statistical Yearbook for Asia and the Pacific.
Although the proportion of ageing populations is still small, ranging in 2013 from 2.9
per cent in Papua New Guinea to 9.9 per cent in New Caledonia, the number and
percentage of older persons is increasing in all Pacific island countries and is
expected to be at 14.6 per cent in Guam, 14.1 per cent in New Caledonia, 13.4 per cent
in French Polynesia and at 10 per cent in Fiji in 2030. With increasing numbers and
percentages of older persons, healthcare costs for this population group is also
expected to increase and so are their needs for social protection. Although pension
schemes exist (which will be discussed in more detail below), few people actually
have access to pensions. Thus, many older persons still have to work and are among
those groups faced with the most hardships. Due to internal and international
migration, many older persons also have to take care of grandchildren (Abbott and
Pollard, 2004).
11
In most Pacific island countries, the working-age population is still on the rise – in
absolute and relative terms. There are also some Pacific island countries where the
relative size of the working-age population is expected to decrease within the next
two decades, such as in French Polynesia, Guam and New Caledonia. However, this
potential for a demographic dividend is not fully harnessed as labour force
participation is relatively low in Pacific island countries, especially among women.
Labour force participation is estimated at 42 per cent in Samoa and around 50 per
cent in many other Pacific island countries. For example in Tonga in 2011, 57 per cent
of the working-age population actively participated in the labour force. While 44 per
cent of them were employed in government or the private sector, 29 per cent were
unpaid family workers (Kingdom of Tonga, 2011). In contrast, labour force
participation is relatively high in Cook Islands, with around 75 per cent being
reported as “economically active” in 2005-2006, among them 58 per cent in wage or
salary employment (Government of the Cook Islands, 2007).
Increasing working-age populations can also become a challenge as unemployment
is already high in several Pacific island countries. Data on unemployment are not
widely available and of limited comparability. Available data show that
unemployment ranges from 1.9 per cent in Papua New Guinea, which is also be
related to the high share of the agricultural sector in total employment (Central
Intelligence Agency, 2013), but high unemployment of 36 per cent in 2006 in the
Marshall Islands and 22 per cent in 2000 in the Federated States of Micronesia. Some
also suggest that unemployment numbers in Pacific island countries would be much
higher if all those of working age who are involved in subsistence activities would be
included in the unemployment rate. For example studies on Kiribati have estimated
unemployment to be at 64 per cent when persons in working-age who are involved
in subsistence activities, but would prefer wage-labour, are counted as unemployed
(AusAID, 2012b).
The average household size in Pacific island countries varies considerably from 4.2
such as in Cook Islands (Government of Cook Islands, 2007) to 8.0 in Samoa
(Government of Samoa, 2011). Some countries also have a relatively high percentage
of female-headed households, such as Vanuatu with 24 per cent of all households
having a female head in 2009 (Vanuatu National Statistics Office, 2009). While a large
number of households may be erroneously reported as female-headed as the male
breadwinner works abroad, the number of truly female-headed households is
increasing, as many women are either abandoned for fled from abusive husbands.
Those households are often at high risk of poverty. For example in Solomon Islands,
female-headed households in rural areas are over-represented in the lowest income
quintiles (AusAID, 2012c).
12
Multi-generation households are still the norm in Pacific island countries. However,
poverty also seems to be highest in households with both children and older persons
as a result of the high number of dependent persons. For example in Kiribati,
Solomon Islands and Vanuatu, more than 40 per cent of those in the bottom three
income deciles are households that include older persons and children (AusAID,
2012a).
Support for persons with disabilities becomes an increasing concern in Pacific island
countries. While data are not available for many Pacific island countries, disability
prevalence ranges from 1.2 per cent in Samoa to 12 per cent in Vanuatu (ESCAP,
2012b). Taking up employment is especially difficult for persons with disability due
to widespread discrimination. Opportunities for education are often limited. In
Samoa, 53 per cent of persons with disability had no education. Children with
disabilities receive only minimal schooling if at all (AusAID, 2012a). Thus, the risk of
poverty is particularly high for persons with disabilities. In Kiribati, persons with
disabilities are likely to live in poorer households and receive limited support from
governments. Although the family usually provides support for them, there are signs
that once their parents are no longer able to care for them, support from other family
members may be limited (AusAID, 2012b). In Vanuatu, most persons with
disabilities are unemployed and experience discrimination, in spite of civil society
efforts to integrate persons with disabilities into society. Some are even despised by
their own families (Ratuva, 2010).
13
2.
Income support schemes in Pacific island countries in the
social protection system of Pacific island countries
2.1.
Overall social protection in Pacific island countries
Several reports state that Pacific island countries still have little experience in
providing social protection (AusAID, 2012). In the Social Protection Index by the
Asian Development Bank, many Pacific island countries are placed at the lower
bottom with an index level of less than 0.1 (see figure 2) (ADB, 2013).
Figure 2: Social Protection Index (SPI) in selected lower middle income countries
in the Asia-Pacific region
Uzbekistan
Mongolia
Marshall Islands
Timor-Leste
Viet Nam
Georgia
Sri Lanka
Philippines
Armenia
Samoa
Fiji
India
Pakistan
Solomon Islands
Indonesia
Bhutan
Lao PDR
Vanuatu
Papua New Guinea
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Source: ADB, 2013
Overall, formal social protection schemes are relatively underdeveloped in Pacific
island countries. Social protection is largely based on traditional and informal social
protections systems provided through family and kinship systems. Civil society,
especially faith-based organizations such as churches also play an important role in
social protection (Mohanty, 2011). There are also some concerns among governments
in Pacific island countries that formal social protections systems would crowd out
traditional systems and support by civil society (AusAID, 2012).
14
Yet, social spending for health and education is relatively high in Pacific island
countries. For example in the Federated States of Micronesia, public health
expenditure made up 19 per cent of government expenditure in 2011, in Marshall
Islands and Tuvalu about 18 per cent. In the Solomon Islands, public expenditure on
education made up 34 per cent of total government expenditure in 2008 and in
Vanuatu in 2009, 23 per cent of total government expenditure (World Bank, no date).
However, while there is relatively high spending on health and expenditure, the
problem may be with the effectiveness of spending and quality of service delivery
(World Bank, 2006). Although health services are often available free of charge, the
quality tends to be limited. Moreover, access to education and health services is still
very limited in remote and rural areas and many poor families are unable to pay
school fees, even if they are relatively low (AusAID, 2012).
Social insurance, in the form of contribution-based pensions, seems to be the most
common form of social protection in Pacific island countries. National Provident
Fund Schemes (NPFS) are the most common type of formal social insurance systems
in Pacific island countries. Most Pacific island countries, with the exception of Samoa,
perform highest in the component “social insurance” compared to other indicators in
the social protection index by the Asian Development Bank (ADB, 2013). Social
assistance, or income support schemes, seems to play a relatively minor role in the
overall social protection system in Pacific island countries. With its Family Assistance
Programme (FAP), a non-contributory cash transfer programme, Fiji has the most
extensive income support scheme in the Pacific subregion. The FAP will be discussed
in more detail below.
The level of social protection in Pacific island countries can be classified in the
following groups.
Firstly, countries/ territories that have political affiliation and ‘free association’ to
larger and wealthier countries are more socially and economically protected them
and partly covered under their social welfare programmes. These countries include
for example, American Samoa, Federated States of Micronesia, Guam, Marshall
Islands, Northern Mariana Islands, and Palau which are partly covered by Federal
Social Welfare Systems of the United States of America. French Polynesia, New
Caledonia and Wallis and Futuna have close association with and protected by
France. Cook Islands, Niue and Tokelau have ‘free association’ with New Zealand
and are protected by New Zealand.
15
Secondly, countries with heavy dependence on their traditional social systems such
as the wantok system providing community support, which is widely practiced in
Melanesian countries such as Papua New Guinea, Solomon Islands and Vanuatu.
Finally, the countries with large out-migration rates that receive family remittances
which serve as social protection and ‘safety net’ in several Pacific island countries
such as for example, Fiji, Federated States of Micronesia, Marshall Islands, Palau,
Samoa and Tonga.
2.2.
Categories of income support schemes in the Pacific
The following section examines how certain categories of vulnerable groups, namely
older persons, children, and persons with disabilities, as well as life-cycle risks are
covered through income support schemes. The discussion includes contributory and
non-contributory schemes.
Generally, non-contributory cash transfer schemes are not very common in the
Pacific. An exception is universal social pensions that have been introduced in some
Pacific island countries. Where social assistance programs exist in the Pacific region,
the eligibility for such programs is determined through variety of mechanisms,
including categorical targeting, means-tested targeting or self targeting (World Bank,
2006a). Means-tested social assistance schemes exist in Cook Islands, Fiji and Kiribati.
2.2.1. Support for older persons
Several Pacific island countries have established contributory pension systems, such
as Federated States of Micronesia, Marshall Islands, Nauru, New Caledonia, Palau,
Solomon Islands, Tonga and Tuvalu. However, in many cases only public sector
employees or sometimes also employees of the formal private sector are covered. For
example in Papua New Guinea, only persons in firms with 15 or more employees are
covered (ISSA, no date). In Tonga and Tuvalu, the pension scheme applies only to
public sector employees. In many Pacific island countries, the proportions of
population above legal retirement age in receipt of a pension are low, such as about 3
per cent in Vanuatu, 10 per cent in Tonga and 20 per cent in Tuvalu, whereas they
are relatively high in Marshall Islands (63 per cent) and Nauru (65 per cent) (ILO,
2010:243).
In the Federated States of Micronesia, all “gainfully employed persons, including
certain self-employed persons” are covered by the contribution-based social
insurance system. The insured person pays 7.5 per cent of his or her earnings and the
16
employer contributes 7.5 per cent of twice the salary of the highest-paid employee
per quarter. An earnings-tested old-age pension is paid to insured above 65 in
addition to a reduced benefit to persons between 60 and 64 who meet the qualifying
conditions for an old-age pension. Those who do not meet the qualifying conditions
for the old-age pension at retirement age may receive a lump-sum benefit, which
covers 4 per cent of the insured persons’ cumulative earnings (ISSA, no date).
Several Pacific Island countries have a National Provident Fund. However, rather
than providing monthly income support on retirement, in several cases it can be
rather considered as a savings scheme, where participants receive a lump sum at the
end of the savings scheme. For example in Vanuatu, the Vanuatu National Provident
Fund (VNP F), administered by a tripartite board representing workers unions,
employers and the government, is one of the biggest providers of formal social
protection. As of 2010, the fund had a membership of about 40,000 (Ratuva, 2010),
covering nearly 30 per cent of Vanuatu’s working-age population. The VNPF has
provision for four types of benefits for members, namely permanent incapacitation at
work; death of a member; and migration. Payment is on the basis of a lump sum
balance at the time of retirement at age 55. The fund has a long-term provision but
cannot react to immediate financial emergencies. Unlike for example in Fiji, in
Vanuatu, there is no provision for emergency withdrawals for example due to
sudden loss of employment. Thus, in cases of such emergencies, urban workers still
rely on informal arrangements, including subsistence farming in small family
gardens (Ratuva, 2010).
The Kiribati Provident Fund also pays a lump summon reaching the official
retirement age of 50 years with partial withdrawals permitted starting from 45 years
of age. Research revealed that many beneficiaries use their lump sums to buy large
goods, such as vehicles to avoid losing cash to demands by the extended family.
Attempts to change the Fund’s scheme into a superannuation fund with a monthly
pension scheme failed. Among the reasons for this failure were that members could
not be convinced of the value of receiving an annual pension rather than a lump sum.
Further, the official retirement of 50 years would make it difficult to build an
actuarially sound and meaningful pension fund (AusAID, 2012b).
An increasing number of countries, namely Cook Islands, Fiji, Kiribati, Nauru, Niue,
and Samoa have introduced universal pensions for older persons. In Samoa, the
amount of the old-age benefit is US $ 94 in purchasing power parity (PPP), which is
247 per cent of the national poverty line. Around 65 per cent of the population above
60 are actually covered by the universal pension (Help Age International, no date). In
Fiji, the Social Pension Scheme (SPS), introduced in January 2013, provides a monthly
payment of $30 as pension (The Fiji Times 23 November, 2012). It is expected to cater
17
for an estimated 9,000 people who do not have access to a superannuation fund.
Senior citizens who are 70 years and older will be entitled to these pensions. The
overall budget for this program is $3.2million in 2013 (Government of Fiji, 2013). In
the Cook Islands, all residents over the age of 60 years are covered under the old age
pension scheme. The benefit has increased in 2008 from $240 to $ 400 a month until
death (Government of Cook Islands, 2010b: 12)
Established in 2004, Kiribati’s “Elderly Fund” offers a pension to every citizen older
than 67 years. According to the 2010 Census, 97 per cent of those eligible were actual
beneficiaries of the social pension. The benefit comprises $ 50 monthly to those above
70 and $ 40 monthly to those between 67 and 69 years old. The benefit is paid to
beneficiaries by the Island Council. Most beneficiaries travel to the Island Council to
receive the benefit, but in those cases where beneficiaries are not able to travel there,
Island councillors will travel to beneficiaries to deliver cash to their homes. The
benefit covers 80 per cent of an adult’s expenditure in the poorest income quintile.
Thus, the universal pension seems to be an effective tool to provide income security
and reduce poverty of older persons. Research has shown that many older persons
use the funds to support other household members, including children and that the
universal pension strengthens traditional forms of social protection. For example
those migrating to other areas within Kiribati are more likely to invite their older
parents to live with them when older persons receive income support (AusAID,
2012b).
2.2.2. Support for persons with disabilities
In most countries in the subregion, existing social insurance schemes also include a
disability benefit. For example the Provident Funds of many countries also pay in
case of disability. The Marshall Islands Social Security Administration (MISSA) pays
disability benefits to those insured under the Social Security Act of 1990. The
Federated States of Micronesia have a contributory disability pension with a
minimum contribution of US $ 1,500 (US-SSA, 2010). However, as with support to
older persons, its problem is its limited coverage, as only those in the formal sector
are covered, which is a relatively small percentage of the working-age population.
Moreover, while insurance schemes offer benefits in case those who had worked
become disabled, but only few countries have income support schemes that entitle
every person with a disability to a cash transfer, including children.
In the Cook Islands, under the Disability Benefit Scheme, about 230 persons with
disability receive a monthly benefit of NZ $ 100. There is also a non-contributory
benefit of NZ $ 150 per months for those who care for a person with disability and
18
are unable to work (ILO, no date). There is also special assistance for improving the
residences of persons with disabilities (ADB, 2010a).
In the Yaren district of Nauru, persons with disabilities receive an allowance of $ 50
per fortnight. The programme is self-funded by the Yaren community (ADB, 2007).
Some countries have no specific schemes targeting persons with disabilities, but
when they are poor, they can access schemes targeted towards the poor. For example
in Fiji, persons with disability under a certain income can receive funds through the
Family Assistance Programme (FAP).
2.2.3. Support for children
The Cook Islands provides an allowance for caretakers for children under the age of
12, which is NZ$ 20 a fortnight (Government of Cook Islands, 2010b). This benefit
also helps older persons to care for their grandchildren whose parents migrated
abroad or from outer islands to Rarotonga. It has shown that the child allowance has
proved an important tool to maintain communities in outer islands. Some studies
indicate that “the outflow of young adults has been almost replaced by an inflow of
young children, sent to their grandparents along with their child benefit payments”
(ADB, 2010a).
Some countries provide financial support for school children, whether as direct
transfers or providing free services. For example in Fiji, the Free Bus Fare Programme
(FBFP) was initiated in January 2011 by the Ministry of Education (MOE), providing
free bus services to children attending schools and whose parents’ combined annual
income is below F$15,000 (Barr, 2011). The budget allocation for that programme was
F$11 million in 2013. The government also provides free transportation to some
village school children who lack transportation facilities. Kiribati has a School Fee
Scheme administered by the Social Affairs Department. The programme provides
cash transfers to certain categories of persons such as incapacitated parents of
secondary school students families with a breadwinner who is incarcerated or
chronically-ill (World Bank, 2006a: 82).
2.2.4. Support for the poor
With its Family Assistance Programme (FAP), Fiji provides one of the more extensive
income-support schemes in the Pacific subregion. It is a means-tested, noncontributory cash transfer programme, targeting certain categories of the poor, and
administered by the Social Welfare Department. At F$ 20 million in 2009, it
19
accounted for nearly half of the government’s spending on poverty alleviation in that
year. To be eligible for the programme, applicants “must pass a rigorous means test,
have no other means of financial support, and fall into one or more of the following
categories: a deserted wife, widow, prisoner’s dependent, over 60 years of age,
physically handicapped, or chronically ill” (ADB, 2010a). According to the Social
Welfare Department of Fiji, to determine eligibility, “an assessment is made of each
family’s properties, land type, home condition, valuables in the house and livestock”
before assistance is granted (The Fiji Times, 2 May 2013). The programme has
sometimes been criticized for targeting only the destitute and not offering enough
even for those. Even those receiving the maximum possible benefit of F$ 100 remain
far below the poverty line in spite of receiving this cash benefit. The distribution of
the FAP allowance is not determined by the extent of need, but by the departmental
budget. There is a long waiting list of applicants and the eligibility process is not
always transparent. As a result, many people who would be eligible for the benefit
do not receive it (ADB, 2010a).
The Cook Islands provides a “Destitute and Infirm Benefit”, which is a monthly
transfer of NZ$ 200, with a Christmas bonus of $ 50 for every recipient at Christmas.
The allowance is strictly means-tested. According to the Welfare Act, the a person
who is destitute or inform is defined as someone who is “unable permanently to
support himself by his own means or labour and includes persons with dependents
where such dependents are unable through infirmity or age to support themselves
by their own means and labour.” Thus, recipients are mostly those who are not able
to work themselves, but also many single mothers. The percentage of recipients out
of the total population is higher on outer islands than in Rarotonga, which is also due
to the larger number of older persons on outer islands. The Welfare Act does not
prevent people to be recipients of several different benefits. Thus, older persons for
example, can receive the “Destitute and Inform benefit” in addition to the universal
pension for older persons (Government of the Cook Islands, 2010b).
In Nauru, the Government of Nauru pays power bills for households who cannot
pay for their own power bills, with a self-contribution of $ 5 (ADB, 2007). The Cook
Islands also provides a power subsidy of NZ $ 20 a month for infirm and destitute
pensioners and the infirm and destitute in outer islands (Government of the Cook
Islands, 2010b).
Countries and territories in association with the United States of America such as
American Samoa, Guam, and Northern Mariana Islands also have access to social
transfers administered by the federal welfare system of the United States. For
example in Guam, needy families can receive direct cash transfers from the
Temporary Assistance for Needy Families (TANF). The programme is means-tested
20
and intended to support families to become self-sufficient. Persons under a certain
income level also have access to Medicaid programmes, which cover healthcare
services for the categorically needy (Government of the United States of America,
2006).
In addition to coverage gaps that often result from rigorous means-testing, such as in
the case of the FAP in Fiji, certain groups remain underserved by existing income
support schemes. For example, although unemployment is an area of concern in
several Pacific island countries, only few countries provide an unemployment benefit.
While the welfare system of the Cook Islands is quite extensive, it does not include
an unemployment benefit. However, Cook Islanders who become unemployed can
move to New Zealand and have access to unemployment benefits there. This often
results in people moving to New Zealand although being ill-prepared for actual
employment (ADB, 2010a). Unemployment benefits exist in New Caledonia, but,
only 20 per cent unemployed in New Caledonia actually receive unemployment
benefits. The unemployed benefit schemes in New Caledonia are both contributory
and non-contributory types. The unemployment benefit is generally funded by the
Government of France (ILO, 2010: 243).
2.2.5. Other income support
In some cases, subsidies that are directly paid, for example to farmers, serve as a
form of social protection. For example Kiribati’s largest formal social protection
mechanism is the copra fund subsidy. The subsidy was established in the mid-1990s
and guarantees a minimum purchase price for copra from the Government of
Kiribati. This price was $ 0.70 per kilo in February 2010. Copra producers receive the
guaranteed price in cash when they bring copra in for weighing (ADB, 2012b).
The purpose of the copra subsidy is to support copra farmers in general, but also to
encourage people to remain on the outer islands, rather than migrate to the capital of
Kiribati. It is also considered as a form of unemployment benefit, as it provides a
cash income to those who cannot find other employment than copra-farming.
However, as it supposed to fulfill several purposes, including encouraging copra
farming, the volume of subsidies is not based on need, but on production volume.
This can lead to inequities between islands with the subsidy value ranging between
$ 4 per person and per year and $ 527 per person and per year. These differences can
be partly explained by differences in the size of landholdings, their productivity and
distance of households from plots. But household composition is another key factor:
those with less labour capacity find it more difficult to harvest and prepare copra for
sale. Thus, the copra subsidy is likely to discriminate against households with older
21
persons, persons with disabilities and single parents (ADB, 2012b). Some also express
the view that instead of maintaining copra production, the subsidy keeps the copra
price artificially high and has discouraged investment in crop improvements, given
that 46 per cent of the country’s coconut trees are senile. A similar subsidy exists in
the Marshall islands where it is also supposed to improve the incomes of poor
farmers living in the outer islands (World Bank 2006a).
Some countries also provide one-time allowances for certain life-cycle events. For
example the Cook Islands provides grants equivalent to one month’s benefit to the
families of deceased welfare beneficiaries, which are supposed to be the “infirm and
destitute” to help pay funeral costs (ADB, 2010a). The Solomon Islands also has a
funeral grant scheme under which the families of the deceased receive SI $ 30 (ILO,
2006d). In Nauru, families of the deceased receive $ 2,000 (ADB, 2007). The Cook
Islands also pays a one-time allowance equivalent to $ 300 to mothers of newborn
children (ADB, 2010a).
2.3.
Governance and administration of income support schemes in
the Pacific
The governance of income support schemes in Pacific island countries is diverse and
often fragmented. In many cases, different programmes are implemented by
different Ministries or agencies. In most of the countries in the Pacific subregion,
income support schemes are administered by the central governments except in
Nauru, where both central and local governments are involved. The Department of
Social Welfare/ Affairs has the responsibility of a state-led social protection system
in most of the Pacific island countries. In Fiji, the Family Assistance Programme is
implemented by the Department of Social Welfare under the Ministry of Social
Welfare, Women and Poverty Alleviation. However, several Pacific island countries
do not have a separate central agencies to promote welfare services. For example,
Kiribati lacks a central agency to promote policy development and provision of social
services (ILO, 2006b:67). In other cases, there is no Social Welfare Department, such
as in Tonga. In some cases, the Social Welfare Department is attached to Ministry of
Health as in Solomon Islands, Ministry of Justice in Vanuatu or Ministry of Internal
and Social Affairs in Kiribati.
In American Samoa, the Child Care Program (ASCCP) is implemented by the
Department of Human and Social Services (DHSS). In Cook Islands, the universal
benefit schemes are administered by the Ministry of Internal Affairs. In Guam, the
Department of Public Health and Social Services implements the Temporary
Assistance for Needy Families (TANF). In French Polynesia and New Caledonia, the
22
Government of France is involved in special education allowance and unemployed
benefits respectively. The federal social welfare system implements the social and
support services, nutrition and child protection assistance in American Samoa, Guam,
Northern Mariana Islands and the welfare payments relating to the period of nuclear
testing in Marshall Islands. The Marshall Islands has a Medicaid program which is
administered by the Department of Public Health and Environment Services.
23
3. Challenges and conclusions
3.1.
Conclusions
Apart from countries and territories that are in close political association with
another, wealthier, country, namely France, New Zealand or the United States of
America, income support schemes play a relatively minor role in the overall social
protection system of most Pacific island countries. Instead, Pacific island countries
seem to focus more on the provision of education and health services. However,
these services tend to be concentrated in more centralized islands, while access to
these services is often difficult for those living on the outer islands.
Traditional, i.e. informal support systems, as well as support by civil society play an
important role in social protection in Pacific island countries. Many governments in
Pacific island countries hold the view that the state’s role in providing income
support should be relatively limited to avoid that the role of the family and civil
society will be crowded out.
The result is that generally, those with more stable incomes, which is those in the
formal sector, are better covered by social protection than the poor. Although in
some countries, certain income support exists for the poor, this is often fragmented
and support levels are inadequate to sustainably relief households’ poverty. This
results from the following set-up of income support system. Generally, countries or
territories with higher income are those that tend to have access to more elaborate
social protection systems. Second, within countries, wealthier income groups seem to
have better access to income support schemes, but also to informal social protection
systems than poorer income groups. For example, most Pacific island countries have
a contribution-based National Provident Fund with provisions for pension and
insurance against disability or inability to work. However, only between 1 to 30 per
cent of the working populations are covered by National Provident Funds. Normally,
National Provident Funds only cover those in the formal sector and in some
countries only cover public sector employees. Thus, those in the informal sector,
which is generally characterized by a lower degree of social protection, also remain
unprotected.
As social insurance schemes are employment-based and women’s labour force
participation is lower than men’s women tend to be less covered by social insurance
schemes. A large number of recipients of schemes directed to the “poor and
destitute” are women, which reflects the greater vulnerability of women.
24
Informal social protection systems also tend to provide better protection to wealthier
income groups than to poor income groups. Informal social protection systems are
often based on access to land. Thus, those with better access to more and better land,
will also have access to better informal social protection in case of need. Access to
remittances is another determinant of informal social protection. However, as
migration is involved with a cost and migrants with better skills tend to have access
to better jobs abroad, particularly Australia and New Zealand, the poorest are often
not able to use migration as a livelihood strategy. Moreover, not all Pacific island
countries have access to migration opportunities. While Samoans and Tongans have
relatively easy access to migrate to Australia and New Zealand and a large
proportion of households in Samoa and Tonga have access to remittances, especially
countries and territories in Melanesia, such as Papua New Guinea and Solomon
Islands have limited opportunities to migrate abroad.
Older persons are increasingly considered in income support schemes. Five countries
have introduced a universal social pension for older persons. The universal pension
for older persons uses a self-targeting mechanism, as wealthier income groups would
not consider it valuable to spend the time on accessing this cash transfer. Experience
has shown that the universal old-age pension contributes to sustaining older persons
livelihood and even improves family cohesion, as younger people are more willing
to continue living with older persons in households if they have some basic income.
Combined with a child transfer, it also keeps communities on outer islands alive.
Many older persons use the allowance also for better education of their
grandchildren. Universal pensions for older persons are still at relatively low cost for
governments of Pacific island countries, as the proportion of older persons out of the
total population is still relatively small in most Pacific island countries. However, in
countries that have not introduced universal pensions, older persons are
inadequately covered by income support schemes.
Only few income support schemes in Pacific island countries target children directly.
The Cook Islands provides direct cash support to children. Experience with the
scheme has shown that it has especially empowered communities in outer islands
and keeps these communities alive, as many parents who work in Rarotonga leave
their children with grandparents in outer islands. The lack of income support for
children may also be explained by budgetary reasons, as a child allowance would be
difficult to afford for many Pacific island countries, given the large percentage of
child populations in Pacific island countries. Some countries provide cash transfers
to cover school fees for needy families. Other countries provide free bus transfers to
school children or school feeding schemes.
25
While in several countries National Provident Funds include payments in case of
disability, this applies only to those who had worked previously and become unable
to work due to a disability. However, only few countries provide income support
schemes for persons with disabilities. In some countries, persons with disabilities
have access to schemes targeted towards the “infirm and destitute’.
Several countries have targeted means-tested schemes to provide cash support or
subsidies meant for the poorest of the poor. However, this means-testing is often
involved with high administrative costs and is subject to targeting errors. In some
cases eligibility criteria are not transparent. In several countries or territories, the
poor face a fragmented system of several smaller support systems to which they
have to apply separately, such as power subsidies, food vouchers, etc. The level of
each cash transfer is generally too low to lead to poverty reduction. For example in
Fiji, even those who receive the highest possible transfer will still remain well below
the poverty line. Moreover, as these schemes only target the infirm and destitute,
those just below the poverty line or those in chronic poverty do not have access to
these support schemes.
Pacific islands countries would benefit from more integrated social policies, taking
into consideration different actors, namely State, civil society and informal social
protection systems. There is evidence that formal and informal support systems
support each other, rather than crowding each other out (Mohanty, 2011;Ratuva,
2010). Civil Society Organizations, particularly faith-based organizations such as
churches also play an important role in social protection and the provision of social
services. Cash transfers by these organizations may further support certain target
groups and provide additional income for these groups, but at the same time also
contributes to further fragmentation.
Currently, the social protection staircase is turned upside down in Pacific island
countries, providing support for those in the formal sector, but leaving the bulk of
the working-age population, namely those in the informal sector largely unprotected.
3.2.
Recommendations
To move towards a universal social protection floor, Pacific island governments may
consider the following:

In order to move towards a social protection floor, countries need to seek to
extend coverage and access to existing income support system and
particularly expand support to vulnerable groups that are currently
underserved by existing income support schemes.
26

Streamline existing income support schemes from several small fragmented
system with a variety of eligibility criteria and target groups to a more
streamlined target group with clearer eligibility criteria. This could save
transaction costs and may allow raising support levels.

There is a need to design integrated social policies that include the roles of
state and non-state actors. Due to capacity constraints of many Pacific island
governments, partnerships with civil society could contribute to increasing
coverage, access and support levels of social protection.

Migration has also proved as an important livelihood strategy in many Pacific
island countries. These transfers often lead to significant poverty reduction
and
also
support
island
communities.
Thus,
enhancing
migration
opportunities, especially for countries that currently have llimited access to
temporary labour migration schemes, could enhance informal social
protection systems in Pacific island countries.

Engaging diasporas and providing specific financial products targeting
diasporas could further contribute to the overall social protection systems.
27
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