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Source: IMF – News in Russian

(photo: Walter G. Allgöwer / imageBROKER / Newscom) Era Double-Norris and Chang Yong Ri April 30, 2020 In Asia, as in other regions, the regimes of full or partial self-isolation introduced to counter the spread of COVID-19 pose serious difficulties for enterprises and workers. Among the most vulnerable are part-time and temporary workers without social insurance, as well as in sectors of the economy that are not taxed and are not regulated by any government. This group is called informal workers, and they are particularly at risk of a sharp decline in income and loss of livelihood. In many countries in the region, informal workers make up a significant share of the workforce, but generally do not have the right to sick leave or unemployment benefits. They often do not have reliable access to health benefits. In addition, many of them have, at best, only very scarce savings. Many, especially self-employed and day laborers, barely make ends meet. If they are unable to work for a long time, their family may lose income. At the same time, protecting their income, whether by increasing unemployment benefits, lowering income taxes or increasing the duration of paid sick leave, and covering them with cash transfers is an almost impossible task. Time is everything. Steps must be taken quickly to support informal workers and their families in order to prevent their (further) impoverishment and protect their livelihoods. Despite limited budgetary resources and administrative capacity, countries in the region are taking measures to assist the most vulnerable. However, given the scale of the economic shock, much more needs to be done. The prevalence of informal employment in the region The share of informal workers in the Asia-Pacific region is almost 60 percent of those employed in the non-agricultural sector (higher than in Latin America and Eastern Europe) and ranges from about 20 percent in Japan, up to over 80 percent in Myanmar and Cambodia. This group includes workers with very different characteristics by type of employment, income and sector in which they work. Among them are hired workers without social protection or other forms of official insurance in enterprises of the formal and informal sectors and self-employed, such as street vendors and family members helping them, as well as day laborers. Informal workers are twice as likely as formal workers to be members of poor households . Some of these poor households are supported by transfer programs, but coverage and benefits levels are still insufficient to overcome the shock caused by COVID-19.

Policy responses Against the backdrop of countries creating widespread social protection systems, a diverse picture is emerging from old and new policy decisions. Expansion of existing social assistance programs. Temporarily expanding existing programs means extending them to more people (for example, in Vietnam) and increasing benefits (for example, in Bangladesh). Nepal and India increased in-kind and cash transfers for poor families and informal workers, while Indonesia increased utility subsidies for poor families. New transfers introduced. Thailand has introduced a $ 153 cash transfer for a three-month period, which can be received by up to 10 million farmers and 16 million workers not covered by the social security program using digital platforms for non-cash payments (Promptpay). In Vietnam, information from tax and utility accounts is used to provide a new cash transfer to informal workers’ households and self-employed people who were forced to temporarily close their businesses. Create public work programs. In the Philippines, measures are in place such as emergency employment programs for informal workers to support some of the essential health services in quarantined areas. Saving livelihoods through maintaining employment by helping small businesses prevent their closure. Malaysia, for example, has introduced special grants for microenterprises with fewer than five employees. Future plans: a “new course” for the region after the pandemic The outbreak of COVID-19 showed how difficult it is to protect informal workers and vulnerable households in Asia. But these extraordinary circumstances also make it possible to take measures to eliminate long-standing inequalities – in access to healthcare and basic services, financial resources and the digital economy – and to expand the social protection of informal workers. The pandemic is already reversing traditional norms in education and social assistance: the Internet, mobile Communications and digital payment platforms reach a wider population than ever before. What informal workers need now is a “new course” that provides immediate social protection against the economic consequences of a pandemic, while laying the foundations for a stronger protection system in the future. How to do this? Choose the right steps correctly. If international assistance and domestic financing can be mobilized, developing countries in Asia should use these resources to implement an effective health response, strengthen its infrastructure and reach, and address gaps in clean water and sanitation. C Develop broader and more inclusive systems protection. Government agencies can use citizen ID systems and digital technologies such as the Adhar biometric system in India to more quickly and efficiently reach most at-risk social protection programs, with the potential to scale up during a crisis. The temptation to introduce universal cash transfers by “distributing money to everyone” should be tempered, focusing on the goal of ensuring an adequate level of support for the most vulnerable at moderate cost of budget funds. Invest in the development of digital potential and increase network bandwidth. Expanding existing digital platforms for education and financial services in all developing countries will help ensure wider and more equitable access to them for all people. Solving the problems associated with the widespread informal sector in Asia also requires the adoption of comprehensive measures to improve the business climate and eliminate burdensome legal and regulatory requirements (especially for startups) and the rationalization of the tax system. Specific policies will depend on country conditions, but should be aimed at involving informal workers in basic social protection systems along with increasing their labor productivity. ***** Era Dabla-Norris – Head, Asian Division, Department of Asian and Pacific Countries and Vietnam Mission Leader. She was previously the head of the department at the IMF’s Department of Budget Affairs, where she dealt with issues of structural reform and productivity, income inequality, budgetary secondary effects, debt, and demography. Since joining the IMF, she has worked with various advanced economies, emerging economies and low-income countries, has many publications on a wide variety of topics and is an active member of the World Economic Council. She holds a master’s degree from the Delhi School of Economics and a Ph.D. from the University of Texas. Chan Yong Ri is director of the IMF’s Asia Pacific Department. Prior to joining the IMF, Dr. Ri was a senior economist at the Asian Development Bank (ADB). He was ADB’s chief speaker on economic and development trends, and also oversaw the Department of Economics and Research. Dr. Ri was Secretary General of the Presidential Committee of the G20 Summit in the Republic of Korea. Prior to his appointment at KFU, Dr. Ri was a professor of economics at Seoul National University and an assistant professor at the University of Rochester. He also frequently and actively acted as a policy adviser to the Korean government, including the Office of the President, the Ministry of Finance and Economics, the Bank of Korea, the Korea Securities Depository and the Korea Development Institute. The main directions of his research work relate to the field of macroeconomics, financial economics and the economy of Korea. He has many publications in these areas. Dr. Ri received his doctorate in economics from Harvard University, and his bachelor’s degree in economics from Seoul National University.

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EDITOR’S NOTE: This article is a translation from Russian Language to English.

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