The social insurance system in Muslim countries.

The social insurance system in Muslim countries. In the Global Jobs Pact of ILO (The Global Jobs Pact, 2009), governments of countries, employers and employees jointly concluded that “countries having strong and efficiently functioning social protection system have a valuable built-in mechanism for stabilisation of their economies and reduction of social impact of the crisis. Therefore, a state should extend the scope of social insurance, adapting it to new challenges that manifest themselves in the rapidly changing modern economic conditions, in order to react to and regulate the increasing level of poverty and vulnerability of social strata”[1]. While the majority of the Arab countries have introduced complex, inefficient and costly systems and social protection institutes for the last decades, some of them have carried out and continue to carry out a clear national policy on social protection, which includes both social insurance and assistance and services, payment of which is not based on previous contributions of recipients. The goals that I set for myself in this study are: to research the social insurance system in Muslim countries and the Arab Region; to identify problems existing in the modern social protection system of these countries and possible ways of their solution. Analysis of the social insurance system in Muslim countries. Historically, a social protection policy in Muslim countries was very different: according to the types of programs, which provided population with social protection (social insurance, programs that are not based on previous contributions and health care) as well as according to the target groups (employees of private and public sectors, various socially vulnerable groups) and provision of financing of these programs (public, private). Socioeconomic status creates conditions, which serve as basis for establishment and development of social protection system and social insurance system, in particular. First of all it depends on the “tax space” (amount of resources available for redistribution), population size and composition (i.e. social differentiation of population is also taken in account), living standards and level of requirements of population. It is important to note that Muslim countries in the Arab Region greatly differ among themselves in terms of level of GDP: there are both the richest and the poorest countries of the world in the region. Source: IMF, World Economic Outlook Database, 2010 Figure 1. Level of GDP per capita according to the purchasing power parity in 2010, international dollar It is noteworthy that most countries in the pre-crisis period showed stable growth indicators, as well as most states, which belong to the group of developing countries. Unfortunately, this potential was not implemented in creation of necessary number of workplaces for a growing quantity of young population. Unemployment, underemployment and shady employment remain major challenges in the region, especially for women. [2] According to recent estimates, the share of people living in poverty (with income below 2 US dollars a day) in the Arab countries is about 20% of the population of this region [3]. The basic element of social protection in Muslim countries is social insurance programs that provide long-term benefits in case of reaching retirement age, disability or death of breadwinner. These schemes protect employees of public sector of economy, including military employees and private sector employees. In most countries the existing schemes of social insurance protect those employees who are employed on a permanent basis. Other categories of employees such as temporary workers, agricultural workers, people who work at home and migrant workers, do not receive a legitimate insurance coverage in all Arab countries. Recent estimates of the World Bank have demonstrated that on average only one-third of employees in the region are subject to pension insurance (there is a great differentiation between countries in the level of provision of financial security and social services in connection with retirement, for example, in Yemen the share of population covered by this type of social insurance is 8%, while in Libya it is 87%) [4]. Protection of mandatory social insurance programs is limited. At the present time, civil servants in the Arab Region use services having quite a high level of protection, while private sector employees in some countries are only partly subject to social security or are not subject at all (in the occupied Palestinian territories). Most of those people, who provide themselves with work independently, are in the shadow economy and are partly subject to social security in Algeria, Tunisia and Egypt [5] Such social insurance protects more than 50% of population in all countries, including partial protection. An important challenge for the Arab countries today is also a social insurance for women. According to international estimates there are very few officially employed women in the Arab countries, while most of them are employed in shadow economy [6]. It is also worth noting that the actual level of social security benefits can greatly differ from the legal level as a result of the difficulty of enforcement and different duration of life [7]. New ways of solving modern problems in the Arab Region. In most Arab countries pension insurance schemes underwent significant changes; several reforms were carried out, which were aimed at reducing the pressure of costs on public finances for this type of social insurance. For this end the following measures were taken: expanding insurance coverage, increasing retirement age, reconsideration of the formula for calculation of insurance benefits, equalisation of potential possibilities in receiving reimbursement or social service according to social insurance of employees of public and private sectors [8]. Main means of interaction with the challenges of contemporary socioeconomic processes that exist in Muslim countries should be the following: The main goal of social protection programs should be building of foundations for social insurance (social pensions, benefits to children and necessary medical services) that will help to disseminate knowledge about protection of one’s income and health, reduction of incidents of child labour. While the majority of the countries in the world adopted international global social security standards, only a few countries ratified some conventions in the Arab countries. For example, the Convention on social security (1952), which contains the basic underlying principles and standards of social protection, was ratified only by Libya and Mauritania. Convention on equality of service (1962), which secures rights of migrant workers, was ratified by Egypt, Iraq, Jordan, Libya, Mauritania and Syria [9]. So, at this stage, Arab countries need a more extensive use of international standards, introduction of international practice in the field of social insurance. Provision of appropriate pensions can be achieved through adequate protection of pension reserves and accumulated savings of employees, checking the adequacy of establishing the minimum level of benefits [10]. To ensure a sufficient level of employment in the economy and fight against unemployment it is necessary to apply a combination of such measures as temporary benefits to employees and quick attraction of unemployed people into the labour market through requalification and retraining that will facilitate transfer of this segment of the population into informal economy. One of the countries that introduced this scheme of unemployment insurance (assistance is provided to those persons who are looking for work for the first time and those who are having requalification and retraining) was Bahrain, which in 2008 reformed the social insurance system, having created the Social Insurance Organisation (is managing and executive state-owned enterprise, whose activities are aimed at offering pension and insurance services to individuals who are the subjects under the Civil and Military law) [11]. One of the most outstanding achievements of development of Muslim countries for recent years has been a significant increase in the number of women involved in education and paid work. Though, the dynamic in a public sector is more active than in a private one due to better social security and better access to its benefits. The problem is a lack of will of the enterprises, especially Small and Medium Enterprise, to pay maternity grants to women, that doubles expenses for salaries. In order to solve this issue some counties decided to distribute the so-called “maternity risk” among employers, employees and state. For example, in Jordan the benefits scheme in case of maternity shifts the obligation to pay these benefits from the entrepreneur to the state, through the introduction of this type of social insurance. The problem of growing number of aging population, reduced adaptability of the labour market to the sharp economic fluctuations more and more confirms the fact that to ensure economic stability, it must have a stable basis ― population, people who are a perpetual motion of development of a separate state or the whole world. Muslim countries have huge potential for development, but the main task of governments in the region is not wasting available resources, but their usage for creation of reserves of economic growth and economic development. Avtor Chernigevich Olga, KNEU,original article - www.klubok.net Translator - Stakhanova Katerina, KNEU.