Costing scenarios with The Rapid Assessment Protocol (RAP) Executive Training on Assessment, costing, and beyond Bangkok, 15 – 19 Oct 2012 Costing scenarios with The Rapid Assessment Protocol (RAP) In this section we will provide an introduction to the costing of scenarios with the Rapid Assessment Protocol. I will provide a brief introduction and then Sinta will take you straight to the model sheets and demonstrate how it works in practice.

Background ILO/FACTS Financial, Actuarial, and Statistical Branch - actuarial valuations of social security schemes - in-house actuarial expertise and model development ILO Social Budget Model (1990’s) - Comprehensive modeling of social expenditure - Comprises separate modules for projecting population, labour force, economy, Government revenues/expenditure, and Social Protection schemes - Tedious to complete, requiring experienced user - Comprehensive data required The Rapid Assessment Protocol (RAP) - Built on the concept of the Social Budget Model - Compact and flexible format (1 Excel file) - Allows for ‘rapid’ costing of SPF benefit scenarios A little background information ILO has a long history assisting member countries on actuarial valuations of social security schemes. The Financial, Actuarial, and Statistical branch at ILO HQ comprises several actuaries and has accumulated a lot of expertise in this field, and is in charge of developing the models used for costing. Initially the models were focused on individual schemes, but there was a push during the 1990’s to develop a more comprehensive national models, this mainly to support social policy reform in transition countries where trade-offs between different schemes or programmes were often required. This led to the development of the Social Budget Model, which aims at a comprehensive modeling of social expenditure including all contributory and non-contributory schemes. However, the model is quite tedious to complete and requires a lot of data that is often not available. In Cambodia for instance we were not able to complete the social budget due to missing data. The Rapid Assessment protocol was developed after the launch of the Social Protection Floor Initiative. It is more compact but allows for a relatively quick costing of SPF policy scenarios.

The ILO Rapid Assessment Protocol (RAP) RAP Model Structure In the sheet you see the structure of the Rap model, I think Valérie showed this chart before. In blue we have the model sheets that generate the model framework that includes the parameters required for costing specific benefits such as: the population by age group and gender, the number of employed, the national average wage, and so on. In green the benefit costing models where specific benefit models are costed based on the parameters given by the model framework. And in red the summary of the different scenarios.

The ILO Rapid Assessment Protocol (RAP) The labour market modules In this chart you can see the details of the labour market module or what we call the labour market balance. On the left side, the population based on which we can generate the labour supply by applying the activity rates or labour-force participation rates. On the right size we can see how the labour demand that depends on national output or GDP. The difference between labour supply and labour demand give us the unemployed. This is just one approach possible, we can also fix the unemployment rate and generate the national output or GDP by assuming a certain productivity rate or output per workers. So this depends on the situation.

The ILO Rapid Assessment Protocol (RAP) The Economic module The economic module comprises GDP in

The ILO Rapid Assessment Protocol (RAP) RAP Excel sheets AR MODEL FRAMEWORK Pop GGO (SQ) EAP ECO BENEFIT SHEETS BS 1 BS 2 BS 3 BS 4 BS 5 SUMMARY SHEET SUM

The ILO Rapid Assessment Protocol (RAP) Data requirements Population projection by age, sex Labour force by age, sex (base year) Labour force by economic sector National average wage (base year) National poverty line Consumer price inflation rate (base year) Real GDP by economic sector (base year) GDP deflator by economic sector (base year) Government revenues and expenditure Other (depending on scenarios): Poverty headcount rates Age-specific fertility rates Per capita cost of in-kind benefits, etc.

Cambodia – costing of policy options Draft policy options selected (from National Social Protection Strategy) Source: ILO: Cambodia - Financial Assessment of the National Social Protection Strategy (forthcoming)

Cambodia – costing of policy options Cost projections – Cash transfers for the poor Source: ILO: Cambodia - Financial Assessment of the National Social Protection Strategy, draft (forthcoming)

Cambodia – costing of policy options Cost projections – Targeted benefits (in % of GDP) Source: ILO: Cambodia - Financial Assessment of the National Social Protection Strategy, draft (forthcoming)

Cambodia – costing of policy options Cost projections – Universal benefits (in % of GDP) Source: ILO: Cambodia - Financial Assessment of the National Social Protection Strategy, draft (forthcoming)

Cambodia – Costing of policy options Results indicative and preliminary - Exercise meant to illustrate array of policy options - Aims to facilitate policy dialogue - Scenarios can be refined later as required Results of costing show affordability increasing over time - Relative cost of all policy options decreasing Main assumptions underpinning projections: - High GDP growth rate (assumption) - Rapid decline in poverty headcount rates (assumption)