SGK head Zararsız: We have exceptional and advanced practices

SGK head Zararsız: We have 
   exceptional and advanced practices

Emin Zararsız

May 25, 2010, Tuesday/ 15:31:00/ ALİ ASLAN KILIÇ
Turkey’s social security policies rival those of the world’s most highly developed nations, according to Emin Zararsız, the head of the Social Security Institution (SGK).

Speaking to Today’s Zaman on the occasion of Social Security Week, Zararsız noted that one of the main purposes of the week-long celebration, which was held for the third time this year, is to build awareness about social security issues.

In 2008, the SGK designated the second week of May as Social Security Week, marking the passage of social security reform into law in May 2006.

Noting that the SGK is currently facing a social security deficit, Zararsız explained that in their long-term projections, they have prepared parameters that will reduce this deficit. He noted that one of the biggest problems in their field is informal employment. “Informal employment [in Turkey], which is far higher than in developed and developing countries, is our biggest area of struggle. During the entire week, we bombard the public with information so as to increase awareness regarding social security. There is no country in the world where illegal employment is zero percent, so even if we can’t reduce the figure to zero, we need to bring it down from around 43 percent to more tolerable levels.”

Zararsız said the social security reforms that were implemented in 2006 were remarkable both for Turkey and for the history of social security, adding that they have been commended by many countries for their efforts. The General Health Insurance (GSS) system, which was implemented as part of the reforms, put Turkey a step ahead of all other countries, Zararsız said. While 98 percent of the public is currently able to benefit from GSS services, they expect 100 percent of the public to be covered by GSS services by 2011. All children under the age of 18, regardless of their nationality, will be able to benefit from general health services, he said.

To begin with, happy Social Security Week. What is the purpose of this event?

Since the two main laws for social security reform were enacted in May 2006, the second week of May was like a holiday for social security. During this week-long event, more attention is given to topics that will increase social security awareness among the public, informing people about their rights and legal protection and contributing to documenting unregistered workers.

What’s the biggest problem in the system, deficits or informal employment?

Both are very fundamental problems. I say both because while deficits are serious enough to impact Turkey’s international credit rating, informality is a major problem that is closely related to the deficit.

How does Turkey compare with other countries in informal employment?

Until the 1990s, we did not have very big deficits. We had problems stemming from three different social security institutions; however, we were able to finance social security services with the income from premiums collected during some periods.

Then populist policies came into play in the 1990s…

Your description is correct as well, but I say the period of coalitions. The social security system was negatively affected during that process. Unfortunately, there were some interventions that were contrary to basic social security principles. And then the deficits of the three institutions started increasing.

Was the deficit increased due to shorter working hours and retirement opportunities?

The early retirement system affected us from both sides. The balance between what we call actives, those who work and pay premiums, and passives, those who are retired and receive a pension from the system, was disrupted. The length of time for those who receive a retirement pension was increased to an unprecedented extent. There needs to be a balance between the amount of money insured people give to the system and take from the system. Nowhere in the world is it possible for a person to give one and then take two or even three. But that is kind of what happened in Turkey. The first intervention that ruined the social security balance in Turkey had to do with the age limit. The age limit for retirement suddenly went down from around 60 to 38 for women and 43 for men. When you reduce the retirement age limit to 20 years earlier, it means less input into the system but more payments.

But didn’t the reforms raise the retirement age too much?

We needed interventions that were compatible with social security principles. The main principle of social security is the balance of benefit and burden. In other words, you will receive payback a certain period later depending on how much you paid in premiums and for how much time. A scientific study was conducted to determine the need for reform. The average premiums paid in Turkey and pensions received from the system were determined. Men paid premiums for 25 years and then received retirement pensions for 27 years while women paid premiums for 20 years and received money from the system for 33 years. No system could keep this up.

What about men who started paying premiums at the age of 25 and will continue to pay for 40 years? How many years will they receive a pension for? Isn’t that unfair as well?

The new reform envisioned the retirement age being 65, but we will be able to reach that point in 2048 starting gradually as of 2036. Once we reach that point, there will be major improvements in our system. As the length of collecting premiums extends, the passive side will increase slowly. We have to do this in order to find a balance in the system again.

So the policy could change depending on whether we establish balance?

We can’t know how legislation that affects the year 2048 will change in the upcoming process. Our wish is that these parameters will become grounded, a balance is established and no changes are made to this system. While positive interventions in the system take 10-15 years to yield a result, populist and negative interventions have negative consequences that manifest themselves immediately or in the following year at the latest. The parameters brought by the reforms are compatible with the principles and philosophy of social security. During interventions, the interests of workers as well as the country and society need to be taken into consideration.

Is the social security deficit the problem of the era for countries around the world?

Finding a balance between actives and passives is a serious problem for all countries. How many workers finance how many retired people? This is a very important question. When we look at the European Union and the Organization for Economic Cooperation and Development [OECD] averages, the figure is around three-and-a-half to four workers [per retired person]. While this figure changes from country to country, when it drops below four workers, the system starts having a deficit. After the negative interventions, this figure dropped to 1.78 in Turkey. According to March 2010 data, the number of active people has increased to 15 million with the number of passive people around 9.2 million.

We know about your action plan to fight illegal employment. What is the latest situation?

According to Turkish Statistics Institute [TurkStat] data, the rate of illegal employment is around 43 percent. This is a very high rate. It is a rate that is far higher than in developed and developing countries. This rate corresponds to more than 9 million workers. The SGK is working solo and with other institutions and organizations to reduce informality. We had a three-year action plan to fight informality, which is concluding this year. We had major cooperation. We signed close to 20 protocols. We carried out joint work with banks and the farmer registration system and had inspectors from other public institutions, such as the Health Ministry, share their field observations. While it is still not enough, 500,000 illegal workers were identified and registered within two years. The struggle will continue. We are preparing another three-year-long action plan for the years 2011-2014.

How will this struggle impact the deficit?

If the 9 million illegal workers in Turkey were registered and provided the most basic insurance, our premium income would have been more than TL 25.7 billion. But we had to take TL 3 billion more than this figure from the Treasury to finance our deficit.

In other words, our deficit would have only been around TL 3 billion. This would mean saving Turkey from a black hole because the Treasury closes this gap by taking loans. Reducing the cost of loans for social security to TL 3 billion would have reduced borrowing costs as well.


Children’s nationality not a criterion for social security services

What is the regulation regarding children under 18 years old for receiving health services; are there any limitations or conditions?

No, there are no limitations or conditions. Nationality is not a criterion for children to receive health services. There is a system in place in which all health expenditures of all children under 18 years old in our country are paid by the government.

How many countries do this? This must be a process unique to Turkey.

There are not many examples. As you know, the US has just recently put reforms into effect which are not as comprehensive as this. We are successfully implementing an exceptional practice in a social government system. We have received admiration and messages of praise from other countries. Turkey has managed to implement important social security reforms, starting in 2006, which have historic significance for Turkey and the world. As the parameters are achieved, its significance will become clearer. It will create an awareness of Turkey.

Some health expenses might be too costly. Is there a limitation for the expenses?

No, there is no limitation or problems for the children. Work in this area is being conducted with determination. There is no limitation for stateless people and refugees, either. There is no problem with general health insurance. They are covered by general health insurance.

What is the case for adult foreigners in Turkey?

There may be some differences depending on whether we have bilateral agreements with their countries or not.

‘Social security problem is not a domestic problem’

Do measures to finance the gap vary from country to country?

Generally, measures are taken according to the basic principles and philosophy of social security. However, they can vary according to each country’s cultural values. Also measures can vary according to the source of the problem. Since informal employment is high in Turkey, we have focused on this area. There may be different problems in countries where democracy and the rule of law are fully adopted. But long-term projections are needed for the sustainability of the system. For example, not too long ago, just about 20 or 30 years ago, the average lifespan was around the 60s and now it is around the 70s. We cannot ignore this because it directly affects the number of passive people in the system.

Is there a difference between a premium-based and a tax-based system?

The theory of social security is more or less the same, but the measures can vary depending on whether a system in which the deficit is financed by taxes is preferred. Turkey has been accustomed to a premium-based system for a very long time, and it meets deficits through the Treasury. A different system in Chile, known as the South American model, has become very popular. Now all countries are applying the tax and premium system in a way in which they are more similar to each other.

Did populism, which destroyed the system, evaluate the issue as a domestic problem for the country?

While theoretically that’s how it can be described, it is incorrect. That is because the Treasury finances the deficit from two sources: domestic and foreign loans. International credit-rating agencies closely monitor national social security systems because social security deficits are deficits that inevitably need to be financed. They pay attention to whether these deficits are paid for using taxes that have been collected or by way of loans. If they are paid for with loans, then borrowing becomes inevitable and credit-rating agencies determine your note and credit costs according to that. If the system creates a small deficit, then the cost of borrowing will be lower. Deficits in the social security system are one of the critical issues not just for our country but for the entire world.

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