The long-running row over social insurance is reaching new heights as a new draft law goes to the People's Assembly for consideration, Mona El-Fiqi reports Unlike many other laws that spark debate between the government and the opposition, the newly proposed social insurance law has a strong public element. Touching on the livelihood of millions, the bill is drawing contradictory comments from all elements of society. As usual, the government has praised the proposed draft law, asserting the importance of social insurance and pensions. However, some experts say the proposed law is full of loopholes. Others believe that there is no need for it at all. For its part, the business community announced that it has reservations on some items of the new law. Meanwhile, employees are pitching in as debate gets heated. Defending the draft law, the government said that it is expected to increase revenues while it aims to raise the number of applicants by promising pensioners and health and injury victims more financial compensation, financed by decreasing the percentage of wages paid by lower income employees and increasing the share paid by higher income employees. Another advantage of the new law is that it permits raising the age of retirement to 65 by 2027. The new system would be run by the Higher Council for Pensions and Social Insurance, a body that includes all government and labour stakeholders. According to government announcements, the new law would handle problems that people face when dealing with the current insurance and pensions law (Law 79/1975). Abdel-Fattah El-Gebali, deputy manager of Al-Ahram Centre for Political and Strategic Studies, asserted that the current law -- which includes five insurance systems for different sectors, including public sector employees, private sector employees, informal labour, expatriates and the self-employed -- needs to be replaced by one unified social insurance system. El-Gebali said that a major defect of the current system is that pensions, for most people, are meagre. Currently, social insurance payments are deducted from a maximum of LE800 of the employee's salary. Any extra earnings are not subject to insurance deductions. According to El-Gebali, the current insurance law provides privileges to those who earn high salaries over those who get low salaries, which helps increase the gap in income distribution among citizens. Another loophole mentioned by El-Gebali is that the current system enables many employees to avoid paying monthly insurance instalments. The new draft law has been discussed for three years and was recently approved by the Shura Council. The law is reaching its final phase and is now waiting to be passed by the People's Assembly during the current session. However, some experts favour the existing law. Former minister of social insurance and pensions Mervat El-Tellawi asserted that there is no need for a new law since the current law has been praised by the International Labour Organisation (ILO) as one of the best insurance laws in the world. El-Tellawi agreed that there are some items that need to be reconsidered due to changes during the past 20 years, "but they are not defects in the current law. The fact that 38 items of the current law have been included in the new draft law is clear evidence that the current law is very good," said El-Tellawi. Further, El-Tellawi said she preferred the introduction of amendments to the current law. She blamed the government for not raising the basic salaries of employees for the past 20 years. "Raising basic salaries should go hand- in-hand with the economic reform policy applied by the government," El-Tellawi added. El-Tellawi also blamed the government for not raising the maximum ceiling for insurance payments to cope with increasing salaries during the past few years. The real reason behind introducing a new social insurance law, according to El-Tellawi, is that the government wants to close the files of insurance savings currently estimated at LE400 billion at the treasury. "The new law changes the social insurance system to a commercial saving system, as if an employee conducts a deal with a private insurance company and at the end they will get exactly what they paid," said El-Tellawi. One more loophole, according to El-Tellawi, is that the new law creates new insurance bodies and their expenditures will be around one per cent of participant payments and two per cent of investment revenues, which she judged as unfair. In the past, pension and insurance funds went to the National Investment Bank. The new law states that 35 per cent of the insurance funds will be invested in the stock market, while the remainder will be invested in national projects. El-Tellawi said she was against investing the funds in the market because once they are in the market they will be left uncontrolled, which is not to the benefit of participants. The draft law has met with general public mistrust. Some say it is a way for the government to gather more money. Others doubt that the government is capable of investing the money successfully and ensuring pension payments. Sherine Habib, an employee, does not trust the government. "It is possible that I could lose all my savings and it is easy for the government to claim that insurance revenues were lost in the market," said Habib. Niveen Ahmed, another employee, is more optimistic, arguing that the new system will provide better insurance services for retired employees. Meanwhile, the Alexandria Business Association (ABA), the Egyptian Business Association (EBA) and the Junior Business Association (JBA) presented a memo to Minister of Finance Youssef Boutros-Ghali, expressing the business community's reservations on three items of the new law. The memo said these items state that in case of violations of the law, owners of private businesses could be imprisoned, while in the case of public sector companies the penalty is only a fine. "The possibility of going to prison as a penalty will discourage local and foreign investors," the memo said. The memo also included a request to decrease any fines imposed on business owners when they do not pay insurance for workers. The memo explained that fines do not fit the insurance payment value. For example, if a firm that employs 50 workers violates the law, a fine of LE10,000 for each worker should be paid. "The application of this item will destroy the firm and the future of its workers, instead of protecting their rights," said the memo. To achieve balance between the rights of workers and business owners, the memo said, penalties should be equal to the violation. The memo suggested that a fine of three times the insurance payment for a worker would be appropriate.
