Capacity Building for Analysis of  Wage and Social Insurance Policies The grant will strengthen ILSSA's capacity to generate a series of analytical studies, digest them under the form of policy reports, and disseminate the main recommendations to decision makers.  It will also help to facilitate two-way communications between ILSSA and the Departments of Wages and of Social Insurance at MOLISA. Ultimately, ILSSA's analytical work will be driven by practical policy questions raised by the two Departments. There are three components: 1.   Capacity building for revision of the design of the pension ,,program 2.   Capacity building for modernization of labor market ,,regulations: 3.   Policy dialogue and consultation: The ultimate objective is to help MOLISA adopt sound wage and social insurance policies and to operate effectively its regulatory functions in a market economy. This grant will enhance the capacity and effectiveness of ILSSA - the research arm within MOLISA- to conduct policy-oriented analyses through providing timely and effective technical inputs to MOLISA?s Policy Departments. It will also strengthen the two-way link between ILSSA?s analytical work and MOLISA?s decision making in relation to wage policies and pension issues.  ILSSA's role is to provide technical inputs to the departments in charge of formulating and developing policies. However, both ILSSA's inadequate capacity and its weak link with MOLISA's policy departments lead to a fragmentation and a considerable inertia of policy formulation in Vietnam.  Currently, regulations related to the labor market and to social insurance programs are defective in terms of economic efficiency and social protection. In relation to wages, MOLISA has been tasked to revise the wage setting and collective bargaining mechanisms in force, so that they become better suited to the needs of a market economy. ILSSA was mandated to produce solid evidence on how the various wage setting mechanisms in force are working in practice, to identify their strengths and weaknesses, and to make recommendations for the design of the new system. At present minimum wage rules contradict WTO principles, whereas the weaknesses of the industrial relation system have resulted in a series of wildcat strikes.  In relation to pension issues, the first ever Social Insurance Law was passed in June 2006. Now MOLISA is facing the challenging task of developing implementation regulations aimed at expanding the coverage of the social insurance system, ensuring its financial stability in the long run, and providing adequate incentives for enterprises and workers to participate.  Regulations for these two areas should be developed in a coordinated manner. Wage policies affect the operation of the labor market and the extent of formalization, hence the coverage of the social insurance system. The expenditures of the latter, on the other hand, are very sensitive to the level of wages in general, and of minimum wages in particular. Changes in the ratio of minimum to average wages also affect the financial sustainability of the pension system in the long run. It is therefore important that policy decisions related to both wage policy and social insurance policy be based on common grounds.  Given that these two areas fall under responsibility of two different policy units, namely the Department of Wages and the Department of Social Insurance, strengthening the capacity of the institute in charge of providing inputs for both should improve the coherence of the resulting regulations. Currently, ILSSA's inputs have not yet had strong influence on policy formulation made at Policy Departments as they have not met the Departments' expectations. Creating a mechanism for all three institutions to continuously work together should facilitate two-way information flows and ensure that analytical work is geared towards serving the formulation of regulations related to both labor markets and social insurance.