Concluding Remarks

As a result of the rapid population ageing due to decline in fertility and increased longevity, Asian LMICs will have a much shorter period in which to construct social security systems that (i) provide adequate benefits to most of the eligible population; (ii) are sustainable financially and fiscally; (iii) are affordable by individuals, businesses, and the economy as a whole; and (iv) are robust in riding out macroeconomic cycles, such as the current global economic crisis. Moreover, even while exhibiting these characteristics, their social security systems will need to ensure that high trend rates of economic growth and incentives for labor-market participation are sustained.

While there is considerable heterogeneity among Asian countries with respect to population size, per capita income levels, and institutional, fiscal, technological, and managerial capabilities, the analysis in this paper suggests that some common areas for turning the global economic crisis into an opportunity to strengthen social protection systems may be identified.

First, social security systems are increasingly regarded as integral to overall economic, social, and political management of the country, rather than being isolated and of secondary concern. The current global economic crisis has reinforced and perhaps accelerated this trend. The role of the state in social security financing, management, and supervision is also expected to increase in Asia-Pacific countries.

PRC, India, Indonesia,¹⁸ and Viet Nam¹⁹ These initiatives are designed to rebalance the economies of these countries to make them less vulnerable to external shocks, and to achieve more inclusive and broader development. They do, however, recognize the importance of sustaining a high trend rate of economic growth, since, in the absence of larger national incomes, the task of managing competing objectives, and adequately providing for the young and the old, may become more difficult. are examples of countries that have relatively recently begun the task of integrating social security reform initiatives that involve pensions, health care and social safety nets into their development strategies.

There are some Asian countries, such as Myanmar, Bangladesh, and Fiji, where there is scope for greater integration of social protection systems in their broader development strategies.

Second, following from the first, is the increasing recognition that an effective reform of social security systems requires complementary reforms in other areas. These include fiscal policies, labor markets, financial and capital markets, and provident and pension fund governance and regulation. Expansion of retirement income transfers, and social assistance, requires concomitant reforms in public service delivery systems. The importance of government competence in delivery of public services has increased considerably as Asian countries pursue aggressive fiscal stimulation packages.

Policies to promote retirement income from labor market participation even after formal retirement will be imperative as life expectancy (at birth and at 65) continues to rise in Asia-Pacific countries. This also implies that countries must be relatively flexible about the formal retirement age rules.

Increasing use of pre-funding in pension financing, as in PRC, India, Philippines, Malaysia, and Thailand, requires concomitant reforms in financial and capital markets, greater investment management expertise among provident and pension fund organizations, and promotion of enhanced financial literacy and financial inclusion policies.

Third, the analysis in this paper underscores the urgent need for greater professionalism by provident and pension fund organizations in many Asian countries in performing the five core functions identified in Avenue 1 in Section IV. The mindset of the relevant government ministries and organizations must change from “providers of welfare services” to being professional service providers, with strong emphasis on economic efficiency and organizational effectiveness.

In conclusion, for Asian countries to strengthen social protection systems, considerable attention to professional level details, and openness to innovative experimentation will be needed. In addition, construction and maintenance of robust databases, strong analytical capabilities, appropriate organizational structures and mindsets, and understanding of the subtleties of pension economics (particularly sustainability over long time-horizon, tyranny of seemingly small numbers exerting powerful impact on pension scheme viability and true meaning of what is meant by funding pensions) will also be needed. It is vital that provident and pension fund organizations publicly communicate to the stakeholders stochastic actuarial assessments providing long term projections of the impact of changes in demographic, labor market and other variables on the sustainability of current pension arrangements.

The global economic crisis represents a potential opportunity to progress toward more extensive and robust social protection systems. As there is considerable heterogeneity among Asian countries with respect to the above constraints, the progress in taking advantage of the crisis to strengthen social protection is likely to be uneven, and perhaps less rapid and comprehensive than desired.

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