Sunday 14 July 2013

Asia spending too little on poor: Report

Singapore trails high-income peers, 'missing middle' losing out on protection
By Himaya Quasem, The Straits Times, 12 Jul 2013

MOST Asian countries, including Singapore, are failing to spend enough on social programmes to help the poor and vulnerable, a study has found.

This includes schemes, such as health insurance, cash transfers and skills training, that can cushion the low-income, disabled or elderly against calamities including unemployment and natural disasters.

The lack of such investment was particularly pronounced in South-east Asian countries surveyed.

This region enjoys an average gross domestic product (GDP) of around US$6,678 (S$8,563) per head, the second-highest after East Asia. But it spends an average of 2.6 per cent of GDP on social protection, compared with East Asia's 6 per cent.

The report, which used data from 2009 and was released last month, said South-east Asia's low rate of investment may be due to "a relative lack of commitment to expanding social protection, the importance attached to other development priorities, or a historical legacy of past practices".

Singapore spent 3.5 per cent of GDP on social protection, which includes the Central Provident Fund (CPF).

This was far below the 19.2 per cent spent by Japan and 8 per cent spent by South Korea, the only other high-income countries in the study.

Malaysia spent 3.7 per cent of GDP on social protection, and Indonesia, South-east Asia's largest economy, spent 1.2 per cent, the report said.

The report, titled Social Protection Index: Assessing the results in Asia and the Pacific, said while the CPF system had given Singapore one of the highest savings rates in the world, it "has been criticised for not being designed to address the needs of vulnerable and poor groups or of a growing number of self-employed and low-wage workers".

The report also warned of a "missing middle" group of people who are falling through the gaps.

Those in this category are not in a position to benefit from social insurance schemes because they are not employed in the public sector or large private sector firms. But they are also ineligible for handouts as they are not deemed poor enough.

Singapore's social policies have contributed to a population with a high educational attainment, health status and rate of home ownership, said Mr Bart Edes, director of the Asian Development Bank's poverty reduction, gender and social development division.

But the Republic faces challenges in terms of wage stagnation and a rapidly aging population, he added. This means Singapore's motto of "self reliance" when it comes to tackling inequality needs to be fine-tuned.

"If people work hard and save, yet still do not have adequate means to support themselves and their families…then they will require a safety net to catch them," Mr Edes told The Straits Times. "There are limits to how self-reliant elderly widows can be if they have an insufficient pension to sustain them through their golden years. Skills training will not be of much use to them if they are frail or disabled."

The report praised East Asia, - consisting of China, Japan, South Korea and Mongolia - for its "relatively high" spending on social protection.

But China, which committed 5.4 per cent of GDP was deemed to be lagging behind its neighbours, including Mongolia which spent almost 10 per cent.

"Although the PRC (People's Republic of China) is developing rapidly and is ambitiously expanding its social protection system, its relative spending in 2009 was still low compared with that of the other three countries," the report said.

It added that South Asia, which includes India, the Maldives and Nepal, represented the poorest part of the continent in 2009 and spent the least on social protection, at an average of 2 per cent of GDP.

Total tally

SPENDING on social protection in South-east Asia (as % of GDP)

- Laos: 0.9%

- Cambodia: 1%

- Indonesia: 1.2%

- The Philippines: 2.5%

- Singapore: 3.5%

- Thailand: 3.6%

- Malaysia: 3.7%

- Vietnam: 4.7%

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