Can Asia Protect the Elderly?
The challenge of providing social protection for older persons in the region is about coming to terms with rapid social change processes as well as household saving and financing pension systems.
One of the main development challenges in Asia is the exponential population growth of older people. Population aging is a phenomenon that we can no longer ignore in this region, where one-fifth of the population will be over 65 years old by 2050. Increasing longevity is one of humanity great achievements. The opportunities to enjoy life at the fullest as an active member of society are a cause to celebrate. Opportunities come with challenges, however. Population aging presents social, economic and cultural challenges to individuals, families, and societies.
What does it mean to be old in Asia? Asia is not a homogenous region, ranging from very rich countries with a per capita GDP over $50,000 like Japan and Singapore to less than $3,000 in Nepal, Lao People’s Democratic Republic, and Tajikistan. A recent ADB study shows that the richer the country, the more old persons are covered by social protection programs such as pensions and health insurance. However, the coverage of older persons is still very minimal and only extends to a regional average of 12.8% of intended beneficiaries.
The coverage of social protection programs in Asia is quite skewed. Most of them benefit both better-off households (which can afford to make contributions to social insurance) and poor households, which can gain some access to social assistance. There is a large ‘missing middle’ of households that can neither could afford social insurance nor are eligible to receive social assistance.
Due to modernization, globalization and the advance of technology, family support for older persons is breaking away. The success story of family planning in Asia and the one-child policy in the People’s Republic of China (PRC) provide clear evidence that older people cannot rely anymore on their children or immediate family members to take care of them, while at the same time the state may not be ready to provide safety nets for them to live with dignity when they cannot work anymore.
Expanding social protection—particularly pensions and health insurance—to cover the majority of ’missing middle’ households represents the major challenge. In response to such problems of exclusion, some Asian countries, including the PRC, Indonesia, Thailand and Viet Nam, have moved aggressively to set up nationwide health insurance systems. In addressing the pension challenge, some governments have set about establishing old-age allowance (social pensions), some of which intended to be universal. Although the size of the benefits is still minimal, Bangladesh, Nepal, and Viet Nam have expanded their non-contributory social pensions to older persons, while the PRC through its rural pension and health insurance programs and the Philippines (via PhilHealth and the Social Security System) have substantially increased the coverage of these programs. Yet economies with a large rural sector or a large urban informal sector find this difficult to do. It is not easy, for example, to register participants in insurance schemes and then collect contributions.
ADB’s study finds that between 2004 and 2012, 14 Asian countries—Bangladesh, Cambodia, PRC, India, Indonesia, Republic of Korea, Malaysia, Nepal, Pakistan, Philippines, Sri Lanka, Uzbekistan, and Viet Nam—made discernible progress on social protection. The expenditure of these 14 countries increased from 2.7% of GDP per capita to 3.2% during this time. Out of the sample of 14, 6 of them (Cambodia, the PRC, Mongolia, Nepal, the Philippines, and Viet Nam) made significant progress, although their expenditure is still far below that of the Republic of Korea (5% GDP per capita) as a realistic medium-term objective for countries in Asia.
The challenge of providing social protection for older persons is also about coming to terms with rapid social change processes such as urbanization, medical technology and healthier life style, as well as the current household saving and financing of pension systems, whether contributory or noncontributory. One of the key questions is, how much of the cost will have to be shouldered, for example, by beneficiaries? Despite these problems, many countries in Asia are striving to institute universal forms of social insurance. The PRC, Indonesia, Maldives, Thailand, and Viet Nam are moving in this direction.
For lower middle-income countries such as Cambodia, Lao PDR, Myanmar, and few Pacific island states with few social protection programs for the ‘missing middle,’ adopting a universal approach to protect the older population is likely to be a strategic priority. These countries will simply have to find ways of mobilizing the necessary revenues to finance such universal forms of provision – a political imperative as well as a key social priority.