Asia-Pacific needs to boost social protection investment to achieve SDGs

The Sustainable Development Goals approved by world leaders last September set an ambitious agenda to reduce poverty, vulnerability and marginalization by 2030. While each government will shape its own approach to meet the SDGs, a common feature in most national programs will be the use of social protection.

Indeed, social protection is seen as so important on the development agenda that the very first SDG includes a target to implement social protection systems and measures to achieve substantial coverage of poor and vulnerable people. To provide such coverage, governments will have to commit to the reform and expansion of social assistance, social insurance and labor market programs.

Social protection is one of the most powerful tools available to government to fight poverty. The need for social protection is highlighted now more than ever by aging populations, highly vulnerable population groups such as migrant workers, and environmental threats.

In Asia, we have seen how social protection can help curb widespread deprivation in countries such as Japan and South Korea. Investing in social protection has for decades been an integral part of their plans to forge successful, globally competitive economies, while promoting social cohesion. Japan has had universal health insurance since 1961, while South Korea approved its National Pension Act almost 30 years ago.

The Asian Development Bank has carried out some initial modelling and analysis to estimate the public expenditure requirements for fulfilling the social protection agenda of the SDGs in 10 developing countries in South Asia and Southeast Asia. This agenda includes achieving full and productive employment and decent work for all; achieving universal health coverage; ensuring access to quality early childhood development, care and pre-primary education; and providing substantial coverage by social protection systems and measures of poor and vulnerable people. To boost expenditures for social protection, governments need to increase revenues.

The ADB analysis provided both a lower estimate and a higher estimate for how much it would cost to meet the SDG social protection agenda. The lower estimate suggests that Malaysia, Thailand and Vietnam would have to increase government revenues by under 10 percent between now and 2030 to fulfill the SDG social protection agenda. Indonesia, the Philippines and Sri Lanka would have to allocate 10-30 percent of projected government revenues, while Cambodia, Laos, Myanmar and Nepal would have to allocate 30-40 percent of projected government revenues. Thus, even the low estimate for government spending suggests a need to increase revenues.

The challenge for governments is more significant when one considers the upper estimate provided by the analysis. In this case, Malaysia, Sri Lanka, Thailand and Vietnam would face a resource requirement of 25-30 percent of projected government revenues. Other countries mentioned above would have to find even more public monies to fill the social protection gap, up to more than 80 percent of project government revenue in Cambodia and Nepal.

Four of the countries studied — Indonesia, Malaysia, Sri Lanka and Thailand — should be able to meet the social protection agenda of the SDGs without a major additional effort to increase revenues. However, they will have to make some progress to increase fiscal space. Reallocation of certain existing resources and improvements of tax collection will almost certainly be needed. Cambodia and Nepal will have to make a major effort to open up new fiscal space to finance social protection. Laos and Myanmar will have to expand fiscal space even more. Vietnam also has work to do to increase public revenues for social protection, but it may be spared the major efforts of other countries.

This initial analysis points to a need for developing Asian countries to increase their government revenue-to-GDP ratio. A ratio of 25-35 percent of GDP is considered a prerequisite to achieve developed country status, and most of the countries studied here have a ratio below 20 percent. To improve revenue collection, governments can broaden their tax base, strengthen enforcement of tax laws, and improve efficiency and transparency of the tax administration. Better utilization of information and communications technologies would substantially improve the effectiveness of tax systems.

In light of the growing priority that social protection is being given by policymakers, ADB is organizing a major regional discussion on the topic this week in Manila, Philippines. More than 200 participants from governments, research organizations, development agencies and nongovernment organizations will attend the Asia-Pacific Social Protection Week. Discussions will address a range of issues around improving social protection systems, including the challenge of sustainably financing them.

Devex is the exclusive media partner of the Asian Development Bank’s Asia-Pacific Social Protection Week.

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