The Rise of the Welfare State in Asia

Indonesian Parliamentary Session (Image via Wikipedia)

Indonesian Parliamentary Session (Image via Wikipedia)With ever-increasing prosperity, will the emerging economies of Asia embrace Western-style welfare states? A controversial subject even in the West, it is more so in the growing economies of Indonesia and China, where both massive populations and booming economies are coupled with debilitating social inequality, disease, and poverty.

While reforms initiated thus far are small in scope, the need for a broader and more comprehensive approach to social welfare is ever more clear when the costs of rampant economic inequality are factored into future economic scenarios.

In October of 2011 the Indonesian parliament passed legislation that aimed to give all 240 million Indonesians with some form of health insurance by 2014 under a single-payer system (soon to be the largest in the world, according to the Economist) that will collect the premiums and foot the bills. Additionally, the government will extend pensions, death benefits, and worker accident insurance by July 2015.

Though much praise is heaped upon this monumental act that lays the foundations for a modern Indonesian welfare state, few figures related to the financial costs of such a scheme are being released.

Indonesia is not alone in the expansion of health insurance coverage to its citizens: 85% of the Philippines citizenry is covered by their national plan while 62% of China’s rural population is covered by its rural insurance plan. The richer nations like South Korea have even created universal basic pension plans and long-term elderly care insurance.

The need to create a welfare state in the booming tiger economies of East Asia came into focus after the Asian financial markets collapsed in 1997. The growing economies kept their social expenditures low and relied upon traditional means, such as closely knit family groups, to shoulder the burdens of elderly care, education, and health care.

With declining birthrates and increasingly mobile populations, reliance upon a localized, kinship network became increasingly unrealistic and the lack of a social safety net posed a threat to economic growth. Additionally during the financial crisis in South Korea, the state was confronted with thousands upon thousands of unemployed workers for whom a safety net needed to be constructed, particularly given their ability to vote politicians into and out of office.


[The Economist]