Financing social protection in developing Asia: Issues and options

Demographic trends portend the rapid ageing of Developing Asia (DA), albeit at varying rates. This phenomenon, along with the need to extend coverage of social protection systems is likely to increase public and private expenditure on social protection, particularly for pensions and healthcare. This paper analyses the options for additional financing of social protection in DA. As total national and fiscal resources devoted to social protection increase, an important issue will be how the additional burden is shared between different sectors, and financing instruments. The paper, however, focuses on options to finance additional social protection expenditure. Three broad options are suggested: first, realizing efficiency gains in managing provident and pension fund organizations; second, design and service delivery innovations including better policy coordination and coherence within and amongst healthcare and pension programmes; third, developing capabilities to obtain resources from conventional and unconventional sources of budgetary revenue. The paper also stresses that complementary reforms in fiscal, labour market, financial and capital markets will be needed to manage rapid ageing in DA, and therefore the issue of ageing should be viewed as involving several economic and social arrangements, and not in isolation.