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Neglected Topics in Pension Reforms in Asia

Mukul G Asher
Professorial Fellow, National University of Singapore
Director, Public Policy, Global Village Foundation
Email: sppasher@nus.edu.sg

Session 9, Asia Social Presentation Week, Asian Development Bank, Manila: August 1-5, 2016
DISCLAIMER: This presentation does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government
cannot be held liable for its contents.

Introduction
1. Focus on pension system as a whole rather than individual
pension schemes.
The discussion on pension reform needs to be from a systemic
perspective and not just focused on individual pension schemes in
isolation. This suggest that each individual pension scheme need
not provide the full income needed in retirement.
The pension benefits received by households, in terms of a bundle
of services, should be the focus. This will include both market and
non-market activities.
As an example in India, the program to provide cleaner cooking
fuel such as LPG, and moving away from wood and coal-based
fuels can impact household welfare, even though this is not
market-based. Similar reasoning applies to services to the elderly in
areas of healthcare, public amenities, etc.
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Introduction
2. Context-specificity & Transition Costs
The emphasis in pension reform is usually on best practice
arrangements. The discussion is usually normative.
What however matters is the context-specificity and the
manner in which and costs of transit from existing set of
trade-offs in the pension scheme to a better set of tradeoffs.
In pension reform, the best should not be the enemy of the
good.
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Introduction
3. Reforming Provident and Pension Fund Organizations
It needs to be recognized that government organizations provide
these services, therefore their effectiveness and citizen-centric
processes and personnel are essential.
This area concerns improving public sector management,
organizational effectiveness, and psychological aspects on how
the bureaucracy communicates and treats members of pension
fund organizations.
If pension reforms are to be effective, the current organizational
structures, processes, and mindsets cannot be left untouched.

Introduction
4. Approach to generate fiscal space should be made in an
integrated framework rather than individual items of
resource mobilization.
An illustrative framework is provided in Figure 1. This
framework has which has three distinct yet interrelated
components
enhancing rate of growth and broadening its base;
improving revenue generation from conventional and
unconventional sources;

this will require not just focusing on income and expenditure flows but on using
the state assets and regulatory powers to generate revenue.

better expenditure management for obtaining value for money.

A Framework for Generating Fiscal Space

Enhancing Rate of Growth


and broadening its base
Use growth Drivers, including
knowledge generation,
application& diffusion more
competently, & technology
adaptation

Use Public Sector current and


capital expenditure to crowdin Private sector domestic
and foreign investment
Harnessing Demographic
Dividend

Improving Revenue performance

Reform Procurement Practices


including in manpower
Conventional Sources

Tax Reforms to broaden


base, Improve compliance,
reduce administrative
compliance costs, preserve
tax base and minimize taxbase shifting. Technology
enabled instruments, e.g.
new IT tool to check PAN
transactions history; renegotiating double taxation
treaties etc.

Improve overall Productivity


Trends
Improve Debt management
including managing
difference between
sustainable ,actual debt
levels

Complementary reforms in
such sectors as labour
markets, regulatory regimes
to facilitate growth

Constructed by Authors

Better Expenditure
Management to obtain value
for money

Cost recovery, User charges


Willingness to charge issues

Regulatory levies, Returns


on Investments

Non-Conventional Sources
Use government
assets(e-g-land mining
assets) more
productively using post
offices for telecom
towards is a good
example
Reform and use Capital
Markets, e-g for state
and municipal bonds,
monetizing housing,
gold & other such
assets
Better use of
Regulatory charges and
levies
Financial Transaction
Tax (FTT)
Remittances from
abroad

Improve Treasury Management

Reforming subsidies and tax


expenditure with emphasis on
efficiency societal outcome
rather than spending. Use
sunset clauses

Reform Public enterprises


obtain better utilization of
resources
Improve Policy coherence and
organizational Co-ordination to
make real resource saving in
transaction costs.
Lower Administrative and
Transactions costs
Better Align existing
expenditure allocation with
societys long-term priorities

FSF: Growth
Enhancing Rate of Growth and broadening its base

Use growth Drivers, including knowledge generation, application&


diffusion more competently, & technology adaptation
Use Public Sector current and capital expenditure to crowd-in Private
sector domestic and foreign investment
Harnessing Demographic Dividend
Improve overall Productivity Trends
Improve Debt management including managing difference between
sustainable ,actual debt levels
Complementary reforms in such sectors as labour markets, regulatory
regimes to facilitate growth

FFS: Revenue
Conventional Sources

Non-Conventional Sources

Tax Reforms to broaden base,


Improve compliance, reduce
administrative compliance costs,
preserve tax base and minimize
tax-base shifting. Technology
enabled instruments, e.g. new IT
tool to check PAN transactions
history; re-negotiating double
taxation treaties etc.

Use government assets(e-g-land mining


assets) more productively using post
offices for telecom towards is a good
example

Cost recovery, User charges


Willingness to charge issues
Regulatory levies, Returns on
Investments

Reform and use Capital Markets, e-g for


state and municipal bonds, monetizing
housing, gold & other such assets
Better use of Regulatory charges and
levies
Financial Transaction Tax (FTT)
Remittances from abroad

FSF: Expenditure
Better Expenditure Management to obtain value for money

Reform Procurement Practices including in manpower


Improve Treasury Management
Reforming subsidies and tax expenditure with emphasis on efficiency
societal outcome rather than spending. Use sunset clauses
Reform Public enterprises obtain better utilization of resources

Improve Policy Coordination & Coherence to realise resource savings


Lower Administrative and Transactions costs
Better Align existing expenditure allocation with societys long-term
priorities