Comment on “Public Pension Programs in Southeast Asia: An Assessment”

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Asher and Bali (2015) is a wide-ranging paper, reviewing current pension issues in Southeast Asia, reporting demographic trends, and making recommendations for reform. The demographic forecasts reviewed in Chomik and Piggott (2015), Asher and Bali (2015), and some alternative projections reported in Table 1 underscore the challenges that some Southeast Asian countries face. Three countries stand out. First, Thailand appears to be remarkably “old,” resembling Singapore on some of the indices that Asher and Bali (2015) report. Second, the Philippines stands out as the only Southeast Asian country that does not become an aged society over the relevant time horizon. Third, Vietnam is expected to age quite rapidly, indeed becoming an aged society while most of the population is still rural. The joke about many Asian countries is that they will get “old” before they get “rich”; Vietnam is on a trajectory to get “old” before it gets “urban.” The large share of the population remaining rural matters: rural areas are characterized by lower population densities and higher rates of self-employment and informal employment which make these populations harder and more costly to serve in terms of the pension issues discussed in the paper. In this respect, Thailand stands out as having achieved universal health-care coverage while still having a relatively large low-income rural population. The contrast with socialist Vietnam, which appears to have trouble extending benefits to the rural populace, and the Philippines, whose pension program is characterized by extraordinary inefficiency, is striking. Ultimately public pensions are political arrangements. Looking at conditions today, the divergence between Thailand and Vietnam is remarkable, and presumably not simply a function of Thailand’s higher income level. A deeper exploration of the political economy of these outcomes could be fascinating. Looking forward, the question arises as to whether the ageing of these Asian societies will generate political economies to promote perverse intergenerational transfers favoring the old over the young as has happened in many of the advanced industrial countries.