Asia Pacific Nations Lag on Social Protection Spending, ADB Says

Asia-Pacific nations need to boost spending on social protection as widening income inequality risks stoking unrest, the Asian Development Bank said.

Only in Japan, South Korea, Mongolia and Uzbekistan out of 35 countries in the region does spending on social protection equal at least 5 percent of per capita gross domestic product, the ADB said in a report released today, using 2009 data. Insurance and pensions dominate such expenditure, while few governments focus on labor, the report said.

“Governments are underspending on social protection and this is a problem because there is widening inequality in the region,” Bartlet Edes, a director at ADB’s regional and sustainable development department, said in an interview in Manila. “If the benefits of Asia’s remarkable growth continues to be distributed in an unequal way, it’s going to weaken the social fabric and lead to social tension.”

Nations from Brazil to Turkey have battled growing unrest in past months as citizens rallied against unemployment and rising costs. Even as incomes climbed quickly on the back of economic expansion, income inequality in China rose to 0.474 in 2012 as measured by the Gini coefficient, above the 0.4 level analysts use as a gauge for social unrest.

South Korea’s social-protection spending, which is about 5 percent of per capita GDP, is a reasonable target for middle-income countries, ADB said in the report. China spends 3.5 percent, the Philippines 2 percent, and Indonesia 1.1 percent, according to data obtained separately from the ADB.

Numerous factors, such as a death in the family, illness, old age, natural disasters, financial crises, and unemployment can affect a large proportion of the population and adequate systems need to be in place to deal with such situations, the ADB said.

To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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