Discussion draft only: Not to be cited
The Third EASP International Conference
Centre for East Asian Studies, Bristol University, UK,
12-13 July 2006
GDPism and Risk:
Challenges for Social Development and Governance in East Asia
The East Asian “Social Policy” Discourse:
Policy Shift, Reversal, or Steadiness?1
Professor Anthony B. L. Cheung
Professor, Department of Public and Social Administration
City University of Hong Kong, Hong Kong, China
Robert Wade (1990)’s study of South Korea, Taiwan and Japan resulted in an understanding of East Asian developmentalism as the “governed market”. Hong Kong arguably had developed an alternative model of growth in the name of “positive non-interventionism”. The identification of an East Asia-specific growth model is also matched by a similar attempt to construct an East Asian “productivist” model of welfare capitalism (Holliday 2000).
This paper explores the substance of the East Asian social policy discourse. The first question addressed is whether by having undergone rapid economic growth by the 1990s, East Asian developed societies have also trodden a path of modernization comparable to that in the West where post-War economic and social changes constituted interlinked aspects of a singular process of transformation leading to policy convergence in the form of the “welfare state”. The productivist explanation casts doubt on such a proposition. The second question is whether since the 1997 Asian financial crisis the pre-existing East Asian developmental model has been eroded because of the impact of globalization and the rise of neo-liberalism as prescription for the economic problems.
Economic challenges like globalization and the Asian financial crisis, and political challenges like regime change with democratization (South Korea and Taiwan) or without democratization (Hong Kong), and the gradual rise of new politics (Japan included), together with increasing fiscal/budgetary pressure (notably in Japan, Taiwan and Hong Kong), have certainly helped to induce public policy rethinking among East Asian governments. However, it is observed changes so far have not substantially moved beyond the original policy path grounded in a developmental state with productivist goals. Path dependency is still very much at play, sustained by institutional continuity. Policy reversals are rare.
Such policy steadiness in East Asian public policy governance can be explained by the longstanding bureaucrats-dominated nature of public policy making in addition to the state-led economic development approach to policy interventions. Some public services have historically been developed and expanded not for the sake of independent social policy values, but as instrumentalist complements to the developmental agenda and related political objectives. Welfare provisions have mostly been introduced not out of welfare ideology considerations, as some suggested to be the case in the formation of the welfare state in the West (Pinker 1979; Marshall and Bottomore 1992), but as a result of a fiscally and economically driven social development programme, in which case economic slowdown and recession could arguably cause a readjustment or even reversal shift, but still within the same logic. New social policy development in some East Asian states like South Korea after democratization can at best been seen as indicative of the rise of “welfare developmentalism”. If developmentalism is still the foundation of the East Asian public policy discourse, then its welfarist component needs to be conceptualized more appropriately as an offshoot of economic development and thus an outcome of fiscal surplus, rather than any pure ideology of collectivist welfare. Social development is thus part and parcel of the bigger economic development project. The role of family and individual efforts remains a key element of the social philosophy underpinning state-society interaction and the state’s response to social demands, even though there are increasing state regulatory and intervention efforts along the way.
^ evelopmental state
Before the 1997 Asian financial crisis cast doubt about the prospect of the postwar developmental state mode (Wong, 2004: 345-56), the conventional wisdom in understanding the system of governance in East Asia would start with the “East Asian Economic Miracle” thesis (World Bank, 1993). According to it, the success of the East Asian growth economies (Japan, Taiwan, Singapore and South Korea) until the 1990s could be attributed largely to the presence of a strong “developmental state” (very often authoritarian and corporatist in nature). Japan was portrayed by Chalmers Johnson (1982) as a pioneer model of the developmental or “plan-rational” state. As Beeson (2003: 26) put it, the very idea of the developmental state was reflective of conceptions and intellectual traditions about the purpose of public policy and the concomitant role of government which fundamentally differed from those prevalent in the Anglo-American nations. Such an idea can be traced to the Meiji Restoration in the 1860s, when the modern Japanese nation-state was created as a response to the challenge (and threat) posed by Western capitalist expansion. Wade (1990)’s seminal study of Japan, South Korea and Taiwan analyzed the nature and operations of the market under East Asian developmentalism and summed them up as the “governed market”.
Among the newly developed East Asian economies, Hong Kong under British colonial rule (until 1997) was arguably an exception as it had all along been held as the last bastion of the free market (Friedman 1981: 54) practicing an official philosophy of “positive non-interventionism”. Whether or not Hong Kong was a reverse proof of a successful free-market non-interventionist economy depends on how intervention (or non-intervention) was interpreted. Hong Kong’s colonial government in reality had displayed some unusual instruments for influencing industrial activities, so that the economy worked very differently from the textbook picture of a free market economy or from those economies of the Anglo-American kind (Wade 1990: 331-33). Though not of a Western welfare state type, the government was active in regulative controls and had extensive involvement in social and community services, relying on land revenue instead of heavy taxation as the principal means of supporting these services. To that extent Hong Kong was recognized by some as having developed a unique model of growth (Schiffer 1983).
According to Wong (2004: 349-52), the East Asian developmental states had the following core features:
Seen in this light, the East Asian development state model attests to Evans’ (1989, 1995) notion of “embedded autonomy” that gives the state the capacity to combine two apparently contradictory aspects – namely “Weberian bureaucratic insulation” and “intense immersion in the surrounding social structure” (Evans 1989: 561). Similarly, Weiss (1998) argued in favour of the “transformative” capacity of the state insulated from undue special interests but firmly embedded in society, and maintaining effective linkages with industry and other societal/economic actors to ensure the happening of things through what she theorized as “governed interdependence”.
Expansion of the residualist welfare regime
As late industrializers, Japan and subsequently other East Asian developed economies had historically exhibited a residual form of social welfare based more on family and corporate welfare than on state protection (Pierson 2004: 11). Their “welfare state”2 was set up and expanded over the last few decades “by conservative governments with clear antiwelfare ideologies” (Aspalter 2002a: 2). Public social expenditures in East Asia were considered very low on a world scale according to Gough (2004: 171), though he included some Southeast Asian countries within the “East Asia” sector. The figures were slightly higher in developed East Asian states, but still be low by Western European and North American standards – see ^ below.
Table 1: Total government expenditure and major social policy expenditures,
as percentages of GDP, in late 1990s
a including social-related withdrawals from the Central Provident Fund.
b 1998 figure
c 1997 figure
Figures on the five East Asian developed economies are from Gough (2004: Table 5.2); figures on the five selected OECD developed economies are from: OECD (2001a: 36-37, unnumbered table) (for general government expenditure), OECD (2001b: 80, Table B2.1a) (for public expenditure on education institutions), OECD (2001a: 8-9, unnumbered table) (for public expenditure on healthcare), and OECD (2002: 67, Table 6.3) (for “social security transfers”)
However, rapid economic growth in the booming decades had resulted in a faster expansion in real resources devoted to the social sector than in most countries (Gough 2004). Rather than an ideological offshoot, the welfare state in Japan, South Korea, Hong Kong, Taiwan and Singapore was explained as largely caused by social protests, political pressures, competition in democratic elections, and particular demographic changes (ibid). In all of these late industrialized economies, economic transformation did not necessarily result in an expanded state welfare regime, and changes in welfare expenditures had been modest compared with Western countries.
According to Pierson (2004: 11), Japan subordinated social policy to the logic of nation (re-)building through economic development, with a high economic growth strategy built around full (male) employment. Relying on a network of communal and family social support, Japanese governments were able to keep to a minimum the state’s responsibility for personal social services. Peng (2002) argued that such a welfare regime was sustained by the anti-welfare stance of the dominant parties (in particular the Liberal Democratic Party), though demographic and social changes in recent years had seen the gradual rise of new pro-welfare women-friendly social policies. Until democratization in the 1990s, South Korea and Taiwan shared the features of a system where an authoritarian state, acting closely with business interests and in a weak-unions context, fashioned a strategy for national economic development. Though social welfare was not a priority, it was improved through enlarging the economic pie and by way of maximizing employment and upgrading the skills base of the economy. In South Korea, the development of the welfare state had an underlying logic of politics (Kwon 2002). The government was forced by the 1997 economic crisis to reform social security schemes and employment programmes, as a way to enhance its political legitimacy and broaden electoral appeal.
In Taiwan, Ku (2002) argued that demographic changes had reduced the role and capacity of the family as the most important provider of welfare, and the rise of public pressure, social movements and ultimately party competition within a growingly democratic political environment following the demise of Kuomintang (KMT, Nationalist Party) authoritarianism had driven the state into the establishment of social insurance and health insurance schemes. Under the logic of positive non-interventionism, colonial Hong Kong had a typical system of residual welfare, though education and healthcare had evolved to become almost universal. Chan (2002) explained how political factors like pressure groups and social movements, politicians’ agitations, and the government’s need for legitimacy had help expand welfare provision. Singapore, despite the “soft” paternalistic nature of its state, had largely depended on the contributory Central Provident Fund to provide for various accounts and schemes of retirement protection, healthcare and even home purchase (Aspalter 2002c).
Convergence towards or deviation from Western welfare state model
As East Asian welfare states came to maturity in the 1990s upon reaching a developed economy stage, an obvious question is whether they would have eventually converged to the typical welfare state model of the West if not for disruption by the 1997 Asian financial crisis. The answer depends on whether there exists some kind of established welfare state modernization path spurred by economic growth.
The OECD experience, however, does not attest to such an inevitability. One would have presumed that there is greater policy interdependence and convergence among Western countries which share in civilization, have greater interaction in economic life, enjoy similar democratic forms of political governance, and are more or less in the same stage of modernity. A common perception was that most OECD countries converged in the post-War years towards big government fuelled by rapid economic development. From the 1970s onwards, economic and fiscal difficulties had triggered a New Right political economy emphasizing rolling back the frontiers of the welfare state, deregulation and privatization of public services. Then development of a globalized economy had prompted another kind of policy convergence tending towards international policy benchmarking and the use of similar policy tools in face of perceived common challenges from such globalization.
However, post-Second World War public policy development in European countries in OECD had not been evolving along uniform patterns. As Castles’ (1998) recent comparative study of OECD post-War transformation discovered, cross-national patterns of social and economic policy outcomes were in a constant state of flux as they were shaped by a wide range of economic, social, cultural, political and policy factors, which all altered over time. He tested the modernization theory that saw post-War economic and social changes as interlinked aspects of a singular process of societal transformation leading ultimately to policy convergence amongst nations, and in the end found that “the story revealed … was of a modernity fractured by major political, demographic and cultural fault lines, cross-cutting each other in different ways in different nations and, potentially, making for considerable policy diversity” (1998: 301, italic ours). The fact was modernity could be characterized by quite different age and occupational structures across nations, so much so that the story became that “of a modernity with many mansions” (p. 305). Castles suggested there were thresholds of modernity in the sense that all these nations had moved into certain government programmes (such as universal health coverage and social security which were typical of the welfare state), but once such thresholds were reached, nations might differ in their policy options and outcomes even if they were of comparable economic development. Economic and social development thus acted more as a constraining factor rather than a determining factor in public policy choices.
Mirroring Esping-Anderson’s (1990) typology of three “worlds” of welfare capitalism (namely Liberal, Conservative, and Social Democratic), he identified four “families of nations” among OECD countries, whose policy development differences could be defined in terms of common cultural, historical and geographical features, namely: English-speaking; Scandinavian; continental Western European; and Southern European (Castles 1998: 8-9). Japan was deemed to be outside such categorization and belong to a new family of newly industrialized nations with East Asian cultural (or Confucianist) features. East Asian social policy scholars have certainly sought to delineate an “East Asian experience … distinctive, differing decisively from the Euro-American models current in social policy discourse” (Kwon, 1998: 27). Cultural explanation aside, the argument for a unique East Asian social policy route rests mostly on an economic thesis of productivism.
^ roductivist welfare capitalism
Drawing upon Japanese and Korean experience, Kwon (1997) found the “Conservative” welfare regime as classified by Esping-Anderson’s “three worlds” typology unable to capture the distinctive characteristics of the “East Asian” welfare regime type. Holliday (2000) came up with the notion of a fourth world with productivist features. This productivist world comprises three distinct subsets – namely “facilitative” (Hong Kong), “developmental-universalist” (Japan, South Korea, Taiwan), and “developmental-particularist” (Singapore). Table 2 below, reproduced from Holliday (2000: table 2), gives the key features of the three subsets.
Source: Holliday (2000: 710, Table 2)
Despite internal variations, the essence of this productivist world is that its social policy is placed subordinate to economic policy. Holliday argued that productivist welfare capitalism could not be fully explained by a unique East Asian social base of political superstructure (such as the typical “Confucian welfare state” argument [Jones, 1993] and developmental state argument [Ramesh, 1995; Kwon, 1997], but had to be seen as a result of bureaucratic politics that drive social policy development. The point is that those technocrats and elite policy makers who staffed key East Asian economic agencies were central to the pursuance of particular social and economic policy (Holliday 2000: 717). We shall return to this point in the later discussion. Citing Japan’s unique politics of welfare, Miyamoto (2003) disputed treating it in the same way as other East Asian states and argued that neither the welfare state regime theory a la Esping-Anderson nor the East Asian model could fully capture the features of the Japanese welfare state.
Irrespective of whether and how the different East Asian developed economies’ experiences can be neatly captured by a uniform conceptual framework surrounding a strong or interventionist state, a key question since the 1997 Asian financial crisis has been whether such a previous paradigm of East Asian state model and social policy regime has been eroded because of the impact of globalization, economic crisis, and political changes (such as democratization such as in South Korea and Taiwan).
If it is accepted that welfare provisions in East Asian countries had been embarked upon not out of welfare ideology considerations, but as a result of a fiscally-driven social programme funded by economic growth, then it is conceivable that economic slowdown and recession can easily triggered a reversal shift. In Hong Kong, Eliza Lee (2005) observed that financial austerity had prompted the state to adopt social policy reforms through re-commodification and cost containment, resulting in the retrenchment of the residual welfare state. The fact that Hong Kong society had never before engaged in real ideological debates on social policies or the role and functions of the state, also means that mainstream public sentiments could easily be won over to a fiscally-driven paradigm of public service. However, it is too early to say that such re-commodification process would be driven home too far partly because bureaucratic conservatism and caution would see that any such reversal in service provision is less dramatic than it would be if induced by mainly ideological or political objectives, and partly because there is still a developmentalist function to be served by the welfare system.
Critics of globalization considered globalization not simply as a market-driven economic phenomenon, but also very much a political and ideological phenomenon, underpinned by the “transnational ideology of neoliberalism which seeks to establish its ascendancy world-wide” (Mishra 1999: 7). Robison and Hewison (2005) reviewed the impact of neo-liberalism on East Asian and Southeast Asian states following the 1997 Asian economic crisis. While it seemed true that the economic crisis had accelerated the restructuring of state and economic power, and offered an opportunity for neo-liberal policies to be strengthened – such as more market reforms promoted by international financial institutions as an alternative to the “Asian capitalism” - such crisis had not succeeded in achieving a grand convergence. In reality, neo-liberalist-motivated processes had been “highly contested, leading to contradictory, ambiguous and sometimes surprising outcomes” (Robison and Hewison 2005: 191). Neo-liberal agendas were also found to have been subverted or hijacked by political regimes in some circumstances for their own policy and institutional goals.
An alternative view, in contrast, sees the Asian crisis as actually helping to spur welfare expansion rather than retrenchment. The argument is this: The East Asian welfare regimes “had relied on optimistic assumptions of decade-long high economic growth rates, and a high and lifelong male labour market participation” (Croissant 2004: 520). The crisis was compounded by increasing urbanization that resulted in demographic changes and weakened the “familialistic” foundations of the welfare regimes, democratization which brought about rising welfare demands, and globalization that eroded “enterprise-based welfare”. The previous welfare regimes had proved to be unsustainable in the post-crisis environment. “Since no actors other than the state will be able to fill the gaps in the welfare system, an increasing role for the state is likely” (ibid), to the extent that the debate about reform of the welfare system “is already increasingly shaped by European models” (ibid). Examining the politics of welfare in Japan, Miyamoto (2003: 21) similarly argued that post-industrialization and globalization did not automatically result in welfare retrenchment. Where it was true that there were strong tendencies towards financial austerity, the concern about increased social instability amidst economic uncertainties had given rise to pressure for welfare expansion. The ageing society had also built up the need for lessening the family burden and increasing welfare protection for the elderly who now constituted a growing portion of the electorate.
Gough (2004), too, saw the possibility of “the transformation of East Asian productivist welfare regimes into productivist welfare state regimes” (p. 201) with an increasing statist orientation. He observed the East Asian welfare regime as an outcome of rapid social development coupled with a residual welfare system highly vulnerable to external shocks (Gough 2001: 177-81). In his view, the aftershock of the Asian economic crisis would leave East Asian welfare states with two possible trajectories (Gould 2004: 199-200). One is towards privatization coupled with persistent informalization, such as marketization and privatization (as, for example, Eliza Lee  alluded to above), but this route would face the resistance to “de-statize” from an essentially developmentalist regime. The other trajectory is towards a more universalist social investment state with more government provision and redistribution. The potential for this direction lies in three reasons (Gough 2004: 200-01):
Decline of productivism?
Taking the line of a post-crisis transformation of East Asian welfare systems, there is the suggestion that even if they were previously productivist, such productivism may have by now outlived its time. For example, Peng (2004) questioned if the logic of “economy first, redistribution later” which underlined the productivist thesis could still be sustained in light of the increasing challenge from three contending factors in recent years, name: political and regime changes; the expansion, rather than retrenchment, of social welfare programmes in response to recent economic crises, which are not necessarily productivist in nature; and new welfare emphasis grounded in family and demographic considerations rather than economic ones. Based on the experience of Japan and South Korea, she argued that the East Asian welfare state configuration was no longer as economically determined, but also mediated by the social structural and domestic political factors. In both countries, “the politics of the welfare state changed as political regimes and political conditions changed” (ibid: 408). During the 1990s, the end of the Liberal Democratic Party (LDP)’s dominant one-party rule in Japan had caused political realignments, creating openings for policy innovations and allowing new civil society groups to enter the policymaking arena; while the 1997 economic crisis and the onset of democracy facilitated the process of political realignment in South Korea which saw the Kim Dae-jung government embarking on both economic liberalization and welfare expansion (ibid: 415-16). The new social policy was thus no longer exclusively confined to protecting and privileging the traditional productive sectors, and financial reform necessitated by economic crisis had actually caused the demise of company welfare, thereby triggering growing political demands for state welfare interventions.
What Peng and Gough have alluded to are of course important developments in the East Asian social policy discourse. However, it remains debatable if East Asian welfare states like Japan and South Korea have already “moved beyond the stage of productivism and developmentalism” (Peng 2004: 416) or, as Peng himself has also allowed for, such changes are no more than only a reorientation of the productivist logic under different social and structural conditions (ibid). Irrespective of the future shifts, if developmentalism is still the foundation of policy governance, which we argue has continued to be the dominant paradigm, then its welfarist component would remain as an offshoot of economic development and thus fiscal accumulation, rather than the outcome of a political ideology of collectivist welfare. After all, the role of family and individual efforts are still the key elements of the East Asian social philosophy that underpins state-society interaction and the response of the state to social demands. The post-crisis emphasis on education and economic and industrial policy reforms are all geared towards revitalizing state-led developmentalism in the new environment of knowledge economy and opened-up markets. Policymaking in East Asia has already been dominated by a developmentalist bureaucracy keen on state-building. The social policy and social development agenda is determined neither by economics nor politics alone, but by bureaucracy-mediated goals of the political economy that embraces both economic (productivist) and political (social stability, distributive and redistributive) imperatives.
Policy Shifts rather than Policy Reversals
We now take a look at major social policy reforms, together with economic and fiscal policy developments, in the five East Asian states (Japan, South Korea, Taiwan, Singapore and Hong Kong) over the last decade, in order to detect their recent trajectories and any significant shifts, especially in the aftermath of the 1997 regional financial crisis. Table 3 highlights those salient policy changes and developments.
[Table 3 about here]
It can be observed that across the policy sectors, all East Asian countries seem to have been most active in steering the education sector forward, through wide-scale school education reform (spanning curriculum reform, school management, and improvement in teacher quality), the expansion and liberalization of the tertiary sector, and the promotion of lifelong education, in order to create a larger and better educated workforce to cope with the challenge of the new knowledge-based economy in the aftermath of globalization and the information technology (IT) revolution. Both general education reform and higher education reform are prominent on all the national policy agendas. In higher education, corporatization of state universities and encouraging private investment seem a common direction. Though private involvement is enlarged in the provision of education, this has not diluted the proactive role of the state in education which is closely aligned with its objectives in achieving economic restructuring and adjustment, and building a more adaptive and knowledge-based workforce. Although as Gough (2004: 171) observed, while “East Asian governments have consistently emphasised the central role of education in economic development, … this is not matched by a higher-than-average expenditure for middle-income countries”.
In healthcare, Singapore has continued with its policy path dated from the 1980s to expect citizens to save more to cater to housing and medical needs through the Central Provident Fund (CPF) vehicle, and made compulsory health insurance and savings a growing feature of its healthcare system. Hong Kong still operates a predominantly government-funded public healthcare system, but is actively reviewing health finance arrangements, with an aim to introduce some form of health insurance and/or savings, and increasing user charges. Even in Taiwan, where a comprehensive national health insurance system was implemented in 1995, there have been gradual increases in insurance premiums in order to cope with rising medical costs. Planning for a second-generation national health insurance system was started in 2002, though progress has been hampered by increasing political uncertainties facing the prospect of the Democratic Progressive Party (DPP) government. Similarly, South Korea and Japan are also facing problems of better funding insurance schemes in order to cope with rising demands and facilitate more equitable pooling of risk. The former consolidated various health insurance agencies into one single organization. Historically Japan’s healthcare system was highly regulated by government and combines a mainly private provision of services with mandatory health insurance, with medical fees approved by government (Imai, 2002). Employees of large companies were covered by company-based insurance society, while those of SMEs were covered by one big subsidized central government insurance scheme and most others by schemes run by municipalities (some 3,250 of them). Now, medical system reform is targeted at raising contribution rates by citizens, and incorporating long-term care insurance. A separate old-age nursing care insurance was introduced in April 2000 (ibid). Recently public-private partnership in the form of private finance was introduced to the management of public hospitals. In summary, all five jurisdictions have striven to maintain the universal coverage of their medical system, mostly through an extended insurance scheme, but with increasing concern about raising enough premiums and means-tested user fees to meet rising medical costs and patient demands. Private sector involvement in the provision of health care is also encouraged.
In housing, Singapore is the only country still pursuing active and extensive state-subsidized housing provision in line with its national development agenda since independence. In 2003, the government replaced the Small Families Improvement Scheme by a new HOPE (“Home Ownership Plus Education”) programme to help these families build up their self-reliance and break out of the poverty trap. The use of CPF to buy an extended range of public housing types is encouraged. In Hong Kong, the post-1997 housing reform agenda – with an ambitious annual new build target of 85,000 units - to bring down an overheated property market was brought to a drastic halt because of the Asian financial crisis. The government also made an important retreat by terminating its “home ownership scheme” (introduced in the late 1970s) and sale of public rental housing to sitting tenants (introduced in 1997) in 2002, in order to save the private property market, even though its commitment to public renting housing remains intact. In Taiwan, South Korea and Japan, private sector housing has all along been dominating housing provision. The situation has not changed after the Asian crisis - for example, even now public renting housing represents only 3% of all housing units in South Korea (Lee, K. B. 2005). In cope with the post-crisis economic situation, though, their governments have provided various support measures to lower-income households mainly in the form of housing loans and some limited public renting housing. South Korea has also introduced measures on real estate stabilization, while Japan has abolished the Government Housing Loan Corporation in order not to be seen as competing with the private sector in the housing finance market. While no significant policy reversal is observed in the five states in relation to their pre-existing housing policy regimes, the recent trend has been to stabilize the housing market and to encourage more private sector provision.
Welfare and labour protection reforms
In the area of welfare and labour protection, Hong Kong has been trying to contain the growth of social security expenditure (through the review of CSSA eligibility and allowance rates), though the level of welfare expenditure (including unemployment benefits and old age allowance) has still increased because of the economic downturn. In 2005 government was forced by political and public pressures to set up a Poverty Commission. Despite its non-interventionist policy orientation, the administration of newly installed Chief Executive Donald Tsang is prepared to support a community-wide debate on the issues of minimum wage and standard working hours, which trade unions have been pushing for a long time but which business and employer interests have all along resisted. In Singapore no new social security programme involving significant additional public expenditure has been established since the 1960s (Ramesh 2003: 83) and government has started wage reform and CPF reform. As relief measures in the aftermath of the Asian crisis, Singapore has introduced various shorter term initiatives – such as the Eldercare Fund, Children Development Co-Savings Scheme (known as Baby Bonus) and CPF top-up in 2000, the Economic Downturn Relief Scheme in 2001, and the “New Singapore Shares” in 2001 and “Economic Restructuring Shares” from 2003 onwards. The objective is to achieve a New Social Compact to cope with the challenge of a New Economy. A Workforce Development Agency was set up to enhance employability, and new measures were introduced in 2006 to support low-wage workers. Both city states are giving greater emphasis on voluntary and third-sector involvement in welfare and community service provision.
In Japan, welfare laws have been revised, social security system revamped, and pension reforms and long-term care insurance reforms initiated because of unemployment and the ageing population. Regime change and democratization of the political system in South Korea and Taiwan during the late 1990s coincided with the advent of the Asian financial crisis and the rising challenge of globalization. As a result, both have engaged more actively in providing unemployment benefits and some form of minimum living allowance/social assistance schemes, as well as measures for labour protection, for political as well as social policy purposes. South Korea adopted a “Protection First” system for the elderly and unprivileged, and expanded the Social Safety Plan to increase financial support to low-income families. In Taiwan, the Employment Insurance Programme was enhanced in 2003 and an Employment Protection Law enacted in 2004.
Overall, both the trends of welfare review and reform with a viewing to containing expenditure growth, as well as the attempts to provide relief and minimum living support allowance schemes, are taking place concurrently, underlining the impact of fiscal and economic pressures, and the state’s objectives to keep society sufficiently harmonious for the purpose of economic growth.
Economic and fiscal policy reforms
The 1997 regional economic crisis has also resulted in stepped-up measures in economic and fiscal policy reforms. Fiscal reform, deregulation, and economic revitalization are among key items of government policy agenda in all five East Asian states. All have engaged actively in financial services sector regulatory reform, coupled with the establishment of proper supervisory/regulatory institution (such as a Financial Supervisory Commission/Agency) to promote better corporate governance, a stronger fair competition regime, tax review or reform to secure a more steady and broader taxation base, and new initiatives to nurture entrepreneurship and innovation, especially IT development. All five have also strengthened their fair trade and pro-competition regimes. Singapore enacted a Competition Law in 2004 while Hong Kong is in the process of doing so.
In ^ , an Industrial Revitalization Corporation was set up in 2003 to provide assistance to small and medium enterprises (SMEs). South Korea places the thrust of economic policy similarly on nurturing SMEs and their IT capabilities as the next-generation growth engines. Taiwan extends credit support to traditional industries and SMEs and establishes R&D centres and free trade zones. Singapore has set up a Research, Innovation and Enterprise Council in 2005 and also provides strong support to the internationalisation of its government-linked companies (GLCs), and even “small government” Hong Kong had established an SME Financial Assistance Scheme in 2001. Innovation technology is given special importance in all jurisdictions to respond to the challenge of the new knowledge economy and to open up a new frontier for the next round of economic expansion as they can no longer rely on the traditional export-oriented manufacturing and service industries for growth and prosperity. Such developmentalist strategy ties in closely with the direction of education reforms as highlighted above.