Social Protection: Reducing Poverty and Inequality in Asia

Social protection is a crucial tool for reducing poverty and inequality as well as accelerating prospects of long-term economic growth, says Sri Wening Handayani, Social Development Specialist at ADB.

How effective are social protection systems in Asia and the Pacific?

In general, the social protection systems operated by governments in the region are not terribly effective outside a few developed countries, such as Japan, Republic of South Korea, and Singapore.  They tend to suffer from fragmentation, weak coordination, and poor beneficiary targeting. The good news is that efforts are underway in many countries to address such shortcomings. For example, the latest evaluation of the large conditional cash transfer program in the Philippines shows very promising results. School enrolment of children in poor beneficiary families has risen, and the incidence of severe stunting has declined. On the whole, experience from around the world shows that well-designed and capably implemented social protection programs contribute to poverty reduction.

Sri Wening Handayani, Social Development Specialist at ADB

Do the various subregions of Asia and the Pacific approach social protection differently?

Yes, one can notice differences while moving across this vast continent. In South Asia, Southeast Asia, and the Pacific, most social protection programs have focused on expanding coverage and identifying financing sources to fight poverty, reduce vulnerability, and provide long-term protection to the population. In transition economies in Central Asia, the focus has been more on modifying generous Soviet-era systems to ensure their sustainability in a market economy. A country’s selection of particular social protection instruments or tools should be based on a thorough assessment of local needs, available resources, institutional capacity, level of development, and the political economy of reform.

“Social protection is an integral component of any comprehensive strategic development effort, and contributes to inclusive growth, poverty reduction, and higher productivity and growth.”

- Sri Wening Handayani, Social Development Specialist

Can developing Asia and the Pacific afford social protection systems?

Yes, it can. Social protection is an integral component of any comprehensive strategic development effort, and contributes to inclusive growth, poverty reduction, and higher productivity and growth. Some Asian countries, such as the Republic of Korea, provide broad-based social protection benefits for only about 5% of GDP. Governments can reduce the cost of systems by minimizing duplication of programs, effectively targeting beneficiaries, and adopting ICT-enabled administrative systems and delivering mechanisms. Replacing expensive and poorly targeted fuel subsidy schemes with direct transfers to very poor population groups is one way to reduce cost while aiding those most in need. Fiscal resources can also be secured by broadening the tax base, improving tax collection, and creating an enabling environment for private sector provision of some programs, such as skills training and job creation activities run by social enterprises.

Is social protection a priority for the region?

Although Asia and the Pacific has a remarkable poverty reduction story to tell, it still remains home to two-thirds of world’s poor people. Social protection has a critical role to play in driving down the numbers of people living in poverty or in vulnerable circumstances just above the poverty line. Governments in Asia and the Pacific are giving higher priority to social protection for several reasons. They recognize the high social impact of recurring economic and financial crises in a globalized and interdependent world, and growing inequality, which undermines social cohesion. In addition, aging populations raise significant issues regarding the sustainability of pension systems and workforce productivity. Growing regional and global recognition of the need for social protection is highlighted by the approval in 2012 of a landmark international labor recommendation on national social protection floors. The recommendation calls for the provision of essential health care and benefits, as well as basic income security.

How can countries avoid the misuse of social protection?

Debates around the expansion of social protection programs always include discussion about the potential misuse of government funds. To promote accountability, it is important that design of social protection programs take into consideration issues of governance and transparency. In this context, governments can establish an information base on poverty issues, and disseminate this information to inform public debate; engage in negotiations with different institutions and citizen groups in order to strengthen consensus about social protection policies and programs, which citizens can expect, and the role of government in fulfilling them; strengthen institutional capacity and transparency of the public administration to effectively design and implement the programs; and boost capacity of civil society organizations representing poor and vulnerable groups to monitor and report on program performance.

What is ADB doing to help its developing member countries develop affordable social protection programs?

Watch video: Cash In Hand: Conditional Cash Transfers Free Families From Poverty

ADB has embraced inclusive growth as a strategic agenda for improving lives in the region. Further, we see social protection as a key pillar of this strategy since it helps vulnerable populations better manage risks, and develop human capital. For nearly 3 decades, ADB has been providing financing and advice to assist countries in strengthening their social protection systems. In particular, we support: interventions to protect communities and the informal sector through provision of social assistance; labor market programs to ensure productive employment, good working conditions, and improved human capital development; and protection of vulnerable populations from micro and macro-economic shocks through provision of social insurance. Many of the newer ADB-financed social protection projects support skills development for employment.

What makes ADB's Social Protection Index a useful tool?

Because social protection systems in developing Asia and the Pacific tend to be fragmented across agencies, it is has been hard to gain a solid understanding of their reach and impact. Only a few countries in the region have generated high-quality statistics on their social protection programs. ADB’s Social Protection Index has pulled together data on central government social protection programs in 35 countries and presents the figures in a variety of ways. The SPI provides policymakers with insights into public expenditures on social protection, the size of benefits and extent of coverage (depth and breadth), and the poverty and gender dimensions. The data are publicly available on ADB’s website, as are individual country reports that provide further analysis to assist governments in strengthening their social protection systems.