“There does not have to be trade-off between growth and social protection. A democracy does not mean much if it doesn’t respond to the needs and will of its people” – Michelle Bachelet, UN High Commissioner for Human Rights and former President of Chile.
The recent #benderaputih or white flag campaign has magnified the growing distress and deepening social malaise in our young Malaysian democracy. As Malaysians rose to the occasion to help one another, the many white flags raised amplified the need to rethink our inadequate social protection measures.
Have we prioritised relentless economic growth at the expense of protecting the vulnerable in our communities? Have we pushed exceedingly for national prosperity though minority groups remain marginalised? Have we pursued Gross Domestic Product (GDP) to the gross extent that families are left behind in dreadful living conditions?
The COVID-19 health and economic crisis have brought to light long-term structural issues which need to be addressed thoroughly and comprehensively. We need to reevaluate and reform our policies and programs which seek to protect individuals and families in times of emergencies. We need to increase the coverage of social protection measures for communities to better manage risk and volatility through strategic instruments which enhance equity, opportunity and build resilience.
The pillars of social protection
Universally, the three main pillars of social protection are known as the 3Ps, namely ‘protect, prevent, and promote’, as shown in the diagram below.
Collectively, these 3Ps seek to safeguard the provision of basic needs, build resilience against the vulnerability to poverty and maximise economic potential. Bank Negara Malaysia expounds on the tendency for many countries to overly rely on measures to ‘protect’ through social safety net policies such as cash handouts and food baskets which are relatively easier to adopt and politically appealing.
However, a holistic social protection system requires an equal emphasis placed on the longer- term social insurance and active labour market policies (ALMP), beyond short term stop-gap measures.
The need for a secure retirement plan
Take for instance old-age income security as a crucial feature of social insurance or ‘prevent’. It will be an increasingly pressing issue in the coming decades as Malaysia transitions from an ‘ageing nation’ in 2020 to an ‘aged nation’ by 2044 with citizens aged 65 and above exceeding 14% of the total population. Financial security among older populations is paramount to address. The population is vulnerable to poverty, has weaker abilities to work and in light of the weakening monetary family support.
Worryingly, the CEO of Employees Provident Fund (EPF) revealed that 6.3 million members have less than RM10,000 in their EPF Account 1, their retirement savings, accounting for the i-Lestari and i-Sinar withdrawals. In other words, 42% of the total
15 million members have insufficient funds to retire comfortably. Furthermore, 9.3 million have less than RM10,000 in Account 2, allocated for specific needs such as paying home loans, education fees and medical expenses. These alarming numbers highlight the fast depleting emergency funds of a substantial number of Malaysian workers.
However, the statistics above do not account for those who do not have active EPF accounts, including the self-employed and informal workers. Without any form of formal social protection, how will these communities fare when they retire? In the first place, can they ever afford to retire?
Thus, the recent call by Khazanah Research Institute to establish a universal social insurance pension scheme to provide basic old-age income security is a sound one. The challenges in coverage and adequacy of old-age savings can be effectively addressed by a contributory social insurance model, shared by the government for homemakers and informal workers.
All in all, the pandemic has presented us with a golden opportunity to plan differently and pursue reforms in social protection measures. In our pursuit of growth, let us never forget that when one member of our Malaysian body suffers, the entire body suffers together. We need to build greater resilience to prepare ahead for the storms and shocks that may come. In an increasingly uncertain future, may we never need to raise the white flag, but instead, raise each other’s resilience as we forge ahead inclusively.
This opinion piece is contributed by Benedict Weerasena, economist of Bait Al Amanah and edited by Wiki Impact as part of a series to explore social mobility, equality and shared opportunity in Malaysia. This series is written against the backdrop of the Global Social Mobility Index which benchmarks 82 global economies and looks into five key dimensions including Health, Education (access, quality and equity, lifelong learning), Technology, Work (opportunities, wages, conditions) and Protection and Institutions (social protection and inclusive institutions).
The higher a country ranks in terms of social mobility, the greater the chance for the next generation to experience a better life than their parents. According to the World Economic Forum’s Global Social Mobility Report 2020, Malaysia ranked #43 out of 82 countries.
Explore our sources:
- Bank Negara Malaysia. A Vision for Social Protection in Malaysia. Link
- World Bank. (2020) . A Silver Lining: Productive and Inclusive Aging for Malaysia. Link
- The Edge Markets. (2021). Cover Story: Withdrawal of Account 1 shook EPF to its core, says Amir. Link
- Khazanah Research Institute. (2021). Building Resilience: Towards Inclusive Social Protection in Malaysia. Link