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Asian govts lag in spending on social services

Publication Date : 14-03-2012

 

Thailand and other Asian countries have been urged to impose higher taxes on wealth to collect enough revenue to finance universal social welfare.

"Asia has underperformed its potential for social strengthening," Supachai Panichpakdi, secretary-general of the United Nations Conference on Trade and Development (Unctad), said yesterday.

Asia has achieved high economic growth but governments have spent below their potential on social welfare, he told an international conference on balancing economic growth and social strengthening hosted by the National Economic and Social Advisory Council.

Social expenditures in Asia are about 2-3 per cent of gross domestic product, while Latin America spends about 5 per cent and Europe more than 5 per cent, he said.

Part of the issue is that Asian governments have low tax revenue. For example, the Thai government collects about 15 per cent of GDP, while for European countries it is about 20-25 per cent.

Norway is the highest at 26 per cent. Europe, particularly Scandinavia, has been able to provide universal welfare - healthcare, education and other services - to its population.

Governments in Asia need to reform fiscal policy by collecting more taxes from the rich who derive a large part of their income from such sources as land, stocks and other financial assets.

"In Thailand, the tax rate on wage income has been relatively high, so the government should collect more tax from wealth instead," he said, referring to the proposed real-estate tax.

"We should have predictability in the tax regime. Taxes may rise gradually," he said.

Central banks in Asia in the past decade focused too much on fighting inflation, which often leads to higher interest rates. They should take into account job creation, which would be supported by a low-interest-rate policy, Supachai said.

"I agree that central banks have to maintain economic stability, but monetary policy should not be overdone," he warned.

The widening income gap between the rich and poor is another concern. The global trend is the acceleration in the disparity between the top earners and the lower income groups, he said.

The United States has faced the same problem.

"Asia has achieved high economic growth and reduced substantially the absolute poverty rate, but income inequality is worsening," he said.

Education/training

Governments should spend more on education and training, particularly vocational education, Supachai said.

"The Thai government should not make too much of an income differential between those who hold a bachelor's degree and those who finish vocational school," he said, apparently referring to the government policy to give state officials holding a bachelor's degree at least a 15,000 baht monthly salary.

Choi Jong-tae, chairman of South Korea's Economic and Social Development Commission, said his country had become a human-resource powerhouse. This had underpinned its success in economic development, leading to a rise of per capita annual income to more than US$23,000 (706,300 baht) from $55 in 1954.

South Korea used to be one of the poorest countries and lacked natural resources, he said.

Patrick Venturini, secretary-general of the International Association of Economic and Social Councils and Similar Institutions, said dialogue between employers and employees in Europe had contributed to social strengthening in the region.

 

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