Governing social security economic crisis and reform in Indonesia, the Philippines and Singapore /

by 1976- Wisnu, Dinna

How do newly industrializing countries in Asia reform their social security programs after the 1997 financial crisis? Going beyond previous studies whose concern were on the relative decline of the welfare state in the midst of global economic competition, this study identifies that after crisis Indonesia, the Philippines and Singapore experienced different shifts in their structure of provision of social security benefits. The shifts vary on two important dimensions of social security provisions: the benefit level and the political control of the state over the private sector. In Indonesia there was a shift that eroded benefit level and strengthened the state’s political control over the private sector. In the Philippines there was a shift that improved benefit level and weakened state control over the private sector. Meanwhile in Singapore the shift improved benefit level yet at the expense of deeper penetration of state control over the private sector. This study asks: what explains the variation in the shifts in the dimensions of social security provisions in Indonesia, the Philippines and Singapore after the 1997 financial crisis? Such variation, I argue, cannot be explained with the usual explanatory variables: fiscal constraints at the national level, the ranking of economies in the global competition, or the intervention of international financial institutions. This economic context after financial crisis only affect the initial proposal of the reform, i.e. the degree ii of dramaticness of change proposed for the social security reform. Once the reform proposal is advanced, however, it was domestic politics that matter more, reshaping the proposal and thus the reform output. The output is influenced by a process of compromise-building among employers, workers, state leaders and bureaucrats as the reform proposal affected the groups’ playing fields differently. More specifically, the reform outputs differ by the variation of the expectations of employers and workers on the conduciveness of the overall economy (low or skeptical, medium or hopeful, and high or optimistic) and the degree of relative intensity of symbiosis between bureaucrats of social security agencies and state leaders (low or relatively less political in leadership and management and high or relatively highly political in leadership and management). By focusing on the variation in the shifts on the two dimensions of social security, this study also reveals the broader reasons why the state leaders pushed toward certain direction of reform, i.e. the need to generate domestic funds that would enable them to be autonomous from outside pressure, the need to develop incentives and punishments for private sector players, and the need to secure certainty for all stakeholders. Indeed this study demonstrates the critical importance of social security reform to market governance. Beyond earlier study of market governance, which identifies the presence of initiative and active intervention of the state in leading the market, this study specifies three areas of market governance that the state leaders push through social security reform: the state autonomy vis-à-vis international pressure, the state control over workeremployer relations, and the overall sense of predictability for all stakeholders. iii