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Social Policy in Singapore WORLD 22713 January2001 SocialPolicy in Singapore WORLD A ConfucianModel? BANK Public Disclosure Authorized HabibullahKhan INSTITUTE WBIWorking Papers Public Disclosure Authorized Public Disclosure Authorized IFILE COPY Public Disclosure Authorized +. ;.-- I.41K 4 Recent Books from WBI Case Studies in Participatory Irrigation Management David Groenfeldt and Mark Svendsen, editors 1999. 169 pages. ISBN0-8213-4540-0. Stock No. 14540. Price code S22 The Challenge of Urban Government: Policies and Practices Mila Freire and Richard Stren, editors 2001. 458 pages. ISBN 0-8213-4738-1. Stock No. 14738. Price code S30 Chile: Recent Policy Lessons and Emerging Challenges Guillermo Perry and Danny M. Leipziger, editors 1999. 437 pages. ISBN 0-8213-4500- 1. Stock No, 14500. Price code S35 Corrupt Cities: A Practical Guide to Cure and Prevention Robert Klitgaard, Ronald MacLean-Abaroa, and H.Lindsey Parris 2000. 175 pages. ISBN0-8213-4600-8. 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HabibullahKhan Abstract According to this paper, Singapore' success in economic and social development in recent decades has been due to pragmatic policies and general public acceptance of a limited government role in such areas as health, social security. Pragmatism has consisted of placing a significant part of the burden of social welfare on families and individuals rather than on the state while, at the same time, using govemment policies to ensure that citizens do take social welfare objectives seriously. The pre-eminent example of this is Singapore's social security system which is based on compulsory savings by individuals and firms, and are managed and invested by the Central Provident Fund (CPF). This provides income security for retirees in their post-working years without placing an excessive fiscal burden on the state. Similarly, the health care system is characterized by a pragmatic mix of personal payments, limited national insurance coverage, and employment-based health care benefits. However, in the sphere of education, government spending has been substantial in recognition of the fact that Singapore's economic prospects were tied to the availability of a highly-skilled workforce. At present, higher education in Singapore remains highly subsidized and private sector involvement-especially in terms of funding and management-remains low. World Bank Institute Copyright © 2001 The International Bank for Reconstruction and Development/TheWorld Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. First Printing January 2001 The World Bank enjoys copyright under protocol 2 of the Universal Copyright Convention. This material may nonetheless be copied for research, educational, or scholarly purposes only in the member countries of The World Bank. Material in this series is subject to revision. The findings, interpretations, and conclusions expressed in this document are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or the members of its Board of Executive Directors or the countries they represent. Social Policy in Singapore: A Confucian Model? Habibullah Khan 2001. 30 pages. Stock No. 37165 Contents Foreword v The Singapore Economy: Performance Indicators and the Main Features of State Policies 3 Public Policies on Educational Financing 6 Public Policies Governing Singapore's Health Care System 10 Public Policies on Social Security and Welfare 12 Concluding Remarks 19 References 21 iii Foreword This paper, entitled Social Policy in Singapore: A Confucian Model? By Professor Habibullah Khan of National University of Singapore, was prepared for a project on Social Development in East Asia. The project was organized by the World Bank Institute under the auspices of the Program for the Study of the Japanese Development Management Experience which is financed by the Human Resources Development Trust Fund established at the World Bank by the Government of Japan. The principal objectives of this Program are to conduct studies on the Japanese and East Asian development management experience and to disseminate the lessons of this experience to developing and transition economies. Typically, the experiences of other countries are also covered in order to ensure that these lessons are placed in the proper context. This comparative method helps identify factors that influence the effectiveness of specific institutional mechanisms, governance structures, and policy reforms in different contexts. A related and equally important objective of the Program is to promote the exchange of ideas among Japanese and non-Japanese scholars, technical experts and policy makers. The outputs of the project on Social Development in Asia include seven papers on topics such as pension systems, health insurance, education, and employment policies which are scheduled to be published in the WBI Working Paper series. In addition, a set of papers focusing on the social policy experience of Japan over the past fifty years is being processed separately as a book- length manuscript. Farrukh Iqbal, Program Director World Bank Institute v Social Policy in Singapore: A Confucian Model?* Habibullah Khan Associate Professor Department of Economics National University of Singapore Singaporewas merely a fishingvillage with an estimatedpopulation of 150 when the island was foundedas a British colony by Stamford Raffles in 1819. It attained self-rulein 1959 and political independencein 1965. Today, the city-stateRepublic is inhabitedby roughly 3 million people, and its economy is characterizedby full employment,high savings and investmentrates, a 90 percent home ownership ratio, a healthybalance of paymentsand growing foreign exchange reserves, a strong currency, and a low inflation rate. There is little doubt that Singaporehas set an example of how a small country of merely 648 square kilometerscan be transformed into an economically powerful nation within a short span of time. In the World Bank's classification,Singapore is listed under "high-incomeeconomies" with a per capita gross national product (GNP) that is higher than that of many developed countriessuch as Australia,Canada, France, Italy, and the United Kingdom(see table 1). A remarkablefeature of Singapore's success story is its simultaneousprogress in both economicand social areas (thoughthe progress in the former is more pronouncedthan the latter), which can be clearly observed from the rising trends in virtually all socioeconomicindicators. This result obviously reinforces the earlier hypothesisof close inter-correlationsbetween social and economicfactors regardingdevelopment but it does not show any causal relationshipbetween the two. Althoughthe main thrust of governmentpolicies in the past was to promote growth-enhancingactivities such as a large-scaleindustrialization program implementedin phases, progress in various social areas such as housing, education,and health was carefullymonitored and nurtured by giving generous subsidies.However, as the policies are mainly motivated by "efficiency" and "pragmatism,"the long-term objectiveof the governmentis to reduce such subsidies so that the problem of excess demandfor social services(resulting in what is known as the "free rider problem") can be avoided.The governmentalso has refrained from making any firm comrnmitmentsto equality and welfare in order to avoid conflictswith its growthobjective, which constitutedthe foremostand single-mindedpriority of state action. Such a development philosophy received strong support from the well-known "Developmental State model"(Johnson1982), which is often used to explain the rapid growth in East Asia's newly industrialized economies(NIEs). How did Singapore achieve a "balanced" development in both social
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