SOCX Technical Papers (2015)1 Social Expenditures of Malaysia for the period 2008-2012 Zulkarnain Hatta, DSW & Jeevasuthan Subramaniam, PhD 4 OECD/Korea Policy Centre – Health and Social Policy Programme SOCX TECHNICAL PAPERS Unclassified SOCX TECHNICAL PAPERS(2015)1 OECD/Korea Policy Centre – Health and Social Policy Programme 1 February 2015 English text only OECD/Korea Policy Centre Health and Social Policy Programmes: SOCX TECHNICAL PAPERS NO.4 Social Expenditures of Malaysia for the period 2008-2012 Zulkarnain Hatta*, DSW & Jeevasuthan Subramaniam**, PhD JEL codes: H51, H53, H55, I38 * Associate Professor School of Social Sciences University Sains Malaysia ** Lecturer Sri Lanka School of Social Work National Institute of Social Development 1 OECD/Korea Policy Centre – Health and Social Policy Programme SOCX TECHNICAL PAPERS This series is designed to make available to a wider readership Health and Social Policy studies with a focus on the Asia/Pacific region. The papers are generally available only in English, and principal authors are named. The opinions expressed and arguments employed here are the responsibility of the author(s) and do not reflect those of the OECD, the Korean authorities, or the OECD/Korea Policy Centre – Health and Social Policy Programme. Applications for permission to reproduce or translate all or part of this material should be made to : Director of the OECD/Korea Policy Centre –Health and Social Policy Programme 5F Anguk Bldg, 33 Yulgongno Jongno-gu, Seoul 110-734, Korea Copyright OECD/Korea Policy Centre –Health and Social Policy Programme 2015 2 Acknowledgement The authors would like to thank Willem Adema (OECD Paris) for his invaluable suggestions and support in helping complete this report. We also would like to thank OECD/KOREA Policy Centre for giving us the opportunity to participate in this important endevour. Without the generous support given to us by the research assistants, especially Inro Lee, our work will not be completed. Finally, we extend our gratitude to those in the Malaysian Welfare Department for providing us with the valuable data . 3 Abstract This technical paper on social expenditures was based on the guidelines stipulated by the OECD. The statistics presented are important as they reflect on indicators of social protection programmes and the trend of social expenditures of Malaysia between 2008 and 2012. Six different social protection areas in the country are discussed: Social security, Social Insurance, Social assistance, Subsidies, Healthcare, and Zakat. The focus of the analysis of the above mentioned areas concerns social expenditure levels also expressed as a percentage of Malaysia’s GDP. These details will help to construct an idea of the value of social protection programmes in Malaysia, and facilitate comparison with those of OECD countries and several other South East Asian countries. However, some informal social protection activities such as programmes implemented by the agricultural and fisheries communities were not included as they were not compatible with the OECD guidelines. In conclusion, the paper suggests that the Malaysian government needs to review its present systems and consider what policy changes are necessary to implement better social security protection provisions in each domain, with the final objective of having adequate social expenditure coverage for the nation. 4 Abbreviations ADB Asian Development Bank AFC Asian Financial Crisis AFF Armed Forces Fund DSW Department of Social Welfare EPF Employee Provident Fund GDP Gross Domestic Product HIV/AIDS Human Immunodeficiency Virus/ Acquired Immunodeficiency Syndrome NGO Non Governmental Organizations MOD Ministry of Defense MOE Ministry of Education MOH Ministry of Health NEAC National Economic Action Council NEP New Economic Model MHI Medical and Health Insurance OECD Organization for Economic Co-operation and Development PWD Persons with Disabilities SEA Southeast Asian SOCSO Social Security Organization STD Sexually Transmitted Diseases TH Tabung Haji WB World Bank 5 Contents Acknowledgement ··········································································································· 3 Abstract ·························································································································· 4 Abbreviations ·················································································································· 5 SECTION 1 Introduction ···························································································· 10 SECTION 2 Social Protection Programs ··································································· 13 Categorization of Social Protection Programs in Malaysia ········································· 13 Social Security Programs and Eligibility Criteria ························································ 16 Public Pension Scheme ··························································································· 16 Employees Provident Fund (EPF) ··········································································· 17 Armed Forces Fund (AFF) ······················································································ 17 Social Insurance Programs and Eligibility Criteria ······················································ 18 Social Security Organization (SOCSO) ·································································· 18 Employer’s Liability Scheme ·················································································· 19 Workmen’s Compensation Scheme ········································································· 20 Social Assistance Programs and Eligibility Criteria ···················································· 20 Subsidies ······················································································································ 22 1 Malaysia People’s Aid ························································································· 22 Public Healthcare ········································································································· 23 Zakat ····························································································································· 24 SECTION 3 Expenditures ··························································································· 26 Public Pension ·············································································································· 26 Benefit Payments to EPF Members ············································································· 27 Armed Forces Fund (AFF) Payments to Its Members ················································ 27 Social Insurance ··········································································································· 28 6 Social Assistance Programs ························································································· 30 Subsidies ······················································································································ 31 Healthcare ···················································································································· 32 Zakat ····························································································································· 33 SECTION 4 Analysis ··································································································· 34 Public Pension ············································································································· 34 EPF ······························································································································· 35 AFF ······························································································································ 35 Social Insurance ··········································································································· 36 Social Assistance Programs ························································································· 36 Subsidies ······················································································································ 37 Healthcare ···················································································································· 38 Zakat ····························································································································· 40 Comparison on Social Security Expenditures between Southeast Asian (SEA) Countries ······················································································································ 42 Expenditure on Social Welfare ················································································ 42 Expenditure on Healthcare ······················································································ 43 Expenditure on Subsidies ························································································ 44 Expenditure on Employees’ Compensation····························································· 45 SECTION 5 Conclusion ······························································································ 47 References ····················································································································· 53 7 Table of Contents Table 1 Government Expenditure on Pension (2008-2012) ·······································