Welfare Capitalism in East Asia: Social Policy in the Tiger Economies

Welfare Capitalism in East Asia

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Welfare Capitalism in East Asia Social Policy in the Tiger Economies Edited by

Ian Holliday Professor of Policy Studies City University of Hong Kong

and

Paul Wilding Emeritus Professor of Social Policy University of Manchester

Editorial matter, selection and Chapters 1, 2, and 7 © lan Holliday and Paul Wilding 2003 Chapter 4 © lan Holliday 2003 Remaining chapters © Palgrave Macmillan 2003 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2003 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 1–4039–0031–0 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Welfare capitalism in East Asia : social policy in the tiger economies / edited by Ian Holliday and Paul Wilding. p. cm. Includes bibliographical references and index. ISBN 1–4039–0031–0 (cloth) 1. East Asia—Social policy. 2. Public welfare—East Asia. 3. Welfare economics. I. Holliday, Ian. II. Wilding, Paul. HN720.5.A8W45 2003 361.6’1’095—dc21 2003050930 10 9 8 7 6 5 4 3 2 1 12 11 10 09 08 07 06 05 04 03 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham and Eastbourne

Contents List of Figure and Tables

vii

Acknowledgements

viii

Notes on Usage

Notes on the Contributors

List of Abbreviations

1 Welfare Capitalism in the Tiger Economies of East and Southeast Asia

Ian Holliday and Paul Wilding Why the interest in East and Southeast Asian welfare capitalism? Social policy analysis and the East Asian welfare model Moving beyond the East Asian welfare model Analytical approach What is to come

2 Tiger Social Policy in Context Ian Holliday and Paul Wilding Basic data Hong Kong Singapore South Korea Taiwan Social policy processes Assessing similarity and difference

3 Education

3 5 10 11 15

18 18 22 25 27 29 31 34

Ka-ho Mok History and basic orientation Regulation Provision Funding Assessment Brief country descriptions

38 44 54 60 64 69 v

Contents

4 Health Care Ian Holliday History and basic orientation Regulation Provision Funding Assessment Brief country descriptions

5 Housing James Lee History and basic orientation Regulation Provision Funding Assessment Brief country descriptions

6 Social Security Yeun-wen Ku History and basic orientation Regulation Provision Funding Assessment Brief country descriptions

7 Conclusion Ian Holliday and Paul Wilding Similarities and differences Debating the East Asian welfare model Tiger social policy and welfare capitalism in the twenty-first century

70 70 78 84 88 92 97

99 100 105 112 116 121 126

128 128 134 141 149 152 159

161 161 172 180

Bibliography

183

Name Index

201

Subject Index

205

List of Figure and Tables Figure 5.1 House price inflation in the four East Asian tigers, 1980–2000

105

Tables 2.1 Basic geographical, population and economic data for the four East Asian tigers, 2001–02 3.1 Education provision in the four East Asian tigers, 2000 3.2 Public expenditure on education as a percentage of GDP in the four East Asian tigers, 1998–2001 3.3 Distribution of public expenditure between different education sectors in the four East Asian tigers, 2000–01 4.1 Standard health outcome indicators in the four East Asian tigers, 1999–2002 4.2 Commitment to health in the four East Asian tigers, late 1990s 5.1 Housing indicators in the four East Asian tigers, 2000–02 5.2 Macro regulation of housing in the four East Asian tigers 5.3 Social organization of housing provision in the four East Asian tigers, 2000–02 6.1 Social security instruments and characteristics 6.2 Social security instruments in the four East Asian tigers 6.3 Social security programmes in the four East Asian tigers 6.4 Funding for selected major pension programmes in the four East Asian tigers 7.1 Projected growth of the population aged 65 in the four East Asian tigers, 1995–2040

vii

19 60 61 64 72 77 100 105 112 130 135 142 148 175

Acknowledgements We gratefully acknowledge research support from the Governance in Asia Research Centre, City University of Hong Kong. We thank Lo Yat-wai for excellent research assistance, and for preparing the index. We also thank an anonymous reader for constructive and helpful criticism. The usual disclaimer applies.

viii

Notes on Usage Throughout the text we use the following short forms for place names: Hong Kong Special Administrative Region of the People’s Republic of China Hong Kong Republic of Singapore Singapore Republic of Korea South Korea Republic of China Taiwan Throughout the text we give all monetary amounts in US dollars. One US dollar is roughly equal to: Hong Kong HK$7.8 Singapore S$1.8 South Korea 1200 won Taiwan NT$35

Notes on the Contributors Ian Holliday is Professor of Policy Studies and Head of the Department of Public and Social Administration, City University of Hong Kong. He has taught at the University of Manchester and New York University. His current research focuses on comparative analysis of political institutions and public policy in East Asia. Yeun-wen Ku is Professor of Social Policy in the Department of Social Policy and Social Work, National Chi Nan University, Taiwan. He has written widely on welfare development and policy debates in Taiwan, extending to East Asian countries. He is currently the Department Head and the Secretary General of the Taiwanese Social Policy Association. James Lee is Associate Professor in the Department of Public and Social Administration, City University of Hong Kong. He specializes in teaching and researching housing policy. He obtained his doctorate in housing policy at the University of Bristol. He is a founder of the Asian Pacific Network of Housing Research. Ka-ho Mok is Associate Dean, Faculty of Humanities and Social Sciences and Associate Professor, Department of Public and Social Administration, City University of Hong Kong. He has a strong research interest in comparative education policy and public policy studies. He is Chairman, Hong Kong Educational Research Association and Vice-President, Hong Kong Comparative Education Society. Paul Wilding is Emeritus Professor of Social Policy at the University of Manchester, and has taught at the University of Nottingham, the University of Wales at Cardiff and the City University of Hong Kong. He is well known for his work on ideological issues in social welfare, on professional power and welfare states, and on general issues in social policy in the UK.

List of Abbreviations CDI CPF CSSA DOH DPP DRG FDI HDB HKHA HKSAR HOS HWFB KLDC KMT KNHC MOH MOHW MPF MPFA NGO NHG NHI NHIC NIE OECD OM PAP PCPS PRIME SEM SingHealth TCM UGC WHO

Curriculum Development Institute (Singapore) Central Provident Fund (Singapore) Comprehensive Social Security Assistance (Hong Kong) Department of Health (Taiwan) Democratic Progressive Party (Taiwan) diagnosis related group foreign direct investment Housing Development Board (Singapore) Hong Kong Hospital Authority Hong Kong Special Administrative Region Home Ownership Scheme (Hong Kong) Health, Welfare and Food Bureau (Hong Kong) Korea Land Development Corporation Kuomintang (Taiwan) Korea National Housing Corporation Ministry of Health (Singapore) Ministry of Health and Welfare (South Korea) Mandatory Provident Fund (Hong Kong) Mandatory Provident Fund Authority (Hong Kong) non-governmental organization National Healthcare Group (Singapore) National Health Insurance (Taiwan) National Health Insurance Corporation (South Korea) National Institute of Education (Singapore) Organization for Economic Co-operation and Development Oriental medicine People’s Action Party (Singapore) Primary Care Partnership Scheme (Singapore) Programme for Rebuilding and Improving Existing Schools (Singapore) School Excellence Model (Singapore) Singapore Health Services traditional Chinese medicine University Grants Committee (Hong Kong) World Health Organization xi

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1 Welfare Capitalism in the Tiger Economies of East and Southeast Asia Ian Holliday and Paul Wilding

Recent decades have witnessed considerable academic and political interest in economic and social development in the so-called tiger economies of East and Southeast Asia. Economically, the reasons are clear. In the post-war period, high and sustained rates of growth gave first Japan, then the four ‘little dragons’ of Hong Kong, Singapore, South Korea and Taiwan (Vogel, 1991), and subsequently Indonesia, Malaysia and Thailand, development trajectories that were unprecedented in modern history (Morley, 1999). Territories that came out of the Second World War near the bottom of international league tables made such rapid progress that some quickly boasted per capita incomes among the highest in the world. For those interested in pathways from the periphery, the East Asian experience was a natural focus of attention (Haggard, 1990). In time, two main sets of contrasts with persistent underperformers began to be drawn. The first was with still underdeveloped states, notably in Africa, which many East and Southeast Asian economies quickly left far behind. It is hard now to believe that in the early 1960s South Korea stood at much the same level of economic development as Ghana. In 2000, South Korean GDP per capita (adjusted for purchasing power parity) was estimated by the UNDP to be $17,380; the equivalent figure for Ghana was $1964. In 2002, the UNDP ranked South Korea at 27 on its composite Human Development Index, and Ghana at 129 (UNDP, 2002). GDP per capita in North Korea, from which the South was divided in the mid-1950s, is currently around $1000, or roughly 5 per cent of the South Korean figure (CIA, 2002). The second, more prevalent set of comparisons was with developed but sluggish performers in the West, which some East and Southeast Asian economies started to overtake in the 1970s and 1980s. Thus it was that academic studies with titles like Japan as Number 1

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One (Vogel, 1979), Hypergrowth in Asian Economies (Chen, 1979), The Taiwan Success Story (Kuo et al., 1981), MITI and the Japanese Miracle ( Johnson, 1982) and Asia’s Next Giant: South Korea and Late Industrialization (Amsden, 1989) appeared. In the early 1990s, the World Bank was persuaded, by Japan, to commission a special study of East and Southeast Asian development (Wade, 1996). This was published in 1993 under the title The East Asian Miracle (World Bank, 1993). There have always been challenges to the notion of an East Asian ‘miracle’ (Krugman, 1994), and, with the benefit of hindsight, we can of course see the hyperbole in some of the claims made about East and Southeast Asian economies. On 2 July 1997, the Thai baht, hitherto pegged to the US dollar, was floated on international exchanges and immediately lost 10 per cent of its value. The ensuing Asian financial crisis comprised a wave of selling of currencies and stocks in emerging markets across Asia, Latin America and Eastern Europe. In East and Southeast Asia, capital flight exposed structural weaknesses in a number of domestic economies, and generated a domino effect of currency and economic crisis throughout much of the region (Haggard, 2000). Among our four societies, South Korea was hit particularly hard. Many explanations of the Asian financial crisis stressed international factors, notably neo-liberal policy measures imposed on the region by US-dominated bodies. Wade and Veneroso, for instance, pinned the blame on the ‘Wall Street–Treasury–IMF complex’ (Wade and Veneroso, 1998). However, there were also domestic explanations, focusing on inadequate governance (Rhodes and Higgott, 2000: 3). The long-term impact of the crisis has been to expose ‘crony capitalism’ in the region (Kang, 2002), and to undermine confidence in its economic prospects. With Japan entering a second decade of economic travail, the East Asian model of development is no longer celebrated in the way it once was. On the social side, it took a little longer for East and Southeast Asian development to draw Western attention. However, by the late 1980s this too was an increasingly prominent theme in the literature. Here what struck analysts were the strong social cohesion that tended to underpin growth in the region, and the good social outcomes that accompanied it. At the same time as they registered rapid rates of growth, East and Southeast Asian states exhibited low rates of taxation and public spending, enviable levels of social stability, and high scores on key quality of life indices such as infant mortality, life expectancy and educational attainment. The result was a further stream of academic work, often taking the form of articles rather than

Ian Holliday and Paul Wilding 3

books. Nevertheless, some book-length publications did appear, notably The East Asian Welfare Model (Goodman et al., 1998), Confucian Welfare Cluster (Lin, 1999), Social Welfare Development in East Asia (Tang, 2000) and Welfare Capitalism in Southeast Asia (Ramesh, 2000a). It is to the debate prompted by this work that we seek to contribute.

Why the interest in East and Southeast Asian welfare capitalism? Some of the reasons for the surge of interest in East and Southeast Asian welfare capitalism witnessed in the past 15–20 years are obvious and have already been mentioned. Sooner or later, perceived success is always likely to draw attention. But there is more to it than that. One relevant factor was timing. The discovery of social policy strength in the region coincided with a period in which Western welfare states, put in place during the course of the twentieth century, were coming under sustained criticism and attack. The ‘fiscal crisis of the state’ (O’Connor, 1973), experienced in many Western countries with sudden severity in the mid-1970s as oil prices spiralled and economic growth stalled, boosted an anti-statist ideological shift that developed first in the UK and USA, and then worked its way through other societies. For individuals who, in Castells’ words, were ‘looking for the lost paradise of “laissez faire” capitalism’ (Castells, 1992: 34), developments in the supposedly free and unfettered economies of East and Southeast Asia had great appeal. Chris Patten, when Governor of Hong Kong, told British Conservatives that rapid economic growth in the region was the product of low rates of public expenditure (Kwon, H. J., 1998a: 38–9). For those seeking to roll back the state, reduce public expenditure, give more scope to markets and stress individual responsibility, this message was very welcome. At the same time, East and Southeast Asian experience appealed to individuals with very different interests. Many of those who looked at what was happening in the region saw not so much laissez faire as strong states playing an active and successful role in stimulating economic and social advance. Here the key early publication was Johnson’s analysis of Japan’s ‘developmental state’ (Johnson, 1982). From this work it became clear that the stunning economic progress witnessed in parts of East and Southeast Asia in the post-war period was not, as some had maintained, the product of something close to classical liberalism. Rather, it had an important statist component,

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generating governed markets (Wade, 1990). Following the Asian financial crisis, this argument was re-evaluated and, on the whole, forcefully restated (Weiss, 2003). Picking up the thread of developmental state theory, social policy analysts noted that the role of the state was not confined to the economic sphere. Furthermore, they revealed that the kind of managed welfare capitalism found in the region was very different in approach and orientation from any variant known in the West. On this basis, some argued that the dynamic economies of East and Southeast Asia represented a third way between laissez faire liberalism and welfarist social democracy. Others held that East and Southeast Asian states looked rather like Jessop’s ‘Schumpeterian workfare state’ (Jessop, 1994) or Cerny’s ‘competition state’ (Cerny, 1997). They naturally wondered whether, to what extent, and how that experience might be transferable. There was also a vibrant cultural component to debates about East and Southeast Asian development, characterized by a strong interest in the role played by Confucianism in the region (Rozman, 1991; Tu, 1996). A political strand of this discourse became known as the ‘Asian values’ debate (Lee, 2000; Bell, 2000). Often, analysis focused on the economic significance of affective networks of trust and cooperation in societies with a Confucian heritage. Drawing on Hamilton and Biggart (1988), Castells, for instance, distinguished three types of contemporary business network in East Asia, based on a communitarian logic in Japan, a patrimonial logic in Korea, and a patrilineal logic in the Chinese enterprises created in Taiwan (Castells, 2000: 195). However, the broader argument is that the links created by Chinese guanxi, Japanese ningengangei and Korean yongo, and the networks thereby generated, permeate all forms of social organization. Chinese xiangjingiye, Japanese keiretsu, Korean chaebol and Taiwanese jiazugiye are examples from the economic sphere. But instances may also be found elsewhere in, for example, factional parties in the political realm (Hahm et al., 2001; Bell and Hahm, 2003). In social domains, the argument is that such networks have generated unique forms of social policy, which build on strong informal ties focused on the family ( Jones, 1990, 1993; Lin, 1999). Another factor that fuelled interest in East and Southeast Asian welfare development was an increasing academic and practitioner concern with comparative analysis, evident from the late 1980s in particular. In this regard a landmark study, from 1990, was Esping-Andersen’s The Three Worlds of Welfare Capitalism, which sought to place developed welfare systems in three overarching categories: liberal, conservative

Ian Holliday and Paul Wilding 5

and social democratic (Esping-Andersen, 1990). One gap in the analysis was its limited attention to welfare in the capitalist states of East and Southeast Asia. Although the Japanese case featured, it was not discussed in any detail, and was felt by some not to have been handled entirely satisfactorily. Indeed, Esping-Andersen himself later conceded the point, arguing that ‘any attempt at labelling the Japanese welfare state is premature since it has not yet sunk its roots, institutionally speaking’ (Esping-Andersen, 1997: 179). No other country from the region featured at all. The result was that when writers from distinct traditions and perspectives picked up Esping-Andersen’s analysis, one outcome was a debate about the nature of social policy and social development in East and Southeast Asia. For anyone interested in the region an obvious question provoked by the worlds of welfare capitalism debate was the extent to which East and Southeast Asia fitted the typology or, alternatively, the typology fitted East and Southeast Asia (Jones, 1993; Lin, 1999). This interest was also shared by others with a more general concern to determine the power and limitations of the ‘three worlds’ analysis. A less tangible, but still significant, reason for interest in East and Southeast Asia is that we live in an increasingly globalized world in which Asia features more and more prominently. Partly this reflects the rise of Japan in the post-war era, partly the re-emergence of China on to the world stage since the late 1970s, partly the Asian financial crisis triggered in July 1997, partly issues that were brought into sharp focus by the terrorist attacks on the USA in September 2001 and Indonesia in October 2002. East and Southeast Asia, comprising some of the most dynamic parts of the region, naturally became and has remained the focus of much attention.

Social policy analysis and the East Asian welfare model The earliest substantial contributions to debate about the nature of social policy in East and Southeast Asia date from the mid-1980s. In 1986, Midgley wrote of ‘East Asian welfare regimes’, implying but not developing an argument about a shared approach which became central to future analysis (Midgley, 1986). In 1990, Jones examined the approach to welfare in Hong Kong, Taiwan, Singapore and South Korea, describing these four societies collectively as ‘oikonomic welfare states’ ( Jones, 1990: 25). By this she meant that each state’s major concern was good household management. Jones stressed, as have all subsequent commentators, the common elements in the approach of

Welfare Capitalism in East Asia

these four societies as well as the significant differences between them. In their approach to welfare, these societies, she argued, showed a shared ‘Chineseness’ in terms of a common core of beliefs, values and priorities. These included an overriding primacy for economic growth as a policy goal, faith in the family as a provider of welfare, emphasis on duty and obligation, belief in order and social stability as the very basis of welfare, a distaste for politics, a concern to build and reinforce community, low expectations of the state, a lack of interest in social justice, social rights and redistributive policies, and an underlying anxiety about the implications of Western-style welfare state policies. Alongside this pattern of similarity were also very clear differences, for example in the organization and funding of health care, in the role the state assumed in housing, and in attitudes towards and use of the mechanism of social insurance. Three years later Jones returned to the analysis of the same four societies. This time she re-titled them ‘Confucian welfare states’ (Jones, 1993: 198), making very clear by implication her view of the central shaping characteristic of their shared nature. She also argued quite explicitly that ‘they make up an “own brand” of welfare state’ (Jones, 1993: 199). In addition, she addressed the question of whether and where they might fit into Esping-Andersen’s typology. Her verdict was that they did not fit. They were not liberal, because there was far too much social direction. They very clearly lacked the central redistributive thrust of the social democratic world. They did not fit happily into the conservative corporatist grouping. These four societies, she argued, were different. They were Confucian welfare states characterized by ‘Conservative corporatism without (Western-style) worker participation; subsidiarity without the Church; solidarity without equality; laissez faire without libertarianism: an alternative expression might be ‘household economy’ welfare states – run in the style of a would-be traditional, Confucian, extended family’ (Jones, 1993: 214). Lin’s analysis of the ‘Confucian welfare cluster’, comprising China, Hong Kong, Japan and Singapore, is a more substantial elaboration of this thesis (Lin, 1999). Following Jones, the next significant contribution to the debate about welfare capitalism in the region was Goodman and Peng’s analysis of social policy in Japan, South Korea and Taiwan, which also contained some reflection on the broader regional context. They held that ‘there may be a case for discussing what might be called “East Asian social welfare regimes” which diverge from the “Western” pattern’ (Goodman and Peng, 1996: 193). These states were classified by some as ‘leaders in

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market conservative social welfare’ (Goodman and Peng, 1996: 192). More particularly, they drew out the common strands in Taiwan and South Korea, noting both that they reflected Japanese practice and could also be said to ‘deviate fundamentally from Western experience’ (Goodman and Peng, 1996: 194). The shared characteristics that were said to distinguish them from Western welfare states were the common language of Confucianism, the putting of the group before the individual, the dominance of economic considerations, the resistance to government provision of welfare, the emphasis on the family, and the hostility to Western approaches. The developing debate can be said to have come of age in the edited collection The East Asian Welfare Model (Goodman et al., 1998), which analysed Japan and the four ‘little dragons’. In the introduction, White and Goodman confronted directly the central issue of ‘whether such a creature as an EAWM actually exists and, if so, what it is and how it developed’ (White and Goodman, 1998: 4). Their conclusion was judicious, but ultimately negative. Welfare systems in the region do differ from their Western counterparts and to that extent ‘do constitute a distinct welfare experience with shared common elements’ (White and Goodman, 1998: 13). Nevertheless, there are clear and important differences, given which ‘it is misleading to think in terms of one hom*ogeneous, over-arching “East Asian Welfare Model” common to these five societies’ (White and Goodman, 1998: 14). This conclusion is interesting and important, not only because few authors have the élan to deny the validity of the title of their book in the introduction, but also because of the terms of the rejection of the model, which is based on policy difference. The responses of the five societies to common social problems are certainly not hom*ogeneous: there are very clear and substantial differences at the level of actual policies and programmes. On the other hand, there is what can be seen as a shared ‘overarching’ approach – the explicit subordination of social policy to economic ends – that marks a fundamental unity of governing philosophy and brings the five societies together to some degree. In earlier work we sought to contribute in two ways to the debate prompted by The East Asian Welfare Model in particular: by summarizing and assessing evidence for the existence of such a model (Wilding, 2000), and by revising and refining the terminology to describe more accurately what actually exists (Holliday, 2000). Wilding’s conclusion was that the idea of an East Asian welfare model was potentially useful both in pointing up clear and important differences from traditional

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Western approaches and in indicating significant similarities in social policy aims, objectives and priorities within the region. The concept was helpful as long as it was not pushed too far. Holliday sought to get away from what he saw as two restricting and potentially misleading elements in the concept of the East Asian model: the geographical element, and the use of the term ‘model’. He drew out the central, defining element in the welfare orientation of the five societies analysed by Goodman and his colleagues: productivism. He saw this concern for production and economic growth as a hegemonic unifying force transcending lower order policy differences. On this basis, he defined the five societies as examples of productivist welfare capitalism. In each, social policy was clearly, consistently and deliberately subordinated to a primary concern for economic growth in a way that was more explicit and sustained than in the West. To allow for clear and acknowledged policy differences between the societies, he created subcategories within the overarching productivist grouping (Holliday, 2000: 710). Looking somewhat beyond the East Asian welfare model debate, a valuable recent addition to the literature is Tang’s Social Welfare Development in East Asia. The heart of the book is an analysis of state welfare in Hong Kong, Singapore, South Korea and Taiwan with the aim of contributing to the cross-national study of what is rather dubiously described as East Asian welfare development. In our view, Tang has a rather problematic starting point. His question is ‘why has social welfare development been underdeveloped in East Asia’ (Tang, 2000: vii). The problem with this characterization of the issue is that it assumes that there is somewhere in the world – for Tang it is clearly in Western welfare states – a model of a proper level of development. Tang operates with this implicit notion of a yardstick of appropriate development and a desirable goal. While the book includes some useful comparative discussion, it is not in essence comparative. It is loosely organized around three key research questions (Tang, 2000: 8). What is the standing of these four societies in terms of achieved levels of social development? Why have they developed as they have? What is their likely future line and pattern of development? Apart from the rather general guidance provided by these three key questions, there is no strong common framework for the case studies. A country-based approach also makes the comparative task very complex. Effective comparative work has, in our view, to begin with narrower and more manageable servicebased comparisons organized around a tight common framework. Nevertheless, Tang’s book does have many strengths. First, the four case studies are perceptive descriptive analyses of social development in the

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four chosen societies. They provide a good factual and analytical basis for understanding developments in the four societies. Second, the book provides good evidence for its argument that Western theories of welfare development do not fit the East Asian situation, and it sketches helpful alternative explanations for what it describes as welfare underdevelopment. Third, its explanation of development in terms of statecentred theories is important. Fourth, its discussion of the future brings out the essential societal and temporal underpinnings of the approaches described. Finally, it attempts to assess how these four societies score in a number of basic areas of social development. Finally, Ramesh’s Welfare Capitalism in Southeast Asia is another important contribution to the literature, though again it is rather divorced from the East Asian welfare model debate. Its particular strengths are its sharp political approach, its detailed analysis of Southeast Asia, and its incidental reference to social policy in other societies, notably in East Asia. Ramesh starts from the puzzle that the factors that seem to be strongly associated with social policy development in the West – industrialization, urbanization and ageing populations – do not seem to have been forces for the expansion of state welfare in Southeast Asia (Ramesh, 2000a: 6). Other explanations therefore have to be sought. Cultural explanations, such as the role of Confucianism, draw criticism on the grounds that Southeast Asia is ‘too diverse to lend itself to easy generalisation’ (Ramesh, 2000a: 7). Some societies can reasonably be styled ‘Confucian’, others cannot. Instead, Ramesh points to the absence of left-of-centre political parties and trade unions and the essential, bottom-line pragmatism of governments in Southeast Asia. He sees social policy development as in substantial measure the product of a desire to build political support for the regime in power (Ramesh, 2000a: 9–10). This analysis is nuanced and perceptive. It emphasizes the value of Deyo’s argument that export-oriented development strategies were a key shaping factor in the evolution of social policy, but points out that Deyo’s thesis says little to help us understand why different nations in the region pursued different social policy strategies (Ramesh, 2000a: 12). It also accepts the value of building international factors into explanatory models of policy development, but emphasizes the need to set alongside such constraints the domestic pressures for welfare development generated by capitalist patterns of economic progress. At the level of actual policies in Southeast Asia, Ramesh’s conclusion is that ‘the similarities across nations and policies are few and the variations many’, with education showing the clearest similarities and social security policies the fewest (Ramesh, 2000a: 15–16). This study is less directly

10 Welfare Capitalism in East Asia

comparative than ours partly, at least, because the lack of other work on social policy in Southeast Asia means there is more need for ‘constructive descriptions’ of national systems. But Ramesh sets out many of the concerns and puzzles that drive our study.

Moving beyond the East Asian welfare model The notion of an East Asian welfare model remains central to debate about social policy in the region. We have already noted that in the major collection of essays devoted to analysis of the model doubts are raised about its validity. However, concerns go deeper than those expressed by White and Goodman. If we look at the debate that emerged in the 1990s, we find that it had several key features. Territorially, it focused on the dynamic economies that succeeded in replicating Japan’s post-war economic performance. Sometimes Japan itself was also made part of the analysis. Other times the focus was on Hong Kong, Singapore, South Korea and Taiwan alone. Much, indeed most, of East Asia was thereby normally excluded from analysis, and only part of Southeast Asia – Singapore – was included. Although the debate was given a geographical label, it was in fact focused on a disparate set of places united not by geography but by similar developmental trajectories. In terms of the geographical categorization, much of the discourse was fundamentally problematic. The societies of interest were not all properly classified as ‘East Asia’, but were more accurately seen as certain newly industrialized countries (and quasi-countries) in the Asia-Pacific region. There were also analytical problems. The debate about the East Asian welfare model usually operated at a fairly general level, and was frequently short on necessary empirical detail. Moreover, when it did engage in empirical study, it was never properly comparative across the major social policy sectors, or among states. The result was a provocative and wide-ranging set of discussions that was never, however, entirely systematic. Nowhere in the debate about the East Asian welfare model is it possible to find authoritative comparative analysis of the major social policy sectors. Moreover, implicit in the enthusiasm for East Asia was a rather dangerous kind of orientalism. What can be found here is a crude grouping together of very different societies on the basis of their shared geographical location, even though they are actually separated by thousands of miles and very different histories. There is also an assumption that there were somehow common development patterns because they are all Asian societies.

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Beyond this, an implicit theme of much debate was the assumption that Europe, or the West, offered some kind of illuminating template of social developmental correctness. Patterns that differed from the European norm therefore required explanation. As Baldwin points out, however, the very notion of a European model of social development is dubious. ‘The idea of a European welfare state’, he argues, ‘does not leap automatically from the data’ (Baldwin, 1996: 33–4). Huge variations in expenditure and in patterns and levels of provision generate tensions within the geographical and normative concept of a European welfare state (Baldwin, 1996: 32). Indeed, such states are sufficiently varied to end up in all three of Esping-Andersen’s worlds of welfare capitalism. Nevertheless, differential development is often seen as requiring explanation simply because it diverges from European or Western experience. Tang expresses this point of view in his strangely unqualified statement that ‘any analysis of Asian welfare should first explain social welfare underdevelopment’ (Tang, 2000: 16). It also features in his pessimistic conclusion: ‘Signs that the four tigers are able to embark on the road of western welfare states are not hopeful’ (Tang, 2000: 172). These judgements clearly reflect a Western yardstick of what constitutes an appropriate level of social provision. Problems with the East Asian welfare model, and linked debates, suggest that it is necessary to begin with an analysis of welfare systems in the region as they are, without assuming that supposed ‘underdevelopment’ or ‘difference’ demand explanation. There are perhaps five key questions that analysts of the nature of social welfare in the region need to address: • Which territories are to be the focus of analysis, and why? • Within them, which policy sectors are to be analysed, and why? • To what extent are similar or different approaches to welfare provision visible? • How are distinctiveness and similarity, coherence and difference, best captured and balanced? • Are the approaches sufficiently similar or coherent to merit classification as a single welfare model?

Analytical approach Our analytical approach develops out of our answers to these five questions. With regard to the first, we have chosen to focus on what we call Asia’s tiger economies: Hong Kong, Singapore, South Korea and

12 Welfare Capitalism in East Asia

Taiwan. The label is not entirely satisfactory, notably because there are good reasons for holding that societies outside these four have revealed ‘tiger’ qualities in recent years: for instance, Japan until the late 1980s (Johnson, 1982), Indonesia, Malaysia and Thailand since the mid-1960s (World Bank, 1993), China since the late 1970s (Babkina, 1997). However, three arguments can be made in defence of our terminology. One is that it is certainly preferable to unqualified use of ‘East Asia’, which, as we have said, is simply false. A second is that in recent years the ‘tiger’ label has become an established means of identifying our four territories. ‘The Four Tigers,’ wrote the World Bank a decade ago, ‘[are] usually identified as Hong Kong, the Republic of Korea, Singapore and Taiwan, China’ (World Bank, 1993: xvi). A third is that our label is considerably terser than the alternatives. To this point, for instance, we have talked in terms of East and Southeast Asian welfare capitalism, and so on. We are keen to get away from such a lengthy descriptor, but without engaging in material inaccuracy. It is worth noting here that we also use shorthand names for each of the four tigers. Formally, Hong Kong is the Hong Kong Special Administrative Region of the People’s Republic of China, Singapore is the Republic of Singapore, and South Korea is the Republic of Korea. Taiwan has an ambiguous international status, and limited recognition. It is sometimes known as the Republic of China. That is the ‘which’ dimension of our first question. The ‘why’ part can be answered in several ways. We came into this project with a practical concern, which was to make the study manageable. This study is manageable in two main senses. First, the spread of territories is not too large. Second, each presents plenty of data for analysis. But there are also good academic and policy reasons for focusing on our four societies. As others have noted, they are sufficiently similar to make comparison fruitful. They have reasonably similar recent histories, are at roughly similar stages of economic development, and have broadly similar demographic structures. They have all experienced common economic and social trends. They are culturally and politically similar. Furthermore, on many measures they are clearly different both from Japan, which was the first hyper-growth economy in post-war Asia, and from the succeeding generation of growth economies in the region. On the UNDP’s Human Development Index, Japan ranked 9 in 2002. The three of our four societies captured in the study (Taiwan was not ranked) were clustered very closely together in the mid 20s: Hong Kong at 23, Singapore at 25 and South Korea at 27. In the rest of East and Southeast Asia, no society came higher than Malaysia at 59, followed by Thailand at 70 and the Philippines at 77 (UNDP, 2002). The clustering of our

Ian Holliday and Paul Wilding 13

societies registered by the UNDP is reflected in other data, such as GDP per capita, and less tangible measures, such as stage of social development. Overall, then, our territories form a reasonably similar group. As will be shown in our sectoral chapters, they are also interestingly and significantly different in their policy responses to shared problems. This makes learning from difference a real possibility. Taking our second question, in engaging in sectoral analysis we focus on education, health, housing and social security. We would have liked to include chapters on labour/employment policy and environmental policy, but relatively little detailed or systematic comparative work has been done in these areas, and it turned out not to be possible. The literature that is now starting to emerge in each area does contain important insights, but in neither case is it sufficiently developed to sustain the kind of study we wanted to undertake. There is, moreover, a strong positive reason for concentrating on the traditional heartlands of social policy. All four societies have developed significant services in these four key service areas. There is good data. A substantial and helpful body of academic work on the services is available to draw on. In these four service areas, we can also see the full range of state action: regulation, funding, provision. These service areas thus provide a firm base for comparative study. The third question is already partly answered. Our four societies display both similarity and difference. They converge in two main ways. At the macro level, similar aims and orientations are visible. At the more micro level of actual policies and programmes it is also possible to find common themes. Yet there are also differences. To capture this, we use Holliday’s ‘productivist welfare capitalism’ analysis. This seeks both to acknowledge the central commonality of approach in our societies, and to indicate that subsidiary differences are also visible. In Holliday’s view there are different ways of being productivist. The argument is that there is a clearly identifiable world of welfare capitalism, but with distinct subworlds (Holliday, 2000: 709–10). In our societies, approaches to social policy are united by an overriding and very explicit subordination of social policy to economic growth. There is an almost unchallenged stress on ‘economy first’ and on growth and full employment as the best route to enhanced welfare. These societies are ‘driven by growth’ (Morley, 1999). Welfare is subordinate to economic goals and is utilized as an aid to further economic development so that welfare seen as supportive to the economy develops, whereas welfare held to make no contribution to economic development languishes. In Holliday’s words, ‘Everything else flows from this’ (Holliday, 2000: 708). This is the essential and powerful

14 Welfare Capitalism in East Asia

overriding force that, in spite of differences of emphasis or actual programmes, justifies the collective classification of these four societies as productivist welfare capitalist states. They are distinctive, too, in their essential, explicit and instinctive ideological hostility to state involvement in welfare, even though at times pragmatism motivates state engagement. Using this approach as the basis for comparative analysis, we can say that the core characteristics of welfare capitalism in the tiger economies mark them out as essentially different from all the approaches known to the West. Wherever they are placed in Esping-Andersen’s typology, Western welfare systems are not fuelled by the concerns that dominate Asia’s tiger economies. Their concerns are rather different: more narrowly and specifically welfarist, and less productivist and political. Of course, when the chips are down, Western states have always given the economy priority over social policy, but that priority has generally been less explicit and more reluctant. It has been a stance in need of justification, rather than a policy given. There has also been much less emphasis on economic growth as the high road to welfare. At the micro level of actual policies and programmes, further distinctive elements are visible. Comparing Asia’s tiger economies with Western states brings out clear differences of approach. These include low expenditure levels, the family’s primacy as a provider, the state’s predominant role as a regulator rather than provider, and the attachment to non-statutory welfare that Jones calls ‘the most striking common Confucian welfare state characteristic’ (Jones, 1993: 213). Taking the fourth question, all commentators emphasize both shared characteristics and differences. What we need is a terminology that captures both distinctiveness and similarity. Our argument is that these four societies are united by a central underlying approach to welfare: that it must always be subordinated to the overriding priority of economic growth pursued for essentially political purposes. That concern dominates welfare politics and social needs. Different states pursue secondary aims in different ways, for example in the provision of health care. However, such differences, though significant, are secondary to the primary orientation of tiger social policy: to foster and facilitate economic growth. We therefore need a form of categorization that captures both this unifying aim and priority and the policy differences that are the product of differences of history, institutional development, and so on. We suggest an extension of Esping-Andersen’s three worlds of welfare capitalism and the creation of a fourth, productivist world to add to the liberal, social democratic and conservative worlds. We also make

Ian Holliday and Paul Wilding 15

subdivisions within the productivist world to take account of different orientations within that shared unifying objective. Regarding our fifth and final question, we have seen that White and Goodman reject the concept of an East Asian welfare model on the grounds that differences in policies and institutions in the societies they study make such a classification misleading. Such differences, they argue, are just too large to make the term ‘model’ either legitimate or helpful because it implies a coherence and similarity that is not reflected in reality. We take this point, but still believe that some advance can be made. In terms of terminology, we follow EspingAndersen in talking of ‘worlds’ of welfare capitalism. ‘World’ captures reality in all its breadth and imprecision, whereas ‘model’ suggests an impossible precision and similarity. What we develop is, in fact, a typology that draws out the fundamental unity of approach in our four societies while avoiding the potential hazards and limitations of geographical and cultural terminology. To emphasize the ‘East Asianness’ of the model seems to us to betray dangerous overtones of orientalism. It also exaggerates the territorial factor when, for us, another element is more central: the productivist thrust that lies at the very heart of these successful capitalist systems. Beyond this, we feel that the crystallization of recent debate around the notion of an East Asian welfare model does have some relevance to our analysis for at least five reasons. First, this model provides a template against which to analyse and evaluate national and service systems. Secondly, it helps to move discussion of welfare development in our four societies beyond a purely national focus to a more rewarding comparative stance. Third, it focuses attention on similarity and difference between our chosen societies. Fourth, it forces us to tease out the essential differences between tiger approaches and Western approaches to welfare. Fifth, it pushes us to think analytically rather than purely descriptively and to work in terms of models or worlds rather than simply of national systems.

What is to come In the rest of the book, Chapter 2 is also introductory and provides some contextual background to the development of our four chosen societies. The heart of the analysis comes in Chapters 3–6, which undertake comparative analyses in the social policy heartlands of education, health, housing and social security. In these sectoral chapters, our authors focus on four key issues: policy development, service

16 Welfare Capitalism in East Asia

regulation, service provision, and service funding. Each chapter, then, seeks to reach an overall assessment of what is happening in the policy sector in question. As a postscript to each sectoral chapter, each author provides a very brief sketch of the four national policy systems to serve as a quick reference point. This approach means that our analysis of the four social policy sectors is necessarily compressed. However, we feel that the gains of our strategy outweigh the losses. This is the first genuinely comparative study of social policy in our four societies. Only a study of this kind can illuminate similarity and difference in a way that stimulates theoretical understanding and policy development. We are firmly committed to both. In exploring policy development our authors focus on when, why and how the state got involved in the policy area in question, and on the central factors that have shaped that involvement. Among the issues that emerge here are economics, politics, ideology, nation building, culture, emulation, and so on. In analysing regulation, they explore and assess the pattern, nature and significance of the relevant legal, political and policy frameworks, as well as the mechanisms and instruments used by the state to guarantee and regulate service provision. To capture provision they examine the extent, nature and balance of the services provided by the different agents and agencies in the sector in question. State, market, family, employers and nongovernmental organizations (NGOs) are all considered here. In analysing funding they try to calculate the overall extent of funding, the balance between different funding agents and agencies, and the significance of the resultant pattern. To reach an overall assessment, each author then evaluates the strengths and weaknesses, successes and limitations of action in the four spheres of policy development, regulation, provision and funding. Each also seeks to reach a judgement about the success or otherwise of the four national systems according to the criteria of access, coverage, quality, value for money, efficiency and effectiveness. Finally, each attempts to reach a necessarily rather speculative conclusion about the actual and potential adaptability of our systems. How well might they adapt to change when faced with, for example, an ageing population or historically lower rates of economic growth? Finally, Chapter 7 concludes the book by analysing in detail the social policy similarities and differences in our four societies, and the sustainability of the tiger approach. We identify six shared core features: the primacy of political rather than specifically welfare concerns in social policy, the commitment to economic growth and full employment as the main engines of welfare and social stability, the subordination of

Ian Holliday and Paul Wilding 17

welfare to economic considerations so that welfare can reasonably be defined as ‘productivist’, a range of shared beliefs about the proper role of the state in welfare, a heavy emphasis on the role of the family in welfare, and finally a belief in strong but limited state action. Differences among our four societies are significant but secondary. Essentially they are to do with differing methods of achieving shared goals, and distinct circ*mstances in the four societies rather than with fundamental differences of philosophy or strategy. The central approach in the four societies is similar. All are clearly and explicitly committed to the same core principles: economy first, productivist welfare and a limited role for the state. Difference is outweighed by similarity in what is of primary importance. We end by reflecting on the sustainability of the tiger approach in the face of significant pressures arising from economic, social and political change.

2 Tiger Social Policy in Context Ian Holliday and Paul Wilding

The sectoral chapters that follow engage in comparative analysis of the four social policy heartlands of education, health, housing and social security. In this chapter, we provide some necessary context for those chapters by examining the nature of the societies, economies and polities within which social policy has developed. Our aim is to sketch the social, economic and political development of Hong Kong, Singapore, South Korea and Taiwan, and to provide a very brief overview of the role the state plays in welfare. As part of this latter aim, we make some general remarks in a section near the end of the chapter about the nature of the social policy process in our four societies.

Basic data One of our justifications for analysing social policy in our four chosen societies is that they exhibit a series of broad similarities. However, looking at some basic data we have to acknowledge that there are also important differences among them (Table 2.1). In terms of sheer size, Hong Kong and Singapore are very small. Essentially, they are both city-states, except that Hong Kong is technically not a state. Although South Korea and Taiwan are also quite small by international standards (at, for instance, roughly one-quarter and one-tenth the size of Japan), neither is in any sense a city-state. Within our group, the land area of South Korea is almost 150 times bigger than that of Singapore. Not surprisingly, a similar split is visible when we look at land use. South Korea and Taiwan contrast with Hong Kong and Singapore in having significant agricultural sectors. As it happens, this difference has only a limited economic impact. In South Korea, agriculture accounts for just 5 per cent of economic activity. In Taiwan, the figure is even lower at 2 per cent. 18

Ian Holliday and Paul Wilding 19

Table 2.1

Basic geographical, population and economic data for the four East Asian tigers, 2001–02

Area (sq. km.) Agricultural land (%) Population (m) Age structure: 0–14 (%) Age structure: 15–64 (%) Age structure: 65 (%) Population growth (%) Size of main ethnic group (%) Literacy (%) GDP ($bn, PPP) GDP/capita ($, PPP) Tax as a percentage of GDP (including social security) Percentage share of household income: highest 20% Percentage share of household income: lowest 20% Percentage share of household income: ratio of H20 to L20 Labour participation rate (%) Service sector in economy (%) Military expenditure (% GDP)

Hong Kong

Singapore

South Korea

Taiwan

1092 6 7.3 17.5 71.6 10.9 1.3 95 92 180 25,000 8.9

693 2 4.5 17.6 75.3 7.1 3.5 77 94 106 24,700 14.9

98,480 19 48.3 21.4 71.0 7.6 0.9 100 98 865 18,000 23.6

35,980 25 22.5 21.0 70.0 9.0 0.8 98 94 386 17,200 17.3

45.0

48.2

39.3

39.2

5.0

5.2

7.5

7.1

9.0

9.3

5.3

5.5

61 86 N/A

65 67 4.9

61 51 2.8

58 66 2.8

Note: Although most data are 2001–02 estimates, some are drawn from the late 1990s. Sources: CIA (2002); DGBAS (2001).

Turning to population, Hong Kong and Singapore are again much smaller than South Korea and Taiwan, though much more densely populated. Again, this creates differential demands on social policy. The age structures of our four societies are not substantially different, but the slightly larger proportions of elderly people in Hong Kong and of young people in South Korea and Taiwan are worth noting. Hong Kong is said to have the lowest birth rate in the world, though population growth is lower in South Korea and Taiwan because they have less inward migration. By far the most hom*ogenous nation among our four is South Korea. About 20,000 Chinese are registered in the society, and very small numbers of other nationals live in Seoul in particular, but overwhelmingly this is a Korean society. Korean is the only official language. Hong Kong, usually considered to be highly cosmopolitan, in fact registers a Chinese population comprising about 95 per cent of the total. This statistic is

20 Welfare Capitalism in East Asia

something of an exaggeration, because many foreign nationals who live and work in Hong Kong fail to be captured in official data for one reason or another. Moreover, there are divisions within the Chinese population between the dominant Cantonese and other groups that give the society further variety. Nevertheless, Hong Kong is quite hom*ogenous. Its two official languages, Cantonese and English, reflect the colonial heritage. Taiwan is an unusual case, in that it is ethnically very hom*ogenous: 98 per cent of the population are Chinese. However, this group is internally divided in ways that, in contrast to the Hong Kong case, are highly significant. The dominant group of Taiwanese, who comprise 84 per cent of the total population, regard themselves as very different from the rest, most of whom are, or descend from, the mainland Chinese who settled on the island at the time of the Chinese Revolution in 1949. Here the official language is Mandarin Chinese. Finally, Singapore is ethnically quite complex, with 77 per cent Chinese, 14 per cent Malay, and 8 per cent Indian. It has four official languages: Chinese, English, Malay and Tamil. In all of these societies a series of Asian religions, such as Buddhism, Confucianism and Taoism, are present. However, in South Korea, uniquely, the dominant religion is Christianity, which nominally registers adherents among 49 per cent of the population. With Buddhism accounting for a further 47 per cent, the Confucianism on which Jones (1993) places so much stress is reduced to a mere 3 per cent. All of these societies are basically literate, registering percentages ranging from 92 in Hong Kong to 98 in South Korea. Economically there are also significant differences. Given their larger populations, it is only to be expected that South Korea and Taiwan register as the biggest economies among the four. However, in terms of GDP per capita, these are also the weakest two of our four societies. By this measure, the citizens of Hong Kong and Singapore are close to half as wealthy again as their counterparts in South Korea and Taiwan. A similar divide is visible when taxation and income distribution are examined. Hong Kong and Singapore are low-tax, inegalitarian societies. South Korea and Taiwan have higher taxes, and are more egalitarian. The same divide is also visible in the composition of the different economies. In Hong Kong and Singapore the service sector is clearly predominant. The other two economies are more diverse, with industry still accounting for 44 per cent of GDP in South Korea and 32 per cent in Taiwan. Labour participation rates are around 60 per cent in all four societies. While Hong Kong spends no money on defence, which is the responsibility of the central government in Beijing, each of the other societies devotes around 3–5 per cent of GDP to its military budget.

Ian Holliday and Paul Wilding 21

On the less tangible cultural side, all four societies are former colonies, but their imperial masters differ: Britain for Hong Kong and Singapore, Japan for South Korea and Taiwan. Moreover, whereas the two Japanese colonies gained their independence in 1945, with the surrender of Japanese forces at the end of the Second World War, the two British colonies had to wait rather longer. Furthermore, in neither case did the early post-colonial settlement comprise full independence. Singapore briefly joined Malaysia, from 1963 to 1965. Hong Kong was handed from British to Chinese sovereignty in 1997. All four societies have lived, and continue to live, with uncertainty about their futures: Hong Kong because of the return to Chinese sovereignty, Taiwan because of PRC claims that it is a renegade province, South Korea because it is technically still at war with the North, and Singapore because of its at times tense relationship with Malaysia. Wade writes that ‘Taiwan and South Korea are both “part countries” facing a credible threat to the continued existence of their torn off part’ (Wade, 1995: 129). With slightly less force, the point also applies to Hong Kong and Singapore. Until the late 1980s, only Singapore could claim to be democratic, and then in a rather constrained way. All four tigers put good government above politics. All face future stresses and strains concerning the management of economic competitiveness, ageing populations, emergent claims for social rights, and changing gender roles. The latter factor is likely to be particularly disruptive in societies laying such stress on the family. At the level of basic data there are, then, significant differences among our four societies. However, those differences start to diminish once they are compared with others. If we were to take other countries in East and Southeast Asia, on most dimensions we would find bigger differences between our four societies and the rest than among our four societies as a group. The contrasts would be even greater if we were to look to, say, Europe, South America or Africa. Moreover, one unifying feature of our societies is the shared experience of explosive growth witnessed in the post-war period. When the World Bank reported on the East Asian ‘miracle’ in 1993, it noted that ‘Between 1960 and 1985, real income per capita increased more than four times in Japan and the Four Tigers’, as well as more than doubling in Southeast Asia’s newly industrializing economies. ‘If growth were randomly distributed, there is roughly one chance in ten thousand that success would have been so regionally concentrated’ (World Bank, 1993: 2). The supporting data for change in GDP per capita placed Taiwan at number two in the international rankings, and Hong Kong, Singapore and South Korea at four,

22 Welfare Capitalism in East Asia

five and six. The World Bank study also noted that East and Southeast Asia contained the only societies in the world to combine high growth with falling inequality (measured by change in Gini coefficient). ‘Moreover,’ it added, ‘the fastest growing East Asian economies, Japan and the Four Tigers, are the most equal’ (World Bank, 1993: 4). Additional data, relating for instance to the gender gap, told much the same story. Of course, the timings differ, as do the trajectories. Furthermore, recent economic trends reveal that the four tigers all experienced profound economic shocks in the Asian financial crisis of the late 1990s from which they are still only starting to recover (Haggard, 2000). Nevertheless, the experience of explosive growth from the mid-1960s to the mid-1990s is common to them, and marks them out in terms of both history and aspiration. This is one of our main reasons for focusing on this element in identifying these societies as essentially ‘productivist’ in orientation. Beyond the economic sphere, all four societies are to varying degrees ‘Confucian’, in the sense that their cultures have been strongly influenced by Confucian teaching and belief systems. They are societies with a Confucian heritage (Tu, 1996; Hahm et al., 2001; Bell and Hahm, 2003). What survives may be no more than the declining deposit of history, and that deposit may have been artificially cultivated by governments for their own political purposes. Nevertheless, Confucianism remains important to an understanding of these societies. Its emphasis on order, hierarchy, duty, stability, family responsibility and the importance of the group rather than the individual has had a substantial influence on policy. This is as true of social policy as of other spheres (Lin, 1999). In the individual overviews that follow we start by focusing on economic underpinnings for the development of social policy and then look at other key factors. Within a general framework of productivist orientation and high growth, we seek to describe the distinctive features that have characterized each of our four cases.

Hong Kong Perhaps the crucial moment in the launch of Hong Kong’s dramatic economic development was a ban on trade with China imposed in 1950 at the start of the Korean War. Hong Kong had always been an entrepôt, earning its living by re-exporting rather than actually manufacturing goods. The ban on trade with China forced it to become the first of the tiger economies to turn to export-oriented industrialization, producing

Ian Holliday and Paul Wilding 23

textiles, plastics and consumer electronics. By the end of the 1950s, domestically-produced exports were of greater value to Hong Kong than re-exports. By 1972, manufactures accounted for 80 per cent of Hong Kong’s exports (Woodwiss, 1998: 149). The rise of this vigorous domestic manufacturing sector, characterized by individual entrepreneurs and small businesses, meant that there was little need for direct state promotion of domestic production, as in South Korea or Taiwan, or for state efforts to attract multinational companies, as in Singapore (Chiu et al., 1997). Indeed, for Pempel, Hong Kong had ‘virtually no state apparatus worthy of the name’ (Pempel, 1992: 83). However, he was also careful to cite Deyo’s qualification: ‘the Hong Kong establishment of major banks, trading companies, and government ministries has played a powerful and unitary role, similar to that played by government bodies elsewhere in mediating and managing foreign economic relations and in providing long-term capital to firms within favored economic sectors’ (Deyo, 1989: 43). In the post-war, post-1949 era, Hong Kong rapidly became one of the most trade-dependent economies in the world, always sensitive to the state of the global economy. Critical factors for the Hong Kong economy continue to include the terms and conditions of world trade, the economic health of its key trading partners, notably the USA and China, the competitiveness of its industries, and its skill in attracting international investment. Particularly at times of crisis in mainland China – the Revolution at the end of the 1940s, the Great Leap Forward a decade later, the Cultural Revolution in the 1960s and 1970s – a flow of unskilled immigrants into the territory ensured a supply of cheap labour for manufacturing industry (Chiu et al., 1997). Between 1970 and 1990, Hong Kong’s economy again changed dramatically when it gradually shifted from a manufacturing to a service economy as industry moved to Southern China to take advantage of lower wages. In those years the contribution of manufacturing to GDP virtually halved. By the time of the sovereignty transfer in 1997, the service sector employed six times as many people as industry (HKSAR Government, 1997: 115). Throughout, the record was one of dramatic economic growth. Politically, until 1997 Hong Kong was a British colony ruled by a Governor and a small group of key civil servants. Miners describes the Governor’s powers as ‘awesome’ (Miners, 1995: 69). The Governor was assisted and advised by Executive and Legislative Councils, but until the early 1990s they were part of the formal rather than the effective constitution. It was not until the arrival in 1992 of the last Governor, Chris Patten, that any serious attempt was made to introduce democracy

24 Welfare Capitalism in East Asia

to the territory. By and large, the colonial political system produced few protests. Dramatic and potentially destabilizing riots, fuelled by the Cultural Revolution across the border in the PRC, took place in 1966–67. In the 1980s and 1990s, the looming prospect of the 1997 sovereignty transfer from Britain to China helped to forge considerable growth in civil society and social conflict (So, 1999). Overall, however, the colonial settlement delivered political and social stability and economic growth, and generated high levels of satisfaction. Since the 1997 sovereignty transfer, the Hong Kong political system has evolved in a gradualist manner. Although a Chief Executive has taken the place of the Governor, the SAR’s polity closely resembles its colonial predecessor. Indeed, one of the earliest acts of the first Chief Executive, Tung Chee-hwa, was to set back the course of democracy in the territory (Lau, 2002). The colonial government’s first and most important welfare initiative was in housing. A massive programme of subsidized public housing launched in the mid-1950s meant that, by the 1990s, almost half the population lived in public housing (Castells et al., 1990). In the early 1960s, the government began to acknowledge a responsibility to provide medical care for those who could not afford to pay. This eventually generated a tax-funded hospital system effectively free at the point of use (Grant and Yuen, 1998). Following ‘Cultural Revolution’ riots in 1966–67, and notably the appointment of Governor Sir Murray MacLehose in 1971, the government moved into other areas of welfare. In 1971, a system of public assistance was established, and primary education became compulsory. In 1978, compulsory education was extended to nine years. In the 1980s and early 1990s, state-funded higher education expanded dramatically (Wilding et al., 1997). In spite of its proclaimed philosophy of ‘positive non-interventionism’, the Hong Kong government intervenes actively in social policy, providing, regulating and funding welfare. Important gaps remain in financial provision for child support, unemployment and old age, though a Mandatory Provident Fund was created in 2000 and in 2002 the government floated the possibility of introducing unemployment benefit. There is thus an active state presence that rather conflicts with the territory’s self-image as the ultimate free-market economy: each year, it competes with Singapore for pre-eminence on this yardstick. By international standards, government is small, and taxation and public expenditure are low. Yet for Hong Kong, as for Singapore, small government is in many respects a ploy for attracting international capital, and the reality is rather more complex. In the Hong Kong case, for instance, Castells writes of ‘a decisive role by the state in creating the conditions for economic

Ian Holliday and Paul Wilding 25

growth’ (Castells, 1992: 45). Notably, government-subsidized housing has made a significant contribution to holding down wages and thereby helping to maintain competitiveness (Castells, 1992: 48–9).

Singapore When Singapore became independent of Britain and then of Malaysia in the 1960s, its future looked unpromising. Like Hong Kong, it had long made its living as an entrepôt. In 1960 over 90 per cent of exports were re-exports, and manufactured exports amounted to less than 10 per cent of GDP. Moreover, the nature of the economy meant that it could not absorb the growing number of entrants and would-be entrants to the labour market. On leading the nation to independence, the People’s Action Party (PAP) under Lee Kuan Yew launched a vigorous state-directed strategy of export-led industrialisation (Rodan, 1989). By the 1980s, manufactured exports amounted to almost 70 per cent of a dramatically increased GDP (Huff, 1999: 223). Unemployment fell from 9 per cent in 1966 to 3 per cent in 1983, and the labour force participation rate rose from 42 per cent to 64 per cent (Castells, 1992: 35). Real wages also increased rapidly, doubling between 1978 and 1990 (Huff, 1999: 225). This was partly the result of a government drive to improve the quality of the workforce, and partly the result of its policy of driving up wages to discourage investment in labour-intensive industries (Haggard and Cheng, 1987: 119). The striking element in Singapore’s economic development is the dominant role played by foreign firms. By the 1970s, they were producing over 70 per cent of manufacturing output (Huff, 1999: 222). Because of its political and social stability, generous tax concessions, good infrastructure, and educated and docile workforce, Singapore quickly became a favoured site for foreign investment. Between 1985 and 1995, it drew in more foreign direct investment (FDI) than any other country in the world, and twice as much as the country ranking second (Huff, 1999: 223–4). By the late 1990s, 5000 multinational corporations were operating in the city state. Singapore is a very clear example of the developmental state in action: Singapore Inc (Low and Johnston, 2001). To survive, Lee and the PAP had to prosper. To do this, they had to overcome the twin problems of a weak domestic manufacturing sector, and a shortage of employment. The solution was found in increasing FDI. However, to secure FDI it was necessary to show that Singapore was stable, that there was a compliant and educated work force, and that there was an efficient infrastructure. It was

26 Welfare Capitalism in East Asia

also judged necessary to provide attractive tax relief. In the 1990s, the profits of two-thirds of Singapore’s manufactured output went untaxed (Huff, 1999: 222). Such a strategy required a government with the power to develop, launch and implement a programme to suppress trade unions and militant workers. Lee and the PAP achieved this in the years after 1963 by jailing trade union leaders, de-registering unions and proscribing political activity by organized labour (Rodan, 1996a). The economic results gave the policy a measure of popular legitimacy. In the late 1990s, Singapore was held to be the second freest economy in the world and the second most competitive (Tang, 2000: 39). In terms of welfare, there are four key aspects to the role of the Singapore state: hostility to welfarism in public discourse and public policy, a massive public housing programme, a multipurpose Central Provident Fund (CPF), and a drive to raise the educational level of the workforce. The ruling PAP has always been deeply hostile to all ideas of social rights and collective responsibility for meeting social needs. Rodan comments that ‘Possibly the second most pejorative term (after liberalism) in the PAP lexicon is “welfarism”’ (Rodan, 1996a: 80). That remains the underlying premise of its political strategy. However, this ideology did not prevent the government from launching a substantial public house building programme. In 1960, just 9 per cent of dwellings were publicly owned. By the late 1990s some 86 per cent of existing dwellings were publicly constructed, though largely individually owned. More than 90 per cent of Singaporeans now own, or are currently purchasing, their own apartments. They nevertheless remain subject to the kind of threats made by Prime Minister Goh in the January 1997 election campaign: that housing estates in constituencies that did not vote for the PAP would not receive government assistance with upgrading in the future (Huff, 1999: 234). Politically, the state housing programme has been a crucial element in buttressing the legitimacy of the PAP’s developmental strategy and its overall authority. The CPF, the key engine of social policy in Singapore, is essentially a compulsory savings scheme to which workers and employers contribute. Contributions are high: normally around 20 per cent of wages for both parties. The initial aim of the scheme was to provide an income in retirement, but the scope has now widened to embrace saving for home purchase, medical care and education. The scheme also provides vast investment funds for the state to deploy: in the mid-1980s, Singapore had the highest savings rate in the world. As with home ownership, the CPF gives people a crucial and stabilising stake in the existing economic and political order (Low and Aw, 1997). Finally, from the very start the PAP

Ian Holliday and Paul Wilding 27

saw the crucial importance of the quality of the workforce to its strategy of encouraging multinational corporations to locate in Singapore. Education to improve the quality of the labour force became a key plank in government economic and social policy. There is a strong and pervasive emphasis in Singapore on individual responsibility. The government sees its responsibility as providing the basic conditions for economic development and full employment. Individuals and families are then responsible for their own well-being, present and future. For those not eligible to join the CPF, or who have an inadequate contribution record, there is only an absolutely residual public assistance scheme, and very basic health provision.

South Korea South Korea’s pattern of economic development was in some respects similar to and in other respects different from that of the other tigers. Korea was a Japanese colony from 1910 to 1945. In the mid-1950s, the southern part of a newly divided society emerged from the Korean War ‘a war torn wreck’. Some 40 years later, it had become the world’s eleventh largest economy (Lee, H. K., 1999: 23). Among other achievements, it was ‘the world’s largest producer of home appliances, the second largest producer of semiconductor chips, the second largest ship builder, and the fifth largest car maker’ (Harvie, 2000: 58). Its GDP per capita is now estimated to be nearly 20 times that of North Korea. From the 1960s the economy grew rapidly under the planned direction of the state. As with our other societies, the key strategy was export-led industrialization. In the early 1960s, South Korea was the fortieth biggest exporter of manufactured goods to the USA. By 1986 it was the fifth biggest. At the heart of this strategy was a stress on technology. Castells writes of science and technology and the upgrading of products as ‘the obsession of all Korean governments since the mid 1960s’. His assessment is that ‘South Korea is probably the industrializing country that has most rapidly climbed the technology ladder in the new international division of labour’ (Castells, 1992: 40). Kwon sees the rationale for the government’s economic strategy between 1961 and 1987 as ‘legitimation through economic performance’ (Kwon, H. J., 1999a: 20). It was also a way of responding to the continuing military threat from North Korea – strength through economic development – and of creating the resources required for defence. The United Sates supported a strategy giving primacy to growth and Japan, the former colonial master, had shown what economic development was possible.

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Until the late 1980s, South Korea was essentially an authoritarian dictatorship with firm, if not brutal, repression of dissent. Following General Park’s military coup in 1961, the society made some moves towards democracy in the 1960s. However, in the 1970s an authoritarian trend developed, and by the 1980s the society had become highly militarized. Full martial law was declared in 1980 (Han and Chung, 1999: 197–202). In the late 1980s, by contrast, as in Taiwan and also Hong Kong to some extent, a political thaw began to set in (Chu, 1998). A range of social movements emerged and put welfare issues squarely on the political agenda. A sense of civil and political rights also began to develop. At the 1987 election there was vigorous social policy debate, with presidential candidates enthusiastically competing in promising developments in national health insurance and pensions. The South Korean state’s developmental strategy had a number of key elements: driving forward industrialization, protecting the home market, creating privileges for export-oriented manufacturing companies, building large industrial conglomerates (chaebol), directing investment in the interest of national self-sufficiency and international competitiveness, controlling labour tightly and often brutally, securing necessary investment funds generally via loans, driving forward technological development in domestic industry, and creating a high quality and low-cost labour force. Two sets of factors worked to South Korea’s advantage. Economically, falling transport costs, lowering trade barriers and low labour costs compared to the USA were key (Wade, 1992: 291). Politically, South Korea joined Taiwan in sitting on what Wade describes as the fault line of post-Second World War global politics. This ensured US concern for the country’s stability and prosperity, and brought US aid, access to US markets, tolerance of South Korea’s protectionist policies and state support for US companies interested in investing in the country (Wade, 1992: 312). In South Korea, the 1960s and 1970s were characterized by fundamental opposition to the extension of state welfare, in spite of considerable efforts by the Korean Development Institute to argue that welfare could make a positive contribution to economic growth (Kwon, H. J., 1999a: 51–2). Social policy development was highly limited until the late 1980s. Significant measures introduced at a relatively early stage comprised Industrial Accident Insurance in 1964, a programme of public assistance in 1965, and National Health Insurance in 1977. However, these initiatives were insurance-based, with the state playing a largely regulatory role. More recently a programme of employment insurance was introduced in 1995. The very tightly drawn public assistance programme was modified

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during the Asian financial crisis to make eligibility for benefits rather wider. A drive to extend educational opportunity resulted in more than 40 per cent of young people entering higher education in the 1990s. In Kwon’s view social policy developments have been shaped by the need for legitimation because ‘democratic deficiency engenders a need for social policy’ (Kwon, H. J., 1999a: 2–3). South Korean social policy has also always had a strongly productivist orientation.

Taiwan Taiwan was a Japanese colony from 1895 to 1945, geared to serving the economic needs of the imperial power. In 1949, the Communist victory in mainland China prompted the Kuomintang (KMT) to flee to the island, where it quickly established control. Economic development was seen as the route to legitimation of its authority. In this the KMT was triumphantly successful, and Taiwan has enjoyed uninterrupted economic growth since the mid-1970s. To achieve this, the KMT was required to strike a difficult balance between securing and maintaining international competitiveness, which was seen as requiring control of wages and welfare spending, and maintaining political and social stability, which depended on a satisfied citizenry (Ku, 1997: 224). Taiwan’s economic story in the years after 1949 is one of state-guided development through various major transformations. In the 1950s, the state pursued a strategy of import substitution. In the 1960s and 1970s the strategy changed to one of exporting labour-intensive manufactured products. In the 1970s, the strategy was refined to move in favour of heavy industry. In the 1980s came diversification and high-technology production (Lam and Clark, 1998: 129). By 2000, Taiwan was the world’s third largest manufacturer of IT products. In the same year, exports amounted to about 40 per cent of GDP, justifying Wade’s notion of ‘a government created export “culture”’ (Wade, 1995: 123). In such an export-dominated economy, maintaining competitiveness is vital. It was not until 1958 that private-sector production in Taiwan moved ahead of the public sector. The private sector was made up of small and medium-sized mainly family-run firms fuelled by a fierce entrepreneurial energy. Often they provided the only real opening for local Taiwanese people, as KMT mainlanders dominated the state bureaucracy and state industries. In the 1980s, small and medium-sized firms produced more than 60 per cent of Taiwan’s exports (Clark and Chan, 1998: 31), and represented half the manufacturing sector and threequarters of the commercial sector (Lam and Clark, 1998: 120). In the

30 Welfare Capitalism in East Asia

late 1980s, nearly half of the top 1000 companies in Taiwan were family enterprises (Chen, 2001: 65). Such a situation calls for a very different developmental strategy from that required by an economy dominated by large or state-run firms. There were essentially five factors in Taiwan’s economic success. A growing world economy and expanding world trade were important as context. Carefully crafted government policy, for example in investment in education, guided development and selected encouragement of FDI, was key politically (Wade, 1990). Within the society, high savings ratios in the 1970s (partly as a response to minimal government provision for social contingencies) provided valuable funds for investment. In the workplace an easily disciplined labour force at least partly reflecting its recent rural roots, and large-scale employment in small, family firms together with an increasing number of women in the labour force, were key. An index of the tightly disciplined nature of the labour force is the fact that while GDP increased in real terms by 18 times between 1952 and 1986, the average labourer’s wages increased by only six times (Ku, 1997: 221). Finally, external support from the USA was important for Taiwan, as for South Korea. This support had a number of strands. A massive aid programme sent $200 million per year to the island in the period between 1953 and 1963. One third of all investment came from the US (Howe, 2001: 50). Policy guidance was given, as well as influence in land reform, privatization of state industries, and the granting of greater autonomy to technocrats in economic policy making (Haggard, 1988: 274). Last but by no means least, the emergence of the USA as the largest single market for Taiwanese products was critical. The USA took just under 50 per cent of Taiwanese exports in 1984, and its share never fell below 30 per cent between 1970 and 1990 (Ku, 1997: 108). Until the late 1980s Taiwan was an authoritarian state led by a Leninist party with a clear economic development orientation. ‘Throughout the century,’ writes Cheng, ‘Taiwan has had a state capable of leading concerted action for economic modernization’ (Cheng, 2001a: 19). The state’s vision of what was necessary comprised picking winners, providing fiscal incentives and offering technological support. Its strategy involved promoting small and medium enterprises and harnessing their dynamism to implement its aims (Wade, 1990). For Gold, the state’s role in economic development was ‘absolutely crucial across the board’ (Gold, 2000: 92). Democracy came to Taiwan in the late 1980s, and has flourished ever since. This, plus the rise of voluntary associations, created a new politics of welfare.

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Taiwan introduced its first significant welfare measures in the 1950s with the establishment of social insurance schemes for military servicemen, government employees and some key workers. The overriding aim was clearly to cement the loyalty of key groups to the state. From the 1960s there was emphasis on the development of education, and nine years of free and compulsory education were established in 1968. There was also a drive to extend technical education which, as in South Korea, helped to increase the pool of highly skilled labour and so lowered its relative cost. This made viable a switch to more skillintensive production (Wade, 1995: 121). In 1980, a national scheme of public assistance was introduced, though benefits were at a very low level. In the early 1990s, a National Pension Programme became a key focus of debate. Over time, various schemes of health insurance were developed, but, since membership depended on employment, coverage was partial. In 1995, coverage for health care became effectively universal. Ku describes the scheme introduced then as ‘the most significant welfare effort of the Taiwanese state in the post war era’ (Ku, 1998a: 119).

Social policy processes One aspect of social policy in the East Asian tigers that is worth separating out and focusing on in some detail is the processes by which social policy has typically been made in recent decades. Each sectoral chapter addresses this issue, but as there are commonalities across all four sectors in all four societies, we provide an overview analysis here. Four features of social policies in the tigers are both notable and distinctive, at least in comparison with equivalent processes in the West. The first is the absence of competitive politics until the late 1980s. In the middle decades of the twentieth century, a period when these four societies dealt with legacies of war and colonialism and set themselves up for dynamic economic growth, they were dominated by very strong political leaders: figures like Lee Kuan Yew in Singapore, Park Chung Hee in South Korea and Chiang Kai-shek in Taiwan. South Korea and Taiwan were authoritarian until the late 1980s, when each experienced its transition to democracy. Singapore is formally democratic, though its democracy has always contained a series of procedural idiosyncracies that make it hard for competing forces to challenge the ruling PAP. The exception is Hong Kong, which arrived at an absence of competitive politics by a different route through remaining a British colony until the late 1990s. Some competitive politics developed in the 1980s, but they were focused almost exclusively on one issue: the looming 1997

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sovereignty transfer. Only once the handover had taken place, and the Asian financial crisis had generated severe budgetary pressures, did additional political spheres start to be contested on a reasonably systematic basis. In South Korea and Taiwan the shift was much more substantial, with democratization processes leading, in little more than a decade, to a loss of governing party control and a peaceful transition of power to opposition forces. However, for as long as largely uncompetitive politics persisted in each society, the outcome was that social policy was depoliticized to a considerable extent. In many ways, the extent of depoliticization is best registered in the enhanced social policy pressures and the reformist measures undertaken in South Korea and Taiwan in the past 15 years of increasingly contested political space (Cheng, 2001b). The second notable feature is in large part a consequence of the first: the dominance of bureaucratic policy making, and of powerful technocrats able to exercise extensive control over the policy process (Vogel, 1991). At the outset, we should note that such dominance and control have also been registered elsewhere. Even in the USA, widely held to be one of the most pluralistic societies on earth (Dahl, 1989), celebrated studies have pointed to the existence of a ‘power elite’ (Mills, 1956; Domhoff, 1990), of ‘iron triangles’ that mark out policy space ( John, 1998: 79–80), and of ‘policy advocacy coalitions’ that compete for control of policy domains (Sabatier and Jenkins-Smith, 1993). In Western societies in which the bureaucracy has traditionally been yet more powerful, such as for instance France, analyses of this kind are still more plentiful (Suleiman, 1974). However, the key points for our purposes are, first, that such analyses have always been contested, and, second, that they have never focused purely on the state bureaucracy. In the USA, the ‘iron triangle’ concept was described by Heclo as ‘not so much wrong as disastrously incomplete’, and replaced by him with a much looser network concept (Heclo, 1978: 88). In contrast to Sabatier, Kingdon argued that the American policy process is essentially fluid and open (Kingdon, 1995). The notion of elite dominance has thus never held complete sway in a country like the USA. Beyond that, the elites in question have rarely been located purely in the bureaucracy, but have instead been seen to encompass key figures in legislatures, interest groups, functional bodies and even wider civil society. Although, then, theories of bureaucratic power have been developed in Western contexts (Beetham, 1996: ch. 2), they have not established the overwhelming dominance of bureaucrats.

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In our four societies, by contrast, bureaucratic power is often held to be considerable to the point of being, on occasion, virtually uncontested. In the early 1980s, Lau wrote of the ‘secluded’ bureaucracy that governed Hong Kong in the colonial period by engaging in mutual self-adjustment with the wider Chinese society (Lau, 1982). Singapore has a system of paternalistic authoritarianism, in which highly paid and highly resourceful bureaucrats hold sway over a politically disengaged society (Rodan, 1996b). In South Korea and Taiwan, the sorts of points made about Japan by observers following in the footsteps of Johnson (1982) applied, at least until the late 1980s. Then democratization processes in both societies started to undermine bureaucratic power, and civil society began to play an important policy role. Nevertheless, the importance of bureaucrats in shaping social policy remained considerable (Joo, 1999b). In all four tigers, then, the social policy process, like policy processes in other sectors, has been dominated by bureaucratic elites. Thirdly, all four tigers have historically had strong economic and industrial policy making institutions, and comparatively weak social policy-making institutions. Again, the contrast with the West should not be exaggerated. The point often made by British social democrats in the 1960s, when economic growth was consistently lower than that registered in other developed nations, was that countries like France succeeded economically as a result of their powerful economic and industrial ministries and agencies (Shonfield, 1965). In subsequent years, some of the leading contributions to Western political economy analysed such agencies in great detail (Zysman, 1977; Hall, 1986). Nevertheless, the dominance of such bodies has rarely been as great as that of their East Asian counterparts. Sometimes drawing explicitly on the Japanese model ( Johnson, 1982), three of the four tigers developed very powerful economic and trade agencies. The exception was Hong Kong, where the philosophy of ‘positive non-interventionism’ espoused in the colonial era prevented it from taking such a step. In the other three societies, however, agencies were established and staffed from the outset with the brightest and the best. The main ones were the Economic Development Board in Singapore, the Economic Planning Board in South Korea (set up by President Park in 1961 after just two months in office), and the Council for Economic Planning and Development in Taiwan, though there were also others (Vogel, 1991). In social policy spheres no comparable agencies were created, though the Korean Development Institute and Taiwan’s Council for Labour Affairs were not entirely insignificant. The result was that while each society generated first-class expertise in the economic and

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industrial spheres, there was never such a critical mass of ability in social spheres. Finally, social policy processes in all four societies have always been skewed by anti-welfarist commitments which, while not unique to the region, have nevertheless been more pronounced than in, say, any of Esping-Andersen’s three worlds of welfare capitalism (Esping-Andersen, 1990; Holliday, 2000). Such commitments have been driven partly by the direct and indirect influence of neo-liberal ideas developed in the US, and partly by the fiscal crisis and seemingly parlous condition of Western welfare states at the key moment when the tigers were starting to be able to afford welfare state development (O’Connor, 1973). The result was that, as in Japan, they refrained from making the strong welfarist commitments characteristic of many Western societies.

Assessing similarity and difference Pulling this analysis together, we find obvious similarities and differences in the developmental trajectories of our four societies. All recorded rapid, dramatic and almost continuous economic growth between the 1960s and the late 1990s, making this their dominant and most striking characteristic. All followed broadly similar (though subtly different) development patterns, with a strong focus on export-oriented growth and a drive for technological upgrading of the labour force and of production. All were, as Chenery put it, ‘super-exporters’ (Chenery, 1988: 39), with exports growing at an average of around 25 per cent a year in the 1970s (Chenery, 1988: 68). All depended on maintaining their competitiveness in terms of price, value-added or product novelty. In all four societies, maintaining competitiveness was deemed to require what Deyo terms ‘the extreme political subordination and exclusion of workers’ (Deyo, 1989: 1). All four economies were fragile in the sense that even minor downturns in the world economy could have very nasty implications simply because they were so trade-dependent. As regards politics, until the late 1980s all four governments were largely undemocratic instances of an ‘administrative absorption of politics’, and depended on economic growth for legitimacy. As Haggard and Cheng put it, economic development became ‘a legitimating pillar of authoritarian consolidation’ (Haggard and Cheng, 1987: 104). All four societies had highly competent governments. Rowen sees ‘effective governance’ as arguably the most important factor in their development (Rowen, 1998: 342). Similarly, Root sees capacity for successful implementation of economic and social policies as ‘fundamental’ to the

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rise of industrial Asia (Root, 1998: 62–3). This competence was given added force by what Haggard describes as the ‘insulated’ nature of government, which liberated it from direct political and rent-seeking business pressures (Haggard, 1988: 261). Governments in our four societies were also liberated by the defeat of the political left (Haggard and Cheng, 1987: 110). They built constructive working relationships with business groups, integrating business into the policy process (Root, 1996: 148). At the same time, however, they kept business people at a distance so that, as Root puts it in his analysis of Hong Kong, ‘they [did] not capture the decision making system’ (Root, 1996: 59). All four governments had the information systems needed for economic planning, the capacity to achieve the aims they set themselves, and the ability to work constructively with the free market system with an appropriate mix of dirigisme and competition (Wade, 1995: 119). All were ‘plan rational’ (Henderson, 1993). All showed skill in the effective use of an educated workforce, and ‘the ability to shift from one level of development to another’ (Castells, 1992: 55). Examples are the reversal of heavy industry initiatives in Singapore and South Korea, and the steering of the economy to higher value-added production. All displayed skill not so much in picking economic winners as in ‘learning how to win’ (Castells, 1992: 51). Clearly, as we said at the outset, there were differences. Pempel accepts that there were common elements in the economic success of our four societies, but argues that each triumph ‘has been the result of a particular and discrete fusing of those factors into a specific national success story’ (Pempel, 1992: 94). Singapore, South Korea and Taiwan can reasonably be styled ‘developmental states’ (Leftwich, 1995: 405), with the state playing a key directive role in economic development through powerful planning institutions. These include the bodies already mentioned: the Economic Development Board in Singapore, the Economic Planning Board in South Korea, and the Council for Economic Planning and Development in Taiwan. In Hong Kong, the state has played a much less obvious role. This is a facilitative rather than a developmental state, having no comparable economic planning powerhouse. However, non-state actors often combined in ways that reflected the role of the developmental states found elsewhere (Henderson, 1993). Similarly, in Singapore, South Korea and Taiwan, state-owned enterprises played a significant economic role, particularly in the early stages of development. There were no such industries in Hong Kong. Singapore set out to attract multinational corporations, which have played a vital role in its economic development. South

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Korea and Taiwan adopted a much more controlled approach, with South Korea allowing national firms to develop and Taiwan limiting the role of foreign-owned corporations to particular export sectors. In Hong Kong there was total freedom of movement for foreign investment. In South Korea and Taiwan, manufacturing still plays a central role in the economy. Singapore and Hong Kong have become much more important as financial service centres. Our four societies have also benefited differentially from external help. Cumings argues that after the Second World War and the Korean War, South Korea and Taiwan became ‘semi-sovereign states, deeply penetrated by American military structures’ (cited in Arrighi, 1998: 71). Hong Kong and Singapore, still controlled by Britain or just emerging into independence, received no direct military assistance from the USA, and none of the economic benefits associated with it. Nevertheless, all four societies gained enormously from various types of inward investment. In the cases of Hong Kong, Singapore and Taiwan, considerable investment from the Chinese diaspora was of great significance. Looking at similarity and difference, it is impossible to reach a firm assessment. This is one of those situations in which the glass can be seen as either half full or half empty. Pempel argues that ‘geographical proximity may be the most easily identifiable feature that these diverse countries have in common’ (Pempel, 1992: 81), and as we have already said our societies are not even very close to each other on that count. It is easy, then, to take a sceptical, half-empty, view of their commonalities. Nevertheless, our belief is that in our four societies there is enough similarity at the level of contextual factors to justify detailed comparative analysis of their major social policy sectors. The next four chapters are devoted to that analysis.

3 Education Ka-ho Mok

One explanation for the economic success of the East Asian tigers points to the role their governments have played in education (Morris, 1996; Kwon, H. J., 1997; White and Goodman, 1998). In order to strengthen their competitiveness and to secure the economic development needed to establish and consolidate their legitimacy, these governments placed education in a very strategic position. The education systems of these ‘purposive governments’ were thus characterized by a centralized, standardized, top-down approach which created educational opportunities and raised the education level of citizens (Morris and Sweeting, 1995; Bray and Lee, 2001). All these tiger governments believe that only through a high level of education can they keep pace with rapid social and economic change. With the rise of the knowledge-based economy and the growing impact of globalization, people in these societies have begun to question whether such a centralized governance model adopted in the education sector can really sustain socio-economic development (Stromquist, 2002). The growing challenges and competition generated from processes of globalization, coupled with rapid technological innovation and knowledge reinvention, as well as the rise of the knowledge-based economy, have driven these East Asian societies to reform and reinvent their education systems ( Jarvis, 2000; Mok, 2001a; Cheng and Townsend, 2000). Comprehensive reviews of educational systems and fundamental education reforms have thus been introduced in the last decade, in the belief that radical educational restructuring is necessary to create a more autonomous, flexible and innovative education system and a labour force to compete in the international marketplace (Sharpe and Gopinathan, 2002). This chapter sets out to examine and compare similarities and differences in educational developments and governance in the four Asian 37

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tigers, with particular reference to educational regulation, provision and funding. The chapter is divided into five major sections. The first section is an overview of the basic orientation and history of education policy. The next three sections examine issues related to regulation, provision, and funding in education, followed by an assessment of the four systems and a comparison to synthesize their similarities and differences. The chapter concludes by examining the common trends and challenges facing the education sector in these tiger economies.

History and basic orientation A number of key factors have shaped the basic orientation of education policy in the Asian tigers. All were colonies of either Japan or Britain and obviously the education systems initially were affected by their colonial history. After gaining independence from colonial rule (before in the case of Hong Kong), these tiger governments gave education a very important role in social and economic development (Tilak, 2000; Bray, 1997). Second, despite the fact that these governments are primarily anti-welfarist in public discourse and public policy, they all conceive of education as an exception (Asher and Newman, 2001). Instead of being treated simply as a necessary public expenditure item, the tiger governments have put strong emphasis on developing education as an investment for providing their economies with a high quality labour force and well-educated professionals. These East Asian governments’ emphasis on education is often cited as one of the main reasons underlying their economic dynamism (World Bank, 1993; Appelbaum and Henderson, 1992; Morris, 1996). The third factor shaping educational developments in these societies is social-psychological, focusing more on those values and attitudes perceived to be prerequisites for development. Central to the legacy of Confucianism and Neo-Confucianism is an emphasis on education and cultural enhancement (Rozman, 1992; So and Chiu, 1995; Morris and Sweeting, 1995). The fourth factor is the significance attributed to education as an instrument, direct and indirect, of nation building in Singapore, South Korea and Taiwan or society building in Hong Kong. Education has helped to create a sense of belonging and nationhood and so has been important in political legitimation in these societies. It has also contributed to that legitimation through the economic opportunities it has offered and the contribution it has made to economic growth (Bray and Lee, 2001; Gopinathan, 2001). Fifth, education policies in these societies are increasingly shaped by external socioeconomic and sociopolitical changes. In response to

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the latest challenges posed by either globalization or the development of the knowledge-based economy, these tiger economies have started reforms and initiated measures like decentralizing managerial power from the state to the higher education level, reviewing curriculum and examination systems and revamping university admission mechanisms. All these reform measures suggest that these governments are keen to launch education reforms to enhance their competitiveness in regional and global markets (Goh, 1997; Green, 1997, 1999; Mok, 2001). Finally, educational developments and reforms have also been shaped by the impact of public sector reform. In recent years, notions like quality education, accountability, choice, competition, quality assurance, efficiency, effectiveness, value for money and responsiveness have become increasingly popular among education policy makers and such ideas have been translated into measures to reform the existing systems in response to changing beliefs and understandings (Weng, 2002; Mok and Welch, 2002; Kwak, 2002; Lim, 1998). Analysing, comparing and contrasting educational developments in the East Asian tigers from a historical perspective, three major shared patterns emerge. First, with the exception of Hong Kong, the former colonial administrations made no serious effort to develop education. When independent status was obtained in Singapore, Taiwan and South Korea, education began to be recognized as one of the important policy agendas (Tilak, 2000; Bray and Lee, 2001; Cheng and Townsend, 2000). Second, real change in the education sector came largely because of the role that education was believed to play in economic development, which encouraged governments in the tiger economies to allocate additional resources to expand schooling opportunities. The 1970s and 1980s can be seen as golden periods of rapid expansion in education, especially when free and/or compulsory education was introduced (Morris and Sweeting, 1995). After a period of rapid growth, the 1990s witnessed a tidal wave of education reform and comprehensive reviews of education systems were conducted in all four societies. Fundamental reforms can be characterized as the most central feature of educational developments in the East Asian tigers in the new century (Mok, 2002a; Cheng, 2002). Hong Kong The colonial government had almost no involvement in education until 1860. In 1854, the government was providing grants to only five schools which enrolled 150 students out of a child population of 8,800 (Tse, 1998). After the foundation of the People’s Republic of China in

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1949, and a flood of refugees from Mainland China, the government’s attitude towards education began to change. In response to the Report of the Education Commission published in 1963, an Education Department was set up to open government schools and to offer subsidized places in private schools. With rapid economic growth in the late 1960s and the early 1970s, the government realized the need for more educated manpower and six years free and compulsory education was established in 1971 (Tse, 1998). In the 1970s and 1980s, the government assumed an increasingly active role in educational provision and financing, with the period of free and compulsory education extending from six to nine years. Between 1984 and 1997, the government launched a series of wideranging reforms in early childhood education, primary, secondary and tertiary education, special education, student assessment methods, teacher education, the private school system and in funding systems (Tsang, 1998: 11). In 1997, when the Hong Kong Special Administrative Region (HKSAR) was established, Chief Executive Tung Chee-Hwa promised to increase public spending on education. A comprehensive review was launched in early 1999. The release of the reform proposals entitled Learning for Life, Learning through Life in September 2000 set out a blueprint for education reform. Four major areas were covered: academic structure, the curriculum, assessment mechanisms, and the interface between different education stages. Entering the twenty-first century, the HKSAR has placed education at the top of its political agenda. Fundamental reforms have been initiated not only in the school sector but also in the university sector (Cheng, 2002; Mok and Chan, 2002; Chan, 2002). Singapore Like Hong Kong, Singapore was a British colony and the colonial government paid little attention to education until the end of the Second World War. It was not until 1946 that substantial change came about when the government announced a Ten Year plan for free primary education (Tan, 1997). Since the foundation of the Republic of Singapore, the ruling People’s Action Party has held the firm belief that education is an agent for social change. The government strongly believes that education can serve the purposes of nation-building. National cohesiveness, racial harmony and meritocracy are the core themes for education in a multi-racial society (Quah, 2001). In 1966, the goal of universal primary education was accomplished. It was followed by a stage of qualitative consolidation, in which greater

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attention was paid to quality. The policy of bilingualism was introduced to ensure students’ proficiency in English as well as in their own mother tongue (Yip et al., 1997). In the late 1970s, the Singapore government began to refine the education system on the basis of improving quality. Identifying problems such as resource wastage, low literacy rates, ineffective bilingualism and variations in school performance, the government response was a radical restructuring of the education system into a system of ability-based streaming at both the primary and secondary levels. The government searched for viable ways to make its citizens more competitive and to stimulate economic growth. One major strategy was to raise the educational level of the population by the expansion of educational institutions, especially developing more learning opportunities in universities in order to give a competitive edge to the Singaporean economy. At the school level, the government began to diversify the school systems by establishing independent and autonomous schools, which would be flexible in staff deployment and salaries, finance, management, and the curriculum, while conforming to national education policies (Yip et al., 1997; Gopinathan and Ho, 2000; Tan, 2002). In the mid-1990s, the Singapore government proposed the notion of ‘Thinking Schools, Learning Nation’ to enhance the capacity of its citizens to learn and be more innovative and entrepreneurial (Goh, 1997). The Ministry of Education formulated a set of desired outcomes to serve as the aims and ultimate goals of education (MOES, 1998). At the same time, the government contributed more than $1 billion for a master plan to promote information technology in education. The school curriculum was cut by 30 percent to leave more room to develop creative and independent thinking. Following the trend of decentralization of school administration and management, a cluster system was introduced in 1997 to achieve greater efficiency in decision-making without involving the Ministry of Education in financial and staffing matters. In 1999, the government introduced the School Excellence Model, which forms a new self-appraisal system for schools to judge their own effectiveness (Gopinathan and Ho, 2000). In his Teachers’ Day Rally in 2001, Prime Minister Goh Chok Tong even spoke of allowing some private schools to be set up to encourage a more diverse and innovative schooling system (Goh, 2001). Universities also have to reform their admission system and curriculum. They are given more autonomy in making decisions regarding staff and salary matters, funding allocation and strategic development in exchange for a higher degree of financial accountability and market relevance and responsiveness.

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South Korea Many of the features of the contemporary education system in Korea go back to the Chosun dynasty (1312–1910) when one of the main purposes of education was to select a political and social elite to support the ruling class (Chung, 1999). In the late 1950s, the policy of free compulsory education was implemented in South Korea. The following decade witnessed a stage of quantitative expansion, symbolized by the universalization of secondary education and a rapid expansion in higher education. Systematic reform dates back to the 1970s when the aim was stated as being to produce self-directed and future-oriented Koreans. There was a scheme to make elementary and secondary education opportunities as wide as possible. There was a diversification of higher education institutions, including universities and junior colleges, to provide tertiary education. In the 1980s, with more emphasis on qualitative improvement and lifelong education, the Korean government set up a Commission for Education Reform to determine the pattern of change (Moon, 1998). Reform gained momentum when the South Korean government set up the Presidential Commission on Education Reform in February 1994 to submit reform proposals (MOEROK, 2000). In May 1995, the Presidential Commission submitted its proposal to develop a New Education System for ‘Edutopia’ or a utopia of education, to assure lifelong educational opportunities for every citizen. The five governing principles of the New Education System include equity, excellence, diversification, learner-oriented education, and autonomous school operation. In 1998, the Ministry of Education launched a campaign for a New School Culture with the aim of transforming the traditional school culture into a more flexible and liberal one (Kwak, 2001; MOEROK, 2000; Moon, 1998). Generally speaking, the latest developments in South Korea indicate a paradigm shift from supplier-oriented to learner/consumer-oriented education in the elementary school sector. Diversification, specialization, autonomy and open competition have become the central themes of higher education. Open to both local and foreign competition, universities have been striving hard to improve their quality (Moon, 1998). In higher education, the Ministry of Education in 1999 launched the ‘Brain Korea 21’ reform to foster world-class research to provide creative ideas and innovative technology, to promote competition among local universities and to strengthen their international competitiveness (MOEROK, 2000).

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Taiwan The contemporary educational system in Taiwan resembles the one established in mainland China in the 1920s, which itself was heavily influenced by the American system (Cheng, 1995). Educational development in Taiwan can be divided into two major periods: between 1945 and 1987, and from 1987 onwards. The education system in pre-1987 Taiwan was characterized by centralization under an authoritarian regime. Education was treated as a means to solidify national sentiment under the Kuomintang (Chinese Nationalist Party) regime and to meet the manpower needs of economic development (Weng, 2000). Since the late 1980s there has been a sharp turn from authoritarianism to pluralism, which shaped the development of education reform in the 1990s. In contrast to the top-down monopolistic control of school management, parents’ and teachers’ associations have been set up to share power in school decision making. Enactment of the University Law in 1993 provided a legal basis for these institutions to enjoy institutional autonomy and academic freedom. University heads were to be elected by faculty members. To assure more financial autonomy for public higher education institutions, the Ministry of Education set up a University Development Fund System to provide more flexibility to use revenues generated from tuition fees, university–industry cooperation, and research grants. In order to generate extra non-state funding, public universities have to carry out fund-raising activities and to compete for research grants with other institutions (Shan and Chang, 2000). As in the other three East Asian tigers, the Taiwanese government has published a number of documents on education reform over the past few years. The most important one, which focused on the overall development of education, is Towards an Educational Vision for the 21st Century (1995), which argued for the need to establish a lifelong learning society. In another document entitled Towards a Learning Society: the Promotion of Lifelong Education, released in 1998, the government called upon all stakeholders to share the responsibility of lifelong learning. In 2001, a White Paper on Higher Education was published setting out new principles for the sector (MOEROC, 2001a). After a period of rapid expansion of student numbers in the past few decades, educational development in the East Asian tigers has entered a phase of consolidation. In order to maintain high academic standards, these governments have conducted comprehensive reviews of their education systems and education reforms of various kinds have been initiated.

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Regulation The tiger governments have imposed considerable central control on the regulation of educational affairs in their societies since the 1950s. In recent years, however, they have begun to follow the global trends of decentralization and diversification in educational governance, as well as the pursuit of marketization to provide more choice for consumers and introduce competition between education institutions to improve the quality of education (Cheng and Townsend, 2000; Mok and Tan, 2003). Here, regulation is broadly understood as the legal, political and policy framework within which education services are delivered. As all four societies have adopted a centralized system of regulating education service delivery, they all have an education bureau, department, ministry or special advisory committees to oversee policy development and policy implementation. Professional associations or other educational bodies only perform advisory functions rather than being part of the formal regulatory framework. Hong Kong Having long adopted a centralized governance model, the government has set up both executive and advisory bodies for the regulation of education in Hong Kong. On the one hand, there are executive bodies like the Bureau of Education and Manpower and the Education Department. On the other, there are various advisory bodies like the Education Commission, the Board of Education for school education, the Vocational Training Council for technical education and vocational training, and the University Grants Committee (UGC) for higher education. In the whole governance process, public consultation is an essential means to win the government legitimacy and improve communication with its citizens (Cheng, 1992). Education policy-making power is still retained in the hands of the government with the dominant role played by the Bureau of Education and Manpower and the Education Commission. In the past, the underlying assumption of policy making was that progress would be best achieved by top-down policy making without much consideration for the uniqueness of different education institutions (Cheng, 2000). A number of controversial policies such as the school management initiative, the target-oriented curriculum and the medium of instruction were criticized as not giving serious consideration to the concerns of school management, teachers and parents. Two major areas relating to regulation in education are how the school curriculum is developed and how the performance of schools is

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best assessed. For curriculum design, the Curriculum Development Institute (CDI) was set up in May 1992. The major role of the CDI is to advise the HKSAR Government through the Director of the Education Department on all matters relating to school curriculum development and to give support to schools in the implementation of curriculum changes. Analysing the relationship between the CDI and the Education Department, it is clear that the government regulates curriculum design in Hong Kong by steering at a distance with the CDI as the key steering/ regulating mechanism. Another means whereby government regulates schools in Hong Kong is quality assurance inspections. In the 2000–01 academic year, quality assurance inspections were conducted in 50 primary and secondary schools while 20 kindergartens were also selected for inspection. When schools are inspected, four major domains are under scrutiny: management and organization, learning and teaching, support for pupils and school ethos, and attainment and achievement. In each domain, there are elaborate performance indicators. During quality assurance inspections, review panels can generate evidence from observation of lessons and other school activities, discussion with members of the school community, scrutiny of samples of students’ work and conducting surveys of school staff, students and parents. The implementation of quality assurance inspection across the whole school sector suggests that while the government of Hong Kong closely monitors and regulates school education even more autonomy has been allowed to individual schools with decentralization and school-based management (Leung, 2001). In addition, educational regulation is clearly demonstrated in teacher training and the monitoring of the teaching profession. In Hong Kong, while all pre-service training courses are now provided by the publiclyfunded Hong Kong Institute of Education for primary and secondary school teachers at sub-degree and degree levels, the government and other local higher education institutions also provide in-service professional development programmes for teacher training. Similar to other higher education institutions, the quality of teacher training is closely monitored by both internal quality assurance mechanisms and external reviews. In order to maintain a high language standard, the government also sets language proficiency requirements for teachers of English and Mandarin Chinese, and language teachers have to sit for language benchmark examinations (HKSAR Government, 2002: 156–7). The Education Ordinance also stipulates that school teachers need to apply for registration as teachers through the Education Department.

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Another aspect of regulation is the role that the Education Department plays in school building. The Education Department in HKSAR oversees the allocation of school sites for different kinds of schools at all levels. The design of school buildings is also controlled by the government. The School Building Design Committee, which comprises practising architects and representatives of the school sector, was established under the Education Department to explore innovations in school building design. Since 1994, with the launch of a school improvement programme, improvement works for 367 schools have been undertaken. The aim is to complete the programme covering about 900 schools by the 2004–05 school year (HKSAR Government, 2002: 149–50). Moreover, student admission policies are also centrally directed by the government. Admission to Primary 1 in aided and government schools is through a centralized system, which aims to avoid intense competition among children for entry to popular schools. At the end of Primary 6, all pupils in schools participating in the Secondary School Places Allocation System are provided with free Secondary 1 places. The allocation is based on parental choice and internal school assessments. Starting from the 2002–03 school year, all Secondary 3 students from public schools (government schools and aided schools) are guaranteed the opportunity to receive subsidized Secondary 4 education or vocational training (HKSAR Government, 2002: 148–9). Although the university sector traditionally expects to be immune from the influence of government, there are examples demonstrating that the government has attempted to intervene in university affairs. The most noteworthy case is the Chinese University of Hong Kong, which was forced to switch from its original four-year to three-year degree programmes following a recommendation made by the Education Commission in 1988. Although there is the UGC to act as a buffer between the government and higher education institutions, this case demonstrates that the government can bypass the Committee to interfere in university matters without obtaining consent from university management, academics or students (Cheng, 2000; Tse, 2002). Quality assurance exercises initiated by the UGC are designed to monitor teaching quality, academic standards, research performance and governance in universities. Academics generally feel that the university sector is under public scrutiny and stringent regulation (Mok and Lee, 2002). Until recently, the government worked to decentralize more decisionmaking power to individual schools in financial and personnel matters

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on the basis of the school-based management policy. The government has changed not by handing over control but by steering from a distance by empowering institutional leaders and giving management a higher degree of autonomy and responsibility while setting up a range of performance measurement mechanisms. Strategic development planning and performance appraisal have become the norm for the education sector amidst the global trend of public sector reform (Mok, 2001a; Mok and Lee, 2000). Singapore Since achieving independence in the mid-1960s, the Singapore government has played a decisive role, dominating education developments through top-down policy making. The core body responsible for education policy making is the Ministry of Education, via the Prime Minister’s Office, in consultation with parliament. As an example of the top-down approach, the implementation of streaming according to student ability was adopted centrally to reduce an alleged wastage of resources in education. Concern about maximizing value for money through action by central government is a feature of such an economically driven developmental state (Low, 1998). As in Hong Kong, curriculum design is centrally regulated, with the Ministry taking primary responsibility in designing, reviewing and revising syllabuses and monitoring their implementation. It is also the Ministry’s function to provide assistance in the teaching of core subjects, provide training in the effective use of instructional materials, disseminate information regarding teaching strategies and act as change agent and facilitator of effective and innovative ideas. In addition, the Ministry takes charge of special curriculum programmes such as international science, promoting the integration of information technology, thinking skills and national education into the curriculum. Furthermore, the Ministry inspects textbooks and supplementary materials, develops and monitors media resource libraries and reading programmes. Judging from the responsibilities of the Ministry in curriculum design and textbook or media resource monitoring, we can argue that the Singapore government stringently regulates school education. Like Hong Kong, the Singapore government has adopted a selfassessment model for schools, adapted from the various quality models used by business organizations. The School Excellence Model (SEM) was developed and modified from the European Foundation of Quality Management to set out criteria for assessing school performance. The

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SEM has a very comprehensive assessment framework, examining areas like leadership, staff management, strategic planning and resource use (MOES, 2002a). In order to encourage schools to engage in deeper reflection about their work, SEM allows individual schools to conduct their own self-assessment every five years. Once schools are ready for validation, review teams visit the schools and gather evidence. Even though the SEM is meant to be a self-appraisal exercise, the Singapore government can still make schools perform according to the standards set by the Singapore Quality Board. Seen in this light, quality assurance systems introduced in the school system in Singapore are a key element in the regulatory framework (Mok, 2002a). However, recently there has been an emerging trend to devolve more autonomy to individual schools to handle financial, personnel and educational matters. Allowing more autonomy for well-established and well-performing schools is a means to greater self-governance. Moreover, the introduction of the school excellence model was based on the assumption that more autonomy is given in exchange for more transparent public accountability in terms of both performance and resource utilization. As a consequence, new internal and external assessment mechanisms have been installed (Tan, 2002). Another means that the Singapore government adopts in regulating education quality is to oversee teacher training. In Singapore, the National Institute of Education (NIE), an institute of the Nanyang Technological University, provides teacher education training courses and postgraduate programmes. After graduation, students are recruited by the Ministry of Education and teachers who are appointed by the governments have to serve as General Education Officer for the government (MOES, 2002b). In terms of school building and development projects, the Ministry initiated a Programme for Rebuilding and Improving Existing Schools (PRIME) in 1999, in which about 290 schools will be upgraded or rebuilt by 2005. Moreover, schools constructed before 1997 will be upgraded or rebuilt. PRIME is to be achieved through three measures, namely on-site rebuilding and upgrading, relocation and mergers (MOES, 2002c). Another quality assurance mechanism in Singapore is related to student admission policies. At the end of Primary 4, pupils are assessed in English, the mother tongue and mathematics to determine a stream appropriate to their abilities for Primary 5 and 6. At the end of Primary 6, students need to take the Primary School Leaving Examination, by which pupils are placed in secondary school courses according to their learning pace and aptitude. There is a division between the Special,

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Express, and Normal courses for secondary education. University admission depends on students’ examination results, Scholastic Assessment Test scores and performance in co-curricular activities (Ministry of Information, Communications and The Arts, Singapore, 2002: 223–34). As for the university sector, there is a history of state intervention in university affairs. On two occasions in the 1960s and the 1980s cabinet members were appointed as university heads in Singapore. Staff associations were banned in universities. There was pressure to make teaching and research more relevant to economic needs. A performance-based salary system and competition for research grants have been introduced with more stringent quality assurance and performance evaluation mechanisms. The government can therefore steer universities from a distance by different means. The government intends to rely increasingly on market forces and mechanisms to encourage competition between local and world-class institutions from overseas to improve the quality of education (Lee and Gopinathan, 2001; Mok and Tan, 2003). South Korea Like Singapore and Hong Kong, the South Korean government adopted a centralized model of educational governance. The Ministry of Education and Human Resources Development (formerly the Ministry of Education) is held responsible for the formulation and implementation of education policies, covering basic and tertiary education, textbook approvals, administrative and financial support to education institutions, universities and local educational agencies, teacher training and lifelong education (Adams and Gottlieb, 1993). Kim argues that ‘centralized administration, far from playing a service role, dominates the main sectors of education . . . The school has been in a subservient position, serving its master, the administrators’ (Kim, 2000: 89). Similarly, the OECD stresses the ‘highly regulated and centralized governing system’ in education in Korea (OECD, 2000a: 57). One indicator that clearly shows South Korea’s highly regulated and centralized model is the way that curriculum design and textbooks are organized. The Ministry is responsible for developing a national curriculum. Education Law 155 prescribes the curriculum for each school level and the criteria for the development of textbooks and instructional materials. Despite flexibility being allowed to individual schools, the Ministry sets out very clear guidelines to govern curriculum design; while textbooks and teachers’ manuals are developed within the framework of the national curriculum. Only three types of textbooks are allowed to be published in South Korea and all are tightly controlled.

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Centralized governance is clearly revealed in teacher training in South Korea since teacher education is mainly provided by universities of education for elementary school teachers, by colleges or departments of education at universities for secondary school teachers, and by colleges and junior colleges for kindergarten teachers. The establishment of teacher training institutes is authorized by the Ministry as well as the superintendents of regional offices of the Ministry (MOEROK, 2000: 104–11). The Ministry closely monitors academic standards of teacher training in South Korea. Another means to regulate education is related to student admissions. In South Korea, elementary education is free and compulsory. Children automatically advance to the next grade each year. Since 1969, there has been no limitation on entrance to middle school and pupils have been assigned to schools based on the principle of vicinity. Middle school graduates may enter high schools subject to the grades attained in a selection examination. With the education reform of 31 May 1995, general high schools have selected students through a multiple application lottery system in each school district since 1996. As for university education, in April 1994, a new entrance examination system was put in force. The system made obligatory the 40 per cent inclusion of the high school achievement scores and allowed the college to decide the recognition ratio or selection between the scholastic achievement test and the college’s own test (MOEROK, 2000: 70). With power concentrated in the hands of the central administration, local initiatives and autonomy have been weakened, and individual institutions have lacked the enthusiasm for a creative approach to their operations. Under strict orders and directives, teachers and academics have had little autonomy while participation of parents in school education is very limited. Similarly, students have little opportunity to develop their own interests, talents or creativity (Kim, 2000; Mok, 2001b). In spite of its remarkable achievements in education, the South Korean government has realized that globalization has rendered the conventional centralized governance model inappropriate. The past decade has witnessed, therefore, a trend to decentralization in relation to budget planning and administration (Kwak, 2002). In order to make schools more creative and innovative, the South Korean government has initiated a reform project ‘Vision for Education Beyond 2002: Creating a New School Culture’. Central to this project is a move away from the centralized model to the mobilization of individual schools and local communities to initiate reforms. Five major reform areas are proposed to promote a New School Culture: creating an

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autonomous school community, implementing a student-centred curriculum, cherishing the value of students’ life experiences, diversifying the methods of evaluating students and emphasizing the professionalization of teachers (MOEROK, 2000). This reform proposal indicates that the South Korean government has tried to move away from the centralized to a more decentralized approach. As for higher education, universities and colleges have been encouraged to formulate their own plans for diversification and specialization with management and financial support provided by the government. The government also eased the criteria for founding private higher education institutions. Before the reform, the MOEROK officially controlled all aspects of higher education management as well as the number of student enrollments. That situation has changed since 1994 when the government granted decision-making power on student quotas to individual institutions. Individual institutions are required to undertake an annual self-evaluation and a more comprehensive evaluation of research and teaching every three to four years. Government funding is now closely linked to research performance. Higher education institutions are therefore motivated to engage in more research-oriented activities to secure government funding (Kwak, 2000). Taiwan Education development in Taiwan is closely linked to sociopolitical change. Before the mid-1980s, the Taiwanese lived under an authoritarian regime and education was under rigid government control (Tsai, 1996). In order to preserve the cultural and national identity rooted in mainland China, the ruling Kuomintang adopted a centralist model of governance (Knowles, 1978; Husen and Postlethwaite, 1985). Education, being a very important means of social and ideological control, was tightly organized (Law, 1998). Under this governance model, the Ministry was responsible for the appointment of school principals and university presidents, the allocation of finance, the design of curricula, the adoption of textbooks and the procedures for student admission and graduation, tuition fees, and even examination and certification standards. Academic publications were assessed and screened by the Ministry, leaving very little room for intellectual freedom for teachers and academics (Morris, 1996; Law, 1996). Even after Taiwan was politically and socially liberated in the late 1980s, the Ministry still compiled, published, and provided textbooks and teaching materials for elementary and secondary schools. Despite the fact that more autonomy is now enjoyed by teachers and academics,

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any proposed changes in teaching materials must go through the screening process of the Ministry and the National Institute for Compilation and Translation (MOEROC, 2002). As in the other three East Asian tigers, the government plays a significant role in monitoring academic standards and the administrative efficiency of schools and universities. For school systems, education supervision is divided into two main aspects, namely administrative review and education review. Schools are divided into different districts and in each district inspectors are appointed to review performance (MOEROC, 2002). In recent years, the Ministry has started a quality assurance exercise to monitor academic standards, teaching quality and research performance in the university sector. Putting education inspection at school level and the university quality assurance movement together, the state has imposed a systematic regulatory framework on educational institutions. The sociopolitical and socioeconomic changes that have taken place since the revocation of Martial Law in 1987 have led to significant changes in the education sector. With moves towards democratization, the state has begun to reduce its control over educational affairs. The notion of songbang or ‘deregulation’ was introduced in the late 1980s in order to resolve problems resulting from over-centralization in the pre-reform period (Chu and Tai, 1996). Since then schools and higher education institutions in Taiwan have experienced a change in governance from a centralized to a more market-oriented model (Mok, 2002b). With the introduction of reforms in the education sector, coupled with a far more liberal sociopolitical environment, Taiwan’s education system has experienced processes of diversification in provision and financing and the non-state sector, especially the private sector, has become a significant actor (Law, 2002; Weng, 2002; Mok, 2002b). Before the lifting of Martial Law, the development of private schools, colleges and universities was stagnant since education provision was virtually monopolized by the public sector. There is now a consensus between the government and education practitioners that private schools should supplement state provision. Despite the fact that the Ministry remains the key regulator in education, the level and extent of state control has fallen significantly. Public opinion in Taiwan believes it is necessary to create a more favourable environment for interest groups and organizations to run private schools by providing public subsidies, improving teaching and learning facilities, adjusting tuition fees levied by private schools, and encouraging social

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donations for private schooling (Weng, 2000). On the other hand, the ideas of school-based management and campus autonomy have been promoted among all schools to enable different stakeholders, including headmasters, teachers and parents, to be involved in school administration and management. It is in the context of the ‘deregulation of education’ (jiaoyu songbang) and decentralization of power that school managerial efficiency has been emphasized with the shift towards schoolbased management (National Institute of Educational Resources and Research, 1999, 2000). In addition, the Law of Teacher Training enacted in 1994 stipulates the importance of teacher training. Teacher training courses are offered by normal universities (universities for teacher training) and universities which have departments or colleges for teacher training (for secondary school teachers) and nine colleges of education (for kindergarten and primary school teachers). In order to assure academic quality, the government has paid more attention in recent years to strengthening quality assurance and evaluation for teacher training institutions by means of external evaluation and peer evaluation by a single national accreditation body for teacher training. After graduation, teachers have to apply for registration through the Ministry to become certified teachers (National Institute of Educational Resources and Research, 2000). With the rapid growth of private schools and universities, the government has therefore formulated a set of rules and regulations to control development. More recently, the government has developed a multi-route promotion programme for senior high schools. In 2001, the Joint Public Senior High School Entrance Examinations were eliminated, allowing junior high graduates to enter senior high schools through assignment, application, or selection by recommendation, provided that they passed the Basic Achievement Test for Junior High Students. Meanwhile, the Joint University Entrance Examination, which had been in use for 48 years, was replaced by a new system that requires students to pass the general Scholastic Attainment Test for College-Bound Seniors and they apply individually to the institutions they wish to join (Government Information Office, Republic of China, 2002: 302–3). As in schools, the higher education sector has been experiencing a process of deregulation. The revision of the University Law in 1994 reduced the control of central government over higher education institutions. While the law provides legal guidelines for the restructuring of the university sector in Taiwan, decision-making power in relation to institutional structure, finance and curriculum has been devolved downward to

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individual institutions. Tai argues that Taiwanese universities are moving from a state-control model to a state-supervised model (Tai, 2000: 112). While universities enjoy more autonomy in various aspects of institutional management, the concept of professorial university governance (jiaoshou zhixiao) has become a fad in the academic profession in Taiwan. State regulation has also been replaced by market competition designed to improve the quality of education. A performance-based staff remuneration and reward system has been adopted. Public and private universities have to compete for research grants. The introduction of market forces and mechanisms in higher education can be understood as devolution not only of decision-making power but also of responsibility for universities to improve their ability to compete in attracting resources derived from student enrollment and research grants (Mok, 2002b; Law, 1998, 2002). Putting the four tigers’ education regulatory frameworks into perspective, we can argue that they have gone through a process of centralization in educational regulation. With the adoption of a centralized model, the education systems have been shaped by central government while other professional associations or educational bodies perform an advisory role rather than exercising regulatory functions. Despite the growing trend to decentralization and marketization in recent years, these governments still remain the decisive regulatory force in education, while other non-state bodies only perform advisory functions. Seen in this light, the state still orchestrates educational policy developments, even though the role of direct service regulator and controller may have declined in recent decades (Mok, 2002a).

Provision Despite the fact that all four East Asian tigers have been well aware of the importance of education for social and economic development, the pattern of educational provision varies in these societies. Comparing and contrasting educational provision, the major differences relate to the roles that the public and private sectors play. While the majority of schools in Hong Kong and Singapore are either run by government or financially aided by government, there is a clearer private–public mix in Korea and Taiwan. This section reviews the pattern of educational provision in the tigers. Hong Kong There are four major types of school in Hong Kong: government schools, aided or subsidized schools, schools in the direct subsidy

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scheme and private schools. Despite the government’s large expenditure on education, only a small proportion of schools in Hong Kong are actually government schools. In 2001, there were 41 government primary schools and 37 government secondary schools, constituting only 5.63 per cent and 9.14 per cent of the total public primary and secondary school sectors respectively (Census and Statistics Department, Hong Kong, 2001a: 244). In 2000, however, 89 per cent of primary schools were either run or subsidized by the government, while the genuinely private ones only constituted 11 per cent. At the secondary level, 77 per cent were effectively public schools (either government schools or aided schools), and 23 per cent were privately owned. Nonetheless, one point must be noted. Aided schools and schools under the direct subsidy scheme are subsidized or primarily financed by government, while being given more autonomy in running their affairs. Seen in this light, aided schools in all aspects but actual ownership are effectively government schools since the government provides almost all the funds and controls who they admit, what they teach, and what students have to do to graduate (Post, 1996). At primary and secondary levels, the genuinely private school sector is relatively small. The only exception is kindergartens, all of which are privately owned. The government has recently encouraged some existing subsidized schools to join the quasi-private school scheme, known as the direct subsidy scheme, by which schools are granted more autonomy regarding student admission, curriculum design and tuition fees on top of public subsidies for each student enrolled. In fact, the number of such schools remains small, capped at no more than 40 for the academic years 2001–03 (Education Department, Hong Kong, 2002). In terms of actual services offered by government and subsidized schools in Hong Kong, all share a similar curriculum issued by the Education Department and students have to sit for public examination or assessment so the syllabus is the same. What really differs among schools could be the way that the principals and teachers present the teaching materials. Since a school-based management model was adopted by the Education Department, individual schools can choose their own ways to run classes. Some may adopt a more creative and active way in teaching while others may still maintain the traditional form of education delivery (Adamson and Li, 1999; Leung, 2001). When comparing government and subsidized schools with privately run schools, what really differentiates them is that the latter have far more flexibility and autonomy in curriculum design, less pressure from examinations and varied ways of governance. The private school sector in

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Hong Kong comprises a growing number of international schools. This increase indicates that these schools no longer only serve various foreign populations but increasingly serve the local population, especially when parents are not happy with the local public school system. They believe the international school sector can make their children become more active learners (Yamato and Bray, 2002). As regards university education, there are not yet any private universities and all eight higher education institutions are funded by the government through the UGC (Mok, 2001). This situation may change as the Education Commission suggested in its education reform proposals that private universities should be encouraged to produce a more diversified system of higher education to allow students more choice. There has been a rapid development of associate degree programmes by community colleges, which are not supported financially by the government. A growth of private higher education, both associate and degree programmes, can be expected in the coming ten years with a long-term goal of achieving a 60 per cent student enrollment rate in higher education (Tung, 2001; Mok and Lo, 2002). Singapore As in Hong Kong, the state has long dominated the provision of education. There are four major types of school in Singapore: government schools, government-aided schools, independent schools and autonomous schools. Nonetheless, it is difficult to differentiate between them, particularly in terms of educational financing, since they are all primarily funded by the government. The overwhelming dominance of the state can be explained by the belief that education needs to be kept in the hands of the state to ensure that educational institutions conform to national policies for socioeconomic development and nation building. This is especially important in an island-state comprised of four racial groups. Although independent schools now enjoy greater autonomy in decision making, they are still required to conform to national education policies designed to serve political, social and economic needs (Quah, 2001; Gopinathan, 2001). What really differentiates schools of various types in Singapore is the extent of autonomy exercised by principals at the school level. In independent and autonomous schools, they are allowed more flexibility and autonomy in running their schools under the guidelines of the Ministry. Despite the fact that the Ministry has set out clear requirements for the curriculum, independent and autonomous schools can enjoy autonomy in student enrollments and the number of teachers

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employed since they are given additional resources. Given abundant resources, students in these independent and autonomous schools enjoy not only more and better facilities, but also a more rounded education especially when these schools have more resources to engage students in different out-of-class activities. As a consequence, students from ordinary neighbourhood schools may find themselves in a less advantageous position since their schools are less competitive in academic results and school facilities and activities when compared to autonomous and independent schools (Tan, 1998, 2002). Similarly, the university sector is also state-dominated with originally two state universities, the National University of Singapore and Nanyang Technological University. A new ‘private’ university, the Singapore Management University, opened in August 2000. It is private in the sense that the university administrators enjoy more autonomy in financial, personnel and curriculum matters. With substantial physical capital support in terms of land and campus building, the university is a joint venture co-managed with the Wharton School of Business of the University of Pennsylvania in the United States. It is essentially a publicly-funded privately-run university. Most recently, with the invitation from the Singapore Economic Development Board to world-class overseas universities to run their offshore campuses in Singapore, an internal competitive market of public, ‘private’ and overseas institutions has been formed (Mok and Lee, 2001; Lee and Gopinathan, 2002). South Korea Unlike Hong Kong and Singapore, the private sector in educational provision has played a significant role in South Korea. Despite the fact that the majority of citizens in South Korea go to public primary, junior and senior secondary schools, this pattern is reversed later on since in the higher education sector private institutions outnumber public or national ones (Chung, 1999; Park, 2000). Statistics show that the state or the public sector dominates the provision of elementary and middle school education. For instance, 99 per cent of students at primary level, 75 per cent at junior high level, and 84 per cent at senior high level attended public schools in 1999 (KEDI, 2000). The extremely large public sector in elementary school education is a result of the policy of free and compulsory education in South Korea. The student enrollment rate for elementary schools has soared to 99.9 per cent. All children are provided with elementary education, with the state dominating provision (MOEROK, 2001).

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A central goal is to promote whole-person development. Since primary and secondary schools are state dominated, the Ministry can actually shape curriculum design. Considering education to be part of the nation building project, the Ministry keeps the core values of traditional culture and Western science and technology in the school curriculum. Rationality in problem solving and decision making, scientific method in new discovery and efficiency in management are preferred learning values. In actual educational delivery, scientific knowledge and technology occupy a central place in primary education, while more than 30 per cent of instructional hours are allocated to it in secondary education. More recently, importance is attached to skills efficiency and work knowledge, training students to be adaptive to changes in the globalizing world, nurturing students with entrepreneurial ability and preparing them to be more responsive to external changes (Kwak, 2002). In contrast, only 10 per cent of students at the junior college and 17 per cent at the university and college levels attend public educational institutions, while the majority of students attend privately-run high schools (KEDI, 2000). Such figures suggest that the higher the educational level, the greater the number of privately-run education institutions. In higher education, for instance, the publicly-run and publicly-funded institutions constitute a small number concentrating on teacher training and professional development. In order to create more higher education opportunities, the government has allowed the private sector to engage in educational provision rather than expanding the number of public institutions. The rapid growth of private colleges and universities has shifted the financial burden from the government to the private sector (Park, 2000). Taiwan As in South Korea, the state dominates the provision of elementary and junior high school education in Taiwan. As in the other Asian tigers, the Ministry sets out a very clear framework for school governance. In terms of actual delivery, individual schools may exercise a degree of autonomy and flexibility. All students in Taiwan have to study the same curriculum outlined by the Ministry and they have to sit for public examinations before graduation. Under the Nine-Year-Coherent Curriculum, schools have to develop students’ basic competence, and they are now adopting an integrative school-based curriculum. With more autonomy under the school-based management model, individual schools may exercise discretion in developing curricula (Weng, 2002). But since the majority of schools are funded by the government, there are not significant differences between them, except that

Ka-ho Mok 59

individual schools may choose varied teaching strategies or different emphases to achieve their missions or to meet the needs of their students (Doong, 2002). The private sector plays a more significant role in senior high school and university education. As for vocational schools, the number of private institutions exceeds the number of public ones. Even though the government enacted the Private School Law in 1998 to promote private education, the number of private elementary and junior high schools has remained stable. The dominance of the private sector is more obvious in higher education, which is comprised of junior colleges (zhuanke xuexiao), colleges (duli xueyuan) and universities. The private sector had already assumed a very significant role in educational provision at the junior college and college levels as early as the 1960s. Between 1965 and 1970, there was a rapid growth in the number of private junior colleges from 20 to 50. The growth was at a slower rate thereafter, but the number increased rapidly in the 1990s. It is noticeable that the number of private colleges jumped from 23 to 36 between 1998 and 1999. The rapid expansion can be explained by the upgrading of a number of junior colleges to the status of colleges, which meant that there was a sudden drop in the number of private junior colleges in 1999. Moreover, there has been a growth of both public and private universities in recent years. While the total number of universities grew rapidly from 24 to 44 between 1996 and 1999, the growth of private universities grew from 8 to 23. In 1999 the number of private universities for the first time exceeded that of public universities. The rapid expansion of privately-run higher education institutions was an important development, in that higher education is no longer monopolized by the state. Well aware that the government alone cannot afford the necessary expenditure on higher education without the involvement of the private sector, the government has encouraged private higher education. In 1999, 64 per cent of institutions, including junior colleges, colleges and universities, were privately run (MOEROC, 2002; Weng, 2002; Tai, 2001; Mok and Lo, 2002). Comparing and contrasting educational provision in the four tigers, Hong Kong and Singapore, the two city-states, can be grouped into one category characterized by strong state dominance with a tiny private sector. In contrast, there is a clearer public–private mix in South Korea and Taiwan, where the private sector plays a greater role particularly in senior and tertiary education (Table 3.1). With increasing demands for learning opportunities, the state alone cannot sustain the cost of rapid educational expansion, and non-state actors and the private market are becoming more active in educational provision. Taiwan and South

60 Welfare Capitalism in East Asia Table 3.1

Education provision in the four East Asian tigers, 2000 Primary

Hong Kong Singapore South Korea Taiwan

Secondary

Public

Private

Public

(%) 89.2 100 98.6 99.0

(%) 9.56 0 1.4 1.0

(%) 77.1 100 65.7e 86.6h

Tertiary

Private

Public

(%) 22.9 0 34.3e 13.4h

(%) 90.9a 85.7c 16.1f 35.3i

Private (%) 9.1b 14.29d 83.9g 64.7i

Notes: a 8 out of 11 degree-awarding higher education institutions are funded through the University Grants Committee in Hong Kong. Hong Kong Academic for Performing Arts is funded by the government whilst the Open University of Hong Kong is operated on a selffinancing basis. b Hong Kong Shue Yan College is the only private degree-awarding institution in Hong Kong. c Includes polytechnics and universities. d The percentage indicates that Singapore Management University was set up as a ‘private’ university in 2000. e Includes middle schools, academic high schools and vocational high schools. f Includes junior colleges, universities of education, colleges and universities. g Includes junior colleges, colleges and universities. h Includes junior high schools and senior high schools. i Includes junior colleges, colleges and universities. Sources: Census and Statistics Department, Hong Kong (2001a: 244); MOES (2001: 5); MOEROK (2001: 12); MOEROC (2001b: 6–7).

Korea have also been significantly influenced by the US, where the private sector is a key player.

Funding The four East Asian tigers have devoted a considerable amount of public expenditure to education. Total public expenditure on education now ranges between 3.5 and 4.5 per cent of GDP (Table 3.2). Although the GDP ratio in the four East Asian tigers is relatively low when compared with Western countries, education is one of the most important and high-spending policy areas. Public expenditure on education is about 20 per cent of the total budget in the four tigers. The state is still the dominant funder of education in these societies. Hong Kong The Hong Kong government has long been the major provider of funds for education. Education is the largest public policy area in terms of public expenditure. In 2000–01, approved public recurrent and total spending on education was 23 per cent of the government’s recurrent

Ka-ho Mok 61 Table 3.2 Public expenditure on education as a percentage of GDP in the four East Asian tigers, 1998–2001

Hong Kong Singapore South Korea Taiwan

1998–1999

1999–2000

2000–2001

3.8 N/A N/A 4.9

4.2 N/A 4.3 4.9

4.1 3.6 N/A 4.1

Sources: HKSAR Government (2001: 506); Goh (2001); MOEROK (2000: 48–9); MOEROC (2001c: 48).

expenditure, and 22 per cent of total public expenditure (HKSAR Government, 2002: 150; Census and Statistics Department, Hong Kong, 2002a: 18). While primary and secondary education account for more than half of the education budget, the ratio for tertiary education is above 30 per cent, even though it has declined since 1998–99 when the government decided to cut back the budget for tertiary education by 10 per cent over the triennium 1998–2001 (UGC, 2001). From 1996 to 2001, public expenditure on education increased by 53 per cent in real terms (Census and Statistics Department, Hong Kong, 2002a: 18). In recent years, Chief Executive Tung Chee Hwa has promised to continue pumping public money into the education sector. However, the increase of investment in education does not necessarily mean that the government will bear the sole responsibility in the longer term. Educational institutions are expected to search for non-government sources of revenue such as tuition fees, social donations, and partnerships with business. Performance-based funding mechanisms have been installed in the university sector to replace the old funding method based on the number of students enrolled. Market mechanisms have been introduced to encourage intra- and inter-institutional competition for performance-linked grants and thus allow more choice for students. Although recurrent public expenditure on primary and secondary schools has been increasing continuously despite economic depression and budget deficits, the eight publicly funded higher education institutions have suffered a decline in their recurrent grants over the past three years (Mok and Chan, 2002). Even in the midst of economic downturn since 1997, the government has maintained a steady growth in educational expenditure. Although other sectors such as the market, employers, NGOs, family and individuals have begun to play an increasing role, the government is still the most significant source of funding (Education Department, Hong Kong, 2001).

62 Welfare Capitalism in East Asia

Singapore As in Hong Kong, the majority of schools and higher education institutions receive funding from the government. Despite the fact that there are different types of schools in Singapore, all of them are dependent upon state financial support. Government-aided schools and junior colleges are given financial aid of up to 90 per cent of the cost for development projects. Substantial grants are also made for technical training and tertiary education. The government subsidizes between 75 and 84 per cent of the cost of university education, as well as 83 per cent of the cost of polytechnic education (Ministry of Information and the Arts, Singapore, 2001: 231). Public expenditure for all levels of education in Singapore has increased substantially as the government has set about developing and reforming the education system. In 2000–01, as in Hong Kong, more than half of government recurrent expenditure on education was spent on primary, secondary and junior college education. For the higher education sector, counting both polytechnics and universities, expenditure was about a third of government recurrent expenditure on education (MOES, 2001: 49). Although there is basically no resource problem in education in Singapore (Gopinathan, 2001), the government is trying to enable higher education institutions to depend less on government as the sole funding supplier. The government has set up a matching fund for universities to attract social donations for their long-term strategic development. It has promised to give the three universities $3 for each $1 raised in their fund-raising campaigns. What the government is attempting to do is to cultivate a culture of social donation for the university sector (Lee and Gopinathan, 2002). In short, the government has been the chief education funder in Singapore. The private sector remains tiny and despite the fact that it has begun to grow it seems probable that the government will continue to be the largest and most important education fund provider. South Korea Funding for education in South Korea comes from central and local government and the private sector. After a comprehensive review, the OECD concluded that ‘Korea has a unique education system characterized by a much larger private sector compared to other industrialized nations (OECD, 2000a: 57). The state acts as the most important education funder, with about 85 percent of funding for schools coming from central government. Non-state financial sources, however, make up a significant share in total education expenditure. This is particularly true when

Ka-ho Mok 63

pre-school education and higher education are taken into consideration (MOEROK, 2001). A close scrutiny of education financing in South Korea shows that there are three main sources: central government, local government, and the private sector. Central government, which secures its funding by levying an education tax, provides funding for local educational offices who supervise elementary and secondary schools, for national universities with some support for private universities, and for administrative and research organizations. Elementary and secondary schools are supported by local government funding, of which 85 per cent is derived from central government while the remaining 15 per cent is generated from parents and local government. As for private education, about 80 per cent of junior colleges and universities are privately-run institutions, which depend on tuition fees from parents, support from national and regional entities, and resources from the schools’ foundations (MOEROK, 2000: 48). While the central government has increased the budget for elementary and secondary education, the financial input to higher education has been declining. Such a decline suggests that the private sector has become more active in the provision of education at higher levels. Even though private education has flourished over the years, the sector has begun to receive subsidies from the government. Data also show high schools are the most prosperous sector in private education, since the majority of their income derives from tuition fees, together with grants from the government through local educational authorities (MOEROK, 2000: 51). The private sector performs a clear role in education financing in South Korea. The increasing private expenditure on education is mostly accounted for by out-of-school and out-of-pocket expenditure. Despite the fact that the government has committed more resources to education, the private sector and other non-state sources form a very important part of education funding. Taiwan As in Hong Kong and Singapore, the government has been very important in education funding in Taiwan. Over the past 50 years, education has grown significantly, with a substantial input of public money. Between 1988 and 1999, for example, government expenditure on education nearly doubled, and now constitutes about 19 per cent of total government expenditure. However, the government is no longer the sole funder for education with the rise of private-sector provision. Although educational expenditure as a percentage of government expenditure remains stable at around 18–19 per cent, there has been a

64 Welfare Capitalism in East Asia Table 3.3 Distribution of public expenditure between different education sectors in the four East Asian tigers, 2000–01 % of public expenditure on education

Hong Kong Singapore South Korea Taiwan

18.9 20.8 19.5 18.0

% of recurrent public educational expenditure for primary education 22.4 24.2 83.4* 44.4

% of recurrent public educational expenditure for secondary education 33.7 24.3 4.8* 33.5

% of recurrent public educational expenditure for tertiary education 31.9 33.1 10.9

Note: *Percentage of total public educational expenditure for combined elementary (primary) and secondary education, and for tertiary education. Sources: HKSAR Government (2002: 523); Department of Statistics, Singapore (2002a: 49); MOEROK (2000: 47–9); MOEROC (2001b: 46); MOEROC (2001c: 48).

decline of public educational expenditure as a percentage of GDP over the past few years (MOEROC, 2001c: 48). It is noteworthy that private contributions to education funding continue to grow alongside a relatively weakened funding role of the state especially in higher education, which is no longer treated as a free public service. Universities have been searching for alternative sources of funding other than government. The most common non-government sources of income include tuition fees, incomes from partnership with business and social donations; NGOs, local communities, families and individuals are additional potential financial sources (MOEROC, 2000). In this section, we have compared and contrasted education funding in the East Asian tigers. One major feature that emerges is the important role that the state performs in education financing. Although the governments of these societies have begun to diversify education financing by revitalizing the non-state sector, governments still act as the key funding provider and education remains the largest single area of government expenditure (Table 3.3).

Assessment From the preceding discussion it is clear that the East Asian tigers have notched up significant achievements at all levels of education. Literacy rates are high (Table 2.1), as are enrollment rates. In Hong Kong, the

Ka-ho Mok 65

average length of schooling increased from 7.2 years in 1972 to 9.3 years in 1991. The percentage of the relevant age group enrolled in higher education institutions increased dramatically in the 1980s and the 1990s from 3 per cent to around 17–18 per cent. Similar achievements can be seen in Singapore where, in 2001, the enrollment rate was 97 per cent at primary level and 99 per cent at secondary level. In the same year, the enrollment rate at post-secondary and tertiary levels stood at 48 per cent and 45 per cent respectively (MOES, 2001, Table 34). South Korea shows an equally impressive record (MOEROK, 2001). In Taiwan, the enrollment rate at primary school is about 99 per cent, while more than 95 per cent of students enjoy free secondary schooling. Similarly, the higher education enrollment rate has increased significantly since the lifting of Martial Law in 1987, particularly with the expansion of private higher education. It now stands at around 50 per cent. A further way to assess educational achievements in these societies is to examine the government involvement in education. What is plain from this analysis is the heavy state involvement. All four governments have seen education as a tool for promoting economic growth and social and political stability. All have launched and funded notably successful expansion programmes. The educational achievements of the East Asian tigers are clearly demonstrated in international comparisons. Comparing eighth-grade students’ achievement in mathematics in 38 societies at the start of the new century, Singapore was ranked number 1, South Korea number 2, Taiwan number 3 and Hong Kong number 4. In science, Taiwan was number 1, Singapore number 2, South Korea number 5 and Hong Kong number 15 (Department of Education, US, 2001). Citizens living in these East Asian societies have generally enjoyed equitable access to education. Despite the fact that students from more favourable socioeconomic backgrounds have a wider choice of schools in both the private and public sectors, no individual will be deprived of educational opportunities because of limited financial means. In South Korea and Taiwan, citizens enjoy a good level of access and coverage in both school and higher education. By comparison, individuals in Hong Kong and Singapore have less good access to higher education, but international comparisons have repeatedly ranked their universities highly while universities in Taiwan and South Korea have been ranked rather lower. Although it is difficult to evaluate the efficiency of school and university systems, the highly centralized governance model has generally proved to be efficient. With only a tiny number of schools and universities in Hong Kong and Singapore,

66 Welfare Capitalism in East Asia

efficient administration should be rather easier than in the larger and more diverse South Korea and Taiwan. The high efficiency in administration in Hong Kong and Singapore has been accepted by their neighbours, and their reforms in public sector management have been widely adopted as models in East and Southeast Asia (Cheung and Scott, 2002). Despite the achievements in education, there are obvious challenges on the horizon. People’s expectations have risen. More young people are now demanding higher education. The pressure on state funding is heavy and there are questions about the state’s capacity, on its own, to meet these pressing educational demands. More importantly, rapid socioeconomic and sociopolitical changes resulting from globalization threaten to render the conventional centralized model of educational governance inappropriate. To sustain their education systems, these societies will have to review existing practices and reform the way that education is managed if they are to adapt to the changing external and internal environment. The popularity and importance of information technology has unquestionably changed the nature of knowledge, and is currently leading to a restructuring of education, research and learning. Equally, the changes resulting from globalization have created strong demands for a comprehensive review of education systems to maintain competitiveness and adapt to the emerging knowledge-based economy. It is in such a context that the tiger governments have engaged in creating more educational opportunities and establishing educational institutions with new missions to serve populations that previously had little access to education. These governments have also engaged in expanding higher education to enhance the global competence of their citizens (Mok and Chan, 2002; Cheng and Townsend, 2000; Mok et al., 2000). As we are heading into an age of expanding communication and information, there is a strong need to rethink the nature of knowledge and the way that education is organized and delivered. According to Townsend, we have, in the past few decades, successfully ‘conquered the challenge of moving from a quality education system for a few people to having a quality education system for most people’ (Townsend, 1998: 248). What we are now confronting is how to move from having achieved a quality education system for most people to developing a quality education system for all. In order to promote lifelong learning and to make the society a learning society, the way that education is managed will have to change fundamentally. Apart from accommodating more students, educational institutions will be

Ka-ho Mok 67

required to improve their administrative efficiency and accountability to meet the demands of different stakeholders like government, business, industry, labour organizations, students and parents. Realizing that depending only on state financial resources can never satisfy growing education needs, the tiger governments have begun to search for additional sources of finance (Yang, 2000; Mok et al., 2000). Non-government resources, market initiatives, individual payments, family contributions and social donations have become increasingly popular. For instance, the Hong Kong government plans to double the number of higher education graduates in 10 years by utilizing these resources (Tung, 2001). Similarly, governments in all four societies have encouraged the private sector to take a larger role in higher education. In South Korea and Taiwan, for instance, the majority of higher education students are now enrolled in private universities, while the Singapore and Hong Kong governments have attempted to recover recurrent costs from student tuition fees and additional income generated by individual universities (Bray, 2000; Tai, 2000; Law, 2002; Mok, 2001a). Conceptualizing recent education developments in the tiger societies, we may argue that they are experiencing a fundamental change in their approach to governance, shifting to an interactionist model (government as a partnership with society), a stronger ‘co-production’ role for civil society groups, and a preference for market-type mechanisms over bureaucratic modes of service delivery. In sum, we can say that as government is the major player in education, what really changes the education sector in these societies is the different roles that states and governments play and have played. All the developments discussed in this chapter suggest ‘not only have changes in the nature of the state influenced the reform of education, but the reforms in education are themselves beginning to change the way we think about the role of the state and what we expect of it’ (Whitty, 1997: 302). The above analysis suggests that although the nature of the state/government does change in a very broad sense, the real transformation is the state’s move from carrying out most of the work of education itself to determining where the work will be done, by whom and under what terms. While there are clear global trends, especially in the economy and technology, comparative study indicates that these East Asian governments are still powerful actors in shaping national development. This study points out that not all nations have responded to globalization in the same way because of the specificities of national history, politics, culture and economy. Therefore, the so-called global tide of market

68 Welfare Capitalism in East Asia

competition, non-state provision of public services, corporate governance, system-wide and institutional performance management should not be treated as an undifferentiated universal trend. These different elements undoubtedly reinforce each other, though they are not equivalent or interchangeable everywhere. Instead, they may take different configurations, which remain national-specific as well as global. As Gopinathan argues, ‘even as educational paradigms and ideas take on a global character, the factors that determine educational policies are essentially national in character’ (Gopinathan, 1997: 18). Instead of being simply the response to a process of globalization, the formulation of national policies is the result of the complicated and dynamic processes of glocalization (Mok and Lee, 2001). Therefore, we must not analyse change in education in terms of a one-dimensional movement from ‘the state’ (understood as non-market and bureaucratic) to ‘the market’ (understood as non-state and corporate). Rather, we must contextually analyse the interaction between a range of critical local shaping factors and the impetus for change driven by global trends. This interaction becomes even more sharply apparent in the reverberations of the Asian financial crisis. It has had a varied economic impact on our four societies, but poses similar challenges. In education, existing tensions generated by globalization and marketization are sharpened by the conflicting pressures produced by the crisis. It manifests itself on the one hand in a search for increased competitiveness via educational expansion and development. At the same time, however, it feeds a desire to control and/or reduce educational expenditure. In all societies, there is thus pressure both for educational development and for cuts in expenditure, alongside attempts to make more effective use of existing resources and pressure on educational institutions to seek alternatives to state funding. Finally, to what extent does the analysis of education policy in the tigers support arguments developed elsewhere in this book about the fundamentally productivist and political nature of tiger social policy? It is no accident that education is the largest area of public expenditure in all four societies. It claims this large share for two main reasons. One relates to its links to fostering economic growth and promoting competitiveness. The other relates to its key role in nation building and in advancing political and social stability. The vigorous reform activity currently taking place in educational sectors in all four societies stems from the perceived economic, political and social importance of education. At the same time, the state’s reluctant collectivism is visible. Combined with a very strong commitment to education is a preference for the government to fund and

Ka-ho Mok 69

regulate rather than actually to provide. In all four societies, education is a mixed economy of strong but limited state involvement.

Brief country descriptions Hong Kong Government/public-sector dominance of education, apart from kindergarten provision which is essentially private. Provision through government schools and aided schools funded out of general government revenues. Independent universities enjoying a considerable degree of autonomy, primarily financed by the government. Education is seen as a right of citizenship, and the state is directly involved in shaping the regulatory framework. Singapore Government dominance of education. Provision through government schools, aided schools, independent schools and autonomous schools, but education funding primarily comes from general government revenues. Universities are financed by the government and are given a certain level of academic autonomy; while the private sector is only tiny. Education has been seen as a tool or public policy instrument by the government to achieve the goals of nation building and economic modernization. The state regulates all levels of education, though more flexibility has been given to schools and universities in recent years. South Korea A public–private mix in education provision. State dominance of school education, but private-sector dominance of pre-school education and higher education. Diversified channels of education finance, including general government revenue, tuition fees and individual contributions, and sources from the industrial and business sectors. State regulation clearly shapes education policies. Taiwan Public-sector dominance of primary and secondary education, funded by general government revenue. Increased role of the private sector in higher education provision. Multiple sources of education funding, deriving from government, social donations, individual contributions and tuition fees, as well as industry and business. State dominance of the regulatory framework, together with growing influence of political parties and professional bodies.

4 Health Care Ian Holliday

Health care systems in the East Asian tigers combine distinct regulatory mechanisms, delivery arrangements and funding regimes to generate mainly excellent health outcomes. In all four tigers, the public and private sectors both play key health care roles, though they differ from one society to another. Equally, in all of the tigers a dominant modern scientific medical system is paralleled, in various ways, by vibrant traditions of indigenous medical practice that continue to be used by large numbers of people. Tiger health care is therefore complex, requiring detailed societal analysis and, within each society, examination of both modern and traditional practices.

History and basic orientation The modern scientific medicine that now dominates all four systems was developed gradually under the auspices of colonial or imperial regimes with little direct stake in the societies they ruled. In three of our four societies, it was only in the post-imperial period that local elites took control of health care and sought to develop some sense of system. In the fourth society, Hong Kong, system-wide coordination has always been largely ad hoc (Gauld, 1998b). Moreover, the modern/traditional medicines dualism that characterizes all four societies, plus the fact that modern scientific medicine has long been privileged by elites, ensured that policy makers often only started to take a serious interest in traditional practices, and their place in the wider health care system, towards the end of the 1990s (Holliday, 2003). The binary divide itself is largely a product of the distinct approaches and philosophical underpinnings that characterize modern scientific medicine and traditional practices. Whereas a clear evidence base has 70

Ian Holliday 71

become the hallmark of scientific medicine, and the cornerstone of its many advances, traditional practices can only rarely be submitted to rigorous verification and validation (WHO, 2002). Even in the unique case of the People’s Republic of China, which did attempt to capture the best of both worlds in an integrated medical system, policy makers have latterly had to acknowledge that in many respects the two traditions simply are distinct. China now has a tripartite system, with modern scientific and traditional sectors standing alongside a third sector that brings together some parts of the two distinct approaches (WHO, 2001: 148–52; Fan, 2003). The superior position of modern scientific medicine in all four societies is the product of many factors. Imperialism played a part, with the Japanese seeking actively to suppress traditional medicines in Korea and Taiwan, and the British merely neglecting and dismissing them in Hong Kong and Singapore. The Nanking Treaties of 1842–43, which prevented the British colonial regime from interfering with Chinese customs in Hong Kong, simply reinforced an existing disposition not to have any policy dealings with traditional medicine. However, it is clear that other factors also played key roles, for with the partial exception of Hong Kong there was no policy backlash in the early post-colonial period in any of our societies. One is the prestige accorded to modern science, and modern scientific medicine by extension, throughout the world. That prestige has been only marginally affected by the postmodern challenge so evident in other spheres of life. Another factor was sociological. The tendency of indigenous elites to send their children to the West for education reinforced the policy predisposition of colonial rulers in developing health care systems. Many of today’s top health care professionals were educated in the US and UK. Moreover, those that did not go abroad were educated in local universities modeled on the US and UK systems. With the assumptive world of health care policy makers being significantly shaped through interaction with such individuals, all four systems placed modern scientific medicine at the heart of the health care sector. Despite this, many people continued to patronize traditional practitioners, especially for non-acute care, and to ensure the survival of traditional medicines. Within the parameters of health care systems increasingly dominated by modern scientific medicine, the policy challenge changed dramatically in the post-war period. Whereas 50 years ago the major health care issue in all four societies was elimination of infectious disease, today it is the amelioration of degenerative disease. This shift from contagious to chronic is in many ways testimony to the early post-war success of all four systems.

72 Welfare Capitalism in East Asia

Indeed, each can claim considerable credit in contributing to a transformation in standard health status indicators, and in generating health care outcomes that now rank among the best in the world (Table 4.1). However, other factors were also significant, notably surging economic growth and rising standards of living. Growth was interrupted, but in no sense definitively halted, by the 1997 Asian financial crisis (Haggard, 2000). The growth fixation is a central characteristic of these four societies (Morley, 1999), and provides us with the key to capturing their basic orientation to health care and welfare more generally (Holliday, 2000). In each case, the underlying welfare orientation has long been productivist, with social objectives being subordinated to economic policy. In Taiwan, there was no health department until 1971. This does not imply that for many years before this date policy makers in these four societies did not involve themselves in the business of health care. Rather, it means that in moving into this sphere, they were primarily motivated and guided by an overarching concern for economic growth. In all cases, growth was seen as a necessary condition for political survival following revolution in China (Hong Kong, Taiwan), war in Korea (South Korea) and a contested post-imperial order in Southeast Asia (Singapore). To this day, each of these societies retains a fragile place within the international order, and faces real challenges to its autonomy and even existence. However, room for policy manoeuvre has not been entirely circ*mscribed, and distinct policy choices have been taken in the four societies. Table 4.1 Standard health outcome indicators in the four East Asian tigers, 1999–2002 Hong Kong Infant mortality rate (deaths per 1000 live births) Under five mortality rate (deaths per 1000) Male life expectancy at birth (years) Female life expectancy at birth (years) Male survival to 65 (%) Female survival to 65 (%)

Singapore

South Korea

Taiwan

5.7

3.6

7.6

6.8

N/A

77.0

75.4

70.5

72.7

82.2 84 91

80.2 81 88

78.3 70 85

78.4 N/A N/A

Note: Infant mortality data are from 2002. Under five mortality data are from 1999. Life expectancy data are from 2000–01. Survival data are from 1999. Sources: CIA (2002); Census and Statistics Department, Hong Kong (2002a); DOH (2002); World Bank Group (2002); WHO (2002).

Ian Holliday 73

In Hong Kong, the policy stance throughout the colonial period and in the first, rather transitional term of Tung government from 1997 to 2002 was highly reactive. In some spheres, such as housing, it was nevertheless also very interventionist (Chapter 5). In health care, while public funding and services increased throughout the post-war period, they did so in a strictly incremental fashion down to the early 1990s (Gauld, 1997). In this period, analyses were undertaken and reports written, but few developed attempts at strategic thinking were made. A 15-year plan for medical and health services published in 1957 was no more than an outline sketch. A more detailed five-year plan followed in 1959, and two ten-year plans appeared in 1964 and 1974. However, it was not until 1990–91, when the Hong Kong Hospital Authority (HKHA) was created, that the vast bulk of secondary care facilities and a small number of primary care facilities were brought into an integrated, publicly-funded system (Yuen, 1994). Most aspects of primary care, and the whole of traditional Chinese medicine (TCM), still stand outside that system, though the Hong Kong government is now taking some policy initiatives in both domains. The basic character of the Hong Kong system is therefore rather schizophrenic. The HKHA presides over an island of planned coordination and public funding. Outside its system is a sea of chiefly private provision where the main role of government is basic regulation (Gauld, 1997, 1998a). Taking health care provision as a whole, it is hard to say that there is any sense of a total system in Hong Kong, or that the government has ever come close to developing a comprehensive policy for health care. Singapore is in many ways very different. The fusion of paternalism and individual responsibility strongly associated with Lee Kuan Yew meant that, as in Hong Kong, the state gradually took a role in expensive, secondary care provision while leaving primary care chiefly to the private sector (Aw and Low, 1997). In the past 20 years attempts have been made to ‘corporatize’ secondary care, but it still falls chiefly within the public sector (Aw and Low, 1997: 55). The distinctive aspect of the Singaporean system came on the financing side, where a health care component was developed within the Central Provident Fund (CPF). Created by the British colonial regime in 1953–55, this non-redistributive compulsory superannuation scheme, to which both employees and employers contribute, was fully developed once Singapore had become an independent city-state (CPF, 1995). A dedicated health care element, Medisave, was not formed until 1984, and was expanded in subsequent years. In 1990, MediShield, a catastrophic illness insurance scheme designed to help individuals meet medical expenses from major or prolonged illnesses,

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was established. An enhanced scheme called MediShield Plus was created in 1994. Additionally, in 1993 Medifund was formed to act as a safety net of last resort for the truly indigent. It operates on the basis of a means test, undertaken by public delivery agencies in the primary and secondary sectors. As in Hong Kong, direct state provision of health care is considerably greater in secondary care than in primary, where the private sector dominates. Also as in Hong Kong, traditional medicines operate as largely separate sectors. TCM is by far the largest. There are also small numbers of traditional Malay and traditional Indian medicine practitioners. The major difference between Singapore and Hong Kong lies in the comprehensive health care vision articulated by the Singaporean government, captured in the phrase ‘Developing the world’s most cost-effective health care system to keep Singaporeans in good health’ (MOH, 2002). Its major policy statement, issued in 1993 as the White Paper Affordable Health Care, makes clear the central thrust of the system. ‘We owe it to ourselves individually to keep fit and healthy,’ argues the White Paper. ‘The health care system needs to be structured to strengthen this sense of personal responsibility. It must give the individual maximum incentive to stay healthy, save for his medical expenses and avoid using more medical services then he absolutely needs’ (MOH, 1993: 2). This is the essence of the Singaporean policy approach and, in characteristic fashion, it has been pursued systematically in both policy formulation and implementation (Aw and Low, 1997). In South Korea, the devastation and poverty generated by the Korean War meant that for many years policy makers left health care provision mainly to market forces, and focused on promoting economic growth. To this day, the health care system is market-focused and private-sector dominated. In contrast to Hong Kong and Singapore, even secondary care is mainly provided by the private sector, with the public sector holding no more than a minimal market share (Yang, 1997). Here, state intervention has operated mainly on the financing side. In 1977 a compulsory health insurance scheme was introduced following the provisions of the Medical Insurance Act 1976. Initially the scheme was limited to individuals in industrial firms with more than 500 employees. Also in 1977, the Medical Insurance Act for Government and Private School Employees introduced a mandatory health insurance scheme to all government employees and school teachers. The industrial scheme was subsequently extended to firms with at least 300 employees in 1979, 100 employees in 1981, and 16 employees in 1984. In 1988 self-employed persons in rural areas and employees working in private companies

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were brought into the scheme. Finally, in 1989 medical insurance was extended to cover independent small business owners in urban areas, bringing virtually all South Koreans within the system (Yang, 1997). Differences in premiums among small business owners, government officials and teachers, people in farming and fishing areas, and those employed by business firms remained a divisive and unresolved issue. Nevertheless, by the early 1990s some 94 per cent of South Koreans had a health insurance plan, with the remaining 6 per cent being covered by the state-funded Medicaid programme, which provides free health care for the poor. Originally, there was no unified national health insurance system. Instead, the government coordinated the efforts of employers and private insurance firms. However, when longstanding opposition leader Kim Dae-jung was elected President in December 1997, he took office on a social solidarity and equity platform that included proposals to create an integrated system. As a result, insurance schemes for the self-employed were merged into a unified system in 1998, with schemes for the employed following in 2000. South Korea now has one National Health Insurance Corporation (NHIC) in place of the hundreds of separate insurance societies that had previously existed (Kwon, S., 2003b). Most insurance funding derives from contributions paid by the insured, with costs being shared equally by employers and workers. However, a government subsidy makes up more than one-third of insurance funds to alleviate the burden on self-employed persons in rural and urban areas. Oriental medicine (OM) is a significant part of the overall health care system in South Korea. Reimbursem*nt of some OM costs can be claimed through the health care insurance system. In Taiwan, health care development has been similar to the South Korean case, with private sector dominance of provision and an emergent state role in developing social insurance. Here, as in South Korea, a series of social insurance schemes developed in the post-war period, including the Government Employees’ Insurance scheme. In 1988, as part of the democratization process, a task force was set up by the Executive Yuan’s Council for Economic Planning and Development with a view to creating a consolidated National Health Insurance (NHI) programme. A National Health Insurance Act was duly passed by the Legislative Yuan in July 1994, and the programme was implemented on 1 March 1995 (Hwang and Hill, 1997; Liu, 1998). The bulk of health care expenditure is now accounted for by the NHI: 57 per cent in 1998. The private sector takes a further 35 per cent, with direct government expenditure coming in at 8 per cent (and falling). The NHI programme is

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mandatory social insurance. Any nationals of the Republic of China who have been registered in the Taiwan and f*ckien Area for more than four months must enrol. In addition, any employed aliens holding alien residence permits and their dependents can also enrol. Since 1 July 1998, spouses of nationals originating from Hong Kong, Macao, mainland China, and other foreign countries holding residence permits, permanent residence permits, or residence permits for aliens, can also enrol. The insured, by their status and occupation, are grouped into six categories, with varying rates of premium contributions. By December 2000, 21.4 million persons were covered, at a coverage rate of 96 per cent (DOH, 2002: 15). Again like South Korea, Taiwan has a thriving traditional medical sector. Among our four systems, there is then considerable variation at the level of basic orientation. In Hong Kong, something like a slimmeddown version of Britain’s National Health Service provides tax-funded health care on the basis of need in the secondary sector. There is some state provision in the primary sector, but it is minor. Equally, there is some co-payment in the secondary sector, but that too is small. On the whole, Hong Kong has a partial system of direct state funding and provision. In Singapore, the state plays a reasonably similar role in health care provision, controlling about 80 per cent of the market for secondary care and 20 per cent of the market for primary care. Its intervention in funding is, however, very different, comprising compulsory individual saving with a strictly limited redistributive element. In South Korea and Taiwan, the state plays a small role in provision, and an extensive role in financing through a social insurance system. There are also differences in policy reach and ambition. In Hong Kong, policy reach is mainly limited to the secondary sector, in the sense that it is only here that policy makers have ever developed a comprehensive vision. That vision stretches across provision and finance. In South Korea and Taiwan, policy reach focuses on health care finance, allowing considerable scope for market forces in provision. In Singapore, policy ambition is greatest, with policy makers playing an important role in health care finance and provision in both the secondary and, to a somewhat lesser extent, primary sectors. Singapore also has the most forceful public health drive, implemented through the National Healthy Lifestyle Programme, launched in 1992, Check Your Health, a health screening programme for over-55s launched in 2000, and linked initiatives (MOH, 2001a: 36–49). Hong Kong conducts sporadic public health campaigns on television, in the press and on advertising billboards, but they do not have the vision or

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consistency found in Singapore. South Korea and Taiwan engage in even fewer such campaigns. The outcome of health care policy in all four societies has been largely successful. This is not to say that there are no problems in these health care systems. Indeed, each faces major challenges and real structural problems. Nevertheless, when the World Health Organization (WHO) used eight standard measures to rank the overall performance of health care systems in its 191 member states, it put Singapore at six and South Korea at 58 (France topped the list; the USA featured at number 37) (WHO, 2000). Hong Kong and Taiwan, which are not members of the WHO, did not feature. However, the evidence presented here and elsewhere suggests that they would rank somewhere between Singapore and South Korea (Table 4.1). In May 2002, when Minister of Health Lee Ming-liang wrote to ask the WHO to recognize Taiwan as a ‘health entity’, he cited a 2000 Economist Intelligence Unit report that ranked Taiwan’s health care second in the world to that of Sweden (which was put at number 23 in the world by the WHO) (Lee, 2002: 3). All four systems would seem, then, to be in the top 30 per cent of world health care, with all but South Korea probably in the top 10 per cent. In many respects, this impressive result is of course to be expected. Even after the 1997 Asian financial crisis, the economies in which these health care systems are embedded remain among the most prosperous in the world. In other respects it is surprising, because these societies have all experienced very rapid economic growth, and only developed clear health care policies quite recently. None of them actually spends very much on health care (Table 4.2). Beyond that, the link between economic performance and WHO ranking is not entirely predictable, as the case of the US clearly shows.

Table 4.2

Commitment to health in the four East Asian tigers, late 1990s

Health expenditure as a percentage of GDP Physicians per 1000 people Hospital beds per 1000 people

Hong Kong

Singapore

South Korea

Taiwan

3.7 1.5

3.2 1.6

5.4 1.4

5.5 1.3

5.2

3.5

4.4

5.3

Sources: DOH (2001); Gross (1998); Census and Statistics Department, Hong Kong (2002a); UNDP (2002).

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Regulation In health care, state intervention usually begins at the level of basic regulation. Only with time does regulation develop into policy, and policy into vision. This section analyses both regulation proper, and the broader policy framework within which health care services are delivered. All four political systems have a health bureau, department or ministry to oversee policy development: the Health, Welfare and Food Bureau (HWFB) in Hong Kong, the Ministry of Health (MOH) in Singapore, the Ministry of Health and Welfare (MOHW) in South Korea, and the Department of Health (DOH) in Taiwan. Moreover, while each peak agency takes its main business to be policy making for modern scientific medicine, each also has a bureau or division devoted to traditional practices. Outside the ministries, additional state bodies also perform regulatory functions. Here we begin by looking at policy making for and regulation of mainstream modern scientific medicine before turning to traditional practices. Modern scientific medicine All four ministries have specialized divisions dealing with distinct aspects of health care policy and regulation. In Hong Kong, the major regulatory agencies are headed by the HWFB, which registers health care professionals and oversees the performance of the HKHA. Beneath the HWFB, the Department of Health is in charge of registering health care institutions and of inspecting and registering medicines. A statutory body, the Medical Council of Hong Kong, takes charge of inspecting and registering medical practitioners, and setting prices for consultations. The Dental Council, Nursing Council and Midwives Council perform parallel functions. In addition, a Supplementary Medical Professions Council has subsidiary boards covering medical laboratory technologists, occupational therapists, optometrists, radiographers and physiotherapists. Another statutory body, the Pharmacy and Poisons Board of Hong Kong, registers and inspects pharmacists and regulates pharmaceutical product traders and pharmaceutical products. The HKHA performs a regulatory role in administering and inspecting public hospitals. Beyond the medical sphere, the Audit Commission reviews the accounts of all government-subvented organizations. In the private sector, complaints mechanisms exist for cases of alleged professional misconduct. For all other cases, the Consumer Council can be used. Hong Kong has, then, a developed system of professional self-regulation through statutory bodies, overseen by government agencies (HWFB, 2002).

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In Singapore, the main regulatory activities are undertaken by the Health Regulation Division of the MOH, which has two branches dealing with modern scientific medicine: Licensing and Accreditation, and Clinical Quality. At the end of 2000, the first of these three branches had licensed 2549 private health care institutions under the Private Hospitals and Medical Clinics Act 2000. These comprised 2404 medical and dental clinics, 68 independent clinical laboratories, 50 nursing homes and 27 hospitals (MOH, 2001b: 58). The major clinical quality programme is undertaken within the framework of the National Medical Audit Programme, launched in 1998, which seeks to measure and evaluate the quality of patient care. One major initiative, dating from April 2000, is the Quality Indicator Project, whereby all acute care hospitals are required to monitor some or all of seven hospital-wide clinical performance measures. Outside the MOH, health care and blood products are monitored and regulated by the Health Sciences Authority. Here the remit includes registration and inspection of medicines, new drugs, medical devices and radiation. A statutory body, the Singapore Medical Council, registers medical practitioners, and is paralleled by the Dental Council, Nursing Board, Pharmacy Board and Contact Lens Practitioner Board. In addition, a Specialists Accreditation Board registers specialists in a total of 35 specified areas (MOH, 2001a). Like Hong Kong, Singapore has bodies to conduct audit and consumer protection functions. Indeed, the two regulatory systems are quite similar, reflecting their shared roots in British colonial experience. In South Korea, the MOHW is the major regulatory agency. Within the MOHW, the Bureau of Health and Medical Policy sets national health policy and regulates health care quality, the Bureau of Health Resources oversees licensing of medical practitioners and linked professions, and the Bureau of Pharmacy and Food Policy regulates the prices of medical drugs and facilities. The MOHW also oversees the functioning of the National Health Insurance Corporation, and sets fee schedules through holding the ring in national negotiations between all the major parties. Fee levels are set on a cost-plus basis to allow room for profit-making in this private-sector dominated system. Schedules are reviewed annually to take account of changes in the consumer price index, profit margins of sampled providers, and wage levels of medical personnel (Yang, 1997: 69). Outside the MOHW, the Korea Food and Drug Administration reviews the safety, effectiveness and approval of manufactured and imported drugs and medical devices, and oversees research (MOHW, 2002a). At the local government level, parallel mechanisms exist. For instance, Seoul Metropolitan Government has a

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Bureau of Medical and Pharmaceutical Service and a Bureau of Health and Hygiene. Overall supervision remains a national responsibility. In South Korea, there is much less reliance on professional self-regulation than in Hong Kong and Singapore. In Taiwan, the lead regulatory agency is the DOH, under the Executive Yuan. Within the DOH, the Bureau of Pharmaceutical Affairs is responsible for inspection and registration of medicines and medical devices, the Bureau of Medical Affairs oversees registration of medical practitioners and other medical professions, and the Central Taiwan Office administers and inspects national hospitals. The Centre for Drug Evaluation, a statutory body, evaluates and reviews pharmaceutical products, and drafts relevant regulations. The Taiwan Joint Commission on Hospital Accreditation, another statutory body, accredits hospitals in line with the Health care Law. For licensing of medical practitioners and allied medical professions, the Ministry of Examination under the Examination Yuan is the key body. At the local level, 24 health bureau function as local branches of the DOH in registering medical practitioners. The National Audit Office of the Control Yuan reviews the accounts of all government agencies and government-subvented organizations (DOH, 2002). Taiwan is similar to South Korea in favouring state regulation over professional self-regulation. In all four societies, policy making was traditionally in the hands of government officials and the leading professional bodies. Frequently, officials in other ministries played key roles, directly or indirectly, positively or negatively, in the development of health care policy. This is of course the case the world over, with finance ministries often playing a key controlling function. In our four societies, the productivist orientation meant that officials in economic or planning ministries were often key figures. All four have powerful peak medical associations with which officials are in regular contact. Again, there is nothing unusual in this. However, in recent years, established relationships have been challenged in some of our societies and, more generally, the policy context has started to change with the emergence of credible NGOs. Here, the leading instances are South Korea and Taiwan (Chu, 1998; Joo, 1999a). In Taiwan, the democratization process of the late 1980s generated external pressures on the health care system, notably focused on medical insurance for farmers. The ultimate result was that Taiwan’s NHI programme was implemented in 1995, rather than in 2000 as planned. In South Korea, the 1997 election of President Kim Dae-jung on a reform platform created pressures internal to the health care system by exposing rifts between the reformist political leadership and more

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conservative officials, and also between the government as a whole and the Korean Medical Association. In 1999–2000, an unprecedented doctors’ strike revealed the extent of division within the health care sector (Kwon, S., 2003a). At the same time, new actors entered the mainstream policy arena, notably through two leading NGOs. Cham Yo Youn De brings together a network of some 30 smaller NGOs, mainly on the left and focused on social issues. Kyoung Shil Yon is more academic in orientation and prioritizes economic matters. Elsewhere, relationships have been less disrupted. Predictably, in small and only partially democratic Hong Kong and Singapore, longstanding patterns remain in place. In Singapore, for instance, only a recent MOH proposal to extend polyclinic opening hours has disrupted relations with the Singapore Medical Association, and then not significantly. Here links within the health care sector are close and on the whole cohesive. Representatives of the major public-sector delivery agencies sit on key health care committees overseen by the MOH, and contribute in broad terms to policy formulation. From the MOH, the minister and permanent secretary hold regular feedback sessions attended by leading stakeholders. In addition, the minister has lunch with senior public-sector health care staff on roughly a monthly basis. Furthermore, senior figures in delivery agencies have direct access to the minister through email, phone and other links. In this way, a two-way movement of ideas is established. This relatively stable system, dominated by the MOH, persists because of the small size of Singapore, the underdevelopment of civil society, and the success of the economy. In a city-state, all significant individuals are known to each other, making informal contacts highly significant. Moreover, in Singapore media and popular dimensions are far less intrusive and pressing than in our other societies, allowing the MOH to operate in a relatively untroubled political environment. When public concerns are registered, they tend to be channelled to the Feedback Unit in the Ministry of Community Development, and fed to the Quality Service Manager in the MOH. Finally, the affluence generated by economic development means that the cash side is not particularly pressing. Turning to the content of state activity, the policy dimension is largely restricted to the public sector, with the considerable private sectors that characterize all four systems usually operating beyond the planning horizon. However, regulation of medical activity now extends to most parts of the public and private sectors, though in Taiwan it is only since 1978 that a hospital accreditation system has operated. In South Korea and Taiwan, regulations have had to be developed to govern the

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qualifications, procedures of establishment, supervision and management of insurers. One central aim is to prevent them from becoming financial conglomerates or from subordinating health care quality to efficiency. In Taiwan, individual hospitals are governed by an accreditation system according to their function as medical centres, regional hospitals, and district hospitals. The purpose of accreditation of teaching hospitals is to identify clinical training institutions for medical students and residents. Accreditation is valid for either three years or one year. Hospitals must apply for reassessment when the accreditation expires. At the end of 2000, 527 hospitals met the requirements (DOH, 2002: 21). Limited state regulation of the scientific medical profession can be controversial in Hong Kong and Singapore. In Hong Kong, this was one of the issues highlighted by the 1999 Harvard Report, which attributed the highly variable quality of health care to the privilege enjoyed by the medical profession to self-regulate without interference and inadequate oversight from external organization (Harvard Team, 1999). It argued that in general an unregulated and dominant profession, like physicians, does little to protect the public interest. It held the Hong Kong situation to be particularly problematic because of the limited and closed nature of the professional system. Members of the medical elite are on the whole graduates of medical school at the University of Hong Kong and have highly uniform educational histories and professional orientations. In consequence, they tend to be cohesive and loyal as a group, and defensive towards external criticism. Reinforcing the elitist nature of the medical profession is the similarly elitist nature of wider Hong Kong politics and society. Even since the 1997 handover, Harvard argued, little transparency or public input in assuring quality of health care has been visible (Harvard Team, 1999). While the Harvard Report contrasted the Hong Kong experience with that found in other developed states, it is less exceptional when compared with other East and Southeast Asian states. Finally, in each of our systems the lead ministry plays a key role in regulating health care provision and finance within the public sectors it oversees. Those aspects are examined in subsequent sections. Here it needs to be emphasized that in regulating modern scientific medicine our four societies divide into two groups, with Hong Kong and Singapore differing from South Korea and Taiwan. Traditional medicines Policy makers have only recently taken much, if any, interest in traditional practices (WHO, 2001, 2002). In Hong Kong and Singapore, moves to go beyond minimal regulation through, for instance, the

Ian Holliday 83

prohibition of noxious substances, emerged only in the late 1990s. In South Korea and Taiwan policy makers have a longer-standing interest in the traditional sector, but again it has operated on the margins of the health care system. As with regulation of modern scientific medicine, a two-by-two division is evident here. The state role is most developed in South Korea and Taiwan. In South Korea, the state formally recognized OM in 1952. However, it took until March 1994 for legislation creating a Korea Institute of Oriental Medicine to be passed. The Institute was opened in October 1994. Subsequently, an Oriental Medicine Bureau was established as one of the major divisions of the MOHW in November 1996 (WHO, 2001: 166–7). It conducts policy planning and oversees research into administrative systems for the development and improvement of OM. Action is also being taken to extend state regulation to OM. Since 1987, fee schedules for acupuncture have been regulated by the state. At the same time insurance coverage was extended to such treatment. Ways of extending state regulation to fee schedules for herbal medicines are currently being studied, but are encountering two types of difficulty. One is the limited evidence base for most traditional practices, which makes them hard to capture within formal regulatory structures. The other is the fact that many herbal remedies are not manufactured, but naturally occurring raw materials that cannot readily be brought within a regulatory regime. The OM profession remains self-regulating to a considerable extent. In Taiwan, a Committee on Chinese Medicine and Pharmacy was formed within the DOH at its creation in 1971. In 1995, it was turned into an autonomous administrative body under DOH supervision. Its Division of Chinese Medicine oversees institutions and practitioners. Its Division of Chinese Pharmacy is responsible for registration of Chinese medicines (CCMP, 2001). Elsewhere, regulation of traditional practices is less developed. In Hong Kong, TCM regulation became part of the broad policy agenda in the late 1980s, partly as a result of a series of scandals reported in the media and picked up in the Legislative Council in 1989. However, only in 1995 did the outgoing colonial government commit to TCM regulation, and set up a preparatory committee to investigate the issue. In late 1997, following the sovereignty transfer, a TCM division was established in the HWFB. In 1999 a Chinese Medical Ordinance was passed, and a Chinese Medical Council was formed to oversee TCM regulation. In late 2000 practitioners were invited to apply for registration, with the first batch of registered practitioners being released in September 2002 (WHO, 2001: 153; Ho, 2002). A parallel process took place in Singapore,

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overseen by the Traditional and Complementary Medicine Branch of the MOH’s Health Regulation Division. Here a regulatory framework for Chinese proprietary medicines was put in place in 1999 and implemented over three years to encompass tablets preparations from September 1999, liquid preparations from September 2000 and medicines in other dosage forms from September 2001. At much the same time, the TCM Practitioners Act 2000 established a framework for gradual regulation of the TCM sector. In 2000–01 acupuncturists were registered, with other practitioners invited to register thereafter (WHO, 2001: 169–70). In 2002, the Singaporean government had no plans to extend formal regulation to traditional Malay or Indian medicines. Both were in any case quite marginal sectors.

Provision The immediate post-war challenge of coping with contagious disease, and the headlong rush into rapid economic growth that soon followed, meant that none of these regimes ever developed an entirely consolidated system of health care provision. In no case did the state seek to impose supply-side control. However, there are varying degrees of inaction in our four societies. Strangely, the state’s role as a direct health care provider in the expensive secondary sector is in some senses greatest in Hong Kong, which broke with its hitherto highly facilitative stance to create the HKHA in 1990–91. The most advanced attempt to generate integrated provision across primary, secondary and tertiary care is currently being made in Singapore. In the traditional medicines sector, the public-sector role as a health care provider is particularly limited. Modern scientific medicine In all four health care systems, delivery of primary care is left chiefly to the private sector, and in all four societies a plethora of private clinics has developed. Often there is some direct state provision at the primary level, but it is always limited. Since 1981, South Korea has constructed more than 2000 community-based primary health care posts. Similarly, in Taiwan each township now has a health station (or, in remote areas, a health room). Singapore is not an exception to this rule, for there the public-sector share of primary care is a mere 20 per cent. However, the Singaporean government does have a policy vision for primary care, and seeks to attain that vision in part through direct state delivery. While some 1900 private medical clinics provide the bulk of primary care, Singapore has 16 public-sector polyclinics operating as one-stop

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primary care centres, and in some case extending their services to dental care, rehabilitation services for the elderly and outpatient psychiatric services. Against private-sector consultation fees of around $15, polyclinic fees are set at a flat rate of $4.50 ($2.25 for children and senior citizens). Prescription fees are $0.80 per item per week, with subsidized items limited to a standard drugs list. Patients pay the full cost for drugs not on the list. An MOH drugs committee monitors the list, and considers requests for extension received from doctors through the therapeutic committees of polyclinics and public-sector hospitals. In recent years, some private-sector GPs have been co-opted into the stateregulated sector through a Primary Care Partnership Scheme (PCPS) that aims to extend subsidized services to elderly people living some distance from a polyclinic. The participating practices are published in lists produced locally, for instance by Community Development Councils. To secure treatment at polyclinic rates, patients must pass a means test. In Hong Kong, responsibility for government-run primary clinics, with a market share of a little less than 20 per cent, passed from the Department of Health to the HKHA in 2002. There is a chance that this may generate enhanced links between the primary and secondary sectors. In the secondary sector, the state’s provider role is most developed in Hong Kong. The 44 public hospitals overseen by the HKHA account for over 85 per cent of all hospital beds in the territory, and provide approximately 92 per cent of total bed days (Grant and Yuen, 1998: 111). Public hospital beds in Hong Kong are divided into three categories: general, semi-private and private wards. However, the latter two form less than 2 per cent of all beds and are used mainly by private patients and senior civil servants. Hospitalization incurs a modest charge of about $9 per day in general wards and around $100 per day in semi-private wards. In private wards, charges recover nearly all the actual costs. For those on public assistance, all charges are waived. The other large public-sector delivery system for secondary care is found in Singapore, where in 2000 14 public hospitals and specialty centres contained 9556 beds (81 per cent of the total), while 13 private hospitals contained 2242 beds (19 per cent) (MOH, 2001b: 43, 91). In recent years changes have been made to the public sector to feed private-sector disciplines into it. Originally, public hospitals were owned and operated directly by the MOH. However, after 1985 they were progressively ‘corporatized’ through takeover by a governmentowned company, the Hospital Corporation of Singapore, which ran them according to the dictates of private enterprise (though without

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seeking to secure a profit). In 1999, two main territorial clusters, Singapore Health Services (SingHealth) and National Health care Group (NHG), were formed to create integrated delivery agencies in the east and west of the island state. These came into operation in October 2000, bringing together hospitals, polyclinics and national centres. SingHealth has six hospitals, seven polyclinics and four national centres. NHG has four hospitals, nine polyclinics and two national centres (MOH, 2001b: 43). Each has a total staff strength of around 9500. This integrated approach to primary, secondary and indeed tertiary health care, though partial, is an important innovation, having no parallel in any of our other four societies. The two clusters are also intended to work in ‘friendly competition’ with each other. In South Korea and Taiwan, provision is dominated by the private sector at all levels. In South Korea, private clinics and hospitals account for 91 per cent of medical facilities, supply 91 per cent of total beds and employ 89 per cent of physicians. It is common in South Korea for secondary care facilities to be owned by doctors, and to operate according to market principles. Most private facilities, and therefore most health care provision, are concentrated in urban areas. Since 1981, when the special law for Health Care in Rural and Fishery Areas was passed, the government has sought to tackle the long-standing urban–rural imbalance by giving financial incentives, such as low-interest loans, to those who establish medical facilities in rural areas. In 17 counties where the private sector could not be tempted to build hospitals, the government either expanded or built hospital-level health centres. In Taiwan, a similar unevenness in provision prompted the DOH, in 1985, to launch a Health and Medical Care Plan with the aim of establishing medical care networks in 17 regions and 63 sub-regions. By December 2000 there were 19,983 medical and pharmaceutical institutions (DOH, 2002: 15). Around 65 per cent of all hospital beds were provided by private-sector institutions. In July 2000, the South Korean government introduced an important reform of health care provision by mandating the separation of drug prescribing and dispensing. Before the reform, physicians and pharmacists could both prescribe and dispense drugs, which resulted in over-prescription and excess cost. By separating the two activities, the government sought to impose a measure of cost control on drug dispensing. To do so, it was forced to respond to a strike by physicians intent on maintaining profits from drugs, which had long been an important source of income. The resultant compromise saw the government raise medical fees substantially to compensate physicians for the loss of income (Kwon, S., 2003a).

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In this section it is worth saying something about the developing contribution of the Internet to health care. E-health is not yet a major theme in any of our four societies, but it is an emergent theme in all of them. The most advanced instance is Singapore, where health is one of a number of cluster points within the eCitizen centre. To date, the major uses made of the Internet concern provision of information. The eCitizen centre contains comprehensive information about health care providers, the health care establishment, and health promotion. It makes possible many searches. The site also allows individuals to submit complaints and feedback (Singapore Government, 2002). By contrast, very few transactions can be undertaken online, and some are indeed illegal. For instance, no doctor is allowed to give specific advice or to issue a prescription without actually seeing a patient. Nevertheless, Singapore has made considerable progress in developing Internet services. Appointments can be made, and altered, online. Through its e-pharmacy services, recurrent prescription items can be ordered online, and delivered throughout the island. In one of its two main health care clusters, the NHG, patients can register online and access summary medical records online. Inside the health care system, information flows are starting to change as polyclinics and GPs gain access to hospital records online. There is a chance that enhanced integration of the public and private sectors will result (Holliday and Tam, 2003). In the provision arrangements for modern scientific medicine, East Asian societies again divide into two groups. In the two former British colonies, Hong Kong and Singapore, the public sector plays an important role in health care provision (notably in the secondary sector) that is not reflected in the two former Japanese colonies, South Korea and Taiwan. However, the clarity of this divide should not be exaggerated. Particularly in Singapore, attempts are currently being made to give the private sector a larger role in secondary care provision. After 1985 the Hospital Corporation of Singapore led a drive towards private-sector principles. Recently, this drive has been taken up by the NHG and SingHealth. By contrast, in South Korea and Taiwan moves have been made in the other direction, not actually to bring secondary care into the public sector, but to ensure that health care provision is coordinated by public agencies even though it is managed chiefly by the private sector. Traditional medicines Traditional medicines form a significant part of health care provision in all four societies, with South Korea and Taiwan having the most developed sectors. In South Korea there were 11,345 registered OM practitioners in

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1999. In 2002, in addition to a large number of independent primary providers, there were 141 OM hospitals, of which one was publicly owned. South Korea also had 11 privately-owned OM colleges, three university departments of OM pharmacy, and two graduate schools of OM. One of the latter two was an integrated graduate school of Western and Oriental medicines established at Kyunghee University in 1999. In 1998, Taiwan had 3330 licensed TCM hospitals and clinics and 8438 licensed TCM doctors, though only 3461 were actually practising. There were 257 licensed manufacturers of herbal medicines, and 9510 licensed dealers. Taiwan has a formal training system in Chinese medicine, with the China Medical College Hospital and the Chang Gung University offering sevenyear training programmes. In all, Taiwan has 28 teaching hospitals (out of 127 in total) with departments of Chinese medicine (DOH, 2002: 35). In Hong Kong and Singapore, traditional medicines are concentrated mainly in the primary sector. Hong Kong has around 7000 TCM practitioners found by a 1996 survey to provide 10.5 per cent of medical consultations (WHO, 2001: 152). Since 1997, the Hong Kong Baptist Hospital has operated a Chinese medicine clinic. The Kwong Wah Hospital also opened such a clinic in 2001. Since 1998, three Hong Kong universities have started to provide degree courses in TCM. Singapore has some 2000 TCM practitioners, plus small cohorts of traditional Malay and Indian medicine practitioners (WHO, 2001: 169). It is estimated that 12 per cent of daily outpatient attendances are to TCM practitioners (MOH, 2001a: 77). The three branches of the Chung Hwa Free Clinic provide free TCM consultation and medication, and see roughly 800–1000 patients daily. Some acute or general hospitals have acupuncture clinics operating separately from modern scientific medicine. The Singapore College of Traditional Chinese Medicine was established and registered in 1953, in the colonial period. By the late 1990s, its six-year part-time training programme had trained 1345 Chinese physicians. Almost all of this activity is in the private sector, though in Hong Kong the government funds some TCM degree courses, and is planning to open 18 publicly-funded TCM clinics by 2005.

Funding The obvious general point to make about health care funding in our four societies is that it is comparatively low (Table 4.2). In this respect, the four have a lot in common. However, in terms of funding mechanisms they display quite a marked diversity, not only in

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the sphere of modern scientific medicine but also with regard to traditional medicines. Modern scientific medicine As with provision, state intervention in funding has been concentrated mainly on the secondary sector. The reason is obvious: that it is here that catastrophic medical need is picked up and here, in consequence, that financial demands are most pressing. However, there is some state subsidy of primary care. In Hong Kong, some primary health clinics are directly funded by the government. In Singapore, government fee schedules for polyclinic consultations and prescriptions translate into a 50 per cent subsidy. However, as only 20 per cent of primary care activity is accounted for by polyclinics, the overall extent of subsidy is small. Some voluntary welfare organizations also receive a government subvention. Elsewhere, primary care is left largely to its own financial devices, and covered on a fee-for-service basis. In secondary care there are diverse funding mechanisms. In Hong Kong, the government provides funds from its general revenues for the operation of public and subvented hospitals under the HKHA. Local users are charged only token fees of $9 per day for a bed, $6 for a specialist outpatient consultation and $5 for a general outpatient consultation. For non-locals, the respective charges are $400, $60 and $25. In November 2002, a fee of $13 was introduced at Hong Kong’s 15 public emergency wards to limit abuse of what had previously been free care. Overall, local users pay no more than a tiny fraction of the actual costs of services: about 4 per cent of inpatient costs and 11–18 per cent of outpatient costs. The balance is paid by the government. Even these low charges are waived in case of hardship certified by a medical social worker. Outside the public system, funding derives either from private insurance, much of which is employer-based, or from outof-pocket payment. Singapore’s health care financing system is complex. A widely-noted feature is the system of compulsory saving linked to the CPF. In 2002, employees paid 20 per cent of monthly wage/salary into the CPF, and employers 16 per cent (down from 20 per cent before the Asian financial crisis), up to a ceiling of $3400 per month. The government was planning to return to the 20–20 contribution system that was in place until the financial crisis struck. Within these overall contributions, a certain amount was designated for Medisave: 6 per cent for those aged below 35, 7 per cent for those aged between 35 and 44, and 8 per cent for those aged 45 and above. Each working Singaporean thus has a personal Medisave

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account, which can be used to pay for hospitalization expenses incurred by the account holder and some immediate family members. By 2003, the ceiling for each Medisave account will be $17,000. At death, CPF accounts, including the Medisave element, are bequeathed as cash to nominated beneficiaries. Alongside Medisave, and indeed partially captured within it, MediShield and MediShield Plus operate as insurance systems covering major medical expenditures. Premiums for both schemes, and also for approved private insurance schemes, can be paid through Medisave accounts. Most Singaporeans have some form of health insurance. At the end of 2000, MediShield and MediShield Plus had 1.9 million members, and the Private Medical Insurance Scheme had 0.4 million members. Finally, the safety-net Medifund system helps to fund health care for ‘needy’ Singaporeans. In the 2000 financial year, 99.5 per cent of 91,000 Medifund applications were approved (MOH, 2001b: 21–7). The philosophy behind the ‘3Ms’ seeks to ensure that individuals take responsibility for their own health. Nevertheless, there are government subsidies within the system, notably through the setting of hospital prices in the public sector. Here service provision is divided into a five-tier series of ward subsidies. At the top of the scale, Class A wards give patients their own room and an all-frills service. The daily ward fee, not subsidized at all by the state, is $135. Government subsidies then operate on a sliding scale for Class B1 (20 per cent), B2 (50 per cent), B2 (65 per cent) and C (80 per cent) wards. As the subsidy rises, so the quality of service falls. In Class C wards there are at least eight beds, no air conditioning and no frills. Although patients are given a free choice of ward (and thus of government subsidy), and no means test operates, some restrictions do apply to those entering subsidized wards in Classes B2 , B2 and C. Patients must be referred by a government polyclinic, and cannot choose the doctor who will treat them (though they can choose which hospital to go to). In regulating service provision, the key government role is to set the ratio of ward classes within hospitals, which it does within ranges. At least 60 per cent of beds must fall into Classes B2 , B2 and C. Beds in Classes A and B1 can amount to about 20 per cent. Beyond this, the government also regulates public-sector hospital charges for treatments on a diagnosis related group (DRG) basis modelled on the Australian system. An overall revenue cap is placed on the amount hospitals can charge patients per episode of treatment. This is reinforced by audit procedures intended to prevent false coding (though some may still take place). Within these various frameworks, hospitals are more or less free to set their own prices. The result of this complex system is that government health expenditure amounted to about 26 per cent of total health care

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spending in 2000. The rest of the spending was contributed by individuals through Medisave accounts and out-of-pocket expenses, and by insurance companies inside or outside the Medisave system. South Korea and Taiwan both have social insurance systems to which individuals must contribute. Originally, South Korea had a multitude of health insurance societies, which were non-profit organizations established on the basis of either the workplace for wage earners or residence area for the self-employed. They attained universal coverage of the population in 1989. However, under Kim Dae-jung a single national health insurance programme was implemented. In 2000, 350 health insurance societies were merged into the National Health Insurance Corporation. Co-payment means that patients directly bear about 50 per cent of heath care costs (Kwon, S., 2003b). Reimbursem*nt to providers takes place on a fee-for-service basis, which has prompted an increase in both the volume and the intensity of care. Supply-side reforms have therefore been introduced in recent years. In 1997, a pilot DRG programme was introduced on a voluntary basis, and has effectively contained costs without sacrificing quality. In 2001, a resource-based relative value payment system was implemented, but proved largely ineffective. Having no mechanism to control volume and expenditure, it generated an almost uniform increase in fees for physician services (Kwon, S., 2003a). In Taiwan, comprehensive social insurance dates from 1995 (Ku, 1998a). Here any individual who has paid insurance premiums and obtained a health insurance card can visit any health care institution (hospital, clinic, pharmacy, etc.) with which his or her insurer is contracted. As in South Korea, co-payment is substantial. The number of health care institutions under contract is maintained at a minimum of 93 per cent of all health care institutions. Competition among insurers on grounds of accessibility to services seeks to give them an incentive to contract with a sufficient number of health care providers. On top of the basic health care package, insurers are allowed to offer insurance for long-term care, plastic surgery and so on. The financial resources of Taiwan’s NHI programme are incomes from insurance premiums collected from the insured, employers and the government. A payas-you-go policy, whereby insurance premiums are collected and medical costs paid at practically the same time, seeks to make health financing self-sustainable by balancing income and expenditure. At the heart of the system are actuarial calculations of premium rates (DOH, 2002: 10–16). As in South Korea, financial pressures have recently prompted policy makers to introduce measures designed to tighten up the funding regime. They include increasing the premium collection rate by

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reinforcing collection of overdue payments, coordinating governments at all levels for timely appropriation of premium subsidies, strengthening audits of wages reported by the insured, requesting reimbursem*nt of medical expenses for accidents and injuries from traffic and labour insurance, and increasing profits from the use of funds. To limit expenditures the payment system is also being reviewed to avoid redundant use of medical care resources, to adjust co-payment for ambulatory care, to review and adjust drug costs, to improve the care system for serious illnesses, and to educate the public and medical care institutions about avoiding abuse of medical care resources. Looking for patterns within the funding regimes in these four systems, we find the greatest similarities between South Korea and Taiwan, both of which have a predominant social insurance system. This marks them out from the other two regimes. Hong Kong has a state-funded secondary sector, but leaves other financial matters mainly to the market. Singapore has a complex set of funding arrangements that are part direct state funding, part compulsory individual insurance and part out-of-pocket expense. Traditional medicines In Hong Kong and Singapore, traditional medicines stand outside state funding regimes, though the Hong Kong government is moving to create a small number of publicly funded TCM clinics. This lack of public funding arises partly because traditional medicines remain concentrated in the primary sector, which gains only limited state funding. It is also because until recently policy makers have tended to neglect them. By contrast, in South Korea and Taiwan payments for some traditional practices are covered by social insurance premiums. In South Korea, a two-year pilot project to include herbal medicines in health insurance benefits was implemented from December 1984 in 24 herb doctors’ clinics. Herbal medicine was subsequently included in all health insurance benefits from February 1987 (WHO, 2001: 168). In Taiwan, Chinese medicines form part of the basic insurance package. Inpatient care can be covered through payment of additional premiums.

Assessment In an assessment, three main issues need to be considered: the strengths and weaknesses of our four health care systems; the challenges they face; and whether the observed similarities and differences provide us

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with useful material for theoretical debates focused on the concept of an East Asian welfare model. Strengths and weaknesses The very good outcomes registered by these health care systems must count as significant strengths. The Singaporean system boasts not only excellent performance data among its resident population, but also an inflow of foreign consumers seeking treatment in the city-state. They are billed at full treatment cost plus around 30 per cent to cover administrative charges. In addition, Singapore has strong links with key external agencies, like the WHO, and an enviable international profile (Ham, 1996; Tan and Chew, 1997). The other health care systems can all point to considerable successes too. However, what is not clear is the role of contingency in this generally positive performance. For the past 40 years or so, these health care systems have had to deal with largely healthy populations. Economic participation rates have been high, the age structure has been tilted towards youth, and running health care systems has been less difficult than in many other societies at a comparable stage of economic development. In these circ*mstances, it is hard to judge just how good these systems really are. Potential future challenges are considered in the next sub-section. Here, inherent systemic strengths and weaknesses are reviewed. At the broad level of regulation, one strength of the Singaporean system is that policy makers have articulated a clear vision that drives policy making. In its uncompromising promotion of individual responsibility, complemented by a minimal social safety net, the Singaporean vision also looks sustainable over the medium to long term. The essentially corporatist nature of the system, and the strong policy networks that result, are also considerable strengths. In this regard, none of the other three systems can match Singapore. Hong Kong does not have a clear health care vision. South Korea and Taiwan are quite visionary, but their focus on social insurance may not be sustainable in the long term. Beyond that, relationships are more contested in these two systems than in Singapore. The large private-sector role in provision makes each of these systems rather disjointed, and looks like a possible weakness. It is certainly harder to plan a private-sector system than one that is owned and therefore directly managed by the state. However, this point should not be pushed too far. On the one hand, it is not clear that private sectors must stand wholly outside the planning framework, as Singapore’s PCPS demonstrates. On the other, it is not necessarily the case that a mix of

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public and private provision generates incoherence at the level of patient experience (Holliday and Tam, 2000). Nevertheless, there is a clear divide among our systems between the rather statist Hong Kong and Singapore on the one hand, and the more free-market South Korea and Taiwan on the other. The significant state role in provision is likely to become an increasingly apparent strength of the former two systems (Ramesh and Holliday, 2001). Funding regimes are always potential weak points of health care systems. In East Asia, the budgetary constraints generated by the late 1990s financial crisis exposed funding problems in all four systems analysed here. Looking to the longer term, Hong Kong looks in some ways to be in a strong position, with direct state control of public funding giving policy makers clear leverage over the system. However, in 2002 Hong Kong’s health care system was being severely tested in this regard, with the HKHA registering its first ever deficit. In the longer term, any taxfunded system is likely to be exposed in times of low growth and tight government revenues. The Singaporean funding regime partly shares the characteristic of direct state control. Its additional element of forcing individuals to take responsibility for their health care needs through the 3Ms system looks like a strength, unless you happen to come from a family with a genetic condition requiring expensive medical intervention. The systems over which most question marks hang are the social insurance regimes of South Korea and Taiwan. In the wake of the Asian financial crisis, both systems came under considerable strain with deficits in insurance financing appearing for the first time and spending from reserve funds taking place. In 2000, Taiwan’s reserve fund moved below the legal minimum of one month of insurance payments. Because medical costs can be expected to increase more quickly than the rate of premium collection, upward adjustment of the premium rate is inevitable. In addition, new measures are being introduced to increase health care revenues. Nevertheless, it has to be an open question whether these systems are sustainable in the long term (Ku, 1998a). Turning to some standard assessment categories, it can be argued that these systems mainly perform well in terms of access, coverage, quality, value for money, efficiency and effectiveness. In Hong Kong, access to the secondary sector is very nearly a right of citizenship. In Singapore, Medifund provides a basic social safety net. In South Korea and Taiwan, social insurance systems are partnered by mechanisms to capture those falling outside the system. Coverage is more patchy. Hong Kong and Singapore face few problems, chiefly because each is so small that territorial distribution is rarely an issue. In South Korea and Taiwan, by

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contrast, rural areas were clearly disadvantaged in the past, and despite concerted attempts to address this issue still sometimes fall behind urban areas. Quality of care is also variable, notably in Singapore. However, there is little reason to object to premium services charged at premium rates. Value for money is high throughout our societies. Efficiency also appears to be high, though, like all developed health care systems, each of our four societies faces problems of bureaucratic coordination and over-extension. The effectiveness of these systems is attested to by their powerful outcome statistics. Finally, the limited interest policy makers have tended to take in traditional medicines must count as a weakness of these systems, notably when so many people continue to patronize traditional practitioners (Holliday, 2003). This issue has been addressed most fully in South Korea and Taiwan. It has only recently been tackled in Hong Kong and Singapore. In all four societies, more needs to be done in this regard. Challenges One key question, raised before, is the sustainability of these systems in the medium to long term. In many ways, the good times are now over as populations age and societies mature. To what extent will these health care systems be able to adapt to bad times? Here, the largest question marks hang over the two social insurance systems of South Korea and Taiwan, as has been demonstrated by the fallout from the Asian financial crisis. The health care systems of Hong Kong and Singapore look less vulnerable, chiefly because their funding regimes contain more control points. However, there is one important respect in which neither of these systems has yet had to face the social pressures that have developed in South Korea and Taiwan in the past 15 years (Chu, 1998; Joo, 1999a). While democratic mechanisms are present in both societies, notably Singapore, neither can be said to be a fully open and participatory society. Policy makers have thus been rather more insulated from social pressures than tends to be the case in economically advanced societies. In Singapore, in particular, they have used their extra policy space to develop a rather rationalist vision of the health care system. There are not yet many signs of change, but if politics becomes more contested in these societies then the pressures on their health care systems could intensify. Then the control points overseen by officials could become a weakness rather than a strength. The likely impact of additional factors is much harder to assess. In particular, the full implications of e-health care are difficult to perceive

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at this stage when, on the whole, few significant changes are taking place (Holliday and Tam, 2003). Similarities, differences and the East Asian welfare model Finally, we need to consider three main issues. First, how similar or different are current health care arrangements in these four societies? Secondly, are they getting more similar or more different as they mature? Thirdly, what are the implications for the East Asian welfare model, and the notion of productivist welfare capitalism in the region? It is clear that at every level there are fundamental, patterned differences within our four societies between Hong Kong and Singapore on the one hand, and South Korea and Taiwan on the other. Regulatory mechanisms are more statist in South Korea and Taiwan. Provision is more statist in Hong Kong and Singapore. Funding mechanisms reveal an important statist component in all four societies, but the social insurance regimes of South Korea and Taiwan mark them out as different from Hong Kong and Singapore. Turning to future trajectories, Ramesh argues in a study of welfare capitalism in Southeast Asia that five states – Indonesia, Malaysia, the Philippines, Singapore and Thailand – ‘maintain different levels and patterns of state intervention in the provision and financing of health care’. He then goes on to hold that there is ‘a convergence in policies emerging as all countries in the region seek to expand the role of the private sector’ (Ramesh, 2000a: 81). In the four East Asian tigers there is little sign of convergence. On the provision side it is hard to say that the role of the private sector, or indeed that of the public sector, is increasing. Instead, these systems seem to be developing into mixed systems in which the state attempts to play a coordinating role among both public and private sector agencies. This results from several factors. The economic growth that propelled the East Asian tigers towards the top of world league tables for standard of living also prompted changes in both the state and civil society. Officials became increasingly aware of the health care role played by the public sector in other developed societies and began to act accordingly. Notably in South Korea and Taiwan, members of the general public became increasingly critical not necessarily of the level of health care provision in their society but of its sometimes inefficient and inegalitarian distribution. Equally, on the financing side convergence seems unlikely, chiefly because neither Hong Kong nor Singapore can be expected to adopt a social insurance system and the moral hazards associated with it.

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There is therefore only qualified support here for the notion of an East Asian welfare model. Naturally, much depends on how strict we want to be in defining what actually constitutes a model (Wilding, 2000). If we are prepared not to be too rigid, then it can be argued that what we find here is some similarity at the level of basic productivist orientation (Holliday, 2000). In all four societies, health care is minimally financed by the state, reflecting a productivist concern not to place an undue burden on entrepreneurial activity. Linked to this is a strong notion of personal and family responsibility for health care, notably in Singapore’s provident fund system and the social insurance systems found in South Korea and Taiwan. But other elements that might be expected to feature in a productivist health care system are not uniformly present. For instance, the strong public health orientation found in Singapore, where officials routinely exhort citizens to keep themselves fit, healthy and, by extension, productive, also exists to a lesser extent in Hong Kong, where public health is often pursued through televised and other advertising campaigns. It is nothing like as evident in South Korea and Taiwan. A degree of shared productivist orientation can thus be found in these four societies, but it should not be allowed to obscure real differences between the social insurance systems of South Korea and Taiwan, the slimmed-down UK National Health Service of Hong Kong, and the CPFdriven health care system in Singapore. In these circ*mstances, it is hard to argue for a single overarching approach. There is no East Asian health care model. Rather, what we find in the tiger economies is a series of rather different ways of constructing a productivist health care system.

Brief country descriptions Hong Kong Mix of state and professional regulation. Private-sector dominance of primary care. Government share is below 20 per cent. Direct state provision of secondary care, funded out of general government revenues. Small private sector at the secondary level. Only limited attempt to integrate primary and secondary care. Minimal safety-net provisions. State regulation of traditional Chinese medicine practitioners, but otherwise little state intervention in this sphere. Singapore Mix of state and professional regulation. Private-sector dominance of primary care, though some direct state provision through one-stop polyclinics, semi-funded out of general government revenues. Government

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share is around 20 per cent. Direct state provision of secondary care, funded partly out of general government revenues and partly on a feefor-service basis. Relatively small private sector at the secondary level. Government share is around 80 per cent. Some attempts to integrate primary and secondary care. Citizens must participate in a state-run savings scheme, Medisave, which may be used to cover secondary care expenses. They can choose to take out additional insurance through state-run schemes, MediShield and MediShield Plus, or through an approved private insurer. Minimal safety-net provisions through Medifund. State regulation of traditional Chinese medicine practitioners, but not of the smaller cohorts of traditional Malay and Indian medicine practitioners. No other state intervention in this sphere. South Korea State regulation. Overwhelming private-sector dominance of all health care provision totalling around 90 per cent. No attempt to integrate primary and secondary care. Funding dominated by social insurance system. State regulation of Oriental medicine practitioners, and some attempts made to bring them within the planning framework. Taiwan State regulation. Considerable private-sector dominance of all health care provision totalling around 65 per cent. No attempt to integrate primary and secondary care. Funding dominated by social insurance system. State regulation of traditional Chinese medicine practitioners, and some attempts made to bring them within the planning framework.

5 Housing James Lee

Rapid urbanization, a high concentration of economic activities, and severe housing shortages have been key features of most urban centres in East and South East Asia in the last four decades. In 2001, the United Nations estimated that in the foreseeable future the rate of urbanization will be highest in Asia and Africa. In 1999, 36 per cent of the Asian population lived in urban areas. By 2030, it is projected that 58 per cent of Asians will live in cities. There will then be nearly five billion people in Asia, more than three times the population of North America, Latin America and Europe combined (UN General Assembly, 2001). Across Asia, the pattern of urban growth is therefore very rapid. It is even more striking in the four East Asian tigers, since all four are highly urbanized, with financial and physical resources concentrated in their capital cities. Concomitant with such rapid urbanization is a growing financial significance of real estate sectors and housing systems in East Asia (Henderson, 1999; Smart and Lee, 2002). In all four tigers, the housing system in general and the housing market in particular are often seen as major sources of regional economic growth. Individual households come to see their housing decisions as pivotal not simply in relation to securing a place to live, but also as an investment, generating equity income. While in the West public housing has always been treated as a residual welfare sector for the poor, in the tigers it has more to do with satisfying aspiring middle-class home ownership needs. In the tigers, one key issue concerns the role of the state in housing. If the free market is supposedly more robust in East Asia than elsewhere in the world, why do states in the tiger economies get involved in the provision of housing? Chua’s answer is that when inequalities in housing affordability and distribution are common maladies, ‘the way in 99

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which the market fails to provide adequate housing for all makes state provision and intervention necessary in this part of the world, although often undertaken reluctantly’ (Chua, 1997). State-assisted housing comes in a variety of forms and structures, such as direct provision by government in low-rental public housing, subsidized home ownership via discounted prices, special access to home financing, rent subsidies, subsidies on land/construction costs to private developers, or a combination of such strategies as appropriate. The exact forms of social housing, therefore, differ widely as a result of these combinations.

History and basic orientation Although all four tigers have a high home ownership rate (Table 5.1), not all of them have a high level of government intervention in housing. Hong Kong and Singapore have large public housing sectors, but South Korea and Taiwan do not. Hong Kong’s private housing is the most expensive while Singapore’s house prices are comparatively affordable. Housing supply in all four tigers is largely capable of meeting growing demand, through either policy reform or market adjustment. One way or another, the tigers are able to produce adequate housing. However, adequate production does not always mean fair distribution. Vacancy rates for upper-middle-class home ownership exist alongside housing shortages for lower income groups. In terms of living space, Singapore, South Table 5.1

Housing indicators in the four East Asian tigers, 2000–02

GNI per capita (US$) Total population (million) Total number of households (million) % Owner occupier % Public housing Housing supply ratio Ratio of house price to income Floor space per person (m2)

Hong Kong

Singapore

South Korea

Taiwan

25,920 7.3

24,740 4.5

9,628 48.3

14,216 22.5

2.1 52 46 1.11

0.9 92 85 1.13

14.3 75 8 0.96

6.5 84 5 1.07

7.4 7.1

2.8 20.0

5.0 17.6

5.5 14.0

Sources: Census and Statistics Department, Hong Kong (2001a); HDB (2001); National Statistical Office, Republic of Korea (2000a); United Nations (1999); Council for Economic Planning and Development, Republic of China (2000); World Bank (2002); Census and Statistics Department, Hong Kong (2000); Census and Statistics Department, Hong Kong (2001c); Department of Statistics, Singapore (2001a); Department of Statistics, Singapore (2000); CIA (2002); DGBAS (2001).

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Korea and Taiwan have relatively larger housing than Hong Kong. To ascertain why the East and Southeast Asian housing sectors differ in these ways, let us briefly visit their various housing development trajectories. In Hong Kong, there was a massive influx of refugees from China after the Second World War, following the Communist Revolution of 1949. This drastic movement in population led to widespread overcrowding in the inner city, and illegal squatter settlements at the city fringe. Population increased rapidly from 600,000 in 1945 to 1.8 million in 1950 (Drakakis-Smith, 1979). As the population grew, the living environment and standards of sanitation deteriorated rapidly. Neither water nor electricity was available. However, the lack of hygiene and extremely poor living conditions were not government’s most pressing concern, and for some years little was done. In Singapore, the post-war years were plagued by problems of urban squalor. Political instability under the British administration in 1946–59 marked a period of underinvestment in housing with squatter settlements and unfit housing increasing. In South Korea, a housing shortage in the 1950s resulted from the Korean War. In Seoul, nearly 600,000 houses, or 47 per cent of buildings, were destroyed (Kim and Choe, 1997: 115–17). The war also triggered north-to-south migration of over a million people. In conditions of severe housing shortage, makeshift dwellings and squatter settlements appeared in many parts of Seoul after the war ended in 1953. In Taiwan, housing shortages resulted from large-scale migration from mainland China following the Communist victory in 1949. At that time, Taiwan was still an agricultural society with minimal housing investment. The consequence of massive rural–urban migration when Taiwan industrialized in the 1960s was squalid squatter settlements (Li, 1998). Almost two-thirds of households lived in shared accommodation, and many had to share communal toilets. Post-war housing development in the four tigers falls into three main stages: (1) non-intervention, (2) repression and resettlement, and (3) exclusion. In the non-intervention period, the government essentially did not respond to housing needs. The lack of regulation spawned selfbuilt makeshift housing. The next stage of repression and resettlement was marked by clear government attempts to control the spread of squatters and to allocate land for development. A repressive regime alternated with neglect. When tension increased, the only viable way out for the government was to create resettlement programmes and to exert more control over squatter areas. Smart (1989), citing his example from Hong Kong, argues that it was during this period that urban governments were able to acquire land for industrial expansion through the displacement

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of squatter areas by activities of higher economic value. When the remaining squatter areas were no longer of substantial economic value, governments sought to exclude newcomers through a registration system and thereby minimize the cost of resettlement (Smart, 2001). In the housing chaos of the post-war years, squatter clearance, resettlement and housing projects alternated as the main public housing policies. Despite differing socioeconomic, cultural and political backgrounds, all four governments tackled housing problems in similar ways. In Hong Kong, the outbreak of fire on Christmas Eve 1953 at Shek Kip Mei squatter camp marked the genesis of public housing policy (Castells et al., 1990). The fire triggered direct government intervention, through the building of H-shaped, seven-storey, low standard resettlement blocks with extremely basic communal facilities. Though the colonial government initially intervened in a reactive and reluctant manner, it paved the way for Asia’s second largest public housing programme. In Singapore, a public housing programme was initiated in 1960 immediately after independence. Facing a diverse ethnic population and poor living conditions, the newly elected People’s Action Party (PAP) eagerly sought political legitimacy, and decided that public housing was the best way to maintain political and ethnic stability (Chua, 1997). The Housing Development Board (HDB) was set up to provide basic rental units for the impoverished living in congested urban shop houses and squatter camps. However, only four years after it began to build rental flats, the HDB launched a home ownership program (Chua, 1997). Since 1964, the HDB has produced 86 per cent of the total housing stock, in which 90 per cent of households are owner-occupiers. In South Korea, the government first responded to the acute housing shortage in 1953. Within three years, a total of 339,706 houses were built, of which 40 per cent were constructed with the assistance of the government and international agencies (Ha, 1987). However, it was not until 1957 that the government began to build public housing for sale financed through a long-term leasing system (Kim and Choe, 1997). This formed the basis for the first national housing policy from 1962 to 1966. Until the 1960s, the single goal of ‘residential stability’ was persistently pursued, implying that families were entitled to maintain a -stable and comfortable residential environment. Three basic objectives were consistently upheld and guided housing policy development, namely expansion of the housing stock, stabilization of housing prices, and equitable distribution of housing welfare (Kim and Kim, 1998). However, industrial expansion and national policies prioritizing industrial development undermined housing investment in the 1960s and

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1970s. As a result, a severe housing shortage persisted, particularly in Seoul, where the housing supply ratio has always been around 50 per cent (meaning that the total housing stock is sufficient for only about half of the existing population). In Taiwan, as in Hong Kong, a catastrophe in 1953 (in this case a typhoon) prompted a housing reconstruction programme funded by US aid to resettle victims. This laid the foundation for a Committee on Public Housing under the Executive Yuan (Chen, 1991). In 1959, a public housing initiative was taken with the creation of a Planning Committee for Public Housing, and a Public Housing Development Fund. However, housing construction progressed slowly as funding was highly stretched. At the same time, the population of Taipei increased rapidly, with squatters taking up most vacant sites along the city fringe. Squalid living conditions and over-crowding presented enormous hygiene problems and fire hazards. Urban resettlement and relocation became the main concern of the city government. Although in very broad terms the tigers’ early public housing programmes were not totally successful, they did lay a firm foundation for housing policy. Different sociopolitical contexts constrained and shaped the way public housing decisions were made. Nonetheless, three main trends are apparent: (1) rapid population growth, (2) growth of home ownership, and (3) housing as a major household investment. Population growth is self-explanatory. The process of urbanization imposed enormous demographic pressure on the tigers, with urban populations rapidly increasing since the 1950s. In Hong Kong, the population increased at the rate of one million per decade. Population increase brought enormous pressure on the demand for urban housing. All four tigers have sought to promote home ownership (Lee et al., 2001), and have seen preferences for home ownership consistently rise. In Oriental societies, home ownership is considered beneficial on both political and economic grounds. Politically, it generates a sense of stability and prosperity. Economically, it is perceived as a source of national and individual growth in wealth (Lee and Yip, 2001). In the past three decades, Hong Kong has experienced a fourfold increase in home ownership rates, and a sixfold increase in real house prices. Since 1987, home ownership has been the long-term housing strategy. In the period 1987–97, roughly one-third of Hong Kong’s GDP came from property-related land sales and tax revenues (Lee, J., 1999). In Singapore, home ownership has long been the national housing strategy. A stakeholder home ownership system has been adopted since 1964, combining elements of pooled and individual risk. The state

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shares with individual households both the risks and the benefits of housing investment (Lee and Yip, 2001). In addition, a successful home ownership policy has generated continual political legitimacy for PAP rule. Housing policy as a nation building instrument can be clearly felt in Lee Kuan Yew’s words: My preoccupation was to give every citizen a stake in the country and its future. We want a home owning society. We have seen the contrast between blocks of low cost rental apartments, badly misused and poorly maintained, and those of house-proud owners, and I was convinced that if every family owned its home, the country would be more stable (Lee, 2000: 95). This statement succinctly summarizes the ethos behind the pursuit of a home ownership policy. In South Korea, home ownership has long been a much soughtafter dream. However, owing to a severe housing shortage, home ownership has declined substantially, from 92 per cent in 1970 to 75 per cent in 1995 as urban population grew (Kim and Kim, 1998). For a majority of Koreans, home ownership is the aspiration amongst all forms of housing tenure, with renting seen as temporary and transient. This mindset incidentally applies to most East Asian societies. The jonsei system, a unique Korean rental payment system that requires the tenant to deposit 50–70 per cent of the dwelling price and get back the deposit without interest at the end of a one- to twoyear tenancy, has been extremely popular among aspiring homeowners. Aspiring young homeowners do not pay rent during the jonsei contract and see this as a way of building up capital for later home purchase. It has helped to bridge a gap in the home financing system, caused by the underdevelopment of bank mortgage lending. In South Korea, only after the Asian financial crisis did commercial banks begin to develop a rudimentary mortgage market. In the two decades prior to the crisis, approximately 70 per cent of homeowners in Seoul acquired their first home through the jonsei system of capital accumulation (Kim and Kim, 1998). In Taiwan, owner occupation has always been the main thrust of housing development. The home ownership rate rose from 80 per cent in 1990 to 85 per cent in 2000. However, this high rate of home ownership has never been the result of direct state intervention, and the share of public housing is extremely small. It can be argued that the domination of home ownership in Taiwan has a lot to do with a

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Chinese cultural disposition: ‘one possesses wealth if one possesses land’. Nevertheless, the successful development of home ownership in Taiwan has much to do with a well-developed mortgage system and the availability of preferential interest rates for a number of social groups, such as ex-soldiers, teachers and civil servants. Looking finally at the role of real estate in the economy, one key common characteristic of housing systems in the tiger economies is the phenomenal rise in house prices in the 1980s and 1990s, particularly in capital cities (Figure 5.1). In March 1997, at the apex of Hong Kong’s house price inflation, one square foot of space could cost as much as $1200 in the most prestigious location, while a two-room flat of 700 square feet could cost $800,000. Since the Asian financial crisis, house prices in Hong Kong have depreciated on average 60 per cent from the peak. While the general explanation for such a level of house price inflation has always been a combination of demographics, housing shortage and a cultural preference for home ownership, one factor that has not been fully developed is the state’s role in regulating the housing sector in order to facilitate economic goals.

450 400

House price index

350 300 250 200 150 100 50

Year Hong Kong House price index (1989 = 100)

Singapore House price index (4Q 1998 = 100)

Taipei City House price index (1996 = 100)

South Korea House price index (12.1995 = 100)

Figure 5.1

House price inflation in the four East Asian tigers, 1980–2000

Sources: Rating and Valuation Department, Hong Kong (1984–2000); Department of Statistics, Singapore (2001a); Taiwan Real Estate Research Center (2001); National Statistical Office, Republic of Korea (2000b).

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Regulation In all four tigers housing policy is regarded as part of macroeconomic policy. Tang (2000) argues that the economic success of the four East Asian societies in the last three decades can be largely attributed to the adoption of a ‘developmental state’ approach in economic as well as social development, where active state intervention in the developmental agenda, accompanied by appropriate regulations in the market, became the yardstick of public policy. Applying this approach to East Asia, regulation takes on two levels of meaning. First, it concerns ‘macro regulation’ between the housing sector and the working of the economy, for example housing and land supply. Second, there are ‘micro regulations’ or institutions to ensure the delivery of public housing goods, which also includes self-regulatory activities such as professional housing management and regulation of the construction sector. The two levels of regulation can involve different institutional systems. Table 5.2 provides a general mapping of macro-level regulation in housing. Hong Kong and Singapore are much more active in terms of regulation and financial involvement, whereas South Korea and Taiwan assume a more liberal approach that generally allows the market to operate whenever possible. Hong Kong and Singapore are comparatively stronger in macro and micro regulations, while South Korea and Taiwan are more concerned with micro regulations. Hong Kong In terms of macro regulation, Hong Kong always appears to adopt a laissez-faire approach in housing by allowing the largest role for the free market. But this is not to say the state has no role to play in the housing system. During the early 1990s, when there was severe house price inflation, the government did step in on a number of occasions by applying macro-regulation measures to cool off the housing market.

Table 5.2

Macro regulation of housing in the four East Asian tigers

1. Level of state initiative 2. Level of public expenditure Source: Lee et al. (2001).

Hong Kong

Singapore

South Korea

Taiwan

High

Low

High

Low to moderate Low to moderate

Low

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One example was a 1994 decree to limit bank mortgages to 70 per cent of house price, and a regulation to prevent developers from setting aside a percentage of new flats for sale to their staff, who could thus make easy capital gains during the pre-sale period between deposit and closure. As a result of these initiatives, house prices plummeted 30 per cent from late 1994 to mid 1996. A more recent example of macro regulation was the decision to curb the production of the government Home Ownership Scheme in 2001, in response to demands from private developers, who saw it as a way to move away from the prolonged property slump since the Asian financial crisis of 1997. The second macro aspect concerns land use. In Hong Kong, historically land use has been heavily regulated and private land could always be acquired by government for development purposes. But since the early 1970s, land sale has been a major source of public revenue. In 1962–63 land sales accounted for only 17.9 per cent of government revenue, but from the mid-1980s to the 1990s it increased to more than 30 per cent of total revenue. Such dependence on land revenues enables developers to wield a powerful position in the political system. An increase in land supply in a situation of tight demand would be seen as a move to push property prices down and as a result both the government and the developers lose out. So land supply and production in Hong Kong has been quite limited since the 1980s. Until the late 1990s, land prices in Hong Kong were locked in an upward spiral. Any government attempt to regulate them would be seen as risky both in political and economic terms. As a consequence, it was easier for the government to do nothing, allowing the good feeling generated by house price inflation to grow, until the pressure became too strong for the bubble to survive. In terms of micro regulation, the government manages 660,000 public housing units through the Hong Kong Housing Authority and its executive arm, the Housing Department. As in Singapore, the Housing Authority manages both the production and distribution of public housing. On the distribution side, both public rental units and the Home Ownership Scheme (HOS) are subject to a means test. However, it is the production side that has caused serious regulatory problems in recent years. The first aspect concerns building quality. It is perhaps the least successful realm in terms of micro regulation in public management. In 1997–99, Hong Kong’s public housing scene was fraught with the scandalous unveiling of sub-standard quality buildings, defective pilings and corrupt construction practices. These events had far-reaching consequences for Hong Kong’s public policy, and finally ended in the resignation of the Housing Authority chairman in June 2000

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(Bereuter, 2000). Two reasons contributed to the low construction quality: the general lack of trained construction workers and the cumbersome traditional subcontracting practices that led to corruption and substandard work. It was also suggested that poor construction work was the indirect result of over-rapid completions which led to overshooting the construction target set by the new government after 1997 (Lee and Yip, 2001). Singapore Singapore has by far the most regulated housing system in East and Southeast Asia. In terms of macro regulation, the combined institution of the Central Provident Fund (CPF) and the HDB serves as both a source of housing finance and a macro management tool for managing national saving, consumption and investment. Savings from individual CPF accounts are mainly used to purchase government bonds with a guaranteed interest return. Mortgages, on the other hand, are provided through the HDB at a preferential interest rate. Another area of regulation concerns land. The Land Acquisition Act of Singapore is extremely powerful. Through it the government can acquire private land for development purposes at a price determined by the buyer rather than the market. It is always said ‘to favour large development capital at the expense of small landlords as it can be invoked to acquire and amalgamate small lots which made possible substantially larger development’ (Chua, 1997: 133). The root of this whole institutional setup for housing is thus premised on the notion of paternalistic welfare where land acquired for public housing is thought to be ultimately beneficial to citizens. Micro management of Singapore public housing derived from the setting up of the Town Council. In 1988, Town Councils were set up to help the HDB to manage this enormous task. Town Councils are one step that the Ministry of National Development has taken to allow residents to play an active role in the development of their estates. Through their Town Councils, residents have the power to make improvements to their estate by negotiating with the HDB to maintain the common areas or to manage car parks, markets, and hawker centres within the town. To this end, Town Councils are based on the idea of fostering in the community a sense of self-determination and self-reliance. To some extent, the idea is similar to tenant participation programmes which are prevalent in the UK, except that the Singapore initiative is more linked to the political system since the Town Councils are led by a Member of Parliament. Local leaders are co-opted by the MP onto the Council. Day-to-day

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estate management is contracted out to private housing management firms run by former HDB staff. If a Council is badly managed, the Party runs the risk of losing a seat in the Parliament in the next election. Town Councils might be seen as a form of political absorption or a form of local government in an attempt to attain more control by the ruling government. They can also be seen as a political innovation to fulfil micro regulation objectives while the HDB could, at the same time, downsize its housing management function. Both Hong Kong and Singapore have a more developed housing management profession following the UK model, where the quality of estate management and the promotion of community well-being are important objectives not just for the housing bureaucracy, but also for professional bodies. In comparison, South Korea and Taiwan have more generic housing management. However, both countries are interested in building up stronger professional housing management practices along the lines of the Hong Kong and Singapore model, since better management is now recognized as being important in maintaining property values. South Korea Macro regulation in the South Korean housing system is only partial. In fact, the jonsei rental system discussed earlier was created under conditions of extremely low intervention. The setting up of a neighborhood system of self-help to satisfy both accommodation and funding needs in the absence of a mortgage system is considered highly innovative within the East and Southeast Asian context. Micro regulation in the housing sector is largely concentrated on land use and house prices control. In 1972, the government enacted the Housing Construction Promotion Law, which mandated the government to develop the massive housing construction plan and to draw up a set of regulations for effectively implementing the plan and promoting the housing industry. A key policy to boost housing production was the Two Million Unit Housing Construction Plan launched in 1988. The key strategies of this scheme were to improve the supply of residential land, expand housing credits for development, and remove various regulations restricting residential developments. Furthermore, in accordance with the National Land Use and Management Law, the government designated close to 68 million pyong of land for residential development. Institutions like the Korea Land Development Corporation (KLDC) and the municipalities were authorized to purchase land from the government at a very low price. The land was then sold to public institutions such as the Korea

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National Housing Corporation (KNHC) at cost or to private builders at subsidized prices, for residential development purposes. In the late 1970s and for most of the 1980s, the South Korean government depended mainly on the tax system for macro regulation and the control of house price speculation. For instance, in 1978, the government declared a war on housing speculation known as the August 8 Measure, when heavy taxes on capital gains were imposed, and criminal charges made against illegal transfers of properties for tax avoidance purposes. Another device was the application of a price ceiling system to newly constructed condominium apartments to discourage developers from seeking speculative profits (Kim et al., 1998). In addition, the government introduced a ‘bond-bidding’ system in 1983 to tax a large portion of windfall gains from both real and potential speculators. However, as Seoul reached a housing supply ratio of nearly 1.0 in 2000, the government decided to move towards more deregulation within the housing system (Kim and Kim, 1998). Now government aims at liberalizing the banking system to allow for more private housing loans to prospective homeowners and to make urban redevelopment a high priority for Seoul. Taiwan Taiwan is arguably the best example of a low intervention regime with only a relatively small public housing sector. A majority of the population opt for home ownership as the main tenure, while the main source of housing finance comes from commercial banks. What is quite different from Western housing debates is that tenure choice does not occupy a prominent position in the political and policy agenda (Chang, 1999). Owner occupation has been the ‘natural’ objective in housing policy over the last three decades. Thus regulation of housing in Taiwan is much more about micro regulation in terms of buildings and land-use control. With over 90 per cent of Taiwan’s housing provided by the market, state provision is minimal and regulation peripheral. However, problems such as high house prices, high vacancy rates and poor housing quality have gradually been uncovered in the last two decades. House price speculation and a buoyant economy, together with the presence of a large number of ‘underground banks’ operating outside the banking system, fuelled the property sector with ‘hot money’ (Chang, 1999). In the late 1980s and early 1990s, this provided an enormous impetus to house price inflation. Nonetheless, constrained by a free market philosophy, the government did very little to alleviate the situation, other than to provide a one-off financial boost in the form of

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housing loans to potential homeowners. Although the law prevents banks from making more than 20 per cent of their loan portfolio to the real estate sector, this limit has never been seriously observed (Chang, 1999). Thus, most banks grasp the opportunity to compete for a share of the lucrative mortgage business, hence successfully boosting the home ownership sector without much government effort. Contrary to the situation in Hong Kong and Singapore, most land is owned by individuals and firms. Developers have comparatively greater freedom in their development projects, except those in prime sites such as Taipei city centre where a different problem exists: over-investment in real estate and high vacancy rates. The 1990 Census revealed a 13.3 per cent vacancy rate in the Taipei area, while in the 2000 Census, an even higher vacancy rate of 17.6 per cent was recorded. The existence of housing shortage alongside high vacancy suggests the lack of an efficient real estate information system. To improve micro regulation in the housing sector, the Department of Land Economy, at Chengchi University has initiated a number of proposals in recent years. First, the mismatch between supply and demand in housing is seen as being due largely to the lack of a real estate registration system. Establishing a Centre for Real Estate Information is thought to be the way to smooth out supply and demand. Professional real estate agents as well as academics support this idea. However, it has met with a lukewarm response from the public because, for the purposes of tax evasion, real estate transactions are generally under-reported (Chang, 1999). The argument is that it will take another Asian financial crisis and a bigger property slump to give sufficient impetus for the government to shift to a more regulatory regime for the Taiwan housing system. The other proposal concerns the securitization of real estate. One of the main arguments for the sluggishness of the property sector is the general lack of confidence in real estate as a long-term investment following the Asian financial crisis. Securitization of the real estate market is seen as a long-term institutional strategy to restore consumers’ confidence in home purchase and also to share out long-term risks in home ownership. Both Japan and South Korea have already begun to implement such strategy. Taiwan’s building quality regulation and control are low, as revealed in the major earthquake in 1999 that had disastrous consequences. Among the four tigers, Singapore and South Korea are adopting a much more effective building code and control system. Two reasons might account for their success: (1) a much stronger developmental state orientation and (2) more developed labour organizations, particularly in

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South Korea, where strong unionization of the construction sector contributes to a higher level of professional self-regulation. There is a clear contrast between the more active regulatory regimes of Hong Kong and Singapore and the less regulated approach of South Korea and Taiwan. In Hong Kong, the government is active in regulation at the macro level, to cool the market, to limit loans for home purchases, and to control the supply of land. It is less successful in its attempts to regulate for quality. Singapore is also an activist regime in terms of its policies to regulate finance, land supply and estate management. In Taiwan, the government has been more active, albeit ineffectively, at the micro rather than the macro level, but it has done little to try to regulate house price speculation. South Korea is, perhaps, the least regulated system.

Provision Housing provision can be analysed on two levels. First, it is about the type of housing being provided: high-rise or low-rise; single-family apartment, semi-detached town house or modern executive condominium. Second, it concerns the mode of housing organization being employed to deliver housing goods. Since by and large high-rise estate-type flats are the dominant housing mode in urban areas of the tigers, we are mainly concerned with the second level here. Table 5.3 illustrates the broad housing organization and the relative weight of housing provision among state, employer and market in the four tigers. Hong Kong and Singapore are clearly more state-centred, while South Korea and Taiwan are more market-centred. Hong Kong In Hong Kong, total housing stock in 2001 amounted to just over 2 million flats, of which 32.9 per cent were public rental housing, 17.6 per

Table 5.3 Social organization of housing provision in the four East Asian tigers, 2000–02

State (%) Market (%) Employer (%)

Hong Kong

Singapore

South Korea

Taiwan

51 46 3

85 14 1

8 87 5

8 82 10

Sources: HKSAR Government (2002a); Department of Statistics, Singapore (2001b); National Statistical Office, Republic of Korea (2002); National Statistics, Republic of China (2002).

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cent were subzidised home ownership and 49.5 per cent were private home ownership. The approved estimate of public expenditure on housing in 2000–01 was $5.6 billion, which was approximately 15 per cent of total public expenditure. This represented a decrease of 8.3 per cent in real terms over 1999–2000, and revealed a clear contraction in public financial support for housing (HKSAR Government, 2000). The 1998 White Paper on Long Term Housing Strategy provided a blueprint for housing policy, with expansion of private ownership the major objective. To achieve this, a number of schemes have been implemented. Firstly, flats under the subsidized HOS are sold at prices below the market value and in a shared equity arrangement to low- and middle-income families. Secondly, tenants in public rental housing are encouraged to buy their flats under the Tenants Purchase Scheme at highly discounted prices. Another scheme, the Buy or Rent Option Scheme, offers prospective public housing tenants on the waiting list the option to purchase subsidized HOS flats. Besides direct housing provision, the government also offers subsidies in the form of housing loans to new homebuyers under the Home Purchase Loan Scheme and the Home Starter Loan Scheme. Notwithstanding a high level of state intervention, the private sector continues to play a crucial role in meeting the 70 per cent home ownership target set in 1998. The private market produces 40 per cent of the total home ownership flats, while the government HOS produces another 15 per cent. Nonetheless, the government has recently decided to slow down and eventually to halt the production of HOS flats in response to immense political pressure from the real estate sector, which considers HOS production too strong a competitor for the private housing market. Besides boosting home ownership, the government recognizes its responsibility in housing those who still find home ownership unaffordable. At the end of September 2001, some 2.1 million people were housed in public rental housing estates. In July 2002 the government completed a comprehensive review of the organization structure of public housing provision and suggested the merging of the Housing Authority, a statutory body set up in the mid-1970s for the overall management of public housing policy, with the Housing Bureau, the government housing policy arm. This change will mean a greater concentration of power in the central government, and a possible efficiency gain. Singapore Among the four tigers, Singapore provides the largest proportion of public housing. In 2001, 85 per cent of Singaporeans lived in one of the many types and grades of HDB flats, and 92 per cent drew on some

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degree of subsidized home ownership. About 7 per cent who could not afford home ownership lived in basic rental housing. To ensure that the low-income group also benefits from the Home Ownership Program, the government has developed policies to help them own HDB flats. The Special Housing Assistance Program was introduced in September 2000 to consolidate all policies, such as Rent and Purchase and Low Income Family Incentive, assisting low-income families to own an HDB home (HDB, 2001). In addition, rental blocks are progressively upgraded to put them on a par with housing standards in all HDB developments. Although Singapore’s housing programme started slightly later than that of Hong Kong, it grew much faster and was more focused on home ownership, largely due to two very significant factors. First, the HDB made an early decision to produce public home ownership flats, only four years after the commencement of the public housing programme in 1960. Second, the government decided in 1968 to allow people to make use of the CPF to purchase government flats. This overcame the problem of low-risk funds for home buying, which was one of the big obstacles in the promotion of low-income home ownership. In Singapore, the HDB is close to having a monopolistic hold on new housing supply, and the private housing sector plays a very insignificant role. The HDB acts like a giant developer, being responsible for everything from planning, design and pricing to distribution and management. Only construction is contracted out. Meeting housing needs and promoting home ownership are central in Singapore on two grounds. First, the state seeks to develop a housing programme commensurate with the growing demand for a better quality living environment and asset appreciation. Starting with one- to tworoom flats in the early 1960s, the HDB now concentrates on the development of four- to five-room flats with better facilities and more space. The government encourages people residing in two- to threeroom flats to upgrade, so that precious land can be resumed for further HDB developments. To cater for the needs of the aspiring young middle class, the government established the Housing and Urban Development Corporation in 1979 to look after the housing needs of young executives who are not eligible for ordinary HDB flats and yet find private housing unaffordable. Second, the state recognizes that growing affluence means that people have a rising expectation of housing as an investment asset. Since the early 1990s, HDB flats have appreciated up to threefold in value. Many households capitalized on their first HDB flats and sought to trade-up to a better flat by using their second opportunity to purchase

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HDB flats. While it is not state policy to encourage speculation in public flats, the spirit of asset appreciation is deeply embedded in the existence of a mature second-hand HDB flat market that allows households to capitalize on their HDB flat in the open market. Thus, the prevalence of publicly subsidized home ownership in Singapore has put the social status of public housing on a par with private housing. Singapore has perhaps the only stigma-free public housing sector in East Asia. South Korea South Korea’s housing provision is largely dependent on the private sector. In Seoul, private housing has more than a two-thirds market share. Before 1988, the housing market suffered from a prolonged period of price inflation. Housing shortage in urban areas was an acute problem. It was not until 1988, when a tortuous period of military rule was ended with a new civilian presidency, that the government decided to do something about the housing shortage. The Two Million Units Housing Construction Plan was announced by President Roh Tae-woo in 1988, and implemented with full support in the ensuing four years. By 1992, the housing supply ratio had increased from 0.69 to 0.79. Broadly speaking, there are three major providers of housing, namely the private sector, the KNHC, a government-backed organization concentrating on the production of low-cost housing, and the Seoul municipal government. In 1988, the shares among the three were 63.5 per cent, 26.9 per cent and 9.6 per cent respectively (Kim and Choe, 1997). Housing production in South Korea reached a peak in the early 1990s, when annual production averaged 600,000 units or more. This reflected the huge amount of resources poured into housing investment by the government to implement the 1988 Plan. The KLDC and the municipalities were allowed to purchase land at very low prices for sale either to the KNHC at cost or to private developers. The land was then converted into residential developments (Kim and Kim, 1998). Besides the boost in housing construction, equally important was the supply of a large amount of funds, which quadrupled in less than four years – from $1 billion in 1987 to $4.5 billion in 1990. Over 80 per cent of these funds were supplied by the state-owned National Housing Fund and the privately-owned Korea Housing Bank (transformed into the Korean Housing and Commercial Bank in 1996) (Kim and Kim, 1998). Private construction firms and the KNHC dominated housing production for almost two decades. The Kim Young-Sam administration, which began in 1993, continued with the mass housing production plan. The housing construction industry continued to boom until the second quarter of 1995, when,

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owing to a lack of funding, the government’s subsidized rental-housing programme for low-income families was terminated. Public housing output was further reduced as the previous pledge for mass housing construction gradually shifted to the private sector. Taiwan Like South Korea, Taiwan’s housing system is market dominated and state intervention is peripheral. Private housing accounts for 90 per cent of total housing. Public housing only constitutes an estimated 5 per cent of the total tenure (National Statistics, Republic of China, 2000). Assisted housing programmes in Taiwan fall into two broad categories (Chen, 1991). The first category consists of housing programmes for low-income households, and includes state-provided public housing for sale as well as for rent and low-cost rental housing provided by social service departments for households with very low incomes who often require other forms of social assistance. In addition, a mortgage interest subsidy scheme was started in 1990 to act as an alternative for direct provision of public housing. The second category of housing subsidy comprises housing programmes for designated groups – namely civil servants, teachers, dependants of servicemen and indigenous people. Two common forms of government assistance in housing are provision of subsidies and loans, and tax advantages for homebuyers. From 2001 onwards, the public housing policy was largely replaced by a subsidy on mortgage interest. In the 2000 presidential election campaign, a new housing subsidy initiative, Low Interest Mortgage Loan for Young People, was proposed by Chen Shui-bian. Preferential mortgage interest (at a 3 per cent discount from market rates) is offered to households between the age of 20 and 40 with an income level in the lowest onefifth of the income bracket (Ministry of the Interior, Republic of China, 2000). It is hoped that this new initiative will substantially boost the number of first time homeowners. Hong Kong and Singapore are great providers of housing, Hong Kong for both renting and sale at subsidized prices, Singapore largely for home ownership. South Korea and Taiwan rely on the market for provision, with government only occupying a residual provider role.

Funding Funding is a more interesting aspect of tiger housing development. It is also more reflective of the level of institutional innovation in terms of housing policy in East Asian modes of governance. It ranges from direct

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government subsidy from public revenues in Hong Kong to complete market domination in South Korea and Taiwan. In between there is the strange variation of Singapore, where home financing is tied to the social security system. Hong Kong As the main housing body, the Hong Kong Housing Authority has received a development loan from the Hong Kong government since 1976. The Authority and the Housing Department (the executive arm of the Authority) receive an annual budget from the government. In the last two decades, however, this annual budget has been progressively reduced as the Authority has managed to develop financial independence through selling government home ownership flats. Thanks to a buoyant property market, the Authority was able to achieve a surplus reserve of $4 billion in the 1990s (Hong Kong Housing Authority, 2000). In other words, public housing development in Hong Kong is no longer a financial burden to the government. The Housing Authority has become a selfsustaining public organization capable of generating income for future investment. This has been made possible largely due to a ‘share-equity’ system of housing finance with the HOS. To understand how it operates, we need go into some detail about the HOS system. Launched in 1976, HOS forms an important component of the government’s home ownership initiative. In the last 25 years, 262,400 HOS flats have been built, and in 2000 the scheme accounted for approximately 15 per cent of total home ownership. As a government initiative to assist prospective homeowners, HOS is essentially a shared equity arrangement in which the state holds on average 40–60 per cent of the equity interest once a HOS flat is sold. Eligible homeowners purchase HOS flats under a ballot system and resale is not allowed within the first five years (initially 10 years). Within the restriction period, homeowners can only return the flat to the government at cost, together with a land premium assessed at market price. Through this arrangement, public sector homeowners are able to reduce both the entry cost and the repayment burden of owning their homes. In a volatile housing market in the 1980s and early 1990s, HOS in fact transferred part of the risk of home ownership from individual homeowners to the government. This explains why it has all along been so popular among middle-income groups who cannot afford high house prices in the market. Similar to all high-risk investments, the return to the state in terms of holding HOS equity was quite handsome in the 1980s and 1990s. With land premium discounts from the government, the Housing Authority has always been

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able to realise profits in the same way as private developers. Subsidized HOS flat sales were a major revenue source for the Authority throughout the 1980s and 1990s. In terms of income redistribution, we can therefore argue that HOS flats actually provide vertical redistribution between the middle class and the working class in public rental housing. Even during one of the worst years of HOS flats sale (1998–99), the Housing Authority was still able to make an operating surplus of $2 billion, while the deficit incurred in public rented housing was only $300 million (Hong Kong Housing Authority, 1999/2000). Indeed, with an extremely strong cash balance, the HA is effectively the best financially managed government agency in Hong Kong. Singapore In contrast to Hong Kong, assisted home ownership in Singapore does not operate as a shared ownership arrangement. Subsidies from the state in terms of land premium discount and government grant are employed to reduce the cost of home ownership. Resale of assisted home ownership flats in the open market is allowed, and sellers are permitted to retain capital gains. A tax of 10 per cent on home sales is levied to achieve redistribution and to prevent huge windfall gains from asset appreciation. The state is not involved in the sharing of risk with homebuyers. Although the HDB is the main operational arm of housing development in Singapore, the funding of public housing is linked to the CPF. This is a mandatory retirement benefits scheme for the entire population, and savings can only be withdrawn after the age of 58. It is operated on a self-funding principle and involves no inter- or intra-generational transfer. Since inception, the rate of contribution has increased steadily from 10 per cent of the employee’s gross income (equally shared between employers and employees) to a peak of 50 per cent in 1985, and then stabilized at 40 per cent in 1998. Since 1968, Singaporeans have been allowed to use their CPF savings for home purchase in the form of down payment and mortgage repayments to the HDB. Homebuyers can use up to 100 per cent of their CPF Ordinary Account money to purchase HDB flats. Since the 1990s, CPF savings have been extended to cover luxurious public housing for the upper middle class (the executive condominium). A significant proportion of CPF funds (approximately 80 per cent) is used to purchase government bonds as a long-term investment, and part of these funds is channelled back to the HDB for housing investment. This is quite different from Western welfare states, where public housing investment usually comes from general government revenue. However, this

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does not mean that the state does not spend on housing. In fact, direct state subsidies can be found in periodic estate upgrading programmes. The CPF–HDB model is unique in two ways. First, the CPF is basically a personal saving system for personal consumption. However, the publicly managed fund, and publicly managed public housing, have successfully ‘collectivized’ individual domains. This provides a unique model of social policy very different from the West where collective consumption is usually not directly related to the individual domain except in the collection of social security contributions. Second, profiteering from collective consumption used to be regarded as both morally unacceptable and economically inefficient, but many homeowners made windfall profits from the sale of HDB flats in the 1980s without being penalized or deterred. To sum up, the Singapore housing finance model has been ingeniously designed to link two forms of private action, personal savings and home ownership, into a form of collective consumption. The system is widely accepted among Singaporeans despite the fact that home ownership has been demonstrated to be extremely risky in the context of a globalised and volatile real estate market (Low and Aw, 1997). South Korea In South Korea, housing funds can be classified into two main sources: the government sector and the informal sector. The government sector housing funds comprise the National Housing Funds and the Korea Housing Bank Funds. However, these sources provide less than 20 per cent of the needed funds for the construction of new dwellings. The remaining 80 per cent of funds come from the informal sector, principally represented by the unique jonsei rental system (Chung and Lee, 1996). In South Korea, payment for home purchase is in the form of a lump sum, and a majority of housing funds comes from the family system. The jonsei funds have become a form of informal capital for home purchase. Within the jonsei system, tenants deposit a substantial amount of money with the landlord, normally 50 to 60 per cent of the dwelling price, and get back the deposit without interest at the end of the tenancy, which is usually one or two years. The deposit represents the landlord’s capital, and is usually reinvested into home purchase or building. This system is a unique solution for home buying when there is no developed mortgage system. The main reason is that the government has been extremely directive over the use of banking finance for household consumption purposes. Thus, the banking system was highly regulated by successive authoritarian regimes in the 1980s and early 1990s. It was not until after the 1997 Asian financial crisis that commercial

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banks began diversifying their loan portfolios and setting up mortgage businesses. As an economically vibrant country, the underdevelopment of personal home loan finance has been one of the unique characteristics of the modern South Korean housing system. Taiwan Taiwan’s housing system is characterized by the dominant role of the private sector and a high rate of home ownership. Private housing constitutes 95 per cent of the total market share, in which over 80 per cent are owner-occupiers. The pre-sale system is a dominant form of housing consumption and offers an explanation of the high rate of home ownership in an environment of minimal state intervention. Despite the high risks of the pre-sale system, homebuyers still choose to purchase houses before actually seeing them. This is largely due to the advantageous payment arrangements offered. Both housing construction and consumption require funding from commercial banks. A good pre-sale offers developers a bargaining chip in negotiating for a larger building loan. In turn the banks will usually offer better mortgage terms to homebuyers, which helps developers to increase sales and hence to repay the loan subsequently. With substantial presale volumes and the availability of loans, smaller down payments are required from buyers, making homebuying much more accessible in the market. This explains why mortgages for pre-sale houses are more popular amongst prospective homebuyers than the second-hand housing market (Li, 1998). Moreover, following a deregulation policy in the early 1980s, banks began to make mortgages more easily available with extended repayment periods of up to 25 years (Ministry of Finance, Republic of China, 1998). For low-income households, funding for housing comes from three major sources: (1) direct production of low-cost home ownership for sale; (2) direct subsidies to specific groups of people, such as ex-servicemen and their families, teachers and civil servants; and (3) provision of mortgage interest subsidies to low income families for home purchase. Among the three funding or subsidy approaches, the most controversial is direct production. Since urban land for public housing production is scarce, many analysts do not support this form of housing subsidy since it creates equity problems among social groups (Chang, 1999). The second approach is fairly limited in extent and therefore insignificant in impact. The most popular funding or subsidy method is therefore the third approach, direct mortgage interest subsidies. It is widely regarded as more equitable and efficient. However, Chang (1999) argues that the organisation of housing

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subsidies is highly complex, involving too many central and local government discrepancies. There are differences in funding similar to those we saw in regulation. Hong Kong and Singapore emerge again as the activist regimes, South Korea and Taiwan as much less involved. In Hong Kong the government provides major funding through the provision of housing at subsidized rents, through subsidized provision for sale through the HOS, and through the way it makes land available for housing at subsidized prices. The Singapore government also makes land available at subsidized prices and uses grants to reduce the costs of home ownership. Compulsory contributions to the CPF from workers and employers are an important source of funds for house purchase. In South Korea, the government provides only around 20 per cent of the funds for new building. The main source of funds for house purchase is the family through the jonsei system. In Taiwan, funding for housing is mainly private, though government subsidies are provided to state servants and to a small number of low income households.

Assessment In the four tigers, the problem of absolute housing shortage has been largely eliminated. The national housing supply ratio in all four has now reached more than 100 per cent, which means that the total number of households is equal to, or less than, the total number of housing units supplied. What remain are issues of distribution, particularly in meeting the needs of the least well off, meeting housing aspirations and also providing opportunities for housing mobility. Can the housing ladder provide adequate choices for middle-class households in their family lifecycle? Is the current housing system sustainable in the long run, both in terms of housing finance and housing subsidies? In this section we shall examine in greater detail the relative performance of the four housing systems, looking first at the public housing sector. Strengths and weaknesses (1)Access and coverage For 50 years of public housing, Hong Kong has been able to maintain a steady flow of public housing production. However, single elderly people and young immigrant families from Mainland China still have very limited access to public housing. For years, local NGOs have been campaigning for a long-term housing policy for elderly people

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that recognizes their special needs. While effort has been made to reduce the waiting list, progress has been substantially neutralized by the large inflow of new immigrants from the Mainland. In the last two decades, low-income families have typically had to wait for seven years before being allocated a rental flat. While the government vowed to produce on average 20,000 new rental flats each year, the overall percentage of the rental housing stock has decreased from 45 per cent of the housing stock in the early 1990s to 35 per cent in 2000. Singapore has by far the best access to public housing and also the highest housing supply ratio. Practically all Singaporeans are able to access public home ownership through the CPF. Supplying 85 per cent of all housing, the HDB is the largest public housing agency in the world and also one that seeks to achieve universal housing coverage. Public housing in Singapore is also the best designed and landscaped amongst the tiger states. Nonetheless, the Singaporean system is not without its long-term worries. More and more the government has realized the increasing financial burden from its heavy commitment in public housing. The adverse impact of the Asian financial crisis on housing prices has revealed for the first time that no market can remain insulated in a global economy. To maintain continued stability in the housing system, the government would have to make ever greater expenditure commitments. South Korea and Taiwan have the lowest access rates and coverage in public housing. The two governments have only intervened when there were severe housing shortages and natural disasters. In these situations, one-off housing assistance was often preferred to long-term housing subsidies. As such, public housing in these two tiger states has been highly selective and residualized. (2)Quality and value for money While the general standard of public housing has improved substantially over the years, the quality of public housing in Hong Kong is still plagued by scandals in corrupt building practices and poor construction quality. Regulation of the building industry is generally weak. The same situation also applies to Taiwan where substandard construction is prevalent in both the public and the private sector. The number of defective buildings in the September 1999 earthquake revealed major problems of building quality. Singapore and South Korea possess by far the best building quality in both the public and private sectors. In both places, the construction sector is strictly managed by building codes and tight government regulations and hence high building quality has been maintained in the last two decades.

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(3)Efficiency and effectiveness For both Hong Kong and Singapore, a long tradition of state intervention in housing has enabled both places to develop a largely efficient institutional framework to deliver housing goods. Both the Hong Kong Housing Authority and the Singapore HDB have been able to organize the production and distribution of public housing resources without much wastage. However, both places perform very differently in terms of effectiveness. Through the CPF system, the Singapore government has been able to amass personal savings on a very large scale and use them effectively in housing investment. Hong Kong does not have such a scheme, and housing investment comes directly from the public budget. An example of the potential problems of such an approach was the over-production of HOS flats and a sudden drop in demand in 2002. Taiwan and South Korea have always relied on the private market as an effective means to provide housing, particularly for home ownership. In South Korea, the health of the construction industry is of particular importance for the economy, accounting for 20 per cent of GDP in 2001 and employing 1.5 million of the country’s 45 million people. The jonsei rental system has proved to be a highly efficient and effective way of preparing households for home ownership when a mortgage system has not been developed. Future challenges Anyone who has visited Singapore will fully appreciate that the government has made housing the number one priority. Haila (1999) argues that Singapore achieved global city status through introducing a very successful regulation regime that is capable of keeping house prices in check while allowing them to appreciate to a level that sustains investment interest. What has often been omitted from the discussion is the risk involved in maintaining the stability of a closed public housing sector that practically controls 90 per cent of the housing market. Already there are discussions of over-production and over-investment in the housing sector, and arguments that the government needs to speed up urban redevelopment in order to create greater scarcity. While Singapore just managed to weather the Asian financial crisis without going into a severe property slump like Hong Kong, the pressure on the government to stabilize house prices remains high. Singapore is currently facing one of the most difficult economic crises, in which continual house price stability remains a key challenge. Whether or not it will remain at the top of the housing league table will depend partly on whether the government can continue to manage the housing system,

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and partly on whether Singaporeans will continue to support and trust the value of their stake in it. The sustainability of the housing system will be keenly watched by policy makers and social policy students everywhere, since it is the only successful housing system in the world with such a high level of state intervention. Theoretically, it will continue to challenge neo-liberals who firmly believe that public involvement in housing should be minimal. South Korea and Taiwan form a second group of societies that place less emphasis on public housing. However, they both have moderate to good scores on accessibility, coverage and general quality of housing. This largely stems from efficient housing markets and regulatory regimes that do not hamper private investment initiatives. The jonsei rental system in South Korea is a good example. Unfortunately, as South Korea began to develop a mortgage system in 2000 amidst efforts to deregulate the financial sector, the jonsei system showed signs of withering (Yoon, 2002). Chang (1999) argues that housing subsidies in Taiwan have largely been tilted towards home ownership to the neglect of those low-income people who can never afford to buy. Rental subsidies to low-income people are rare and difficult to secure. Nonetheless, it is still too early to suggest that both South Korea and Taiwan will go for a more regulatory system. The market seems likely to remain an effective tool of housing allocation. The development urge will continue to guide the housing policies of the four tigers. This will mean providing continual attractions to multinational corporations, building a cosmopolitan living environment, promoting tourism and opportunities to invest in real estate with appreciation potential. Already we have witnessed the mass exodus of property-related capital from the tiger economies to Europe, Australia and North America after the Asian financial crisis. Property prices across the Western world have to some extent benefited from this windfall gain and recorded an annual appreciation of 15 per cent for the period 1998–2001. To salvage the property sector and to regain their rising momentum, the tigers are doing everything they can to boost the economy, with the assumption that a buoyant economy will bring new life to the real estate sector. The working of East Asian housing systems affects at least two key social domains: the economy and social security provision. The relationship between housing policy, housing consumption, economic growth (or decline), the real estate sector and social security is extremely complex, and presents a fascinating agenda for research. Our exploration of East Asian housing experiences highlights two aspects of

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theoretical interest that might illuminate this complex relationship. First, the tiger states all have an active property-led accumulation regime where middle-class people are able to make use of home ownership to generate additional income and wealth. However, all four tiger states have demonstrated a different degree of risks and vulnerability within their housing systems. Globalization of capital and investment has made the development of a mature property-led accumulation regime much more difficult to attain as the Asian financial crisis revealed the many inherent structural deficiencies in East Asian finance systems. There is certainly a long way to go before these property-led accumulation regimes finally mature. Second, housing policy provides the possibility of linking home ownership with the social security system, as is demonstrated in the case of Singapore. This case provides an interesting example of blending individual consumption with collective consumption. Through the configuration of CPF and HDB, Singapore has demonstrated the possibility of combining individual responsibility in housing consumption (through mortgage repayment buying government-built flats) within the context of stateassisted home ownership. In turn, this contributes to overall economic growth. However, the sustainability of the Singapore system is also thought to be at risk. Within the context of a small open economy, the ability of the state to insulate the public housing system from the world economy is doubtful. In Hong Kong and Singapore, the societies with the most active state involvement in housing, policy is driven by a mix of productivist and political purposes. In Singapore, the explicit aims of government housing policy are to promote social stability through giving people a stake in society. Stability is obviously a desirable end for PAP elites keen to preserve the existing regime and generate social order. Policy is also, however, productivist. Economically, housing is crucial to attracting the inward investment on which the Singapore economy has long depended. In Hong Kong, the links between housing policy and economic development are more complex, but still very real. In the 1950s, clearing land for industrial development was a significant element in the government’s early flat building programme. Subsequently, revenue from land sales, largely for housing, was a major source of income for government and so a way of maintaining the low rates of taxation on which incentives and competitiveness were believed to depend. Government-provided housing for rent was also an effective but indirect subsidy to wages and so a prop to competitiveness and profitability. In South Korea and Taiwan, housing policy involved lower levels of government activity and greater reliance

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on a modestly governed market, but the guiding preoccupations were again economic and political. The tiger housing systems have produced policies and institutions that are often very different from those found in the West. They have also registered notable successes. How they will fare in the context of a more turbulent global economy remains to be seen. What is clear, however, is that the impact of the Asian financial crisis on the housing sector and on housing policy has been considerable, and is likely to be long-lasting, even if its effects vary from place to place. Hong Kong has perhaps seen the most dramatic impact, in a massive slump in property values and confidence in the real estate market that had long been so critical to the territory’s economic advance. Singapore has avoided a complete meltdown, but confidence in the likelihood that property will maintain its investment value has been shaken. In South Korea and Taiwan, the impact of the financial crisis has also been significant, encouraging banks in South Korea to develop a more formal mortgage loan system, and generating pressure in Taiwan for more market regulation. Housing is the area of social policy most closely linked to financial markets, institutions and systems. Inevitably, the impact of the Asian financial crisis has been felt particularly severely here.

Brief country descriptions Hong Kong Approximately half of Hong Kong’s housing is provided by the government, with public rental housing accounting for 32 per cent while the government-run Home Ownership Scheme amounts to 18 per cent. Private housing takes up roughly the other half of the housing stock. Home ownership is the major tenure and reached 55 per cent in 2001. Singapore The Singapore Housing Development Board (HDB) produces and distributes 85 per cent of all housing for most working- and middle-class people. An extremely high percentage of Singapore public housing – 92 per cent – is home ownership. The HDB, in conjunction with the Central Provident Fund, allows homeowners to use their savings to pay their mortgage. The private housing market is quite small and is largely confined to top-end home ownership.

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Taiwan Taiwan’s public housing sector is very small at 5 per cent of the total housing stock. It is largely composed of subsidized low-cost for-sale flats for low-income people. Private home ownership dominates the housing system with an 85 per cent share. Home financing for the majority of the people is mainly provided by commercial banks. South Korea South Korea has a very small public housing sector, dominated by subsidized for-sale flats targeted at low-income groups. The private housing market provides the majority of housing through a unique rental system called jonsei. Home ownership is a widely preferred tenure, accounting for 75 per cent of the total housing stock. Home financing is mainly provided through savings and private loans.

6 Social Security Yeun-wen Ku

The East Asian tigers have a long history of social security provision, ranging from traditional poverty relief to modern social insurance and provident funds. However, it was the 1997 Asian financial crisis that made social security reform more central to welfare reform across the region. In the wake of the crisis, the tigers have sought not only to take necessary measures of economic reform, but also to strengthen the social safety net. In Singapore, the provident fund approach, comprising compulsory individual savings with contributions from employees and employers, is favoured. In Hong Kong, a tax-funded, means-tested social assistance scheme introduced in the 1970s was supplemented by a provident fund in 2000. South Korea and Taiwan have chosen to rely on social insurance and social assistance schemes as the two key pillars of social security. The contrasting approaches illustrate the diversified nature of welfare systems in the four tigers. This chapter begins by exploring the development of social security in the four societies, and then analyses their contemporary systems in terms of regulation, provision and funding. It ends by making an overall assessment.

History and basic orientation Since the publication of the UK Beveridge Report in 1942, the concept of social security has been closely linked to poverty prevention (Alco*ck, 1999). In practice, it has meant that some kinds of cash benefit, the most direct form of poverty relief, are allocated to people in need through institutional arrangements other than market mechanisms. Although social security can be taken to embrace schemes for getting people into work and changing work-related behaviour, income maintenance is still central (Sainsbury, 1999). Organized poverty relief is, of course, not a 128

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recent phenomenon, having long been associated with capitalist development. Gough writes that ‘capitalism generates one unprecedented new contingency – unemployment. Underemployment, seasonal idleness, even casual employment were known before the industrial revolution, but the lack of any productive activity is a phenomenon peculiar to capitalism’ (Gough, 1979: 33). The nature of economic insecurity in capitalist society in fact extends far beyond unemployment. People can face insufficient income for other reasons such as the premature death of the family head, old age, injury and disease, substandard wages, price-level changes, natural disaster, and personal factors. Not all of these contingencies are targets of social security. Wage levels are usually negotiated by employers, workers and trade unions, for example, and the state gets involved only rarely. In addition, some needs arising from injury and disease are covered by health care systems, with social security providing benefits to compensate for loss of income arising from ill health. According to the United States Social Security Administration, cash benefits for poverty, old age, unemployment, occupational injury, and disability, death and survivors are most commonly regarded throughout the world as requiring social security provision (Social Security Administration, US, 1999). They have become the main fields of action for what we define as social security. Within this broad conceptual framework, it is also possible to distinguish varying forms of cash benefit deployed to relieve adverse contingencies. As Table 6.1 shows, these are very diverse and have many dimensions, such as purpose, funding and eligibility, all of which require analysis. Moreover, although the market mechanism does not normally play a central role in social security provision, in some countries it plays a role in providing for, say, old age or sickness. Because state social security exists primarily to overcome market failure in providing adequate incomes for people’s essential needs, eligibility is a central issue. Individuals have a clear responsibility to contribute to the system, but adequate provision cannot depend solely on what individuals have contributed while in work. Redistribution across the life-span and among individuals is important for risk pooling, which in turn is necessary to achieve an effective system. In general terms, the key shaping factors for social security development in the four tigers have been political and economic concerns. In the 1940s and 1950s, all four governments sought legitimation mainly through economic growth, which they held to depend on low rates of taxation and public expenditure. This constrained social security development. However, at the same time governments needed to secure a measure of

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Table 6.1

Social security instruments and characteristics Assistance

Insurance

Allowance

Provident fund

Employers’ liability

Poverty alleviation Taxes Means test

Poverty prevention Contributions Contribution record

Poverty prevention Employers Current employment

Benefits

Flat-rate cash & in-kind, up to poverty line

Contributions refund

Earningsrelated cash

Focus

Persons in need

Persons with additional income need

State role

Regulatory and funding Social responsibility

Earnings- and (or) contributionsrelated cash Persons suffering interruption of earnings Regulatory

Social compensation Taxes Some social or demographic category Flat-rate cash

Regulatory and funding Social responsibility

Persons suffering interruption of earnings Regulatory

Individual responsibility

Employers’ responsibility

Interpersonal

Life-span

Gratitude

Purpose Funding Eligibility

Responsibility

Redistribution

Interpersonal

Social and individual responsibility mixed Life-span and interpersonal mixed

Source: Adapted from Dixon and Chow (1992) and Jacobs (1998).

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popular support, which prompted them to launch schemes of social security for key social groups whose support was crucial to the regime. Nevertheless, social development remained slow because a number of factors, including economic growth, full employment, youthful societies and strong family support systems, reduced need. In these circ*mstances, governments were able to proclaim the virtues of independence and selfreliance, and to trumpet the dangers of a Western dependency culture fostered by over-generous social security systems. Hong Kong Hong Kong has long been seen as a residual welfare regime: ‘the family, the voluntary sector and the market have been actively encouraged to take primary responsibility for the delivery of welfare’ (McLaughlin, 1993: 106). Since its introduction in 1971, Comprehensive Social Security Assistance (CSSA) has been the major state social security system for the provision of subsistence income. In 1999 it covered about 3 per cent of the population, mostly elderly people (Brewer and MacPherson, 1997: 76; Tang, 2000: 125). However, since the onset of the Asian financial crisis it has covered increasing numbers of unemployed claimants, as there is no specific scheme of support for the unemployed. Since the mid-1970s there has also been a system of taxfunded benefit, now known as the Social Security Allowance Scheme. The scheme provides a means-tested normal old age allowance for individuals between 65 and 70, and a non-means-tested higher old age allowance for those over 70. There is also an allowance at normal and higher levels for people with disabilities. The levels of these allowances, however, make them little more than tokenistic. In 2000, the Mandatory Provident Fund (MPF) was introduced as a pale imitation of Singapore’s Central Provident Fund (CPF). Employees and employers now have to pay pension contributions into designated saving accounts. Those accounts are managed by private companies, in contrast to government control in Singapore. The aim is to promote saving for old age. It also, of course, increases the funds available for investment by financial institutions (Tang, 2000: 125–6). Singapore In Singapore the CPF is the key element in social security policy. It is funded by contributions from employers and employees, and managed by a government department. Since its introduction in 1953, the CPF has expanded to cover more and more social functions. Today, it is not only an instrument of social security but also a central element in housing,

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health, and education policy. There is no unemployment benefit. The Public Assistance Programme is a safety net for needy Singaporeans who are unable to work, have no savings and no family to depend upon. Its eligibility conditions are very tightly drawn, and levels of benefit are low. Claimants are mostly elderly people, women and children (Ku, 1996). South Korea Development of the South Korean social security system came with Government Employees’ Pension Insurance in 1960 (implemented in 1962), Military Personnel Pension Insurance in 1962, and Industrial Accident Insurance in 1963 (Kwon, H. J., 1999a: 80; Tang, 2000: 98–100). Since the 1980s, the government has proceeded with a series of radical expansions in social security. In addition to the existing pension insurance scheme for civil servants, private school teachers, and the military, the National Pension Programme, enacted in 1988, has progressively been extended to all workers in private firms with more than five employees, as well as to farmers, fishermen and the rural self-employed aged 18 to 60 (Jacobs, 1998: 118). In 1993, the Employment Insurance Programme was established to provide unemployment benefit. It came into effect on 1 July 1995, and over the next three years its coverage, rates and duration of benefits were regularly extended. For poor families and other needy people, a Livelihood Protection Programme was enacted in 1965 as a kind of means-tested assistance. It divides recipients of benefits into four categories according to earning ability. It assumes people between 18 and 65 years old have an income-earning ability, unless they are mentally or physically disabled (Kwon, H. J., 1999a: 84–5). In 1990, 5.26 per cent of the total population received benefits from the programme. At the end of the decade, however, it seemed unable to cope with the growing number of claimants produced as a result of the financial crisis. A new system, the National Basic Livelihood Security Law, therefore took effect on 1 October 2000. Anyone who is eligible for social assistance receives it as a right. Second, in exchange for assistance, beneficiaries who are able to work are obliged to search for jobs and to accept training, employment on public works and any job placements provided by the local welfare office, with the objective of promoting self-reliance. Taiwan Of our four societies, Taiwan was the first to establish a social insurance system. Here social security consists of social insurance and social assistance. The coverage of the former has been expanded significantly.

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The first social insurance legislation was the Military Servicemen’s Insurance Law 1953. Although the Labour Insurance Programme and the Military Servicemen’s Insurance programme had already been introduced in 1950, labour insurance was not implemented until 1958. By 1980, three major systems of social insurance had been established – for military servicemen, civil servants, and labourers – to cover the risks of maternity, industrial injury and sickness, medical care, disability, old age, death, and funeral costs (Ku, 1997). Subsequently, medical care benefits were transferred to the National Health Insurance scheme. Among the three major systems, labour insurance is the largest, covering 7.9 million workers, equivalent to about 36 per cent of the total population in 2000. A national pension insurance scheme is currently being planned. For the poorest, social assistance provides a cash benefit. The first act in this field was the Social Relief Law 1943, helping those in poverty as a result of age, youth, pregnancy, disability, or disaster. It was replaced by the Social Assistance Law 1980. This was a progressive development in that it adopted ‘income’, rather than causes of poverty, as the key eligibility criterion. However, the 1980 Act contained no definition of poverty, leaving government officials the discretion to set the poverty line. In consequence, an extremely low line was established under which only 0.5 per cent of the total population qualified for relief (Ku, 1997). This became the first target for improvement when the government proposed the Social Assistance Law 1997. This act specifies the poverty line as 60 per cent of per capita consumption expenditure in the previous year. Its impact on the number of poor claiming benefit was, however, marginal, increasing the proportion receiving social assistance only to 0.7 per cent in 2000. Apart from social assistance, there are some allowances specifically for elderly people with insufficient incomes. In 1994, the Living Allowance for Middle-Low Income Elderly People was introduced, followed in 1995 by the Welfare Allowance for Aged Farmers. Together they benefited around 840,802 people, equivalent in 2000 to about 44 per cent of the aged population. In addition, some local authorities provide cash benefits to the elderly, but these are not regular sources of income. In response to government concern about increasing unemployment, the Labour Council in the late 1990s launched a series of measures to establish an unemployment benefit system. Since 1 January 1999, benefit has been provided for those who are laid off. It has the aim of integrating employment and retraining services to help workers back into the labour market as quickly as possible.

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Social security development in the tigers has been shaped by a range of factors. Critical in Singapore, South Korea and Taiwan was government concern to bolster government legitimacy by offering benefits to groups central to regime stability, such as civil servants and the military. In Singapore, there was also a rather broader concern to give citizens of the new city-state an important stake in the future. In Hong Kong, CSSA developed very much as a residual, last resort, paternalism-driven safety net to be used only when other support mechanisms had failed. Politics, beliefs about the economic impact and implications of social security systems, demography and the ability of social security systems to generate sui generis growth all played a role.

Regulation In social security, the regulatory task is always complex whatever the pattern of provision. Certainly, there are no problems of professional regulation, as in education or health, but there are large areas requiring precise and detailed regulation. At least six regulatory tasks face governments. There is regulation of the framework of benefits and definition of the contingencies to be covered. There is the task of setting and regulating the levels of benefit. There is regulation of the conditions of access to benefits, the regulation of eligibility and who gets what and when. There is the question of the determination and regulation of contributions. Often responsibilities for particular aspects of social security provision or administration are delegated to non-government agencies, such as employers, local authorities and ad hoc agencies. These bodies need regulation. Finally, there is regulation and monitoring of the discretion inherent in all bottom-line assistance systems. All mature, developed social security systems cover a wide range of disparate contingencies. If government is to retain control, a substantial body of regulation is inevitable. Whereas the state is the ultimate regulatory body, in most societies responsibilities are dispersed to take account of the range and variety of benefits and systems. In none of our four societies is there a single regulatory body. Table 6.2 shows the complexity of the regulatory task with five types of provision – insurance, assistance, allowances, employers’ liability and provident fund – seeking to provide for five different contingencies. Hong Kong In Hong Kong, social security regulation is relatively straightforward, because the benefit system is both limited and long-established. The

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Table 6.2

Social security instruments in the four East Asian tigers

Poverty Old age

Unemployment

Disability, death and survivor Occupational injury

Hong Kong

Singapore

South Korea

Taiwan

Assistance Employer liability MPF Assistance Allowances Employer liability Assistance Assistance Allowances Employer liability

Assistance CPF Insurance Assistance

Assistance Insurance Assistance Employer liability

Employer liability

Insurance Assistance

Assistance Insurance Assistance Employer liability Allowances Insurance Assistance

CPF Life insurance Employer liability

Insurance Assistance Insurance Employer liability

Insurance Allowances Insurance Employer liability

Source: Adapted from Jacobs (1998).

establishment of social security can be traced back to 1947, when the colonial government set up a Social Welfare Office responsible for poverty relief (McLaughlin, 1993: 110–11). Today, the Social Welfare Department is generally responsible for a broad range of social policies, and has a staff of more than 5000. Social assistance is the heart of social security provision in Hong Kong. CSSA is a tax-funded and noncontributory but means-tested scheme to provide a safety net for individuals and families in need. To be eligible, claimants must satisfy conditions such as residence requirements (at least one year in Hong Kong), monthly household income insufficient to meet needs (a long list shows every item of living costs), total household capital assets below a prescribed level, and work in the case of able-bodied adults. Benefit levels are adjusted case by case, according to disposable income, age, disability, and needs (Social Welfare Department, Hong Kong, 2002a). Running such a scheme requires a massive and complex body of regulations to meet needs and control eligibility and expenditure. Regulating administration of the Social Security Allowance scheme is much simpler. It is a non-contributory scheme for elderly and disabled and severely disabled Hong Kong residents aged 65 and more. It consists of Normal Old Age Allowance (for those aged 65–69), Higher Old Age Allowance (for those aged over 70), Normal Disability Allowance (for disabled persons), and Higher Disability Allowance (for very severely

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disabled persons). Eligibility does not require a financial test, except for Normal Old Age Allowance, which sets asset and monthly income limits. Eligibility for Disability Allowances is determined after a social and medical assessment (Social Welfare Department, Hong Kong, 2002a). The other element in social security in Hong Kong is the MPF, an employment-related contributory system for workers aged between 18 and 65. The government’s main role after passing the legislation was to create regulatory and administrative systems to ensure contributions are collected and paid to registered MPF trustees. The scheme is privately run but monitored by the Mandatory Provident Fund Authority (MPFA), which is a statutory but non-governmental body (Ngan and Cheung, 2000). MPF trustees are responsible for investing the funds, with a proviso that 30 per cent of contributions be invested in Hong Kong dollardenominated securities. Contributions and accrued earnings must remain in the MPF until the member reaches age 60 and has retired, or reaches the age of 65, or dies. If a member departs permanently from Hong Kong, or is totally incapacitated, he or she may withdraw accumulated benefits in a single lump sum (Asher and Newman, 2001). The MPF is portable between jobs. Due to its compulsory nature, by the end of 2001 the MPF covered almost 86 per cent of employers, 93 per cent of employees, and 90 per cent of the self-employed, though it excluded marginal workers and unpaid housewives (Ngan and Cheung, 2000). Singapore The CPF and social assistance are the twin pillars of Singaporean social security. The CPF is managed by a governmental department, the CPF Board, whose members are appointed by the Minister of Manpower, and comprise representatives of government, employers, employees, and professionals. However, the CPF Board does not have policy making and investment responsibilities. These are the prerogative of the Ministry of Manpower (Asher and Newman, 2001). Employers and employees pay CPF contributions at a fixed per centage of wages. Each member has four CPF accounts: • Ordinary Account: savings in this account are available for preretirement withdrawals for home purchase, education, approved financial investment, and for topping-up a parent’s retirement account. • Medisave Account: savings in this account can be used for meeting hospitalization costs and to pay premiums for approved medical insurance schemes such as MediShield for the cost of catastrophic illnesses.

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• Special Account: savings in this account are reserved for old age and contingency purposes and can only be withdrawn at age 55. • Retirement Account: at age 55, a member can withdraw the remaining balance in the Ordinary Account and the balances in the Special Account as a tax-exempt lump sum after leaving a minimum sum in this account (IMF, 2000). In the proliferation of CPF accounts we can see its functions expanding to meet a widening range of social needs. However, the CPF only covers workers who are employed by the same employer for more than one month. Workers such as pensionable civil servants, the self-employed, those in low-paid jobs, and those in part-time and irregular employment are excluded from membership (Lee, 2001). The CPF does not provide assistance to the poor. During periods of sickness or unemployment, workers cannot get help from the CPF (Lee, 2001). Social assistance, overseen by the Ministry of Community Development and Sports, remains the only safety net against poverty in Singapore. For those in financial distress, several programmes are available, including Public Assistance, Special Grant, the Rent and Utilities Assistance Scheme, the Short-term (interim) Financial Assistance, and the Center-Based Financial Assistance Scheme for Child Care. Public Assistance is the most important, and is meant to provide very basic cash benefits to Singaporeans who are unable to work and have no means of subsistence and no one to depend on, due to old age, illness, disability or unfavorable family circ*mstances. South Korea In South Korea, the Ministry of Health and Welfare (MOHW) is primarily responsible for overseeing the major social security schemes: the National Pension Programme, National Livelihood Protection, and National Health Insurance. As in Taiwan, however, responsibility for managing and regulating benefits for military servicemen, school teachers, workers, and veterans is assigned to the relevant functional departments: the Ministries of Defense, Education, Labour, and Patriots and Veterans Affairs. This generates a proliferation of regulatory mechanisms to deal with the terms and conditions of different schemes in departments with very different traditions and approaches. The MOHW is responsible for policy making for the National Pension Programme, covering the scope of the scheme, contribution rates, benefit conditions, levels of benefit, and fund management and operation. The scheme is actually administered, however, by the

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National Pension Corporation, with a staff of 4000. The Corporation in turn is supported by a range of high-level committees: the Committee for National Pension Fund Operations, the Working and Evaluation Committee, the National Pension Council, and the National Pension Review Committee. The Committee for National Pension Fund Operations is chaired by the minister and made up of representatives of the key stakeholders along with two pension experts. Although these committees are all part of the policy, administration and regulation process, the MOHW ultimately regulates the scheme. Article 34 of the South Korean Constitution states that the government must guarantee every citizen a fundamental right of life. Social assistance organized under Livelihood Protection legislation, which goes back to the 1960s, is the core mechanism for achieving this objective. In response to the growing needs created by the 1997 financial crisis, the programme was replaced by the National Basic Livelihood Security Law in 2000. The new act significantly increases state responsibility for social assistance, including an expansion of coverage to a wider range of needy people, and new measures to enhance recipients’ ability for self-reliance, particularly the obligation to work. One important innovation is that cash benefits are provided for poor households regardless of their age and ability to work. The number of recipients consequently increased from 540,000 in 1999 to 1,940,000 in 2001. Such expansion places new demands on the policy making and regulatory skills of the MOHW to maintain the credibility of the scheme and control costs while meeting unprecedented levels of need. Crucial is the determination of the level of income for eligibility. The MOHW is responsible for setting the poverty line. It is also responsible for most of the budget for social assistance, while local authorities and their welfare officers are in charge of the actual administration and delivery of benefits. The Ministry of Labour has two major responsibilities in the field of social security: the new Employment Insurance Scheme, and the much older Industrial Accident Compensation Scheme. While the Ministry makes policy, day-to-day administration is the responsibility of the Korea Labour Welfare Corporation. The Employment Insurance Programme began to operate in 1995 with two main purposes. One is to provide unemployed workers with cash benefits. The other is to provide financial support to companies and employers to enhance employment stability and the skills of workers through active labour market policy measures (Lee and Lee, 2000: 74). Various extensions of the unemployment insurance scheme since 1995 have vastly expanded

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its scope, and the administrative and regulatory tasks facing the Ministry and the Corporation. Taiwan In Taiwan, as in the other tigers, the key role of the state in social security is as regulator rather than as funder or direct provider. There are three basic areas for regulation – insurance, assistance and allowances – and a number of responsible agents, including government departments, employers and local government. Benefits from social insurance are essentially national, meaning that eligibility is determined by national criteria relating to the time period and levels of contribution, rather than areas in which people happen to live. However, this does not totally remove inequalities and status differences. Social insurance in Taiwan basically consists of labour insurance, civil servants’ insurance, and military servicemen’s insurance. The system classifies people into different occupational categories entitled to benefit from different insurance programmes. Furthermore, there is not one department in central government to regulate insurance programmes. Responsibility is dispersed, with the Council of Labour Affairs responsible for labour insurance, the Ministry of Examination for civil servants’ insurance, and the Ministry of Defense for military servicemen’s insurance. Alongside the planned National Pension Scheme, the Taiwanese government is now considering reorganizing its social security system on a much more integrated base. Behind this development is the need to construct a comprehensive safety net with uniform rules and regulations, in which no one is excluded from benefits but also no one above a minimum needs level can claim benefits. Due to difficulties in integrating so many current systems, the government has proposed ‘Separated Systems with a Unified Benefit’, meaning that all related oldage benefits will be calculated along the same lines but paid by different systems, and individuals without any other social insurance will be covered by the forthcoming national pension scheme (Ku, 1998b). Given the reluctance of the tigers to accept the case for unemployment insurance, the development of such a scheme in Taiwan from 1999 has introduced a new and difficult area requiring tight regulation by the Council of Labour Affairs and its local branches. In Taiwan, social assistance administered by local authorities remains the social security safety net, though its importance has declined as insurance has developed. Social assistance legislation, passed by central government, grants local authorities discretionary powers to set poverty lines and benefit levels, as well as requiring them to assume

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full responsibility, financially and administratively, for social assistance. In response to varied financial conditions, local authorities seek to make the most of limited public money by creative adjustments to the eligibility of claimants. Those living below the poverty line are not automatically entitled to cash assistance. Local authorities further define them as ‘deserving’ or ‘undeserving’ according to their ability to work. Someone of working age but unemployed, for instance, cannot fit into any category eligible for help. This can significantly reduce the number of claimants receiving benefits. Only in Taipei City are the poor defined solely in terms of income. Allowances are increasing in Taiwan, notably for old people and the handicapped with low incomes, driven by intense party competition (Ku, 2002). There is thus a corresponding need to regulate eligibility. As central government and local authorities have their own schemes, regulating entitlement is complicated and inconsistent, prompting criticism of ‘one country so many systems’ (Sun, 2000). One failure of regulation in Taiwan is in relation to occupational retirement programmes (employers’ liability in Table 6.2). Employers are supposed to provide benefits, but the regulations are largely disregarded in practice, indicating the primacy given to employers’ needs over employees’. The tigers have adopted very varied approaches to social security regulation. Nevertheless, there are some clear similarities. All four societies have top-down, state-led schemes developed essentially for political purposes, namely political legitimation and social stability. In each case, a reactive response to emergent or immediate needs prompted the state to place a premium on regulation because of its reluctance to get involved in direct provision and funding. Equally, in none of these societies is there a single unitary management and regulatory authority. Nowhere is there a Ministry of Social Security. Instead, responsibility is dispersed between different departments, such as social welfare, labour affairs, defence and education. This dispersion reflects the fact of diversity in social security provision for different population groups, resulting from separate categorical schemes introduced at different times for different reasons. The result is a regulatory maze. Finally, all four societies have last-resort assistance schemes, as do almost all societies. However, the schemes have different scales and play distinct roles in our four societies. In Hong Kong, CSSA is social security, and, uniquely in Asia, it is tax-funded. It plays an important role in relieving poverty, and because of its importance has spawned a massive infrastructure of detailed regulation. In no other of our societies is

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assistance of similar importance, though South Korea has recently made important changes to Livelihood Protection to create a more acceptable bottom-line scheme following the Asian financial crisis. In Singapore and Taiwan, the assistance schemes remain small and starkly residual. Additional differences are visible in the regulatory simplicity of Hong Kong and Singapore, and complexity of Taiwan and South Korea. Until recently, when the MPF scheme was established, Hong Kong had only two schemes of social security: CSSA and the Allowance system. Singapore had the CPF scheme and the small, residual assistance scheme. Regulation in these two societies remains relatively simple. By contrast, Taiwan and South Korea have a number of long-established, category-based insurance schemes, and complex regulatory systems.

Provision Many concepts have been proposed to describe welfare provision in the four tigers. The concept of ‘reluctant welfarism’ used by Midgley (1986) aptly captures how political elites in the four tigers have responded to social need. However, in social security there have been significant developments in the scope of state activity in all four societies since the late 1940s. Table 6.3 shows the wide range of benefits currently available. What has emerged is a very mixed economy in which the state plays a significant role, chiefly as regulator and organizer rather than as direct provider and funder. In all four tigers, the state’s role in simultaneously funding and organizing social security is essentially restricted to two areas: bottomline social assistance, and benefits to its own employees. However, there are exceptions, such as the all-purpose Labour Insurance programme in Taiwan, towards which the state makes a token contribution (10 per cent of earnings, compared to the 70 per cent required of employers). All four societies have social assistance schemes in which benefits are directly funded and provided by the state. The schemes vary considerably in their role, scale and generosity, but all reflect a strong belief in limited eligibility. Hong Kong’s is the largest because, until the creation of the MPF, CSSA and the parallel Allowance scheme were effectively the only state social security in Hong Kong. Until the Asian financial crisis, CSSA was primarily a benefit for elderly people, but since 1997 the number of unemployed people claiming benefit has increased sharply. In 2001 there were 242,000 CSSA payments. The Allowance scheme paid out benefits to 560,000 elderly and disabled people. In South Korea, the Livelihood Protection assistance scheme was substantially reordered and

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Table 6.3

Social security programmes in the four East Asian tigers Hong Kong

Singapore

South Korea

Taiwan

Poverty

1 (Comprehensive Social Security Assistance, CSSA)

1 (Public Assistance Pr.)

1 (Social Assistance Law)

Old age

4 (Long Service Pay, Social Security Allowance, CSSA, Mandatory Provident Fund)

4 (CPF, Civil Servants’ Pension, Dependants Protection Scheme under CPF, Public Assistance)

1 (Livelihood Protection Pr., replaced by National Basic Livelihood Security Law in 2000) 6 (Nt’l Pension Pr., Gov’t Employees Pension Pr., Private Sch. Teach. Pension Pr., Military Personnel Pension, Pr., Livelihood Protection Pr., Labour Standards Law)

7 (Labour Ins., Gov’t Employees Ins., Military Servicemen Ins., Old Age Allowance, Farmers’ Old Age Allowance. Social Assistance Law, Labour Standards Law)

Unemployment

2 (Severance Pay, CSSA)

Disability, death and survivor

2 (Social Security Allowance, CSSA)

Occupational injury

1 (Employers purchase private insurance)

0 (Negotiation between employers and employees) 2 (CPF and Dependants Protection Scheme, a kind of life insurance)

1 (Employers purchase private insurance)

2 (Employment Insurance Pr.,Livelihood Protection Pr.) 5 (Nt’l Pension Pr., Gov’t Employees Pension Pr., Private Sch. Teach. Pension Pr., Military Personnel Pension Pr., Livelihood Protection Pr.) 2 (Ind. Accident Ins., Labour Standards Law)

2 (Labour Ins., Social Assistance Law) 5 (Labour Ins., Gov’t Employees Ins., Military Servicemen Ins., Farmers’ Ins., Handicapped Welfare Law) 4 (Labour Ins., Gov’t Employees Ins., Standards Law) Service Servicemen Ins., Labour

Source: Adapted from Jacobs (1998).

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extended in the years after 1997, and the number of claimants rapidly doubled. In Taiwan and Singapore, the schemes remain very marginal with low take-up rates and a great deal of non claiming from the seemingly eligible. In all four societies, the level of benefits remains extremely low in terms of proportion of average earnings replaced or per capita GDP (Jacobs, 1998: 41). In Singapore, it is ‘significantly lower than what the government considers as the minimum necessary for subsistence’ (Ramesh, 2000b: 247). The state plays a much larger role in social security schemes, where it acts simply as organizer rather than as organizer and funder. All four societies are active in relation to pensions for elderly people. Singapore has the CPF, which 50 years ago began life as a scheme of compulsory savings for old age. It is funded by very substantial contributions from workers and employers. In Hong Kong, the much more recent MPF has a more limited role, being designed simply to provide financial support for elderly people. It is funded by much lower contributions again from workers and employers. South Korea has a contributory National Pension Programme funded by employees and employers, but it will only start paying out full benefits in 2008. Workers employed at firms with five or more employees, and farmers, fishermen and rural selfemployed between the ages of 18 and 60 are covered by the National Pension Programme compulsorily, while workers employed at firms with less than five employees and the urban self-employed can join the programme voluntarily. The National Pension Programme is only for workers without coverage from the other three existing pension programmes for civil servants, military servicemen, and private school teachers (Lee and Lee, 2000: 63). The number of workers covered by the National Pension Programme increased from 7.84 million in 1997 to 16.28 million in 2001. Coverage is now about 75 per cent of the labour force (MOHW, 2002b). Three kinds of benefits, for old age, disability, and survivors, are provided, with a benefit level around 60 per cent of average income after a daunting 40-year full contribution period. Benefits are adjusted accordingly if there are fewer than 40 years of contributions (MOHW, 2002a). At the moment, the programme not only includes those in stable full-time jobs but also the self-employed, housewives and students. There is concern about its long-term financial viability (Kwon, H. J., 1998b). Taiwan has a number of pension schemes designed for particular categories of workers and is actively planning a new National Pension Programme. Only South Korea and Taiwan have schemes of unemployment insurance, and both are very new. In South Korea, the programme has

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extended its coverage in response to the Asian financial crisis, and pays a more generous benefit: the duration of payments was increased from 60 to 210 days, and the benefit payable to 70 per cent of the minimum daily wage (Jacobs, 1998: 121; Tang, 2000: 104). However, official estimates show that only one in eight of the unemployed receive unemployment benefits. In addition, less than half participate in some type of labour programme, the others remaining potential clients for social assistance benefits. The current Taiwanese scheme only covers workers with formal and full-time employment in firms with five or more employees, and specifically excludes the self-employed and workers without permanent employers. Of the workers covered by labour insurance, only 62 per cent are entitled to unemployment benefit, equivalent to half the total labour force. Workers claiming unemployment benefit must be involunarily unemployed and have to accept an assigned job and training. The benefit level is about 60 per cent of the insured wage, with a duration of no more than six months (Ka, 2000: 407–11). While frequently deploring the economically and socially debilitating effect of public social security provision, governments in all four societies have developed generous schemes for their own employees: civil servants, the military and teachers. The loyalty of these groups is vital to regime survival, and social security schemes have been developed to bind them to the government. In Taiwan, Ku calculated that in 1991 military servicemen, government employees, teachers, veterans and retired Members of Parliament received almost 75 per cent of central government welfare expenditure (Ku, 1997: 58; see also Tang, 2000: 77). Ramesh comments that what sets apart social security programmes in Singapore is ‘the extent to which the expenditure of public funds are concentrated on state functionaries, while insisting on private financing for programmes for the rest of the population’ (Ramesh, 2000b: 244). In South Korea, Tang argues that ‘government deviated from a “production first” approach temporarily in 1963 and legislated to give pensions, medical and other benefits to the civil service, the military and private school teachers’ (Tang, 1996: 4). Contributions costs are shared equally between government and employees. In Hong Kong, civil servants and the police have traditionally been well cushioned against the vicissitudes of life. These arrangements illustrate the essentially political nature and purposes of social security in these societies. Apart from social assistance and provision for their own employees, governments have been reluctant to get involved in directly funding provision. The major social insurance schemes that South Korea and Taiwan have initiated in recent years have been government organized

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and regulated but with funding limited to a contribution to administrative costs, for example in the Korean National Pension Programme (Kwon, H. J., 1999a: 98). As these schemes have extended beyond the ranks of the more secure workers, both governments have come under pressure to pay the contributions of some marginal workers so that they are not bereft of cover. However, these schemes are not social insurance in the traditional sense of involving government organization and management, tripartite membership and contributions from workers, employers and the state. In most societies with the level of economic development of the Asian tigers, the market would play a significant role in social security provision. Individuals would take out insurance against sickness, disability or, most commonly of all, for retirement. There is little evidence of private social security provision in the tigers. However, employers play an important if not always very obvious or quantifiable social security role in all four societies. They contribute to governmentsponsored social security schemes, and to the provident funds in Singapore and Hong Kong, and are clearly central to the viability of these programmes. Furthermore, in the latter society Employers’ Liability leads Jacobs to argue that, if a broad rather than statedominated view of social security is taken, ‘Hong Kong’s social security might . . . be financed mostly by the private sector’ (Jacobs, 1998: 28). Returns made under the 1993 Occupational Retirement Scheme Ordinance revealed that approximately one-third of the Hong Kong workforce was covered by occupational pensions (Brewer and MacPherson, 1997: 86). Jacobs stresses the importance of legal severance and long service pay, which is compulsory for all workers who have been in post for more than five years, at a rate of two-thirds of basic monthly salary for each year of service. Tang provides some support for Jacobs in the argument that the rather puzzling absence of business opposition to the MPF can be explained by the fact that most larger firms already have some kind of private insurance in place for their employees (Tang, 2000: 126). In Hong Kong, employers also have significant statutory responsibilities for paying sick pay, maternity benefits and compensation for industrial injuries (Jacobs, 1998: 131). Benefits are paid for a maximum of six months. In South Korea since 1989, firms with more than five employees have had to fund lump sum retirement payments for their employees equivalent to one month’s average salary for each year of service. Although this is a key source of retirement income, it is not captured in official statistics. Shin stresses ‘the reliance of government on the private sector to provide social benefits’. He calculates that South Korean enter-

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prises spend 1.4 per cent of GDP on mandatory private social benefits, which amounts to 26.5 per cent of total social security expenditure (Shin, 2000a). Here the enterprise is clearly an important provider of social benefits such as severance, sickness, and child allowances, but coverage is limited to regular workers. Moreover, in important areas such as sickness benefit it is dependent on custom rather than on law (Jacobs, 1998: 117). Employers also have to fund schemes of industrial accident compensation. In Singapore, employers have significant social security responsibilities. Employees are entitled to 14 days of paid sick leave per year, and up to 60 days if they have been in hospital. Employers have to pay full wages for eight weeks in cases of maternity, though only for the first two children. Employers also have to bear the full cost of occupational injuries (Jacobs, 1998: 136; Ramesh, 2000b: 246). Similarly, Taiwanese employers bear responsibility, prescribed by the Labour Standards Law, for paid leave for their employees, adjusting from seven to 14 days per year, in addition to regular weekends and national holidays. However, Labour Insurance provides cash compensation for workers in maternity, illness and injury. Normally compensation levels are from one to six months wages. This can extend to two years in cases of occupational injuries (Ka, 2000: 403). In all four tigers, family is a very significant provider of social security, reflecting cultural factors, custom, government exhortation and the force of law. Ramesh says in relation to Singapore that ‘By the early 1990s, one finds a sense of urgency in the government’s determination to ensure that individuals and families remained responsible for their needs during old age’ (Ramesh, 2000b: 252). In 1995, the Maintenance of Parents Act enabled neglected parents to sue their children for support in old age. South Korea and Taiwan also have legislation requiring people to support their family members, including parents and siblings whether they live together or not (Jacobs, 1998: 10). There is no such legislation in Hong Kong, but one survey showed that the majority of respondents thought that there should be. It can be argued, of course, that the passing of such laws suggests the weakening rather than the strength of family commitments. Despite significant growth in stateorganized and provided social security, family provision still remains the primary source of support for elderly people in all four societies. In Singapore, seven out of ten older people rely on family members, predominantly children, for support in old age (Asher, 1998: 19). The biggest income source for the elderly in both South Korea and Taiwan is children, where they provide 44 and 53 per cent respectively of elderly people’s incomes. In terms of the family and state roles, family support plays a far bigger part than public transfers (Kwon, H. J., 2001).

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Nevertheless, in both societies the contribution of children to the income of elderly people is declining sharply. In South Korea, the contribution decreased from 72 per cent in 1981 to 44 per cent in 1994. In Taiwan the decrease was from 68 per cent in 1986 to 53 per cent in 1993 (Kwon, H. J, 2001). A similar development is illustrated in Ku’s study of Taiwanese elderly people, showing that income transfers within households declined sharply from 66 per cent in 1986 to 48 per cent in 1996, while public transfers grew significantly from one per cent to 6 per cent during the same period (Ku, 1998b). The ideal type of tiger social security provision is a state-regulated partnership between employees and employers. That is the essence of the National Health Insurance scheme and the National Pension Programme in South Korea, and of National Health Insurance and the projected National Pension scheme in Taiwan. It is also at the heart of the CPF in Singapore, and the MPF in Hong Kong. The state makes the legislation and the regulations, but it does not provide or fund except at the periphery. These are employment-based bipartite schemes funded by workers and employers, which ultimately means they are funded by workers, as employers’ contributions are effectively financed by wage reductions. Essentially, these are individual self-help schemes in which the state plays only a fairly marginal role once the schemes have been established. However, there is also great variation in patterns and methods of provision, and of the degree of state involvement. Enthusiastic acceptance of the social insurance mechanism in South

Table 6.4

Funding for selected major pension programmes in the four East

Asian tigers Taiwan

South Korea

Hong Kong

Singapore

Pension Programmes

Labour Insurance

Contribution Rates (% of wages) Percentage Shared by: State Employees Employers

6.5

National Pension Programme 9

Mandatory Provident Fund 10

Central Provident Fund 36

10 20 70

* The state bears management costs only.

0* 50 50

0* 56 44

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Korea and Taiwan contrasts with its rejection in Singapore and Hong Kong. This generates built-in forces for change in the former two societies, but does not generate them in the latter two. Incremental development of the CPF in Singapore over 50 years as a catch-all individual self-help welfare funding system contrasts with the reluctant, focused and very recent MPF in Hong Kong. Employers’ roles also differ, and family support is starting to decline.

Funding Different social security instruments imply different financial arrangement in the four societies (Table 6.4). Generally speaking, social assistance and allowances are totally funded from government revenues. Social insurance and provident fund systems mainly rely on the contributions of employers and employees. The government, however, may subsidize social insurance, by funding management costs, by providing necessary operating reserves, or by paying contributions for some prescribed categories of population, mostly the acutely disadvantaged. The state also funds pension schemes for government employees such as civil servants, military servicemen, teachers, and contracted workers in government departments and enterprises. The government pays contributions for them because of its position as employer, rather than as an aspect of welfare policy. It is very difficult to obtain an accurate picture of the government contribution as expenditure on social security is classified under different headings. The number and variety of schemes in our four societies makes detailed comparison difficult. Hong Kong In Hong Kong, although Jacobs argues that social security is financed mostly by the private sector, the government in fact has full responsibility for social assistance (Jacobs, 1998: 28). Government expenditure on social security almost doubled between 1996 and 2001 (Census and Statistics Department, Hong Kong, 2002b). In 2001, the total amount of social security expenditure was close to $4 billion, of which 98 per cent was from general revenue and the remainder from the Lottery Fund (Census and Statistics Department, Hong Kong, 2002b). The MPF contribution rate is 10 per cent of salary, with employers and employees each paying 5 per cent and the self-employed required to contribute 5 per cent of income on either a monthly or a yearly basis. The government monitors the work of the MPFA, and maintains a fund of about $750 million to protect MPF members against fraud and misfeasance.

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Otherwise the government bears no financial responsibility (Asher and Newman, 2001; Ngan and Cheung, 2000). Singapore In Singapore, the CPF is funded by contributions from employers and employees. Contributions were set initially at 10 per cent of wages, and were gradually raised to a peak of 50 per cent in 1984. The targeted longterm contribution rate of 40 per cent was reached in 1994. However, in response to the financial crisis the employers’ rate was cut to 10 per cent in 1997, while the employee rate was left at 20 per cent. In 2001 the overall rate was raised to 36 per cent, and the authorities plan to raise it back to 40 per cent (IMF, 2000; Department of Statistics, Singapore, 2002b) The government has no responsibility for funding the CPF, which greatly decreases the financial burden of social security. Government is responsible for funding the social assistance scheme, but the costs of that are tiny, at around 0.5 per cent of GDP in the early 1990s. Tax allowances encourage taxpayers to support aged parents and grandparents, and siblings with disabilities, and constitute a rather different form of social security. There are also generous child allowances designed to encourage well-educated and well-paid young women to have children (Ramesh, 2000b: 246). Ramesh argues that the financially well-off are ‘showered with tax rebates as a reward for having children’ (Ramesh, 2000a: 68), a quite unique measure in the four societies. South Korea Social insurance stands at the heart of the South Korean social security system, with contributions generally shared equally between employers and employees (Jacobs, 1998: 17). However, there are three exceptions. The first is the National Pension Programme, with three sources of funding: employers, employees, and retirement funds previously built up by companies (which are now being phased out). Each source contributes 3 per cent of standard monthly earnings. Voluntary subscribers must pay the full 9 per cent. Government covers management costs and the contributions of low-income farmers and fishermen (Lee and Lee, 2000: 64). Another exception is Industrial Accident Insurance, financed solely by employers. Here the contribution rate is subject to the risks involved in particular industries. The Employment Insurance Programme is funded by three kinds of contribution: one per cent of monthly earnings for unemployment benefit, split equally between employers and employees; 0.3 per cent for job security, paid by employers; 0.5 per cent for training, again paid by employers (Kwon, H. J., 2002: 67–71).

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Government expenditure on social security has grown rapidly in recent years. The MOHW budget increased from about $873 million in 1990 to $5.7 billion in 2001, while total government expenditure increased from $20.8 billion to $75.1 billion in the same period (MOHW, 2002a). However, total social security expenditure in South Korea only accounts for about 5.28 per cent of GDP, a figure significantly lower than in Western welfare states. Private expenditure (often from employers) contributes 26.5 per cent of total expenditure, equivalent to 1.4 per cent of GDP (Shin, 2000a). Taiwan In Taiwan, all social insurance programmes are essentially of the partialfunding type, based on a pay-as-you-go method but with a legally required reserve fund to ensure its stability and to provide a cushion against any sudden increase in claimants. Unlike the full-funding system, as in the provident fund approach, individuals do not need to pay a very high contribution rate, because, firstly, the pay-as-you-go method effectively pools risk among different groups of the population and, secondly, the state bears final responsibility for the financial viability of the scheme. For labour insurance, the contribution rate is 6.5 per cent of the monthly wage, and is generally shared by employers, employees and the government on a 70/20/10 ratio. For some categories of population, the government subsidizes up to 80 per cent of contributions. An additional 0.34 per cent of the average contribution rate, varying with different occupations, is specifically for work injuries, and is entirely paid by employers. A contribution rate of 6.4 per cent applies for government employees’ insurance, with the government bearing 65 per cent of the cost. The contribution rate for military servicemen’s insurance is 8 per cent, and the government subsidy ranges from 65 per cent for officers to 100 per cent for soldiers and those with over 30 years of contributions (Ka, 2000: 399–421). The expansion of social insurance programmes in Taiwan, together with the introduction of assistance and allowances, have increased government expenditure on social welfare remarkably, from 8.8 per cent of total government expenditures in 1990 to 16.9 per cent in 2000 (when it was equivalent to about 4 per cent of GDP). Expenditure on social security (including insurance schemes, assistance and allowances, but excluding personal social services and health care) absorbs 82.4 per cent of welfare expenditure, while social insurance alone takes 73.6 per cent, illustrating the importance of social insurance in the Taiwanese social security system. As for the total funding sources of social security,

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the government contributes 47.7 per cent, while enterprises and households contribute 24.2 and 20.8 per cent respectively. The remainder comes from returns on reserve funds and donations (DGBAS, 2001). Although government expenditure on welfare as a percentage of GDP is still far lower than in Western welfare states, it is clear that the role of the Taiwanese state has become more and more significant. Hong Kong and Singapore have adopted the provident fund approach of compulsory individual savings plus employer contributions. By contrast, in South Korea and Taiwan the basic funding method is insurance. Taxfunded schemes play a very varied role, from central (until recently) in Hong Kong to extremely marginal in Singapore. Sources of funding, of course, are closely related to funding methods. In all four societies, there are the obvious four sources: individuals, employers, government and family. The variation, considerable and significant, is in the balance between them. In relation to assessing levels of expenditure on social security, it is difficult, and perhaps impossible, to be accurate, though there are clearly considerable differences whether we look at the percentage of GDP spent, the percentage of expenditure financed by government, or the percentage of earnings devoted to funding social security.

Assessment Social security systems in the four tigers differ from each other, with varied instruments, regulation mechanisms, and levels and patterns of provision and funding. Assessment of social security performance is never easy. However, many local research studies, as well as official reports, give insights into system performance and help us to construct an overall assessment. Here we look at similarities and differences, strengths and weaknesses, and future challenges. Similarities and differences The most obvious shared characteristic across the four tigers is the restricted development of formal systems of social security. Despite their level of economic progress, all have only limited systems of stateorganized social security. Within that shared low level of development, there are two basic models. The first consists of Taiwan and South Korea, where social security is based on contributory schemes accompanied by a social assistance safety net. Singapore and Hong Kong together form the second model, in which social insurance as the key mechanism is rejected. However, significant differences also exist within the second

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model. Singapore has relied for many years on the CPF, whereas Hong Kong until very recently relied on social assistance and social security allowances. In 2000, Hong Kong moved towards the Singaporean system with the creation of the MPF, but it will be many years before it plays a significant role in social security in the territory. A further difference is that Singapore’s CPF is a state-dominated system, while Hong Kong’s MPF is deeply rooted in the market mechanism. Whatever the differences, all four schemes are state-led, state-regulated and stateorganized. Moreover, working people and their employers contribute most of the funding to the social security systems, with varied, if generally small, state subsidies. Although private provision, especially from the family, still plays a significant role, it is gradually being replaced by public provision. This implies an eventual transformation from traditional familialism to modern welfarism. How do we explain these similarities and differences? These are all, to a greater or lesser extent, societies with strong Confucian traditions and deep-rooted traditions of family help. However, they had very different twentieth-century histories, and their colonial experiences may go some way to explaining social policy differences. The provident fund approach has been, for instance, a legacy of a number of former British colonies. All have been driven by the need to make their way in the world from difficult starting points. All depended on trade and competitiveness in world markets. All have been brilliantly successful in economic terms. All were ruled by authoritarian governments that believed in certain rules for economic success: limited government, low taxation and low public expenditure. Underlying the differences of actual approach to meeting social needs was a common orientation to their situation. The outcome was differences of actual scheme and technique within a context of shared philosophy and convictions. Strengths and weaknesses The strengths and weaknesses of the four social security systems can be assessed in terms of access, coverage, quality, value for money, efficiency and effectiveness. Their performances in terms of all six criteria are explored in this section. In terms of accessibility, or eligibility to join social security programmes and ability to secure benefits according to need, in Singapore, South Korea and Taiwan access depends on contributions either to social insurance schemes or, in Singapore, to the CPF. These systems therefore focus on those members of the population who have full-time jobs in the formal labour market. Employment becomes the

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most significant criterion for access to social security, which means that important groups are excluded. For those who, for one reason or another, have no access to contributory schemes, means-tested benefits, via social assistance and allowances designed for specific needs such as disability or old age, are available but limited in both availability and level. Both Hong Kong and South Korea have relatively high take-up rates for social assistance compared to the very low rates in Singapore and Taiwan, though Taiwan does relatively better than Singapore because of its system of allowances for elderly people with low incomes. In all four societies, individual and family stigma function as deterrents to claiming assistance. Coverage, or proportion of the population protected under the various social security programmes, is about two-thirds of the total labour force, except in Hong Kong where the only attempt at general provision is the MPF (which, of course, will not make a significant contribution to social protection for many years to come). In Singapore the CPF fails to cover some 20 per cent of men and 33 per cent of women at age 60 (Lee, 2001: 67). In both South Korea and Taiwan, social security is expanding to cover more and more of the population and more contingencies. The aim of the planned National Pension scheme in Taiwan is to cover all members of the population without any other protection, though clearly that will not be achieved for many years. In South Korea, it is estimated that in 1990 only 2 per cent of people over 65 actually received a public pension (Tang, 2000: 102), This figure will obviously improve as the National Pension Programme begins to pay benefits after 2007. There is no unemployment benefit scheme in Hong Kong or Singapore, and there seems little likelihood that the situation will change. Quality can be defined as the replacement rates which benefits achieve, and the extent to which they provide recipients with a socially acceptable living standard. There are no guaranteed levels of income in Hong Kong and Singapore. Estimates of replacement rates in Taiwan are very difficult, because the social insurance benefit usually comes in the form of a lump-sum payment, and pensioners collect benefits from different sources. However, some estimate that the best replacement rate in Taiwan is the pension for civil servants, reaching about 70 per cent, while labour insurance achieves only 20 per cent. The Taiwanese government has set a goal of a 50 per cent replacement rate, which is going to become a standard for integrating varied benefits (Ku et al., 1999: 65–76). Although it is threatened with financial problems, the South Korean pension programme is very generous, currently promising a 60

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per cent replacement rate (Shin, 2000b). However, the day for cashing in that promise is still a long way ahead. Unemployment insurance in South Korea pays 50 per cent of workers’ average earnings for the preceding 12 months, with a floor of 70 per cent of the minimum wage (Kwon, H. J., 2001: 102). In spite of its high contribution rates, the Singapore CPF does not seem able to offer its members an acceptable income in retirement. A 1995 survey of senior citizens showed that around 60 per cent did not have any private savings, and 56 per cent of those with a CPF account had insufficient savings there for support in old age. Those on low incomes, and those excluded from the labour market, never have a chance to accumulate enough savings in CPF accounts to provide adequately for old age. The low return rate on CPF funds is another threat to economic security in old age. For most of its history, the CPF fund has only been allowed to invest in governmentapproved stocks and securities, which give returns far below the market level (Asher and Newman, 2001). The Singapore government has long enjoyed the benefits of paying only low interest on CPF funds, with costs borne by CPF members and their families. However, now there are some signs of change. Although the Hong Kong MPF scheme is only just beginning, Hong Kong citizens seem already to lack confidence in its ability to provide adequate benefits (Ngan and Cheung, 2000). Value for money identifies whether individuals, and society as a whole, get benefits that represent an acceptable return on contributions. In South Korea and Taiwan, people pay an extra 4 per cent of GDP in social security contributions. In return, they enjoy a more comprehensive social security system. Contributions to the MPF and CPF are not counted as taxation, which reduces the formal tax burden in Hong Kong and Singapore. However the sums are done, Hong Kong can be regarded as an example of low taxation and low welfare spending. Singapore is a more complicated case. The CPF contribution comprises between 16.3 and 30.4 per cent of gross national saving, equivalent to between 7.8 and 14.6 per cent of GDP (Asher, 1995). In other words, taking the CPF contribution into account, the taxation burden in Singapore is not obviously less than in South Korea and Taiwan. Even if we ignore the CPF contribution, taxation as a per centage of GDP in Singapore, at 14.9 per cent, is still higher than the level of 12.9 per cent registered in Taiwan excluding social security. Social security in Singapore is probably value for money for the state, but it is definitely not good value for the contributors. Efficiency refers to the extent to which social security systems deliver benefits at low levels of administrative cost. It seems impossible to find

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direct evidence about how efficient the systems are, due to their diversified nature across, not only the public and private sectors, but also across welfare and employment (or labour). There is not a single government department in charge of all social security schemes, which makes it even more difficult to estimate real administrative cost, especially in South Korea and Taiwan. However, Taiwan has the highest per centage of governmental administration cost, at about 15 per cent of public expenditure, compared to 10 per cent in Hong Kong and South Korea, and a mere 4.5 per cent in Singapore. If we take specific examples, Taiwan has legally set a ceiling of administrative cost, to be borne by the government, for all social insurance programmes. For labour insurance, the ceiling is 5.5 per cent of premium revenue. For government employees’ insurance it is 3.5 per cent. The Social Welfare Department in Hong Kong spends 6.7 per cent of its budget on administration (Social Welfare Department, Hong Kong, 2002b: 9). In Singapore, the administrative cost of the CPF is less than one per cent. The National Pension Programme in South Korea has a similar administrative cost (Asher, 1995; Kwon, H. J., 1999a). Generally speaking, the Hong Kong and Taiwanese systems are less efficient than their counterparts in South Korea, and especially, Singapore. Finally, effectiveness means the degree to which social security fulfils its central objectives and functions, namely preventing, or compensating for, the risks involved in life in modern society. To achieve this, risk pooling through redistribution across different categories of population is very important. Compared to provident funds, social insurance is more redistributive and collective because it involves redistribution between individuals and across life-span. Also, in terms of risk, social security in South Korea and Taiwan covers all the major social risks such as poverty, old age, unemployment, disability, death and widowhood, and occupational injury, while the risks of unemployment and occupational injury are relatively ignored in Hong Kong and Singapore. Hong Kong is still more effective than Singapore in the provision of CSSA and SSA to help the elderly and the handicapped. One good, though limited, test of the effectiveness of social security provision is the level of poverty in a society. It is a good test because social security exists to counter poverty. It is limited because it may be that there is no social security provision to counter major causes of poverty such as low pay. Be that as it may, there is evidence of continuing poverty in our four societies, though the incidence varies. There is now a considerable body of evidence both about the continuing incidence of poverty in Hong Kong and about low rates of CSSA that

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leave claimants with inadequate incomes. (see, for example, Brewer and MacPherson, 1997: 80–2). Tang (2000: 145) cites evidence of continuing if lower levels of poverty in Singapore, South Korea and Taiwan. Overall, South Korea and Taiwan have a much more equal income distribution than Hong Kong and Singapore. It is difficult to argue that income distribution is the result of different patterns of social security provision, but they play a part. Future challenges Three major challenges face the social security systems of our four societies: ageing populations, the check to economic growth and the increase in job insecurity and unemployment, and the manifest inadequacy of bottom-line social assistance schemes. The first of these challenges is a fundamental one that overtakes all societies at a particular stage of development. The other two have been sharpened and highlighted by the Asian financial crisis, which simultaneously increased the pressures on governments and social security systems. Social security has increased in political significance, with higher unemployment and declining government revenues. That increased significance has prompted different policy outcomes in different societies. In Hong Kong, the government response was to propose cuts in benefit levels as the number of claimants rose. In South Korea, in contrast, the response was to extend the coverage of the Livelihood Protection scheme and extend the duration of benefits. In Singapore, cuts in employer contributions to the CPF were part of the government strategy to reduce production costs and restore competitiveness. Sustained economic growth and full employment allow and encourage a society to give social security policy only a low priority. That situation changes in time of economic turbulence, particularly when government is exposed to democratic pressures. The implications of population ageing differ in the four tigers, being a particularly large concern in South Korea and Taiwan because of the pay-as-you-go method of provision (Ku, 2000, 2002; Shin, 2000a, 2000b; Kwon, H. J., 2002). Longer life expectancy and a decline in the working age population will lead to a situation of more pensioners but fewer contributors. Financial difficulty will result. To cope with this challenge, South Korea is struggling to increase contribution rates, to reduce benefits, to expand coverage in order to increase revenue, and to search for a better return on pension fund investment for the funded elements in the scheme (MOHW, 2002b). An increase in the state’s contribution to the cost of benefits for elderly people is another

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response to the problem, but it seems unlikely to be accepted by the government or the public who would have to pay the necessary additional taxation (Kwon, H. J., 2002). Personal saving accounts will also face challenges. Many scholars have criticized the CPF for failing to provide adequately for post-retirement economic security (Asher, 1995; Ramesh, 2000b). In part, this is because of the small contributions paid in the early days of the scheme, when wages were low. It is also because of the poor return on their investment that contributors have received. In the future, additional problems will face the CPF, including a likely increase in employment insecurity. This would mean broken contribution careers and longer time in retirement dependent on CPF savings (even though efforts are being made to raise the retirement age). Traditionally, the tigers’ approach to social welfare rested on two pillars: economic growth and full employment, with the latter really depending on the former. Both seem now to be under threat. Mature economies grow less rapidly than developing economies. In such a situation, full employment becomes problematic. The challenge will be to develop more active labour market policies, and to provide social security systems that can provide income during periods of unemployment. South Korea and Taiwan have begun to pick up this challenge, but as yet Hong Kong and Singapore are reluctant to do so. However well designed the social security infrastructure, there will always be people who fall through the gaps. All societies need bottomline social assistance to provide a safety net. In these societies, the family has picked up a large share of this burden, but it seems likely that it will be less able to do so in the future. Social assistance schemes are better developed in Hong Kong and South Korea than in Singapore and Taiwan, but in all four societies they need reform in terms of coverage, level of benefits and philosophy. The low levels of social security expenditure and provision in the tigers show the way in which economic concerns – productivism – have been given priority over public responsibility for the meeting of social needs. The concerns driving social security policy are essentially threefold. First, there is a determination to restrict and restrain claims on state funding because of beliefs about the supposed burden which public expenditure places on the economy. Second, there are attempts to limit the costs to employers in the interests of international competitiveness. Third, there is a desire to avoid weakening individual and family responsibility and developing any kind of Western-style dependency culture. All three concerns have shaped and continue to shape social security policy. The limited development of social security systems reveals the

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productivist underpinnings of social policy in the tigers. Moreover, to the extent that social security systems have been developed, the primary drivers have been political – incorporation of key social groups, giving ordinary people a stake in society – through, for example, Singapore’s CPF or social insurance schemes in South Korea and Taiwan. If the CPF at the same time provided investment funds for the state at attractively low rates of interest, that was a bonus. It is only with the development of democracy in South Korea and Taiwan that social security began to develop along lines more familiar in the West, and to move away from its productivist foundations.

Brief country descriptions Hong Kong Comprehensive Social Security Assistance is the key mechanism, supplemented by Social Security Allowances for elderly people and people with disabilities. In time, the Mandatory Provident Fund (MPF), launched in 2000, will become important. It is an employment-related contributory system for workers aged between 18 and 65. Contributions and accrued earnings must remain in the MPF until the member has retired and attained age 60–65, or has died. By the end of 2001, the MPF covered 86 per cent of employers, 93 per cent of employees, and 90 per cent of the self-employed. It does not cover marginal workers and unpaid housewives. Singapore The government-managed Central Provident Fund (CPF) is the key mechanism, supported by a very residual social assistance scheme. Over the years the CPF has expanded its role and functions to fund health, housing and education. The contribution rate, generally shared equally between employers and employees, was initially set at 10 per cent of wages and was gradually raised to a peak of 50 per cent in 1984. The targeted long-term contribution rate of 40 per cent was reached in 1994, but was cut temporarily in the late 1990s in response to the Asian financial crisis. South Korea Social insurance and social assistance are the two major components. Specific groups of the population have different benefit schemes. Development of social security has been fragmented, and there is no unitary regulatory body. Social insurance contributions are generally

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shared equally between employers and employees. Government expenditure on social security amounts to more than 5 per cent of GDP. Taiwan Social security consists of varied occupational insurance schemes, welfare allowances for prescribed population groups, and social assistance for the poor. The expanding coverage of social insurance has increased social security expenditure remarkably, reaching 16.9 per cent of total government expenditures in 2000. The government contributes roughly 50 per cent, enterprises 25 per cent and households 20 per cent.

7 Conclusion Ian Holliday and Paul Wilding

In this conclusion we attempt to pull together the comparative social policy analysis undertaken in the preceding chapters. Our first task is to look in some detail at the similarities and differences revealed in our four separate sectoral chapters, and to reflect on their significance. Our second task is to set this analysis in the framework of debates about an East Asian welfare model. Our third task is to move to the global arena, and consider how our examination of tiger social policy contributes to analysis of welfare capitalism and the challenges it faces in the early part of the twenty-first century.

Similarities and differences It is easy to find differences in the social policy approaches taken by our four societies. Across all four policy sectors, the balance of public and private responsibility for regulation, provision and funding varies in major and minor ways. In attempting to work out whether the East Asian tigers constitute a coherent world of welfare capitalism, the key task is to reach a judgement about the significance of those differences. Are they essentially differences of method, mechanism, detail and emphasis within a broadly shared common orientation? Or are they of such significance that they call into question the very notion of a shared tiger approach to social policy? In trying to answer these questions, we start in this section by analysing common features of the state approach to welfare in our four societies along six dimensions. We argue that: • political purposes have always been primary • economic growth and full employment have been the main engines of welfare 161

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• • • •

productivist welfare has been the goal welfarism has been shunned the family has been accorded a key welfare function states have been strong but limited.

We then conclude the section by examining similarities and differences in terms of approach, institutional framework, funding, and specific policies. In this way we set up the debate about the East Asian welfare model that appears in the following section. Political purposes have always been primary In all four tigers, a preoccupation with political rather than simply welfare needs has driven social policy development. From the 1950s onwards, the primary concerns were social stability, political legitimation and nation building. In each case, all government activity was geared to these linked ends. The extreme instances were the authoritarian dictatorships established in Taiwan following the Chinese Revolution and South Korea following the Korean War. Kwon describes the early welfare initiatives of General Park’s military government in South Korea as ‘a pre-emptive strike to compensate for its lack of political legitimacy’ (Kwon, H. J., 1998a: 54). Much the same could be said of social policy reforms introduced by Chiang Kai-shek’s KMT in Taiwan. In Hong Kong, the objectives were slightly different, because nation building was never a real concern of the British colonial regime. However, social stability was very clearly part of its agenda. Tang sees welfare development as ‘pivotal in ensuring social stability’ after the 1966–67 riots (Tang, 2000: 129). Finally, formally democratic Singapore has always been motivated by the same concerns. Tremewan argues that the two key welfare policies in Singapore, the CPF and public housing, were both primarily concerned with social stability and political legitimacy. He argues that the CPF gave members a strong commitment to the existing political order, and thereby provided government with ‘immense control’ (Tremewan, 1994: 54). Equally, ‘public housing has undoubtedly been a powerful regulatory mechanism to reconstitute and stabilise the work force’ (Tremewan, 1994: 71). This interpretation is endorsed by Singaporean Senior Minister Lee Kuan Yew who, in describing his social policy approach, states that ‘My primary preoccupation was to give every citizen a stake in the country and its future’. First and foremost, he sought ‘a home-owning society’. Secondly, he built up the CPF. ‘And because the government fulfilled its promise of fair shares

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for workers through the ownership of their homes, industrial peace prevailed’ (Lee, 2000: 95–7). Looking in more detail at ways in which political concerns have shaped social policy development, it becomes clear that the tacit agreement between government and political opposition implied in Lee’s statement is key. Central to it is a ruling party signal that moderation pays. Welfare development is a significant element in the coinage of the exchange thereby established (Pei, 1998: 53–4). In all four societies, governments have used social welfare benefits to incorporate key groups and bind them to the regime. All provide generous benefits, such as pensions, sick pay and health care, for their own employees, while of course deploring the economically and socially debilitating effects such provision would have on the general population. Hong Kong and Singapore have always treated their civil servants with remarkable generosity. In 1963 South Korea introduced pension, medical and other benefits for civil servants, the military and teachers. By the early 1990s, as much as 75 per cent of the Taiwanese central government’s total welfare expenditure went on civil servants and the military (Ku, 1997: 58). In the East Asian tigers, writes Tang, ‘social security is a weapon to target politically important interest groups’ (Tang, 2000: 139). Many factors lie behind the politicized welfare regimes of the East Asian tigers. First, emergence through struggle was an experience common to them all. South Korea and Taiwan ‘were states born of civil wars that have not ended’ (Woo-Cumings, 1998: 319). Hong Kong and Singapore were also exposed, at-risk societies. Welfare became one of many instruments used in the search for political legitimacy and social stability. Secondly, in all four societies authoritarian political elites controlled social policy development in a top-down, technocratic fashion, and ensured that their own political goals and strategies predominated. Only in the 1980s did grass-roots movements start to develop in Hong Kong, South Korea and Taiwan and, as part of democracy struggles, push for social policy change. Thirdly, the tigers used welfare policy as a crisis management tool to respond to social unrest in Hong Kong and Singapore in the 1960s, and in South Korea and Taiwan in the 1980s. Fourthly, all four regimes prided themselves on their capacity to deliver, and sought to retain control over social policy for this reason. Root (1998: 62–3) sees policy capacity as fundamental. The tigers have long been characterized by effective states with highly developed bureaucratic capability and effective channels of communication with civil society. Each element has been crucial to policy development.

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Economic growth and full employment have been the main engines of welfare Central to all four tigers has been a commitment to economic development. Since their economic take-offs in the 1960s, all four societies have been driven by growth (Morley, 1999). In analysing Japan, Johnson argues that a state’s first priority determines its essence (Johnson, 1982: 307). In the decades after the Korean War, our four societies joined Japan in giving first priority to economic development, a competitive edge, and full employment. Situational imperatives were often critical in establishing the context in which growth came to be seen as the only viable way in which each society could tackle the huge economic, social and political problems it faced. Situational factors also played critical roles in generating the growth they sought, with many forces contributing to their considerable progress. As Pempel writes, the tigers’ economic success was ‘highly overdetermined’, ‘the result of far too many “good” things’ (Pempel, 1992: 82). For us, the key point is that economic growth became the core commitment in all four societies. Castells writes that ‘To become competitive in the world economy, for all the Asian NICs, was first, their way of surviving, both as a state and as a society. Second, it also became their only way to assert their national interests in the world’ (Castells, 1992: 57). In determining the essence of all four states, the commitment to growth became the predominant feature of their social policy. It has been vigorously maintained over decades of high economic growth. In consequence, full employment has come to be seen as the best engine for promoting welfare. Patten, as Governor of Hong Kong, argued that ‘full employment should be the government’s most important social objective’ (Patten, 1995: 6). What he meant by this was that full employment should be central not only to economic policy, but also to social policy. Jacobs holds that ‘The importance of full employment in East Asian economies can hardly be overstated in an overview of their social welfare systems’ because ‘East Asian welfare states are built around it’ (Jacobs, 1998: 66). Work is central to welfare not only in terms of the income it provides, but also in terms of the way status in the labour force affects access to state benefits, directly or indirectly, through social insurance schemes in South Korea and Taiwan and through membership of provident funds in Hong Kong and Singapore. The developmental approach revealed by this social policy orientation is the ‘trickle down’ theory associated in the West with economists like Milton Friedman and politicians like Ronald Reagan and Margaret Thatcher. Tang holds that ‘the Asian Tigers . . . are ardent believers in

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the trickle down theory of development’ (Tang, 2000: 139). Part of their belief is that the cascading benefits of growth make many aspects of social policy unnecessary, or at least necessary in only a residual sense. In the tigers, economic growth and full employment were seen as the royal road to welfare. The approach became self-justifying when growth cut the need and pressure for state welfare, and provided evidence that limiting state expenditure was the best way forward. Productivist welfare has been the goal The tigers’ welfare orientation is captured in a number of descriptions, all of which converge on the notion of productivism. Deyo characterized their approach as ‘developmentally supportive social policy’, arguing that social policy was ‘driven primarily by the requirements and outcomes of economic development policy’ (Deyo, 1992: 289–90). Goodman and Peng concluded that ‘welfare policy has been dominated by economic rather than social considerations’ (Goodman and Peng, 1996: 198). White and Goodman used the term ‘developmental welfare systems’ (White and Goodman, 1998: 15), seeing welfare provision as an element in state economic development policies. Tang argued that social welfare institutions were ‘merely adjuncts to the capitalist economy’ (Tang, 2000: 156). Holliday identified a world of ‘productivist welfare capitalism’ in East Asia (Holliday, 2000). The essence of this argument is that social policy aims chiefly to boost economic development. It does not have an independent status, but rather is subordinate to, and facilitative and supportive of, the core task of the developmental state, which is the promotion of economic development. Government commitment depends on the assumed contribution social policy can make to broader developmental objectives. In consequence, leading social policies in the East Asian tigers are held to have predominantly economic objectives. Public housing in Hong Kong and Singapore, partnered by the CPF in the latter case, are classic instances (Castells, 1992; Tremewan, 1998). The driving concern behind Singapore’s late 1970s policy of raising wages is similarly held to have been economic rather than social. The aim was to enhance the quality of labour by increasing its price to employers, and thereby to prompt the development of higher-value production. This was also an important factor in eliminating the endemic labour unrest of the 1950s and 1960s, which was a significant deterrent to international investment (Root, 1996: 48). Furthermore, the tigers appear to have been highly successful in making social policy contribute to economic growth. Deyo’s judgement is that ‘economic development has been

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energised by social policies that have enhanced labour productivity, encouraged enterprise training and subsidised wages . . . economic development and proactive social policy have been mutually supportive’ (Deyo, 1992: 304–5). Welfarism has been shunned The flip side of the tigers’ productivist orientation has been a denigration of welfarism. All have sought to build what Lee Kuan Yew calls ‘a fair, not welfare, society’ (Lee, 2000: ch. 7). They have therefore espoused distinctive beliefs with regard to the economy and its functioning, the proper role of the state in welfare, and the European welfare state. Underpinning the tigers’ focus on economic growth has been a distinctive view of the proper working of a capitalist economy, which was especially notable in the years of international Keynesian orthodoxy in which it was initially formulated. This view shared with Keynes and his disciples the notion that states have an important role to play in capitalist development. In Wade’s terms, they should ‘govern’ markets (Wade, 1990). As is very clear from the literature on East Asian development, most tiger regimes have done precisely that. The partial exception, Hong Kong, has seen an informal coalition of state and non-state actors perform the functions undertaken by states elsewhere (Henderson, 1993). The tigers departed from many of Keynes’ disciples in rejecting the Beveridgean welfare commitments held to be the social policy equivalent of demand management in the economic sphere. For all of the tigers, individual responsibility was the key to economic advance, and had to be protected from the debilitating effects of excessive state welfare. Low-tax, low-welfare regimes in which innovation and efficiency would be rewarded were created in all of them. On the positive side, the tigers developed distinctive beliefs about the proper role of the state in welfare. A strong pragmatic strand meant that those beliefs were not always adhered to, but they were nevertheless always present. At heart, those beliefs turn on a distinction between productive and unproductive expenditure. Productive expenditure is likely to contribute to economic growth through, for example, education and training. Unproductive expenditure has no clear economic pay-off. All four societies spend significantly on education. All seek to ensure access to health care, though Hong Kong is the only society to have an essentially tax-funded system. All are instinctively hostile to social security and social care. Social security is widely regarded as a burden on the economy, as undermining individual and familial

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responsibility, and as fostering dependency. Social care is seen as essentially a family responsibility. More widely, there is a shared but generally unspoken belief that responsibility for welfare is shared by the public and private sectors. Community, firm and family are all expected to play a part. In Hong Kong, employers’ liability schemes are an important element in social security (Jacobs, 1998: 28). In South Korea, the enterprise remains an important provider of welfare, including sickness and severance benefits and child allowances, though coverage is of course restricted to regular workers (OECD, 2000b: 124). In South Korea and Taiwan, co-payments constitute around half of health service funding (Jacobs, 1998: 28–9). One consequence is that there is little, or at best only a very weak, sense in these societies of a general right to welfare, of welfare as a right of citizenship. Rights may be secured through contributions to social or health insurance schemes, but not simply through being a citizen. Equally, there is little sense of a general public responsibility for the needy. That responsibility belongs not to society in general but to families or local communities. In these societies there is ‘resistance to the provision of government guaranteed social welfare’ (Goodman and Peng, 1996: 198). Similarly, there is little support for state welfare as an instrument of either redistribution or social justice. ‘Nowhere’, writes Jones, ‘has there been a popular call for “social justice” in principle – let alone for (forced) redistribution in practice’ (Jones, 1990: 455). In fact there is hostility towards the very idea of trying to redress inequalities. As Singaporean Prime Minister Goh Tok Chong put it, ‘If you level down society, you want everybody to be equal, you are not sharing prosperity. You are sharing poverty’ (cited in Rodan, 1996b: 81). It is therefore no surprise that all four societies have exhibited clear hostility to the European welfare state. This was partly a matter of timing. The tigers started to develop their welfare systems just when the high tide of state welfarism was ebbing, and the ‘crisis of the welfare state’ had come to preoccupy politicians and social policy analysts. But their opposition went deeper than this. Ramesh points to ‘ideological opposition to the welfare state’ in Singapore (Ramesh, 1997: 1103), and the PAP has no qualms about concurring. In its 1998 budget statement, it argued that ‘extensive welfare programmes damage the fabric of our society as they discourage individual responsibility, self reliance, community support and the work ethic’ (Tang, 2000: 42). Quah identifies ‘rejection of the welfare state’ as one of nine policies making up the Singaporean model of development (Quah, 1998: 105–6). Again, Senior

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Minister Lee endorses the argument. ‘Watching the ever-increasing costs of the welfare state in Britain and Sweden,’ he writes, ‘we decided to avoid this debilitating system’ (Lee, 2000: 104). Looking elsewhere, Tang describes Hong Kong as ‘anti welfarist in orientation’ and Taiwan as ‘profoundly anti welfarist’ (Tang, 2000: 131). His conclusion is that the tigers are ‘pervaded by mistrust of social welfare’ (Tang, 2000: 135). The family has been accorded a key welfare function In all four societies, the family plays a central role in welfare provision. In all four, there is great emphasis on the centrality of the family to social welfare and social stability in Confucian societies. One key strand in East Asian opposition to the development of a European-style welfare state is the belief that state service provision undermines family provision, weakens family bonds, and erodes social stability. ‘We thought it best,’ writes Lee, ‘to reinforce the Confucian tradition that a man is responsible for his family – his parents, wife, and children’ (Lee, 2000: 104). As all four societies have a Confucian heritage, there are strong cultural foundations for this approach. The Confucian tradition emphasizes filial piety and family obligation. Moreover, to ensure the survival of that tradition in the modern age, the requisite obligations are mandated by law in all four societies bar Hong Kong. In Taiwan and South Korea, legislation has been passed to require individuals to support family members, including children, spouses, parents and siblings. This requirement greatly reduces the demand for public assistance programmes. In Singapore, elderly people have been able since 1996 to take their children to court if they fail to support them. Although there is no such law in Hong Kong, survey evidence reveals strong support for it. Extensive family provision has been used to justify and legitimate limited state provision, which becomes unnecessary when families do their duty as carers and instruments of income redistribution. Governments have therefore set out to promote family care. In Singapore, ‘Encouraging families to assume greater responsibility in looking after their less fortunate members is an archstone of the government’s social security strategy’ (Ramesh, 1992: 1101). More recently, there has been ‘A sense of urgency in the government’s determination to ensure that individuals and families remained responsible for their needs in old age’ (Ramesh, 2000a: 163). States have been strong but limited Returning to the political sphere, one of the many interesting paradoxes of our four societies is that all have strong but consciously bounded states. All four proclaim a philosophy of small government. At the same

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time, they are all heavily pragmatic, and non-principled, in the face of real issues. We therefore find active but low-spending states, with comparatively low levels of public spending. It is true that accurate comparison is difficult, and that published figures underestimate true expenditure levels (Kwon, H. J., 1998a). Nevertheless, even when all the requisite qualifications have been made, it remains very clear that our four societies are low spenders in comparison with the West. These states are strong in the sense that they are highly active in the social welfare field. Their role is limited in the sense that it tends to be restricted to regulation, enabling and organizing, rather than funding and providing. Our states organize national health insurance schemes and national pension schemes, or they make provident fund membership compulsory. They play a large role in education, but engage to only a limited extent in provision. They are strong states but they set deliberate limits to their role in many areas, stopping short of funding and actually providing in domains where European states have tended to do both. The limited dimension to state welfarism is the product of ideology. At least in theory, all four states believe in small government. What pushes them beyond a limited role is simple pragmatism, combined with developmental state aspirations. When it matters, pragmatism nearly always wins out over ideology. Thus, despite their public philosophies, both Hong Kong and Singapore got into public housing provision in a very big way because it was viewed as vital on political, economic and social grounds. Pragmatism rather than principle has also led to the development of health insurance schemes in Taiwan and South Korea. Unprincipled pragmatism comes out clearly in the famous declaration of the Hong Kong government that no one shall be denied necessary health treatment because of a lack of ability to pay. No principle of a universal right to health care is enunciated because that would strain the bounds of Hong Kong’s public philosophy of individual and family responsibility and limited government. Instead, a pragmatic, commonsensical approach is adopted. These strong states are bounded states partly because of ideology and partly because they have no vision of the future that is different from the past. In the golden age of development, European welfare states were fuelled by visions of the mass slaughter of giants barring the road to reconstruction and of a new world about to be born. There is no such vision of the future in East Asia. The only vision on offer is of economic growth and of restoration and preservation of past patterns of family life and family-based social stability. Without a social vision, pragmatism rules. Tang speaks of welfare development in Taiwan since the

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Second World War as ‘piecemeal, reactive and lacking in grand vision’ (Tang, 2000: 78). He describes the colonial state in Hong Kong as ‘a pragmatic drifter’ with ‘no clear social vision, and no comprehensive future plan’ (Tang, 2000: 126). Goodman and Peng’s judgement on the development of social welfare in East Asia is that ‘the states’ approach to welfare has been haphazard, and extremely pragmatic’ (Goodman and Peng, 1996: 211). Such a philosophy tends to make for limited government. Assessing similarities and differences It is important to recognize the real differences that exist among the tigers in terms of social policy approach. Funding is often starkly different. In Hong Kong, welfare has always been basically tax-funded, and remains so even after the creation of the MPF in 2000. In Singapore, the foundation of state welfare has always been compulsory private saving and individual responsibility via employer and employee contributions to the CPF. In South Korea and Taiwan, by contrast, the approach has come to be based on social insurance. Similarly, Hong Kong’s provision of non-means-tested, non-contributory financial benefits to the elderly funded by taxation is a kind of limited universalism that is unique in Asia. Equally unique is the way in which Singapore’s CPF has been extended to become an almost all-purpose compulsory individual welfare savings scheme. Furthermore, different approaches lead to different outcomes. In terms of access, for example, Hong Kong has universal access to tax-funded health care, with a token hospital hotel charge the only barrier. In Singapore, access is partly dependent on the balance in the individual’s Medisave account. In South Korea and Taiwan, membership of health insurance schemes is critical. Following recent extensions, these are now virtually universal, though significant co-payments are required, which act as a potential barrier to free access according to need. There are also differences in terms of changes in approach. In recent years, both Taiwan and South Korea have made major social policy innovations. In Taiwan, Guiding Principles of Social Welfare Policy were published in 1994. The subsequent launching of the Taiwanese National Health Insurance scheme soon gave the state a major new financing role as well as a regulatory role, with pressure building up to bring in all Taiwanese citizens even if they were not in productive employment. In South Korea, President Kim Dae-jung expressed a clear commitment to the idea of a welfare state during his term of office (Tang, 2000: 93–4). Both societies have moved to launch unemployment insurance

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schemes. No significant initiatives have been seriously debated in Hong Kong or Singapore. Thus, a broad commonality of approach and orientation at the macro level combines with real differences at the micro level. Within a generally shared philosophy of welfare, actual policies differ in sometimes significant ways. Such differences generate differences in institutional frameworks. The key contrast is between social insurance in South Korea and Taiwan, the CPF in Singapore and tax-funded pragmatism in Hong Kong. The result is that in South Korea and Taiwan a strong welfare infrastructure has been put in place that is likely to generate its own growth dynamic. For Jacobs, despite anti-welfare state rhetoric and built-in constraints, the two are ‘progressively developing into fullfledged welfare states’ (Jacobs, 1998: 42). By contrast, in Hong Kong and Singapore no institutions have been created with the kind of institutional dynamic that social insurance systems always seems to develop. Singapore’s CPF and Hong Kong’s fledgling MPF do not have this potential. Jacobs, again, argues that ‘Hong Kong and Singapore’s existing institutional frameworks are mature in the sense that further growth would require major institutional shifts which they have failed to initiate so far’ (Jacobs, 1998: 85). While health insurance regimes in South Korea and Taiwan have been driven by a logic of incrementalism, they have also exhibited elements of radicalism, for example in extensions to formally non-productive members of the population and through assumption by the state of responsibility for their contributions. The extension of contributory pensions can be seen in the same light. Incremental changes, however, have created new situations and the institutional frameworks for further development. In Singapore, the CPF is probably already over-stretched in terms of what can be provided simply by employer and employee contributions. In Hong Kong, the limits of a tax-funded system in a society committed to low rates of taxation are very plain. Among our four societies there also are significant overall and specific differences in levels of state expenditure on welfare. Jacobs calculates that Hong Kong and Singapore spend some 5 per cent of GDP on welfare. South Korea and Taiwan spend about twice as much (Jacobs, 1998: 88). All four of our sectoral chapters reveal distinct levels of funding across the policy area they survey. Finally, specific policy variations are visible among our four societies, the product of different histories, circ*mstances, problems and approaches. Housing policy exhibits the most striking variations, with Hong Kong and Singapore again differing from Taiwan and South

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Korea. Both Hong Kong and Singapore have had major public programmes with massive public expenditure and subsidies, though with rather different slants. Hong Kong’s initial orientation was to supply housing to rent. It then grafted various purchase schemes on to this. In Singapore the emphasis has always been on housing for owner occupation. The major dynamic behind these massive housing programmes was pressure on land and housing supply in small, confined city-states, combined with government awareness of the seriousness of the shortage problem and the potential economic, social and political gains to be secured from an active housing policy. South Korea and Taiwan have done no more than dabble in housing. Unemployment insurance schemes now exist in South Korea and Taiwan, resulting from the compulsions of incrementalism in times of high unemployment. No such development has yet been enacted in Hong Kong or Singapore. It would in any case be extremely difficult to develop without an existing social insurance system. In labour affairs more generally, the state has been much more active in Singapore and South Korea than in Hong Kong or Taiwan (Joo, 1999a: 71). More active labour movements are the critical explanatory factor. Though Singaporean activism faded quite early in the face of vigorous measures taken by the PAP, labour remained active in South Korea in the 1970s and 1980s. In consequence, a minimum wage law was implemented in 1988. Laws were also passed outlawing discrimination against women and providing one year’s maternity leave. In 1990, the working week was reduced from 48 to 44 hours.

Debating the East Asian welfare model Where does this analysis leave the debate about the East Asian welfare model? Does the body of evidence we have amassed support the argument that there is here a coherent and distinctive fourth world of tiger welfare capitalism? Or do the differences we have outlined undermine such a classification? In the first sub-section we argue that an East Asian welfare model does exist. Beyond this rather academic concern lies is a very practical issue. If there is such a thing as an East Asian welfare model, is it sustainable in the medium and long terms? That is our second interest. Is there an East Asian welfare model? Our judgement is that there is a fourth world of welfare capitalism here. In these four societies we find an approach that is fundamentally different from the approaches taken in each of Esping-Andersen’s three

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worlds (Esping-Andersen, 1990). The essential defining difference is the fundamentally productivist nature of our four societies. Differences do exist among them, and should not be overlooked or minimized. However, whilst they are real they are also secondary. Policy makers are simply taking different routes to the same broad goal, guided by similar beliefs about how economic growth is best promoted, by similar anxieties about the dangers of over-generous state welfare and by shared conceptions of the proper orientation of the state’s role in welfare. Within a productivist subordination of social policy to economic policy, Holliday identifies three distinct approaches in our four societies to the key issues of social rights, stratification effects, and state–market–family relations. The approaches are facilitative (Hong Kong), developmentaluniversalist (South Korea and Taiwan) and developmental-particularist (Singapore) (Holliday, 2000: 709–10). Facilitative marks the lowest level of state social welfare activity, measured in terms of its impact on the three key issues. Although the Hong Kong state is actively involved in social policy, there is little extension of social rights, only a limited impact on stratification and inequality, and the state prioritizes rather than supersedes the market. By contrast, in South Korea and Taiwan, social insurance to extend social rights to key workers in the labour market reinforces the position of key productivist elements, and market and family provision are underpinned. In Singapore, the emphasis on compulsory individual savings provision, not social rights, reinforces the position of those in employment. In relation to market and family, the state asserts the priority of market provision and seeks to encourage and enforce family responsibility. In the tigers, when social policy was seen as irrelevant or potentially damaging to economic goals, most obviously European types of social security, it was strictly limited. This was the basis of their shared orientation. There were different perceptions of how welfare might best serve this primary state goal – hence social insurance schemes, the CPF and the tax-funded CSSA – but these simply represent different approaches to securing shared objectives. What shapes and defines approaches to welfare in these four societies is the concern for production because economic growth is seen as the only secure basis for a broadly-defined concept of welfare. Is the East Asian welfare model sustainable? How strongly grounded is productivist welfare capitalism? Is it simply the specific and temporary product of a particular economic, social and political situation? How resilient is it likely to be in the face of future

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shocks and challenges? In this section we explore some of the challenges likely to be faced by the tiger approach to welfare. The nature of the pressures and changes varies across our four societies, and even similar pressures and changes will produce distinct responses in different societies. Moreover, challenges can of course appear as crises or opportunities, depending on the perceptions and resources of decision makers. The tiger approach of productivist welfare capitalism has for many years rested on five main pillars: significant economic growth, a young population, strong families, limited social protest and pressure, and successful government criticism of the Western welfare state. These five pillars all look less secure than they did in the mid-1990s, because of long-term trends and because of short-term developments. The most important short-term development is the 1997 Asian financial crisis and its aftermath. More than five years after the onset of that crisis, the tiger economies are still seeking to recover their earlier economic dynamism. However, even before the crisis, Goodman, White and Kwon held that ‘there are serious questions about the sustainability of the East Asian Welfare Model in the light of fundamental trends’ (Goodman et al., 1997: 376). The most obvious challenge to the tiger approach is the seeming end of rapid and sustained economic growth, and of the economic confidence engendered by it. The financial crisis had very different impacts on our four societies, ranging from virtual economic collapse in South Korea through serious but not catastrophic effects in Hong Kong to limited immediate effects in Singapore and Taiwan. Nevertheless, all four economies have been affected by the regional and now global economic slowdown. More than five years on, South Korea actually seems to be recovering most strongly. Because tiger social policy was largely based on faith in economic growth as the main engine of welfare, and of growth as the main solvent of social and political problems, the strategy was highly successful for some 30 years. Growth did increase welfare. It did cement political and social stability. It did satisfy people’s expectations. It did provide full employment and extend opportunities. It did enable the painless financing of a range of welfare services. It did legitimate low levels of state involvement in welfare. The end of a generation of high and sustained rates of economic growth and full employment was a substantial shock to government and people. The most obvious and immediate effect was increased unemployment, which was devastating for systems ‘built around full employment’ (Jacobs, 1998: 12). For those affected there was little tailored provision. In South Korea, unemployment rose from 2.1 per cent in

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October 1997 to 8.6 per cent in February 1999. The government quickly moved to extend its embryonic insurance scheme in terms of coverage and benefit levels. A Tripartite Commission consisting of representatives of labour, management and government was set up in January 1998 as a forum for discussion of labour issues. As Jacobs puts it, ‘tough’ welfare states can work in a booming economy but ‘Once a Korean like crisis appears it seems that there is no alternative to the old fashioned unemployment insurance’ (Jacobs, 2000a: 19). Kwon made a similar point, that government policy ‘must shift its emphasis from active labour market programs to social safety nets and poverty alleviation programs’ (Kwon, S., 2001: 106). More generally, the check to economic growth damaged confidence in government. It weakened the belief that growth is the best road to welfare. It ended the easy financing of social programmes through the fiscal dividend. It created unemployment and pressures for an extension of social security benefits for the sake of individual, family and social stability. It challenged the essential basis of the tiger reliance on growth as the universal solvent. In the longer term, ageing populations provide a sharp challenge to current patterns of social provision. All four societies have rapidly growing numbers of elderly people (Table 7.1). Because of declining fertility Table 7.1 Projected growth of the population aged 65 in the four East Asian tigers, 1995–2040

Hong Kong Singapore South Korea Taiwan

1995

2020

2040

10.2 6.7 5.9 7.6

19.3 16.0 13.2 14.1

32.6 24.4 19.3 21.5

Source: Jacobs (2000b: Table 4).

and the longer expectation of life, there will be larger numbers of elderly people dependent on a smaller working population. Elderly people will also be dependent for longer periods of time, either on social security systems of one kind or another, or on personal savings or family support. Current social security provision for old age in the tigers is very limited. Hong Kong has a restricted allowance scheme topped up by low levels of CSSA. Singapore has the CPF, but experts are largely united in concern about the scheme’s ability to generate an adequate income in old age (Asher, 1998; Ramesh, 2000a: 57). South Korea has a National Pension Scheme of dubious financial viability (Kwon, S., 2001). Taiwan

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is debating the introduction of a new National Pension Scheme. What is plain is that none of the tigers has in place a scheme likely to guarantee a secure and adequate income in old age. It is likely to be at least 20 years before they are able to create such schemes, should they demonstrate the political will to do so. Pressures to create new schemes and/or improve existing schemes are likely to be considerable in the future, coming both from elderly people themselves and from their families who would otherwise have to assume the responsibility. To try to forestall the inevitable political pressures that ageing will create even in such a politically well-managed society as Singapore, Senior Minister Lee proposed that economically active voters be given an additional vote to counter the potential selfinterested age-based voting of the elderly population (Ramesh, 2000b: 253). Low expenditure on social security is the main reason why the tigers appear in international league tables as low spenders on welfare. The main element in social security expenditure is retirement pensions, so essentially it is low expenditure under that heading that makes the tigers low spenders overall. In the coming decades, that record will be put under great and increasing pressure by ageing populations. In providing income and care for the needy, the family has been the lynchpin of tiger welfare systems. The strong ethic of family responsibility has made the low level of public service provision much less problematic than it would otherwise have been. For roughly half of elderly people in South Korea and Taiwan, children are their main source of income (Kwon, H. J., 1999b: 11). In the late 1980s and the 1990s 65 per cent of elderly people in South Korea and 74 per cent in Taiwan lived with their children (Kwon, H. J., 1999b: Table 4). In Western countries, the comparable figure is usually between 5 and 15 per cent. What is very plain is that children have been providing a declining proportion of income for elderly parents in South Korea and Taiwan (Kwon, H. J., 1999b: 11). In South Korea, the proportion of income provided by children fell from over 70 per cent in 1981 to 44 per cent in 1994. In Taiwan, the drop was from 68 per cent in 1986 to 53 per cent in 1993. The shortfall has been made up to a degree by extra earnings by elderly people. In times of economic slowdown and unemployment, however, the elderly are one of the first groups to be squeezed out of the labour market, so that is not a long-term solution. Family transfers are therefore already inadequate to secure elderly people an acceptable level of living, and are becoming more so with time (Kwon, H. J., 1999b: 14). What is happening in the tiger economies is essentially what has happened in all industrial societies. The supportive role, potential and

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capacity of the extended family have weakened not because of moral decay but because of nuclearization, increased geographical mobility, and the greater integration of women into the formal labour market. Smaller families mean that there are fewer family members to care, while at the same time elderly people tend to be more dependent and to be dependent for longer. On top of all this, our four societies have rapidly ageing populations. They have been slow to develop adequate pension schemes because of youthful populations and because of the strong tradition of family support. The result is a growing income and care gap which politicians have been reluctant to acknowledge because of the expenditure implications. Nevertheless, as Jacobs concludes ‘it is very likely that states will have to fill the gap’ (Jacobs, 2000b: 11). Pressure to do so will certainly be strong. Emerging ideas of rights, albeit so far only rather tentative, are likely to provide another challenge. The National Health Insurance system in Taiwan represents a radical move away from a categorical-type system towards a rights-based system for all citizens regardless of age, gender or work status. In Taiwan, too, since the late 1980s there has been a growth of social movements pressing for an extension of the rights of particular needs groups (Ku, 1998a: 120). The same trend is clear in Hong Kong. Chow argues that ‘democratic participation and citizenship or welfare rights have gradually become important ideologies influencing social welfare development since the mid 1980s’ (Chow, 1998: 164). According to the OECD, the South Korean National Basic Livelihood Security Law enacted in August 1999 represented ‘a comprehensive rights based social assistance system’ (OECD, 2000b: 143). Notions of rights of access to services, of services as a right of citizenship, of equality of opportunity, are potentially powerful forces for the development of social welfare. Policy makers in our four societies have always rejected notions of rights because of the possible dynamic they embody. However, ideas of rights are fed and watered by other developments, for example democratization, the growth of civil society and globalization. In 1997, Goodman, White and Kwon described the East Asian welfare model as being ‘under threat from democratic political pressures’ (Goodman et al., 1997: 377). Then, democratization seemed a powerful force in Hong Kong, South Korea and Taiwan. Since then democratic development in Hong Kong has been reversed, but democratization remains an important factor in South Korea and Taiwan. Tang holds that ‘The experiences of Korea and Taiwan have shown that democratization could be a crucial factor which influences social welfare development’ (Tang, 2000: 60). He even argues that democratization ‘[forced]

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these developmental states to assume new responsibilities to ensure that parts of the fruits of economic growth are equitably shared’ (Tang, 2000: 158). In Taiwan, writes Kwon, ‘It was the political reform since the late 1980s which transformed socio-economic changes into new developments in social policy’ (1998b: 48). In Hong Kong, in contrast to South Korea and Taiwan, the containment of democratization ‘serves as a brake on welfare expansion’ (Tang, 2000: 159). Democratization operates in various ways to bring pressure to bear on the state. Most importantly, perhaps, it inaugurates an era of competitive politics. It did this in Taiwan, allowing the emergence of the Democratic Progressive Party (DPP). To make its way against the dominant KMT, which had a long record of successful economic policies, the DPP decided to focus on social policy issues and successfully forced discussion of national health insurance and pensions onto, and up, the political agenda. In March 2000, DPP candidate Chen Shui-bian captured the presidency. Much the same happened in South Korea, where democratization ‘afforded opportunities for newly empowered groups to press demands which the government could not always ignore’ (Ramesh, 2003: 93). Competitive politics also offers alternative visions of the ‘good’ society, which stimulates debate and the growth of interest groups, and can act as a force for the development of civil society and, with it, social policy. In South Korea and Taiwan the state–society relationship was transformed in the late 1980s, and a key factor was the increased assertiveness of civil society (Castells, 2000: 300–2). In Hong Kong, interest and advocacy groups became more active in seeking to influence government policy in the late 1980s, and were a significant factor in the build up of pressure for an extension of democracy. Democratization also alters the political agenda, making the short term more important than the longer term, and prioritizing the meeting of popular social needs. Partly linked to the democratization theme, and partly separate from it, rising expectations help to drive social policy change. Increasing affluence, better education and broadening awareness of provision in other states are also key factors here. Three obvious areas exposed to the pressures of rising aspirations and emulation in the tigers are social security provision and expenditure, policies to promote equal opportunities for women, and policies to safeguard and improve the environment. Opinion and policy makers and shakers in government and in emerging social movements and political groupings are likely to become ever more aware of the differences between their societies and Western societies in patterns and generosity of social security provision. For

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years, tiger governments seemed to be on the moral and political high ground, stressing the superiority of the tiger way. When economic growth falters and unemployment increases, the argument that it is the absence of high expenditure on social security that fosters greater economic efficiency becomes less compelling. The appeal of more generous provision for economic and social casualties becomes rather stronger. Similarly, it is hard to believe that the global movement to improve legal, economic and social rights for women will not strike chords in the hearts of tiger women. In more democratic societies they will increasingly demand active intervention to promote greater equality of opportunity and to provide the support and caring services, for example for children and elderly people, that are the necessary prerequisite for realisation of such globally validated aspirations. Additionally, in the dash for growth in East Asia, the environment has always been tomorrow’s issue. In the end, however, tomorrow arrives. Seeing the environment as a free good has led to an almost total absence of effective environmental policies. Rising aspirations and increased affluence seem likely to generate greater concern for the environment as the meeting of basic needs becomes less dominant. There will inevitably be pressure on governments to extend their role in regulation, in funding projects to improve the environment and to provide a better infrastructure of environmental services. Looking at internal pressures, maturation of services will also force increasing social expenditure in the tigers. It seems certain that expenditure under the South Korean and the Taiwanese pension schemes will rise. There are also the laws of sui generis growth. Once established, services tend to expand in terms of range, coverage, generosity of benefits, and so on as ideas of a right to a service evolve alongside the actual growth of services. It is not difficult to see likely pressure points that will become forces for development. One example is the deterrent effect of high co-payments on access to health in South Korea and Taiwan (Jacobs, 2000b: 5–6). Another is the growing evidence that Singapore’s CPF scheme does not provide an adequate income in old age (Asher, 1998: 19–20). More generic instances are the failure of systems of public assistance to guarantee an income adequate for dignified survival, and the growing need for publicly provided social care for the increasing numbers of very elderly, highly dependent people for whom it has become increasingly difficult for families to care appropriately. It is not difficult, then, to pick out current and future pressures on existing patterns and levels of provision. How societies will respond to those pressures is, of course, much more difficult to predict. The impact

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of the Asian financial crisis, and the varied responses to it, brought out just how different our four societies actually are despite all their similarities. South Korea responded by expanding its network of welfare provision through enhanced unemployment insurance and public assistance. Hong Kong sought to reduce expenditure. In Singapore, employer contributions to the CPF were reduced temporarily, in effect marking a significant wage cut. Overall, though, the pressures we have outlined are essentially in the direction of a larger role for the state and increased expenditure. But there are also counter pressures, the most obvious being lower rates of economic growth, a smaller fiscal dividend, and strong business pressure against enhanced social provision. Unsurprisingly, there are those who think that the tigers will expand their commitment to welfare, and those who think they will not. Ramesh believes that they will. For him, South Korea is ‘an embryonic welfare state’ (Ramesh, 2003: 88). He also sees ‘indications that Taiwan is in the early stages of transforming into a welfare state’ (Ramesh, 2003: 89). Both, he argues, are ‘on their way to transforming into conservative welfare states’ (Ramesh, 2003: 98). Tang sees fewer indications of welfare development, finding, for instance, no sign that Taiwan’s still powerful KMT is changing its anti-welfare stance (Tang, 2000: 165). Regarding the possibility of welfare development in Hong Kong and Singapore, neither Ramesh nor Tang holds that significant change is likely. Tang describes Hong Kong as ‘relentless in bringing back the residual state’ (Tang, 2000: 166). He sees little possibility of real reform of Singapore’s CPF-dominated system (Tang, 2000: 170).

Tiger social policy and welfare capitalism in the twenty-first century Ultimately, debates about contemporary welfare capitalism need to be set in the context of the raft of social and economic changes associated with globalization (George and Wilding, 2002). It is in this context that we now conclude our analysis of tiger social policy. We look first at the impact of globalization and secondly consider tiger social policy in the context of international debates about welfare capitalist futures. The impact of globalization Globalization has varied effects on social policy development. According to some theorists, it constrains states because of the negative attitude of global capital to high levels of taxation and public spending, and because of the premium placed on competitiveness (Ohmae, 1995; Cerny, 1997).

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According to other analysts, globalization means that small states highly integrated into the global economy will develop social protection systems to shield their citizens from the risks inherent in that situation (Rodrik, 1998). Such states will also need to invest heavily in education, training and research and development. In the tiger economies, globalization has certainly had some positive effects on social policy development. Ramesh, for example, argues that the internationalization of the South Korean economy has probably contributed to rather than hindered the expansion of social security, because of the way in which, after South Korea joined the OECD, the country was exposed as a welfare laggard. This served to strengthen pressures for development. Equally, the Taiwanese government saw democratization and social policy development as crucial to improving Taiwan’s international standing and securing the much desired legitimating membership of international organizations (Ramesh, 2003). Beyond this, all the tiger governments acknowledge the importance of education to international competitiveness, which helps to explain their relatively high levels of spending in this area. Globalization is also about the spreading of ideas and orthodoxies. Such ideas can have either a negative or a positive effect on social development. In the 1980s, the globalization of new right critiques of welfare state policies profoundly affected developments in the tiger economies. By contrast, the globalization of ideas of rights – for women, children, people with disabilities, people in ill health – are powerful pressures in states sending their ablest young people to the West for higher education and seeking a legitimating global acceptability. As globalization has placed restraints on further developments in already developed welfare states, so it will put catch-up pressure on welfare laggards. The future of welfare capitalism International debate about the future of welfare capitalism is cohering around one key proposition, that globalization does not necessarily signal the end of welfare capitalism. It certainly makes life difficult for welfare states. We live, argues Pierson, in an age of ‘permanent austerity’ (Pierson, 2001: 99). However, globalization impacts are proving to be highly variable. The key determining factors include path dependency and complex actor preferences (Pierson, 2001: 12–13). Almost all analysts now agree with Leibfried: ‘The race to the bottom has not taken place’ (Leibfried, 2001: 5). Developing this theme, Swank argues that the dramatic post-1970 rise in international capital mobility has not resulted in systematic welfarestate retrenchment across the board. It has not even directly reduced the

182 Welfare Capitalism in East Asia

revenue-raising capacities of government, and thereby undercut supporting structures for welfare states. Instead, globalization pressures have been mediated by domestic factors in the welfare state itself, and in the wider polity of which it is part. Overall, Swank holds that continental European welfare states have been quite well protected from global pressures by inclusive electoral systems, social corporatist interest representation and policy making, centralized political authority and universal and social-insurance-based programme structures. By contrast, welfare states in Anglo-American systems have been less well protected through majoritarian electoral systems, pluralist interest representation and policy making, decentralization of policy-making authority and liberal programme structures (Swank, 2002). A more negative spin on this is Leibfried’s contention that ‘What is often labelled a crisis of the welfare state may simply be a crisis of a blocked and veto-ridden political system’ (Leibfried, 2001: 1). Thinking about East Asian welfare states in the light of this analysis, it may be that we will witness a clear parting of the ways. Until the end of the twentieth century, the argument goes, the successful growth strategies employed by tiger states gave their welfare systems a shared productivist orientation that outweighed their many differences. For some 30–40 years, this was a single world of welfare capitalism. When, however, the financial crisis abruptly interrupted their experiences of growth, and subjected them to the permanent austerity found in all other highly developed societies, those differences took on a life of their own. Then it became relevant that two tiger welfare states were based on social insurance systems that have proved to be highly resistant to retrenchment and reform, and that two others had much weaker institutional bases. This is clearly a very strong line of analysis. However, it is still too early to say for certain whether the early decades of the twenty-first century will witness real differences within the hitherto single world of tiger welfare capitalism. Ramesh’s prediction is that fully-fledged welfare states will emerge in South Korea and Taiwan, with much less substantial welfare systems continuing to characterise Hong Kong and Singapore (Ramesh, 2003). He may prove to be right. For now, however, there remain strong elements of productivism in all four social policy systems analysed in this book.

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Name Index Adams, D., 49 Adamson, B., 55 Alco*ck, P., 128 Amsden, A. H., 2 Applebaum, R. P., 38 Arrighi, G., 36 Asher, M., 38, 136, 147, 150, 155, 156, 158, 175, 179 Aw, T. C., 26, 73, 74, 119 Babkina, A. M., 12 Baldwin, P., 11 Beetham, D., 32 Bell, D., 4, 22 Bereuter, D., 108 Biggart, N. W., 4 Bray, M., 37, 38, 39, 56, 67 Brewer, B., 131, 146, 157 Castells, M., 3, 4, 24, 25, 27, 35, 102, 164, 165, 178 Census and Statistics Department, Hong Kong, 55, 60, 61, 72, 77, 100, 149 Central Intelligence Agency, 1, 19, 72, 100 Central Provident Fund Board, Singapore [CPF], 73 Cerny, P., 4, 180 Chan, D., 40, 61, 66 Chan, S., 29 Chan, Y., 154 Chang, C. O., 110, 111, 120, 124 Chang, J., 43 Chen, D. S., 30 Chen, E. K. Y., 2 Chen, L. C., 102, 116 Chenery, H., 34 Cheng, K. M., 44 Cheng, T. J., 30, 32 Cheng, T. Y., 34, 35 Cheng, W. H., 43 Cheng, Y. C., 25, 37, 39, 40, 44, 46, 66

Cheung, B. L., 66 Cheung, F., 136, 150, 155 Chew, S. B., 93 Chiang, K. S., 31, 162 Chiu, S. W. K., 23, 38 Choe, S. C., 101, 102, 115 Chow, N., 130, 177 Chu, C. Y., 52 Chu, Y. W., 28, 80, 95 Chua, B. H., 100, 102, 108 Chung, B. G., 42, 57 Chung, H. S., 119 Chung, O., 28 Clark, C., 29 Committee on Chinese Medicine and Pharmacy, Republic of China [CCMP], 83 Council for Economic Planning and Development, Republic of China, 100 Dahl, R., 32 Department of Education, US, 65 Department of Health, Republic of China [DOH], 72, 76, 77, 78, 80, 82, 83, 86, 88, 91 Department of Statistics, Singapore, 64, 100, 105, 111, 150 Deyo, F. C., 23, 34, 165, 166 Directorate General of Budget, Accounting and Statistics, Republic of China [DGBAS], 19, 100, 152 Dixon, J., 130 Domhoff, G. W., 32 Doong, S. L., 59 Drakakis-Smith, D., 101 Education Department, Hong Kong, 55, 61 Eng, S. P., 41 Esping-Andersen, G., 5, 6, 11, 14, 34, 173

201

202 Name Index Fan, R., 71 Fei, J. C. H., 2 Forrest, R., 106, 110 Friedman, M., 164 Gauld, R., 70, 73 George, V., 180 Goh, C. T., 26, 39, 41, 61, 167 Goh, L., 24 Gold, T., 30 Goodman, D., 3, 6, 7, 10, 15, 37, 165, 167, 170, 174, 177 Gopinathan, S., 37, 38, 41, 49, 56, 57, 62, 67 Gottlieb, E. E., 49 Gough, I., 128 Government Information Office, Republic of China, 53 Grant, C., 24, 85 Green, A., 39 Gross, A., 77 Ha, S. K., 102 Haggard, S., 1, 2, 22, 25, 30, 34, 35, 72 Haila, A., 123 Hahm, C., 4, 22 Hall, D. L., 4, 22 Hall, P., 33 Ham, C., 93 Hamilton, G. G., 4 Han, S. J., 28 Harvard Team, 82 Harvie, C., 27 Health, Welfare and Food Bureau, Hong Kong [HWFB], 78 Heclo, H., 32 Henderson, J., 35, 38, 99, 166 Higgott, R., 2 Hill, M., 75 Ho, K. C., 23 Ho, P. L. H., 83 Ho, W. K., 41 Holliday, I., 7, 8, 13, 34, 70, 72, 87, 94, 95, 96, 97, 165, 173 Hong Kong Special Administrative Region Government, 23, 45, 46, 61, 64, 111, 113 Hong Kong Housing Authority, 117, 118

Housing Development Board, Singapore [HDB], 100, 113 Howe, C., 30 Huff, W. G., 25, 26 Huque, A. S., 24 Husen, T., 51 Hwang, Y., 154 Hwang, Y. S., 75 International Monetary Fund [IMF], 137, 150 Jacobs, D., 130, 132, 135, 143, 144, 145, 146, 147, 149, 150, 164, 167, 171, 174, 175, 177, 179 Jarvis, P., 37 Jenkins-Smith, H. C., 32 Jessop, B., 4 John, P., 32 Johnson, C., 12, 33, 164 Johnston, D. M., 25 Jones, C., 4, 5, 6, 14, 20, 167 Joo, J., 33, 80, 95, 172 Ka, M., 145, 147, 151 Kang, D. C., 2 Kim, D. J., 75, 80, 91, 170 Kim, G. Y., 102, 104, 110, 115 Kim, J., 101, 102, 115 Kim, J. H., 102, 104, 110, 115 Kim, J. Y., 110 Kim, S. I., 110 Kim, Y. H., 49, 50 Kingdon, J. W., 32 Knowles, A. S., 51 Korean Educational Development Institute [KEDI], 57, 58 Krugman, P., 2 Ku, Y. 154 Ku, Y. W., 29, 30, 31, 91, 94, 133, 135, 140, 145, 148, 157, 163, 177 Kuo, S. W. Y., 2 Kwak, B. S., 39, 42, 50, 51, 58 Kwok, R. Y. W., 24 Kwon, H. J., 3, 7, 27, 28, 29, 37, 132, 144, 146, 147, 148, 150, 155, 156, 157, 158, 162, 169, 174, 176, 177, 178 Kwon, S., 75, 81, 86, 91, 175

Name Index Lam, D., 29 Lau, S. K., 24, 33 Law, W. W., 51, 52, 54, 67 Lee, D. S., 119 Lee, H. H., 47, 49, 57, 62, 67 Lee, H. K., 27 Lee, I., 138, 144, 150 Lee, J., 99, 103, 104, 106, 108 Lee, K. Y., 4, 25, 104, 163, 166, 168 Lee, M. L., 77 Lee, S., 138, 144, 150 Lee, W. K. M., 137, 154 Lee, W. O., 37, 38, 39 Leibfried, S., 181, 182 Leftwich, A., 35 Leung, J., 45, 55 Li, S. P., 55 Li, W. D. H., 101, 120 Lim, S. G., 39 Lin, K., 3, 4, 5, 6, 22 Liu, C. T., 75 Lo, H. C., 56, 59 Low, L., 25, 47, 73, 74, 119 Lui, T. L., 23 MacLehose, Sir Murray, 24 MacPherson, S., 131, 146, 157 McLaughlin, E., 131, 135 Midgley, J., 5, 141 Mills, C. W., 32 Miners, N., 23 Ministry of Education, Republic of China [MOEPOC], 52, 59, 60, 61, 64 Ministry of Education, Republic of Korea [MOESOK], 42, 43, 49, 57, 60, 61, 63, 64, 65 Ministry of Education, Singapore [MOES], 41, 48, 50, 51, 60, 62, 65 Ministry of Finance, Republic of China, 120 Ministry of Health, Singapore [MOH], 74, 76, 78, 79, 81, 85, 86, 88, 90 Ministry of Health and Welfare, Republic of Korea [MOHW], 79, 83, 137, 138, 144, 151, 157 Ministry of Information and the Arts, Singapore, 62

203

Ministry of Information, Communication and the Arts, Singapore, 49 Ministry of the Interior, Republic of China, 116 Mok, K. H., 37, 39, 40, 44, 46, 47, 48, 49, 50, 52, 54, 56, 57, 59, 61, 66, 67, 68 Moon, Y. L., 42 Morley, J. W., 1, 13, 72, 164 Morris, P., 37, 38, 39, 51 National Institute of Educational Resources and Research, 53 National Statistics Office, Republic of China, 111, 116 National Statistical Office, Republic of Korea, 100, 105, 111 Newman, D., 38, 136, 150, 155 Ngan, R., 136, 150, 155 O’Connor, J., 3, 34 Organization for Economic Co-operation and Development [OECD], 49, 62, 167, 177 Ohmae, K., 180 Park, C. H., 28, 31, 33, 162 Park, N., 57, 58 Patten, C., 164 Pei, M., 163 Pempel, T. J., 23, 35, 36, 164 Peng, I., 6, 7, 167, 170 Pierson, P., 181 Post, D., 55 Postlethwaite, T. N., 51 Quah, J. S. T., 40, 56, 167 Ramesh, M., 3, 9, 94, 96, 144, 145, 147, 150, 158, 167, 168, 175, 176, 178, 180, 181, 182 Rating and Valuation Department, Hong Kong, 105 Reagan, R., 164 Rhodes, M., 2 Rodan, G., 25, 26, 33, 167 Rodrik, D., 181 Roh, T. W., 115

204 Name Index Root, H. L., 34, 35, 163, 165 Rowen, H. S., 34 Rozman, G., 4, 38 Sabatier, P., 32 Sainsbury, R., 128 Scott, I., 66 Shan, P., 43 Sharpe, L., 37 Shin, D., 151, 155, 157 Shonfield, A., 33 Singapore Government, 87 Smart, A., 99, 101, 102 So, A. Y., 24 So, A., 38 Social Security Administration, US, 129 Social Welfare Department, Hong Kong, 135, 136, 155 Stromquist, N., 37 Suleiman, E. N., 32 Sun, C., 140 Swank, D., 182 Sweeting, A., 37, 38, 39 Tai, H. H., 51, 54, 67 Taiwan Real Estate Research Center, 105 Tam, W. K., 87, 94, 96, 106, 110 Tan, J., 40, 41, 44, 48, 49, 57 Tan, T. M., 93 Tang, K. L., 3, 8, 11, 26, 106, 131, 132, 145, 146, 154, 157, 162, 163, 165, 167, 168, 170, 177, 178, 180 Tao, J. L. P., 24 Thatcher, M., 164 Tilak, J., 38, 39 Townsend, T., 37, 39, 44, 66 Tremewan, C., 162, 165 Tsai, C. W., 51

Tsang, W. K., 40 Tse, K. L., 39, 40, 46 Tu, W., 22 Tung, C. H., 24, 40, 56, 61, 67 United Nations, 100 United Nations General Assembly, 99 University Grants Committee, Hong Kong [UGC], 44, 61 United Nations Development Programme, 1, 12, 13, 77 Veneroso, F., 2 Vogel, E., 1, 2, 32, 33 Wade, R., 2, 4, 21, 28, 29, 30, 31, 35, 166 Weiss, L., 4 Welch, A., 39 Weng, F. Y., 39, 43, 52, 53, 58, 59 White, G., 3, 7, 10, 15, 37, 165, 174, 177 Whitty, G., 67 Wilding, P., 7, 24, 97, 180 Woodwiss, A., 23 Woo-Cumings, M. J. E., 163 World Bank, 12, 21, 22, 38, 72, 100 World Health Organization [WHO], 71, 72, 77, 82, 83, 84, 88, 92, 93 Yamato, Y., 56 Yang, B. M., 74, 79 Yang, K. T., 67 Yap, J., 41 Yip, J., 41 Yip, N. M., 103, 104, 108 Yoon, J., 124 Yuen, P. P., 24, 73, 85 Zysman, J., 33

Subject Index ageing, 175–6 Asian financial crisis, 2, 68, 77, 94, 95, 104, 111, 119, 122, 123–4, 128, 131, 141–4, 144–5, 157, 159, 174–5, 179–80 Asian values, 4 bureaucratic dominance, 32–3 Central Provident Fund [CPF], 26, 73, 89–90, 108, 114, 118–19, 122, 123, 125, 126, 131–2, 136–7, 141, 144, 149, 150, 153, 154–6, 159, 170–1, 180 colonial states, 24 competitive politics, 31–2 Confucianism, 20, 22, 38, 153, 168 Confucian welfare states, 6 curriculum design, 45, 47, 49 decentralization in education, 41, 46–7, 50–1, 52–3, 53–4 democratization, 32, 33, 177–8 denigration of welfarism, 166 deregulation in education, 52, 53, 54 developmental state, 3–4, 25–6, 28, 106 East Asian welfare regimes/model, 6–9, 11, 96, 172–80 economic growth, 21–2, 172–3 economic growth and social policy, 164–5 economic and industrial policy making, 33–4 e-health, 87 education policy assessment, 64–9 access to education, 64–5 educational achievements, 65–6 educational challenges, 66 education funding, 60–4 in Hong Kong, 60–1 in Singapore, 62

in South Korea, 62–3 in Taiwan, 63–4 education policy development, 38–43 in Hong Kong, 39–40 in Singapore, 40–1 in South Korea, 42 in Taiwan, 43 education provision, 54–60 in Hong Kong, 54–6 in Singapore, 56–7 in South Korea, 57–8 in Taiwan, 58–60 education regulation, 44–54 in Hong Kong, 44–7 in Singapore, 47–9 in South Korea, 49–51 in Taiwan, 51–4 expectations, 178–9 family and welfare, 168, 176 full employment and welfare, 164–5 globalization, 180–1 governance of education, 45, 47–9, 50–1, 67–8 governance of health care, 76–7, 78, 80–2, 87 governance of housing, 99–100, 106 governance of social security, 134, 135–6, 137, 137–8, 139–40 Harvard Report, 82 health care achievements, 71–2, 77, 93 health care expenditure, 77, 88–9 health care funding, 88–92 in Hong Kong, 89 in Singapore, 89–91 in South Korea, 91 in Taiwan, 91–2 of traditional medicines, 92 205

206 Subject Index health care policy assessment, 92–7 access, 94–5 challenges, 95–6 similarities and differences, 96–7 strengths and weaknesses, 93–5 health care policy development, 70–7 in Hong Kong, 73 in Singapore, 73–4 in South Korea, 74–5 in Taiwan, 75–6 health care provision, 84–8 modern scientific medicine, 84–7 traditional medicines, 87–8 primary care, 84–5 secondary sector in Hong Kong, 85 secondary sector in Singapore, 86 secondary sector in South Korea, 86 secondary sector in Taiwan, 86 health care regulation, 78–84 modern scientific medicine, 78–82 traditional medicine, 82–4 in Hong Kong, 78 in Singapore, 79 in South Korea, 79–80 in Taiwan, 80 Hong Kong economy, 22–3 Hong Kong politics, 23–4 housing funding, 116–21 in Hong Kong, 117–18 in Singapore, 118–19 in South Korea, 119–20 in Taiwan, 120–1 housing management, 107–8, 108–9 housing policy assessment, 121–6 access and coverage, 121–2 efficiency and effectiveness, 123 future challenges, 123–6 quality and value for money, 122 housing policy development, 100–5 in Hong Kong, 102 in Singapore, 102 in South Korea, 102–3 in Taiwan, 103 housing prices, 105, 107, 110, 110–11 housing provision, 112–16 in Hong Kong, 112–13 in Singapore, 113–15 in South Korea, 115–16 in Taiwan, 116

housing regulation, 106–12 in Hong Kong, 106–8 in Singapore, 108–9 in South Korea, 109–10 in Taiwan, 110–11 land supply, 107, 108, 109 marketization, 61, 62, 67, 85 modern scientific medicine, 70, 71, 80–2, 84–5, 87, 89 in Hong Kong, 78, 85, 89 in Singapore, 79, 85–6, 89–91 in South Korea, 79–80, 86, 91 in Taiwan, 80, 86, 91–2 oikonomic welfare states, 5–6 People’s Action Party, 25, 26, 102 population, 19–20 pragmatism, 168–9 private sector in education, 52–3, 55–6, 57, 58, 59, 63, 63–4, 67 private sector in health, 74, 75–6, 84, 86, 87, 93–4 private sector in housing, 103–4, 110–11, 114, 115, 116 private sector in social security, 147–9 productivism/productivist welfare, 8, 14–15, 68–9, 72, 80–1, 97, 126, 158, 165, 166–7, 173 quality assurance, 45, 52 rights, 177 Schools Excellence Model, 41, 47–8 school-based management, 46–7, 52–3, 55, 58 Singapore economy, 25–6 similarities and differences in tiger social policy, 161–2, 170–1 social policy making, 31–4 social security assessment, 152–9 access/eligibility, 153–4 coverage, 154–5 effectiveness, 156 efficiency, 155–6

Subject Index replacement ratios, 154–5 similarities and differences, 152–3 value for money, 155 social security development and patterns, 128–34 in Hong Kong, 131 in Singapore, 131–2 in South Korea, 132 in Taiwan, 132–3 social security funding, 149–52 in Hong Kong, 149–50 in Singapore, 150 in South Korea, 150–1 in Taiwan, 151–2 social security: future challenges, 157–9 ageing, 157–8 Asian financial crisis, 157 social assistance coverage, 158 unemployment, 158 social security provision, 141–9 ideal pattern, 148–9 range of provision, 135 role of employers, 145–7 role of the family, 147–8 role of the state, 141, 144 social security regulation, 134–41 in Hong Kong, 134–6 in Singapore, 136–7 in South Korea, 137–9 in Taiwan, 139–40

207

South Korean economy, 27 South Korean politics, 28 states, strong but limited, 168–70 student admission policies in Hong Kong, 46 in Singapore, 48–9 in South Korea, 50 in Taiwan, 53 Taiwan economic development, 29–30 Taiwan political development, 30–1 teacher training in Hong Kong, 45 in Singapore, 47, 48 in South Korea, 50 in Taiwan, 53 tiger economies, 20, 34, 35–6 traditional/oriental medicine, 70–1, 82–4, 87–8, 92–3 unemployment, 172, 174–5 university governance in Hong Kong, 44, 46, 56 in Singapore, 49, 57 in South Korea, 51, 58 in Taiwan, 43, 53–4, 59, 64 welfare expenditure, 176, 179–80

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