Social security pension “reforms” in Thailand and Indonesia: unsustainable and unjust

Historically, both Thailand and Indonesia have had relatively limited social security programmes, in terms of labour-force coverage and public expenditure. In the last decade, both have embarked on apparently ambitious reforms to move towards a more embracing system. This paper examines the political context of pension reform in Thailand and Indonesia. It also considers the likely economic and welfare effects of these reforms. These country experiences are located in a wider discussion of social security in developing countries. This discussion questions many conventional assumptions about social security programmes, especially as regards their distributive effects. It draws attention to the diversity of international experiences, which contrasts with a more proscriptive approach advocated by agencies such as the World Bank. In the light of international experience, the paper is pessimistic about the impacts of Thailand and Indonesia’s reforms. Rather than promote general welfare and economic growth, they have led to the establishment of unsustainable and highly inequitable financing structures. This will threaten medium-term economic stability and questions the value of contributory pension schemes as an agent of social protection for the most needy.