Friday, January 29, 2016

BWorld 40, CCT vs other welfare programs, SSS vs pension deregulation

* This is my article in BusinessWorld the other day, January 27.

It appears now that there are many data showing that the conditional cash transfer (CCT) is good and successful in reducing poverty. Good, then it is now time to abolish other existing welfare programs that were failures. Each new welfare program is an admission that other existing welfare programs are wasteful and unsuccessful in reducing poverty.

Let us count some of those existing welfare programs: Books and education for the poor, medicines and PhilHealth for the poor, housing and relocation for the poor, credit and agrarian reform for the poor, irrigation and rural roads for the poor, MRT/LRT subsidy for the poor, jeepney diesel subsidy and e-trikes for the poor, rice price subsidy for the poor, condoms and pills for the poor, public Wi-Fi for the poor, etc.

There is an endless, no timetable, and even expanding welfare programs for the poor. Which means there will be endless and expanding taxes, fees, fines and penalties, and mandatory contributions for the rest of the population. These benefit the poor, non-poor who pretend to be poor, and the many layers of legislators and bureaucracies that administer these endless welfare and entitlement programs.

A warning: CCT is a targeted program, targeting the “poorest of the poor.” This is not possible actually because many of these people are highly mobile in the midlands and uplands. They don’t have IDs, they seldom stay at home, and cannot attend the mandatory, regular meetings by the Department of Social Welfare and Development (DSWD). They are always in the mountains, hunting or cutting trees, producing firewood and charcoal, and so on.

So by convenience, those who can regularly attend DSWD seminars and not blacklisted from the program are those who have some means to stay at home. Like a spouse or one older child has regular work, or working abroad and sending money regularly.

Our social security insurance and pension system should be deregulated.

Membership in the government Social Security System (SSS) monopoly corporation should not be mandatory and by coercion. The people should have more choices, more freedom, to whom they should trust their current contribution for their future pension fund.

This measure can be called as “pension fund deregulation,” not “SSS deregulation or privatization.”

SSS can be retained as a government-owned corporation, need not be privatized, but membership with it should be voluntary, not mandatory.

If people have more choices, it is doubtful that SSS as we know it now can get millions of members. SSS officials are always beholden to the high-level politicians who recommended and appointed them there, not to the actual contributors from the private sector.

SSS, GSIS, PhilHealth, and Pag-IBIG business model is so 1950s or 60s: Filipinos are assumed to be non- or less-mobile, they will work, retire, and die here in the country. This is wrong because millions of Filipinos now are very mobile across the globe, and the Philippines also attracts millions of mobile and foreign professionals, some of whom have decided to settle down here.

Global and multinational pension funds should be allowed to compete with SSS. So Filipinos who work here for 10 years or so, then move to other countries in Asia, Europe or north America should have ALL of their contributions from Day 1 in the Philippines counted. These contributions should be portable and can be utilized once they decide to retire whenever and wherever they wish.

The arrangement should be the same for foreigners who contribute to such pension fund -- if they choose to retire here in the Philippines, they can enjoy the full benefits even if they contributed for 10, 20 years in another country.

Governments in many countries are often jurassic central planners. They are incapable of highly flexible policies, they survive only via rigid and inflexible policies, that is why things -- like social security, pension, health insurance, housing insurance -- are made mandatory, obligatory, by force and coercion.

Currently, if a Filipino has worked here for 20 years and contributed faithfully to those funds then move and work abroad, retire there and come home only to visit friends and families, all of their contributions are non-portable and hence, cannot be used in their adopted country. Such contributions only make the Directors and Commissioners (most if not all are political appointees) and employees of SSS become richer.

The same can be said of foreigners who later settled down in the Philippines. Their contributions in their mother countries will not be honored by SSS here.

If membership in SSS is not mandatory, it will become more responsive, more sensitive, more friendly to members. If members are unhappy, they can opt out and stop contributing to SSS and go to another private pension fund.

The Philippine government guarantees solvency of the SSS. Can a private pension fund promise a similar assurance?

Good question, and a multinational private pension fund, or local but in close alliance with international and global pension funds, will have the financial muscle to ensure solvency. It is among the first questions that members who have the privilege to opt out will be asking, and the fund/s who can provide convincing answers will get more subscribers.

Thus, SSS membership will not be made mandatory. What should be mandatory is that ALL people should have social security insurance.

When there is competition, public and private players tend to be more customers-friendly and sensitive. Where there is zero competition, many ugly features and wastefulness of a monopolist can be observed. We see many of such wastes and inefficiencies in the current SSS.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers, and a Fellow of the South East Asia Network for Development (SEANET).

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