Asia weaves strands of social safety net

While many European countries struggle to pay for social safety nets, some in Asia are finding they can no longer afford to do without them. The shift is as much about politics as economics. Asia's explosive growth over the past decade has created thousands of new millionaires and widened the income gap. Rising inequality is becoming a bigger issue at the polls.
In Malaysia, where elections are widely expected this year, the cabinet has approved a national minimum wage for the first time, two government sources said. Hong Kong, which will select a new chief executive on March 25, adopted a minimum wage for the first time last year.
Singapore released a budget last month with the slogan, "An inclusive society, a stronger Singapore." It included tax relief for lower-income families and more spending on medical care for the needy. India's budget, expected on Friday, will probably contain heavier spending on social programmes as well.
In both countries, the ruling party lost ground in the most recent polls. Asian nations have traditionally left social protections up to families or perhaps local leaders who offer assistance in exchange for political support, said Frederic Neumann, co-head of Asian economics at HSBC in Hong Kong. "Modernisation has broken this down, leaving the poor arguably less well protected and creating a need for more formal protection," he said.
Unlike in Greece or Portugal, where debt crises have forced painful budget cuts that will weaken the social safety net, most Asian governments have light debt burdens and fiscal space to manoeuvre. The region also boasts some of the world's largest foreign exchange reserves, led by China's nearly $3.2 trillion. India, Malaysia, Indonesia, Singapore, South Korea, and Thailand each hold reserves in excess of $100 billion. Yet almost half of the Asia-Pacific population is poor, OECD data shows. To be sure, foreign exchange reserves are intended to serve as a self-insurance policy against the risk of financial upheaval, not to pay for a social safety net.