Discussion draft only: Not to be cited

The Third EASP International Conference Centre for East Asian Studies, Bristol University, UK, 12-13 July 2006

GDPism and Risk: Challenges for Social Development and Governance in East Asia The East Asian Social Policy Discourse: Policy Shift, Reversal, or Steadiness?1
Professor Anthony B. L. Cheung Professor, Department of Public and Social Administration City University of Hong Kong, Hong Kong, China sabltony@cityu.edu.hk

1. Introduction
Robert Wade (1990)s study of South Korea, Taiwan and Japan resulted in an understanding of East Asian developmentalism as the governed market. Hong Kong arguably had developed an alternative model of growth in the name of positive noninterventionism. The identification of an East Asia-specific growth model is also matched by a similar attempt to construct an East Asian productivist model of welfare capitalism (Holliday 2000). This paper explores the substance of the East Asian social policy discourse. The first question addressed is whether by having undergone rapid economic growth by the 1990s, East Asian developed societies have also trodden a path of modernization comparable to that in the West where post-War economic and social changes constituted interlinked aspects of a singular process of transformation leading to policy convergence in the form of the welfare state. The productivist explanation casts doubt on such a proposition. The second question is whether since the 1997 Asian financial crisis the pre-existing East Asian developmental model has been eroded because of the impact of globalization and the rise of neo-liberalism as prescription for the economic problems. Economic challenges like globalization and the Asian financial crisis, and political challenges like regime change with democratization (South Korea and Taiwan) or without democratization (Hong Kong), and the gradual rise of new politics (Japan included), together with increasing fiscal/budgetary pressure (notably in Japan, Taiwan and Hong Kong), have certainly helped to induce public policy rethinking among East Asian governments. However, it is observed changes so far have not substantially moved beyond the original policy path grounded in a developmental
1

Acknowledgement: The author is most grateful to the Governance in Asia Research Centre (GARC) of the City University of Hong Kong for providing financial support to enable him to travel to Bristol for the conference at which this paper is presented. The research support of Lo Oi-yu, senior research assistant of GARC, is also gratefully acknowledged.

state with productivist goals. Path dependency is still very much at play, sustained by institutional continuity. Policy reversals are rare. Such policy steadiness in East Asian public policy governance can be explained by the longstanding bureaucrats-dominated nature of public policy making in addition to the state-led economic development approach to policy interventions. Some public services have historically been developed and expanded not for the sake of independent social policy values, but as instrumentalist complements to the developmental agenda and related political objectives. Welfare provisions have mostly been introduced not out of welfare ideology considerations, as some suggested to be the case in the formation of the welfare state in the West (Pinker 1979; Marshall and Bottomore 1992), but as a result of a fiscally and economically driven social development programme, in which case economic slowdown and recession could arguably cause a readjustment or even reversal shift, but still within the same logic. New social policy development in some East Asian states like South Korea after democratization can at best been seen as indicative of the rise of welfare developmentalism. If developmentalism is still the foundation of the East Asian public policy discourse, then its welfarist component needs to be conceptualized more appropriately as an offshoot of economic development and thus an outcome of fiscal surplus, rather than any pure ideology of collectivist welfare. Social development is thus part and parcel of the bigger economic development project. The role of family and individual efforts remains a key element of the social philosophy underpinning state-society interaction and the states response to social demands, even though there are increasing state regulatory and intervention efforts along the way.

2. East Asian Welfare States Nature and Evolution

The developmental state Before the 1997 Asian financial crisis cast doubt about the prospect of the postwar developmental state mode (Wong, 2004: 345-56), the conventional wisdom in understanding the system of governance in East Asia would start with the East Asian Economic Miracle thesis (World Bank, 1993). According to it, the success of the East Asian growth economies (Japan, Taiwan, Singapore and South Korea) until the 1990s could be attributed largely to the presence of a strong developmental state (very often authoritarian and corporatist in nature). Japan was portrayed by Chalmers Johnson (1982) as a pioneer model of the developmental or plan-rational state. As Beeson (2003: 26) put it, the very idea of the developmental state was reflective of conceptions and intellectual traditions about the purpose of public policy and the concomitant role of government which fundamentally differed from those prevalent in the Anglo-American nations. Such an idea can be traced to the Meiji Restoration in the 1860s, when the modern Japanese nation-state was created as a response to the challenge (and threat) posed by Western capitalist expansion. Wade (1990)s seminal study of Japan, South Korea and Taiwan analyzed the nature and operations of the market under East Asian developmentalism and summed them up as the governed market. Among the newly developed East Asian economies, Hong Kong under British colonial rule (until 1997) was arguably an exception as it had all along been held as the last bastion of the free market (Friedman 1981: 54) practicing an official

philosophy of positive non-interventionism. Whether or not Hong Kong was a reverse proof of a successful free-market non-interventionist economy depends on how intervention (or non-intervention) was interpreted. Hong Kongs colonial government in reality had displayed some unusual instruments for influencing industrial activities, so that the economy worked very differently from the textbook picture of a free market economy or from those economies of the Anglo-American kind (Wade 1990: 331-33). Though not of a Western welfare state type, the government was active in regulative controls and had extensive involvement in social and community services, relying on land revenue instead of heavy taxation as the principal means of supporting these services. To that extent Hong Kong was recognized by some as having developed a unique model of growth (Schiffer 1983). According to Wong (2004: 349-52), the East Asian developmental states had the following core features: 1. Their economies had benefited from the advantages of economic backwardness, and hence the advantages of catch-up development, by importing knowledge, technology, and economic know-how from abroad instead of starting from scratch. 2. They used public policy instruments to allocate productive resources rather than relying solely on the market, sometimes playing a big leadership role in prospecting potentially lucrative industrial sectors. 3. They were social welfare laggards because their economic policy, including industrial policy, was primarily geared toward maximizing national productivity, i.e. rapid economic growth, with distributive consequences being considered secondary. 4. They were highly capable in economic policymaking, implementation, and policy monitoring and enforcement. 5. The developmental state model was anchored in a relatively autonomous, and historical hard state in the case of South Korea and Taiwan, functioning independently of popular social forces with close linkages with industry. Seen in this light, the East Asian development state model attests to Evans (1989, 1995) notion of embedded autonomy that gives the state the capacity to combine two apparently contradictory aspects namely Weberian bureaucratic insulation and intense immersion in the surrounding social structure (Evans 1989: 561). Similarly, Weiss (1998) argued in favour of the transformative capacity of the state insulated from undue special interests but firmly embedded in society, and maintaining effective linkages with industry and other societal/economic actors to ensure the happening of things through what she theorized as governed interdependence. Expansion of the residualist welfare regime As late industrializers, Japan and subsequently other East Asian developed economies had historically exhibited a residual form of social welfare based more on family and corporate welfare than on state protection (Pierson 2004: 11). Their welfare state2
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The term welfare state is used here as a general term not necessarily denoting any particular form of welfare state such as that in some European countries. As the later discussion explains, there are different forms of welfare state.

was set up and expanded over the last few decades by conservative governments with clear antiwelfare ideologies (Aspalter 2002a: 2). Public social expenditures in East Asia were considered very low on a world scale according to Gough (2004: 171), though he included some Southeast Asian countries within the East Asia sector. The figures were slightly higher in developed East Asian states, but still be low by Western European and North American standards see Table 1 below.
Table 1: Total government expenditure and major social policy expenditures, as percentages of GDP, in late 1990s East Asian developed economies Japan Singapore Hong Kong Taiwan South Korea Selected Western countries Australia Sweden United States United Kingdom Germany Total government expenditure 1997-98 29.4 16.8 14.5 22.7 17.4 Government expenditure 1999 31.9b 55.1 32.7c 37.8 44.8 Education 1995-97 3.7 1.8 2.6 5.0 3.7 Education 1998 4.34 6.59 4.82 4.65 4.35 Health 1997-98 5.3 1.2 1.7 3.5 2.2 Health 1998 5.9 7.0 6.1 5.6 7.9 Social security 1990-97 6.7 0.8 (2.2a) 1.2 2.2 3.0 Social security transfers 1998 8.4 19.3 12.6c 13.6 19.0

Notes: a including social-related withdrawals from the Central Provident Fund. b 1998 figure c 1997 figure Source: Figures on the five East Asian developed economies are from Gough (2004: Table 5.2); figures on the five selected OECD developed economies are from: OECD (2001a: 36-37, unnumbered table) (for general government expenditure), OECD (2001b: 80, Table B2.1a) (for public expenditure on education institutions), OECD (2001a: 89, unnumbered table) (for public expenditure on healthcare), and OECD (2002: 67, Table 6.3) (for social security transfers)

However, rapid economic growth in the booming decades had resulted in a faster expansion in real resources devoted to the social sector than in most countries (Gough 2004). Rather than an ideological offshoot, the welfare state in Japan, South Korea, Hong Kong, Taiwan and Singapore was explained as largely caused by social protests, political pressures, competition in democratic elections, and particular demographic changes (ibid). In all of these late industrialized economies, economic transformation did not necessarily result in an expanded state welfare regime, and changes in welfare expenditures had been modest compared with Western countries. According to Pierson (2004: 11), Japan subordinated social policy to the logic of nation (re-)building through economic development, with a high economic growth strategy built around full (male) employment. Relying on a network of communal and family social support, Japanese governments were able to keep to a minimum the states responsibility for personal social services. Peng (2002) argued that such a welfare regime was sustained by the anti-welfare stance of the dominant parties (in

particular the Liberal Democratic Party), though demographic and social changes in recent years had seen the gradual rise of new pro-welfare women-friendly social policies. Until democratization in the 1990s, South Korea and Taiwan shared the features of a system where an authoritarian state, acting closely with business interests and in a weak-unions context, fashioned a strategy for national economic development. Though social welfare was not a priority, it was improved through enlarging the economic pie and by way of maximizing employment and upgrading the skills base of the economy. In South Korea, the development of the welfare state had an underlying logic of politics (Kwon 2002). The government was forced by the 1997 economic crisis to reform social security schemes and employment programmes, as a way to enhance its political legitimacy and broaden electoral appeal. In Taiwan, Ku (2002) argued that demographic changes had reduced the role and capacity of the family as the most important provider of welfare, and the rise of public pressure, social movements and ultimately party competition within a growingly democratic political environment following the demise of Kuomintang (KMT, Nationalist Party) authoritarianism had driven the state into the establishment of social insurance and health insurance schemes. Under the logic of positive noninterventionism, colonial Hong Kong had a typical system of residual welfare, though education and healthcare had evolved to become almost universal. Chan (2002) explained how political factors like pressure groups and social movements, politicians agitations, and the governments need for legitimacy had help expand welfare provision. Singapore, despite the soft paternalistic nature of its state, had largely depended on the contributory Central Provident Fund to provide for various accounts and schemes of retirement protection, healthcare and even home purchase (Aspalter 2002c). Convergence towards or deviation from Western welfare state model As East Asian welfare states came to maturity in the 1990s upon reaching a developed economy stage, an obvious question is whether they would have eventually converged to the typical welfare state model of the West if not for disruption by the 1997 Asian financial crisis. The answer depends on whether there exists some kind of established welfare state modernization path spurred by economic growth. The OECD experience, however, does not attest to such an inevitability. One would have presumed that there is greater policy interdependence and convergence among Western countries which share in civilization, have greater interaction in economic life, enjoy similar democratic forms of political governance, and are more or less in the same stage of modernity. A common perception was that most OECD countries converged in the post-War years towards big government fuelled by rapid economic development. From the 1970s onwards, economic and fiscal difficulties had triggered a New Right political economy emphasizing rolling back the frontiers of the welfare state, deregulation and privatization of public services. Then development of a globalized economy had prompted another kind of policy convergence tending towards international policy benchmarking and the use of similar policy tools in face of perceived common challenges from such globalization. However, post-Second World War public policy development in European countries in OECD had not been evolving along uniform patterns. As Castles (1998) recent

comparative study of OECD post-War transformation discovered, cross-national patterns of social and economic policy outcomes were in a constant state of flux as they were shaped by a wide range of economic, social, cultural, political and policy factors, which all altered over time. He tested the modernization theory that saw postWar economic and social changes as interlinked aspects of a singular process of societal transformation leading ultimately to policy convergence amongst nations, and in the end found that the story revealed was of a modernity fractured by major political, demographic and cultural fault lines, cross-cutting each other in different ways in different nations and, potentially, making for considerable policy diversity (1998: 301, italic ours). The fact was modernity could be characterized by quite different age and occupational structures across nations, so much so that the story became that of a modernity with many mansions (p. 305). Castles suggested there were thresholds of modernity in the sense that all these nations had moved into certain government programmes (such as universal health coverage and social security which were typical of the welfare state), but once such thresholds were reached, nations might differ in their policy options and outcomes even if they were of comparable economic development. Economic and social development thus acted more as a constraining factor rather than a determining factor in public policy choices. Mirroring Esping-Andersons (1990) typology of three worlds of welfare capitalism (namely Liberal, Conservative, and Social Democratic), he identified four families of nations among OECD countries, whose policy development differences could be defined in terms of common cultural, historical and geographical features, namely: English-speaking; Scandinavian; continental Western European; and Southern European (Castles 1998: 8-9). Japan was deemed to be outside such categorization and belong to a new family of newly industrialized nations with East Asian cultural (or Confucianist) features. East Asian social policy scholars have certainly sought to delineate an East Asian experience distinctive, differing decisively from the EuroAmerican models current in social policy discourse (Kwon, 1998: 27). Cultural explanation aside, the argument for a unique East Asian social policy route rests mostly on an economic thesis of productivism. Productivist welfare capitalism Drawing upon Japanese and Korean experience, Kwon (1997) found the Conservative welfare regime as classified by Esping-Andersons three worlds typology unable to capture the distinctive characteristics of the East Asian welfare regime type. Holliday (2000) came up with the notion of a fourth world with productivist features. This productivist world comprises three distinct subsets namely facilitative (Hong Kong), developmental-universalist (Japan, South Korea, Taiwan), and developmental-particularist (Singapore). Table 2 below, reproduced from Holliday (2000: table 2), gives the key features of the three subsets.
Table 2: The Productivist World of Welfare Capitalism Social Policy Facilitative Subordinate to economic policy Social Rights Minimal Stratification Effects Limited State-marketfamily Relationship Market prioritized

Developmentaluniversalist

Subordinate to economic policy Subordinate to economic policy

Developmentalparticularist

Limited; extensions linked to productive activity Minimal; forced to individual provision linked to productive activity

Reinforcement of the position of productive elements Reinforcement of the position of productive elements

State underpins market and families with some universal programmes State directs social welfare activities of families

Source: Holliday (2000: 710, Table 2)

Despite internal variations, the essence of this productivist world is that its social policy is placed subordinate to economic policy. Holliday argued that productivist welfare capitalism could not be fully explained by a unique East Asian social base of political superstructure (such as the typical Confucian welfare state argument [Jones, 1993] and developmental state argument [Ramesh, 1995; Kwon, 1997], but had to be seen as a result of bureaucratic politics that drive social policy development. The point is that those technocrats and elite policy makers who staffed key East Asian economic agencies were central to the pursuance of particular social and economic policy (Holliday 2000: 717). We shall return to this point in the later discussion. Citing Japans unique politics of welfare, Miyamoto (2003) disputed treating it in the same way as other East Asian states and argued that neither the welfare state regime theory a la Esping-Anderson nor the East Asian model could fully capture the features of the Japanese welfare state.

3. Impact of Economic Crisis and Globalization

Irrespective of whether and how the different East Asian developed economies experiences can be neatly captured by a uniform conceptual framework surrounding a strong or interventionist state, a key question since the 1997 Asian financial crisis has been whether such a previous paradigm of East Asian state model and social policy regime has been eroded because of the impact of globalization, economic crisis, and political changes (such as democratization such as in South Korea and Taiwan). Two trajectories If it is accepted that welfare provisions in East Asian countries had been embarked upon not out of welfare ideology considerations, but as a result of a fiscally-driven social programme funded by economic growth, then it is conceivable that economic slowdown and recession can easily triggered a reversal shift. In Hong Kong, Eliza Lee (2005) observed that financial austerity had prompted the state to adopt social policy reforms through re-commodification and cost containment, resulting in the retrenchment of the residual welfare state. The fact that Hong Kong society had never before engaged in real ideological debates on social policies or the role and functions of the state, also means that mainstream public sentiments could easily be won over to a fiscally-driven paradigm of public service. However, it is too early to say that such re-commodification process would be driven home too far partly because bureaucratic conservatism and caution would see that any such reversal in service provision is less dramatic than it would be if induced by mainly ideological or political objectives, and

partly because there is still a developmentalist function to be served by the welfare system. Critics of globalization considered globalization not simply as a market-driven economic phenomenon, but also very much a political and ideological phenomenon, underpinned by the transnational ideology of neoliberalism which seeks to establish its ascendancy world-wide (Mishra 1999: 7). Robison and Hewison (2005) reviewed the impact of neo-liberalism on East Asian and Southeast Asian states following the 1997 Asian economic crisis. While it seemed true that the economic crisis had accelerated the restructuring of state and economic power, and offered an opportunity for neo-liberal policies to be strengthened such as more market reforms promoted by international financial institutions as an alternative to the Asian capitalism - such crisis had not succeeded in achieving a grand convergence. In reality, neo-liberalistmotivated processes had been highly contested, leading to contradictory, ambiguous and sometimes surprising outcomes (Robison and Hewison 2005: 191). Neo-liberal agendas were also found to have been subverted or hijacked by political regimes in some circumstances for their own policy and institutional goals. An alternative view, in contrast, sees the Asian crisis as actually helping to spur welfare expansion rather than retrenchment. The argument is this: The East Asian welfare regimes had relied on optimistic assumptions of decade-long high economic growth rates, and a high and lifelong male labour market participation (Croissant 2004: 520). The crisis was compounded by increasing urbanization that resulted in demographic changes and weakened the familialistic foundations of the welfare regimes, democratization which brought about rising welfare demands, and globalization that eroded enterprise-based welfare. The previous welfare regimes had proved to be unsustainable in the post-crisis environment. Since no actors other than the state will be able to fill the gaps in the welfare system, an increasing role for the state is likely (ibid), to the extent that the debate about reform of the welfare system is already increasingly shaped by European models (ibid). Examining the politics of welfare in Japan, Miyamoto (2003: 21) similarly argued that postindustrialization and globalization did not automatically result in welfare retrenchment. Where it was true that there were strong tendencies towards financial austerity, the concern about increased social instability amidst economic uncertainties had given rise to pressure for welfare expansion. The ageing society had also built up the need for lessening the family burden and increasing welfare protection for the elderly who now constituted a growing portion of the electorate. Gough (2004), too, saw the possibility of the transformation of East Asian productivist welfare regimes into productivist welfare state regimes (p. 201) with an increasing statist orientation. He observed the East Asian welfare regime as an outcome of rapid social development coupled with a residual welfare system highly vulnerable to external shocks (Gough 2001: 177-81). In his view, the aftershock of the Asian economic crisis would leave East Asian welfare states with two possible trajectories (Gould 2004: 199-200). One is towards privatization coupled with persistent informalization, such as marketization and privatization (as, for example, Eliza Lee [2005] alluded to above), but this route would face the resistance to destatize from an essentially developmentalist regime. The other trajectory is towards a more universalist social investment state with more government provision and

redistribution. The potential for this direction lies in three reasons (Gough 2004: 20001): 1. Globalization and increased competition demand moving into higher-tech and higher-productivity production, requiring more public investment in social policy, infrastructure and planning; 2. The very weakness of existing social stratification effects among welfare recipients and of path-dependency effects in the regime as a whole may permit a statist turn; and 3. The impact of rising democracy in East Asia, notably in Taiwan and South Korea. Decline of productivism? Taking the line of a post-crisis transformation of East Asian welfare systems, there is the suggestion that even if they were previously productivist, such productivism may have by now outlived its time. For example, Peng (2004) questioned if the logic of economy first, redistribution later which underlined the productivist thesis could still be sustained in light of the increasing challenge from three contending factors in recent years, name: political and regime changes; the expansion, rather than retrenchment, of social welfare programmes in response to recent economic crises, which are not necessarily productivist in nature; and new welfare emphasis grounded in family and demographic considerations rather than economic ones. Based on the experience of Japan and South Korea, she argued that the East Asian welfare state configuration was no longer as economically determined, but also mediated by the social structural and domestic political factors. In both countries, the politics of the welfare state changed as political regimes and political conditions changed (ibid: 408). During the 1990s, the end of the Liberal Democratic Party (LDP)s dominant one-party rule in Japan had caused political realignments, creating openings for policy innovations and allowing new civil society groups to enter the policymaking arena; while the 1997 economic crisis and the onset of democracy facilitated the process of political realignment in South Korea which saw the Kim Dae-jung government embarking on both economic liberalization and welfare expansion (ibid: 415-16). The new social policy was thus no longer exclusively confined to protecting and privileging the traditional productive sectors, and financial reform necessitated by economic crisis had actually caused the demise of company welfare, thereby triggering growing political demands for state welfare interventions. What Peng and Gough have alluded to are of course important developments in the East Asian social policy discourse. However, it remains debatable if East Asian welfare states like Japan and South Korea have already moved beyond the stage of productivism and developmentalism (Peng 2004: 416) or, as Peng himself has also allowed for, such changes are no more than only a reorientation of the productivist logic under different social and structural conditions (ibid). Irrespective of the future shifts, if developmentalism is still the foundation of policy governance, which we argue has continued to be the dominant paradigm, then its welfarist component would remain as an offshoot of economic development and thus fiscal accumulation, rather than the outcome of a political ideology of collectivist welfare. After all, the role of family and individual efforts are still the key elements of the East Asian social philosophy that underpins state-society interaction and the response of the state to

social demands. The post-crisis emphasis on education and economic and industrial policy reforms are all geared towards revitalizing state-led developmentalism in the new environment of knowledge economy and opened-up markets. Policymaking in East Asia has already been dominated by a developmentalist bureaucracy keen on state-building. The social policy and social development agenda is determined neither by economics nor politics alone, but by bureaucracy-mediated goals of the political economy that embraces both economic (productivist) and political (social stability, distributive and redistributive) imperatives. 4. Recent Social Policy Reforms Policy Shifts rather than Policy Reversals We now take a look at major social policy reforms, together with economic and fiscal policy developments, in the five East Asian states (Japan, South Korea, Taiwan, Singapore and Hong Kong) over the last decade, in order to detect their recent trajectories and any significant shifts, especially in the aftermath of the 1997 regional financial crisis. Table 3 highlights those salient policy changes and developments. [Table 3 about here] Education reforms It can be observed that across the policy sectors, all East Asian countries seem to have been most active in steering the education sector forward, through wide-scale school education reform (spanning curriculum reform, school management, and improvement in teacher quality), the expansion and liberalization of the tertiary sector, and the promotion of lifelong education, in order to create a larger and better educated workforce to cope with the challenge of the new knowledge-based economy in the aftermath of globalization and the information technology (IT) revolution. Both general education reform and higher education reform are prominent on all the national policy agendas. In higher education, corporatization of state universities and encouraging private investment seem a common direction. Though private involvement is enlarged in the provision of education, this has not diluted the proactive role of the state in education which is closely aligned with its objectives in achieving economic restructuring and adjustment, and building a more adaptive and knowledge-based workforce. Although as Gough (2004: 171) observed, while East Asian governments have consistently emphasised the central role of education in economic development, this is not matched by a higher-than-average expenditure for middle-income countries. Healthcare reforms In healthcare, Singapore has continued with its policy path dated from the 1980s to expect citizens to save more to cater to housing and medical needs through the Central Provident Fund (CPF) vehicle, and made compulsory health insurance and savings a growing feature of its healthcare system. Hong Kong still operates a predominantly government-funded public healthcare system, but is actively reviewing health finance arrangements, with an aim to introduce some form of health insurance and/or savings, and increasing user charges. Even in Taiwan, where a comprehensive national health 10

insurance system was implemented in 1995, there have been gradual increases in insurance premiums in order to cope with rising medical costs. Planning for a secondgeneration national health insurance system was started in 2002, though progress has been hampered by increasing political uncertainties facing the prospect of the Democratic Progressive Party (DPP) government. Similarly, South Korea and Japan are also facing problems of better funding insurance schemes in order to cope with rising demands and facilitate more equitable pooling of risk. The former consolidated various health insurance agencies into one single organization. Historically Japans healthcare system was highly regulated by government and combines a mainly private provision of services with mandatory health insurance, with medical fees approved by government (Imai, 2002). Employees of large companies were covered by companybased insurance society, while those of SMEs were covered by one big subsidized central government insurance scheme and most others by schemes run by municipalities (some 3,250 of them). Now, medical system reform is targeted at raising contribution rates by citizens, and incorporating long-term care insurance. A separate old-age nursing care insurance was introduced in April 2000 (ibid). Recently public-private partnership in the form of private finance was introduced to the management of public hospitals. In summary, all five jurisdictions have striven to maintain the universal coverage of their medical system, mostly through an extended insurance scheme, but with increasing concern about raising enough premiums and means-tested user fees to meet rising medical costs and patient demands. Private sector involvement in the provision of health care is also encouraged. Housing reforms In housing, Singapore is the only country still pursuing active and extensive statesubsidized housing provision in line with its national development agenda since independence. In 2003, the government replaced the Small Families Improvement Scheme by a new HOPE (Home Ownership Plus Education) programme to help these families build up their self-reliance and break out of the poverty trap. The use of CPF to buy an extended range of public housing types is encouraged. In Hong Kong, the post-1997 housing reform agenda with an ambitious annual new build target of 85,000 units - to bring down an overheated property market was brought to a drastic halt because of the Asian financial crisis. The government also made an important retreat by terminating its home ownership scheme (introduced in the late 1970s) and sale of public rental housing to sitting tenants (introduced in 1997) in 2002, in order to save the private property market, even though its commitment to public renting housing remains intact. In Taiwan, South Korea and Japan, private sector housing has all along been dominating housing provision. The situation has not changed after the Asian crisis - for example, even now public renting housing represents only 3% of all housing units in South Korea (Lee, K. B. 2005). In cope with the post-crisis economic situation, though, their governments have provided various support measures to lower-income households mainly in the form of housing loans and some limited public renting housing. South Korea has also introduced measures on real estate stabilization, while Japan has abolished the Government Housing Loan Corporation in order not to be seen as competing with the private sector in the housing finance market. While no significant policy reversal is observed in the five states in relation to their pre-existing housing policy regimes, the recent trend has been to stabilize the housing market and to encourage more private sector provision.

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Welfare and labour protection reforms In the area of welfare and labour protection, Hong Kong has been trying to contain the growth of social security expenditure (through the review of CSSA eligibility and allowance rates), though the level of welfare expenditure (including unemployment benefits and old age allowance) has still increased because of the economic downturn. In 2005 government was forced by political and public pressures to set up a Poverty Commission. Despite its non-interventionist policy orientation, the administration of newly installed Chief Executive Donald Tsang is prepared to support a communitywide debate on the issues of minimum wage and standard working hours, which trade unions have been pushing for a long time but which business and employer interests have all along resisted. In Singapore no new social security programme involving significant additional public expenditure has been established since the 1960s (Ramesh 2003: 83) and government has started wage reform and CPF reform. As relief measures in the aftermath of the Asian crisis, Singapore has introduced various shorter term initiatives such as the Eldercare Fund, Children Development CoSavings Scheme (known as Baby Bonus) and CPF top-up in 2000, the Economic Downturn Relief Scheme in 2001, and the New Singapore Shares in 2001 and Economic Restructuring Shares from 2003 onwards. The objective is to achieve a New Social Compact to cope with the challenge of a New Economy. A Workforce Development Agency was set up to enhance employability, and new measures were introduced in 2006 to support low-wage workers. Both city states are giving greater emphasis on voluntary and third-sector involvement in welfare and community service provision. In Japan, welfare laws have been revised, social security system revamped, and pension reforms and long-term care insurance reforms initiated because of unemployment and the ageing population. Regime change and democratization of the political system in South Korea and Taiwan during the late 1990s coincided with the advent of the Asian financial crisis and the rising challenge of globalization. As a result, both have engaged more actively in providing unemployment benefits and some form of minimum living allowance/social assistance schemes, as well as measures for labour protection, for political as well as social policy purposes. South Korea adopted a Protection First system for the elderly and unprivileged, and expanded the Social Safety Plan to increase financial support to low-income families. In Taiwan, the Employment Insurance Programme was enhanced in 2003 and an Employment Protection Law enacted in 2004. Overall, both the trends of welfare review and reform with a viewing to containing expenditure growth, as well as the attempts to provide relief and minimum living support allowance schemes, are taking place concurrently, underlining the impact of fiscal and economic pressures, and the states objectives to keep society sufficiently harmonious for the purpose of economic growth. Economic and fiscal policy reforms The 1997 regional economic crisis has also resulted in stepped-up measures in economic and fiscal policy reforms. Fiscal reform, deregulation, and economic revitalization are among key items of government policy agenda in all five East Asian states. All have engaged actively in financial services sector regulatory reform,

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coupled with the establishment of proper supervisory/regulatory institution (such as a Financial Supervisory Commission/Agency) to promote better corporate governance, a stronger fair competition regime, tax review or reform to secure a more steady and broader taxation base, and new initiatives to nurture entrepreneurship and innovation, especially IT development. All five have also strengthened their fair trade and procompetition regimes. Singapore enacted a Competition Law in 2004 while Hong Kong is in the process of doing so. In Japan, an Industrial Revitalization Corporation was set up in 2003 to provide assistance to small and medium enterprises (SMEs). South Korea places the thrust of economic policy similarly on nurturing SMEs and their IT capabilities as the nextgeneration growth engines. Taiwan extends credit support to traditional industries and SMEs and establishes R&D centres and free trade zones. Singapore has set up a Research, Innovation and Enterprise Council in 2005 and also provides strong support to the internationalisation of its government-linked companies (GLCs), and even small government Hong Kong had established an SME Financial Assistance Scheme in 2001. Innovation technology is given special importance in all jurisdictions to respond to the challenge of the new knowledge economy and to open up a new frontier for the next round of economic expansion as they can no longer rely on the traditional export-oriented manufacturing and service industries for growth and prosperity. Such developmentalist strategy ties in closely with the direction of education reforms as highlighted above. Policy shifts rather than policy reversals In short, economic challenges like globalization and the Asian financial crisis, and political challenges like regime change with democratization (South Korea and Taiwan) or without democratization (Hong Kong), and the gradual rise of new politics (Japan included), together with increasing fiscal/budgetary pressure (notably in Japan, Taiwan and Hong Kong), have together helped to induced public policy rethinking in the various East Asian governments. All have to rise to the demands for policy shifts (and some for even policy reversals). No doubt, new initiatives and modifications have been launched (such as towards contributory support of public healthcare, withdrawal from state-subsidized home ownership in Hong Kong, and a wider acceptance of minimum living standard and income). Policy shifts, certainly there are, but evidence as enumerated above does not point to policy reversals per se, such as in drastically privatizing state responsibilities. At best, the government had only resorted more to regulating corporate and private resources on welfare, and in imposing legislative frameworks for welfare schemes. The mode of policy delivery governance has, however, seen some notable changes, such as moving increasingly from state provision to shared responsibility (compulsory insurance/savings schemes, public-private partnership, and more voluntary/thirdsector involvement) and contracted-out provision and private sector production, but such shifts in public management systems has not fundamentally eroded the old regime of East Asian governance, nor diluted (not to say negated) the state domination, except with reference to Hong Kong, which has all along been a muddled type of deviant among the East Asian states. Path dependency is still very much in play, sustained by institutional continuity. Policy changes have not moved significantly beyond the original policy path which is still essentially productivist and

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conforms to the East Asian model of state developmentalism. State policymakers and managers remain to espouse strong developmentalist thinking (despite the advent of new democratic regimes in Taiwan and South Korea). Even Hong Kongs postcolonial regime has become more proactive in economic and industrial policy because of business pressure and political motives (Cheung 2000). The picture is not complete without tracking the fiscal performance of the East Asian states. Over the past decade, public expenditure as a percentage of GDP over the past decade in the five developed East Asian states had not recorded any pattern of substantial contraction (Table 4 below), though fiscal stress created by the fluctuating economic performance after the Asian financial crisis had accounted for some adjustments. Even Japan had managed to maintain a relatively stable level since the mid-1990s despite the bursting of the economic bubble in the beginning of the 1990s. It is interesting to note that in the case of South Korea, Taiwan and Hong Kong, public expenditure had actually taken up a higher proportion of GDP since the Asian crisis which hit them more severely than Singapore. The fiscal picture in a sense corroborates the path of public policy developments highlighted above.
Table 4: Public expenditure as percentage of GDP, 1996-2005 Public expenditure as percentage of GDP 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Japan South Korea 14.0 14.1 16.4 16.6 15.1 15.9 15.9 16.3 15.2a 16.6a Taiwan Singapore Hong Kong

36.5* 35.3 42.7* n.a. 36.4* 38.0* 38.1* n.a. 36.9* n.a.

14.8 15.6 12.7 13.8 15.9 c 17.1 15.3 16.0 15.2 16.0

n.a. 18.4 18.0 18.1 17.5 18.1 17.1 16.8 15.6 14.8 b

17.7 17.5 17.5 20.8 21.6 21.1 20.9 22.2 20.7a n.a.

Notes: n.a. = figures not available. All figures are for financial years except for most years in Japan, marked with*. a estimates; b preliminary figure; c from July 1999 to December 2000. Sources: Japan Ministry of Finance (various issues); Ministry of Finance (various years); South Korea Ministry of Planning and Budget (2006); Taiwan Directorate-General of Budget (various years); Singapore Ministry of Trade and Industry (various years) [figures calculated by author based on official GDP (current market prices), government operating expenditure, and government development expenditure figures]; Hong Kong - Information Services Department (various years).

5. Explanations of East Asian Policy Steadiness

Path of East Asian public policy governance The developmentalist nature of East Asian states has to be understood not just as an economic management strategy, but historically path-dependent, which has contributed towards policy steadiness. Public policy governance is grounded in a

14

strong tradition of centralized, politics-administration fusion. Both Singapore and Hong Kong are typical administrative states where either the bureaucracy runs the state (as clearly in colonial Hong Kong) or the ruling party and the bureaucracy are one (Singapore). Taiwan until the late 1990s was under the KMT one-party rule where bureaucrats were at the same time KMT functionaries. Things might be for a change after the DPP came to power in 2000, but there seems a tendency for DPP to follow the footsteps of KMT in politicizing the bureaucracy and public corporations to create another interlocking model of governance. In Japan, the bureaucracy has been a strong staying force in government decision-making, which despite a long history of administrative reforms, makes the reform experience mostly a slow and somewhat hesitant process, because of the previously successful inter-locking array of institutions which were resistant to rapid change (Beeson 2003). Reforms were more often than not a compromise with the agency bureaucrats, known as pre-emptive bureaucrats (Ito 1995: 251). The same scepticism existed in South Korea where bureaucrats generally saw reform activities as a source of instability and uncertainty (Hahm and Kim 1999: 491). The East Asian bureaucracy is considered as a modernizing and developmental force, in line with the nature of the state. Public management reforms have been pursued mostly to secure new or reinvented structures and systems of operations that can improve the capacity of the state (and of the bureaucracy), so as to better lead nationbuilding and economic development efforts. Thus administrative reforms have tended to adopt a pro-bureaucracy or at least bureaucracy-friendly orientation, and are usually bureaucrats-driven. In the aftermath of the Asian financial crisis, as global competition intensifies resulting in more economic pressures, reform agendas might have embraced more overt managerial, fiscal and economic objectives that seek to make the bureaucracy less bloated and more efficient, and to contain fiscal pressure, but this is far from trying to erode public bureaucratic power. Despite the apparent similarity of the East Asian governance and public sector reforms to the OECDpioneered new public management reforms, the political and institutional setting for such reforms is quite distinct from a typical Western context (Cheung 2005). Some key features can be identified as in Table 5 below.
Table 5: Features of governance reform setting of East Asian governments Administrative traditions and legacies Nature of political economy State role and capacity Salience of administrative reform Forces for change Outcome so far
Source: Cheung (2005: Table 2)

Strong, centralized bureaucratic tradition; politics-administration fusion (Singapore and Hong Kong are typical administrative states) Developmental state governed market model (with the exception of Hong Kong which displays a semi-interventionist model) Historically strong capacity; highly interventionist (less so in Hong Kong) Bureaucratic modernization and self-improvement; state capacity enhancement Mainly bureaucrats-driven, until most recently when politics and societal demands push for greater pace of reform. (In Singapore, there is a joint politics-bureaucracy agenda) Bureaucratic domination of reform agenda, with slow progress. (Successful public service bargain in Singapore, hence minimum bureaucratic resistance)

15

Bureaucrats-dominated policymaking A key reason for policy steadiness in East Asian public policy governance including social policymaking - is thus the bureaucrats-dominated nature of public policy making, in addition to the state-led economic development approach to policy interventions, which see things in economic/developmental perspectives rather than strict welfare vs. market dichotomies. Bureaucrats who have been the driving force in public policy formulations are not used to drastic changes that upset the status quo too much. Their preferred mode of operation is policy modifications and readjustments along the original policy path, or what Hogwood and Peters (1983) described as policy succession. Bureaucrats, or politicians thinking like them or in alignment with them, tend to see the world as more static and policies as vehicles to help achieve stable development. Once settled in state-led developmentalism, or in Hong Kongs case a kind of growth-oriented positive non-interventionism, they are unlikely to change course substantially even amidst economic crisis because of the complexities and, at times, the inertia imposed by inter-locking interests between state, society and industry. Besides, the recalcitrance of bureaucrats who are inherent stakeholders of existing policies and the modus operandi, as well as the opposition or even open revolt by other stakeholders who felt affected by drastic policy changes, such as teachers, health care workers, social workers, and civil servants at large, would serve to prevent too much deviation from pre-existing policy governance. The fierce opposition of civil servants to pay reductions and contracting out in Hong Kong, and that of Taiwanese teachers to education reform, are cases in point. In Japan, as well as South Korea and Taiwan both of which were previously colonized by Japan and have inherited a public administration system whereby legislative approval of detailed policy programmes and administration organizational plans is mandatory, executive-legislative gridlock grounded in factional politics is yet another cause of slow policymaking. This has resulted in a high degree of policy continuity and slow incremental policy change. Despite the 2004 electoral system reform in Japan which some assumed to have weakened traditional factions within the ruling LDP, factional politics have not subsided. As Krauss and Pekkanen (2004:1) pointed out, [u]nexpected, kenkai [i.e. factions] have grown stronger because they perform new functions. LDPs Policy Research Council remains a major avenue of career advancement and specialization for Diet members and an important if now challenged structure for policymaking. Its structure and norms are still a means for specialized zoku giin (Policy Tribes Diet members) to function as gatekeepers over the policy and legislative agenda of individual members and the bureaucracy in LDPs and governments legislative process (ibid: 23). Accumulation and legitimation in East Asian capitalism The emergence of the welfare state as part of Western capitalism can be explained in various ways like functionalist theories and conflict theories of both the Marxist and non-Marxist orientations (Aspalter 2002b). Market and capitalism, like any institutions, are politically and culturally embedded in society. As Gray (1999: 191-2) argued, it is a mistake to assume that capitalism everywhere will come to resemble the highly individualist culture of England, Scotland and parts of Germany and The

16

Netherlands. It has not done so in France or Italy. Polanyi (1944) had similarly pointed out much earlier that market institutions did not emerge spontaneously, but rather often depended heavily on state actions. Indeed the creation of national markets in the West had historically coincided with the constitution and expansion of state institutions (United Nations Development Programme 1999). In the same vein, the welfare state is a construct of state actions within a historically and nationally specific cultural, political and social context. There are thus different forms of welfare states, embodying different forms of social policy development, inasmuch as there are different forms of capitalism. As market capitalism is not an abstracted final stage of economic evolution (Robison 2003: 168), so the Western welfare state model is not the ultimate destiny of a welfare state development trajectory that all welfare states - European, American and Asian, etc. had to converge to. Even globalization does not necessarily end up in convergence, either towards a universalist welfare regime or a neo-liberal economic regime sceptical of welfare. As an old Chinese philosophical saying puts it: a white horse is not a horse, so the impact of globalization may bring about divergence as much as convergence. Indigenous values and projects count more than simply emulating some external models even as the process of policy learning and diffusion takes place. Whether globalization can predetermine the specific context and agenda of policymaking at the national level is therefore problematic. Even if policy ideas may get transferred globally, policymaking and politics are always local. Social policy regimes are the outcome of institutional pathways which in themselves are constructs of social processes and of historical evolution. In the Western experience, if one were to employ the Marxist functionalist interpretation, capitalism came to a point where it suffered from the crisis of accumulation (i.e. continued growth and capital accumulation) and the crisis of legitimacy (of the capitalist mode of production). The role of the state in serving the ultimate interest of the logic of capitalism is to promote both economic growth (accumulation) and the stability of the social and political order (legitimation) through extensive social policy provisions and the construction of a welfare state that helps to reduce class confrontations and political challenges to the capitalist system (OConnor 1973; Gough 1979; Offe 1984). Among East Asian states, developmentalism (subsuming both economic and political productivism) can similarly be understood as an array of state actions and interventions in promoting and bolstering a unique form of market capitalism (which some describe as state-led for economies like South Korea and Singapore, and others depict as predatory or clientelist for countries like Indonesia and Thailand). In the aftershock of the Asian financial crisis, facing increasing pressure from globalization as well as the domestic politics of democratization, the developmental welfare state of both South Korea and Taiwan had clearly become more inclusive. According to Kwon (2005: 495), the socially inclusive welfare regime helped these two states to come out of the economic crisis without suffering too many adverse social effects, such as a sharp rise of poverty or serious worsening of income inequality. Granted, social policy helps to mitigate the impact of economic setback and uncertainty, and enables the society to regain cohesion and the collective capacity to pursue economic development, with still strong productivist connotations. In any case, the need for sustained growth (or accumulation in the Marxist sense) and

17

political legitimacy (legitimation) would make it imperative for an increased state role for East Asian states in social policy development despite a cultural and social context that had traditionally assigned welfare functions to the family, the clan and the corporate sector (as in Japan). The essence of the East Asian welfare state to facilitate the growth of East Asian capitalism would, like how Marxists and neo-Marxists had explained the relationship between Western capitalism and its welfare state, support a social policy discourse that cannot be decoupled from the larger developmentalist paradigm. References:
Aspalter, C. (2002a) Introduction, in C. Aspalter (ed) Discovering the Welfare State in East Asia, Westport, CT: Praeger Publishers, pp. 1-8. Aspalter, C. (2002b) Exploring Old and New Shores in Welfare State Theory, in C. Aspalter (ed) Discovering the Welfare State in East Asia, Westport, CT: Praeger Publishers, pp. 9-38. Aspalter, C. (2002c) Singapore: A Welfare State in a Class by Itself, in C. Aspalter (ed) Discovering the Welfare State in East Asia, Westport, CT: Praeger Publishers, pp. 169-90. Beeson, M. (2003) Japans reluctant reformers and the legacy of the developmental state, in A. B. L. Cheung and I. Scott (eds) Governance and Public Sector Reform in Asia: Paradigm Shifts or Business As Usual?, London: RoutledgeCurzon, pp. 25-43. Castles, F.G. (1998) Comparative Public Policy: Patterns of Post-war Transformation, Cheltenham: Edward Elgar. Chan, R. (2002) The Struggle of Welfare Development in Hong Kong, in C. Aspalter (ed) Discovering the Welfare State in East Asia, Westport, CT: Praeger Publishers, pp. 81-114. Chen, C. (2005) Taiwans Burgeoning Budget Deficit: A Crisis in the Making?, Asian Survey, Vol. 45, No. 3, pp. 383-96. Chen, H. N. (2002), Taiwan, in R. Agus, J. F. Doling and D. Lee (eds) Housing Policy Systems in South and East Asia, Basingstoke: Palgrave Macmillan, pp. 84-103. Cheung, A, B, L. (2000) New Interventionism in the Making: Interpreting State Interventions in Hong Kong After the Change of Sovereignty, Journal of Contemporary China, Vol. 9, No. 24, July, pp. 291-308. Cheung, A. B. L. (2005) The Politics of Administrative Reforms in Asia: Paradigms and Legacies, Paths and Diversities, Governance, Vol. 18, No. 2, pp. 257-82. Croissant, A. (2004) Changing Welfare Regimes in East and Southeast Asia: Crisis, Change and Challenge, Social Policy and Administration, Vol. 38, No. 5, pp. 504-24. Directorate-General of Budget, Accounting and Statistics, Executive Yuan of Taiwan (various years), Zhuyao Guojia Zhongyang Zhengfu Zhichu Zhan Guonei Shengchan Maoe (GDP) Bilu [ (GDP) ], http://win.dgbas.gov.tw/dgbas03/bs8/world/expgdp.htm. Esping-Anderson, G. (1990) The Three Worlds of Welfare Capitalism, Cambridge: Polity Press.

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Evans, P. B. (1989) Predatory, Developmental and Other Apparatuses: A Comparative Political Economy Perspective on the Third World State, Sociological Forum, No. 4, pp. 233-46. Evans, P. B. (1995). Embedded Autonomy: States and Industrial Transformation, Princeton, N. J.: Princeton University Press. Friedman, M. (1981) Free To Choose, Harmondsworth: Penguin Books. Fukawa, T. (2005) Some structural issues in the Japanese social security system, The Japanese Journal of Social Security Policy, Vol. 4, No. 2, pp. 67-75. Gough, I. (1979) The Political Economy of the Welfare State, London: Macmillan. Gough, I. (2004) East Asia: the limits of productivist regimes, in I. Gough, G. Wood et al Insecurity and Welfare Regimes in Asia, Africa and Latin America: Social Policy in Development Context, Cambridge: Cambridge University Press, pp.169-201. Gray, J. (1999) False Dawn: The Delusions of Global Capitalism, London: Granta Books. Hahm, S. D. and Kim, K. W. (1999) Institutional Reforms and Democratization in Korea: The Case of the Kim Young Sam Administration, 1993-1998, Governance, Vol. 12, No. 4, October, pp. 479-94. Hayakawa, K. (2002) Japan, in R. Agus, J. F. Doling and D. Lee (eds) Housing Policy Systems in South and East Asia, Basingstoke: Palgrave Macmillan, pp. 20-37. Hogwood, B. W. and Peters, B. G. (1983) Policy Dynamics, Brighton: Wheatsheaf. Holliday, I. (2000) Productivist Welfare Capitalism: Social Policy in East Asia, Political Studies, Vol. 48, pp. 706-23. Imai, Y. (2002) Health Care Reform in Japan, Economic Department Working Papers, No. 321, Organization for Economic Cooperation and Development, Paris: OECD. Information Services Department, Government Hong Kong Special Administrative Region (various years) Hong Kong Year Book, http://www.info.gov.hk/yearbook/. Ito, M. (1995) Administrative Reform, in H. K. Kim, M. Muramatsu, T. J. Pempel and K. Yamamura (eds) The Japanese Civil Service and Economic Development: Catalysts of Change, Oxford: Clarendon Press, pp. 235-60. Johnson, C. (1982) MITI and the Japanese Miracle, Stanford: Stanford University Press. Jones, C. (1993) The Pacific Challenge: Confucian Welfare States, in C. Jones (ed) New Perspectives on the Welfare State in Europe, London: Routledge, pp. 198-217. Krauss, E. and Pekkanen, R. (2004) Explaining Party Adaptation to Electoral Reform: The Discreet Charm of the LDP?, Journal of Japanese Studies, Vol. 30, No. 1, pp. 1-34. Ku, Y. W. (2002) Towards a Taiwanese Welfare State: Demographic Change, Politics, and Social Policy, in C. Aspalter (ed) Discovering the Welfare State in East Asia, Westport, CT: Praeger Publishers, pp. 143-68.

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Kwon, H. J. (1997) Beyond European welfare regimes: comparative perspectives on East Asian welfare systems, Journal of Social Policy, Vol. 26, pp. 467-84. Kwon, H. J. (1998) Democracy and the Politics of Social Welfare: A Comparative Analysis of Welfare Systems in East Asia, in R. Goodman, G. White, and H. J. Kwon (eds) The East Asian Welfare Model: Welfare Orientalism and the State, London: Routledge, pp. 27-74. Kwon, H. J. (2002) The Korean Welfare State: Development and Reform Agenda, in C. Aspalter (ed) Discovering the Welfare State in East Asia, Westport, CT: Praeger Publishers, pp. 63-80. Kwon, H. J. (2005) Transforming the Development Welfare State in East Asia, Development and Change, Vol. 36, No. 3, pp. 477-97. Lee, D. (2002) Korea, in R. Agus, J. F. Doling and D. Lee (eds) Housing Policy Systems in South and East Asia, Basingstoke: Palgrave Macmillan, pp. 104-26. Lee, K. B. (2005) The Effects of the Aug. 31 Real Estate Measures, Korea Policy Review, October, pp. 50-53. Lee, E. W. Y. (2005) The Renegotiation of the Social Pact in Hong Kong: Economic Globalization, Socio-economic Change, and Local Politics, Journal of Social Policy, Vol. 34, No. 2, pp. 293-310.8 Marshall, T. H. and Tom Bottomore (1992) Citizenship and Social Class, London: Pluto Press. Ministry of Finance, Government of Japan (various issues) Public Finance Related Information [], http://www.mof.go.jp/jouhou/syukei/siryou/sy_new.htm. Ministry of Finance, Government of Japan (various years) Understanding the Japanese Budget (previous under series name The Japanese Budget in Brief), http://www.mof.go.jp/english/budget/budget.htm. Ministry of Planning and Budget, Government of Republic of Korea (various years) Annual Budget Expenditures, FY 1996-FY2006, http://www.mpb.go.kr/english.html (MPB Data: Statistics section). Ministry of Trade and Industry, Government of Singapore (various years) Economic Survey of Singapore, http://app.mti.gov.sg/default.asp?id=123&cat=2 Mishra, R. (1999) Globalization and the Welfare State, Cheltenham: Edward Elgar. Miyamoto, T. (2003) Dynamics of the Japanese Welfare State in Comparative Perspective: Between Three Worlds and the Developmental State, The Japanese Journal of Social Security Policy, Vol. 2, No. 2, pp. 12-24. OConnor, J. (1973) The Fiscal Crisis of the State, New York: St. Martins Press. Offe, C. (1984) Contradictions of the Welfare State (ed. by J. Keane), Cambridge, MA.: MIT Press. OECD (Organization for Economic Cooperation and Development) (2001a) OECD in Figures 2001, Paris: OECD, http://www.sourceoecd.org/.

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OECD (2001b) Education http://www.sourceoecd.org/. OECD (2002) OECD http://www.sourceoecd.org/.

at

Glance:

OECD

Indicators,

Paris: Paris:

OECD, OECD,

Historical

Statistics

1997-2000,

Peng, Ito (2002) Gender and Welfare State Restructuring in Japan, in C. Aspalter (ed) Discovering the Welfare State in East Asia, Westport, CT: Praeger Publishers, pp. 39-62. Peng, Ito (2004) Postindustrial Pressures, Political Regime Shifts, and Social Policy Reform in Japan and South Korea, Journal of East Asian Studies, Vol. 4, pp. 389-425. Pierson, C. (2004) Late Industrializers and the Development of the Welfare State, Social Policy and Development Programme Paper No. 16, September, United Nations: UN Research Institute for Social Development. Pinker, R. A. (1979) The Idea of Welfare, London: Heinemann Educational. Polanyi, K. (1944) The Great Transformation: The Political and Economic Origins of Our Time, Boston: Beacon Press. Ramesh, M. (1995) Social security in South Korea and Singapore: Explaining the differences, Social Policy and Administration, Vol. 29, pp. 228-40. Ramesh, M. (2003) Globalization and social security expansion in East Asia, in L. Weiss (ed) States in the Global Economy: Bringing Domestic Institutions Back In, Cambridge: Cambridge University Press, pp. 83-100. Robison, R. (2003) Looking Back on the Asian Crisis: The Question of Convergence, Asian Journal of Social Science, Vol. 31, No. 2, pp. 162-71. Robison, R. and Hewison, K. (2005) Introduction: East Asia and the Trials of Neoliberalism, The Journal of Development Studies, Vol. 41, No. 2, pp. 183-96. Schiffer, J. R. (1983) Anatomy of a Laissez-faire Government: The Hong Kong Growth Model Reconsidered, Hong Kong: Centre of Urban Studies and Urban Planning, University of Hong Kong. Shin, C. and Shaw, I. (2003) Social Policy in South Korea: Cultural and Structural Factors in the Emergence of Welfare, Social Policy and Administration, Vol. 37, No. 4, pp. 328-41. United Nations Development Programme (1999) China Human Development Report 1999: Transition and the State, New York: United Nations. Wade, R. (1990) Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization, Princeton, N. J.: Princeton University Press. Weiss, L. (1998) The Myth of the Powerless State, Ithaca, N. Y.: Cornell University Press. Wong, J. (2004) The Adaptive Developmental State in East Asia, Journal of East Asian Studies, Vol. 4, pp. 345-62. World Bank (1993) The East Asian Economic Miracle: Economic Growth and Public Policy, New York: Oxford University Press.

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Government website sources for Tables 3: Japan Office of the Cabinet Public Relations, Cabinet Secretariat (Japan), Speeches and Statements by Prime Minister Junichiro Koizumi, http://www.kantei.go.jp/foreign/koizumispeech/index_e.html Office of the Cabinet Public Relations, Cabinet Secretariat (Japan), Archives of Previous Cabinets (Since 1996), http://www.kantei.go.jp/foreign/archives_e.html South Korea Cheong Wa Dae Office of the President, Republic of Korea, Cheongwadae Archives List Speeches, http://english.president.go.kr/warp/app/en_speeches/list? group_id=en_archive&meta_id=en_speeches Taiwan Research, Development and Evaluation Commission, Executive Yuan, Tuidong Gongying Shiye Minyinghua [], http://www.rdec.gov.tw/public/Attachment/521217123871.doc State-owned Enterprise Commission, Ministry of Economic Affairs, Executive Yuan, http://www.moeacnc.gov.tw The Executive Yuan of the Republic of China (Taiwan), Shizheng Jihua [] (various years since 2001), http://www.ey.gov.tw/web92/n_policies_list.asp.htm Singapore Government of Singapore, Prime Ministers National Day Rally Speech (various years since 2000), http://www.gov.sg/pressreleases.htm Ministry of Finance, Budget Archives http://www.mof.gov.sg/budget_archives/index.html (various years since 1996),

Ministry of Finance, Budget Speech 2005, http://www.mof.gov.sg/budget_2005/index.html Hong Kong Government of the Hong Kong Special Administrative Region, Peoples Republic of China, Policy Address by the Chief Executive (various years since 1997), http://www.policyaddress.gov.hk/

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Table 3: Salient public policy changes in Japan and East Asian NICs since 1990s Japan Education Amendment of School Education Law to promote flexibility and diversity in school education system Education Reform Plan for the 21st Century launched in 2001 (National Commission on Education Reform) National universities to be converted to be National University Corporations Compulsory Education Reform (2004) more flexibilities in current 9-year compulsory education, new licensing and renewal system for teachers, and involvement of parents and local authorities in school management Revision of Health Insurance Law (1997) - 80% of medical costs to be paid to the insured; South Korea Higher Education Reform to merge 10 national universities into 5 Brain Korea (BK) 21 a 7-year project to develop worldclass research-centred universities (2005) Taiwan Comprehensive reform of education system started in 1996 (curriculum reform, expansion of higher education, quality assurance, encouraging nongovernment investment, autonomy of universities, and corporatization of public universities) Amendment to University Law in 2005 to enable public universities to select their own presidents Provision of kindergarten education vouchers Singapore Emphasis on developing workforce for knowledge economy and promotion of R&D Curriculum reform Establishment of Lifelong Learning Endowment Fund (2000) Upgrading universities and creating high education hub in the region (build a 5th polytechnic and 3 new junior colleges) More autonomy to public universities and corporatization of National University of Singapore and Nanyang Technological University Hong Kong Education reform a major agenda of new Tung administration (1997) (holistic education, curriculum reform, academic structure reform, teacher quality upgrading, IT education, and promotion of lifelong education Increasing higher education rate through associate degree education Encouraging private schools and Direct Subsidy Schools (DSS). School-based Management Establishment of Quality Education Fund

Health

National Health Insurance extended to universal coverage in 1989 Consolidation of

Introduction of national health insurance scheme aimed at universal coverage in 1995

Introduction of Medisave (compulsory savings scheme) and Medisheld (insurance

Review of Healthcare Finance in 1999 Harvard Study advocated compulsory health insurance-cum-

23

Housing

introduction of prescription drugs Increase of patients cost-sharing in 2000 Implementation of the Long Term Care Insurance in 2000, and subsequent reform in 2005 Medical System Reform in 2002 to increase contribution rate of citizens insured by Societymanaged Health Insurance from 20% to 30%, to be on a par with the same rate under Governmentmanaged Health Insurance; repeal of the patient charge on prescription drugs Introduction of public-private partnership in public hospitals: first public hospital managed by private sector opened in 2005 under framework of Private Finance Initiative Amendment of Public Housing Law in June 1996 to tighten eligibility for public

various health insurance agencies into one single organization to facilitate more equitable risk pooling in 2000

Planning for secondgeneration national health insurance system began in 2002, in order to cope with funding deficits

scheme) in order to make individual citizens bear a large part of health expenditure Reform of Medishield in 2004 to raise claims for deductibles and prevent medical insurance industry from being too selective, thus leaving Medisheld to protect the disadvantaged Extending means testing to general hospitals

savings schemes; government counterplan for compulsory health savings, supplemented by increase in fees and charges (e.g. in Accident & Emergency services) Recent (2005) proposal Healthcare Reform Future Healthcare Delivery Model Consultation - to allow more publicprivate interface in provision of healthcare and to introduce family doctor scheme Hospital Authority introduced standard drug formulatory to help reduce prescription expenditure

Temporary measures for improvement of low income housing (1989-1999) to

Encouraging private sector to build housing units for labourers (some 20

Stepping up state housing through provision of new categories such as

Housing reform as major agenda of new Tung administration (1997): Short-lived

24

housing The 7th Housing Construction Fiveyear Plan (1996): to promote building of good quality housing, with target of 7.3 million units by 2000, of which 3.5 million funded through pubic finance Housing and Urban Development Corporation reorganized into the Urban Development Corporation in 1999 Amendment of Building Code and City Planning Law in 1997: High Rise Housing Promotion Zones designated in centre of large cities; Fixed term Rental Rights System introduced in 1999 Ending of direct housing financing by the Government Housing Loan Corporation (GHLC) in 2004, following the abolition of the corporation which ceased to issue new loans in 2001

facilitate low income housing redevelopment projects Price ceiling of new residential housing units introduced in 1997 Privatization of Korea Housing Bank in 1998 Establishment of Korea Housing Finance Credit Guarantee Fund in 1998 Korea Housing Finance Co-operative established in 1999: government participation in housing consumer protection measures New Real Estate Reform Policy stabilizing housing for ordinary people and curbing real estate speculation More budgetary allocations to National Housing Fund Increasing public rental housing supply Vitalizing long-term loan systems for

designated categories of workers, ranging from miners to media workers) since early 1990s, with terms similar to those for public housing Focus of central government civil servants housing shifted from direct provision to offering of subsidized loans (1995) Six-Year Housing Plan 1996-2001: with majority of public housing units to be purchased from the market, and government providing subsidised loans Executive Yuan proposed to set up a single organisation in 1999 to tackle housing problems, instead of having the responsibility fragmented across various branches of government Executive Yuan acknowledged problem of housing oversupply and inadequate land

luxurious apartments for higher-income citizens, and upgrading of existing public housing estates Introduction of Special Housing Assistance Programme, to bring together various home ownership schemes for lower income households A new CPF Housing Grant Scheme for lower income families who buy HDB (Housing Development Board) flats

post-1997 pledge of 85,000 new build target to prevent market overheating Reducing waiting time for public renting housing, improving management & maintenance, and rent relief scheme Establishment of Urban Renewal Authority Termination of public provision of ownership housing through Home Ownership Scheme (HOS) and Tenant Purchase Scheme (TPS) in 2002 due to property market collapse Review of Domestic Rent Policy for Public Housing in 2006

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Welfare and labour protection

Revision of eight welfare laws in 1990, including Welfare Law for the Elderly Child Allowance for the first child introduced in 1991 Advisory Council on Social Security recommended rebuilding social security system (1995) Enactment of Longterm Care Insurance Law) in 1997, taking effect in 2000 Pension Reform raising the starting age for payment of employees pension in 1994; amendment to Public Pension Law in 1998 to set maximum pension premium, increase pensionable age, stop wage-indexation, and introduce old-age pension for active workers in late 60s,

small-sized rental houses for needy citizens, and for middle-class citizens to enjoy stable life in rental housing Implementation of Employment Insurance Programme by integrating unemployment benefit scheme with job-training in 1995 Establishment of tripartite EmployeesEmployersGovernment Commission in 1998 Labour Standard Law expanded, and Labour-ManagementGovernment Committee established Introduction of minimum living standard guarantee scheme in 2000 Protection-first system (2005) for elderly and other disenfranchised citizens Review of National Pension Programme with new fiscal measures

system in 1999 Home Finance Loan scheme to benefit 120,000 households (2004) Passage of Social Assistance Law in 1997 Introduction of Employment Insurance Programme in 1999 Reform of labour pension system in 2001 Attempts to amend the three labour laws (Trade Union Law, Collective Bargaining Law, and Industrial Disputes Settlement Law) (currently still pending in the legislature because of partisan disagreement) Temporary Provisions for Elderly Welfare Subsidy (2002) Reform to retirement pension system, and provision of unemployment benefits in 2002 Wage Reform and CPF (Central Provident Fund) Reform Promote voluntary help through charity organizations Setting up of Eldercare Fund, Children Development CoSavings Scheme (or Baby Bonus), and granting of CPF Topup to all citizens in 2000 Economic Downturn Relief Scheme (2001) Emphasis on New Social Compact to cope with the New Economy Issue of New Singapore Shares to less well-off citizens in 2001, with guaranteed dividend payment and redeemable for cash. Issue of Economic Restructuring Shares Introduction of new Mandatory Provident Fund (MPF) scheme enacted in 1996 and implemented in December 2001. Review of CSSA (Comprehensive Social Security Allowance) scheme (1998) to impose more stringent conditions of eligibility and to reduce rate of allowances Voluntary and thirdsector participation being encouraged (e.g. through Community Investment and Inclusion Fund set up in 2002) Setting up of Poverty Commission in 2005 Feasibility of minimum wage and standard working hours being considered

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etc; further pension reform in 2004, including raising contribution rate and reducing pension benefits Social Insurance Agency Reform (2004) to respond to scandals of corruption and to eliminate mismanagement of pension insurance premiums

Economic and fiscal policies

Consumption Tax increased from 3% to 5% (1997) Financial Supervisory Agency created in 1998 Creation of Bank Equity Purchasing Corporation in 2001, to help stabilize financial markets Financial Revival

Social Safety Plan 2005 to expand financial support for low-income families Presidential Commission on Low Birthrate and Aged Society (2005) Pilot project on longterm care system Measures to reduce income gap between irregular and regular workers Increased opportunities for vocational training for workers in SMEs Plan to rationalize wage determination system to transit from seniority-based to productivity and jobbased wage system (2005) Seven-Year Development Plan for High-Tech Industry (1990) Kim Young-sam administrations 100day Plan for the new economy (1993) Kim Dae-jung administrations Corporate Restructuring and

Unemployment benefit scheme and existing training scheme integrated into Employment Insurance Programme (2003) Enactment of Employment Protection Law in 2004 Provision of elderly welfare allowance and medium to lowincome family childrens livings support allowance Emphasis on third sector collaboration

(ERS) in 2003, 2004 and 2005 to offset increase in Goods & Services Tax (GST) rate from 3% to 5% Strategy for sustaining ageing population Singapore Workforce Development Agency set up to enhance employability New measures to support low-wage workers, including assistance to lowincome families with childrens education expenses (2006)

Amendment of the Pubic Debt Law in 2002 setting the new public debt ceiling at 15% of total government expenditure Reduction in Land Value Increment Tax, exemption of Business Tax for financial institutions,

Reducing employers contribution rate from 20% to 10% to CPF to cope with postAsian crisis situation in 1999 and subsequently restored to pre-Crisis level in 2002 Economic Review Committee to make important changes to

Financial Services sector reform in aftermath of Asian crisis Economic restructuring originally a major government agenda Setting up Commission on Innovation and Technology and an

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Plan in 2002 to deal with non-performing loans Regulatory reform under Council for Regulatory Reform set up in 2001, to open up governmentdriven markets in medical care, social services, education, agriculture, and other sectors to private sector and create consumer-oriented society Amendment of Antimonopoly Act to prohibit private monopolization and the maintain fair trade through strengthening Fair Trade Commission (2003) Regulatory reform in telecommunication industry relaxing foreign ownership restrictions and tariff approval system Scaling down of Fiscal Investment and Loan Programme, ending its privileged access to resources of mandatory deposits of postal savings and

Reform measures in the aftermath of 1997 Asian crisis Roh Moo-hyun administrations market reform and corporate governance restructuring (2003) Regulatory Reform to enhance market openness and improve quality of government regulation 3-year Market Reform Roadmap issued by Korean Fair Trade Commission (2003) Amendment to Monopoly Regulation and Fair Trade Act Enactment of new electricity energy law in 2004, ending state monopoly in electricity supply Regulatory reform in telecommunication industry Special Law on Balanced National Development enacted (2003) Amendment to Basic Act on funds Management to boost Korea as financial

and integrated income tax system adopted in 1998; expansion of tax incentives for selected industries. Introduction of Public-Private Partnership in form of BOT (build, own, transfer) Financial Services Sector Reform establishment of Financial Supervisory Commission in 2004 Tax reform Draft legislation on basic taxation rate in 2005 Agricultural Finance Law proposed Strategy for technology-based new economy Setting up of R&D centres and Free Trade Zones Credit support to traditional industries and SMEs

tax structure and CPF Establishment of New Innovation Council Deregulation/ liberalization of gas and electricity industry Income Tax Amendment Bill in 2004 to enhance incentives to promote asset management industries Competition Law enacted in 2004, and Competition Commission set up in 2005 To set up Research, Innovation and Enterprise Council, and a National Research Foundation to fund long-term research in strategic areas (2005) Internationalization of Government-linked Companies (GLCs)

Innovation & Technology Fund in 1998 Development of Cyberport and Disneyland, and logistics centres Setting up of SME Financial Assistance Scheme and SME Committee in 2001 Emphasis on culture and creative industries Emphasis on PublicPrivate Partnership as preferred approach to government procurement (2003) Review of competition policy in 2005 - to consider necessity for enacting comprehensive fair competition law

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public pension premiums Industrial Revitalization Corporation set up in 2003 to provide assistance to SMEs Special zones for structural reform Urban assistance through active use of private finance initiative (PFI) in the development of public facilities and elimination of traffic congestion Fundamental tax reform through collaboration among Government Tax Commission, Tax Research Commission of ruling parties and Council on Economic and Fiscal Policy E-Japan strategy

hub in Northeast Asia Thrust of government economic policy on nurturing SMEs and their IT capabilities as next-generation growth engines To nurture education and medical industries, as well as consumption industries like culture, tourism and leisure Revision of Foreign Investment Promotion Law to provide cash grants for high-tech industries Major restructuring of the Korea Fair Trade Commission in 2005 Targeting completion of foreign exchange liberalization by 2009

Sources: Various government websites (listed separate in References); Chen, C. (2005); Chen, H. N. (2002); Fukawa (2005); Hayakawa (2002); Kwon (2005); Lee (2002); Shin and Shaw (2003)

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