Government pensions distort social spending
The World Bank’s October 2015 Myanmar Economic Monitor is out and boasts the growth of social spending over defence, but between the lines the positive news is somewhat misconstrued.
In a functional breakdown for % of GDP spending, social services reach an estimated 3.9% of GDP in the 15/16-budget estimate while defence dips to 3.77% of spending.
But the social services breakdown depicts a different reality.
Health at 1.03% of spending is dropping as well as education, 1.91% of spending. The bump for social spending is thanks to the .27% increase to pensions and in Myanmar those who receive pensions are ex-civil servants and ex-state enterprise workers.
Myanmar economics specialist Sean Turnell told (Mizzima) News that the pensions are increasing with the rise in state-sector employee salaries.
He later posted on social media, “Curiously, the World Bank disguises the above by lumping in with health and education spending the outlays for government employee pensions – all into a category it calls ‘social spending’.”
Adding, “Aggregated this way they report social spending as exceeding military spending for the first time. This new metric is without utility in my view, and only serves to blind us to the realities in Burma.”
According to a July 2015 report by the World Bank, “The current pension scheme is a non-contributory and unfunded defined benefit (DB) plan based on a formula that provides a pension worth 50 percent of the final salary for a worker who spends 35 years in the civil service.”
The general public must rely on cultural traditions in their older ages as there is essentially no money dedicated for pensions, in the WB report it noted that social welfare spending is at 0.01% dropping by .01%.
The number of pensions is set to grow according to the same July 2015 WB report the pension scheme covers 3%, “In 2014/15, there were 668,538 civil, political, and defence pensioners supported by the state budget and 174,022 pensioners supported by SEEs (State Economic Enterprises).”
As of 2012, agriculture still employed over half of Myanmar’s workforce, when excluding agriculture, informal employment accounted for 60% of work in Myanmar, according to the International Labour Organisation.
Myanmar’s GDP growth will drop down to 6.5% from an estimated 8.5% and inflation is set to increase as it is currently at 11% as government laws to secure investor confidence are set to pass in the post-election period.
The drop in estimated GDP is thanks to the natural disasters that have wreaked havoc across the country mostly affecting poorer areas that rely on agriculture, displacing and destroying farmlands as NGO’s and the government scramble to lock in a long-term recovery plan.
The report depicts a somewhat stable short-term view for the country’s economy, amongst a slumping China and a surging US dollar.
East Asia is also set to grow by 4.6% in 2015, throwing off ideas that China will disrupt trading and other SE Asian developing economies.
“Countries within the region would be China’s last entrenchment as it withdraws, so it is unlikely that countries like Cambodia and Myanmar will suffer,” said The World Bank Chief Economist for East Asia and Pacific Region, Sudhir Shetty, via video stream from Singapore. “Developing Asia’s growth is expected to slow because of China’s economic rebalancing and the pace of the expected normalisation of US policy interest rates.”
While China is slowing it will not slow the wave of Chinese tourists that venture to South East Asia, roughly 1.5 million (excluding Thailand) in the first three months of 2015, it is a drop though from 1.9 million a year earlier, according to the Centre of Aviation.