Ekonomi Madani and Raising the Floor: A renewed commitment to inclusive social protection

As we proudly celebrate Malaysia’s 66th National Day, it is a pertinent moment to commemorate the nation’s progress, as well as to reflect on the commitment made towards an inclusive and sustainable future.

While cherishing the successes achieved, we must also remain cognisant of the formidable challenges that lie ahead.

Indeed, the plan laid out in the Ekonomi Madani framework to raise the floor of stronger social protection demonstrates the continuing commitment to the promise of protecting all, leaving no one behind.

About half a century ago, Malaysia's second Prime Minister, Tun Abdul Razak Hussein, set the foundation of inclusive social protection with the establishment of the Social Security Organisation (Socso), with a vision of protecting every individual from womb to tomb. Sadly, this aspiration has yet to be fully realised.

The Covid-19 pandemic serves as a stark reminder that Malaysia’s social protection system still grapples with the issues of coverage gaps and inadequate benefits. The approach taken to many of the challenges the country faces today is to resort to “short term relief programmes” with a heavy emphasis on “targeting” rather than persistently striving to build a system that can make everyone resilient for shocks across their lifetimes.

The dedication to ending poverty may have relegated key social protection schemes to welfare aid programmes targeting those deemed “deserving”, such as those under the poverty line and bottom 40 per cent (B40). However, identifying those in need is difficult and policymakers often rely on arbitrary thresholds like the B40 income demarcation. Given the complexity of accurate targeting, some are bound to be left to their own devices.

The social insurance schemes operated by the Employees Provident Fund (EPF) and Socso have demonstrated great agility in dispensing reliefs. Nonetheless, the coverage continues to be limited to formal sector workers who are making contributions.

Often neglected are the “missing middle”, who are neither “rich” nor “poor”. Largely in the informal economy, they cannot access social insurance benefits due to non-contribution, yet left out from government’s welfare aid. The missing middle issue is manifested in most schemes, from children to elders, and remains unaddressed.

Navigating the Future

Malaysia faces impending demographic and social challenges. Economic growth has been slower and we have yet to transition to a high-income nation. Malaysia is also facing rapid population ageing with many living longer but not necessarily healthier.

The economy is also not immune to challenges brought on by globalisation, technological changes and climate change. Against this backdrop, creating a stronger system that prevents individuals from falling through the cracks is both pressing and challenging. It is imperative now than ever for the Ekonomi Madani to move us from aspiration to attainment of a social protection floor for all.

To build back better, paradigm shifts are necessary. While Malaysia has come a long way in poverty eradication, it has yet to establish its own nationally adapted social protection floor that guarantees a basic level of social security for all.

Building back better means going back to this fundamental premise of providing essential social security and services to everyone at every stage of life—during childhood; during periods of illness, injury, and unemployment; and during old age.

These life-cycle risks are not new and have been encapsulated in the nine branches of Social Protection under the ILO Convention 102 since 1952. We must move from viewing social protection as a gesture of charity to seeing it as an act of justice.

This shift is grounded in the understanding that everyone is susceptible to shocks that can potentially push them into poverty. Addressing the issue of limited legal coverage requires amendments to existing provisions.

However, expanding legal coverage alone does not guarantee effective coverage. To fill the coverage gaps and improve benefit levels, a universal approach is essential, that is, including all individuals regardless of economic status. When everyone has a stake, everyone is more willing to pay and support the system.

A universal approach also demands sustainable financial and legal foundations, making it harder to repeal and less susceptible to political changes. A coherent and sustainable system can be created through a well-coordinated funding from employers, employees, and government’s tax revenue, within an integrated social protection framework.

Rather than dispensing welfare aid through various targeted schemes, a more effective strategy is to have a greater government commitment under existing social security institutions, extending protection to all.

As observed during the Covid-19 pandemic, being outside the system traps individuals in a vicious cycle of poverty. This not only hampers individuals’ well-being, but also the country's economic and social development.

Extending coverage to those in the informal sector not only grants them access to essential supports but also facilitates their entry into the formal sector, hence fostering economic growth and government revenue. Furthermore, firms stand to gain, as research indicates that enhanced social protection boosts labour productivity and competitiveness.

Honouring the commitment

The recent crisis offers an opportunity to review and transform the existing status quo. While the economy is showing a positive recovery, some will find it harder to rebound.

For children who have lost their parents, the pandemic has left a scarring effect they have to endure throughout their entire lives. Hence, it is an opportune time for the current model to be reconfigured in preparing for a more volatile and challenging future which could contest the sustainability of the welfare state in the coming decades.

Finally, it is imperative to view social protection as an investment in the people and integrate it into the nation's development strategy, enabling all individuals to meet basic needs regardless of their social status. Staying true to the theme “Tekad Perpaduan, Penuhi Harapan”, to rekindle the hopes of the collective, Malaysia Madani is well positioned to honour the promise of social protection for all.

Hawati Abdul Hamid and Jarud Romadan are researchers at Khazanah Research Institute (KRI). The views are those of the writers and do not necessarily reflect the official position of KRI.

The views expressed in this article are the author's own and do not necessarily reflect those of Sinar Daily.