Aging in the Asian "tigers" : challenges for fiscal policy

The paper assesses the timing and magnitude of the government expenditure effects arising from the changing demographics and evolving medical demands of the Asian Tiger economies. With some exceptions, and unlike the industrial countries, the limited social insurance commitments in most of these countries initially suggests that aging populations may not adversely affect fiscal balances. Yet for all the Tigers, factors such as changing illness patterns, modernization of the medical sector, upgrading of the labor force, and income distributional concerns will combine with demography to intensify budgetary pressures. How the Tigers address these developments and their ultimate fiscal cost is thus uncertain. The paper examines some of the broader challenges of policy reform in the pension and medical care sectors, noting that the social management tasks challenging the Tigers will become more complicated and costly. The paper comments on the implications of the Tigers. approach of relying on private sector insurance systems in the pensions and medical sphere. While there is much that is innovative, the Tigers are also grappling with the insufficiency of these private sector initiatives in correcting for market failure, suggesting the need for complementary public sector policies to ensure competitive markets and reflect distributional concerns. An important consequence of increased reliance on private sector approaches is the increasing difficulty posed for fiscal analyses. Private sector financing instruments, often mandatory, are no longer captured as fiscal instruments, thus complicating the analysis of their allocative and distributional implications. The database on .quasi-public. sector issues is also weaker. This suggests the problems that arise for assessing fiscal developments in those countries seeking to emulate the approaches of the Tigers [author]