Universal Pension Scheme: A vital step towards an inclusive welfare state

Rabindranath Tagore, in his widely discussed article 'Goals and Education', wrote: "... one of the signs of a nation which is on the path to progress is that it shuns meagreness and sees that ... as much as possible all of them (people) have the right to claim the full glory of humanity." Indeed, a developing country must look forward to providing its citizens the right to go beyond its 'hand to mouth' strategy of survival and put in place the policy where they too can dream of a self-respectful long-term livelihood with dignity. There is no doubt that Bangladesh has been going through a long-term strategy of inclusive and sustainable development, especially during the last 12-13 years. Despite ill-presence of some super-rich pushing the income inequality to an unacceptably sky-high level, the level of consumption has been well distributed leading to a stable Gini-coefficient or the inequality index of the same. Accordingly, the per capita income has risen dramatically to more than USD 2,500, recording a rise of three and a half times, during this period. Defying economic slowdown due to Covid-19 as experienced in many of its peers and, as well as all the developed countries, the latest GDP growth rate of Bangladesh has been recorded as 7.2 per cent. The per capita nominal GDP in Bangladesh remained exceptionally robust compared to all the countries of emerging Asia. The consistent economic progress has had a positive impact on its social development indicators such as life expectancy (73 years) and hunger index (19.1 score). The prospect of a useful demographic dividend is high as the average age of the Bangladeshi population is only 26 years. But, according to BBS, senior citizens will make up 20 per cent of our total population by 2031 (compared to 11 per cent in 2017), indicating an increase in the size of our aging population with a huge implication for the management of public expenditures. Undoubtedly, there is pressure on the employment of the marginalised which is concentrated mostly in the informal sector. Nevertheless, their efforts to overcome this crisis are endless. Even in this context, the talk of ensuring the 'full glory of humanity' of the people is now very relevant. Our development discourse needs to come out of the familiar poverty-centric discussions or that about basic needs like food, clothing, and education to chalk out a long-term strategy of social security for all. Therefore, the announcement made by the government to launch the Universal Pension Scheme (UPS) in the next 6 to 12 months should be seen as a timely, commendable, and brave initiative, particularly in midst of the post-covid uncertainties of the global and domestic economic realities.

While there are some challenges in implementing and managing a well-planned long-term social security policy, it must be acknowledged that our achievements in ensuring partial social safety-net programmes and the innovative supportive role of the non-governmental sector are not insignificant. Thanks to these inclusive policy experimentations Bangladesh witnessed a steady fall in the overall poverty rate to 20 per cent and that of extreme poverty to about 10 per cent just before the advent of the covid-19. The pandemic has, of course, shattered many such gains in our development pursuit, albeit temporarily.  However, the proposed universal pension scheme should be seen as different from these traditional social safety net programmes. Therefore, there must be a new way to implement this initiative. There is a quote from the great scientist Albert Einstein that is very relevant in this context. He goes on to say: "We can't solve problems by using the same kind of thinking we used when we created them." So, we have to be highly innovative in implementing this courageous policy initiative.

Given the country's macroeconomic situation following the Global Financial Crisis of 2008-09, the best way to deal with the situation was to extend the coverage and support of traditional social safety net programs through efficient use of state-of-the-art technology and limited resources. As the government led by the daughter of Bangabandhu, Sheikh Hasina, moved strategically in that direction, socio-economic development started gaining new momentum. However, the fiscal space was not wide enough to launch a Universal Pension Scheme a decade ago. But Bangladesh has come a long way during the last 12-13 years to become a developing country jumping out of the category of the Least Developed Countries due to its consistent success in pursuing a well-crafted inclusive development strategy as argued earlier. Fortunately, Bangladesh was able to mobilise enough resources, both from within and outside, without creating an unbearable debt repayment pressure for itself. Instead, it heralded a very strong macroeconomic stability including a robust external sector economy with a foreign exchange reserve worth about eight months of import costs. Its overall economic stability remains at a praiseworthy level. Yet, we need not be complacent about these gains, particularly in the context of rising prices of vital imports energy and wheat in the wake of the Ukraine-Russian conflict.

 One must, however, appreciate the courageous policy initiative of the government for moving away from the traditional 'targeted' social security towards this universal pension programme. So far, old age allowances have been given to poor senior citizens. And a share of non-poor senior citizens belonging to the middle-class may have been relying on national savings certificates. Government officials and employees are, of course, receiving pensions. Yet, many more may have been overlooked. But now our society and economy have reached a stage when it is time to think and take initiative for the universality of social security.

With the universal pension scheme being talked about by the government, it seems that a roadmap must be in progress to include everyone irrespective of religion, caste, profession, and income in this programme. While this goal of inclusiveness is noble and desirable, there are several challenges in achieving this goal. And some precautions are needed to implement it. Let me highlight some such issues here.

First, let's look at the issue of registering the beneficiaries of this new programme. All citizens between the ages of 18 and 50, except those already getting the public pension, are likely to join this programme. Each of them will have to open an account and make regular payments to it. After paying subscriptions for at least ten years, the account holder will be able to get a monthly pension at the age of 60 and onwards. I believe, the spouses will be nominees for the pensionholders. The physically and mentally challenged children may be included as co-nominees as well.

Of course, at first, the citizens will be somewhat sceptical and not so much interested about it. So, they need to be made interested gradually by focused advocacy. Fortunately, the government wants to walk on that path. Though initial registration will be optional, it will be made compulsory in phases. The success that we have shown in the registration of the national identity card and the latest public corona vaccination will work as an example in this case. The government can recheck the list of registered beneficiaries of this programme by aligning it with the the National Identity Card database.

The second issue is how to cover the beneficiaries from all walks of life. Private sector companies may show less interest, but it should be kept in mind that private organisations enjoy various financial and tax benefits from the government. Therefore, it is desirable that they should be involved in this initiative. Yet I think they can be properly motivated rather than being forced initially. There will be pressure from the employees if they see that this is working in the neighbouring companies/factories. From Bangladesh Bank, we got good results with various incentives to make commercial banks open branches in rural areas and provide agricultural finance. We can certainly learn from that experience and implement this programme following 'learning by doing' approach.

Another thing that is particularly important to note is the informal nature of our economy. More than 80 per cent of our workforce is involved in the informal sector. They must be included to ensure the universality of the pension scheme. So, they should be included as individual citizens rather than based on where they are working. They can move out of any organisation of employment with their own pension identity number. Initially, the private employer organisations may not be keen on contributing to this scheme for their employees. But at some point, they too will be roped in. Surely, the NGOs should come forward as first takers of this scheme given their pronounced commitment for social responsivity. The RMG units should then be motivated to join the fray. This will, however, need a huge advocacy. All stakeholders including academia, media, NGOs, chambers, and associations must come forward to join this advocacy drive.

Fourth, we need to focus on building trust. It is not uncommon in the minds of the public to have a kind of apathy towards pension schemes as government officials and employees have experienced a variety of bureaucratic complications in collecting pensions after retirement. Therefore, special attention needs to be given to ensure that no one has such a bad experience with this new public scheme. A digital dashboard-based monitoring system can be set up from the scratch. Initially, participation in this programme will be optional. In that case, it is possible to build a sustainable and reliable system by conducting experiments with dashboard-based monitoring. Citizens will voluntarily open their own pension accounts. In this way they will deposit money, perhaps a share will come from the organisation they are working for, and above all the government will deposit a part of the amount there. By investing all this money, the citizens will be given a share of profits. Therefore, it is necessary to create a place of trust to get the benefits of this investment. The matter of where to invest should be chosen as carefully as possible. No big risk should be taken with this fund in the hope of making easy profit.

To provide services under this programme, maximum attention must be paid to make the processes flexible and user-friendly. It can be said that a revolution has already taken place in Bangladesh in providing easy financial services using digital technology. There must be a mobile banking facility for depositing and withdrawing money from the pension scheme. If necessary, a separate 'app' may be created. Care should be taken that no one must spend, for example, Tk.200 for depositing Tk.1,000. The 'One Size Fits All' system, that is, the method of proceeding with the same service for all, cannot be adopted. The target group of this scheme will be very diverse due to its universality. We want to have different packages under a national scheme keeping in view the economic ability and personal decisions of people of different classes and professions. Even the rich should be welcomed to this system, of course with no contribution from the government, as they too may face old-age survival challenges as the children may not be near them. They too can make use of the well-regulated system. As people from different income groups have different plans for savings, different people in the same income group may also have different expectations and decisions. Someone may suddenly need money. That is why the proposal to lend at least 50 per cent of the total funds is justified. In addition, in some insurance schemes, if one or two instalments are not paid, the entire programme is cancelled. This should not be happening here. Even if someone fails to pay a few instalments for want of money, she or he should be allowed to pay the outstanding instalments later with some fines to keep the account alive.

Finally, the views of all stakeholders must be welcome and the dialogues between all of them should start from now on this programme. Necessary tests, experiments, and research should also be done. There will, certainly, be such initiatives from the government. But civil society and experts must also come forward on their own. The media and civil society should come forward and take initiative to make the potential beneficiaries aware and to convey expert opinions to the government.

Reports so far suggest that the government is going to form a regulatory authority to oversee the whole affair. A law must be enacted for that matter. This authority must be created based on the views of all stakeholders, considering all the above issues carefully. Just as there is no rush, there is no room for bureaucratic procrastination either. Therefore, it is equally important to draw the right path for implementation in a participatory manner along with planning. Bangabandhu was always in favour of 'learning by doing'. Ensuring the long-term economic security of all in the Golden Bengal of his dreams, it is necessary to learn from all right from the beginning and reach the desired goal. It is heartening to know that the government will start  implementation of this programme within a year but has chosen 2030 as the final time to ensure this service for all. This is how the caravan of our development has progressed for the last 12-13 years. I believe that this progress will continue in the future as well and will bring benefits to all in Bangladesh.

Dr Atiur Rahman is Bangabandhu Chair Professor of University of Dhaka and former Governor of Bangladesh Bank.