Inequality requires fiscal action in SE Asia, UN warns

3 Aug 20

Southeast Asian governments have been urged to address the “fiscal termites” making it difficult to support their citizens through the economic crisis caused by Covid-19.


Hanoi, Vietnam's capital city

Hanoi, Vietnam


They need to find space in their budgets to improve social protection schemes, or they risk deepening already large inequalities within their populations, according to a policy brief from the UN Economic and Social Commission for Asia and the Pacific.

But they should do so without resorting to unsustainable borrowing, the report stated.

“To create fiscal space without excessive debt, governments could re-examine budget policies and address ‘fiscal termites’ – long-standing problems that undermine national budgets, such as tax competition, tax evasion, transfer pricing and fossil fuel subsidies,” the brief stated.

UNESCAP research from May found that in many Asian countries, simply eliminating fossil fuel subsidies could have enabled them to fully finance coronavirus stimulus packages announced up to that point.

Much of this initial stimulus was aimed at protecting businesses, but now governments need to put tackling inequality at the heart of their efforts, because an “uneven landscape” of social protection systems has left many individuals unable to deal with the virus’s economic hit, the report authors said.

Serious inequalities exist in Southeast Asia in terms of income, wealth, access to basic services and social protection, the added.

UNESCAP particularly stressed the importance of moving towards universal healthcare systems, but said in the short term, measures responding to the needs of vulnerable groups such as women, people with disabilities, migrants, refugees and informal workers should be prioritised.

The region, encompassing the area from Myanmar in the north west to Indonesia in the south east, has had significantly lower confirmed Covid-19 cases and deaths than most others, but the UN warned that these early successes must be translated into averting a socioeconomic crisis.

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