The Social Impact Bond (SIB), first used in the UK in 2010, was an initiative developed to provide services to improve community welfare, in an agreement between the government and the private sector, where the latter provides the funds. It is not a bond in the generally understood meaning of the term, and it is better understood as a type of contract.
According to this contract, the private investor provides the funds to a service provider, and the government — when the period of the contract has expired — agrees to redeem the original investor with their initial outlay, together with an extra financial compensation or award in line with the success of the project. This is, however, contingent on the provider achieving their specified goal, as determined by an independent assessor. If the objectives have not been achieved, the government has no obligation to make any payments to the investor.
The SIB differs from the more traditional social service provision system in that the funding comes from the private sector — whereas the traditional system relies on public financing — and also that the SIB is an investment in service provision for the improvement of social welfare provision, compared with the more traditional approach that seeks to remedy or find solutions for existing problems. In addition, the SIB is a Pay For Success (PFS) scheme, in which the risk is transferred to the private investor, compared with the traditional model, in which the government is saddled with the risk and cannot evade its obligations.
The SIB concept has started to take off overseas, and it is already being applied in 10 countries. On Taiwan’s doorstep, South Korea passed SIB legislation in 2014, with plans to start a children’s welfare SIB in Seoul, and Japan started a senior citizen long-term care plan last year. Taiwan, however, has yet to get in on the act.
As government debt accumulates, the social welfare budget will be increasingly difficult to pay for. Combined with an aging demographic and a declining birth rate in Taiwan, the social welfare bill is only going to become more of a burden. This will surely place added stress on the already creaking government coffers. According to figures from the Executive Yuan’s Directorate-General of Budget, Accounting and Statistics, Taiwan’s excess savings stand at as much as NT$2.61 trillion (US$83.42 billion), and life insurance companies are sitting on about NT$15.8 trillion that they could put into action.
If the government takes the initiative and establishes a similar SIB system, and mobilizes private-sector funds to make up for the shortfall in government finances, the provision of social services can be expanded, improving social welfare, and economic development will be stimulated.
The government should look into examples of how this has worked overseas, how much it will save in costs, and who it can work with to provide such services. Initiatives could include reducing the rate of recidivism, finding shelter for children in care, improving special-needs education, providing long-term care, offering housing for vulnerable groups and shelters for the homeless, as well as getting people back into work.
The National Development Council should establish an SIB unit charged with developing legislation and creating the structure, standard operating procedures and evaluation systems needed, as well as drafting short, medium and long-term plans.
Yang Chung-hsin is a retired research fellow of Academia Sinica’s Institute of Economics.
Translated by Paul Cooper
Two sets of economic data released last week by the Directorate-General of Budget, Accounting and Statistics (DGBAS) have drawn mixed reactions from the public: One on the nation’s economic performance in the first quarter of the year and the other on Taiwan’s household wealth distribution in 2021. GDP growth for the first quarter was faster than expected, at 6.51 percent year-on-year, an acceleration from the previous quarter’s 4.93 percent and higher than the agency’s February estimate of 5.92 percent. It was also the highest growth since the second quarter of 2021, when the economy expanded 8.07 percent, DGBAS data showed. The growth
In the intricate ballet of geopolitics, names signify more than mere identification: They embody history, culture and sovereignty. The recent decision by China to refer to Arunachal Pradesh as “Tsang Nan” or South Tibet, and to rename Tibet as “Xizang,” is a strategic move that extends beyond cartography into the realm of diplomatic signaling. This op-ed explores the implications of these actions and India’s potential response. Names are potent symbols in international relations, encapsulating the essence of a nation’s stance on territorial disputes. China’s choice to rename regions within Indian territory is not merely a linguistic exercise, but a symbolic assertion
More than seven months into the armed conflict in Gaza, the International Court of Justice ordered Israel to take “immediate and effective measures” to protect Palestinians in Gaza from the risk of genocide following a case brought by South Africa regarding Israel’s breaches of the 1948 Genocide Convention. The international community, including Amnesty International, called for an immediate ceasefire by all parties to prevent further loss of civilian lives and to ensure access to life-saving aid. Several protests have been organized around the world, including at the University of California Los Angeles (UCLA) and many other universities in the US.
In the 2022 book Danger Zone: The Coming Conflict with China, academics Hal Brands and Michael Beckley warned, against conventional wisdom, that it was not a rising China that the US and its allies had to fear, but a declining China. This is because “peaking powers” — nations at the peak of their relative power and staring over the precipice of decline — are particularly dangerous, as they might believe they only have a narrow window of opportunity to grab what they can before decline sets in, they said. The tailwinds that propelled China’s spectacular economic rise over the past