Sweden’s welfare system: A model for Malaysia to emulate

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Only when we can provide the essentials for the welfare of our people will we be acknowledged as being in the league of developed nations, writes Benedict Lopez.

Of the five Nordic countries I covered in the scope of my work, I know Sweden perhaps better than the other four as I was based in Stockholm. During my four and a half years stay, I always had a notebook, jotting down my observations on the many facets of Swedish life.

For someone from the tropics, I found the harsh winters a challenge, especially when at times I bled from the nose and my skin cracked and when chilly winds blew straight at my face as the temperature plunged to as low as -20C. I found solace in the cliche “There is no bad weather but there’s only bad clothing.” Proper winter jackets, woollen socks, boots, sweaters, scarves and hats proved to be a lifesaver for me.

Considered one of Europe’s poorest countries in the past, Sweden today has evolved into an egalitarian society providing its citizens a sense of security. Income inequality has dropped substantially since the 1970s, and the trend towards more equity has been sustained, albeit with occasional glitches.

A burning desire for a welfare state is at the heart of Sweden’s agenda, virtually guaranteeing its citizens equality in all aspects of life.

A social safety net only protects you when it covers all the basic needs for a decent life – food, clothing, housing, healthcare, education and a state pension.

Not even the US, where there is vast disparity in income amongst the people, can compare to Sweden in this respect. US senators like Democratic presidential candidate Bernie Sanders and his wife Jane earned only US$205,000 per annum, while corporate tycoons, celebrities and sportsmen earn millions a year. Senator Sanders remarked that he remained “one of the poorest members of the US senate”.

There are many in the US still fighting for a decent minimum wage. A significant section of the population have to eke out a living while others have to queue-up at soup kitchens even in major cities like New York.

Malaysia can learn and emulate many positive attributes from Sweden, a country with a population of only 9.5m.

Personification of a welfare state

Sweden’s today is the model of an advanced welfare state, where income inequality has not only contracted significantly, but poverty has virtually been eliminated as a result of pragmatic policies.

Sweden has a tax system similar to Malaysia, where there is a tax number and the register can be audited. High taxes are the norm – a mandatory prerequisite for a welfare state, and the unrelenting drive towards full employment transcends all political party lines.

Employment is the unquestionable guarantee in Sweden to circumvent poverty, and taxes are structured with the aim of realising the country’s uncompromising goal of moving towards a classless society.

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In comparison with international standards, poverty in Sweden is negligible, found primarily among the unemployed and the underemployed. But these groups receive financial assistance from the state. Migrants and their families arriving in Sweden, mainly from strife-torn areas of the world, rely on a reasonably generous but stringently means-tested social assistance arrangement.

Sweden leads the world in providing pensions for its senior citizens, which has evolved over time, guaranteeing them sustainable income upon retirement. Changes are periodically incorporated into the pension system to suit the prevailing environment. Anyone who works and pays taxes in Sweden, including foreigners, is entitled to a state pension.

The more taxes a person pays during his or her working life, the higher the pension will be. There is something known as a guaranteed pension which everyone is entitled to and is computed by a formula. In a nutshell, even if a Swede has not worked a single day in his or her life, this pension is guaranteed, but it is only available to those aged 65 and above.

I know of many Malaysians who have worked in Sweden for many years and who are now enjoying the benefits of this pension system. Besides the state pension, many in Sweden also receive their own private pensions under schemes financed through contributions they made during their working life via established companies.

Tax evasion in Sweden is minimal. Every purchase at any retail establishment, irrespective of size, is subject to tax or moms, as it called in Swedish. The cash register is linked online to the tax office, and consequently the tax paid is automatically registered.

Tax officers frequently visit business premises, under the guise of patrons, and observe from a distance whether owners key in the stipulated amounted purchased into the cash register. If an owner is caught cheating, a heavy fine is imposed.

The standard VAT rate in Sweden is 25 per cent, with reduced rates of 12 per cent and 6 per cent for food, accommodation rental, books, newspapers and other goods and services. As a result of the broad base in tax collection, Sweden is in a position to provide life’s necessities to its people.

Family benefits, the hallmark of the Swedish welfare state, are aimed at ensuring parents’ financial security at childbirth or adoption. They importantly allow parents to combine work and family life. Currently, the child welfare benefit is SEK1,050 (RM520) per child, and more for those having more than one child, and is paid until a child reaches the age of 18.

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Sweden unequivocally advocates equality in all respects of life. In Sweden, it is against the law to discriminate against anyone on the grounds of race, religion, colour, gender, disability and sexual orientation. Complaints against any form of discrimination anywhere can be lodged with Sweden’s Equality Ombudsman.

Quality health service and education

Subsidised mainly by the public sector, Sweden’s healthcare system ensures everyone has equal access to good quality health care. The responsibility for healthcare in Sweden is shared by the central government, county councils and municipalities.

The Health and Medical Service Act regulates the responsibilities of county councils and municipalities, and gives local governments more freedom in this area. The role of the central government is to establish principles and guidelines, and to set the political agenda for health and medical care. Patients pay a token amount.

A Malaysian friend of mine, a resident in Sweden, had a heart surgery and a pacemaker inserted many years ago. He paid only a nominal sum.

Malaysia’s public healthcare may be free for those who cannot afford it, but the state of many of our public hospitals leaves much to be desired. It is simply deplorable, especially in ‘third class’ wards where beds are crammed and patients have to suffer from the humidity without air-conditioning. I was shocked to see the state of a third class ward at one public hospital I visited recently.

A crammed cubicle in a 'third class' ward at the Penang General Hospital
A crammed cubicle in a ‘third class’ ward at the Penang General Hospital

Like healthcare, education is free in Sweden from primary school till university. No Swede is denied a tertiary education solely on financial grounds, and consequently all Swedes have the right to quality education irrespective of their family’s station in life.

And Swedish tertiary education is top class. I had the opportunity the meet and engage with several Malaysian students pursuing tertiary education in various Swedish universities. All of them praised their respective universities, and many of them were government scholars. Until 2010, university education in Sweden was free even for foreigners, and I know of several Malaysian who were beneficiaries of Sweden’s noble deed to foreign students.

Clean environment and sustainable development

Swedes are passionate about environmental technology and sustainable development. Sweden exports environmental technology all over the world, while simultaneously creating an ambience for domestic companies to flourish, and subsequently commercialising their innovations.

Government agencies like the ministry of environment, the Swedish Green Building Council and Swedish Innovation Systems assume a pivotal role in facilitating the development of a green ecosystem.

Lush and green in Sweden
Lush and green in Sweden

In Sweden today, more than 99 per cent of all household waste is recycled in one way or another, vis-à-vis only 38 per cent in 1975. Recycling stations are located about 300 metres from any residential area, and most Swedes separate all recyclable waste in their homes and deposit it in special containers at designated areas in their apartments or at a recycling station.

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In 2012, about 2.3m tons of household waste was burnt and converted into energy. The 32 incineration plants in Sweden today produce heat for 810,000 households and electricity for 250,000 private households. Relevant Malaysian government agencies can learn from Sweden’s green technology and sustainable development, which we can implement in Malaysia.

Developed nation status: Challenges for Malaysia

Malaysia has come a long way since independence in 1957. Today, we are considered as an upper- middle income economy.

The government has been successful in the economic transformation of the country, from a commodity-based economy to one which is today a vibrant manufacturing and service-oriented economy.

Poverty rates have plummeted conspicuously from more than 50 per cent in the 1960s to 0.6 per cent in 2014 – a remarkable feat by any standards.

Our infrastructure development all over the country is conspicuous and internationally renowned: a fact that is even by attested to by foreigners. We have among the best roads and highways in the world. And to our credit, the quality of life of our people has improved leaps and bounds since independence.

But with slightly more than three and a half years left before we achieve the status of a developed and high income economy, we have yet to attain some ingredients of a developed country.

Like Sweden, we need to provide quality healthcare and free education from primary school to university level for our people, and give a decent monthly pension to our senior citizens. We should strengthen and rebrand public sector organisations like EPF and Socso as a measure towards realising these objectives.

Combined with our natural resources, taxes collected, toll receipts, and with the additional source of revenue from the GST, we are definitely in a position to fulfil these binding obligations to our people.

Critical issues facing the country like environmental technology and sustainable development should be at the forefront of our development agenda. But very often we seem to be more skilled only at rhetoric, rather than action. Malaysia cannot afford to be complacent as we move forward towards being recognised as a developed country.

But only when we are able to deliver all these essentials to our people will we be acknowledged as being in the league of developed nations. Like Sweden, we too can be an egalitarian society – if we have political leaders who genuinely care for ordinary people and the political will to put the public interest uppermost.

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Benedict Lopez
Benedict Lopez was director of the Malaysian Investment Development Authority in Stockholm and economics counsellor at the Malaysian embassy there in 2010-2014. During the course of his work, he covered all five Nordic countries. An eternal optimist and now an Aliran member, he believes Malaysia can provide its citizens with the same benefits and privileges found in the Nordic countries - not a far-fetched dream but one that he hopes will be realised in his lifetime.

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Phua Kai Lit
Phua Kai Lit

Actually, the “neoliberal” ideological virus has also infected the Swedish body politic.

Its healthcare system has been privatised to a certain degree, with higher costs as a result.
Goran Dahlgren, a Swedish expert, has written about this.

O Yassin
O Yassin

I don’t agree., not in the very near future.

The high taxes will drive investors out, which is badly needed in Malaysia. Sweden can do it because they have a developed economy and they have home grown big businesses.

Culturally Malaysians are not there yet. It needs a big mindset change. As we can see, increase in taxes have already drove citizens nuts and many will become lazier knowing that there will be handouts.

First and foremost. we need a strong educational foundation, a good work attitude and a vibrant economy with a near zero unemployment rate, zero tolerance on corruption. etc. etc.

Are we moving towards that?

peter ray
peter ray

Excellent article by Benedict Lopez. Yes, Sweden is indeed a country to emulate in many respects but we are not looking in that direction, are we? We are clueless as to where we are heading.