Pension Crisis Threatens Gulf

By Geoffry Bew, Daily News

Bahrain

 March 15, 2006

Pensions in Bahrain and other Gulf countries will fall short of demand within a generation, an expert warned yesterday.  The region will face similar problems already hitting European countries, says Shumeet Banerji, of global management consulting firm Booz Allen Hamilton.

Signs of an ageing population are already showing in the region, with mortality rates in the GCC halved over the last 40 years.

Dr Banerji, the managing partner of the firm's London office, said figures showed the average life expectancy was less than around 47 in 1950 but is expected to reach more than 70 by 2010.

It is already around 73 in Bahrain , according to official figures.

He warned this, combined with a fall in fertility rates, would lead to fewer people working to support pensioners in retirement.

Dr Banerji was speaking on the sidelines of the 10th regional Pension and Social Insurance Conference held at the Diplomat Radission SAS Hotel yesterday.

The two-day event is organized by the Beirut-based Muhanna Foundation in co-operation with the Pension Fund Commission (PFC).

Bahrain Finance Minister and PFC chairman Shaikh Ahmed bin Mohammed Al Khalifa opened the conference held under the theme Pension Reform: Step by Step.

About 180 people representing 70 public and private sector pension providers from 28 countries, including the GCC, Far East and Europe are attending the event.

"The question is not will this be a problem, but when will it be a problem," Dr Banerji told the GDN.

"There is no reason that we can believe the (Gulf) region will be immune to the same issues."

Dr Banerji said the impact of changing demographics was not only restricted to pension problems but other areas, including health care provision.

"One of the issues is there are higher standards of living in the GCC region but that in turn creates substantial expectations about what should be done to care for the elderly.

"The corresponding problem of rising expectations is it has the real potential to create social unrest if you do not match income growth with an adequate system of provision."

He said the level of private pension provision was lower in the region than elsewhere in the world.

Dr Banerji said stark, politically difficult decisions were required to tackle the problem, including either encouraging people to save more, work for longer, receive less benefit or through imposing taxes.

Pension systems across the Arab world need reforming, said Bahrain 's Pension Fund Commission (PFC) director-general Rashid Al Meer.

"The impact of reform is very important," he said.

"Reform is urgently needed in the region in most Arab countries."

Mr Al Meer the Bahrain government had already taken several steps to improve the pension system, including proposals submitted to parliament in 2004, which were being considered by the Shura Council.

The PFC is for government employees while the General Organization for Social Insurance provides private-sector pensions.