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Frost & Sullivan Case Challenge 2015 © 2015 Frost & Sullivan.

SECURING THE SOCIETY IN SALUSIA

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PROBLEM STATEMENT

As the advisor to the Finance Minister of Salusia, you

have been tasked to recommend measures to address

the challenges related to social security and post-

retirement sustenance in the country.

Having served in various related ministries and

departments, you are aware of the social and financial

challenges faced by the country, particularly in post-

retirement related issues. You understand that to

ensure sustainable growth and ensure social harmony,

these issues need to be resolved (see Annex 1 for the

challenges).

You have been mandated to propose measures to

ensure the following:

Reduce financial dependence of retirees in

the economy

Smoothen personal income consumption

over a lifetime

Generate a positive impact on the welfare

of citizens and residents

What measures would you recommend to

the Salusian government in order to ensure

post-retirement sustenance?

The success of the proposed initiatives will be

measured based on the Key Performance

Indicators (KPIs) defined by the Minister (see

Annex 3).

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WHAT STRATEGIES SHOULD BE

INCLUDED IN SECURING THE SOCIETY?

A. The vision can be achieved using one of many

possible approaches. You need to decide the best

strategy for the country

B. Create some quick-win strategies which can be

realized in the next 1-2 years

C. Develop critical recommendations that can drive

Salusia’s development over the next 10 years

D. Guiding questions which will help structure your

thinking are listed in Annex 2

E. The recommendations should also align with

your KPIs – both quantitative and qualitative

(see Annex 3)

Notes for Participants Guidance for developing case solution

A. Your case solution must be in Microsoft PowerPoint and should not be more than 10 slides

B. You can refer to and quote any additional information available in the public domain. You can also make assumptions where necessary

C. The solution should be practical and rooted in reality. Out of the box solutions will be given higher ratings during evaluation

Judging criteria

1. Quality of Analysis 2. Clarity of the presentation and solution flow 3. Creativity in developing out-of-the box solutions 4. Actionable recommendations 5. Language and completeness of solution

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alusia, officially the Democratic

Republic of Salusia, is a country in Latin

America, situated west of Argentina. The

Salusian War of Independence was a series of

military conflicts beginning in 1982 that

culminated in the proclamation of the

independence of Salusia on July 24, 1997. The

wars of independence took place with the

background of the 1990-1991 uprising by

indigenous leader Franco Valentina II and the

earlier removal of Upper Salusia Regions.

Salusia is well known for its primary industry,

including agriculture, general manufacturing.

The economic roadmap of the current

government of Mr. Rodriguez Dominic focuses

on the development of the services sector.

Salusia recovered quickly since the Great

Depression, and has seen strong growth in its

economy, attracting investments in many of its

industries.

However, this quick economic recovery has

created new social challenges. During the global

financial crisis, the retirement age in Salusia was

lowered to 58 years (from earlier 60 years) to

create new jobs for younger generations. This

has led to a need for social welfare schemes for

the retirees. While the short-term issue can be

resolved by adding to the retirement fund

through added taxation, the government

believes that this is not a sustainable solution as

it hampers economic development and flow of

foreign capital.

Some key challenges that continue to affect the

society are highlighted below

S

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Key Challenges Focus on Illiquid Assets

Traditionally, Salusian people have preferred assets that cannot be sold quickly because of a lack of

ready and willing investors or speculators to purchase the asset, such as real estate, cars and antiques.

With a global dip in foreign capital flows, the real estate prices also declined in Salusia. This makes it

hard for silver generation to liquidate their assets to finance their retirement. The typical savings rate is

20.2% of the GDP.

Shrinking Nest Eggs

Experts reveal that in order to overcome the increased cost of living and longer life expectancy, citizens

need a minimum sum of SL$ 250,000 for their post-retirement life span. Only 22.3% of the population

has this amount, while the average citizen currently has SL$ 88,000.

Lack of Medical Insurance

Recent polls have indicated that 82.3% of the population does not have any medical insurance coverage.

Of these, 77.5% do not intend to purchase, or upgrade their insurance due to lack of awareness and high

financial costs associated with the insurance. As such, only 32.4% of senior citizens mention that they

are able to afford the health care in the country.

Rising cost of Living

Salusian currency has depreciated 10.2% against the US$ in the last 3 years. This has resulted in an

average of 6.2% year-on-year inflation (real) since 2010.

High Budget Deficit

As per the latest available data, the budget deficit is 6.2% of GDP – limiting the government’s ability to

increase spending.

High tax rates

The tax rates in Salusia are one of the highest in the world – at 30.5% on average. This limits the

government’s capability to raise funds for any social security scheme. The government is looking at

innovative solutions to address these funding challenges.

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Note: These questions are meant to guide your thinking as you work on your analysis. They are not intended to

serve as an exhaustive sweep of all underlying issues.

What should be the framework to ensure

post-retirement sustenance of the population?

Think of non-traditional solutions, as much as

possible.

What can we do in order to address the post-

retirement needs of the ‘silver tsunami*’ within

the next 5 years?

How can we balance economic development,

while meeting social needs?

How can we provide affordable health care

health care for the elderly, without

overspending government’s budget?

How should the policies be segmented to cater

to the different needs of Salusians?

What are some of the negative impact

resulting from the policies, and how

should the government balance this?

*Silver tsunami refers to the a large number of

persons turning 60 and above, as a result of the

post war baby boom

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Note: These KPIs are a guide to measure the impact of your proposed strategies. You may choose to meet all or

some of these KPIs.

Key Performance Indicators (Targets)

Reduce government budget deficit to below

4% of GDP

Inflation rate to be below 5%

GDP growth to be maintained at 4% or above

Increase in the number of citizens with the

minimum sum ($250,000) by 10%

Increasing retirement savings sum per

capita by 20% by 2030.

Improve senior-citizen population’s access to

health care to old-age health care

Encourage savings per capita in the

economy

Reduce the social disparity amongst

different segments of the population

Minimize the public spending on the

initiatives, while maximizing the self-

sustenance/private funding of

initiatives

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Geography Location: Southern Latin America, bordering the Pacific Ocean Area: 406,752 sq. Km.

Government

Government Type: Democratic Federal Republic Elections: Every 5 years (Scheduled) Parliamentary System: Bicameral Administrative Systems: 15 states and 2 Federal Districts (Athome – administrative

capital, and Venan – main economic centre)

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Economy

GDP, current (SL$): 1,523.3 billion (2014), 1,438.0 billion (2013) GDP growth (2014, %): 5.6% GDP growth (2013, %): 4.5% Annual Inflation: 7.6% (2014) Budget Surplus (Deficit): (6.2%) of GDP (2014) || target: deficit below 4% by 2020 Public Debt: 49.5% of GDP (2013) SME Contribution to GDP (2013): 36.2% of the GDP (incl. Foreign SMEs) Exports: 70.3% of GDP || 20.2% of total Exports are for the Services Imports: 75.4% of GDP || 56.7% of total Imports is Services Foreign Direct Investment, net inflow (% of GDP, 2014): 3.5 % of the GDP Foreign Direct Investment, net outflow (% of GDP, 2014): 0.8% of the GDP Composition of Economy: Agriculture 36.4% || Industry 32.1% || Services: 21.5% Tax Rate: Businesses (25.0%) || Individuals (30.5%, average) Currency Unit: Salusian Dollar (SL$) Exchange Rate: 1 US$ = 8.68 L$ Joined World Trade Organization (WTO) in 2009

Demographics

Population: 63.3 million (2010 census) Population growth rate: 2.2% (annually from 2000 to 2010) Ethnic Mix: Ethnic races such as Silesia, Butenese, and Tihas form approximately 92% of

the population. Other ethnicities such as Spanish, Portugese, Chinese, and Indians form the remaining 8%

Languages: Salusee (87%), English (68%), Spanish (32%), Portugese (27%) Age Split (2010 census):

o 0-14 years: 15.6% of population o 15-25 years: 16.8% of population o 26-40 years: 25.7% of population o 40-58 years: 33.6% of population o >58 years: 8.3% of population

Gender Split (2010 census): o Male: 53.4% of population o Female: 46.6% of population

Net migration Rate (2010): 0.3 migrant(s) per 1,000 population (official) Urbanization: 42.2% of population (2010, growth rate of 2.3% annually) Life Expectancy at birth: 71.2 years (overall) || 70.3 (male), 72.4 (females) Population below poverty line: 33.6% (2012) Distribution of family income (Gini Index, 2011): 41.4

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Labour statistics

Literacy Rate: Total Population (76.8%) || Males (80.1%), Females (70.3%) Labour Force (2010 census): 32.7 million || 60.3% males, 39.5% females, Labour force by Education: 26.7% (primary) || 25.3% (secondary) || 48.0% (tertiary) Unemployment: 7.7% (2013) Foreign Workforce Participation: 40.2% (skilled), 60.4% (unskilled) – (2013) Public Expenditure on Education: 3.1% of GDP (2013) Number of Graduates (Degree): 305,247 (2014) Universities: 10 with federal status, and 23 associated with various states in the

country

Infrastructure Mobile Penetration: 78.5% (2013) Broadband Penetration (>256kbps): 40.3% (2013) International Airports: 2 (Evimeria – capital, and Salutem – economic centre) –

connected to all major Latin American destinations Sea Ports: 3 Railways: 3,456 km || Roadways: 205,567 km

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