Ageing population: Asia braces for grey future

Economy May 30, 2015 01:00


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ASIA is undergoing one of the most profound demographic shifts the world has ever seen. By the middle of this century, the number of people aged over 65 is expected to rise from 300 million to around 1 billion.

In many countries the dependency ratio – the ratio of people older than 64 to the working-age population, those 14 to 64 – is set to soar.

Between 1965 and 1970, Asia’s population was growing at an annual rate of 2.5 per cent, outpacing the rest of the world in growth. Over the last couple of decades, as Asia’s economic growth soared, population growth began to slow down in many parts of the region such as Hong Kong, Singapore, South Korea, Japan and Taiwan.

Even the Chinese mainland’s population growth is said to be slowing down.

The Asian Development Bank (ADB) says Asia is on track to become the oldest region in the world, with many governments unprepared for the unprecedented demographic shift.

“As the population dividend that fuelled Asia’s labour-intensive growth becomes a tax, the region must find more innovative ways to sustain its economic expansion, and to provide more comprehensive support for its growing elderly population,” the bank said in its “Asian Development Outlook 2011 Update” report. In a 2014 report by HSBC Global Research, Frederic Neumann, an economist with the financial-services company, said Asia was ageing at an “unprecedented rate – arguably the fastest the world has ever witnessed”.

Neumann added that the opportunities “permitted by the ‘demographic dividend’ in recent decades will only be matched by the challenges presented by ageing”.

He predicted that Asia’s demographic composition in the next half-century “will change inexorably” as the number of elderly people across the region rises while the working-age population falls.

In terms of ageing, the Chinese mainland is already starting to look like “Japan and the Asian tigers”, he said, referring to a term describing Hong Kong, Taiwan, South Korea and Singapore.

Within Asean, which consists of populations considered “relatively youthful” compared with other parts of Asia, Vietnam and Thailand have begun to see a rising population of senior citizens.

“On the other side of the spectrum, the likes of the Philippines and India are only starting their demographic transitions.

“The implications of Asia’s ageing demographics are vast, stretching from growth to a wide range of micro factors, such as savings, labour, pension funds, healthcare and welfare costs, among others,” Neumann said.

Some governments have already rolled out policies to help soften the blow of an ageing population.

A little over a decade ago, Thailand established an affordable urban and rural healthcare system known as the 30-Baht Programme.

Taiwan, with no organised healthcare system before 1995, has developed one of the world’s most effective universal healthcare regimes, boasting nearly 100-per-cent coverage and costing just 7 per cent of gross domestic product.

Singapore, which has one of the lowest birth rates in the world, has made increasing the fertility rate a national priority.

In Hong Kong there is an ongoing debate on increasing the retirement age from 60 to 65.

Meanwhile in the Chinese mainland, with 1.3 billion inhabitants and an economy that dominates the region, the rapidly ageing population has spawned a number of challenges for the government – from a shrinking labour force to soaring pension needs.

Last year, the market for goods and services for China’s elderly population topped 4 trillion yuan (Bt21 trillion), which translates to 8 per cent of GDP.

In Japan, where around 25 per cent of the population is aged 65 or above, the corporate sector has reduced its dependence on the country’s shrinking population by expanding abroad. The ADB says that while developing Asia is following in the “demographic footsteps of the advanced economies, the sheer speed and scale of the transition make preparing for a greyer future all the more challenging and complex as the transition to an older population will deprive the region of one of the main drivers of its past economic success”.

Ageing populations pose difficult policy challenges for developing Asian nations. At best, the experiences of the advanced economies can only provide limited guidance, according to the bank.

“Although the need to prepare for older populations is greatest where ageing is most advanced, youthful economies should take advantage of their larger window of opportunity to prepare also.

“Just as reaping the demographic dividend requires appropriate institutions and policies, so does managing the impending demographic transition.”

Having longer working lives to reduce the dependency burden and encouraging women’s participation in the labour force are some of the measures that can mitigate the negative impact of ageing populations on Asian economies.

“Therefore, to the extent that governments implement policy reforms that bring about those responses – more and better childcare and raising the legal retirement age – our projections overestimate the demographic effects,” says the ADB.