• East Asia Pacific aging at unprecedented pace

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    Philippines one of the exceptions – World Bank report

    Economies in the East Asia Pacific region are facing sharp labor force declines given an unprecedented rise in aging with the Philippines among the exceptions, the World Bank said on Wednesday.

    In a report titled “Live Long and Prosper: Aging in East Asia and Pacific,”—referencing a Star Trek catchphrase—the Washington-based lender said nearly all middle-income countries in the region were in the midst of, or would soon experience, a transitioning from young to old societies in 20 to 25 years.

    “Although the starting points vary, nearly all East Asian and Pacific countries move from aging to aged societies relatively quickly when the aging threshold is reached (exceptions are the Philippines and Papua New Guinea),” it said.

    The region was said to be aging more rapidly than any place in history—a trend driven both by sharp declines in fertility and by steady gains in life expectancy—and in many countries, aging is occurring at relatively low-income levels, the multilateral said.

    The region “has undergone the most dramatic demographic transition we have ever seen”, said Axel van Trotsenburg, regional vice president of the World Bank’s East Asia and Pacific Region.

    “All developing countries in the region risk getting old before getting rich.”

    The report said fertility in the region has fallen from 5.91 children per woman in 1960 to 2.46 in 2005, significantly faster than the global decline of 5.51 children per woman to 3.03 during the same period.

    It noted that the pattern and pace of aging across East Asia Pacific was diverse, ranging from aged richer countries such as Japan and South Korea, to rapidly aging middle-income countries such as China, Thailand and Vietnam and younger and poorer countries such as Laos that will only start to age rapidly two or three decades from now.

    The report grouped the demographic diversity of East Asia Pacific economies into red, orange and green.

    The red group comprises Hong Kong, Japan, South Korea and Singapore. It includes the wealthiest economies and have people aged 65 and older representing 14 percent of the total population as of 2010.

    The orange group, meanwhile, includes China, Indonesia, Malaysia, Mongolia, Thailand, and Vietnam—described as aging very quickly.

    Those in the green group—Cambodia, Laos, Myanmar, Papua New Guinea, the Philippines, Timor-Leste and the Pacific Island countries—are still young, with just 4 percent of the population aged 65 or older in 2010, but are expected to age quickly in the coming decades.

    By 2040, the graying of the population could shrink the number of working-age adults by more than 15 percent in Korea and more than 10 percent in China, Thailand and Japan. In China alone, that would translate into a net loss of 90 million workers.

    “In contrast, in green and some orange countries, the working-age share of the population is not expected to shrink until after 2040. In absolute terms, the Philippines and Indonesia will account for the largest share of the regional increase,” it said.

    With this, the World Bank said tailwinds to growth provided by demographics in older East Asia Pacific countries had raised headwind fears as labor force sizes decline and aging accelerates. Policy and behavioral responses, however, can mitigate these forces.

    “Although the risks to growth are real, even rapidly aging countries have significant scope to act. Managing the growth and other macroeconomic effects of aging will require public policy action and wider behavioral change in a range of areas that span the life cycle. Priorities differ across country groupings,” it said.

    For red economies, a sharper focus on increasing female labor force participation, extending productive working lives and—in some countries—increasing immigration of younger workers from within the region will be vital.

    Orange countries will need to sustain high productivity growth and undertake struc-tural reforms in social security, health and long-term care, and labor market policies
    Green countries will enjoy favorable demographics as the youth bulge continues to feed their labor forces for the next few decades.

    The report said countries with young populations like the Philippines should establish conditions that will realize maximum gross domestic product growth from the demographic dividend (through investments that raise productivity and maximize youth employment) and avoid adopting policies in areas such as pensions and health that are affordable now but will rapidly become unsustainable when aging accelerates.

    “These countries’ success in doing so will determine their readiness to manage aging when it accelerates over the coming two to three decades,” the World Bank said.

    The key message of the report, the multilateral said, is that it would be possible to address rapid aging in the East Asia Pacific region.

    “It is possible to manage aging while sustaining economic dynamism … but it requires tough policy decisions and significant behavioral change on the part of workers, employers and society in general,” said Sudhir Shetty, chief economist for the East Asia and Pacific Region of the World Bank.

    “The region’s demographic and epidemiological transitions require proactive policy responses on pensions, health care and labor markets,” Shetty added.

    WITH A REPORT FROM AFP

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