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ADB Says Asia Needs to Prepare For Impact of Falling Population

By ALAN YONAN JR.
Wall Street Journal, August 6, 2002

Governments in Asia should begin planning now to deal with the impact of declining populations on their economies over the next several generations, the Asian Development Bank said in a report Tuesday.

With birth rates falling and life expectancies rising in many countries, economies will have to become more productive so that shrinking work forces can support expanding pools of retirees, according to the report.

Countries that will begin to feel the impact first are China, South Korea and Singapore, where populations are forecast to begin declining by 2050. In China and South Korea, the percentage of the population over age 65 is expected to double by 2025, while in Singapore it is expected that better health care has helped boost average life expectancy across the region by about one year during the past decade.

The demographic changes will force policy makers to reassess their health care, pension and social security systems for the elderly , as well as consider extending the age of retirement, said Nagarajah Gnanathurai, ADB assistant chief economist. "Changes in population trends don't occur overnight. They happen over a long period of time so policy makers can do some planning," he said.

Singapore, with its fully funded Central Provident Fund, is in a better position than many other countries with "pay as you go" pension schemes, he added.

Although the report highlights some of the difficulties that lie ahead for policy makers, the fact that population growth is slowing, life expectancies are rising and infant mortality is dropping are all positive developments, Mr. Gnanathurai said.

China's effort to bring its explosive population growth under control with the one-child policy has helped bring "historically unprecedented" rates of economic growth to the country in the 1990s, said Christopher Edmonds, an ADB economist.

At the other end of the spectrum, countries such as the Philippines, Bangladesh and Laos continue to maintain high birth rates, creating "equally challenging implications for job creation, food security, and environmental stress," according to the report.

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