Defusing the Population Bomb

Bangkok Post 

October 10, 2011

Thailand

As the old adage goes, "Time and tide wait for no man." The same is true in Thailand, which is about to find itself saddled with a population that is ageing more rapidly than anyone had expected.

With the number of children that families are choosing to have shrinking steadily, awareness is slowly growing of the need for a better plan to care for the increasing numbers of elderly.

A group of local experts has been conducting an in-depth study of population behaviour in terms of transferring wealth from one generation to the next in order to understand how the country can better cope with the greying society.

Working in cooperation with the National Transfer Accounts project, a collaborative scheme aimed at measuring, analysing and interpreting the macroeconomic aspects of age and population ageing around the world, Thammasat University economists began a survey in 2006 on Thai population behaviour by age group.

The researchers received a grant from the UN Population Fund through the Nihon University Population Research Institute (NUPRI) in Tokyo.

Assoc Prof Dr Mathana Phananiramai said the survey results showed people had less capacity to take care of family members, while no safety net exists to help the ageing population.

"Thailand's population growth has been falling, and society is ageing rapidly. But other countries that have experienced this have been much wealthier than we are," she said.

The low per-capita income means the country needs a better system to cope with the future ageing society, as people will increasingly find they can no longer rely on family transfers. The ratio of workers to elderly could drop to 1.6:1 in the not-too-distant future from 4:1 now.

Assoc Prof Dr Mathana said priorities should include promoting personal savings, making the economy more competitive and enhancing economic growth potential.

"Long-term policies seeking to promote savings and worker productivity to make the cake bigger are more practical than short-term solutions that incur a huge fiscal burden such as monthly pensions of 500 to 1,000 baht," she said. "The cost will only increase tremendously as more people reach retirement age. And like it or not, people will no longer be able to rely on family transfers."

In the vernacular of the emerging field of generational economics, many Asian countries and territories including South Korea, Japan, Taiwan, Hong Kong and Thailand are categorised as being in a "second dividend period" in which the proportion of elderly has grown so large that they can no longer be relied on to generate growth.

In this regard, Assoc Prof Dr Mathana said the government should forge ahead with setting up a National Savings Fund, a law paving the way for which has just been passed. Besides, the country needs to improve the social safety net.

"We must stimulate savings before the practice of receiving handouts and entitlements from the government becomes too ingrained," she said.

"A sustainable social safety net for the elderly is what's needed, not big, unsustainable promises from politicians."

Assoc Prof Dr Mathana also said tighter laws for trustees should also be drafted to protect the assets of those elderly who are unable to handle their own affairs.

Prof Naohiro Ogawa of the NUPRI said Thai policymakers should consider the changing social values and come up with comprehensive measures that address the ageing demographic.

"One area that needs particular attention is education. Thailand allocates a big investment budget for education annually. It should ensure that the quality of the human resources it produces can cover the investment," he said.

Prof Ogawa said Japan made a mistake in overlooking the problem of demographic change in the decade after World War II, when new births dropped by half over the decade.

To address this, the country in 1961 set up a social coverage system guaranteeing huge benefits, but it proved unsustainable during hard times.

The system also led to changes in social values that resulted in households relying more on the government to support elderly family members.

"While Western countries made big promises for welfare states, Japan had to move step by step once we started universal coverage. Whenever we had an economic crisis, we found it was not so easy," he said.

Prof Ogawa said Japan then changed to an employment-based system.

"South Korea started pension coverage in 1999 after the economic crisis, but they put the focus very much on work and called it a 'workfare' system. Thailand might come up with its own unique model of social insurance programme," he said.