Rapidly ageing Asia 'faces tough choices'

MUMBAI • China and other middle-income countries in East Asia are getting old before they are getting rich, requiring overhauls of health and pension systems.

The World Bank said in a report yesterday that the sprawling region, where a third of its people are aged 65 and above, is ageing faster than any other in history.

Its developing countries - from China to Indonesia to Vietnam - that have neither the wealth of Japan nor the youth of the Philippines will have to increasingly rely on people working longer.

"It will be possible to manage rapid ageing in East Asia and Pacific while sustaining economic dynamism," Mr Axel van Trotsenburg, the bank's vice-president for the region, wrote. But "this effort will require politically difficult policy choices, including dealing with associated fiscal risks".

By 2040, China will have lost a net 90 million workers, said the report. Although it abandoned its decades-long one-child policy in October to find new motors of growth, the change may have come too late and could be thwarted by the cost of raising children.

A lack of reforms to tackle ageing in the region would come at a high cost, the bank said. Pension payments as a share of GDP could be as much as 12 percentage points higher by 2070.

Calling for "a comprehensive policy approach across the life cycle", it urged nations to build and invest in childcare, education, healthcare and pensions to offset the demographic time bomb.

Wealthy countries, such as South Korea and Singapore, need to battle the decline in their labour force by encouraging more women and immigrants to work. Countries with a larger proportion of young people, like Cambodia, must find them jobs and build pension systems that can be sustainable when ageing accelerates.

Meanwhile, the bulk of middle- income economies "will need to sustain high productivity growth and undertake structural reforms in social security, health and labour market policies", it added.

BLOOMBERG, AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on December 10, 2015, with the headline 'Rapidly ageing Asia 'faces tough choices''. Print Edition | Subscribe