MEET THE NEW OLD MAN OF ASIA ... THAILAND
Nuchnart Sakvisetchaikul got married four years ago in Bangkok at the age of 33. She has one child and doesn’t want more, an increasingly common trend among a population that is rapidly growing old.
“I want my kid to have the best I can give,” said Nuchnart, an insurance company executive whose mother looks after her three-year-old daughter during the day. “My work is demanding. It’s good that I have only one kid.”
Women marrying later and having fewer children is one reason why Thailand will join the ranks of its northern peers, whose labour forces are shrinking, just as the number of working-age people in other Southeast Asian countries rises in coming decades. The decline will constrain Thailand’s long-term growth potential, said analysts at Credit Suisse Group.
Almost a third of Thailand’s population will be over 60 by 2050, compared with less than one sixth in the Philippines and one fifth in Malaysia, according to the UN. That puts the country at a disadvantage just as rising costs in China are pushing manufacturers to find new bases in Asean.
“Thailand is emerging as the old man of Asean,” said Chua Hak Bin, a Singapore-based economist at Bank of America. “Demographics are useful predictors of real gross domestic product growth” and Japan’s experience suggests an aging population will weigh on expansion and property, he said.
Thailand’s working-age population is forecast to peak in 2017, a year after South Korea, according to estimates by Bank of America Merrill Lynch based on UN data. Indonesia won’t get there until 2058 and the Philippines not until 2085. In China, which adopted a one-child policy in the 1980s, the decline began in 2012.
Thailand’s pool of workers is shrinking as it tries to regain its position as a regional powerhouse for manufacturing and exports after floods inundated its industrial heartland in 2011 and years of political impasse ended in a military coup last year.
Exports fell for a second straight year in 2014, the first back-to-back decline in almost two decades, while Vietnam and the Philippines posted strong gains. Thailand is forecast to have the slowest growth in the region this year after Singapore, Southeast Asia’s only developed economy.
Bank of Thailand Governor Prasarn Trairatvorakul likened the country to a patient with flu and arthritis — the flu being the export slowdown caught from the global economy and the arthritis being the country’s own structural problems.
The country needs to find a cure fast, “before it’s too late”, he said in a speech on March 13. Thailand will be an ageing society within 10 years and “this will make it even more difficult to cure our economic diseases”.
It wasn’t always like this: Thailand once led the charge in Southeast Asia’s development, going from a low-income country to an upper middle-income one in less than a generation.
The government had encouraged large families, setting up a marriage promotion bureau in 1942 and holding contests to reward women with the most children. Participants generally had 15 children or more, a research paper showed.
Government policy flipped in the 1970s with the slogan “the more children, the poorer” as the country turned its attention to raising the standard of living.
As more women were educated and began working, they had fewer children. The annual population growth rate for the 2010-15 period is estimated at 0.3%, the lowest among the 10 Asean nations, UN data showed. The fertility rate in the same period is 1.4, compared with 3.1 in the Philippines and 2.4 in Indonesia.
“Our key problem is how we will shape our future and drive the economy with this demographic structure,” said Arkhom Termpittayapaisith, head of the National Economic and Social Development Board, which is preparing a population plan for the next 20 years. “We need to make the public realise the seriousness of the impact and how to prepare for it.”
The government’s efforts to increase the fertility rate include encouraging married couples to have children and giving tax benefits and child-related perks. Proposals include raising the retirement age, encouraging mothers to join the workforce and revising rules for foreign workers, an NESDB draft showed.
Thailand’s challenge is the opposite of Indonesia, where a birth-control programme has been revived after decades to prevent a burgeoning population from overwhelming its services. In the Philippines, President Benigno Aquino took on the Catholic Church to provide free contraceptives to the poor as unemployment rises.
An alternative for Thailand is to increase immigration. Human Rights Watch estimates there already may be about 3 million migrant workers from Laos, Cambodia and Myanmar in construction, agriculture and seafood processing, most of them undocumented.
Thailand will need at least 3.3 million workers over the next three years in industries such as electronics and autos, the Office of Industrial Economics estimates.
The country should move to less labour-intensive industries, a shift that’s been hampered because the country is “the most unstable politically” in the region, said Santitarn Sathirathai, a Singapore-based economist at Credit Suisse. “The demographic challenge hasn’t been a priority for the government, and has become an issue probably faster than they anticipated.”
Thailand’s demographic challenges, low investment and limited innovation may have reduced the trend GDP growth rate to a range of 3.5% to 4%, from 4% to 5%, Credit Suisse said.
“We’re heading toward growing at a developed-market rate while we’re still not a developed market,” Santitarn said.