Asia: Changing the World

Boecker

I

ASIA’S POTENTIAL AS A WORLD POWER

Demographic Dynamics of Asia

CARL HAUB

Demography is destiny. So stated the 19th-century French sociologist Auguste Comte. If that is so, Asia must certainly hold the key to the world’s economic future. In terms of the size of its population and growth, no other region looms as large. As a region, Asia is home to the world’s largest numbers of consumers and producers. It enjoys, and will continue to enjoy, a favorable ratio of workers to retirees and dependent children. Yet no single adjective can describe any one Asian country, as it is a collection of some of the most diverse nations on earth.

Asia has been the world’s largest region in terms of population throughout history and is virtually certain to remain so far into the future. Asia is home to 4 billion people - 6 out of 10 of the world’s inhabitants - and that figure is expected to rise to at least 5.3 billion by mid-century, 1.3 times what it is today. That increase is not as dramatic when compared to Africa’s, which is expected to more than double, rising from 0.9 billion inhabitants today to 2.0 billion by mid-century.¹ But its slower population increase is, in fact, a key element in Asia’s rise to political and economic influence on the global stage.

The world population explosion of the 20th century - and it truly was an explosion-was triggered by a rapid improvement in health conditions in developing countries that was not accompanied by a decrease in birth rates.² Simply put, death rates, particularly infant mortality rates, dropped far more quickly in developing countries following World War II than they ever had in developed countries due to the rapid importation of improved public health measures into the poorer nations. Population growth rates in developing countries rose to levels never before seen, even above 3 percent per year. Such rates will double a population in only 23 years. Never before in history had the world experienced this situation. If their governments did not comprehend the implication of such a growth rate, countries that were already living in poverty would almost certainly be doomed to remain in that state. In the second half of the 20th century, however, Asian countries did recognize the new dilemma and did react, while Africa largely did not.

It has been observed that, historically, countries tend to progress from a period of high birth and death rates to low ones as they become more urban, educated and industrial. Demographers refer to this process as demographic transition. Asia entered its transition decades ago, a key reason for its emergence as a global force today. In addition to lower population growth, an important result of demographic transition is an altered age structure, often expressed as the percentage of the population to be found in one of three categories: below the age of 15, between 15 and 64 (the working ages), and above 65.

Countries with high birth rates, such as an average of six or more children, are considered quite young, with 45 percent or more of their population below age 15. Under those circumstances, it can be difficult for a country to develop economically, as a constantly rising population places great pressure upon often meager national budgets. It can also indicate a country’s lack of concern over the ill effects of persistently rapid population growth.

The role of fertility

The key to Asia’s present and future demographic development lies in the total fertility rate, or TFR. The TFR is the average number of children a woman would have in her lifetime if the country’s overall birth rate were to remain constant. For example, there are about 27 million births per year in India, which equals a birth rate of 24 births per 1,000 inhabitants. At that rate, women in India would average about three births each in their lifetime, or a TFR of three. The TFR has the advantage of expressing fertility in terms of the number of children, or family size. ³

Related to the TFR is the concept of replacement level fertility. This occurs when couples average about two children, simply replacing themselves and not increasing the size of successive generations. If maintained for a long period, a TFR of about two will result in a population with zero growth. Some Asian countries are currently above replacement level, some quite close to it and some well below it. Europe is familiar with the last case, since its very low fertility rates have led to growing concerns about aging and declining populations.

Asia is different from the other large developing world regions, Africa and Latin America, in that the TFR in Asia shows the greatest range of variation, from 1.1 in South Korea and Taiwan to 6.8 in Afghanistan. Some of Asia’s most economically successful countries have very low TFRs. In addition to South Korea and Taiwan, the TFR in Singapore is 1.2; in Japan, it is 1.3; in China, 1.6; in Thailand, 1.7; and in Sri Lanka, 2.0. Countries with low or medium-level TFRs include Vietnam (2.1), Indonesia (2.4), Malaysia (2.6), India (2.9) and Bangladesh (3.0). TFRs are higher in the Philippines (3.4), Nepal (3.7) and Pakistan (4.6).⁴

As can be observed from the TFRs noted above, a country’s status as an emerging world economic power is not necessarily tied to the current level of its birth rate, no matter how important that may be to its future demographic experience. Countries with very low TFRs but with considerable economic influence-such as Japan, South Korea and Taiwan-now face serious societal aging. That implies a waning domestic market, a labor force whose seniority requires higher wage rates and a declining ratio of workers to retirees. These countries might therefore be termed the aging Asian tigers. In Vietnam, low birth rates have been dictated from above, yet the country is, at present, poorly prepared to realize its genuine economic potential due to low levels of education and the lack of a qualified workforce. Bangladesh, which has achieved a remarkable decline in its TFR despite an agrarian, poverty-stricken population and few natural resources, is many decades from being considered a global economic player. The TFR, then, while not itself a predictor of a country’s economic influence, should be watched closely, since it can help predict the future proportion of a country’s population in the productive working ages, a factor now popularly called the demographic dividend.

The sex ratio

Another issue that has grown in importance and must be mentioned is the abnormal sex ratio at birth in several major Asian countries. In countries where there is a strong preference for male births, couples may resort to the abortion of females following an ultrasound test, skewing the normal worldwide ratio of 105 male babies born per 100 females. The situation has grown quite serious in China,⁵ where there are now 119 male babies born for every 100 females, and in India,⁶ where the ratio is 114. In both China ⁷ and India⁸ the situation appears to be getting worse. In South Korea, the sex ratio at birth is 108, although the situation may be slowly improving.⁹ All three countries are making considerable efforts to stop the practice of aborting female fetuses, yet considerable damage to the normal gender structure has been done. Such unprecedented sex ratios are certain to result in some social disruption, such as a lack of brides. This may result in the importation of women from other countries or a partial exodus of males.

Population size

Although it clearly suggests a country’s potential as both a market and a producer, population size is not the only indicator of a country’s influence. Of Asia’s 3.9 billion people, just over 60 percent live in two countries, China and India, with 1.3 and 1.1 billion residents, respectively. Indonesia, with a population of 226 million, is the world’s fourth largest, ranking after the United States. Other large nations include Pakistan (166 million), Bangladesh (147 million), the Philippines (86 million), Vietnam (84 million), Thailand (65 million), Myanmar (51 million) and South Korea (49 million).¹⁰ Future economic and political development, however, is contingent upon many other factors, such as a country’s social conditions, political history, cultural and religious situation, and its regulations regarding foreign investment. Yet Asia’s sheer size alone will make it a player.

One rather stunning indicator of Asia’s population size is the simple fact that, at 62 million, just one age-sex group in India-males below the age of 5-is larger than the entire population of France.¹¹ Even if the proportion of people in India who live a more Western-style consumer lifestyle is relatively small, the potential size of such a market is quite large.

Demographic transition and dependency

The demographic key to Asia’s economic emergence is its changing age structure. As fertility falls and the proportion of a population’s youth declines, those in the working ages make up an increasingly larger share of the total. In Asia, 40 percent of the population was below the age of 15 in 1970. In 2007, that had fallen to 27 percent and will almost certainly continue to drop, to about 24 percent in 2020. From 1970 to 2007, the percentage of the population aged 65 and over grew only modestly, from 4.1 to 6.6 percent.¹² Thus, the nonworking age groups fell quite dramatically.

Analysis of such changes is often conducted in terms of measures such as dependency ratios, or the ratio of non-workers to workers and, perhaps more intuitively, workers to non-workers. The classic non-worker age groups are ages 0-14 and 65 and over, although few societies fit quite so neatly into those categories. In developed countries, for example, far fewer people aged 15-19 are in the labor force, and many retire before age 65. Such will undoubtedly be the case in developing countries as educational levels increase and pension systems mature. Still, these classic dependent age groups will be used here for discussion.

In Asia, the number of people of working age per 100 persons in the dependent ages rose from 126 in 1970 to 193 in 2007. That ratio is expected to increase to 207 by 2020. On the surface, Europe’s figures for the same three years compare favorably: 179, 217 and 194. It is when we look below the surface that the real significance emerges. In Europe, the age pyramid has been turning upside down for some time. The number of people in Europe in 2005 who were aged 40-44 was about 56 million; those aged 0-4 were but 37 million. In Asia, those same age groups were 259 and 357 million, respectively.¹³ It is this stark difference that defines Asia’s demographic dividend and the youthfulness of its labor force and market. Even with declining birth rates, Asia will maintain a population pyramid with a base that is at least as wide as the age groups above it. Thus, Asia will stay young.

In other words, Asia is aging, but only slowly. In 2005, the median age of Asia’s population was 27.7 years, and that is projected to rise to just 32.2 by 2020. Europe’s median age in 2005 was 39.0 and that is expected to increase to 43.1 in 2020. In Europe, moreover, the group aged 65 and over is likely to rise from 16.0 percent to 19.1 percent over the same time period.¹⁴

As a region, Asia stands at a remarkable point in its history. Only a few decades ago, Asian societies were largely agricultural and what might be called too young, burdened with the impossible task of delivering education to ever-growing numbers of young people while providing housing, food and health care to the general population. As population growth has slowed, these tasks have not only become more manageable, but it has been possible to increase the quality of services delivered. From a demographic standpoint, Asia has reached this stage, although some countries have arrived at it before others.

Focus: India

While Asian countries will become world economic contenders, as some already have, this will not happen automatically. India, the country most often mentioned in recent times as a rising power, must still contend with an undernourished, poorly educated society based mostly in villages, while upper middle class consumers remain an elite subgroup, largely confined to metropolitan areas. Its birth rate has come down, but not equally in all areas. Birth rate decline has been quite stubborn in many large, poorly educated northern states. Still, India has both the energy and imaginative leadership to involve a larger share of the population in its growing economy. The potential demographic dividend, moreover, is significant.

In 1970, India’s worker-to-non-worker ratio was but 127. By 2007, the country’s declining birth rate raised it to 173. In addition, if the birth rate continues its decrease, the ratio will rise to 200 or more. But the overall worker-to-nonworker ratio conceals the fact the India’s working age population will itself be a young one, as shown by the country’s median age. That is expected to rise from a young 24 years at present to only 29 by 2020. Part of the reason India will stay young is its higher birth rate in the past and the fact that the proportion in the older ages, 65 and over, will likely rise from about 5.5 percent today to just 7 percent in 2020.¹⁵

Focus: China

China, as is well known, has had a much lower birth rate than India due to its stringent national population policy. Today, the TFR in China is a low 1.6. That would lead one to suspect that China is likely to confront an aging situation similar to what can be seen in European countries. While that may well prove true in the more distant future, China’s present and nearer-term prospects point to its own demographic dividend, also due to a more recent history of higher fertility. In 1970, when the country’s TFR was about 5.5 children per woman, the ratio of workers to non-workers was 152. Following the dramatic drop in fertility, that stands at about 250 today. It is still projected to be quite high in 2020, at about 230.¹⁶ With that, however, it will have an older working-age population than will India. China’s median age of 32.6 in 2005 is expected to rise to 37.9 in 2020, a consequence of its very low current birth rate. Similar conclusions can be drawn about many additional Asian countries whose development today is at a medium level or somewhat below it. Virtually all countries are in transition demographically, either having completed their transformation or continuing to do so. Thus, the stage is set.

Looking again at China and India, the countries with the largest number of potential consumers and producers, it should be noted that while population figures are a fundamental indicator of a country’s potential, they are only that. The speed of economic emergence will depend on many factors. Even today, 44 percent of China’s employment¹⁷ and 57 percent of India’s¹⁸ are still generated in the agricultural sector, and often only at a subsistence level.

Yet regardless of its speed or ultimate extent, Asia’s influence will grow in coming years. The size and youthfulness of its population ensures this. In the future, Asia’s power will be felt across both the political and economic spectrums, thanks to a host of factors ranging from its market size to its production capabilities to its influence in global organizations.

Notes

1 Population Reference Bureau, World Population Data Sheet (Washington D. C.: 2006).

2 The designation of developed and developing countries used here follows United Nations practice. The developed countries comprise Europe (including Russia), North America, Australia, Japan and New Zealand. The developing countries comprise the remaining countries of Africa, Asia, Latin America and the Caribbean and