Global Demographic Changes and the Future of Indonesia
If it is able to formulate the right strategy to take advantage of opportunities from global demographic changes, Indonesia will become a developed country by 2045.
The Ministry of National Development Planning/Bappenas is currently preparing the 2025-2045 National Long-Term Development Plan.
This document is very strategic because it serves as the basis for the outlining of the vision/mission of Indonesia's future for presidential/vice presidential candidates in the 2024 election.
The future is certainly not just a continuation of the past. The world is constantly changing, becoming more complex and full of uncertainty. A strategic foresight approach is needed by understanding environmental changes that may occur in the future. One of the future strategic issues as the main basis for this National Long-Term Development Plan (RPJPN) is global demographic changes, which refer to changes in the characteristics of the world's population as a consequence of births, deaths and migration.
It is clear that two of the four forces are demographic changes, namely urbanization and changes in the age structure of the population.
Many experts look to demographic changes in looking into the future. Richard Dobbs et al (2015) in his book, No Ordinary Disruption, explains, the world is experiencing global disruption due to the influence of four major forces, namely urbanization, globalization, technology and the age structure of the population.
These four forces are producing significant changes in the way production, distribution and transactions in the market affect the geo-economy of the future. It is clear that two of the four forces are demographic changes, namely urbanization and changes in the age structure of the population.
Global demographic changes
George Friedman in his book The Next 100 Years(2010) believes that world demographic changes throughout the 21st century have a great influence on the future. A country that is aging and declining in population will experience a decrease in its power and influence in the world, changing the geopolitical map. Klaus Schwab, founder and executive chair of the World Economic Forum, noted that changes in the age structure of the population have an impact on the demand for goods and services, productivity and fiscal pressure due to future health and pension financing needs.
The world's population reached 8 billion people in November 2022. The African continent has the highest population growth rate at 2.5 percent, and Europe the lowest at only around 0.01 percent. Asia's population growth is less than 1 percent/year. The population of Africa is expected to double by 2050, and thereafter slowly but surely, catching up to even surpassing the population of Asia. Africa will become the world's most populous continent. The United Nations noted a decline in the global birth rate. The number of children per woman (total fertility rate/TFR) continues to fall from around 3.7 children (1980) to 2.4 children (2022). Contrary to global trends, women in Africa have an average of four children. World population growth will slow down, except in Africa.
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Southeast Asia tends to follow global trends with low birth rates. Vietnam, Malaysia, Thailand, Brunei Darussalam and Singapore have TFRs below two children per woman. The number of residents has the potential to decrease in the future. Indonesia, Myanmar, Cambodia and Laos are already approaching the replacement level of 2.1 children per woman; their population will grow steadily at low rates in the next 20 years.
The world's population continues to be aging, with the number of lansia (elderly people) over 60 years reaching 1.4 billion people, it is estimated that this will continue to increase to 2.1 billion people (2050). The University of Oxford recorded an increase in the median age, from 20 years (1970) to 30 years (2022).
This means that 50 percent of the global population is currently over 30 years old. The median age is commonly used as a statistical measure of population that represents the middle age of the population. Monaco has the median age of the world's oldest population (53 years), followed by Japan (48 years) and Italy (47 years).
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European countries, such as Germany, the Netherlands and Portugal, dominate the oldest median age. In contrast, Niger in West Africa is the country with the youngest median age in the world, which is 15 years. Of the 20 countries with the youngest median age, 19 are in Africa, with Afghanistan being the only country outside Africa.
Urbanization (an increase in the proportion of urban population) has increased dramatically.
The World Bank notes that 56 percent of the world's population lives in urban areas (2022), and will continue to increase to 70 percent in 2050. Cities are the world's main economic activity centers with a contribution of 80 percent of the global economy.
McKinsey Global Institute estimates that half of the world's economic growth during 2010 to 2025 will be contributed by only 440 cities in developing countries. The number of consuming classes, especially in cities, has increased sharply from 36 percent (2010) to 53 percent (2025) of the world's population. The consuming class is the population with a high purchasing power and an income of above 10 United States dollars per day (considering purchasing power parity).
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Opportunity for Indonesia
Changes in the age structure of the world's population have an impact on global production and consumption patterns. The industrial revolution will accelerate as a response to the problem of labor scarcity in developed countries. The UN projects that the number of people of productive age (15-64 years) in China (one of the centers of world manufacturing industry activity) will drop significantly from 1 billion (2010) to 849 million people (2050).
Production activities will shift to developing countries that have a large workforce. Developed countries may open the door for immigrants to meet the needs of workers.
Indonesia is still in a demographic bonus period with an abundance of workers so that it can fill this opportunity. Although many types of jobs have disappeared as a result of the fourth industrial revolution, some types of jobs will remain. Indonesia could be an option for relocating the global manufacturing industry and taking advantage of it to get out of the middle income trap (MIT).
However, Indonesia still faces productivity problems. One of them is due to the gap of skilled workers. The number of highly skilled workers is limited and the quality/skills are not identical with the level of education. The US is having a hard time finding quality workers because only 15 percent of college graduates are majoring in STEM (science, technology, engineering and mathematics) fields. Meanwhile, in China, 42 percent of graduates are STEM graduates, supporting the development of the manufacturing industry.
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If you want to be the choice of industrial relocation, education in Indonesia must produce a lot of quality graduates in the STEM field. Education is not just about improving an individual's social status, but also fulfilling the need for skills in an era of disruption, adaptive to technological developments and future industrial advances. How can we have many STEM graduates if the capacity of universities in this field is small? Educational performance is not only the education level of the population, but also the quality of education.
For the next strategy, we must expand global economic cooperation partners. Africa will be the most populous continent in the world and will be dominated by young people. The population concentration is in South Asia. Of the 4.7 billion people in Asia, nearly 2 billion people live in South Asia (2022). Africa and South Asia will experience a growing consuming class.
Regarding the trend of urbanization there is no choice; we must build highly competitive and efficient cities for industrial locations. Mass transportation systems and urban utility networks must be developed to support efficient productivity and mobility. The development of urban infrastructures with smart city technology must consider the development of digital economic ecosystems and urban innovation.
If it is able to formulate the right strategy to take advantage of opportunities from global demographic changes, Indonesia will become a developed country by 2045.
Sonny Harry B Harmadi.
Sonny Harry B Harmadi, Chairman of the Indonesian Population Coalition, Lecturer in Economics and Demography at ITS
This article was translated by Kurnia Siswo.
