Population Aging Shadows the ASEAN+3 and Indonesian Economies

Don't let population aging only be "read" as numbers or economic values, but also with your heart.

KOMPAS/FERGANATA INDRA RIATMOKO

Elderly residents were measured their waist circumference when participating in the Elderly Integrated Service Post (Posyandu Lansia) activities at the Tipes Sub-district office in Serengan, Surakarta on Tuesday (9/1/2024).

Currently the ASEAN+3 region, including Indonesia, is at the cusp of significant demographic change. The productive population or working age population is slowly decreasing, thereby slowing down the rate of economic growth.

ASEAN+3 consists of 10 countries in Southeast Asia, including Indonesia, plus China and Hong Kong as well as Japan and South Korea. Japan has experienced an aging population, while China is starting to experience it.

Next up will be Thailand. Meanwhile, Cambodia, Indonesia, Laos, and the Philippines are in the early transition with high birth rates, although they have begun to decline.

This emerged in a report by the ASEAN+3 Macroeconomic Research Institute (AMRO) which was released in Singapore, Monday (8/4/2024). The annual report is entitled "ASEAN+3 Regional Economic Outlook 2024: Navigating Tomorrow".

AMRO said that the large demographic dividend – arising from the rapid growth of the working age population – has been very important for ASEAN+3 economic growth in recent decades. However, this progress is slowly diminishing because almost all member countries are experiencing population aging although at different speeds.

SUMBER: AMRO

Indicators of population aging in a number of countries in the ASEAN+3 region.

Japan, China, and South Korea are considered to be in the final stages of transition. This phase reflects the long-term decline in the working-age population and the rapid increase in the elderly population dependency ratio. The elderly population dependency ratio shows the comparison of the number of elderly residents to the number of productive age population.

AMRO noted that the peak of Japan's population and working-age population ended in 2009 and 1991, respectively. The number of elderly people aged 65 or older in 2021 has already reached 29.8 percent of the total population, with an elderly dependency ratio of 51.

In China, the population and working-age population have peaked in 2021 and 2009, respectively. The number of elderly citizens as of 2021 has reached 19.6 percent of the total population with an elderly dependency ratio of 19. By 2050, the elderly dependency ratio is expected to increase to 32.5.

As for Thailand, its population is set to peak in 2029. The country's demographic bonus, known as the "Land of the White Elephant," has already ended since 2012. As of 2021, the population aged over 65 has reached 14.5 percent of the total population, with a dependency ratio of 20.8 for the elderly. In 2050, the dependency ratio for the elderly is expected to increase to 34.6.

Also read: Shrinking Population Trends and World Anxiety

Rapid aging triggers fiscal concerns amidst priority spending needs such as food, education, and infrastructure development. This is because there will be an increase in healthcare service costs, insurance coverage, and pension obligations.

AP PHOTO/NG HAN GUAN

An elderly resident tours the Temple of Heaven Park in Beijing, China, on June 5, 2015.

AMRO Group Head and Principle Economist Allen Ng said that population aging is one of the three major secular trends in the ASEAN+3 region. Two other secular trends are the reconfiguration of global trade and increasingly rapid technological change.

"The aging population presents important challenges and risks for the ASEAN+3 region. However, it also creates new sources of growth and increased productivity," he said in a press release.

Therefore, efforts to balance risks and opportunities will help ASEAN+3 secure sustainable, resilient, and inclusive long-term growth. One of them is through the utilization of technology and innovative breakthroughs in productive sectors that support a country's economy.

Not only that, according to Allen, the ASEAN+3 region is also facing the challenge of a population that wants to live longer and healthier lives. "Adapting to live longer and enabling our communities to age productively will be crucial for the future of this region," he said.

KOMPAS/LUKI AULIA

The problem of air pollution is not new. The community's condition threatened by air pollution has long been happening. There is a lot of research evidence indicating the threat of air pollution's impacts. However, this fact has not been able to drive significant efforts in controlling air pollution. As a result, residents are increasingly suffering from living in the midst of air pollution. Mirza Amanda (second from the left) is one of the elderly caretakers at Panti Jompo Ukima Sakuraso, Tokyo, Japan, who already holds an official license or certification from the Japanese Government. The Japanese Ministry of Foreign Affairs notes that as of March 2016, within the framework of the Economic Partnership Agreement (EPA), there were 109 Indonesian citizens who had passed the national nursing profession exam. In addition, there were also 262 Indonesian citizens who passed the national elderly caretaker profession exam.

Aging in Indonesia

So, what about Indonesia? AMRO stated that Indonesia's population peak will occur in 2060, while the demographic bonus peak will happen in 2029. As of 2021, the average growth of the working-age population is 1.45 percent, and the elderly population accounts for 6.8 percent of the total population.

Over the course of a decade from 2012 to 2022, the dependency ratio of the elderly in Indonesia has increased from 12.01 to 16.01. This means that in 2022, 100 productive-aged citizens will support 16 elderly individuals. In other words, one elderly person is now supported by six productive-aged citizens instead of the previous eight.

Adapting to live longer and enabling our community to age productively will be crucial for the future of this region.

The Demography Institute of the Faculty of Economics and Business at the University of Indonesia states that by 2045, the number of elderly people in Indonesia will increase to 19.9 percent of the total population. The ability of the productive population to support one elderly person will also decrease to five people.

Acting Deputy for Population and Employment at the Ministry of National Development Planning/National Development Planning Agency, Maliki, stated that Indonesia is predicted to experience population aging more quickly than Japan. Indonesia took around 21 years to achieve an increase from 7 percent of the population 65 years and over to 14 percent. Meanwhile, Japan needs around 25 years (Kompas, 6/10/2023).

Also read: Maximizing the Potential of the Second Demographic Bonus

For Indonesia, the aging of the world population, including in the ASEAN+3 region, as well as domestically, will also have an impact on economic growth. The aging of the population in several of Indonesia's major trading partner countries, such as China for example, is beginning to have some influence on the country's economic growth.

Many people say that China's era of miracles is starting to recede. This has the potential to affect Indonesia's export performance in the future.

The Vice President for Industry and Regional Research of PT Bank Mandiri (Persero) Tbk, Dendi Ramdani, believes that the Chinese economy is currently at a saturation point. Several indicators include a lack of significant growth in infrastructure development, many investors relocating their industries from China, and a property crisis. The purchasing power of the population is also starting to decline due to an aging population.

The era of high economic growth in China is expected to come to an end. However, this doesn't mean that China's economy will continue to decline in the future. China's economy will still grow, but not as high as in previous years.

"Like Japan, after decades of economic development and experiencing a demographic bonus, China will enter the era of a steady-state economy. "The country's economy is in a stationary state or not changing much," he said.

Also read: The Era of the Chinese Miracle is Estimated to be Over, What is the Fate of the Republic of Indonesia?

In the country, aging of the population will increase the fiscal burden on the state and the expenses of the productive age population. In addition, population aging will also spread to several other sectors. One of the most crucial sectors is food.

Based on the results of the 2023 Agricultural Census Phase I, the Central Statistics Agency reported that the proportion of individual farmers aged 55-64 years managing agricultural businesses increased from 20.01 percent in 2013 to 23.3 percent in 2023. The proportion of farmers aged 65 years and above also increased from 12.75 percent to 16.15 percent in the last ten years.

Also read: Farmers are Increasingly Aging and Experiencing Guremization

KOMPAS/AGUS SUSANTO

A portrait of farmers cultivating the Ipoh field in Wargajaya Village, Sukamakmur District, Bogor Regency, West Java, taken on Wednesday (11/5/2022). One's old age is endured alone while continuing to work in the field.

Japan has faced a similar issue and is seeking to overcome it through technological innovation. As the problem begins to be addressed, Japan is experiencing a shortage of hospital and nursing home workers. As time goes on, the shortage of workers is spreading to the construction sector, shipping services, public transportation, and teaching positions in various educational levels.

However, it is important not to view the aging population solely as a number or economic value. The aging population also needs to be addressed with empathy. The sector for economic growth outside of household consumption needs to be considered and developed from now on, especially towards Indonesia's Emas 2045.

Currently, Indonesia has A National Strategy for Aging which is contained in Presidential Regulation Number 88 of 2021. The national strategy includes five pillars.

The five pillars are the improvement of social protection, income and individual capacity guarantees; the improvement of health status and quality of life for the elderly; the development of communities and elderly-friendly environments; the strengthening of institutions implementing the elderly program; and the respect, protection, and fulfillment of the rights of the elderly. This strategy needs to be optimally implemented in the new leadership era to come.

The national strategy for aging is expected to continue to be optimized by the incoming government, even adjusted to the needs of the times. Once again, do not let the aging population be merely "read" as mere numbers or economic values, but also with a heart.

Also read: Indonesia's Challenges Facing Population Aging