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How can rapidly aging East Asia sustain its economic dynamism?

Axel van Trotsenburg's picture
Panos Agency


In the last three decades, East Asia has reaped the demographic dividend. An abundant and growing labor force powered almost one-third of the region’s per capita income growth from the 1960s to the 1990s, making it the world’s growth engine.
 
Now, East Asia is facing the challenges posed by another demographic trend: rapid aging. A new World Bank report finds that East Asia and Pacific is aging faster – and on a larger scale – than any other region in history.
 
More than 211 million people ages 65 and over live in East Asia and Pacific, accounting for 36 percent of the global population in that age group. By 2040, East Asia’s older population will more than double, to 479 million, and the working-age population will shrink by 10 percent to 15 percent in countries such as Korea, China, and Thailand.
 
Across the region, as the working-age population declines and the pace of aging accelerates, policy makers are concerned with the potential impact of aging on economic growth and rising demand for public spending on health, pension and long-term care systems.
 
As the region ages rapidly, how do governments, employers and households ensure that hard-working people live healthy and productive lives in old age? How do societies in East Asia and Pacific promote productive aging and become more inclusive?
 

Taxes and budget 2016: On the road to a developed country

Faris Hadad-Zervos's picture
This article first appeared in The Edge Malaysia Weekly

MALAYSIA has travelled far on the road to economic growth and shared prosperity. Using its natural resources, the country not only eliminated absolute poverty from 49% in 1970 to less than 1% in 2014, but also lifted the incomes of households at the bottom 40% of the income bracket. The Gini Coefficient — a measure of income inequality in an economy — dropped from 55.7 to 42.1 over the same period, implying that gaps in incomes were narrowing. This road is now leading towards a developed country, with a vibrant and growing middle class where aspirational households have access to relevant education and training, higher income opportunities, more savings for retirement and a safety net to protect the vulnerable from shocks.

Underlying this journey to developed country status is a series of structural reforms that have formed the bulk of the national development plans, most recently the 11th Malaysia Plan. The quest moving forward is therefore to sustain and finance this process. The 11th Malaysia Plan is budgeted to cost RM246 million between now and 2020. Taxation choices will matter a great deal for Malaysia’s prospects in this journey, more so in an environment of low or volatile oil and commodity prices and a global and regional economic slowdown.

We must prepare now for another major El Niño

Axel van Trotsenburg's picture
El Niño is back and may be stronger than ever.
 
A wooden boat is seen stranded on the dry cracked riverbed of the Dawuhan Dam during drought season in Madiun, Indonesia's East Java province.  October 28, 2015 © ANTARA FOTO/Reuters/Corbis



The latest cyclical warming of Pacific Ocean waters, first observed centuries ago and formally tracked since 1950, began earlier this year and already has been felt across Asia, Africa and Latin America.

Weather experts predict this El Niño will continue into the spring of 2016 and could wreak havoc, because climate change is likely to exacerbate the intensity of storms and flooding in some places and of severe drought and water shortages in others.

El Niño’s impacts are global, with heavy rain and severe flooding expected in South America and scorching weather and drought conditions likely in the Horn of Africa region.

East Asia’s challenge: ensuring that growth helps poor

Axel van Trotsenburg's picture

Unprecedented economic growth in the last three decades propelled East Asia into an economic powerhouse responsible for a quarter of the world’s economy.

Hundreds of millions of people across the region, including in China, Indonesia, Malaysia, Thailand and Vietnam, lifted themselves out of extreme poverty and enjoyed greater prosperity, largely because of more labor-intensive and inclusive growth.

The success didn’t come without challenges. As of last year, 100 million people in East Asia still live on $1.25 a day. About 260 million still live on $2 a day or less, and they could fall back into poverty if the global economy takes a turn for the worse or if they face health, food and other shocks at home. Their uncertain future shows the increasing inequality of East Asia’s galloping growth.

Financial inclusion in Asia – time for disruption?

Nataliya Mylenko's picture



More than half of the world’s population lives in Asia and its robust growth is supporting the world economy.  After weathering well the 2008 crisis Asia is now in the spotlight with currencies depreciating and capital markets in retreat.  One widely voiced concern is rapid expansion of credit in the past decade fueled by abundant liquidity.  Globally, and in Asia, regulatory response to the 2008 crisis has been to strengthen financial regulation and de-risk financial intermediation.  Yet the reality of credit markets in most Asian economies is quite different from that in high income economies.  While domestic credit by financial sector represented on average over 100% of GDP for high income OECD countries, emerging Asia’s average in 2014 stood at 60%. The differences across countries are substantial in this diverse region, but in two thirds of Asian economies domestic credit is less than 60% of GDP.  The reality for most economies in Asia is that of limited and often inefficient financial markets which do not serve fully their growth needs. Low level of financial inclusion is a major contributing factor and a major challenge.

Part of the #Youthbiz movement? Share your story!

Valerie Lorena's picture

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A boat trip from Port Elizabeth to Kingstown, in the Caribbean country of Saint Vincent and the Grenadines, is a one-hour trip that locals take several times a day. It was during one of these journeys that the boat of Kamara Jerome, a young Vincentian fisherman, ran out of gas six miles from Bequia City in what is termed locally as the "Bequia Channel." While waiting for help with strong wind gusts and the sun on his head, the idea of developing a boat that would run with wind and solar energy was born. Soon after, the idea became a prototype; a boat using green technology was on the water making 20-year-old Jerome a winner of international innovation competitions and a role model to other Caribbean youth. 
 
In Mexico, young engineer Daniel Gomez runs a multimillion bio-diesel company originally conceived as a research project for his high school chemistry class. Gomez and his partners - Guillermo Colunga, Antonio Lopez, and Mauricio Pareja - founded SOLBEN (Solutions in bio-energy in Spanish) in their early twenties. 
 
Although Daniel and Kamara have different educational backgrounds, they do share one important skill, the ability to identify a problem, develop an innovative solution, and take it to the market. In other words, being an entrepreneur, an alternative to be economically active, that seems to work and not only for a few.

Financial inclusion: Stepping-stone to prosperity

Sri Mulyani Indrawati's picture

In Pakistan, Salma Riaz, right, shows Saba Bibi how to use her new cell phone to receive payments. © Muzammil Pasha/World BankTwo and a half billion people in the world do not have access to formal financial services. This includes 80% of the poor — those who live on less than $2 a day. Small businesses are similarly disadvantaged: As many as 200 million say they lack the financing they need to thrive.

This is why we at the World Bank want men and women around the world to have access to a bank account or a device, such as a cell phone, that will let them store money and send and receive payments. This is a basic building block for people to manage their financial lives.

Why is this so important? Financial inclusion helps lift people out of poverty and can help speed economic development. It can draw more women into the mainstream of economic activity, harnessing their contributions to society. And it will help governments provide more efficient delivery of services to their people by streamlining transfers and cutting administrative costs.

A step out of poverty

Studies show that access to the financial system can reduce income inequality, boost job creation, and make people less vulnerable to unexpected losses of income. People who are "unbanked" find it harder to save, plan for the future, start a business, or recover from a crisis.

Being able to save, make non-cash payments, send or receive remittances, get credit, or get insurance can be instrumental in raising living standards and helping businesses prosper. It helps people to invest more in education or health care.

Now is the time to strengthen disaster risk reduction in East Asia and the Pacific

Axel van Trotsenburg's picture
In PDF: Korean | Khmer

Every time I learn of another natural disaster – the people killed and injured, homes destroyed, livelihoods lost – I know we must act to reduce the tragic impact instead of waiting for the next disaster strikes.

We have that chance with this year’s World Conference on Disaster Risk Reduction in Sendai, which seeks to finalize the successor to the Hyogo Framework for Action (HFA2) that guides policymakers and international stakeholders in managing disaster risk. The conference is an opportunity to set new milestones in disaster risk reduction and fighting poverty.

The cost of natural disasters already is high – 2.5 million people and $4 trillion lost over the past 30 years with a corresponding blow to development efforts.

In Asia, rapid urbanization combined with poor planning dramatically increases the exposure of cities, particularly those along densely populated coasts and river basins. Typhoon Haiyan, which killed more than 7,350 people in the Philippines in 2013, directly contributed to a 1.2 percent rise in poverty.
 

Despite expectations, cities in East Asia are becoming denser

Chandan Deuskar's picture

 
When we think of urban expansion in the 21st century, we often think of ‘sprawl’, a term that calls to mind low-density, car-oriented suburban growth, perhaps made up of single-family homes. Past studies have suggested that historically, cities around the world are becoming less dense as they grow, which has prompted worries about the environmental impacts of excess land consumption and automobile dependency. A widely cited rule of thumb is that as the population of a city doubles, its built area triples. But our new study on urban expansion in East Asia has yielded some surprising findings that are making us rethink this assumption of declining urban densities everywhere.

How to narrow the gap between the rich and poor in Malaysia?

Frederico Gil Sander's picture

If you could make one New Year’s wish for your country, what would it be?

For many Malaysians, Prime Minister Najib Razak’s wish for “a safer, more prosperous, and more equal society” likely resonated with their hopes for 2015.

Malaysians appear to be increasingly concerned about income inequality. According to a 2014 Pew Global survey, 77% of Malaysians think that the gap between the rich and poor is a big problem. The government has acknowledged that inequality remains high, and that tackling these disparities will be Malaysia’s “biggest challenge” in becoming a high-income nation.

How can Malaysia narrow the gap between the rich and poor? Global experience suggests two possible levers to achieve a more equitable income distribution.


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