Malaysia Dateline

Malaysia is (fast) becoming an aging society

PHAR KIM BENG

Something serious is happening in Malaysia, and Northeast Asia. Yet, no one is talking about it actively. In fact, the numbers are staring at our face. Between 1990-2020, the size of the Malaysian population was added by 80 per cent.

But in the same period, the number of people who has aged has also increased by a whopping 210 per cent too (Source: Click).

By 2050, 23.5 per cent of the total population of Malaysia will be above 65 years of age. (Source: Click).

By then Malaysia would have been an aged society. But Malaysia could be there even sooner. By 2030, 15 per cent of Malaysian population would be above 60 years of age. This is a mere ten years away, when Malaysia is still fighting Coronavirus, a problem that will widen its fiscal deficit to approximately 6 per cent next year.

The problem with fiscal deficit is that it may become a permanent trend, where the government spending of Malaysia, will always exceed its revenues collected from taxes and other incomes, such as Petronas.

If fiscal deficit continues indefinitely, Malaysian currency will be perennially weak, even as its population gets older and older.

Ironically, China, Japan and South Korea are aging in manners not unlike Malaysia too. But it is good to understand China first, since Malaysian policy makers often pin a lot of hope on gaining from its seeming economic prowess. True, China is an economic juggernaut. But all that gold is not glitter.

As things are, China is getting old too, and this is fast happening. According to the United Nations (UN), it will take China just 20 years for the proportion of the elderly population to double from 10% to 20% (between 2017-2037). The next closest is Japan where it took 23 years.

According to Kenneth Rapoza, writing in the Forbes: “By comparison, it took 61 years in Germany and 64 years in Sweden (to reach the above numbers).” Indeed, it took France 115 years to become an aged society, whereas Malaysia will experience it in 24 years (Source: Click).

Further more, Rapoza added “China’s dependency ratio for retirees — those aged 65 or older divided by total working population — as at 2015 was 14%.” (Source: Click).

But Rapoza added that the “UN estimates this number in China, could rise as high as 44% by 2050 with the number of those over 65 rising from approximately 100 million in 2005 to approximately 330 million in 2050.”

Thus, Malaysia should be careful not to assume that China can rise perennially. Like Malaysia, it can grow old too. Why ?

An aging society is one where up to seven per cent of its population is above the age of 65; whereas an aged society is 15 per cent above this age range. Currently, Malaysia is first moving to an aging society in 2030, then an aged society in 2040; tracking the trends in China, Japan and South Korea completely.

Economists, such as Ruchir Sharma, and many others, have noted that when societies begin to age, before they become aged, their levels of economic growth are likely to plateau first. Is it any wonder, thus, why Malaysia is trapped in the “Middle Income Trap ?” admitted by the Khazanah Institute.

Time, therefore, is of the essence in solving the gargantuan problems of Malaysia, given the size, and speed, of this problem confronting the country together with Northeast Asia.

In fact, based on the statistics of 1990-2020 in Malaysia, those above the age of 65, in other words, has increased at almost three times the rate of the youth in Malaysia. (Source: Click).

Invariably, learning from Japan is not an option but a strategic necessity. Not just for Malaysia but China too. Yes China has to learn from Japan.

Between 2019-2025, for example, Japan is estimated to be in need of 500,000 skilled and semi skilled workers a year. Therefore, on December 6 2018, despite heavy contestation in the Lower House of the Japanese parliament, Japan has changed its immigration policy to welcome more workers to work in some 14 sectors of its economy.

The labor shortage in Japan, which is caused by the aging effects, with which Malaysia is facing too, will continue to confront who ever is in Putrajaya in 2030 and 2050 respectively; not unlike China and South Korea.

Therefore, it is important to learn from Japan on how it is switching to robotics (Source: http://fortune.com/2016/02/01/robot-farm-lettuce-japan-2017/).

To be sure, even before UN has identified the aging in Japan, the country has long passed the stage of being an aged society defined by the UN. Indeed, by 2045, its total population will further shrink from 130 million to 90 million people.

Research has further shown that in 2016, the average age of Japanese farmers was already at 66 years of age (Source: Click).

But Japanese agriculture and aging industries have increasingly used robotics and mechanization to make up for the short fall of labor for now, thus avoiding the full brunt of the aging effects. The top four Japanese fishing companies are:

1. Maruha Nichiro
2. Nihon Suisan
3. Toyo Suisan
4. Kyokuyo

Each of them are doing well, and will continue to do well with strong support from the Japanese government. One hopes that if China has a strong fishing industry, it will not begin to encroach on the Exclusive Economic Zones of other neighboring countries too, especially in East and South China Sea. Otherwise, this will be a perennial problem, that can negatively disrupt the diplomatic atmosphere in the region, making it more war-like, and less peaceful.

That being said, nifty solutions are there to feed the people, even when the population gets older and older.
Aquaponics, for example, can produce three times higher than the yield of natural methods of farming in Japan. A green house that uses robotics, and an automatic system of water sprinkler, can produce 30,000-50,000 tonnes of cabbage a day as opposed to 21,000 tonnes a day with sheer human labor (Source: Click).

If Malaysia and China do want to work closely together, both countries would have to accept the fact that they need to learn from the aging process in Japan first. Barring any successful adaptation of these lessons, both countries, not excluding South Korea, will be overwhelmed by their negative impacts, leading to wild contestation in the seas.

Learning from Japan, especially in the fishery and agriculture sector is especially important for another reason. Malaysia’s contribution of agriculture to the Gross Domestic Product (GDP) of the country, has always remained between 8-11 per cent between 1957-2020. Japan has faced the same dilemma before, and overcome it.

Agriculture in Malaysia is therefore coming from a low base. It merely contributes close to RM 3.5 billion to the GDP every year. But this is also how and why the agricultural economy can grow further, according to the Ministry of Agriculture and Agro-Based Industry. (Source: Click). By using methods already tried and tested in Japan, if not other countries in the Organization of Economic Cooperation and Development (OECD), almost all of which are facing the process of aging too.

As things stand, what one needs is tenacity, coued with a concerted effort of modernization and mechanization, all of which are pioneered by Japan. China can mechanize too. But can Malaysia succeed ?

Such a question depends on whether Malaysia is willing to learn from Japan first, followed by a careful understanding of how China is adapting itself to an aging and aged society too.

The sooner the Ministry of Agriculture and Agro-Based Industry learns from Japan, for example, including Japan’s ruminant industry and livestock, the sooner Malaysia will move away from the perpetual fear that the farmlands and industries will collapse.

Indeed, it would be good to see Maiaysia’s Agro Bank and Farmland Banks working side-by-side to make Japan and Malaysia the fruit basket of the whole of Asia ranging from tropical fruits, to plain water and salt water fish; all of which Malaysia and Japan can provide to China too, therefore, relieving the food security pressures of the massive country.

In sum, before Malaysia can benefit from China, Putrajaya has to learn from Japan and potentially other OECD countries on the best practices in agriculture and fishing.