Ma Ying-jeou��s second term aspresident of Taiwan, secured in an election win three days ago,may be one of the island��s last opportunities to address theconsequences of something unmentioned on the campaign trail: theworld��s fastest-aging society.
Ma��s push for closer ties with China won a fresh mandate ashe defeated Tsai Ing-wen, who said the tighter bonds may riskTaiwan��s autonomy. While Taiwan��s top planning body predicts theisland��s population will start falling in 11 years, coping withan aging society and low birth rates were absent from the debatebecause the challenge is intractable, said Chuang Meng-han, anindustrial economics professor at Tamkang University in Taipei.
Failure to tackle the change, by reducing the cost ofraising families or allowing immigration, will leave Taiwan��slabor force shrinking, putting pressure on growth and assetprices. The economy��s trend rate of expansion is poised to fallto about 3.5 percent annually in the next decade, from 5.1percent in the 20 years through 2010, according to DBS Bank Ltd.
��The impact will be huge,�� said Chuang, who has analyzedthe housing market. ��Most people aren��t well-prepared for theaging society. The later the government faces the consequences,the more difficult they will be to deal with.��
Taiwan��s 2010 total fertility rate was 0.9 babies per woman,according to baseline estimates compiled by Taiwan��s Council forEconomic Planning and Development. That��s less than in the 196other countries and territories tracked by the United Nations.Taiwan��s 23 million population will fall to less than 19 millionby 2060, according to the council.
Bear Market
By 2050, Taiwan will have an aging index of almost 413percent, compared with Japan��s 339 percent, the CEPD estimates.That makes the island the most rapidly aging society, said LoYu-mei, a council researcher. The index is defined as the numberof people aged 65 and over per 100 youths under age 15.
��Taiwan is heading the way of Japan, who! se popul ation isshrinking,�� said Tim Condon, chief Asia economist at ING GroepNV in Singapore, who previously worked at the World Bank.��Taiwan��s stock market resembles Japan��s Nikkei in that bothhave been in a bear market since asset bubbles burst in 1990.��
Japan has struggled to overcome an aging and decliningpopulation, leading to two decades of depressed economic growth.The Nikkei 225 stock index is down 78 percent, the most in theworld, since a peak in December 1989. Taiwan��s Taiex (TWSE) index isdown 25 percent in the period, the third-worst performance.
Ma, 61, has put in place a monthly childcare stipend ofNT$2,500 ($83) for newborns, payable to certain householdsearning an annual net income below NT$1.13 million until thechild is two, to try and turn the birth rate around.
Property Risk
During the election, neither he nor Tsai of the DemocraticProgressive Party recommended greater immigration to boost thepopulation. The CEPD has said Taiwan has the world��s second-densest population among territories with more than 10 millionpeople, limiting political scope for such a policy.
Aging raises the risk of substantial future home-pricefalls, said Laura Ho, an economist at Grand Cathay Services Corp.in Taipei. Property prices ��are disproportionately high�� and��older people are investing in property they won��t be able tofind buyers for in years to come,�� she said.
The president has vowed to consider imposing new taxes torein in property costs. Housing prices in Taipei have more thandoubled since 2000 and reached a record last year.
��Young people are discouraged from getting married becausethey can��t afford to buy a home,�� Tamkang��s Chuang said.
Costly real estate and stagnant wages combined with therisk of recession to stir voter discontent. Gross domesticproduct fell 0.15 percent in the third quarter from the previousthree months, as Europe��s fiscal crisis damped the export-ledisland��s overseas sales.
Stagnating Wages
Hous! ehold in come adjusted for inflation was lower in 2010than in 2000. Joblessness, at 4.3 percent, compares with lessthan 2 percent three decades ago.
Ma says detente with former civil-war foe China, theisland��s largest trading partner, will help bolster Taiwan��s$430 billion economy. He has relaxed trade, tourism andinvestment restrictions. Tsai argued his policy risks givingChina too much sway over Taiwan.
China��s economy expanded 8.9 percent in the fourth quarterfrom a year earlier, a report showed today. One consequence ofcloser economic ties to the nation has been an exodus offactories to the lower-cost mainland, crimping job opportunitiesat home.
Taipei-based Foxconn Technology Group (FOXCGZ), which assemblesApple Inc. iPhones and iPads, employs more than 1 millionworkers at its Chinese factories, compared with 10,000 in Taiwan.
About 800,000 Taiwanese live in China, according toTaiwan��s Mainland Affairs Council. Some of them may be countedas part of the island��s population depending on their periods ofcontinuous residence in Taiwan, the statistics bureau said.
Pace of Detente
In his victory speech, Ma said he will ��control�� the paceof rapprochement with Asia��s largest economy to ensure thepolicy retains public support. He took 51.6 percent of the votein last week��s election, compared with Tsai��s 45.6 percent.
��Rapid ageing means declining labor input and, in the longterm, suggests population will fall, which will slow theeconomy,�� said Ma Tieying, an economist at DBS Bank inSingapore. ��The savings rate will drop too, as older peopleusually have to spend their savings. That will be negative forinvestment.��
Taiwan��s predicament echoes a trend across Asia, signalingincreased regional pension and healthcare burdens. Asia willaccount for 62 percent of the global elderly population by 2050,up from 44 percent in 1950, the Asian Development Bank said in a2009 report.
While 2012, the year of the dragon, may boost Taiwan��sbirth rate tempor! arily as it��s considered an auspicious period,population decline is inevitable, according to the CEPD.
��The economy isn��t in good shape,�� Tamkang��s Chuang said.��But you need to have a stable income and feel secure aboutyour job to have children.��
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