Asia's Diverse Population: How Could it Affect Investing?
Many see the 21st century as the time of “youthful Asia”, which is promising for economic growth and prosperity. But what people fail to notice is that some of the biggest and most developed Asian markets happen to also be aging nations such as China, Japan, South Korea, Taiwan, and Singapore.
The United Nations predicts the loss in the Asian workforce due to old age to reach as high as 145 million workers, with the majority being in China. Yet, Asia’s economic future could be driven by nations that fit the successful growth-driven model, since 300 million new laborers will be joining the global workforce from other Asian nations, mainly from India, Pakistan, Indonesia, and Bangladesh. These predictions line up with those of Natixis Investment Managers, which stated that by 2040 Asia would be split between aging countries that will lose workers and youthful ones that will add them, thus creating endless opportunities.
The promised enormous opportunities look very much like the golden ages that many senior Asian economies had experienced decades ago. The process can be simply explained with the following steps:
- Youthful Asian nations steer their massive supply of laborers to build infrastructure.
- Proper infrastructure attracts global offshoring manufacturing.
- The middle class expands.
- They start to invest in technology and innovation heavily.
- Social restructuring eventually takes place, and birth rates drop.
It is important to note that having a demographic advantage of an enormous labor force is not always enough for Asian nations to last in the economic race. Essential factors remain to build a quality labor force; create productive jobs for the youth with high enough wages to foster the nation’s middle class; have proper labor laws and regulations set in place; simplify the investing process for foreign investors; and invest in building a qualified workforce.
Two Asian nations seem to stand out with the best potential for economic growth, thanks to their high percentage of youth and transparent investment in that population segment. The first is India, which is most promising in labor-intensive manufacturing sectors, and the second is Malaysia, with a great aptitude for advancing in capital-intensive sectors. However, both face some real obstacles, such as lacking the proper infrastructure for both transportation and communications, as well as their reluctance to adopt renewable green energy solutions.
All in all, Asia undoubtedly possesses much growth capacity and offers endless opportunities for investing, especially if its energy and infrastructure needs and shortcomings are met. While it is financially demanding and challenging to transform Asia’s economies, its nations can attract investors to put their money in its markets, if the proper demographic management is implemented.