One often-unexamined article of belief in emerging Asia is that long-term high economic growth will take care of most challenges that a country may face. Persistent government deficits: an economy growing at a fast pace will cough up the money the government can use to smooth the fiscal gap. A bulging youth population: a thriving economy will create jobs that facilitate their transformation into adults well integrated in society. Tottering and under-armed military: economic growth will provide for increased defense spending necessary for military modernization.
While a fast-growing economy over the long term expands the possibilities that a lower-income country can consider, what happens if it stumbles and consequently veers off course? The pivotal assumption of this belief is that high economic growth will take place for as long as it takes to raise the developing country to prosperity. In the Asian context, post-war Japan is one future that sustained high economic growth promises: a wealthy, stable society that garners respect abroad. In the wider context, however, many economies—Argentina and Russia come to mind—have stalled after decades-long high growth and as a result, they languish in the middle-income category.
This uncertainty has focused attention on the possibility of China growing old before it grows rich, but this prospect is one that most countries in Southeast Asia also must confront as they are on the same path. In the IMF version of this scenario, China’s quickly graying population—swifter than the historical experience in the west—will lead to flagging economic growth. This results in China unable to achieve a per-capita income comparable to those that prevail in advanced economies and in less time to adapt policies appropriate for a more aged society. In China, the working-age population peaked at 925 million in 2011 and is projected to shrink to 700 million in 2050. Southeast Asia’s working-age populations, meanwhile, will peak starting in the 2020s.
All this means that most countries in Southeast Asia only have a decade or two to benefit from high economic growth and then to set in place strategies and policies to deal with an aging society. In other words, in the phrasing of this week’s first Spotlight article by former Financial Times correspondent James Crabtree, emerging Asia risks never growing rich. Moreover, Crabtree points out that Southeast Asia faces reduced growth potential because of dropping productivity and a workforce with mediocre skills. This challenge is exacerbated by an environment of increased protectionism and a global manufacturing that is ‘restoring’ to the west. If Southeast Asian governments don’t get their house in order, they may run out of time in their effort to converge with high-income economies.
Raising skills level in the workforce is one imperative for a Southeast Asia under time pressure. However, as our second Spotlight article that first appeared in the Times Higher Education lays out, emerging economies in the region face an upward battle in skilling up their workforce. Not only are education and training institutions chronically underfunded, the education system simply does not prepare those entering the workforce for the knowledge-based economy. Once those people are in the workforce, they also lack further support and opportunities to update their skills.
Faced with an increasingly inhospitable international economic environment, and unresolved challenges from within, emerging countries in Southeast Asia must spur economic growth even further. Governments have known what to do for a long time: invest in infrastructure and their own people, facilitate foreign investment, and create a less corrupt and more transparent system. The time is now ticking: they must act before it’s too late.
