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Economy

Asia must embrace -- not fear -- its changing demographics

SINGAPORE -- At a news conference with U.S. President Barack Obama at the White House on Aug. 2, Singaporean Prime Minister Lee Hsien Loong suddenly brought up Japan's aging population and declining birthrate. "Demographics will [be] a big factor to come. If we look at Japan -- 50 more years, population shrinking and you have a very small country left."

His remark was in reply to a question about what Asia and the U.S. will look like 50 years from now.

Changing demographics are a pressing concern for the leader of a Southeast Asian city-state with a population of 5.5 million. He went on to describe a future Japan as "a very small country ... in terms of economy, in terms of influence internationally."

Shifts in the population profile of each country could completely transform the economic landscape and power balance in the region, especially given that U.S. involvement in Asia will likely change in the coming years.

Workers on the move

In contrast to Japan, national borders in Southeast Asia are permeable. Singapore's economy, for example, is sustained by labor from the Philippines, Malaysia and Indonesia.

Live-in maids from abroad do housework and care for Singaporean children, allowing their mothers to work outside the home. This, in turn, boosts the country's productivity. Workers from Myanmar, Laos and Cambodia are flowing into richer Thailand, whose total fertility rate of 1.4 presents a demographic challenge as grave as Japan's.

Thailand appears to be trying to escape the "middle-income trap" by filling gaps in its workforce with labor from neighboring countries. Thailand is an immigration hub for the region, and Bangkok's status as the largest manufacturing center in the Association of Southeast Asian Nations seems secure.

Cheaper air travel makes it easier for job-seekers to try their luck abroad. Of the three cogs in the engine of globalization -- goods, capital and labor -- labor was long considered the stickiest. That is still true, but less so than before.

Collectively, Asia has a large workforce and economies at every stage of development. This means the region should have little trouble meeting its labor needs: Workers from emerging economies can make up for shortages in developed countries, while the openings they leave are in turn filled by workers from developing countries.

Diversity can foster technological progress and the creation of new business models. As a region where talented people from various backgrounds can easily brush shoulders, Asia may soon become a center of innovation to rival the U.S.

"We have to adjust to a new world [while] maintaining our position and our ability to compete," Singapore's Lee said of Asia's demographic changes. It would be more helpful if policymakers and business leaders saw these changes as an opportunity rather than a hurdle.

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