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Graying Asia Faces Pension Time Bomb
July 14, 2009

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Indonesia and other Asian countries are facing an aging crisis with weak and inadequate pension systems and family-based support dwindling, the Asian Development Bank has warned.

“A young continent reaping the demographic dividend of a large youthful work force is giving way to a graying continent where the ratio of retirees to workers is on the rise,” senior economist Park Donghyun said in a study released by the bank.

Improved educ a tion of women and better medical care is inducing Asians to have fewer children, allowing them to live longer and causing a “seismic” demographic shift, Park said.

The median age in China, Indonesia, South Korea, Malaysia, Singapore, Thailand and Vietnam “will exceed the world average by 2050,” which spells trouble for their pension systems, the study said.

The graying phenomenon is more pronounced in East and Southeast Asia than in South Asia, it added.

“In contrast to industrialized countries, most Asian countries do not yet have mature, well-functioning pension systems,” Park said.

“As a result, they are ill-prepared to provide economic security for the large number of retirees who l o om on the horizon.”

The bank found “key systemic failures,” including low coverage, inadequate benefits, lack of financial sustainability and insufficient support for the elderly poor.

Meanwhile, “the weakening of informal family-based old age support mechanisms suggests a greater role for formal pension systems throughout the region.”

Asians have traditionally relied on their children to take care of their material needs in old age, in effect a substitute pension system in a region where it was not uncommon for three generations to live under one roof.

However, rapid urbanization and the reduced role of agriculture in the economy “are creating a vacuum in Asia’s old-age support, a vacuum that must be filled by formal pension systems.”

The study warned that globalization had also weakened job security, pushing large numbers of people into the informal sector, where they enjoy no pension or labor-protection coverage.

Park said the pension systems of the countries in the study covered a mere 13.2 percent to 58 percent of the labor force, with the coverage rates for the working-age populations at just 10.8 percent to 40 percent.

They compared poorly with developed countries, where 90 percent of the labor force and 60 percent to 75 percent of the working-age population are covered, the economist added.


Agence France-Presse