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25 May 2015
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As Thailand’s population ages and shrinks, policymakers need to speed up efforts to adapt on many fronts.  By Nareerat Wiriyapong

Thailand has a 20-year population development plan that contains many measures to deal with a growing ageing population and a shrinking labour force. However, the country’s long record of political volatility suggests that turning plans into meaningful actions will be a challenge.

Drafted by the National Economic and Social Development Board (NESDB), the plan is scheduled to cover the period up to 2035. It foresees the working-age population (15-59 years) starting to shrink noticeably from 2017, and by 2030 Thailand will officially be an ageing society, with its overall population declining.

The state think-tank projects that the number of Thais aged 60 or older will total 20.5 million or nearly one-third of the projected population in 2040 of 63.8 million – lower than the current estimate of around 67 million. The total workforce will fall dramatically to 35.2 million from this year’s estimate of 42.98 million.

“We are heading toward the ageing society as the labour force has begun to shrink along with the declining birth rate. As a result, we have to make sure that every birth comes with quality,” said Chutinart Wongsuban, the NESDB deputy secretary-general.

The 20-year population development plan has three goals: to match Thai people’s capacity with the future needs of the country’s development; to promote economic and social security for people; and to promote the well-being of Thai families.

The United Nations estimated the annual population growth rate in Thailand for 2010-15 at 0.3%, the lowest among the 10 countries in Southeast Asia. The fertility rate was 1.4 children per woman, compared with 2.4 in Indonesia and 3.1 in the Philippines.

The old-age dependency ratio, which measures the number of elderly people as a share of those of working age, is projected to shrink from 5:1 in 2010 to less than 2:1 in 2040, according to NESDB estimates.

“We aim to prevent the fertility rate from falling further although there are possibilities that it might slip to 1.3 in 2040,” Ms Chutinart told Asia Focus .

“In terms of the existing workforce, productivity is the key through the improvement of production technology and skills.”

The shrinking workforce will inevitably affect the manufacturing sector, exports and overall economic growth. Key sectors such as automobiles and electronics already are seeing a shortage of qualified workers as the country does not produce enough vocational graduates.

“When we talk about a labour shortage, sometimes it doesn’t mean there are not enough workers in the market but there are mismatches between the demand and supply sides,” said Ms Chutinart. “That’s why we have tried to involve the private sector such as the Federation of Industries, chambers of commerce and tourism organisations in drafting the plan.”

Apart from its impact on economic development, the greying population will create social stresses such as a widening generation gap between young and old given different lifestyles, added Ms Chutinart.

Jirawat Panpiemras, a research specialist at the Thailand Development Research Institute (TDRI), said the situation would become worrisome once the elderly account for a quarter of the total population in the next 20 years.

As the number of retirees surges, Thailand’s savings as a whole will be reduced as seniors will have to use their savings to live. Consequently, the government will receive a lower contribution from national savings to be used to finance public projects.

Mr Jirawat recommended the government introduce incentives for those aged 50-59 to continue working even if their productivity will decline. Nonetheless, support in terms of training will be required so that they can move to other positions in a company.

“The majority of workers on production lines generally retire early before age 50 but with proper training, they would be able to transfer to other functions in the organisation,” he said.

According to TDRI research, if people aged 50-59 continue to work, it would help lift gross domestic product (GDP) by another 5% by 2050 because of the larger workforce, although the short-term gains would be limited.

“Measures to cope with the ageing society take time to implement and we have to act as early as we can,” he told Asia Focus .

“I think all the measures required are listed in the government’s long-term plan but to implement it successfully, it needs support and cooperation from several parties, so whether the execution is successful or not, we still have to see.”

Meanwhile, the labour shortage might worsen as neighbouring countries raise their minimum wages in line with their economic development. As a result, migrant workers now in Thailand might want to return home, he said.

“Cambodia, Laos and Myanmar are at the stage of driving economic development and they are in need of workers. Industries in those countries are also in the labour-intensive sectors including textiles. Thus they need a lot of labour, as Thailand did in the past,” he said.

“Thailand needs to shift from labour-intensive industries to sectors that are more advanced in terms of technology and with higher productivity. That requires the development of human resources through education and training.

“Innovation is also a key. Research and development takes a lot of time and money in order to ensure that work can be commercialised and not just stay on the shelf.”

The TDRI research on the ageing population suggests that technology development should increase by 1.6% a year for Thailand to maintain its level of economic development.

Hak Bin Chua, a Singapore-based economist at Bank of America, recommended that Thailand review its immigration and foreign worker policies.

“The country has to decide whether some liberalisation is socially acceptable so as to cushion the slowing and eventual shrinking of its labour force from 2018. An overly strict foreign worker policy risks hurting growth and derailing the fragile economic recovery,” he told Asia Focus .

“Thailand also needs to address its social support system, raise the retirement age and allow for the elderly to remain in the workforce for as long as possible.”

Another TDRI study raises concern about the declining workforce in the agriculture sector.

Yongyuth Chalamwong, the TDRI research director for labour, said the number of workers in the agricultural sector has fallen by 1.5 million or 1% annually over the past 10 years due partly to low wages. Meanwhile, the average age of agricultural workers has increased with 43% now over 50.

Given those factors, the sector relies increasingly on migrant workers, mainly from Myanmar, Laos and Cambodia. About 22% of nearly 3 million unskilled migrant workers are employed in agriculture.

“If Thailand’s agricultural sector does not go through a major revamp through the use of machines to replace human labour, the country will see the number of migrant workers in the sector topping 800,000 by 2021,” said Mr Yongyuth, adding that by then, low-tier migrant workers in Thailand would total 4 million.

Such heavy reliance means Thailand will face an even bigger economic threat once those migrants start to return home. The Asean Economic Community (AEC), starting from the end of this year, will allow the free flow of capital and goods within Asean and that too could encourage migrant workers to leave Thailand to take part in growing economic development at home.

“We have to seriously restructure the agricultural sector and implement various practices such as commercial farming or integrated farming in areas that are suitable” said Mr Yongyuth.

He recommends that the government provide farmers with alternatives to increase incomes, cut expenses and reduce their dependency on manual labour. As well, a new generation farmers should be developed to replace old and retiring farmers.

“The use of migrant workers should be limited and we should treat them the same as local workers. Otherwise, heavy reliance on migrant workers would lead to never-ending security problems,” he added.


First Published:  Bangkok Post, May 25, 2015