The Asia-Pacific region will continue to power global economic growth in 2013, but the region’s increasing ageing population will cast a shadow on the long-term development, according to a Canadian think-tank.

“Productivity gains and a large, young working-age population have done much to boost Asian economic growth over the past three decades. But Asia’s demographic dividend is quickly coming to an end,” said Kip Beckman, author of the Conference Board of Canada’s recent published report World Outlook. 

Due to fewer births and longer life expectancies, the average age of the population in Asia is increasing rapidly. Today, 7 percent of Asia’s population is above 65 years old, while the share has increased to 23 percent in Japan, reported Xinhua citing the Conference Board of Canada. 

According to the organization’s analysis, the changing demographic profile in the region comes from two major shifts. First, women in Asia have become better educated, making them more financially independent and less likely to rush into marriage at a young age. 

Second, the cost of raising children has risen substantially. For instance, in South Korea, education costs are a major contributor to the country’s huge household debt -- currently 160 percent of income. 

To maintain future economic growth, the think-tank suggested the region increase investment in education to enhance productivity and consider more open immigration policies than currently existing ones.

Aging populations are most prevalent in China, Hong Kong, Japan and Taiwan. Seven per cent of Asia’s population is 65 years or older today; in Japan, the share has increased to 23 per cent.The demographic shift has been especially prevalent in China, in part due to the country’s one-child policy. By 2035, the median age will increase to 45 from 35 – equal to Japan’s current median age. 

The Japanese experience in the past two decades illustrates how an aging population can affect long-term economic growth. As Japan’s population has aged the savings rate has tumbled from over 10 per cent in the 1990s to 2 per cent today. This has made it more difficult to finance investment domestically. 

In general, Asian governments are not prepared to handle a rapidly aging population. “Since children have traditionally looked after their aging parents, governments have invested sparingly in pensions for older citizens,” said Beckman. 

Future economic growth in the region will depend more on productivity gains than on a large support of low-cost labour. Investment in education (to enhance productivity) and support for working parents (mothers, in particular) would help to maintain robust growth – which will also generate the resources to support an aging population. 

In addition, Asian governments must weigh prevailing nationalist and cultural sentiments with the need to replenish their populations, and may have to consider more open immigration policies than currently exist in the region.

According to the CIA World Factbook, Asia’s most developed economies such as Singapore, Hong Kong, Taiwan and South Korea were among the top six countries with the lowest fertility rates in the world this year.

Rising education levels, late marriages and long working hours among women have contributed to the fall in fertility rates across Asia.

Singapore has the lowest fertility rate among 222 nations, according to the World Factbook, with a woman expected to give birth to an average 0.78 children during her lifetime. In Japan, the rate of 1.39 has stayed around the same level for the past decade, while in China it is 1.55.

This compares to 2.06 children per woman in the United States and 1.91 in the U.K. According to the World Factbook, an average two children per woman is needed to maintain a population at its current level.

“Asia as a whole is aging for sure, and this poses two big strategic challenges,” said Donghyun Park, senior economist at the Asian Development Bank (ADB). “One is its negative impact on economic growth, and the other is the need to provide adequate income support for the large and growing elderly population.”

Asia has long reaped the benefits of what is called a demographic dividend, or the positive effects of a youthful population in the form of a big labor force and high productivity, but that is changing fast.

“Asia’s favorable demographic structure is set to fall. In fact in some countries, this demographic dividend is already turning into a tax,” said Park.

Take the case of Japan, which has the largest number of people above the age of 65 in the world; these older people make up 25 percent of its 128 million-strong population. This is increasing the burden on its public finances as economic growth stagnates.

The most populous country in the world, China, with 1.3 billion people, is also aging fast; its 60-plus population is expected to account for more than a third of the total by 2050, according to the Boston Consulting Group and global reinsurer Swiss Re. This is putting pressure on Beijing to rethink its one-child policy started in 1979.

Several Asian countries have come up with special programs and innovative ways of encouraging people to get married and have more kids.

In Singapore, for example, its Ministry of Community Development Youth and Sports has accredited 11 dating agencies; through initiatives like the Social Development Network it facilitates marriage via speed dating and salsa workshops.

In Taiwan, the central bank has started playing matchmaker by organizing get-to-know tours for public and private sector employees. These trips include sightseeing and speed dating events in upscale hotels, according to local media reports.

Several other Asian countries, such as Thailand, are considering measures like tax incentives and more affordable childcare services to encourage couples to have children.