1 Introduction: Political Demography in Indonesia, Malaysia and the Philippines

Indonesia, Malaysia and the Philippines are three major countries in Southeast Asia with a total current population of around 400 million people. They share many common characteristics in terms of culture, language and history. All of them became independent from their respective colonial power countries in the aftermath of the Second World War.Footnote 1 As will be explained in more detail, they all started as poor developing countries, and in the decades following independence witnessed remarkable population growth accompanied by major improvements in living conditions in these countries. Indonesia is the fourth largest country in the world in terms of population size (after China, India and the US ). The country is home of at least 400 hundred different ethnic groups and cultures. However, nearly 40% of the population can be classified as Javanese, the dominant ethnic group of Indonesia . Indonesia’s national motto is “unity in diversity” (Bhinneka Tunggal Ika) and reflects the multitude of ethnic, cultural and linguistic features in the world’s largest archipelago, which stretches more than 5000 kilometres from West to East. In the latest (2016) Human Development Index (HDI) of the United Nations Development Programme (UNDP), Indonesia is ranked 113th in the world (out of 188). Indonesia’s neighbour Malaysia has a similar cultural, linguistic and historic background as the western parts of Indonesia . However, the country is much smaller and has seen, not least due to the British colonial past, a massive influx of labour migrants from South China and India in the first half of the twentieth century. After independence in 1957, Malaysia progressed quite fast and developed markedly better in socio-economic terms than Indonesia . Malaysia is now (together with the small city states of Singapore and Brunei) one of the wealthiest and most developed states in Southeast Asia . In the HDI, Malaysia is ranked 59th in the world (out of 188). The Philippines is another densely populated archipelagic state in Southeast Asia . With more than 100 million citizens, it is the 12th most populated country worldwide. The largest part of its population is relatively closely connected to Malaysians and Indonesians in ethnic and linguistic terms. However, after centuries under Spanish colonial rule, almost 90% of the Filipinos are Roman-Catholic. Another major external influence was the colonial period under the US from 1898 to 1946, which greatly impacted the current economic, cultural and political system. In the latest HDI, the Philippines are ranked 116th in the world, only three places below Indonesia .

This chapter will first give a concise description of the major demographic trends in Indonesia, Malaysia and the Philippines, and then give a condensed explanation of these population developments, before drawing some tentative conclusions about the demographic implications for all the three countries in a comparative perspective. I will specifically focus on the challenges which have arisen in relation to the pension system, the labour market, the migration movements, the urbanization as well as the consequences of demographic change in different regions and ethnic/religious groups. In terms of methodology, I performed a critical examination of the existing literature on demographic changes in Southeast Asia and interpreted demography data in a comparative perspective. For the demographic data, I relied on the Database Global Political Demography (Goerres et al., 2020). Another source was the World Bank Development Indicators, which are available online. Additionally, international literature with a specific focus on Indonesia, Malaysia and the Philippines was used to gain insights into the political and economic consequences of demographic change in Southeast Asia.

2 Demographic Trends, 1990–2040

Since their respective independence shortly after the Second World War, all three countries have witnessed remarkable population growth. In Indonesia, the population more than doubled within 40 years—form 72.8 million people in 1950 to 181.4 million people in 1990. The first census in Malaysia in 1970 counted a population of about 11 million people. As Table 1 shows, a significant rise in the population has taken place since then. The number of citizens has nearly tripled to over 30 million people. It is expected that the population of Malaysia will continue to grow up to 38.5 million people in 2040. Similarly, the Philippines witnessed enormous growth in the first decades after their independence in 1947. The population grew from 20 million citizens in 1950 to 61.9 million in 1990, thus tripling within 40 years. The growth has continued, but at a lower speed, reaching 100.7 million citizens in 2015. For the year 2040, the UNDP predicts a population size of 137.0 million people.

Table 1 Demographic data
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As Table 1 shows, the similarities between Indonesia, Malaysia and the Philippines, despite their country-specific and historic differences, are remarkable in terms of political demography. All three countries have witnessed an extremely high population growth between the 1950s to around 1990. At the same time, the fertility rate declined to a great extent and life expectancy grew. Compared to other countries worldwide, the transformation from a very young to an ageing society within a few generations in these three Southeast Asian countries is very fast. The same transition took almost 150 years in the more developed countries of Western Europe or the US (Goldstone, 2012: 19f.). The transformation within these societies becomes more visible when we analyse the age structure over time. Table 1 shows the distribution of different age sectors in all three countries in 1990, 2015 and 2040. In 1990, Malaysia still had a very young population, with a high number of young people under the age of 15 years and only very few senior citizens over the age of 65 years. This had already changed to some extent by 2015, when the proportion of young people under 15 years dropped quite steeply from 37.1 to 24.5%. This trend will continue. By 2040, the share of young people will decline (despite only a slight decrease in absolute numbers) to 18.9% of the total population. In correlation with the rising life expectancy, the median age in Malaysia will further rise. While it was only 21.56 years in 1990, it had already grown to 27.68 years in 2015. For 2040, the UN predicts a further increase up to 37.65 years.

In Indonesia, young people under 15 years of age were a quite large group, accounting for 35.43% of the total population in 1990. Their absolute number grew only slowly until 2015. However, their share of the total population was nearly 10 percentage points lower in 2015 than in 1990. This trend will continue until 2040, when the proportion of young people under the age of 15 years is expected to drop to 21.36% of the total population. Slowly, the age structure of the population will shift from a still relatively young population pyramid to one characterized by a significant ageing of the population, with the share of the population above the age of 65 years increasing from 5.17% to 11.43%.

The median age in Indonesia has also increased significantly from 21.3 years in 1990 to 28.0 years in 2015. It is expected to grow to 34.3 years by 2040. But even then, Indonesia will still not yet have an ‘old’ population. In 2015, countries such as Germany or Japan already had a median age of over 46 years. Nevertheless, the number of old people will increase to a great extent. In particular, the number of people above the age of 80 years will more than double between 2015 and 2040. The number of elderly people (aged 65 or older) in the Philippines grew from 1.94 million in 1990 to 4.61 million in 2015, which is equal to an increase from 3.1% to 4.6% of the total population. The UNDP predicts the share of elderly people to reach 8.2% by 2040. Consequently, the median age in the Philippines rose from 19.3 in 1990 to 24.1 in 2015 and is predicted to reach a median age of 29.6 by 2040. As mentioned above, the key drivers of the ageing of the population in Malaysia, Indonesia and the Philippines relate to longer life expectancies and declining birth/fertility rates. The birth rates in all three countries fell dramatically after 1960. In Indonesia, this meant a fall from 44.56 births per 1,000 citizens in 1960 to 25.81 in 1990 and—less dramatically—to 19.35 in 2015.

Malaysia’s crude birth rate fell from 42.69 in 1960 to 28.09 in 1990 and 17.09 in 2015. The birth rates of the Philippines declined to a lesser extent. In 1960, the birth rate was at 44.32 births per 1,000 citizens, very similar to that of Indonesia and Malaysia. It then fell to 33.02 in 1990 and 23.45 in 2015, higher than in Indonesia and Malaysia. The declining birth rates are closely connected to the decline in the total fertility rates. In Indonesia, this rate has dropped drastically from an average of 5.48 children per woman in 1970 to 2.39 children per woman in 2010–2015. In Malaysia, too, the total fertility rate has declined enormously over the last 55 years from an average of 6.45 children per woman in 1960 to 3.55 in 1990, and a comparatively very low 2.06 in 2015. The birth rate in the Philippines also fell dramatically from 7.15 children per woman in 1960 to 4.32 in 1990 and to 2.96 in 2015. However, the total average fertility rate in the Philippines is currently still significantly higher than in Malaysia and Indonesia.

Not only the declining birth rates are leading to ageing societies, but also the sharp rise in life expectancy due to better nutrition as well as medical and hygienic progress. Life expectancy in Indonesia increased drastically from 1950 (38.8 years) to 1990 (62.67 for males and 65.67 for females) and 2015 (67.35 for males and 71.65 for females). It is expected to be over 70 years for both sexes by 2040. A Malaysian born in 1955, on average, reached an age of 55.4 years. This number climbed to 64.9 in 1970. The average life expectancy at birth continued to rise to over 70 years in 1990 and about 75 years in 2015 and is expected to grow further to near 80 years in 2040. Somewhat lower, but still impressive, is the rise in life expectancy in the Philippines. While the average life expectancy at birth was only 58 years in 1960, the number for men rose to 63.0 years and that for women to 68.6 in 1990. Life expectancy continued to grow, and by 2015, it was 66.0 for men and 72.9 for women. For 2040, the UNDP forecasts life expectancy to be 68.0 years for men and 76.4 for women.

The ageing process in the three countries is clearly visible when one looks at the ratio of people over 65 years of age compared to people between 15 and 64 years of age. In Malaysia, the ratio in 1990 was 1:16.42, meaning that for every elderly person there were 16.42 persons between the age of 15 and 64 years. This ratio dropped to 1: 11.81 in 2015 and will be 1: 5.35 by 2040. In absolute numbers, this means a rise from 1.78 million elderly people in 2015 to 4.86 million by 2040. The numbers for Indonesia are similar and only slightly lower. The ratio was 1:15.80 in 1990, fell to 1:12.98 in 2015 and for 2040 a ratio of 1:5.88 is predicted. In absolute numbers, the number of Indonesian older than 65 years will rise from 21.12 million in 2015 to 26.52 million by 2040. Again, the Philippines have the slowest ageing process. The ratio of people over 65 years compared to people between 15 and 64 years was 1:17.80 in 1990, 1:13.86 in 2015 and will be 1:8.00 in 2040.

As shown in Fig. 1, the shape of the population pyramids in these three countries in 1990 is that of the classical developing countries, where the largest group is made up of children and young people. In 2020, the largest group is that of persons in working age providing a favourable demographic profile for the labour market. The number of young people is no longer as dominant as it used to be, and the number of elderly people is not yet as high. In 2040, however, the pyramids in all three countries will probably have more features of ageing societies.

Fig. 1
figure 1

(Note Males are to the left [black], females to the right [grey]. Source Computations by Richard Cincotta)

Population Pyramids, 1990, 2020, 2040

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3 Reasons for the Demographic Developments

In the 1950s, all three countries were poor and underdeveloped. There was a high rate of illiteracy of more than 80% and poorly developed healthcare and education systems. Since then, all of them have steadily developed and are now regarded as lower middle-income countries. In so far, one of the explanatory factors of the rapid population growth is the improvement of living conditions for the average citizen. This in turn has led to higher rates of life expectancy. Furthermore, birth rates in all three countries sharply declined at the same time as living conditions improved. What were the reasons for these developments? Malaysia and Indonesia (and to a lesser extent the Philippines) have sustained a long period of consistent economic growth since the 1970s, with average annual growth rates of more than 5%. This economic progress has led to advances in medical science, which resulted in improved healthcare systems and a sharp decline of child mortality. As the countries became more developed, the demographic behaviour of the respective populations changed, and in accordance with classic theories of demographic change (Goldstone, 2012: 19), the fertility rates declined and the number of elderly people grew.

At the same time, new social norms relating to more Malaysian and Indonesia women pursuing their education and career aspirations led to later marriage and less children per woman (Sumra, 2016). In Malaysia, it had been observed that the mean age at first marriage of women has increased from 21.6 to 25.1 years between 1970 and 2000 (Mahari, 2011: 4). The opportunity for women to pursue higher education and skills level empowers them to participate in the labour market. This contributed to delay in their marriages (see also Hirschman & Bonaparte, 2012: 30f.). Another reason for the declining birth rates was the availability and acceptance of contraceptives in both countries. The Indonesia government, coordinated by the National Family Planning Coordinating Board (NFPCB), actively promotes and financially supports family planning since the late 1960s until today. The use of contraceptives and the government promotion of them met with resistance from societal organizations, including Muslim groups, only initially in both countries. In the late 1960s, major Islamic groups in Indonesia expressed their unease with family planning because they saw family planning as the replacement of the will of God with the will of individuals in relation to procreation (Shiffman, 2004: 29). However, the authoritarian government under General Suharto made the family planning programme one of its major development targets and used pressure as well as financial incentives to counter any resistance. After intensive consultations with government officials, the most influential Islamic groups such as Muhammadiyah and Nahdatul Ulama changed their point of view and supported the family planning programmes (Shiffman, 2004: 30).

Among the three countries, the highest population growth took place in the Philippines although the mortality rates declined at similar rates to those in the other countries. Whereas in other Southeast Asian countries, population growth rates dropped substantially to below 2% a year, the population growth rate in the Philippines declined much slower. Many researchers argue that “the persistence of poverty in the Philippines has to do largely with its inability to achieve —and sustain — an income growth substantially higher than its population growth” (Balicasan, 2007). They complain about “the vicious cycle of high fertility and poverty: high fertility rate prolongs poverty in households and poor households contribute to high fertility rates” (Mapa et al., 2012: 15).

One reason for the comparatively high fertility rate in the Philippines is “the teachings of the influential Philippine Catholic Church (no divorce, contraception or abortion) and the active sexual life of young Filipinos. Many women become pregnant at a very early age, soon after puberty” (Boquet, 2017: 117). Besides the Vatican, the Philippines is the only country in the world where divorce is not legal. “The use of government money, taxpayers’ money to give out contraceptive pills is corruption”, Archbishop Socrates Villegas was quoted (see Alave, 2012: n.p.).

The Catholic faith of most Filipinos, however, “does not exercise a strong direct influence on fertility desires, but that it is a major factor influencing population policy and programmes. Church opposition to contraception has been a major factor in preventing the government - both national and local - from committing funds for population programmes. This in turn fosters a social climate that works against coalescence around an explicit two-child norm” (Costello & Casterline, 2002: 533). The slow pace by which the total fertility rate has dropped from 6.96 in 1960 to 3.30 in 2008, a measly 1.6% per year, “can be attributed to a lack of concrete and proactive government policies on population management aimed at accelerating the demographic transition” (Mapa et al., 2012: 12). In recent years, the last two Philippines presidents supported an active family planning policy. Benigno “Noynoy” Aquino (2010–2016) supported the ‘Responsible Parenthood and Reproductive Health Act of 2012’ against bitter resistance from conservative politicians and the Catholic Church. Current President Rodrigo Duterte (since 2016) has stated to champion contraception to reduce poverty during his term. He stated that he wants to reduce unwanted pregnancies among poor Filipinos and that overpopulation is a threat to the country’s economic development (Corrales, 2016). Both presidents followed their own ethical beliefs and risked part of their popularity with citizens and voters who followed the pro-life policy of the Catholic Church. On the other hand, their progressive approach on family planning brought both support from reform-oriented people in the middle and lower classes.

Remarkably, there is a huge contrast between the Catholic Philippines and the majority Muslim countries of Indonesia and Malaysia which had no significant internal political debates about state-led family programmes. In Malaysia, the Family Planning Act No. 42 was already passed in 1966 and was widely approved by the population (Nai Peng Tey, 2007: 269). In the mid-1980s and 1990s, the government under Prime Minister Mahathir Mohammad proclaimed a pro-natalist (and Islamist) agenda to raise the number of Malaysians. He publicly stated that Malaysia should have 70 million citizens by 2100 (Nai Peng Tey, 2007: 268). But at this time, the use of contraceptives and active family planning policies were already well-spread over Malaysia so that an enormous population growth did not take place and the fertility rate continued to decrease.

In so far, the main reason for the demographic change in all three countries is not culture, geography, climate or religion, but rather improved living conditions. As in most other countries in the world, economic modernization goes along with a relative decline in the agricultural sector in terms of employment and percentage of the GDP (Martin & Warr, 1993: 381), while the importance of the industrial and service sectors is growing. Therefore, more people are moving to cities, where living space is expensive. Since education is an increasingly important way to get ahead, parents want to invest more in the education of their children, which is also costly. Additionally, parents are gaining confidence that nearly all their children will survive to adulthood, and thus, they will not need more than two children. It is not only access to birth control (although it is a contributing factor) but particularly the educational level of women that effectively limits the number of children they bear (Goldstone, 2012: 19).

4 Political Implications of the Demographic Changes: The Illusions of Demographic Momentum?

What has been the impact of the above-described population changes on the domestic policies of Indonesia, Malaysia and the Philippines? It is remarkable how little awareness there is of the dramatic demographic changes in all three countries. The general public, but also the political elites, still regard their country as young and tend to ignore the decline in fertility that has already occurred. Of course, there are demography experts and scholars who are aware of the demographic changes, but the public perception of an ageing society is not widespread in all three countries. Why? First, the change in population is not so clearly visible. As has been pointed out above, the major increases will be in the years leading up to 2040. In Malaysia, for example, the percentage of people above 65 years grew from 3.6% in 1990 to 5.8% in 2015. This is an increase which is significant, but not really dramatic. The increase during the next 25 years will draw more attention with a rise from 5.8% (2015) to 12.9% by 2040. Second, the three populations are still growing due to the demographic momentum (Goldstone, 2012: 20). Despite dramatically declining birth rates, the population is still growing due to a large proportion of its population being in its reproductive years. Therefore, there will be a population increase in all of the three countries in the years to come, which will presumably last until 2060 or 2070.

The executive director of the Philippine Commission on Population (PopCom), Juan Antonio Perez III, stated in 2015: “We can say our population is not yet aging. We are still a young population but we are on the boundary of a demographic transition stage of an aging population” (Chrisostomo, 2015: n.p.). Compared to other countries in Asia and the rest of the world, Malaysia, Indonesia and particularly the Philippines will still have relatively young populations in 2040. Therefore, Deloitte Malaysia risk advisory leader Cheryl Khor stated that “compared to a number of nations, the impact of ageing on Malaysia’s economic growth is relatively gentle and will not really be felt until the 2050s. Our economy will avoid many of the more challenging downsides of population ageing for some time yet, although those challenges will eventually arrive here too” (quoted in Dhesi, 2017: n.p.).

However, in the years to come, the consequences of an ageing population will surely become a major policy concern for Indonesia, Malaysia and the Philippines. Population ageing in lower middle-income countries, such as Indonesia or the Philippines, brings potentially more challenges as in the upper-middle-income economy of Malaysia. Nevertheless, in all the three countries, two important national development goals will conflict: How to sustain robust economic growth while at the same time provide welfare to the growing number of old people? Achieving these two goals simultaneously “will require new policies, most importantly policies that encourage saving, and investment in health and education to improve productivity” (Kohler & Behrman, 2017: 11).

One of the socio-political challenges, however, which is likely to affect all three countries, is the financial aspect of ageing. If their populations continue to age, the proportion of elderly dependents will increase. Accordingly, all three governments will have to address this challenge through their fiscal policies, including the provision of healthcare spending. They will have to respond proactively, anticipating the rising number of elderly people. It is already clear that financial pressures and challenges of human capital (Sumra, 2016) will most probably emerge. Malaysia and Indonesia in particular have to plan for the time after the end of their demographic window of opportunity now. After 2050, both countries are predicted to become “aged nations”, defined as nations where post-working population (65 years and older) constitutes 14% or more of the total population. For the Philippines, this will take some more years, but in the second half of the twenty-first century they are also predicted to obtain this status.

4.1 Pension Systems and Retirement Age

So far, all three countries have not yet sufficient welfare state capacities in terms of pensions. Indonesia, for example, has not yet developed a general pension system for old people. Except for public servants, including the staff of police and army, who receive a modest state pension, the care for old people is generally regarded as a family affair. In recent years, however, the government has taken the first step towards a welfare state programme that includes a mandatory universal pension programme for all citizens. The Social Security Administration Body for Employment (BPJS Ketenagakerjaan) is responsible for dealing with the policy implementation of this ambitious programme and it is difficult to predict whether BPJS will be successful or not. Indonesia, as a recent study of the UN Population Fund (UNPFA) concludes, “is not ready for population ageing. Ideally, older people should enjoy life upon retirement. But the 2010 Population Census show that half of them are still working, a large number of them create their own employment or are working as unpaid workers. These situations indicate a general lack of social protection for older people” (UNPFA, 2014: 59).

There are not many Indonesians who get a pension. Currently, 53.1% of males of 65 years and older are required to work (or have a business) to have an income, and only 12.7% can rely on a pension or income from social security. The numbers of Indonesian elderly women who have to work is lower (23.7%), but so is the number of those who receive a pension (7%). More than 50% of them (28.6% males) are dependent on the money of their children/family (Arifin et al., 2012: 20).

Without much public outcry or political debates, the governments of President Susilo Bambang Yudhyono (2004–2014) and President Joko Widodo (since 2014) have increased the pension age of public servants. In 2011, it was extended from 55 to 56 years without any opposition from the parties represented in the national legislature. In 2014, the Ministry for the Empowerment of the State Apparatus developed a proposal, which was later approved as Law No. 5/2014 by the president and the legislature. This law increased the pension age for civil servants to 58 years. Government Regulation No. 11/2017 on Civil Servant Management regulated the pension age according to position: 58 years for administrative officers and junior experts, 60 years for medium ranking officials and 65 years for chief functional officers (Sekretariat Kabinet Republik Indonesia, 2017). Again, there were no protests from any major social group or political party against this government regulation. Political experts explain that it is more attractive for public servants to work a few years longer with their relatively high salaries than to retire and face financial loss due to the relatively low pensions (Sikumbang, 2015).

Malaysia has also witnessed an increase of the minimum retirement age for government servants. It was gradually raised from 55 to 56 in 2001, before further increasing to 58 in 2008 and to 60 in 2012. The Minimum Retirement Age Act, which took effect in July 2013, increased the retirement age for the private sector from 55 to 60. For the private sector, Malaysia has a pension scheme called EPF (Employee Provident Fund). The fund is managed by the national Ministry of Finance and both employers (12% of payroll) and employees (11% of payroll) must contribute to the fund. At the age of 60, any person paying into that fund will get a monthly pension after retirement. However, this amount is seen as very low. Out of over 14 million members in the EPF system, less than seven million are active contributors and 72% of the members do not meet the basic savings requirement at the age of 54 (Hussein, 2016). In short, as DM Analytics Malaysia chief economist M. Abdul Khalid stated: “Malaysia at present does not have a comprehensive policy to address the issue of ageing population” (Toh, 2018: n.p.). Other Malaysian academics agree and already proposed to raise the general pension age from 60 to 65 (Konrad Adenauer Foundation, 2017: 35).

In the Philippines, the retirement age is determined in Article 287 of the Labour Code, which mentions 60 years as the earliest and 65 years as the latest retirement age of employees when there is no retirement plan or contract provision on the matter. Government employees are subject to a mandatory retirement age of 65, while uniformed personnel such as the Armed Forces are required to retire by 56 years old. Recently, there has been a proposal to adjust the mandatory retirement age for uniformed personnel from the current 56 to 60 years (Roxas, 2017), but otherwise there have been no other proposals to increase the retirement age. Compared to Malaysia and Indonesia, the retirement age is already relatively high.

However, the above-mentioned PopCom director Juan Antonio Perez III stated that the social protection systems have yet to catch up with social conditions: “People are living longer but in poorer health and socio-economic conditions. They are only partially reaping the benefits of better health and social conditions” (Chrisostomo, 2015: n.p.). He also demanded an action programme from the government to be developed in the next ten years, since older persons need the government’s help as they will be “the poorest members of the population because usually their pensions are not enough for them” (Chrisostomo, 2015: n.p.).

The Population Institute of the University of the Philippines published a study with the title “The Future Aging in the Philippines: Demographic Trends, Human Capital and Health Status”, which concluded that “while Filipinos are living longer, their sunset years are being increasingly troubled by poor health and poor socioeconomic conditions” (Kritz, 2015: n.p.). The authors warned the government that it has only 10 years to find solutions before “the graying of the population starts to drag on the country’s overall well-being” (Kritz, 2015). Other government officials added that the ageing population will also need larger amounts of resources because of rising costs for the health services of an ageing society (Chrisostomo, 2017).

In the current National Development Plan (2017–2022), which was prepared by the National Economic and Development Authority (NEDA), population policies play an important role. NEDA seeks to reduce the fertility rate by decreasing unwanted pregnancies and increasing the age of first births. However, no concrete measures are proposed to meet the challenges of an ageing society.

In all three countries, the provision of adequate healthcare services to an increasing number of older people with deteriorating health or multiple illnesses will place a financial burden on the states’ budgets. So far, very few measures have been planned by public or private actors to meet the healthcare needs of the rapidly increasing number of older persons.

The biggest financial challenge for pension systems in all three countries, however, is the lack of a universal national pension and healthcare system, which can support those not working in the formal sector. For public servants and those having worked in the formal private sector, there are some pension schemes already in place, but for the large part of the population, who work in the informal sector or as housewives, there are no universal national pension systems. The traditional form of elderly care by family members is still widespread in Southeast Asia. Respect for elderly people is still higher in Indonesia, Malaysia and the Philippines than in many other parts of the world. However, these attitudes are expected to decline in the near future as traditional family ties are loosened by modernity, urbanization and increasing material wealth.

4.2 The Demographic Dividend and Youth Unemployment

All the three countries have enjoyed a relatively favourable demographic environment in recent years, characterized by a high percentage of working-age population, which was growing at a higher rate than the overall population. Malaysia in particular, but also Indonesia and to a lesser extent the Philippines, has been very successful in translating this demographic window of opportunity into a sustained economic growth path, poverty reduction and achievement in the non-income dimensions (Nori, 2017). The so-called democratic dividend is thus a major topic in all three countries. As it has a favourable ratio of productive workers compared to child or elderly dependents in the population, it is often seen as an ideal condition for economic growth. In the Philippines, the latest National Development Plan gave one of the 21 chapters the title “Reaching for the Demographic Dividend” and generally sees great opportunities for the Philippine economy (National Economic and Development Agency, 2017).

Several financial service companies also predict a rosy future for the Philippines. Deloitte, for instance, writes that millions of new jobs will be provided by the construction sector and by Business Process Outsourcing (BPO) from the US (ibid., 2017). Standard & Poor’s stated that in the Philippines “a growing and educated middle class would continue to be absorbed by a combination of overseas employment and a booming outsourcing industry” (Agcaoili, 2016: n.p.).

According to the Philippine Statistics Authority (PSA), the working-age population between the ages of 15 and 64 is expected to rise from about 58 million people in 2010 to about 96 million in 2045, which equals about 67.5% of the total population. This high amount of people in a productive age will, according to the PSA, be on the one hand attractive for domestic and foreign investors as a big labour pool and on the other hand stimulate the economy since it is a huge consumer market (Kritz, 2015). Former Philippine senator Edgardo Angara is more critical, writing in 2015 that a “challenge for early-dividend countries […] is to accelerate job creation to a rate faster than the growth of the working-age population. For the Philippines, such an undertaking is big, but not formidable—as more than a million Filipinos enter the labour force each year, up to 4.3 million are unemployed, and close to 14 million are underemployed, according to the July 2015 Labour Force Survey” (Angara, 2015: n.p.).

The National Economic and Development Agency also sees difficulties and warned that the unemployment rate among 15–24 years olds is more than twice the overall unemployment rate. In addition, the share of youth not in education and not in employment is 22.1% of the total young working population. This has serious implications because the demographic dividend will largely depend on a productive working-age population (National Economic and Development Agency, 2017: 205).

In Indonesia, the government is also relatively cautious concerning the benefits of the demographic dividend. President Joko Widodo stated in October 2017 that the demographic window of opportunity can be a blessing, but it can also be a disaster if the quality of the country’s human resources is not good enough to find good jobs (Yulianto, 2017). Around 60% of the Indonesian workforce are only graduates of primary and junior high schools. There are currently millions of (educated) unemployed Indonesians who cannot be absorbed by the labour market (Van der Schaar Investments, 2017) and the unemployment rate for people between the age of 15 and 24 is far above the country’s national average.

Malaysia’s prospects regarding the demographic dividend are somewhat similar, but the country is in a different position. It has reached the so-called sweet spot, which provides the optimal balance of demographic costs and benefits. In addition, the population with ideal demographics is still growing so that the country can look forward to a longer period of favourable demographic dividends. Consequently, a study by the Research Unit of CIMB wrote that for “Malaysia to seize the dividend, the time is now. Given that Malaysia is currently undertaking structural reform measures to elevate its GNI per capita to US $15,000 by 2020, the potential to yield a high demographic dividend that coincides with higher incomes can be substantial over the next two decades” (CIMB, 2015: 15).

However, the key to this endeavour is reducing youth unemployment. The World Bank estimated that Malaysia’s unemployed youth had declined from a peak of 11.6% of the total labour force aged 15–24 years in 2009 to 10.2% in 2012 (Teo, 2015). The Malaysian Employers’ Federation (MEF), on the other hand, argued that a smaller manpower pool might not be the biggest problem in a country with an ageing population because industries would opt for increased automation. “The types of jobs needed in the future won’t be labour intensive,” said MEF executive director Shamsuddin Bardan (quoted in Augustin, 2017: n.p.).

4.3 Migration and Urbanization

Migration movements will also affect the population policies in all three countries. Currently, and as the UNDP predicted in the next 25 years as well, Malaysia will be a destination for net immigration whereas Indonesia and the Philippines will be migrant-sending countries. As a comparatively rich country, Malaysia attracts labour migrants from nearly all its neighbouring countries, particularly Indonesia, but also the Philippines and more distant countries such as Myanmar, Bangladesh, Nepal, China and India. Many of these migrants aim to live permanently there and/or become Malaysian citizens as the socio-economic situation is regarded as more favourable than in their countries of origin.

Indonesia and the Philippines, in contrast, will have a continued outflow of (mostly relatively unskilled) labour migrants to neighbouring countries and the Middle East. Official figures are difficult to obtain, because a high number of migrants are not officially registered. However, it is estimated that at least 3 million labour migrants and 2 million unregistered immigrants (together around 15% of the total population) are currently in Malaysia. The UN predicts that there will be increased migration to Malaysia in the future, which will add to its population growth (Goerres et al., 2020).

In the Philippines, more than 10 million citizens (or more than 10% of the total population) are working outside of the country and are registered as Overseas Filipino Workers (OFWs). Nearly every family, especially in rural areas, has family members abroad and, in the absence of a welfare state, waits for their remittances. The Philippines are the third-biggest remittance-receiving country (after India and China) with around 33 billion US-Dollars (World Bank, 2018), which is more than 10% of the total GDP of the Philippines. In the Philippines, emigration is a common way to escape poverty and is openly promoted as such by the government and various private agencies. This is similar in Indonesia, but the percentage of people and remittances is significantly lower. Only around 1% of the total GDP comes from remittances of Indonesians working abroad. According to Minister of Manpower Hanif Dhakiri, the number of these so-called TKI (Tenaga Kerja Indonesia) is around 9 million people, 55% of whom are working in Malaysia. In contrast, only around 85,000 foreigners are working in Indonesia (Putera, 2018).

In so far, Indonesia’s contemporary population issues are very different from those of the 1970 s and even the 1990 s, when high fertility rates and population growth were regarded as pressing problems. Nowadays, population ageing and migration have become increasingly important emerging issues (Ananta & Arifin, 2014: 29). Much later than the Filipinos, Indonesians have become highly mobile in their search for income, and the labour market for them is no longer confined to their districts or provinces, but has expanded to the entire world (Ananta & Arifin, 2014: 39).

Another dramatic population trend in Indonesia is rapid urbanization. In 1990, around 69.4% of the Indonesians lived on the countryside and only 30.6% in cities with more than 100,000 citizens. Only 25 years later, in 2015, the urban population has become the majority (with 54.5%). For the future, the UN projected that by 2050 two-thirds of Indonesia’s population will live in urban areas. Similar developments have taken place in the Philippines over the last 50 years. With 337 inhabitants per square kilometre in 2013, the country is among the ones with most pressure on land resources worldwide (Boquet, 2017: 118). Metro Manila is regarded by many to be the most densely populated urban area in the world (Deloitte, 2017). Urbanization has also considerably transformed the Malaysian population over the last 50 years. In 1960, only 26.6% of Malaysians lived in urban areas and 73.4% in the countryside. By 2015, the living situation has reversed, with nearly 75% of the Malaysians living in cities.

For the respective national economies, the above-described processes constitute a positive development, as urbanization and industrialization are necessary to grow into the ranks of a middle-income country (Van der Schaar Investments, 2017). However, urbanization also creates many problems and raises new challenges for political decision-makers. Currently, Malaysian and even more so Indonesian and Philippine cities are already plagued with problems such as air pollution, smog, noise, lack of access to safe water, inadequate sewer systems, limited living space and lack of infrastructure. Limited public transport possibilities and a huge rise in private car ownership in recent years led to frequent traffic collapses and regularly to huge traffic jams in Southeast Asia’s cities. The capitals of Indonesia and the Philippines, Jakarta and Manila, belong to the most congested cities worldwide, causing enormous economic damage. Due to time loss and higher transport costs, these cities are estimated to account for 2–5% of the national GDP (Dancel, 2017). The expected substantial rise in urban population over the next 25 years, especially among the urban poor, will compound these problems.

4.4 Regional, Ethnic and Religious Differences of Population Growth

Another important issue for population policies in Indonesia, Malaysia and the Philippines is the fact that there are remarkable regional differences in terms of demography in all three countries. Additionally, all three countries have significant variations concerning the fertility rates of certain ethnic and religious population groups, which has an impact on population policies (see also Skirbekk and Navarro, this volume). A general trend is that more rural and less developed parts have higher birth rates than urban and richer parts of the country. In Indonesia, the Eastern provinces of East Nusa Tenggara, Maluku, North Maluku and West Papua have the highest average fertility rates of more than 3 children per woman. All of them belong to the provinces with the highest incidents of poverty and underdevelopment. Not surprisingly, the lowest birth rates can be found in the urban (and rather developed) provinces of Jakarta and Yogyakarta as well as in the provinces of East and Central Java, which have population sizes of more than 30 million people, but can be rated as rather well-developed. Yogyakarta, Central and East Java are also the only provinces in which people older than 65 make up more than 10% of the population (UNPFA, 2014: 25).

As Indonesia, the Philippines also have the highest fertility rates among the provinces with the poorest people. In general, the very high spatial diversity in the Philippines is quite remarkable (Balicasan, 2007). Metro Manila’s HD for 2016 is comparable to that of Poland or the Baltic States, whereas that of the Bangsamoro area in West Mindanao is comparable to Eritrea and Niger. The two Philippines regions have also the lowest and the highest total fertility rate in the country, with an average of 2.3 children per woman in the National Capital Region and 4.2 in the Bangsamoro province.

In the latest National Development Plan, it can also be seen that the level of education and wealth of women is a decisive variable for the number of children. While Filipinas with no or only elementary education on average have 3.8 or 4.6 children, those with a college degree or higher have on average only 2.1 children. The lowest education quintile of the Philippine women gets an average of 5.2 children, whereas this number is only 1.7 among the highest quintile (National Economic and Development Authority, 2017: 203).

Malaysia also has some remarkable regional differences in birth rates. The birth rates in the rural and rather traditional Islamic states of Kelantan and Terengganu at the East coast of Peninsular Malaysia are significantly higher than in the rest of the country, whereas the birth rate on Penang Island, a rather urban state with a high percentage of Chinese population, is the lowest in all states. The birth rate in the rural and less developed East Malaysian states Sabah and Sarawak on Borneo Island, with a lower percentage of Islamic population, is also remarkably low.

What makes Malaysia a special case in terms of population policies is the sensitive issue of race and religion in the country. The Malays, who are considered indigenous to Malaysia and have Islam as their religion, were only a very narrow majority compared to other ethnic groups. But since the Malays had a much higher fertility rate than the other ethnic groups, population growth has resulted in significant changes in the ethnic composition of Malaysia. This trend will continue over the next 25 years. The proportion of Malaysian Chinese and Malaysian Indians is predicted to shrink as their birth rates are significantly lower than those of the Malay Muslims. The fertility rates of the latter have remained relatively high due to pro-natalist cultural values and, to some extent, the traditional role of women as housewives and mothers in traditional Islamic lifestyle. Another reason is that the Muslim-Malay are living in rather rural areas and have less income than the other ethnic groups (Zin, 2013: 236, 238). Particularly, the Chinese community in Malaysia (which is generally more urban, wealthy and educated than other ethnic groups) but also other ethnic and religious minorities in Malaysia fear that they will be further marginalized economically and politically due to the growing Malay-Muslim birth rates.

Another major issue of political demography in Malaysia is the claim that the national government, which is dominated by Muslim-Malays, is actively encouraging the immigration of Muslims from other countries (including Indonesia and the Philippines) in order to improve the ratio of bumiputera towards other ethnic groups. Particularly, in the East Malaysian states of Sabah and Sarawak, which historically did not have a Muslim-Malay majority, the so-called Project IC, which allegedly gave identity cards to several hundred thousands of “illegal” Muslim immigrants, has been debated intensively (Sadiq, 2005), but until 2018 has not been resolved completely. Not only in Malaysia, but also in Indonesia and the Philippines, the issue of regional, ethnic and religious differences of demographic developments will remain a political topic in the years to come. All three countries have very heterogeneous populations and their respective demographic behaviour will have an impact on domestic politics, internal conflicts and economic transformations. Thus, political demography, as defined by Kaufmann and Toft (2012: 3) and Vanhuysse and Goerres (this volume), will be of utmost importance for the assessment and analysis of socio-economic and political developments in these countries.

5 Conclusion: The Risk of Premature Ageing

Indonesia, Malaysia and the Philippines are typical examples of a demographic transition. In this process, “societies move from having a combination of low life expectancy and high fertility to the opposite condition with high life expectancy and low fertility” (Goldstone, 2012: 18). Whereas wealthier countries have completed their demographic transition, the three Southeast Asian countries are still medium-developed and thus currently still in the process of their respective demographic transitions. The Philippines have just entered the early stage of the demographic window of opportunity that promises high economic growth rates, whereas Indonesia is already a bit longer in the era of demographic dividend. Malaysia is feeling the ageing of society the most of the three countries. The demographic change towards an ageing population with a significant percentage of elderly people will be a huge challenge for all of the three countries. The existing pension and healthcare systems are not fitting the increasing demand in future. At least two out of the three countries have reacted and increased the retirement age for public servants. This is, however, a small step compared to other, mostly highly unpopular measures, which the respective governments have to implement in order to deal with the multifaceted problems of an ageing population.

The major problem for emerging economies such as Indonesia or the Philippines—which have not yet reached a middle-income country status and where poverty is still widespread—could be that economic growth stalls before they transition into high-income status. Getting old before getting rich is one the biggest medium-term structural challenges for developing countries in Asia and other parts of the world. The premature ageing of their respective populations might inhibit their ability to join the group of high-income developed countries (Lee, 2017). Indonesia and the Philippines, but to a lesser extent also Malaysia, thus face the potential problem that they cannot reap the benefits of the demographic dividend due to problems in their labour markets. Migration within Southeast Asia is increasing, but it is mainly unskilled labour which is looking for job opportunities across borders. Regional imbalances also hamper the chances of the three Southeast Asian countries to become rich before the ageing process will set in. Rural and underdeveloped regions contrast with some developed parts of the respective countries, which already exhibit a demographic behaviour similar to fully developed economies.

When looking at the challenges facing the three countries, one has to be aware that the demographic transition has taken place within the lifetime of only one or two generations. The population of all the three countries more than tripled in the second half of the twentieth century and will further grow until the end of the first half of the twenty-first century. At the same time, Southeast Asia has transformed from one of the poorest regions in the world in the 1950 s (and in some parts into the 1980 s) to a quite developed region with an impressive increase of life expectancy, income and level of education over the last 50 years.

Therefore, the demographic change went hand in hand with a positive economic development. It is thus a challenging task for the governments of the three countries to manage the necessary adjustments for the societal transformation into ageing societies at a time when further economic progress will be more difficult to achieve and societal demands (e.g. on a welfare state, a national pension system or an affordable state-sponsored healthcare system) will continue to grow. Due to its advanced ageing process, Malaysia will be the first of the three countries to deal with a full-fledged ageing society, but at the same time it is also by far the most developed and smallest of the three countries. For Indonesia and the Philippines, these problems are likely to be greater, but they will have more time to adjust.