The so-called demographic dividend, the benefit derived from an increasing supply of young workers, is one reason Japan’s second-largest shipbuilder expanded in the Philippines, where workers are on average half the age of its Japanese employees. Tsuneishi is considering Indonesia, the Philippines, and Myanmar for another shipyard, says Hitoshi Kono, chief of the company’s local operation.
Asia’s manufacturing powerhouses—Japan, South Korea, and China—are among the fastest-aging countries in the world, while developing nations in Southeast Asia are among the youngest in the region. As factories, jobs, and investment flow south to tap younger and cheaper labor, economic growth in the 10-member Association of Southeast Asian Nations (Asean) is poised to accelerate, propelling the area’s currencies and fueling consumer and property booms, Bank of America (BAC) says.
“The demographic dividend is over for Japan and Korea, and it will be over for China soon,” says Yoshimasa Maruyama, chief economist at Itochu, Japan’s third-largest trading company. “It’s happening now in the Asean area, and it will continue for some time.” The Chinese workforce will peak at about 970 million in 2020 as the population’s median age rises to 37.8, Merrill Lynch forecasts.
The Philippines is a “standout” among countries set to benefit from a bigger labor pool, says Chua Hak Bin, an economist in Singapore at Bank of America’s Merrill Lynch. The International Monetary Fund predicts the Philippines will be growing at an annual rate of 5 percent by 2017, compared with 3.7 percent last year. Growth in Vietnam will reach 7.5 percent a year by 2017, up from 5.9 percent in 2011. Chua thinks that over the long run the Indonesian rupiah and the Philippine peso may prove stronger currencies than the yen or won.
India has the biggest potential dividend of all, with a projected labor-force expansion of 95 million by 2020, a 12 percent gain from 2010. Even so, businesses such asLarsen & Toubro (LT), India’s biggest engineering company, and Leighton Holdings (LEI), Australia’s largest builder, say a lack of skills means there aren’t enough trained workers to build the roads, railways, and ports India needs. Adult literacy is above 92 percent in the Philippines, Malaysia, and Indonesia, while in India it is 63 percent, according to the United Nations’ Human Development Report 2011.
Another advantage for Southeast Asia is proximity to Japan and China, which have billions to invest overseas. Japan’s foreign direct investment into the Asean region more than doubled in 2011, to $19.6 billion, from the year before, surpassing the $14.2 billion it invested in China and Hong Kong, according to the Japan External Trade Organization. “Asean labor costs are becoming relatively cheaper because China’s wages are rising,” says Satoshi Osanai, a Daiwa Institute of Research economist in Tokyo. Migrant workers’ average pay rose 21 percent in China to 2,049 yuan ($322) a month in 2011, according to the country’s National Bureau of Statistics. The average wage in Japan is 26 times higher than in the Philippines, government and International Labor Organization data show. A Japanese laborer makes an average daily wage of $209.20; a Manila worker paid at the high end of the minimum wage makes about $11 a day.
Japanese investment has transformed the village of Balamban, which got its first shopping mall last year. “There were practically no jobs before, none. Nothing was happening until Tsuneishi came,” says Renold Macasi, 34, a general foreman at the shipyard. The company forecasts the yard will have 35 billion pesos ($832.4 million) in sales in 2012, more than double the revenue of five years ago. A rich dividend indeed.
The bottom line: Japan invested almost $20 billion in Southeast Asian nations last year, more than it invested in China and Hong Kong combined.
Yap is a reporter for Bloomberg News in Manila. Ujikane is a reporter for Bloomberg News in Tokyo. Adam is a reporter for Bloomberg News in Singapore.
Original article here: http://www.businessweek.com/articles/2012-07-26/young-workers-give-southeast-asia-an-edge