Wednesday, October 14, 2009

Thailand needs to prepare now for an ageing society

Japan and Thailand have enjoyed a long-standing relationship in most diverse areas, supported by a special relationship between the Royal Family and the Imperial Family, as well as by robust exchanges in trade, investment and culture.

Japanese ambassador Kyoji Komachi says Japan can lend Thailand the benefit of its experience in dealing with the aged.

With structural changes in both countries, the time has come for us to move on to more policy-oriented dialogue on issues affecting us both.

One of the most pressing issues now is how to confront the challenges posed by rapidly ageing societies. We can start to discuss our experiences and identify an appropriate social safety net model.

Thailand has achieved a remarkable economic growth particularly over the past two decades. In the process, the structure of the Thai economy has undergone significant transformation. Now agriculture accounts for only about 10% of GDP, while manufacturing makes up over 30%.

Such a rapid change reminds me of the post-war Japanese economic growth. The so-called Japanese miracle not only increased the overall GDP of Japan but also provided an opportunity to reduce the income gap among various social groups. As a result, about 90% of the Japanese population came to regard themselves as members of the middle class. This was made possible thanks to the policy measures for realising more equal income between cities and rural areas, coupled with a fair tax policy and redistribution of budget resources from the central government to local governments. Farmland ownership reform, anti-trust laws and support for small and medium-sized enterprises also contributed to the process.

Of course, we should not forget the role played by the welfare system in Japan in this regard. In 1961, the universal public health insurance scheme was introduced together with a universal public pension system, which embraced both farmers and self-employed people in addition to the already well-looked-after civil servants and workers in big enterprises.

In 2000, after long discussion a universal long-term care insurance for the elderly was introduced.

Even during the period of high economic growth, the Gini co-efficient for Japan remained remarkably stable in the range between 0.25 and 0.40. According to Pasuk Phongpaichit, the total size of income by the top 20% of the richest group in Japan is only 3.4 times bigger than that of the poorest 20%, while the corresponding figures for countries of Europe and North America are somewhere between 6-8 times. Japan is regarded as one of the most equal societies in the world.

Against such a background Japan was relatively well poised to confront the challenges of an ageing society. But the pace of ageing in Japan exceeded a set of assumptions the policy-makers had worked on, which requires a constant review of policy responses.

A senior citizen in traditional costume smiles as she attends Valentine’s Day activities at a home for the aged in Ayutthaya this year.

The present demographic situation of Thailand resembles that of Japan in the mid-80s, where the share of senior population over 60 years old exceeded 10% of the whole population. This figure is the highest among Asean countries except for Singapore (UN World Population Prospects). The same UN statistics anticipates that Thailand will reach a stage where the share of citizens over 65 years will be above 14% of the whole population in about 20 years from now.

The point in question here is, how many years it will take for a country to reach the threshold of 14%? Because 14% symbolises a watershed beyond which it will be regarded as an aged society by the definition of OECD. If you have more time to adapt, it is easier.

Prof. Kei-ichiro Oizumi from Japan made an estimate projection for some Asian countries about how many years each country took, or will take, for the percentage of the citizens over 65 to increase from 7% to 14% of its population. In the case of Thailand, it may be only just over 20 years, between 2001 and 2023. For Japan, it was 24 years, between 1970 and 1994. It will most probably be about 25 years for China, between 2001 and 2026. Those European countries which enjoy all the benefits of a welfare state were accorded more time for adapting to such demographic changes. For example in the case of Sweden, it was 82 years.

Japan reached the 14% threshold in 1995, little over 30 years after the completion of all-inclusive healthcare and pension system. The arrival for Japan of this 14% threshold necessitated the review of relevant welfare measures already in place. The review involved a wide variety of policy issues with serious and difficult discussions over budget allocation.

Another important figure: According to Mahidol Population Gazette vol. 17 of January 2008, the total fertility rate of Thailand dipped to 1.50 in 2008, which forebodes the acceleration of an ageing society at a quicker pace than Japan. You have to maintain the rate above 2.0 mark to prevent a decrease in population. In addition, the rate of 1.50 means an ever-decreasing share of the young in the overall population.

All this compels us to believe that Thailand will follow the path Japan took and has to work hard to adapt to the social change, including more social safety nets, rather quickly.

In this regard, I am impressed with the strenuous and vigorous efforts the Thai government has been implementing. Newly-initiated policy measures such as 500-baht-a-month universal allowance for all elderly above 60 years of age, 300-baht-a-month incentive for volunteers engaged in elderly care and 1,000-baht-a-month support for the handicapped and HIV/Aids patients are very impressive, indeed.

All these point to the seriousness of the Thai government in confronting head-on the issues of an ageing society. And if the sharing of Japanese experience can be of any help, we stand ready.

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