PH expected to post strongest growth in labor force in Asia

The Philippines will likely post the strongest growth in labor force in Asia over the next decade and hit its demographic peak at 2085, American investment bank BofA Merrill Lynch said.

It is thus seen an “opportune time” for the Philippines, and other countries with similarly favorable demographics, to capitalize on their abundant labor resources and lower labor costs to attract greater foreign direct investments (FDI),” said a Merrill Lynch research written by Hak Bin Chua dated Aug. 23.

“Asia is only starting to feel the reverberations from China’s shrinking working age population and labor force. Significant shifts within Asia are already taking place in relative production, consumption and investment patterns as the costs and availability of labor diverge. The price of labor in Asia has been rising more sharply in recent years,” the research said.

But Merrill Lynch also noted that as barriers to foreign investments remained “daunting,” the outcome in countries like the Philippines had been “more an outflow of workers and talent to a growing diaspora outside their borders, rather than investments flowing in.”

The report noted that Asia’s demographic divide between North and South appeared stark over the next decade. It said that the latest UN Population 2012 revisions had made the divergence even starker by extending the demographic peaks for the Philippines (to 2085 from 2077) and Indonesia (to 2058 from 2036) while Thailand’s peak had been brought forward (to 2017 from 2020).

“Philippines, Malaysia, Indonesia and Singapore—in that order— will likely see the strongest labor force growth in Asia over the next decade,” the research said, noting that Thailand would emerge as the “old man” in the Asean.

In the coming decade, Merrill Lynch projected that labor force in the Philippines would expand by 21.3 percent, faster than its forecast for Malaysia (+15.4 percent), Indonesia (+15.2 percent) and Singapore (+14.3 percent).

Overall, the six largest countries of Southeast Asia (including Vietnam) will see labor force grow by an average of 12.2 percent through 2023—in stark contrast to the rest of Asia, where labor force may only grow by 5.1 percent led by India, the research said.

Other countries are seen facing decline in labor force as their population ages: Japan (-8.1 percent), Hong Kong (-5 percent), Korea (-2.3 percent), Thailand (-1.2 percent) and China (-0.9 percent). China’s demographic path may, however, be altered with a two-child policy.

“Still, Philippines, Indonesia and India have struggled to attract FDIs despite their resource advantage,” the report said.

The research noted that demographics were useful predictors of real GDP (gross domestic product) growth as changes in working-age population over the past decade (2002-12) were highly correlated with real GDP growth, especially if China is excluded.