Category: Society

Categories
Economics Society

[2649] Malaysian demographics in 2040

Last week, the Department of Statistics released its projection of Malaysian population in 2040.[1] The Department projects that there will be 39 million persons living in Malaysia by 2040, of which 93% of them will be Malaysians. In 2010, there were 29 million persons living in the country with 92% of them being Malaysians. The median age is projected to be about 10 years older than what it is right now. In 2010, the median was 26 years old.

The projection has two population booms in it (possibly three; whether the third is part of the second or distinct by itself is up for debate). The first is the current generation either in universities or has just entered the labor market. The next boom is expected to happen between the next five and ten years or so as the earlier boomers start their own families and do what rabbits do (chart from the Department of Statistics):

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If the assumptions of the projection are taken to heart, Malaysia’s economic growth from now till 2040 might set to be strong if nothing disastrous like wars or institutional degradation happens. Growth may begin to slow down 20 years later in 2060 when the first Malaysian baby boomers enter retirement. The real demographic trouble may start in 2080 when the second boomers enter retirement.

The projection states that the Malaysian society will become an aging society by 2021 but this is merely definitional problem as the projected median age in 2021 is around 30 years old. That age is still well inside the productive age, and probably close to the optimal age/experience to productivity, wherever that point is.

It is possible that the second boomers may bring about a third boomers (there is a third local peak for 5-9 cohorts in 2040) but the fertility rate is projected to be pretty low by the time the second boomers reach their 20s, which is expected to happen in 2040s. Fertility rate in 2040 Malaysia is expected to match that of an advanced country.

The Malays and the other Bumiputras are expected to experience an annual population growth rate of less than one. The Chinese and Indians lose interest in making babies and only the mysterious “Others” will have an amazing rabbit-like rate of 2%.

So, it appears, 40 million to 50 million (or 60 million but anything above 60 million sounds like a very unlikely scenario) people may be the maximum number for Malaysia in this century.

The projection however may be conservative. The growth rate of non-citizens is low and given how ASEAN is set to integrate even further and on top of that, more globalization, one would expect more non-citizens.

But anyway, based on the population projection by the Department of Statistics, the population dividend Malaysia is enjoying is set to last for a very long time. It will probably outlast my generation, which is part of the first boom.

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[1] — [Population Projection, Malaysia 2010-2040. Department of Statistics. January 18 2013]

Categories
Society

[2648] The future importance of the Malay language

I have two related conversations to share. The first happened in a cab in Sydney and the other happened over lunch in Jakarta. Combined, the conversations are possibly a testament of the future importance of the Malay language.

The first conservation was not really a conversation. The cab driver, who was probably in his 40s or 50s, was overly chatty. He drove both the car and the conversation alone. “I came from Hong Kong,” he said without being asked.

“Oh, did you?” I answered with feigned surprise. I was tired and I wanted to go wherever I needed to go quickly and painlessly. So I took the cab. He did not take the hint, however, and so he went on talking.

So I learned that he immigrated to Australia some time when the United Kingdom returned Hong Kong to the People’s Republic of China in 1997. He left because he did not trust the communists and he did not want to risk his livelihood under communism.

Since he was already at it and I was trapped in his cab, I decided to somewhat participate in the conversation. I was especially encouraged to do so when he demonstrated that he was an anti-communist. At least, I thought, there would not be any ideological battle here.

But I wanted more nuance. So I suggested to him that China might be communist in name only these days as the Chinese government had embraced capitalism with a surprising fervor. He would have none of that. “The communists are not good.”

“I’m an Australian now,” he said to end that part of the conversation. To him, communism is communism and it is all the same.

The fact that he is a first-generation immigrant was easy enough to spot. He did not sound like a completely naturalized Australian. He shouted his English with a strong, harsh south Chinese accent. He failed to use the word ‘mate’ whenever it is proper to do so. He also did not end his sentences with question marks, like a stereotypical Australian would do.

Between the accent and the shouting, I had to frown to catch his words. I know it does not make sense but somehow frowning helps with my hearing.

Another thing that I made out of the conversation was that he understood the importance of Mandarin in this era. Who does not, really? With about one billion native speakers in China alone and the country becoming more and more open than the China that the cab driver once knew, there is really no room for a dispute.

However, he confidently said there are only two languages that mattered in this world: English and Mandarin. The word only stirred me.

“Only two?” I asked skeptically. In my head, I could name several more languages of global importance.

“Two only,” he replied with an almost angry tone. I could not be sure if he was really angry because he sounded angry throughout the conversation anyway.

The really interesting part of the conversation came after he gleefully expounded on the importance of Mandarin, almost exhibiting a hint of cultural superiority. Or maybe he was not. Something might have been lost in translation.

“What language do you speak?” he asked.

“I speak Malay,” I answered.

With the same confidence, he dismissed the Malay language as useless. “What would you do with that language of yours?”

I smiled, looked outside and tuned out. “Are we there yet?”

More than 5,000 kilometers to the northwest, in Jakarta two years later, a friend was treating me to lunch. The friend is an Indonesian of Chinese descent who is currently residing in Sydney. He was on Christmas holiday and I was travelling with Jakarta being my first stop.

“I’ve been in school for too long. I want to take a gap year. I want to see the world,” he told me after we argued whether Malaysia or Indonesia is the real owner of nasi goreng and batik, among many other things.

He is training to be a surgeon and he has been in university for too long. That means English has been his primary language for some years now. He has little opportunity to practice the other two languages that he speaks, which are Indonesian and Mandarin.

He plans to spend his gap year by staying in Beijing for six months to practice his Mandarin and another six months somewhere in Indonesia to practice his Indonesian, which is not very different from the standard Malay language. To most speakers of standard Malay, understanding Kelantanese is likely harder than understanding Indonesian.

He wants to practice Indonesian because he knows that the Indonesian economy is growing rapidly and the population is large; the country is the fourth most populous country in the world. A population of more than 200 million, add another 30 million from Malaysia and several more million from elsewhere, the importance of Indonesian and Malay will be as undeniable as Mandarin, contrary to the opinion of the Australian cab driver. The friend does not want to be in a disadvantageous position when the language finally becomes a major world language in the future. The friend is in his 20s and he has a more urban, modern and global worldview than the cab driver. He has some ideas of how the future will look like and he is preparing for it.

In contrast, the cab driver is living in the present and stuck with old ideas. All he sees are the vehicles on the road and nothing beyond that. The only fortunate thing for the cab driver is that, the development outside of Sydney or even Australia probably does not matter so much to him. So, he can afford to keep his opinion.

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First published in the The Malaysian Insider on January 16 2013.

Categories
Books, essays and others Economics Society

[2644] Albert Hirschman, and Exit, Voice and Loyalty

I just learned that Albert Otto Hirschman, the economist who wrote Exit, Voice and Loyalty, died in December 2012 as I was traveling across Java. Perhaps, this is an opportune time to review Exit, Voice and Loyalty which was published in 1970. I read the book some years back.

The idea presented in the book is pretty widely known now. So if one is to read about the book now, one would probably go, ”what is the big deal?” But you see, that idea came from this particular book. It is an influential book. At the very least, Hirschman was the one who formalized the very intuitive idea of dealing with disagreement in an organization.

The New York Times in its obituary of Hirschman told a story of William Safire and Albert Hirschman. William Safire was an amazing writer. I remember enjoying his sometimes hilarious column at The New York Times. Being an expert on language, he wanted to learn the origin of the term “exit strategy.” Safire traced it back to Hirschman.[1]

That is one proof how influential the book is.

Exit, Voice and Loyalty introduces a simple idea. A person in an organization has two options: exit and voice. The organization can be anything. It could be marriage, firm or even a state. It should be noted that the full title of the book is Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations and States.

A member of an organization is a member of an organization because he or she agrees with it to some extent. Depending on how tolerant the member is to the differences, he or she may decide to first voice out against the disagreement in hope to affect the position of the organization. The member does so because he or she cares about the organization.

If the divergence of position becomes too great, the member may decide to leave the organization altogether. The decision to leave may hurt the organization as the organization loses members.

The two options interact with each other. Some members have no opportunity to leave and so they employ the voice option to express their dissatisfaction. For Malaysia, the easiest example may involve Muslims where apostasy is hard if not impossible given all the restrictions imposed. This may explain why some Muslims are very critical of the religion, or at least the one sanctioned by the state in Malaysia. Of course, that is not the only reason for criticism. Many criticize the way Islam is practiced in Malaysia because they care about Islam. There’s loyalty in the religion. To them, leaving is impossible not because they are not allowed to leave, but because leaving is unimaginable.

So, loyalty is the glue that encourages the use of the voice option. Exit option is exercised if the glue fails.

The exit and voice option and its interplay which involves the notion of loyalty is probably best demonstrated in political settings. Application of the idea within political parties is probably the most widely known.

Another application involves immigration. I think I have written something about this as part of my degree requirement in what seems like a long time ago. It is easy to see how robust the model is. How many people have migrated out of Malaysia because they disagree with the prevailing policy?

What is interesting is that when a country has an authoritarian setting when the voice option can be deadly and exit is not really an option for one reason or another. I am unsure if this particular example is presented in the book itself but on Wikipedia:

Exit need not be physical, but can be mental or emotional. For example, under communism, many could not physically exit the country, but did not want to participate in the system either. In these cases, citizens could be said to exit from civic or political participation, as they were neither loyal to the party nor were they willing to voice their dissatisfaction (except for noted times of dissent, e.g., 1956 in Hungary, 1968 in Prague and the Revolutions of 1989) because doing so could lead to imprisonment, exile, or even death. Many thus mentally and emotionally exited their countries for the duration of a repressive regime they did not agree with but felt they could not fight or topple. The consequences of this exit can sometimes provide an explanation for why voter turnout is often low in countries where free elections are being held for the first time in years (or ever). [Exit, Voice and Loyalty. Wikipedia. Accessed on January 11 2013]

This obviously is not a comprehensive review. But what I can say is that it can be an enlightening reading, even if it is a common idea. It is not a thick book but there can multiple pow moments when you would go wow. You should read it as a tribute to a great economist.

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[1] — In 2003, William Safire, the columnist for The New York Times who also wrote the On Language column for The New York Times Magazine, led an informal search for the roots of the phrase ”exit strategy.” The search led to economists, who pointed to Mr. Hirschman, who denied culpability, sort of.

”Did he coin the phrase?” Mr. Safire wrote after interviewing Mr. Hirschman. ”No; it’s nowhere in his book. He used exit option. ”˜It was a somewhat new concept then,’ Hirschman recalls. ”˜I used exit to indicate a possibility, a strategy. When you are dissatisfied, you can use your voice option or your exit option. It is not so different from the political use today. Speak up or get out.’ ” [Nelson Benjamin Albert Hirschman, Optimistic Economist, Dies at 97. The New York Times. December 23 2012]

Categories
Conflict & disaster Society

[2635] To boycott Israel, we first need ties

The Israeli-Palestinian conflict can be an emotional matter to many Malaysians. While there are diverse opinions on the conflict, the pro-Palestinian sentiment is firmly in the majority in Malaysia. Each time the conflict between Israel and Palestine flares up, the pro-Palestinian side will egg the public on to do at least two things. One, they will organize a demonstration in front of the United States embassy on Jalan Tun Razak in Kuala Lumpur.

The other is a boycott against products sold in Malaysia that the pro-Palestinian side believes has something to do with Israel. McDonald’s has been on the receiving end of the call to boycott, but in a brilliant public relations move involving free burgers, I think the boycott died prematurely.

The truth is the demonstrations and boycotts generate more heat than light. It does nothing practical and significant to affect the situation in Israel and Palestine.

The reason for that is this: Malaysia has no traction with Israel because Malaysia does not maintain any significant relations with Israel. There is no real direct leverage that any Malaysian can use against Israel in the conflict.

To Israel, Malaysia is just that little trading country far out on the other end of the world that has little to do with Israel. Malaysia probably does not even exist to most Israelis, maybe apart from that one time when former Prime Minister Mahathir Mohamad claimed that the Jews ruled the world by proxy at a summit of the Organization of the Islamic Conference hosted in Kuala Lumpur in 2003.

If Malaysians truly want to have some traction on Israel, then perhaps Malaysia needs to find some leverage on Israel. One of those leverages may involve having an official relationship with Israel, which includes significant trade ties.

The power of a boycott is that it gets to where it hurts when it works, which is the pocket. At the moment, however, there is really no way a boycotting Malaysian can hurt Israel. A successful boycott at the very best hurts those who have ties with Israel and not Israel itself. That has the potential of making more enemies than friends. And influence comes from making the right friends.

As always, the boycotts and demonstrations against Israel are really directed against the United States and anything related to the US. The rationale is that the US is Israel’s greatest ally. Yet, making an enemy of the US is not the best thing to do for Malaysia given how China looms to the north and countries in Southeast Asia sorely need a power to balance Chinese influence in the region. Never mind that the US is one of Malaysia’s biggest trade partners. That means there are a lot of jobs in Malaysia created by US-related corporations.

Look at the boycotters’ favorite target: McDonald’s. Who do they employ? They are mostly Malaysians. In fact, who owns the McDonald’s franchise in Malaysia? Malaysians. So, the ones who would have been hurt by a boycott launched by the pro-Palestinian camp are Malaysians first. Israel itself is probably somewhere down the list, receiving the least brunt of all, if any.

With significant economic ties with Israel, perhaps Malaysians with strong opinions on the matter can do something more practical. With such links, the threat of a Malaysian boycott has a real and direct impact on Israeli interests. With interests in Malaysia which are susceptible to a Malaysian boycott, maybe then Israel may want to take Malaysian voices more seriously.

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First published in The Malaysian Insider on November 28 2012.

Categories
Economics Society

[2634] Any Malaysian welfare system may encounter some problems 30 to 50 years from now

An ageing population is a major economic problem to a number of developed countries. It is not ageing itself that is the issue or even slower economic growth. An aged society usually has an advanced and rich economy. Further economic growth does not mean much if the society is already extremely rich. The problem comes when there is a social welfare system that depends on the young to support it. With an aged society, the system would have to distribute its resources to the aged majority with the young minority supporting contributing to the system.

Malaysia does not the demographic problem yet because the country has a very young population. The median age is approximately 26 years old. In fact, Malaysia’s baby boomer generation has just entered or just about to enter the Malaysian labor market. With a high proportion of productive population, Malaysia is set to grow in a meaningful way in the long run.

Population growth, specifically labor force growth, is important to the sustainability of a social welfare system, including the Employees Provident Fund. The EPF is a retirement fund for those working in the private sector in Malaysia. It is not a comprehensive welfare system but it is still susceptible to demographic changes nonetheless.

At the moment, words on the streets have it that the EPF has more money than it can invest in Malaysia: there are not enough Malaysian sovereign bonds for EPF to buy (this probably leads to a conclusion that I dislike: the Malaysian government can comfortably raise more debt, especially in this environment of low yield without much economic repercussion). That is a testament of how favorable Malaysian demographics is at the moment.

This is the latest population profile for Malaysia from the Department of Statistics:[1]

You can see the baby boomer generation in the lower part of the chart.

What may be of concern — some far distant future, probably in 30, 40 or even 50 years — is when the Malaysian baby boomers begin transitioning into their golden years. I give the 30 to 50 years range because the current boomers are below the age of 30; remember the population median is 26. Assuming that they will retire at 60 years, you will get an estimate. My guesstimate is somewhere between 30 and 50.

Already the 0-4 years old, 5-9 years old and 10-14 years old cohorts are individually smaller than the 15-19 year old and 20-24 years old cohorts. The profile of a boom is clearer when one compares the population profile in year 2000 against that in year 2010.

There is still possibility that the baby boomers may have more children to produce yet another population boom sometime in the future. Yet, with rising income which tends to lead to smaller families everywhere in the world, I doubt it. And average Malaysian income is set to rise (at least in the next few decades notwithstanding business cycle) — please, not because of Pemandu — it’s the population boom dividend!

I may be wrong still — we will see that within the next 40 years’ time — but I think we are seeing our only population boom. If I am proven right, then the EPF might have trouble servicing the retirees in 40 or 50 years’ time, unless Malaysia suddenly develops a greater appetite for immigration.

The problem of EPF will be the least of our concern if Malaysia institutes the so-called 1Care scheme which aims at creating a more comprehensive healthcare system, which includes universal insurance coverage.

The problem however is beyond the horizon of the current leadership, in both Barisan Nasional and Pakatan Rakyat, judging by the populism of the day.

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[1] — Population and Housing Cencus, Malaysia 2010. Department of Statistics.