2

THE NATIONAL TRANSFER ACCOUNT (NTA) FOR MALAYSIA

3

1

MALAYSIAN DEMOGRAPHIC PATTERNS

CONCLUSION & THE WAY FORWARD

6.23 6.03

4.56

3.73

3.42

2.45

1.98 1.85 1.78 1.76 1.76

0

1

2

3

4

5

6

7

0

5

10

15

20

25

30

35

40

45

1950-1955 1960-1965 1970-1975 1980-1985 1990-1995 2000-2005 2010-2015 2020-2025 2030-2035 2040-2045 2050-2055

Tota

l Fe

rtili

ty R

ate

Cru

de

Bir

th &

De

ath

Rat

e (

pe

r 1

,00

0)

Period

Crude Birth Rate Crude Death Rate Total Fertility (Children per Woman)

1 MALAYSIAN DEMOGRAPHIC PATTERNS

Source: UN, 2013, World Population Prospects (The 2012 Revision)

Fertility, Mortality & Total Fertility Rate, Malaysia, 1950 - 2050

Pro-natalist policy (1980’s)

1 MALAYSIAN DEMOGRAPHIC PATTERNS

Age-Sex Pyramid for Malaysia, 1970, 2010, 2040

Source: UN, 2013, World Population Prospects (The 2012 Revision)

10 8 6 4 2 0 2 4 6 8 10

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85-89

90-94

95-99

100+

Percent

Ag

e G

rou

p

1970 1970

Male Female

10 8 6 4 2 0 2 4 6 8 10

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85-89

90-94

95-99

100+

Percent

Ag

e G

rou

p

2010 2010

Male Female

10 8 6 4 2 0 2 4 6 8 10

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85-89

90-94

95-99

100+

Percent

Ag

e G

rou

p

2050 2050

Male Female

1 MALAYSIAN DEMOGRAPHIC PATTERNS

TFR, Median Age and Life Expectancy for Malaysia, 1970 - 2050

Year TFR (children

per women)

Life expectancy at birth

(yr)

Life expectancy at

60 (yr)

Median

age (yr)

Male Female Male Female

1970 5.94 57.8 61.0 14.3 17.2 17.5

1980 4.16 63.5 67.1 15.5 18.2 19.7

1990 4.00 67.5 71.6 16.1 18.4 21.5

2000 3.10 69.6 74.5 16.7 19.0 23.6

2010 2.14 71.9 76.6 17.9 20.1 26.2

2015 1.91 73.5 78.2 n/a n/a 28.2

2020 1.85 74.4 79.0 n/a n/a 30.3

2030 1.78 76.2 80.5 n/a n/a 34.0

2040 1.76 78.2 81.9 n/a n/a 37.4

2050 1.77 80.0 83.2 n/a n/a 39.8

Source: DOSM, various years; United Nation (2013); Saw, 1988

1 MALAYSIAN DEMOGRAPHIC PATTERNS

Age Composition of Malaysian Population, 1970 - 2050

Year Number of Persons (million) Percentage of total

population

0-14 15-59 60+ Total 0-14 15-59 60+

1970 4.89 5.44 0.59 10.91 44.8 49.8 5.4

1980 5.39 7.66 0.78 13.83 39.0 55.4 5.6

1990 6.76 10.43 1.03 18.21 37.1 57.3 5.6

2000 7.80 14.17 1.45 23.42 33.3 60.5 6.2

2010 7.83 18.26 2.19 28.28 27.7 64.6 7.8

2015 7.74 20.14 2.78 30.65 25.3 65.7 9.1

2020 7.82 21.52 3.52 32.86 23.8 65.5 10.7

2030 8.17 23.46 5.22 36.85 22.2 63.7 14.2

2040 7.67 25.18 7.01 39.85 19.2 63.2 17.6

2050 7.32 25.05 9.75 42.11 17.4 59.5 23.1

Source: United Nation (2013)

Dependency Ratios and Ageing Index, Malaysia, 1950-2100

17.8 14.1 11.6 10.6 12.1 12.7 14.4 14.6 15.1 16.0 18.6 20.5 25.4

33.0 42.2

52.2 61.0

70.0 79.5

90.9

103.0 114.1

127.0

139.4 150.3

160.2 170.1

178.2 185.9

192.0 197.5

0.0

50.0

100.0

150.0

200.0

250.0

0

10

20

30

40

50

60

70

80

90

100

19

50

19

55

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

20

55

20

60

20

65

20

70

20

75

20

80

20

85

20

90

20

95

21

00

Age

ing

Ind

ex

(60

+/<1

5)*

10

0

De

pe

nd

en

cy R

atio

s

Year

Total Dependency Ratio Child Dependency Ratio Old-age Dependency Ratio Ageing Index

1 MALAYSIAN DEMOGRAPHIC PATTERNS

1 MALAYSIAN DEMOGRAPHIC PATTERNS

The Speed of Ageing

France (1865 - 1980)

Sweden (1890 - 1975)

Australia (1938 - 2011)

United States (1944 -…

Hungary (1941 - 1994)

United Kingdom (1930 -…

Japan (1970 - 1996)

115

85

73

69

53

45

26

Developed countries

Azerbaijian (2004 - 2037)

China (2000 - 2026)

Sri Lanka (2002 - 2026)

Malaysia (2020 - 2043)

Thailand (2002 - 2024)

Columbia (2017 - 2036)

Singapore (2000 - 2019)

South Korea (2000 - 2018)

33

26

24

23

22

19

19

18

Developing countries

Source: Kinsella and He, 2009;

U.S. Census Bureau, International Data Base,

accessed on October 20, 2014.

2 CONSUMPTION PROFILE

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95

Pe

r C

apit

a, R

ingg

it (

RM

)

Private other Private Health Private Education Public Health Public Education Public other

Public Education

Private

Education

Public other Public Health

Private

Health

Per Capita Consumption Profiles for Malaysia, 2009

2 INCOME PROFILE

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

22000

24000

26000

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94

Pe

r C

apit

a, R

ingg

it (

RM

)

Earning Self employment Labor Income

Per Capita Labour Income for Malaysia, 2009

Phase1:

Phase2 Phase3 Phase4 Sharp increase (19-33)

Slow growth (Peak=44)

Sharp decline till around 60

Gradual dissipation till around 90

The self-employed continued to work even after age 70s.

Many shifted from wage-based to self-employment upon retirement– self-employment peak around age 57/58

Note: Small proportion of total LC income earned was contributed by those under 20 (1.4%) and over 60 (4.38%)

Small proportion of employee continued working after 70

2 THE LIFE CYCLE DEFICIT FOR MALAYSIA

The Most Important Graph for Malaysia, 2009

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

22000

24000

26000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95

Pe

r C

apit

a R

ingg

it (

RM

)

Labor Income Consumption

2 LIFE CYCLE DEFICIT FOR MALAYSIA

The Life Cycle Deficit for Malaysia, 2009

-12000

-10000

-8000

-6000

-4000

-2000

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94

SURPLUS: A productive/surplus period of 31 years (between 26 to

57 years old)

DEFICIT: Child dependency: the first 26 years of

life; Older person dependency started at 57 and over

Most critical issues on financing the lifecycle deficits:

Planning: How the inter-temporal re-allocation can benefit the economy with good investment.

Choice of system: Efficient public transfers consider the efficient re-allocation system from the public taxes to the government services that can benefit development of human capital, reducing poverty or inequality.

Choice of Institution: Private transfer from family is critical, especially if there is no other means of the elderly to finance their consumption.

2 LIFE CYCLE DEFICIT FOR MALAYSIA

The productive/surplus period is 31 years (26 to 57 years old) 1. The average duration of education is relatively long;

2. A relatively high number of persons aged 55 and over are outside the labour force.

Recent extension of the retirement age to 60 has improved the life time income for wealth accumulation.

But, what is our wealth accumulation trend/behaviour during productive years? Is it worrying? EPF fears that many Malaysians in retirement will be in poverty due to

insufficient saving (The Malay Mail, 5 October 2014) which mainly caused by:

1. Premature withdrawal for housing, health and education;

2. The relatively low income of the employees which affects the amount that could be saved for their old age.

2 LIFE CYCLE SURPLUS FOR MALAYSIA

2 NTA APPLICATION: DEMOGRAPHIC DIVIDEND

First Demographic Dividend • Changes in the economic support

ratio

• Declining fertility leads to a larger share of effective producers, (More production and higher economic growth)

• Transitory: Continual decline in fertility leads to population aging (Smaller share of labor force, lower production, slower economic growth)

Second Demographic Dividend • Changes in lifecycle wealth • The growth in productivity induced by

an increase in the demand for lifecycle wealth.

• Compositional effect: population is concentrated at older, high wealth ages

• Behavioral effect: increase in duration of life and retirement lead to greater accumulation of wealth

Changes in population age structure interact with the economic lifecycle, affecting economic growth – Thus, taking the advantage of

demographic change to achieve rapid economic growth

Countries in the later stage of demographic transition: changes in age structure is not favorable as the share of working age population declines

Countries that rely on transfers (both public and familial): in meeting the retirement needs of the elderly, the 2nd demographic dividend may not emerge (Ogawa, Maliki & Matsukura, 2006).

-1.00

-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

First Demographic Dividend, Malaysia 1950-2050

By 2015, Malaysia has about

23 years to prepare by

taking advantage of the first demographic dividend Note:

Growth rate of the support ratio is the demographic

dividend

2 FIRST DEMOGRAPHIC DIVIDEND

2 THE DEMOGRAPHIC DIVIDEND

Demographic changes that brought economic growth is

approaching the end of the (1st dividend) period

The second demographic is:

More important to the economic growth than the 1st dividend

Not automatic; it requires policy that encourages capital

accumulation rather than relies on pension wealth to finance

consumption during the retirement ages

Thus, declining fertility and population aging could lead to a

higher economic growth if there are policies that

Encourage capital accumulation during working ages to support

retirement consumption

Stimulate human capital investment so as to raise productivity of the

future labor force

The Malaysian Government is heavily investing in its people through

public expenditure on health and education:

The amount of both deficit and surplus (LCD) raised these questions:

1. The possibility of bad financial behaviours and lack of

preparedness of Malaysian for their retirement. Thus, the need to

intensify financial education intervention programmes for all ages to

rectify the financial misbehaviour and improve the financial

wellbeing of Malaysians

2. The sufficiency of efforts in capturing the second demographic

dividend

3. The sustainability of public expenditure on health and education

4. The adequacy and effectiveness of the current social protection

system in Malaysia.

3 CONCLUSIONS AND WAY FORWARD