Business Times

Golden opportunity of demographic bonus to trigger economic growth

(Review - Prof. Indralal De Silva’s book, Population of Sri Lanka: Increasing Fertility and Challenges for Development)
By Professor Sirimevan Colombage, Senior Professor of Social Studies, Open University of Sri Lanka

Sri Lanka faces numerous socio-economic challenges in the present post-conflict period in uplifting the standards of living of the people. Acceleration of economic growth while restoring the livelihoods in the Northern and Eastern provinces, which were severely affected by the conflict, is a major challenge. In the background of these challenges, Prof. Indralal De Silva, in his recently published book entitled ‘Population of Sri Lanka: Increasing Fertility and Challenges for Development’, stresses the need to optimize the grand opportunity currently enjoyed by Sri Lanka in accelerating economic growth.

This, of course, is a “window of opportunity” what is known as the “demographic bonus” or “demographic dividend”. The term demographic bonus simply means an opportunity very rarely experienced by a country during a particular period which is characterized by an increase in the share of working age people in the population. In other words, the share of the number of dependents or non-working people (who are too young or too old) in the population remains low during that period. It is argued that this opportunity could be used to raise economic growth of the country. Sri Lanka is now enjoying this rare opportunity. Prof. De Silva urges the authorities to take advantage of the golden opportunity immediately as it is diminishing at a much faster rate than originally expected.

Golden era of demographic bonus

According to the population projections of Prof. De Silva, the demographic bonus period of Sri Lanka which began in 1991 will continue until 2017. Thus, we have already passed nearly two decades, and less than seven years remain. He emphasizes, therefore, that it is a prime responsibility of the government and other stakeholders to make an effort at least now to utilize this rare opportunity to foster economic growth. Even on previous occasions Prof. De Silva made this point in his population projections to no avail.

Demographic dividend is a somewhat neglected dimension in the policy arena in Sri Lanka, as there is hardly any reference to this critical aspect in the policy documents. In contrast, the four Asian Tigers or the Asian Dragons – Hong Kong, Singapore, South Korea and Taiwan – achieved fast economic growth by taking advantage of their demographic dividends, as clearly pointed out by the author. He projects that the demographic dividend of Sri Lanka is likely to end much sooner than envisaged in the original projections due to a rapid rise in the fertility rate in the country. Therefore, the author draws urgent attention of political authorities, economic planners, intellectuals and the general public to make use of this rare opportunity that we are about to lose.

As pointed out by Prof. De Silva, action should be taken to ensure the prerequisites to economic growth such as high domestic savings and investment, political stability, new employment opportunities and promotion of knowledge-economy so as to reap the benefits of the demographic bonus.

Demographic transition in Sri Lanka

As in the case of many other countries, Sri Lanka has been undergoing demographic transition during the last several decades. Broadly speaking, the demographic transition is a shift from a period of high and uncontrolled levels of mortality and fertility to one of low and controlled levels. The transition results in dramatic changes in the size and age structure of the population leading to various socio-economic implications. In Sri Lanka, a sharp decline in the mortality rates began in the mid-1940’s due to the expanded health services.

The gross mortality rate (number of deaths per 1,000 persons) declined from 35.4 in 1931-’40 to 21.5 in 1945, and to 6.0 in 1995. This led to a rise in the population growth. As the rapid population growth was detrimental to economic growth, the government took action in the 1960s and later decades to control fertility. As noted by the author, the successful implementation of fertility policies and family planning programmes helped to bring down the fertility rates at a rapid pace. In fact, Sri Lanka recorded the lowest fertility rates in the South Asian region, as observed by the author. For example, the total fertility rate (the average number of children a woman would bear during her lifetime) was only 2.67 in Sri Lanka as compared with 4.20 in India and 6.75 in Pakistan during 1985-’90.

Ageing population

Sri Lanka has been experiencing a low population growth of around 1 % per annum in the recent past mainly as a result of the rapid decline in fertility. The low population growth coupled with improved life expectancy which is already higher than in some western industrial countries have resulted in an increasing proportion of persons living to an advanced age in Sri Lanka. The proportion of persons above 55 years rose from 9 % in 1990 to 13 % by 2009. The ageing of population results in an increase in the old-age dependency ratio (the ratio of the number of people aged over 60 years to those aged 15-59 years), and thereby shrinking the population dividend. Prof De Silva projects that the old dependency ratio will rise from 14.3 % in 1981 to 19.3 % in 2011, and to 32.8 % by 2031. This trend will continue thereafter.

The increasing trend in the share of the older people in the population will lead to intensify the dependency burden marking the end of the golden era of demographic bonus. In about two decades from now, Sri Lanka’s population is expected to grow as old as today’s population of Europe or Japan today, but her level of income will be much lower than those countries. This is a major socio-economic challenge for Sri Lanka. In developed countries, the challenges of ageing are associated primarily with the negative impact of ageing on economic growth and it is not so difficult to divert additional public and private outlays for old age income support and healthcare. In Sri Lanka, the challenges are compounded by the fact that a larger proportion of the old people lack social security coverage. Allocation of financial resources for old age care is not an easy task, given the low income levels of the country.

Rising fertility trends

In addition to the ageing population, Prof. De Silva pinpoints another factor that will lead to speed up the disappearance of the demographic dividend. That is the reversal of the fertility trend previously experienced in Sri Lanka. According to the original population projections prepared by the author in 2007, the total fertility rate was expected to decline from 1.7 in 2006-2011 to 1.5 in 2021-2026. On the contrary, the total fertility rate rose from 1.9 in 1995-2000 to 2.3 in 2003-2006, according to the Demographic and Health Survey of 2006/07 conducted by the Department of Census and Statistics. Prof. De Silva points out that it was an unanticipated trend which shattered the expectations and assumptions of demographic researchers and planners. As a result, the country has failed to sustain the low fertility rate which was achieved much earlier than expected in the previous decades. A major implication of this rising trend of fertility is an increase in the child dependency ratio (the ratio of the number of children aged 0-14 years to the number of people aged 15-59 years) from 35.3 % in 2011 to 30.4 % by 2021. This trend is likely to prevail in the subsequent years, according to the forecasts.

Imminent threat

As highlighted by Prof. De Silva, the demographic dividend is projected to diminish at a much faster rate than predicted earlier due to the rising trend of fertility. This together with the aging of population will push up the total dependency ratio (child dependency ratio plus old-dependency ratio) from a low level of 53.6 % in 2006 to 54.6 % in 2011, and to 56.6 % by 2021. The increasing trend is projected to continue in the subsequent decades.

Sri Lanka has lost many opportunities at hand in the past to foster economic development. In the post-independence period, the country had a fairly educated and skilled labour force compared with some of the East Asian countries, in addition to its diverse natural environment. But these resources could not be optimally used for various reasons. Then Sri Lanka had a unique advantage at the time of liberalizing her economy in 1977 to set in motion the envisaged export-led growth, when many developing countries including the other South Asian countries did not even dream of liberalizing their economies. This opportunity could also not be used to our advantage again due to many reasons, which cannot be explained in this short space. Now, we are on the verge of the golden era of demographic dividend, almost missing this opportunity as well.

Prof. De Silva,a renowned demographer, should be commended for drawing our attention to this imminent threat of missing the demographic dividend, which seems to have been ignored by policy makers and researchers for more than two decades. He has made this distinctive contribution in the midst of his busy academic schedule at the University of Colombo. The book, which is based on a study sponsored by the Family Planning Association of Sri Lanka, is well organized with statistical data and scientific interpretations. It will be a useful reference material to students, researchers, policy makers and to those who are interested in the subject matter. The author may consider including a glossary in the future editions, as some of the technical terms appearing in the book may be unfamiliar to the layman. The book is currently published in Sinhala language, and I sincerely hope that the author will launch the English version soon for the benefit of a wider audience.

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