Authored by: Sitti Nadhirah
In Malaysia, life expectancy at birth stands at 73.4 years, with 11.3% of the population aged 60 and above. With mortality rates rising and fertility rates declining, it is predicted that this senior group will increase to 15-20% by 2040, subsequently transforming Malaysia into an aged nation. This demographic shift poses significant challenges to the nation’s economic productivity, fiscal health, and sustainability.
Economic Implications of an Ageing Malaysia
The shrinking workforce, reduced capital accumulation, and diminished innovation potential could threaten long-term economic growth and competitiveness. Moreover, the ageing population strains public finances as expenditures on pensions and elderly care rise, while tax revenues decrease from a declining workforce.Currently, Malaysia spends just 0.37% of gross domestic product (GDP) on elderly care – reflecting a critical need to increase investments in senior support services. This gap highlights the need to boost investments in senior support services.
(Source: World Bank, 2022)
To tackle these challenges, Malaysia must shift towards an economic model that prioritises optimised public spending, tailored for the elderly and economic inclusivity. This approach aligns with the emerging Silver Economy, which caters to individuals aged 50 and above. In the Asia-Pacific (APAC) region, the elderly population is estimated to reach 1.3 billion by 2050, presenting major investment opportunities. Evidently, 74% of this population belong in the middle-income segment with the average yearly household savings per capita projected to be USD12,583 in 2025 – highest in countries like Singapore, Australia, and Japan. This creates new avenues for investments across various sectors and geographies.
Shifting Family Dynamics and the Future of Elderly Care
As Malaysia faces the challenges of an ageing population, traditional family structure that once supported elderly care are evolving. With smaller family sizes, greater mobility, and rising rates of singlehood, new approaches to elderly care are necessary. Over the past five years, the number of aged care centers has seen a 24% rise, highlighting the growing need for alternative care solutions.
While Malaysian seniors prefer subsidised government healthcare – 82% of whom belong to lower or middle-income households – the country’s expenditure on elder care remains relatively modest at 0.37% of GDP. This is significantly below the Organisation for Economic Co-operation and Development (OECD) average of 8%, addressing the rising costs of pensions and healthcare amid a shrinking global workforce. In light of these shifts and financial concerns, the findings from KWAP recently launched Retirement Strategic Agenda report, private housing has emerged as a preferred option among government employees. This indicates that promoting early homeownership could be crucial in addressing future retirement needs.
In a broader context, international pension systems also highlight the importance of comprehensive planning. Based on the Mercer Pension Index 2022, which evaluates pension systems across 44 countries covering 65% of the world’s population, Singapore, UK, and Sweden rank among the highest due to their distinct retirement income systems. Unlike these countries, Malaysia relies heavily on the Employees Provident Fund (EPF), akin to Singapore’s Central Provident Fund (CPF), which may not provide enough support for the financial needs of an aging population.
(Source: EPF 2023 Annual Report)
Global Models and Strategic Opportunities for Elderly Care
As Malaysia explores new models for elderly care, it can draw insights from global examples. Japan, a prominent example of a super-aged nation, implemented a national long-term care insurance system over a decade ago, which entails a partnership with private sector providers to fund home nursing and elderly care centers. Likewise, China recently launched initiatives to incentivise both state-owned enterprises and private companies to innovate in elderly care services, spanning from smart healthcare solutions to financial planning tools. In G7 countries, raising the retirement age has emerged as a critical strategy to sustain national productivity, especially as Bain & Company projected 150 million jobs to transition to workers aged 55 and above by 2031.
(Source: United Nations Population Division, World Bank, 2023)
As retirees control an increasingly substantial portion of global wealth and expenditure, businesses and governments are experiencing shifts in global dynamics. This creates a conducive environment for strategic partnerships and investment opportunities across diverse sectors. While public equity markets offer accessible investment options, private markets present even greater potential, needing careful risk management and diversification. Diversifying investments ensures a balance between growth and value. This is particularly important in sectors like healthcare, which are highly sensitive to policy changes. Leveraging options and futures can effectively reduce market volatility.
While challenges persist, there are numerous opportunities for proactive stakeholders. Addressing the evolving needs of an ageing population demands robust investment and policy frameworks, where innovation and inclusivity can thrive. By strategically aligning investments with the demands of the Silver Economy, stakeholders not only foster economic growth but also pave the way for a more equitable and sustainable future for ageing populations across APAC and beyond.
Sources:
- Department of Statistics Malaysia. (n.d.). Newss portal. https://newss.statistics.gov.my/newss-portalx/ep/epLogin.seam
- Healthcare Asia Magazine. (n.d.). Malaysia’s budding elderly care plays catch up with the ageing population. https://healthcareasiamagazine.com/healthcare/in-focus/malaysias-budding-elderly-care-plays-catch-ageing-population
- United Nations Conference on Trade and Development. (2023). World investment report 2023. https://unctad.org/publication/world-investment-report-2023
- United Nations Economic and Social Commission for Asia and the Pacific. (n.d.). Recognize reality of a rapidly ageing Asia-Pacific region and revitalize the role of older persons in society. United Nations ESCAP. https://www.unescap.org/news/recognize-reality-rapidly-ageing-asia-pacific-region-and-revitalize-role-older-persons-society
- World Health Organization. (n.d.). Ageing and health. https://www.who.int/news-room/fact-sheets/detail/ageing-and-health
