Demography and Infrastructure Collide in the Philippines

A story in the business section of the New York Times today caught my eye because it was discussing the need for more infrastructure development in the Philippines if the country's economy is going to improve. I was thinking about the fact that the US also needs infrastructure development--even though the current Congress does not want to pay for it--but the difference is that in the Philippines the rapid rate of population growth must be addressed, rather than ignored or even misunderstood.

The stakes are high for the Philippines, said Frederic Neumann, a managing director and co-head of Asian economic research at HSBC.
Mr. Neumann noted that the country was in what some economists call a demographic sweet spot, in which millions of young people will be entering the work force. That makes the country a competitive destination for investments in export-driven manufacturing, which have propelled many countries in East Asia to prosperity.
“This is the Philippines’ moment,” Mr. Neumann said. “China has been extraordinarily competitive in the last 20 years, but it is now — with rising labor costs — moving toward other types of production. The Philippines has low labor costs. It could pick up where China leaves off.”

The HUGE difference between China and the Philippines is that China experienced a dramatic drop in fertility, whereas the Philippines has not. Thus, China created a demographic dividend, but the Philippines is not on that path. The TFR in the Philippines is still over 3 children per woman, and the number of young people moving into the 15-24 age group is projected by the United Nations Population Division to keep growing well beyond the middle of this century. That is not an opportunity--it is a disaster in the making. It is going to take more than just infrastructure improvement for the country to cope with the ever larger cohorts of young people moving into the labor force ages.