Indonesia wants fewer babies. But is it a good idea?

BusinessWorld
February 22, 2021
FREEPIK

INDONESIA’S AMBITIONS to rein in its vast population growth have a big flaw: The plans may work too well. One of the world’s top emerging markets may panic about a shortage of people in a few decades.

President Joko Widodo wants to cut the nation’s fertility rate to 2.1 in four years, down from 2.26 last year, the government announced recently. That’s a laudable goal; Indonesia is the planet’s fourth most-populous country with 270 million souls. The capital, Jakarta, is clogged and sinking, literally. The dominant island in the far-flung archipelago, Java, is home to more than half the republic’s residents and is among the most packed places on earth.   

A baby brake is a step frequently taken on the path to becoming a wealthy, developed country and a financial and manufacturing power. South Korea, China, Taiwan, and Singapore all curtailed births in the final decades of the 20th century by strenuously pushing family planning. But they overshot and are now scrambling to recalibrate and encourage couples to get busy. Japan has come to epitomize demographic challenges and dwindling headcount. Indonesia should heed lessons from the neighborhood.

Demographic trends evolve slowly over time and it can be years before officials realize they need to dial policies down. By that point, a country’s economy can change dramatically. Societies become more prosperous and urban. Manufacturing, often based on relatively inexpensive wages and a pool of abundant labor, loses some appeal. Services become a bigger part of commercial life. The costs of rearing children, including education and healthcare, climb. The increasing participation of women in the workforce can mean marriage and kids come later in life, as has been the case in Singapore. Powerful forces are hard to unravel once set in motion.

After a disastrous financial collapse in the late 1990s, Indonesia is now one of the Group of 20 largest economies. While its gross domestic product is markedly smaller than South Korea and Japan, the country last year graduated to upper-middle income status, according to the World Bank.

Jokowi, as the president is known, is pushing against an open door. The increase in Indonesian headcount is already cooling, according to census results published in January.  The population grew at a rate of 1.25% each year between 2010 and 2020, slower than the 1.49% recorded in the prior decade. While the fertility rate is higher than Jokowi wants, it’s far lower than levels of the mid-1960s. A fertility rate of 2.1 is generally considered what’s required to keep the population steady. (The census also showed those aged 60 or older account for almost 10% of the citizenry, the threshold for becoming an aging society.)

Indonesia made great strides during the three decades that autocrat Suharto was leader. Greater than five when he seized power in 1965, the rate came down to about 2.5 in 1998, the year he was toppled. Progress stalled thereafter. The initial years after Suharto’s exit were marked by administrative and political chaos before Indonesia emerged as a democracy, with significant power devolved to provincial authorities. Jokowi wants to kick-start the process again. His goal is to further eliminate poverty and lift the economic growth rate to about 7% a year from the average of about 5% during his first term from 2014 to 2019. Barred from running again, Jokowi is in the legacy business.

The president should be careful what he wishes for. During years of rapid growth in South Korea under army-backed strongmen, births fell, poverty was almost eliminated and healthcare improved dramatically. By the economic crisis of the late 1990s and the transition to full democracy, scrutiny of population trends fell through the cracks. Only fairly recently has the government realized it’s too late. Last year, South Korea’s population fell for the first time. In late 2019, I traveled through provincial areas and was taken aback by the demographic and commercial hollowing out, and billboards promoting weddings and births.

Indonesia isn’t there yet. The country’s concerns about crowding and poverty, especially given the crushing recession attributed to the COVID-19 (coronavirus disease 2019) pandemic, are valid. A few years ago, the government projected that the population was on track to exceed 310 million by 2045. Java’s infrastructure is groaning and the island accounts for much of the economy; in 2019, the cabinet proposed moving the capital to Borneo island. The plan has since stalled, but spreading the wealth and population were decent aspirations.   

Jokowi has his hands full. He doesn’t need to sweat the details of fertility. If the president can crank up economic growth, rising living standards might take care of the rest. That’s a big lesson from one-time Asian “tigers” that made the leap to wealth.

BLOOMBERG OPINION


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