ADB shuns reality in search for an argument
'Be calm, Hong Kong, and have no fears. Your problem starts in 40 years.' (nod to Dr Seuss) The Asian Development Bank says it is time for Hong Kong to start worrying about its ageing population.
In its annual Asian Development Outlook, the high-living Manila-based bank says the rising proportion of old people in Hong Kong's population will have an increasingly large impact on government resources.
'Some estimates indicate the fiscal pressures created by the need to service an ageing population could lead to a public debt-to-GDP ratio that exceeds 20 per cent in about 40 years,' the report states.
Mighty long time that, and you may also have noticed the precision of a forecast phrased in such terms as 'some estimates' and 'could lead'.
It is understandable that the ADB should be concerned about age. It has itself long outlived its usefulness.
But ageing populations are a recognised problem for government social-support programmes across the world and it is worthwhile putting our own position into perspective here.
As the chart shows, we are about where we could expect to be on the ruling guideline that the rich get older and the poor get kids. Our population bulge is in the 35 to 39-year-old bracket, which makes us a good deal less grey-haired than Japan but still a good deal older on average than that nation of relative infants, Malaysia.
The bulge in the 30-year-olds may also be less than it seems. It is probably where you get the heaviest concentration of migrant workers and returning immigrants who may yet fall into some other country's social-services net when they retire.
But, yes, it is something our Government may wish to bear in mind, let's say at about No. 37 on the priority list.
What makes the ADB's comments interesting, however, is that it also solemnly warned the Hong Kong Government to avoid intervention in industrial matters. It is a rather unusual warning for Asia's least interventionist government.
The only notable intervention our Government has made recently is its purchase of $120 billion of stock on the market last August.
Given the movement of the Hang Seng Index since that time, the value of the portfolio may easily have doubled by now, which would put it at about 20 per cent of GDP.
Way to go, Mr Tsang. There is the ADB's debt forecast for 40 years from now covered through a well-timed investment in just eight months. You may consider yourself the most successful Asian pension-fund manager in history. Congratulations, sir.
Another gem in the ADB report is also worth noting. It says Asian policy-makers face a dilemma because defending currencies requires higher short-term interest rates, which means growth will be restrained by the high cost of capital.
Fact is that, outside of Indonesia, Asian interest rates are on average at record lows, yet currencies on average are stronger against the US dollar than they were a year ago.
Looks suspiciously like another case of an economist who has not let the figures get in the way of a closely reasoned argument.
