Concluding Remarks

Singapore has experienced prolonged period of below-replacement fertility rates for more than three decades. Declining fertility and increasing life expectancy, along with high levels of per capita income and education, have resulted in profound changes in the age-structural composition of its population over the years. Such demographic changes have lead to population aging, labor force shortages, increasing elderly dependency ratios, and feminization of the elderly population, thereby posing significant challenges to the policymakers. The primary challenge has been to sustain its growth and economic dynamism, while simultaneously managing the implications of a prolonged period of low fertility on the economy and the society.

Singapore's approach to managing the challenges of prolonged low fertility rates has been wide-ranging. Singapore has emphasized high growth and prudent fiscal management to lessen the fiscal impact of its aging population. It is consciously attempting to focus on gross national product (GNP) which includes investment income earned overseas from accumulated financial assets. Its two SWFs have been quite aggressive in their investment strategies in pursuit of higher returns.

Singapore has consciously encouraged high net immigration on a sustained basis, but without altering the predominance of the Chinese population. Singapore has invested heavily in physical infrastructure, in social and cultural amenities, and has pursued flexible labor markets and government procedures to facilitate the inflow of requisite manpower. At the same time, it is cautiously encouraging past emigrants to retain some links with Singapore.

Singapore has primarily relied on a single-tier mandatory savings mechanism to provide for retirement income security, and health care. It has been reluctant to broaden social risk pooling through a multi-tier approach (even though it has run persistent government surpluses and accumulated comfortable foreign reserves), and has discouraged long-term institutional care for the aged. Such reliance, however, is contingent on the continued oneparty dominance of Singapore's political, social, economic, and cultural landscape. A more contested political arena and weakening of one-party dominance are likely to make the current mechanism politically unsustainable.

Unlike other high income, de-populating economies, it has not taken sufficient advantage of the demographic complementarities with other Asian countries (such as India, Philippines, or Viet Nam), by engaging in outsourcing and off-shoring activities, despite its geographical and cultural proximity to these economies; and technological sufficiency. It has therefore failed to extend its economic space.

As Singapore responds to low rates of fertility for a prolonged period of time, and forces of globalization, it faces a fundamental dilemma. It must ensure its competitiveness as a business location on the one hand, and meet its residents' needs and expectations on the other. The danger is that if the balance is shifted too far in the direction of Singapore as a business location, both aspects of Singapore (business location and a nation) may be undermined. If the balance is shifted towards meeting the national needs, then the trade-off will be acceptance of a somewhat slower growth.

Singapore will have to make participating in the labor force and procreating more compatible if it is to manage prolonged periods of low fertility. It will also have to meet the needs and expectations of an increasingly demanding and internationally mobile population for better balance between work and life; and for increased economic security and better risk management in old age. This will be a major challenge for the policymakers, and will test their abilities and ingenuity.

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