SHAPING THE FUTURE HOW CHANGING DEMOGRAPHICS CAN POWER HUMAN DEVELOPMENT

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Financial literacy
and education
support savings
and investment in
productive sectors
Countries no longer need to produce finished
goods to participate in global markets, if they
can make components competitively.
While global value chains unleash new
opportunities in niche markets, not all countries
are taking full advantage of them. Countries
in Central Asia, South Asia and the Pacific
need to further deepen production networks,
including by building trade links based on local
labour market skills and available technology.
Leveraging local expertise could spur industrialization
and job creation in new areas, and
enhance labour competitiveness.
MOBILIZE AND UTILIZE SAVINGS
Savings are a powerful instrument to magnify
the demographic dividend, with the right policy
instruments in place. Maximizing the contribution
of savings requires effective collection and
mobilization, as well as a stronger environment
for investment.
Mobilize savings from all households: The national
savings rate, while high in some Asia-Pacific
countries, varies considerably across the
region, in part due to the fact that many people
do not have access to financial institutions. In
East Asia and the Pacific, 55 percent of people
hold an account at a financial institution, while
in South Asia, the share is only 35 percent. 52
This often means that the poor in particular have
less cash in times of distress, making them more
vulnerable to shocks, whether from economic
crisis, a job loss or a health emergency. Other
losses come when the financial sector is unable
to use these savings for productive investments.
The most common reasons for not having
a bank account include lack of money, and
the expense of opening and maintaining an
account. 53 Other barriers comprise lack of trust
and regulatory obstacles, knowledge gaps, social
constraints and behavioural biases. 54 The
distance to financial institutions, especially for
people in rural areas, is an important factor too.
Bank expansion in rural India from 1977 to
1990 led to an increase in poorer people saving
and contributed to a 2.2 percent reduction of
rural poverty. 55 While opening new branches
in remote locations can be a costly disincentive
for banks, technology can now play a big role
in boosting access. Mobile banking is picking
up in South Asia, where more people are using
telebanking services to deposit and transfer
money, make payments, receive remittances
and collect social security benefits. Kiosks in
some cases allow people to convert their cash
to electronic money. 56
Financial literacy and education could support
the extension and use of financial services.
Hardly any country, except Japan, has financial
education in its school curriculum. National
surveys of target groups—such as youth and
women—will help understand their specific
needs and challenges. A national strategy for
financial literacy could guide this process, but
only a few Asia-Pacific countries have these,
such as India, Indonesia and Japan. 57
Effectively collect and use tax revenues: Tax
revenues are expected to increase during demographic
transition, given a larger working-age
population, but poor tax administration remains
a challenge. A majority of countries in South
Asia and East Asia are unable to effectively collect
taxes due to corruption, tax evasion, lack of
transparent collection systems and inadequate
technology, among other factors. Personal income
taxes remain a small portion of total tax
revenues, although there is significant potential
for this to increase while the demographic
window is still open. With the exception of a
few countries, including Mongolia, Viet Nam
and some Pacific island states, a majority of
countries need to undertake major reforms to
boost their capacities to generate tax revenues.
Having a wider tax base may be opportune
for governments to build long-term capital, such
as by investing in pension schemes and public
infrastructure. Early investment in national pension
systems will give the current working-age
population enough time to save and support
themselves when they retire, and will limit
future fiscal burdens. Building infrastructure
within and across national boundaries can forge
economic links and foster industrial growth
while achieving goals such as inclusive access
and environmental sustainability. Many cities
still require efficient systems for transport and
energy, which contribute to economic and environmental
aims as well as higher quality of life.
Industrialization, innovation and development