Harnessing the Power of Demographic Dividend in Malaysia

Have you heard of demographic dividend?

It basically refer to a country with favourable demographic profile such as young population base, positive population growth, rising labour force and etc.

Malaysia is blessed to have a demographic profile which is positive to our long term economic growth. 

Key statistics:

a) Malaysia's population is estimated to hit 31.7 million people in 2016 as compared to 31.2 million people in 2015, translating into an estimated growth of 1.6%. 

b) World Bank reported that Malaysia's death or mortality rate has been on the declining trend, from 11 deaths per 1 thousand people in 1960 to 5 deaths per 1 thousand people in 2014.

c) Although birth or fertility rate per woman in Malaysia has declined from 6 births per woman in 1960 to 2 births per woman in 2014, our overall population growth remains in positive territory.

d) The average age of our population in 2016 is estimated to be around 28 years old.

e) Age group of 15-64 years old make up 70% of our population whereas age group of 65 years and above make up only 6% of the population. 

What could we possibly conclude based on the above information?

a) We are unlikely to face ageing demographic profile yet and the risk of shrinking population in the near future remains low.

b) Unlike country like Japan which has an ageing population with age group of 65 years old make up 26% of its population, rising mortality rate, less married couple and rising mortality rate. These factors could result in demographic crisis and further aggravate the various economic challenges in Japan.

c) With favourable demographic profile in Malaysia, there could be rising pool of working class and consumer base which could provide a 'sweet spot' to a lot of public listed companies in Malaysia. 

Rising population could result in:

a) Rising demand for food, electricity or even tissue paper ( i.e. F&N, Tenaga &  NTPM).

b) Rising demand for life and general insurance coverage ( i.e. Allianz & Takaful)

c) Higher demand for cars and houses and electronics appliances (i.e. UMW Holdings & Panasonic Manufacturing)

d) Higher demand for air travel (Air Asia).

e) Rising number of shoppers which could benefit retail malls (retail REITs).

f) Higher demand for brewery products (i.e. Carlsberg & Heineken Malaysia).

In short, investors could invest into companies which are the potential beneficiaries from the country's demographic dividend!

Rising population could result in higher demand for the companies' products or services which in turn, result in potentially higher revenue and profitability for the company. Eventually, a company with rising profitability is likely to generate more value to shareholders in the forms of dividend payout & capital gains.

Disclaimer: The companies mentioned above are strictly for illustration purposes only and should not be construed as an investment recommendation.