Shrinking Societies: The Other Population Crisis - BusinessWeek

Shrinking Societies: The Other Population Crisis

The earth's population is growing at an alarming rate, but in some countries the lack of growth is the biggest problem

By Venessa Wong

A Japanese woman's role in society is to give birth, and "all we can do is ask them to do their best per head," said Hakuo Yanagisawa, Japan's former health minister. His remark, as reported by Bloomberg in 2007, drew criticism for being sexist, but it touches on one of Japan's most pressing issues: its rapidly aging and shrinking population.
Japan is expected to see its population contract by one-fourth to 95.2 million by 2050, according to the Population Reference Bureau, a Washington-based research group, making it the fastest-shrinking country in the world.Former Eastern Bloc nations Ukraine and Georgia came in second and third, respectively, in a ranking of more than 200 countries by Businessweek.com based on the Population Reference Bureau's 2010 World Population Data Sheet.
These countries defy the global trend—but that doesn't mean they'll be spared problems of their own. The world population is expected to expand by 37 percent to 9.5 billion in 2050, according to the report, but growth will not be evenly distributed. Developing countries will grow the most, with the population in Africa expected to double.
Meanwhile, other regions will shrink as the boomer generation ages, people have fewer children, and workers leave for opportunities abroad. The most widespread decline is projected in Eastern Europe, where birthrates have declined since the breakup of the Soviet Union. The number of people in every country in the region, except the Czech Republic, is forecast to contract. By 2050 the region will have lost 13.6 percent of its population, according to data from the Population Reference Bureau.
"Europe, Korea, and Japan have gone into panic mode," says Carl Haub, a senior demographer at the Population Reference Bureau. A declining population impacts a country's economic growth, labor market, pensions, taxation, health care, and housing, according to the U.N. Globally by 2050, the number of older persons in the world will exceed the number of young for the first time in history, according to the U.N. The imbalance will create havoc in the pension systems and make it difficult to support retired and elderly persons, Haub says.
Despite these economic and social consequences, there have been no easy long-term solutions for countries trying to reverse this trend. "Demographic changes are pretty glacial," says Haub.

Incentivizing Growth

That does not mean governments are not trying. Many countries are on a mission to raise the number of births. Although migration patterns affect many countries—such as Lithuania, where the number of people leaving the country is several times the number entering it—they change quickly and can be difficult to project.
Japan's fertility rate fell from 1.57 children per woman in 1989 to 1.26 in 2005, according to Haub. It has rebounded to 1.4, but remains below the rate needed to replace the population: 2.
To encourage people to have more children, the government started implementing a series of programs called "Angel Plans" in 1994, says Toshiko Kaneda, senior research associate at the Population Reference Bureau. The plan offers counseling to couples, increases child-care services, and provides a monthly stipend of 26,000 yen (approximately $303) per child to ease the burden of raising a family.
In Germany, where the fertility rate is 1.3, the government pledged to increase the number of nursery schools and introduced an allowance that pays 67 percent of a parent's income for the first year after a child is born if he or she stays home.
Even in Iran, where the fertility rate is 1.8, President Mahmoud Ahmadinejad recently introduced a policy that pays families for every child born and deposits money into the child's bank account until he or she is 18.
Such policies only have moderate success, says Dimiter Philipov, a research group leader at the Vienna Institute of Demography in the Austrian Academy of Sciences. As subsidies mainly cause people to have children earlier, the number of births typically increases in the first few years after a policy is passed. The allowances are much lower than the amount needed to raise a child, but "this is a success because it brings in more babies and makes population changes smoother," he says.
Also, while declining fertility was once attributed to the falling marriage rate, today the deteriorating job environment also affects people's decisions to have children, according to NLI Research Institute in Japan. Thus, in developed countries, rather than offer financial incentives, Philipov says, it is more effective to relieve pressure on parents through child-care services and ensuring job security for mothers. "Some would say no one has done it better than France," where there is a broad menu of services for women and parents, says Haub.

Ideal Fertility Rate

Some argue the need to boost the fertility rate might not be so urgent. Tomáš Sobotka, a research scientist at the Vienna Institute of Demography, wrote in February in a column for The Guardian in the U.K. that demographers have been envisioning the demise of Europe since birthrates in the region began declining in the late 19th century, but "it is not population size but affluence and technology that make some countries more powerful than others."
Philipov says a debate has emerged about the ideal fertility rate. Advances in science and technology that boost productivity might compensate for a fertility rate below the replacement level, such as 1.7 to 1.8, he says.
Still, a fertility rate of 1.4 or 1.5, as seen in many countries, is "too low," Philipov says. At that level, the number of entries into the labor force becomes too narrow, making it difficult to support pensioners and children.

Elder Care

As fewer children are born, the fastest-growing age group in the world is people age 80 and older, according to the U.N. In 2000, there were about 4 people over age 85 for every 100 people ages 50 to 64; by 2050, it will rise to 11.
The situation is more dire in places such as Japan, where the Population Reference Bureau predicts there will only be one working-age person for every person over age 65 in 2050. Already, there are long waiting lists at nursing homes in Japan's cities. To meet demand, the government has been recruiting, testing, and training nurses from Indonesia and the Philippines.
Also, new technologies are being introduced in Japan to serve the elderly, although they are no substitute for people. For example, companies have reportedly been designing robot caretakers, devices for remote medical care, and cars that monitor brain activity to assist older drivers.
Over the next 40 years, the age pyramid will be upside down and technological advancements will only provide limited relief. While demographic trends are difficult to change, Haub says, "something will have to happen."
Click here to see the 25 countries with the fastest-shrinking populations.

Wong is a lifestyle and real estate reporter for Bloomberg Businessweek.

Shrinking Societies: The Other Population Crisis - BusinessWeek

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Would you like a helicopter or minisub to go with that megayacht? - International Herald Tribune

Would you like a helicopter or minisub to go with that megayacht?

By John Tagliabue

Monday, October 1, 2007

MONACO: Massimo Vilardi, an executive with Eurocopter, came to this year's Monaco yacht show to sell helicopters.

Helicopters? At a boat show?

Yacht sales have increased 10 percent to 15 percent a year in the last few years, and this year was no exception. Since everyone who is anyone has to have a yacht, and increasingly does, what buyers want most now, naturally, are accessories: minisubmarines and helicopters.

Olivier Milliex, head of yacht finance at the Dutch bank ING, summed it up best. "Today, a mega-yacht is indispensable," he said. "It's not like 15 years ago, when a yacht was a luxury item."

Stock markets may be in rough seas and oil prices exploding, but none of that put much of a blemish on the mood at the trade fair last month in Monaco. Europeans often watch boat fairs like the canary in the coal mine to judge the overall health of their economies. But Monaco may not be the best bellwether: if other boating fairs are prêt-a-porter, Monaco is, by design, haute couture.

The annual boating trade fair, hardly the largest in a series of fairs that go from Cannes to Genoa to Fort Lauderdale, Florida, at the end of October, ran here from Sept. 19 to Sept. 22. Monaco limits the number of exhibitors to about 500; moreover, many yacht builders do not even show yachts. Their customers do not want off-the-rack yachts, they want boats custom-built to designs that will not be replicated.

One bauble that increasing numbers of big yacht buyers are asking for is a helicopter. Of course, that means adding a pilot and a mechanic to the yacht's crew, but for the people who buy these yachts, that is hardly a concern. So Vilardi, head of marketing in the business and private market segment of Eurocopter, a unit of the EADS aerospace group, has linked up with the British yacht broker Edmiston to meet their wishes. At Monaco this year, Edmiston showed a 60-meter, or 200-foot yacht with Eurocopter's smallest helicopter, which sells for about $2 million, perched atop.

"Our motto is, 'To create what money can't buy,' " Vilardi said. "You're looking at a global offer: a car, a yacht, a helicopter, maybe a plane." And, maybe, a submarine?

Across the fair from Edmiston, the Dutch company U-Boat Worx was showing its colorful two-seater submarine, whose bulbous shape makes it look like Mickey and Minnie Mouse would drive it, with a list price of $246,000. The minisub, said Erik Hasselman, U-Boat Worx's head of sales and marketing, is ideal for stowing on a yacht, but for safety reasons can only dive to about 50 meters, where there is still surface light. "It's only for recreation," he said.

The banks at the trade fair, said Milliex of ING, were doing cross-selling: offering tax and finance advice to the same people who they serve as private banking clients.

Some wealthy customers, for example, prefer a mortgage for their yacht, taking advantage of low interest rates, rather than tying up cash in a yacht purchase. Others need advice on creating a company to buy their yacht, rather than purchase it directly, to save on taxes, or on registering their boat in a foreign country to enable them to pay lower social security contributions for crew members. Many of the yachts parked in Monaco were registered in George Town, in the Cayman Islands.

"Anyone who is in the oil business, naturally, is going to be motivated to build a yacht," said Hans-Erik Henze, senior vice president for yachts of Germany's Blohm & Voss, a division of the ThyssenKrupp steel group. "And that's where we do a lot of our business."

Blohm & Voss had the largest yacht at the show, the 105-meter Lady Moura, but it was moored offshore, not for visiting, being too large to fit Monaco's narrow harbor. Henze said the company's three yards had 15 yachts under construction. "Once, 100 meters was thought big," he said. Now we have several projects above that."

Despite the ostentation of Monaco's yacht shoppers, some bargain hunters come here, and they, in turn, are attracting shipbuilders from low cost countries. One of those was Timmerman Yachts, a Russian-Polish enterprise with yards in Moscow that is named for the Dutchman who introduced Czar Peter the Great to the art of shipbuilding. The yards build yachts in five sizes, from 25 to 47 meters, and there are 12

Asked why someone in Monaco would buy a Russian yacht, Irina Bogatyreva, a company official, replied unabashedly: "The price is cheaper, and the quality is the same as in other countries."

Curiously, some of the world's biggest yachts are owned by Russians. Roman Abramovich, the Russian tycoon, owns at least three, and has another under construction, the 165-meter Eclipse, which according to Monaco newspapers, will be outfitted with twin helicopter landing pads, and a submarine.

The high price of oil, which yachts burn as fuel, did not seem to worry anyone.

"I would say this market can withstand a lot of fluctuations, as the economy worsens," said Diane Byrd, executive editor of Power & Motor-yacht, the trade publication. "It's a small group of owners, a handful of people, and it's still growing."

Nor did the anemic U.S. dollar appear to be having much influence on the flow of orders. Westport Yachts, which showed a 50-meter, $29 million yacht, said that of five 35-meter yachts it would build next year, all were sold, and of five 40-meter yachts, three were sold.

What did seem to be creeping into the business is an awareness of the environment. In a narrow stand, Lance Sheppard hawked a foam and fiberglass product that replicates wood, like teak, hence sparing the forests.

"These days it's hard to get all types of veneers," said Sheppard, marketing director of Digital Veneer, a unit of the SMI Group, of Whangarei, New Zealand. "A lot of teak is illegally lumbered, some by the Chinese, in Burma and Nepal."

But the boat that dripped green, in spirit if not color, was a 50-meter yacht built by the Italian yard Mondo Marine. Renato Polo, a company official, listed the yacht's environmental assets: devices to recuperate its used water, filters on its twin diesel engines to capture particles, a hull covering that is benign to its marine environment, filtered glass to diminish the heat on board and hence reduce the need for air conditioning.

The $34 million yacht was built for Luciano Benetton, of the clothing chain whose ads always promoted social causes, for instance, against poverty or for education, and Benetton named it Tribu, Italian for Tribe, for his large family. Benetton gave the yacht five spacious bedrooms, each with its own bath, plus two exercise rooms and a sauna. Asked how much the environmental features would add to the bill for such a boat, Polo replied, "On a boat of this size, the difference in cost is laughable."