The Population White Paper challenges us to contemplate Singapore's future. In the projection, one thing is certain. The number of elderly citizens will rise to 900,000 by 2030. But how we are to cater to them and muster enough resources to support them is not so apparent.

An ageing population exerts a huge impact on society. Scholars use terms such as "demographic time bomb" and "silver tsunami" to describe its ramifications. Making it worse is low fertility. Taiwanese President Ma Ying Jiu described Taiwan's "shrinking and ageing population" as a "National Security Issue".

Low fertility and lack of immigration have caused the Japan workforce to shrink since 1996. In the 50 years after World War II, Japan went from ruins to riches, adding 37 million people to its labour force to a total of 87 million. Yet in the next 40 years from 1996, Japan's population will shrink back to where it started in 1950.

Lessons from other East Asian Countries

Many European and Asian countries alike are greying like never before in human history. Japan is ageing most rapidly. Following close behind are its Asian neighbours, with about a 25-year gap, as shown in the following chart. This chart shows that from around 2010, Taiwan, South Korea, Singapore and China will begin this uphill trend of rapid ageing. As Japan is way ahead in the curve, it serves as a useful reference point for us to anticipate our problems going forward. In terms of degree of ageing, Singapore at 11.1 per cent today is like Japan in 1984.

Lessons from Japan - Just what it is like?

Many of us are familiar with large cities such as Tokyo, Osaka and Sapporo in Japan. Three years ago, however, I had the chance to visit a mid-sized city outside Nagoya called Gifu. It was home to 400,000 people. What I saw in downtown Gifu City left an impression on me. A number of shops on the main street were closed for good. Amongst those which are open, they carried mostly merchandise for the elderly.

Before long, I found out that the Gifu population had been shrinking since 1985, alongside the decline of stores and industrial enterprises. The city centre literally decanted. Families moved out. Elderly population made up one quarter (24.4 per cent) of the city's population. Some scholars described Gifu City as a "super-ageing society".

Gifu is not alone in ageing. Across Japan's countryside, there are many such small- to medium-sized cities that have shrunk too. In Hokkaido, there is a small town called Yubari. While it has only 11,000 people today, it used to be a town of 120,000 in its heydays. Mine closure and lack of economic opportunities have forced young people and families out. Today, half of Yubari is above 65 years old, and the consequences are dire.

Yubari's small working population means a measly tax base. Four years ago, the city government went bust, owing a debt of US$315 million. The city was forced to embark on an 18-year austerity drive. It retrenched half of its civil servants. "The Town Hall is like a morgue, with few lights on", The Economist declared. Public service in the City was badly affected. The public library was gone. Six primary schools merged into one. The General Hospital closed down two thirds of its facilities to save utilities. It also halved its number of ambulances and asked its elderly patients to walk to the hospital by themselves.

Yubari is hardly a picture of happiness visitors often associate with Tokyo Disney or Osaka Universal Studio. Yet, Japan is full of such Yubaris. Between 2000 and 2005, the number of people living in small towns across Japan fell by 10 million. Of the 28 million people in Japan over 65, many live alone. Young people left their parents for bigger cities, looking for economic opportunities.

Declining population and workforce mean less consumption, reduced demand for real estate as well. Land and property prices in Japan have reduced by more than half since its peak in the 1990s, evaporating the life-long savings of many individuals and corporations. So for many people who believe that rental and property prices will always be on the climb, think again - it can fall significantly too, as in this case.

The effect of two decades of economic stagnation has led to the Waniguchi (crocodile's mouth) effect. It described the soaring public expenditure coupled with a drop in tax revenue.

The Japanese government has so far resorted to domestic borrowing to finance its social expenditure. But now that its public debt has piled up to 220 per cent of its GDP, and there are going to be fewer younger people and profitable Japanese companies to tax and borrow from. How Japan continues to finance its social programmes for the elderly remains a very big question.

As the social expenditure of an ageing population rises, Japan's debt to GDP ratio more than quadrupled from 55 per cent in 1982 to 211 per cent in 2012. The huge silver tsunami is destabilising Japan, so why doesn't it increase its working population to maintain a vibrant economy? The answer seems simple and yet inherently intractable: Japan couldn't build a consensus to allow immigration to boost their workforce.

As our own population age, our old-age support ratio will fall drastically from the current 5.9 (2012) to 2.1 (2030). When that happens, our young people may find the heavy burden unbearable, physically and financially. Is this sustainable?

The 2.1 support ratio presented here already assumes that our young ones do not leave us. But is this a valid assumption?

In the case of Japan, after a two decade-long recession, companies are now reluctant to hire new school leavers. Even if they do, they would only do so on a temporary or contract basis. For such "casual workers" as they call it, job benefits are minimal, training and development are spared. There is no job security, let alone "career development". When population ages, the young actually suffers more.

And to make things worse, competition for talent and capital will intensify going forward. In a study by McKinsey, by 2025, 136 new cities - all from the developing world - will take their place amongst the world's leading urban centres. Many of them will be in Asia. With buoyant economic prospects, these cities will attract the young and the talented from around the region. They will compete directly against Singapore for talents and capital. We might even lose our young and the talented if our economy stagnates.

The picture of an ageing society is a sobering one. Without more childbirths and immigration, our citizen population will start to shrink in 2025. This is just 12 years away. This is why it makes sense for the nation to maintain a sustainable and a stable Singaporean population while we are still young, and while external conditions are favourable. We have to anticipate, we have to save up, we have to prepare. We have to build the physical and social infrastructure.

Extracts of Senior Minister of State for National Development and Trade & Industry Mr Lee Yi Shyan's Parliamentary Speech in February 2013 on the Population White paper.

We are not deciding now on the population trajectory beyond 2020. Nor are we deciding that we will have a population of 6.9 million in 2030. We are using this figure (which is at the high end of the 6.5 to 6.9 million range) only to prepare infrastructure plans. This is especially important for infrastructure plans that may take many years to implement, and once built will be there for decades. If we under-provide in our Land Use and infrastructure plans now, Singaporeans will have less flexibility in the future, and if things turn out unexpectedly, we will face bottlenecks and constraints. In fact, these are precisely the problems that we are facing today. We do not want to repeat these scenarios by under-providing.

What the population will actually be in 2030 will depend on the needs of Singaporeans, and the decisions we make on economic and workforce policy along the way. We hope that with restructuring and productivity gains, with Singaporeans living healthier and longer and therefore choosing to remain in the workforce longer, and more women joining the workforce, our population will not reach 6.9 million. It is the ability to meet the needs of Singaporeans and provide a good quality of life that is the driver. That is our objective, and not the numbers per se. If we are able to achieve this with a smaller population, whether 6.5m or lower, there is no reason to go higher. But it is prudent to plan our infrastructure for the upper end of the range, so that we do not get caught out.

Is our aging and shrinking citizen population really such an urgent issue? Between now and 2030, over 900,000 Baby Boomers – or more than a quarter of our present citizen population – will enter their silver years. By 2025, our citizen population will start to shrink if we do nothing. Let me explain what the trends mean. At a Total Fertility Rate of 1.2, for every 100 Singaporeans in this generation, there will be 60 Singaporeans in the next generation, and only 36 in the generation after that. And this poses a huge challenge to the sustainability of our Singaporean core population. As our Baby Boomers retire, and fewer school leavers enter the workforce, our citizen workforce will start shrinking by 2020.

Today, we have 5.9 working-age citizens for each citizen aged 65 and above. 5.9, so nearly 6. By 2030, this will fall to 2.1, or roughly one-third. This is about half the average of 4.1 for the OECD countries in 2010.

What does this mean for Singaporeans? Higher taxes on those working, to fund subsidised healthcare for a much larger number of seniors. Slower business activity and less investment in new sectors leading to fewer job and career opportunities. Young Singaporeans may decide to leave for more exciting opportunities in other growing cities. This would hollow out our population and workforce further. This is a real worry not just on a national level, but for parents too who wonder whether their children will go abroad in search of better opportunities, and they will be left here alone here during their silver years.

The best and most fundamental way is to encourage Singaporeans to start families. So, regardless of whatever else we do, encouraging marriage and parenthood, bringing up children must remain a key priority. This is not just for tackling our population challenge, but to continue to have strong families, and the fulfilment and happiness that come from having families. We introduced a Marriage & Parenthood Package in 2001. Last month, we announced the latest enhancements to the Package, taking on board the feedback that we received from Singaporeans over the past year. Since 2001, the families of about 350,000 Singaporean children have benefited from the Package. The latest enhancements will benefit more families.However, to support our families, we need the community, employers, extended families and individual Singaporeans to foster a pro-family culture in our whole society.

We would like to see the birth rate rise above 1.5, perhaps to the replacement rate of 2.1, but it will take time, and we will need all Singaporeans to do their part to make it happen. To prevent our Singaporean core from shrinking and ageing rapidly, we will need to augment our population with new citizens and permanent residents. A significant number of Singaporeans are themselves marrying non-Singaporeans, reflecting the more globalised nature of interactions between people today. About 40% of Singaporean marriages each year are between a Singaporean and a non- Singaporean, numbering some 9,000 in 2011. We should continue to welcome immigrants who can contribute to Singapore, share our values and integrate into our society. Taking in younger immigrants will supplement the smaller cohorts of younger Singaporeans born since the 1980s, and balance the ageing of our citizen population. If we are able to raise our birth rates, we can eventually take in fewer immigrants. But a baby born today will only be 20 years old in 20 years’ time.

Some have pointed out that the proportion of Singapore citizens in our total population will fall from just under 62% today to perhaps 55% by 2030, and asked: Is this Government pro-Singaporean or pro-foreigner?

Having foreigners here on work passes must be for the purpose of meeting Singaporeans’ needs and benefitting them, sometimes directly, sometimes indirectly. The largest group, the majority, will continue to be those on work permits who do jobs and provide services that Singaporeans need, but do not want to do ourselves. For example, we expect to need significantly more healthcare, eldercare and domestic services workers to support our ageing population and working families. With our aging population, our dependency ratio of working adults to seniors will fall to 2.1. By supplementing our Singaporean core workforce with foreign workers, we will be able to maintain a ratio of working persons to retirees of about 4 in 2030, similar to the OECD average today. This is based on our projections for significantly slower workforce growth, compared to our historic average. We are also able to adjust the numbers and types of foreign workers flexibly, depending on our changing needs.

As Singaporeans become increasingly better educated and upgrade their skills, they will have higher job aspirations. Singaporeans in non-Professional, Managerial, Executive and Technical (PMET) jobs will also be higher skilled, but their numbers will fall by 200,000 by 2030. This is why we need more foreign work pass holders to take up more of the lower-skilled jobs, even as we upgrade industries and improve productivity.

While the number of Singaporeans in non-PMET jobs falls, the number of Singaporeans in PMET jobs is expected to rise by 400,000 to about 1.25 million by 2030, compared to 850,000 today. Two-thirds of Singaporeans in the workforce will hold PMET jobs in 2030, compared to about half today. To sustain such a high ratio of PMET jobs among Singaporeans, we need a dynamic economy and businesses that produce goods and services not just for Singapore and the Singapore market, but for the region and the world.

Companies need foreign workers to complement the Singaporean core in our workforce, so that companies can pull together a diverse range of skills, backgrounds and experiences. These foreigners help companies to expand to regional and international markets, set up regional HQs in Singapore, or kick-start new high value-added sectors in Singapore. These new activities will provide more good job opportunities which Singaporeans can take up. But again, the work pass criteria will need to be more stringent. MOM has progressively tightened salary and qualification requirements for Employment Pass and S pass holders.

Those on work passes are here during their productive years, and return to their home countries after working here. Hence they help boost our ratio of working persons to retirees, but do not add to our retiree population.

We have heard concerns that there are jobs which Singaporeans want, but are instead going to foreigners. It is a fine balance. We need to allow companies to create the jobs, and to do so they may need a workforce supplemented by foreigners. But we must also ensure that Singaporeans will benefit from the good jobs. This is something we are looking into, and MOM will address Members’ concerns later in the Debate.

OPENING SPEECH BY DPM TEO CHEE HEAN AT THE PARLIAMENTARY DEBATE ON POPULATION WHITE PAPER, 4 FEBRUARY 2013 (click to read more)