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Manila, Philippines - Jose Winylito Tanquis has reason to be proud as he raises a flag to signal the launch of the 58,000- ton "Ocean Symphony" in the Philippines. Not only did he help build the cargo vessel, his son John now works at the yard.
"Now, he can buy his own stuff, like shoes and clothes," said Tanquis, 47, a foreman at Tsuneishi Holdings's yard in Balamban on Cebu Island. At 21, John is the eldest of six siblings who will enter the workforce in the next decade.
The so-called demographic dividend from a rising supply of young workers is one reason Japan's second-largest shipbuilder expanded in the Philippines, where workers are on average half the age of its Japanese employees. Tsuneishi is considering Indonesia, the Philippines and Myanmar for another shipyard, said Hitoshi Kono, chief of the company's local operation.
Asia's manufacturing powerhouses - Japan, South Korea and China - are among the fastest-aging countries in the world, while developing nations in Southeast Asia are among the youngest in the region. As factories, jobs and investment flow south to tap cheaper labor, growth in the 10-member Association of Southeast Asian Nations is poised to accelerate, propelling the area's currencies and fueling consumer and property booms, Bank of America says.
"The demographic dividend is over for Japan and Korea, and it will be over for China soon," said Yoshimasa Maruyama, chief economist at Itochu Corp., Japan's third-largest trading company. "It's happening now in the Asean area, and it will continue for some time."
For Cebu, famous for its luxury beach resorts, that means regional authorities are building another four 10,000 square- meter (108,000 square-foot) factories this year. Krispy Kreme Doughnuts unveiled its first outlets on the island in October, while 7-Eleven chose July 11 to open its first two Cebu convenience stores.
Two hours' drive from the Shangri-La Mactan Resort & Spa - where tourists enjoy parrotfish fillet and black-pepper squid overlooking the ocean - Tsuneishi has launched 11 ships this year, supporting more than 15,000 workers. The company has two shipyards in Japan and one in China.
Mitsumi Electric Co., with more than 14,000 staff on Cebu, is among businesses looking to move more manufacturing out of China, said Yoshitsugu Murakami, a spokesman in Tokyo for the electronic-parts maker.
"Labor costs in China have been rising," Murakami said. "It's good for us to shift production to the Philippines little by little. It's easy to recruit talented workers."
The Philippines is a "standout" among countries set to benefit from a bigger labor pool, with its rate of economic expansion likely to rise as much as 1.5 percentage points during the next decade, according to Chua Hak Bin, an economist in Singapore at Bank of America's Merrill Lynch division.
The International Monetary Fund predicts China's growth will slow to 8.5 percent by 2017 from 9.2 percent last year, while the Philippines will expand 5 percent compared with 3.7 percent, and growth in Vietnam will reach 7.5 percent from 5.9 percent, according to projections published in April.
"Domestic demand will more likely grow at faster rates if the labor force is going to grow more quickly, and that will spur the exchange rates as well," said Chua, who previously led the Singapore central bank's external economies division.
Standard & Poor's this month raised the Philippines's credit rating to one level below investment grade, its highest since 2003. In January, Moody's Investors Service elevated Indonesia to investment grade for the first time since 1997.
The demographic dividend - a term popularized by economists David E. Bloom, David Canning and Jaypee Sevilla in a 2001 National Bureau of Economic Research study - happens when most of a country's population is in the 15-to-64 working-age range. This increases productivity if supported by policies that promote health, family, labor and financial and human capital, the study concluded.
The Philippine labor force will expand by almost 18 million, or 31 percent, to 75 million by 2020 compared with 2010, Merrill Lynch projected in an April 27 note. Malaysia will grow by 19 percent, to 22 million. Indonesia will see a gain of more than 18 million, to 180 million.
China's workforce will peak at around 970 million in 2020 as the population's median age rises by more than three years, to 37.8, Merrill Lynch forecasts. Japan's median age will increase to 48.5 and South Korea's to 43.4, compared with 23.9 in the Philippines and 28.4 in Malaysia.
India has the biggest potential dividend of all, with a projected labor-force expansion of 95 million by 2020, Merrill Lynch estimates. Even so, businesses from Larsen & Toubro, the nation's biggest engineering company, to Leighton Holdings, Australia's largest builder, say a lack of skills means there aren't enough trained workers to build the roads, railways and ports India needs.
The South Asian country's expansion skidded to a nine-year low in the first quarter, and the rupee tumbled to a record low against the dollar in June, as investors lost confidence in Prime Minister Manmohan Singh's ability to revive the economy.
"An increasing labor force is definitely a plus point," Sri Mulyani Indrawati, a World Bank managing director and former Indonesian finance minister, said in a May 24 interview in Tokyo. "But it's not necessarily going to become an economic gain if they're not trained and skilled."
Adult literacy is above 92 percent in the Philippines, Malaysia and Indonesia, while in India it is 63 percent, according to the United Nations 2011 Human Development report.
Other impediments to realizing the potential from demographic shifts include lawlessness and delays in implementing governments' ambitions for infrastructure.
The Philippines ranked 130th of 142 countries in the World Economic Forum's latest survey on the cost to business of terrorism, and 112th in terms of crime and violence - the worst in Southeast Asia. Fifty-four percent of mining companies said issues such as attacks by terrorists, criminals and guerrilla groups are a strong deterrent for investors, a Fraser Institute poll released in February showed.
The nation also has lagged behind on government construction projects, with its fiscal deficit last year below projections mainly because public capital spending had fallen, the IMF said in March.
One advantage for Southeast Asia, astride one of the busiest maritime arteries, is proximity to Japan and China, the world's largest net creditor nations.
"Investments in Asean will continue for the next decade," said Jan Oosterveld, former head of Royal Philips Electronics's Asia Pacific operations and now a senior lecturer at the University of Navarra's IESE Business School in Barcelona. "Simple manufacturing will go to the cheapest countries: It's going now from China to Vietnam, Laos, Cambodia, Myanmar and Bangladesh. More advanced industries will go to Singapore, Malaysia, the Philippines."