Many predictions have been made about the trajectory of Asia in the 21st Century. Expected to be the global engine of growth in coming decades, the Indo-Pacific is undergoing political, economic and competitive churn as governments attempt to respond to demands of inclusiveness, equality and access to opportunity from their citizens.
South Asia is no exception. While the sub-region is currently experiencing economic growth rates the envy of most other parts of the world, its governing institutions are under increasing pressure to respond to societal demands spurred in large part by a new global reality – the rapid dissemination of technology, communication and information.
Looking at the sub-region broadly, over the last decade there has been remarkable success with respect to increased literacy, life expectancy rates and income, increased access to education and lower rates of poverty. Yet there are a number of reasons that the region still faces significant social and security challenges; not the least of which include the dismal pace of economic development and connectivity, and because genuine opportunity is still out of reach for millions. South Asia’s societies will continue to experience social flux as they integrate into the wider Asia-Pacific region and compete for investment from the broader global economy.
By 2030, however, much more can be done by policymakers to truly unleash the potential of the increasingly educated and upwardly mobile youth of South Asia. The next generation, approximately two thirds of the region’s 1.8 billion citizens, will grow up in a fundamentally different world than those before it – reinforced by pervasive technology, increased access to information, better infrastructure and higher (but not yet high enough) incomes. Their aspirations are different and they are increasingly confident about competition, whether local or foreign.
Facing the Employment Challenge Head on
In order to face the challenge and capture the promise of this young demographic, the region’s decision makers should update legal, educational and vocational frameworks for increased entrepreneurship and innovation. By 2030, South Asian economies should have taken their next step up the global value chain – though this entails a mammoth challenge, requiring 1 – 1.2 million jobs be created each month for the next two decades. South Asia’s state-owned enterprises and traditional conglomerates will simply not be able to produce the kind of employment needed over the next 20 years. Startups, small business and entrepreneurs will be the next wave of growth.
According to the World Bank’s Ease of Doing Business report, South Asia’s countries rank poorly in terms of meeting the employment challenge they face. Leadership is badly needed at the local, provincial and state level to crack the code for success. Education systems that produce market-ready skills, tax codes that encourage small business, accessible capital from the banks and efficient bankruptcy/insolvency laws are needed to drive opportunity and economic growth. By 2030, young South Asians could contribute significantly to prosperity if provincial and national governments were to prioritize educational and vocational institutions and update legal frameworks to be friendly to entrepreneurs. Both would begin to provide the ecosystem needed for entrepreneurs to create and start new companies – connected to the global economy but localized to succeed in their unique context. A modern legal framework designed to spur start-ups should allow entrepreneurs to start companies, fail and start again until their ideas work.
In India alone, 90% of the 500 million strong workforce is in the “informal” sector – a situation that inhibits not only the physical and financial safety of workers, but the overall growth of the economy. Perhaps in acknowledgement of the scale of the task, the Modi government recently launched a “Start Up India, Stand Up India” campaign to promote bank financing of start-ups across the country, including developing vital agricultural SMEs. India’s parliament also recently passed a revamped bankruptcy and insolvency code, which it hopes will be one of the most efficient in the world. The clear emphasis on job creation initiatives outside the traditional state or conglomerate-led sector demonstrates much-needed leadership in this space, though implementation remains to be seen. And to further demonstrate seriousness about job creation by 2020 or even 2030, labor laws require further political consensus and vocational/skills training initiatives need more attention and emphasis.
An Opportunity Cost for Poor Regional Connectivity
South Asia is also the least economically integrated region of the world, with a dismal 5% of its overall trade as intra-regional trade. It is important that the region’s entrepreneurs be able to connect with their peers and potential partners around South Asia, the rest of Asia and beyond. Non-tariff barriers, high levels of mistrust and poor infrastructure stymie the region’s growth.
In addition to getting the domestic regulatory framework right, South Asia’s governments should also be working towards taking advantage of regional trading blocs – both those led by the U.S. (the Trans Pacific Partnership) and China (RCEP or Regional Comprehensive Economic Partnership). China’s One Belt One Road, and the BBIN grouping (a more informal initiative including Bangladesh, Bhutan, India, and Nepal) also present opportunities for South Asia to connect with neighbors to boost trade and partnerships.
South Asia is at an important crossroads. By 2030, the rest of Asia will likely see tariff barriers shrink, and trade and prosperity further increase. Governments in Bangladesh, India, Nepal, Pakistan and Sri Lanka ought to use the policy tools available to them now to enable their next generation workforce to change the region’s fate from being the least connected region of the world to a more responsive, equitable, inclusive one.