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What’s behind South Asia’s low exports?

Hans Timmer's picture
South Asian countries’ exports are only one-third of what they should be, had they mirrored the experience of economies with similar characteristics. Without further integration into global markets, South Asia will not sustain its growth. Photo: Shutterstock 

This blog highlights the findings from the recent South Asia Economic Focus: Exports Wanted

Bela Balassa worked for the World Bank from 1966 till his death in 1991. Luckily, his insights on international integration, revealed comparative advantages, trade diversion, and natural progress toward political integration have outlived him.

And what Bela is best-known for—and rightfully so—is the Balassa-Samuelson effect.

Put simply, this effect explains why a haircut or a restaurant meal is much cheaper in poor countries than in rich countries whereas the price tag for a car or a television is almost the same everywhere.

What’s behind this phenomenon is simple and can be summed up in three parts.

First, international competition equalizes the price of tradable goods like televisions across countries.

Second, the prices of non-tradable goods like haircuts can differ.

And third, the difference in productivity across countries is much more significant in tradable goods than in non-tradable goods. For example, a barber in Dhaka needs roughly the same amount of time as a barber in New York to cut my hair.

But manufacturers or farmers in Nepal need more labor to produce the same output than their counterparts in Germany.

Countries tend to be poor because their level of productivity in tradable goods is low.  

Should women get a job? “Yes...but” say Pakistani men

Saman Amir's picture
A large number of Pakistani women waiting to get relief money for her own business work at Lahore, Pakistan.
Pakistani women in Lahore, Pakistan. Photo: A M Syed, Shutterstock

 
This blog is part of a series examining women’s economic empowerment in South Asia.

In patriarchal societies—as in most of Pakistan—men exert much influence over the lives of their female relatives and almost always have exclusive control over household income.
 
Having a supportive father or husband is therefore critical for women and determines their choices and work opportunities, especially outside the home.

Conversely, men reluctant to see women in the workplace can derail progress toward greater participation of women in the labor force.
 
As part of the Women in the Workforce study, we interviewed a purposively selected group of men in Karachi, Lahore, Quetta, and Peshawar on their thoughts on women’s work outside the home.[1]
 
Despite the constraints of a purposive sampling technique, a few broad themes emerged from these interviews that can be relevant to anyone advocating for women’s economic empowerment.
 
As anywhere in the world, men’s attitudes toward women’s work were varied. 
 
Some men we spoke to expressed support for women’s work for economic gain.
 
The most common reason was the urgent need for a double income to maintain the household’s living standards in a fast-changing economy.

Shaping a brighter future for Pakistan

Illango Patchamuthu's picture
Pakistan needs to think big on investing in its people
Pakistani girls attending a primary school. Photo: World Bank
This blog is part of a series that discusses findings from the [email protected]: Shaping the Future report, which identifies the changes necessary for Pakistan to become a strong upper middle-income country by the time it turns 100 years old in 2047. 
 
In 28 years, Pakistan will turn 100 years old. The children born this year will be adults then.

I wonder what they will see when they look around. Will they see a country teeming with opportunity? Or will they be in a country that does not offer enough jobs and does not provide the needed skills to compete?

Some of them may well be new parents at 28. Will they be able to look at their own children, and see a brighter future for them?

Pakistan has some important decisions to make if it wants to give its children the future they deserve.

If the country can make the right decisions now, Pakistan can accelerate and sustain growth to become a confident upper middle-income by the time it turns 100. It’s ambitious but possible.

Other countries –South Korea, China, and Malaysia – have transformed their economies within a generation, and there is no reason why Pakistan cannot achieve the same.

The alternative is not inspiring. If the country fails to accelerate and sustain growth as well as control population growth, by 2047 income levels will be close to where they are today and with challenges similar to what they are today.

I like to imagine another Pakistan, in which stunting and malnutrition are gone, in which family background does not determine what job you can get, women compete equally with men, businesses thrive, and Pakistan competes with the likes of Shanghai or Singapore as a trading hub.

Last month we launched a report, [email protected]: Shaping the Future, which looks at some of the reforms needed to accelerate and sustain growth and transform Pakistan’s economy.

Now is the time to come together and see what needs to be done to achieve this goal. A growth narrative for Pakistan needs to rest on these four elements: investing in people; using resources more efficiently; caring for the environment; and finally, improving how Pakistan is run to support growth and the implementation of difficult reforms.

Pakistan needs to think big on investing in its people.

Technology is transforming governance in Pakistan

Irum Touqeer's picture
Punjab Excise and Taxation Service Center
Punjab Excise and Taxation Service Center. Photo: World Bank

Technology is changing our world faster than ever before.

And Pakistan, home to more than 64 million internet users and 62 million people connected to mobile data, is no exception.

As they’ve become more digital-savvy, Pakistanis are now expecting better digital services from their government.

To meet these demands, the Government of Punjab has been working to modernize over the last decade.

As part of the government’s governance reforms, and learning from earlier pilot programs in education and health, the Punjab Public Management Reform Program (PPMRP) has aimed to transform citizens’ experience, improve access to administrative services, and boost public employee performance and the management of public resources.

Before that, Punjab authorities were facing several challenges in delivering public services. This, in turn, impacted social outcomes in the province: the health sector’ performance was affected by the absenteeism of vaccinators, resulting in a low immunization rate in Punjab (49% in 2014).

The education and agriculture departments faced similar absenteeism issues with teachers, students, and agriculture workers in the field.

Overall, citizens were dissatisfied with these public services.

South Asia can get more women to work

Hiska Reyes's picture
 World Bank
South Asian countries are making progress in clearing the way for women to get jobs and creating a safer work environment for them. Yet, too many women across South Asia are left out of the workforce—and that despite booming economic growth. Credit: World Bank

This blog is part of a series examining women’s economic empowerment in South Asia. Starting today on International Women's Day and over the next few weeks, we will be exploring successful interventions, research, and experience to improve gender equality across the region. 

Meet Fazeela Dharmaratne from Sri Lanka.
 
Her story, like that of millions of other women in South Asia, is one of struggle between family and work and a story worth telling as we mark International Women’s Day.
 
Unlike too many of her female peers, Fazeela was able to reinvent herself professionally.
 
As a young woman, straight out of school, she joined a bank in Colombo as a banking assistant. In 17 years, she climbed up the corporate ladder to become regional manager—a position she later quit to care for her children.
 
Unfazed, Fazeela started her own small home-based daycare business in 2012, initially serving only 4-5 children. Today, Fazeela is the director of the CeeBees pre-school and childcare centers serving several corporate clients in Colombo.
 
Fazeela’s success belies the fact that across South Asia too many women are left out of the workforce—and that despite booming economic growth.
 
And while employment rates have gone down across the region, women account for most of this decline.
 
Between 2005 and 2015, women’s employment declined by 5 percent a year in India, 3 percent a year in Bhutan, and 1 percent a year in Sri Lanka.
 
These numbers are worrying because a drop in female employment has important social costs.
 
First, when women control a greater share of household incomes, children are healthier and do better in school.
 
Second, when women work for pay, they have a greater voice in their households, in their communities, and society.
 
Conversely, the economic gains from women participating equally in the labor market are sizable.
 
A recent study by the International Monetary Fund estimated that closing gender gaps in employment and entrepreneurship in South Asia would help grow the economy by about 25 percent. 
 
The good news is that South Asian countries are making progress in clearing the way for women to get jobs and creating a safer work environment for them.  

Sri Lanka’s women want to work—and thrive in the workplace

Idah Z. Pswarayi-Riddihough's picture
A woman hand painting fabric in a local Batik fabric factory
A Sri Lankan woman is hand painting fabric in a local Batik fabric factory. Matale, Sri Lanka. Credit: Shutterstock. January 3, 2017.

It’s International Women’s Day today, and there is a lot to celebrate in Sri Lanka and beyond.

Being a woman, mother, sister, aunt – name it, it’s something women wake up to daily and they love it.  None of them question about being enumerated for these roles.  We marvel and revel in the roles. 

But make no mistake. Women are also very capable breadwinners, contributors to the economies, innovators and entrepreneurs amongst many other roles.

Women want to work, and they want to stay in the workplace. 

What they seek is balance: a gender-balanced workplace, a gender-balanced management, and more gender-balance in sharing wealth and prosperity. 

In that sense, it’s heartening to see some of the proposals put forth in the government of Sri Lanka’s budget: more daycare centers, flexible work hours, and incentives to promote maternity leave. 

These are very welcome changes to think equal, build smart, innovate for change—the 2019 International Women's Day campaign theme—and we encourage those with jobs to implement these policy changes. 

This year, let me share with you a quick analysis of five laws that Sri Lankan women and their advocates have identified as constraining for joining the workforce and staying there! 

Skilling up Bangladeshi women

Tashmina Rahman's picture
Learning new skills for better jobs in Bangladesh: Meet Kamrul Nahar Omi


The Bangladesh garments industry is poised to grow into a $50 billion industry by 2021 and for this, two million semi-skilled workers are needed.

Non-garment industries such as leather, furniture, hospitality and Information & Technology (IT) are also poised to grow.

But how can we think equal, build smart, innovate for change, the theme of this year’s International Women’s Day? 

Female participation in the workforce has been increasing but remains less than half of male participation rates across primary working ages.

Of those females joining work, over 80 percent are engaged in low-skilled, low-productivity jobs in the informal sector with little opportunity for career progression.

Technical and vocational education and training (TVET) is one important medium to equip women with employable skills and improve their job market participation.  

Overcoming the perception of TVET as ‘male-dominated’ training, women’s participation in technical programs has been steadily rising over the past decade.

Yet, Bangladesh still has a long way to go with female share in enrollments around 25 percent in TVET programs.

In fact, a World Bank study identifies some keys areas of intervention for improving female participation in technical diploma programs:

  1. creating a gender-friendly environment in polytechnics and workplaces;
  2. developing more service-orientated diploma programs;
  3. developing a TVET awareness campaign for females;
  4. (supporting a career counseling and guidance system for females;
  5. improving access to higher education;
  6. providing demand-stimulating incentives; (vii) generating research and knowledge;
  7. leveraging partnerships to promote opportunities for females and
  8. generating more and better data to track progress and inform policy and operations for female-friendly TVET. 

What’s keeping India in the dark?

Fan Zhang's picture
To boost and sustain its energy supply, India needs urgent investments and reforms to fix the inefficiencies that plague its entire electricity supply chain.
To boost and sustain its energy supply, India needs urgent investments and reforms to fix the inefficiencies that plague its entire electricity supply chain. Credit: World Bank

Statistics show that what is commonly perceived as an energy gap in India is actually an efficiency gap.

To boost and sustain its energy supply, India needs urgent investments and reforms to fix the inefficiencies that plague its entire electricity supply chain. 

But first, the good news. In 2018, every village in India got connected to the grid.  That same year, power shortages declined dramatically to 0.9 percent from 8.5 percent in 2012.  

As for clean power, India has become one of the world’s leading countries in renewable energy and aims to add 227 gigawatts of green electricity by 2022.

True, India today generates more power than ever. Yet, 178 million Indians still lived without access to grid-connected electricity in 2017.

On top of that, air pollution from coal-powered plants contributed to 82,900 deaths across India in 2015.

Given its rapidly growing economy, demand for power in India is expected to triple by 2040.

The country faces a monumental task to meet this demand while protecting its natural environment and the health of its people.

As I write in my new report, ‘In the Dark’, power distortions cost India much more than previously estimated: $86 billion in 2016—that is 4 percent of the country’s economy.

How to diversify Bhutan’s economy?

Yoichiro Ishihara's picture
Bhutan has made tremdendous progress in reducing poverty. But it needs to do a better job at diversifying its economy by improving its physical and human capital by using resource rents from hydropower.
Bhutan has made tremendous progress in reducing poverty. But it needs to do a better job at diversifying its economy by improving its physical and human capital by using resource rents from hydropower.

Will diversifying its economy help Bhutan address its youth unemployment, let alone its macroeconomic volatility and vulnerability?

With the right approach, yes.

And to that end, the latest World Bank Bhutan Development Report: A Path to Inclusive and Sustainable Development proposes solutions relevant to Bhutan’s context.

For more than ten years, developing the private sector through greater economic diversification has been Bhutan’s top policy as described in the 10th and 11th five-year plans.

Yet, youth unemployment, especially for educated Bhutanese, has remained high: 67 percent of bachelor’s degrees holders were jobless in 2016.

Diversifying the economy is touted as a standard prescription to cure such development ailments as joblessness, low productivity, and macroeconomic volatility.

However, international experience shows that this prescription does not always work.

Case in point: A World Bank’s analysis Diversified Development concludes that in resource-rich countries, investing in physical capital, human capital and economic institution are the best ways to sustain growth in the private sector.

Further to that, the development of specific sectors, which is often a common ingredient of diversification strategies in certain countries, is neither necessary nor sufficient for private-sector-led growth.

The main driver of Bhutan’s high growth and poverty reduction, hydropower has led the country’s development and will remain the backbone of its economy.

However, Bhutan needs to do a better job at diversifying its economy by improving its physical and human capital by using resource rents from hydropower.

Bhutan ranks 149 out of 160 countries on the 2018 Logistics Performance Index and 121 out of 176 countries on the 2017 ICT index.

Bhutan falls in the bottom half of the Human Capital Project rankings on critical indicators such as expected years of schooling.

South Asia: A bright spot in darkening economic skies?

Hartwig Schafer's picture
South Asia is set to remain relatively insulated from some of the rising uncertainties that are looming large on the global economic horizon. The region will retain its top spot as the world’s fastest-growing region. The Siddhirganj Power Project in Bangladesh. Credit: Ismail Ferdous/World Bank

If, like me, you’re a firm believer in New Year’s resolutions, early January ushers in the prospect of renewed energy and exciting opportunities. And as tradition has it, it’s also a time to enter the prediction game.
 
Sadly, when it comes to the global economy, this year’s outlook is taking a somber turn.
 
In the aptly titled Darkening Skies, the World Bank’s new edition of its twice-a-year Global Economic Prospects report shows that risks are looming large on the economic horizon.
 
To sum up:  In emerging market and developing economies, the lingering effects of recent financial market stress on several large economies, a further deceleration in commodity exporters are likely to stall growth at a weaker-than-expected 4.2 percent this year.
 
On a positive note, South Asia is set to remain relatively insulated from some of these rising global uncertainties and will retain its top spot as the world’s fastest-growing region.
 
Bucking the global decelerating trend, growth in South Asia is expected to accelerate to 7.1 percent in 2019 from 6.9 percent in the year just ended, bolstered in part by stronger investments and robust consumption.  

Among the region’s largest economies, India is forecast to grow at 7.5 percent in fiscal year 2019-20 while Bangladesh is expected to moderate to 7 percent in fiscal year 2018-19. Sri Lanka is seen speeding up slightly to 4 percent in 2019.
 
Notably, and despite increasing conflicts and growing fragility, Afghanistan is expected to increase its growth to  2.7 percent rate this year.

In this otherwise positive outlook, Pakistan’s growth is projected to slow to 3.7 percent in fiscal year 2018-19 as the country is tightening its financial conditions to help counter rising inflation and external vulnerabilities.

However, activity is projected to rebound and average 4.6 percent over the medium term.

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