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.
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.
This blog highlights the findings from the recent South Asia Economic Focus: Exports Wanted
Nepal is on the brink of a new era. Four years ago this April, the powerful Gorkha earthquake devasted parts of Nepal and shook Kathmandu to the core.
: It is young, with more than 40 percent of Nepalis in the 16-40 age group. It is ambitious, with plans for new highways, new mass transit infrastructure, new airports, more trade, more energy, and growth.
And it is resilient. . Much has been said about the strength of the Nepali people. I’m humbled to have witnessed it firsthand.
. They are eager for education, for opportunity. They shouldn’t have to leave Nepal to get it.
As investors gather for the Nepal Investment Summit, this is the perfect time for Nepal to send a message to the world -- that .
With a stable government and an ambitious economic plan, Nepal is, for the first time in decades, in a position to dream big and to carry out a long-term vision that includes more and better services and opportunities for people.
Things are moving in the right direction. Extreme poverty is expected to decline from 15 percent in 2010 to a 10 percent in 2019, based on a poverty line of $1.90 a day. .
The goal of becoming a middle-income country by 2030 -- in just 11 years – is possible.
This blog is part of a series that discusses a way forward for South Asian regional integration.
That South Asia is brimming with possibilities for economic growth is well-known. It’s what drove us to write A Glass Half Full: The Promise of Regional Trade in South Asia. .
What we weren’t prepared for, however, was the overwhelmingly positive response the report received across the region. Government officials, members of the private sector, civil society, and particularly young people we met with were eager to learn more about how their countries could improve trade relations with their neighbors.
despite political circumstances that make it seem impossible.
In Pakistan, which suffers the biggest welfare loss because of non-cooperation, A Glass Half Full hit home in a variety of ways.
The country can increase its intraregional trade almost 8-fold, from $5.1 billion to $39.7 billion. This resounded with audiences at launch events in Islamabad, Lahore, and Karachi, evoking a sense of loss for the missed opportunity. They asked how Pakistan and other countries could amend their discriminatory policies and enjoy the benefits of free trade.
Politics often trumps economic cooperation in South Asia, but many in Pakistan suggested politics wins because the cost is so low. If intraregional trade were to increase, lobbies would arise to protect those interests.
A week before our report’s launch, Pakistan and India had initiated the Kartarpur border corridor to facilitate visa-free visits for Indian pilgrims to Pakistan’s Sikh holy sites. This had locals brainstorming more initiatives for regional integration.
I just ended my first round of country visits as the World Bank’s Vice President for the South Asia Region. Over and above all,
These women are succeeding in a region where it is hard for women to realize their career dreams. .
What better opportunity than International Women’s Day to give a huge shout-out and applaud those women who are role models, entrepreneurs, and leaders in the eight countries of South Asia.
. Despite strong growth, job creation remains weak and is often of poor quality.
This is especially true for India, which grew at a rate of 7.2 percent in 2017 and which managed to reduce the number of poor people considerably.
But the growth of new job opportunities is below what many had hoped for; . Strong population growth also puts pressure on labor markets, with millions of Indians entering the job market every year.
. And those who work often do so only in the informal sector, which is larger than in any other region in the world. Some groups, like women or workers in rural areas, are at particularly high risk of having to work in the informal economy, where wages are often lower.
Meanwhile, trade in goods as a share of the economy is much lower than in other regions. The trends in India and much of South Asia differ from other regions, where trade, growth, and jobs are directly connected and go hand in hand.
This South Asian paradox raises the question of how governments can boost job growth, and how to raise the quality of new jobs so that economic development brings more shared prosperity.
, job creation and shared prosperity.
: Despite strong growth job creation remains weak and is often of poor quality.
Sri Lanka grew at an average rate of 5.8 percent from 2010-2017 but the growth of new job opportunities is below what many had hoped for. .
Meanwhile, trade in goods as a share of the economy is much lower than in other regions. The trends in Sri Lanka and much of South Asia differ from other regions, where trade, growth and jobs are directly connected and go hand in hand. This South Asian paradox raises the question of how governments can boost job growth, and how to raise the quality of new jobs so that economic development brings more shared prosperity.
Titled “Exports to Jobs: Realizing the Gains from Trade,” the report shows how higher exports can translate into benefits for workers across the country, and it therefore recommends policies to expand exports together with policies that help sharing these benefits more widely, for example through measures that help workers get the skills needed to compete for new formal-sector jobs.
The South Asian Free Trade Area (SAFTA) agreement has been in effect since 2006—with little success.
This is in sharp contrast to the ASEAN free trade area (AFTA), which started in 1992 with six six countries and later added more members, completing the ASEAN ten by 1999.
Between 1992 and 2017, intraregional imports as a share of global imports in ASEAN increased from 17 to 24 percent, and exports from 21 to 27 percent.
In South Asia, these shares were largely stagnant since SAFTA came into effect, at 3 percent for intraregional imports and 6-7 percent for intraregional exports.
In fact, .
Statistics show that what is commonly perceived as an energy gap in India is actually an efficiency gap.
But first, the good news. . That same year, power shortages declined dramatically to 0.9 percent from 8.5 percent in 2012.
As for clean power,
On top of that,
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.
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.
as described in the 10th and 11th five-year plans.
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.
- Jobs and Development; Skills; Human Capital
- Human Capital Project
- Human Capital Index
- human capital accumulation
- Human Capital
- Social Development
- Public Sector and Governance
- Private Sector Development
- Law and Regulation
- Financial Sector
- Climate Change
- South Asia
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.
To sum up:
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.