Transcript A South Asian Private Sector Perspective to Emerging

A South Asian Private Sector Perspective
to Emerging Employment Prospects
Anura Ekanayake
Source: Google Maps
September, 2011
New York
Abstract
Emerging employment prospects in South Asia are
discussed based on some mega global trends and
selected key developments of significance to
business in the region. While available secondary
data and relevant research are utilized for specific
elements in the discussion, the synthesis of these in
a holistic picture, admittedly is of a “crystal ball
gazing” nature. The justification for this approach
being that private sector decisions are often made
in this manner.
•
•
•
•
•
•
•
•
•
•
Contents
South Asia in Brief
South Asian private Sector
How Business People Respond to Markets
Some Mega Trends Relevant to South Asia
Key developments in South Asia
Constraints
Adjustment Costs in Transition
Business Prospects
Employment Out Comes
Policy Implications
South Asia in Brief
•
•
•
•
•
•
•
•
•
South Asia – Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka
Geography – elevation ranges from Maldives entirely at sea level to the Himalayas in Nepal,
with climate varying from tropical in the south to temperate in the north, with tropical
rainforests to hot and cold desserts.
Demography – accounts for almost one quarter of world population with India accounting for
1.2 billion people, a young and growing labour force, and low but rapidly improving
education.
Economy – Accounts for half of the worlds poor with per capita GDP ranging from US$ 6900
in Maldives to US$ 900 in Afghanistan (in PPP 2010). Agriculture in the economy ranges from
32% of GDP and 79% of employment in Afghanistan to 5.6% and 11% respectively in the
Maldives.
HDI – overall index ranking ranges from 91 in Sri Lanka to 155 in Afghanistan.
Ease of Doing Business ranking ranges from 83 for Pakistan and 167 for Afghanistan.
Global Competitiveness Index ranking ranges from 52 in Sri Lanka to 125 in Nepal.
Interestingly when the two economies with less than a million people are left out the
country with the highest per capita GDP, Sri Lanka, has the highest HDI, the highest GCI and
the second highest DBI ranking.
Conversely Afghanistan has the lowest per capita GDP, lowest HDI and the lowest DBI
ranking.
Table 1
Some Key Data on South Asian Economies
Population GDP / Cap
Country
HDI 2010 1/
(ml in 2010) (PPP 2010) Index
Rank
Afganistan
29.8
900
0.349
155
Bangladesh
158.5
1700
0.469
129
0.7
5500
1189.0
3500
0.519
119
0.4
6900
0.602
107
29.3
1200
0.428
Pakistan
187.3
2500
Sri Lanka
21.2
5000
World
6928
11000
Bhutan
India
Maldives
Nepal
Notes:
1/ Out of 169 countries
2/ 2011/12, out of 142 countries
3/ Ease of Doing Business 2011 out of 183 countries
Global Comp.ness 2/
Doing Business 3/
Index
Rank
Rank
167
3.73
108
107
142
4.30
56
134
138
3.47
125
116
0.490
125
3.58
118
83
0.658
91
4.33
52
102
South Asian Private Sector
•
•
•
•
•
•
Non homogeneous,
Global MNCs operating in South Asia
A few local MNCs with global operations
Some large local conglomerates
A larger percentage of Medium sized businesses
Predominance of small and micro enterprises,
accounting for 60% of employment and 40%
exports.
• Very different in the way they behave
How business people respond to
markets
• Multinationals and large conglomerates have the resources and the
capacity to be proactive. Most have corporate strategy units to
monitor global developments and strategize. They may carry out
scenario planning, SWOT analysis and ‘Blue Ocean’ strategizing.
• Others respond to market signals and are reactive to varying
degrees
• Large businesses react to global and national market signals
• Medium and Small businesses react to local market signals
• Micro enterprises react to neighbourhood market signals
• There are firm specific differences, but the above is the general
pattern.
• Business people look for business opportunities, job creation is an
outcome and not a business objective / goal.
• Essentially what is presented is an optimistic overall view
characteristic of private enterprise and not a “dismal” one.
Some Mega Trends relevant to South
Asia
• Trends which ‘we have to come to terms with’!
• Global slow down in the medium term
• High growth in Asia and growing intra Asian trade (42% to
47% of the large economies as per ADB 2011)
• The shifting centre of gravity towards Asia, with ‘rebalancing’.
• Limited natural resource availability, climate change
may have drastic impacts (consumption of natural resources / capita / day
in North America was 88 Kgs. compared to 14 Kgs. In Asia)
• Rapid urbanization
• Technological change elsewhere and their speedy
adoption / adaptation in South Asia (example of ICT)
Global GDP Growth
Source: WEO June 2011, IMF
Figure 1
Table 2
Trade Volumes
2009
2008
Import
Import
Advanced
Advanced
Economies
Economies
0.4
-12.6
Emerging/
Emerging/
Developing
Developing
Economies
Economies
-8.2
8.6
2011
2010
2009
2010
Export
Export
Import
Import
Export
Export
Import
Import
2012
2011
Export
Export
Import
Import
Export
Export
1.9
-12.2
-12.7
12.7
11.2
12.0
--12.4
5.8
6.8
11.0
10.1
5.5
4.6
5.9
5.0
-7.5
4.5
13.5
--8.3
14.5-8.5
10.2
12.5
8.8
10.5
9.4
9.3
8.7
9.0
International Monetary Fund, World Economic Outlook,
June ,2011
Key Developments in South Asia
• Growing middle class in India, 50 ml in 2007 to 267 ml by
2016 and 523 ml in 2025 (NCAER 2011, MGI 2007); accelerating
consumption.
• Growing labour force and the demographic dividend
• Rapid rise in educational attainments
• Capability to rapidly adopt / adapt new technology
• Culture of ‘hard work’.
• Low per capita use of resources
• High propensity to save
• Extended family and low pressure on public support
• Potential role of India similar to that of China in East and
South East Asia
Table 3
Projected Demand for Consumer Durables in India
Source: NCEAR 2005
Figure 2
Source: The Economist 21st July 2011
Constraints
• Barriers to trade (trade facilitation reforms
can increase intra regional trade by 75% and
inter regional trade by 22% according to Herzal and Mizra 2009)
• Low ‘ease of doing business’ and all related constraints
• Mistrust among nations
• War for talent – attraction, motivation and retention ( widespread
shortage of skilled labour in South Asia, across the board labour shortage in Sri Lanka)
• Gap in skills and aspirations – nearly 10% of youth (age 15 – 24 yrs) unemployed. 20%
in Sri Lanka
• Gender gap – (In Sri Lanka for every one female of 15 yrs and above
in the labour force two
are out side the labour force)
• Poor access to capital for micro and small businesses
• Poor infrastructure
World Ranking in
Ease of Doing Business (2010)
Table 4
Ease of
Doing
Busines
s
Starting a
Business
Dealing
with
Construc
tion
Permits
Registeri
ng
Property
Getting
Credit
Protectin
g
Investor
s
Paying
Taxes
Trading
Across
Borders
Enforcing
Contracts
Closing a
Business
Bangladesh
107
79
116
172
72
20
93
112
179
101
Siri Lanka
102
34
169
155
72
54
166
72
137
43
Pakistan
83
85
98
126
65
28
145
81
155
67
Malasya
21
113
108
60
10
40
32
37
59
55
Thailand
19
95
12
19
72
12
91
12
25
46
Philippines
148
156
156
102
128
132
124
61
118
153
Vietnam
87
100
62
43
15
173
124
63
31
124
Taiwan
33
24
95
32
72
74
87
17
90
10
Mongolia
73
85
104
27
72
28
66
158
35
119
Nepal
116
96
130
25
89
74
123
164
123
107
Figure 3
Intra-regional Trade as a Share of GDP, 2008
60%
50%
48.1%
40%
31.4%
30%
20%
13.0%
9.0%
10%
7.2%
5.5%
0%
Europe & Central
Asia
East Asia &
Pacific
Sub-Saharan
Africa
Source: World Development Indicators Database
Latin America &
Caribbean
Middle East &
North Africa
South Asia
Table 5
Export Destinations of SAARC Countries 2009
Country
Exports to
EU
2009 (%)
Exports to
US
2009 (%)
Other
Bangladesh
51.2
25.7
23.1
Sri Lanka
36.9
23.1
40
Pakistan
24.6
18.3
57.1
India
20.5
10.8
68.7
31
-----
49 (Thailand)
Nepal
11.1
7.1
63.5 (India)
Bhutan
-----
-----
93.5 (India)
Maldives
Source: WTO
Table 6
A Brief Comparison of SAARC with EU and ASEAN
Membership
Original
SAARC
Current
7
Trade Liberalization
Significant Dates
8 SAPTA – 1993
Intra regional
trade - 2005
4-5%
SAFTA – 2005
ASEAN
5
10 AFTA – 1992
EU
6
27 EU single market
launched in 1992
25%
66.60%
Adjustment costs in transition
• Transition from inter regional to intra –
regional trade, investment and business
• Transition from commodities to value added
• Serving the new middle class and urban
middle and working class communities
• Costs of information, business contacts,
capital, technology and skills
• Not a case of instant switching from one to
another
Business Prospects
• Catering to the needs of the growing regional Middle Class
• Catering to the needs of regional urbanization including
infrastructure
• Building regionally integrated supply chains
• Exporting to new Asian markets
• Competing better in the old ‘mature’ markets
• Developing niches ‘sending coal to new castle’
• Adapting /adopting technology fast at lower costs to those
of the pioneers
• Leapfrog, synergize and create fusion
• Specifically for Sri Lanka plugging into the Indian growth
generator appears to be the best prospect in the light of
the global slowing down and ‘re-balancing’.
Example 1
Example 2
Example 3
Example 4
Employment Out-Come
• Futile to attempt listing specific industries or even sectors given the
complexity of the environment and the ingenuity of the private
sector – how can policy makers second guess enterprise?
• FMCG and CDs, construction, transportation, leisure, services are
obvious.
• Even with growing middle class and urbanization, the consumption
patterns will not exactly replicate those of the West, but the sheer
number of middle class people will boost the demand.
• Low resource intensive, highly ICT leveraged, knowledge intensive
and relatively labour intensive businesses.
• Continuing high share of micro enterprises leveraged by ICT and low
costs and linking with local value chains.
• Will depend on PPP in skill development and private initiatives in
attracting, motivating and retaining employees.
Policy Implications
• Greater regional economic integration
• Trade liberalization instead of industrial policy
• Reduced tariff and non tariff behind the border
barriers to trade
• Continuing and even increased investment in
education, health and physical infrastructure
• Greater private sector participation in education
• Vocational training and seed capital for youth
• Attract more females to the labour force
• Allowing private enterprise to decide ‘what’ to do
‘when’, ‘where’ and ‘how’.
Thank You