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Unemployment in South Asia

June 17, 2012


A daunting challenge for South Asia is to create one million jobs every month in the decade ending 2020 with most countries in the region facing deceleration in economic growth and escalation in unemployment.

This warning-cum-advice has come from the World Bank study shared with the visiting journalists in the Nepalese capital. The region is experiencing a huge demographic transformation, as half of its population belongs to the young generation. Many of these youths are seeking jobs.

Now it is not easy to create enough jobs when most economies are in distress because of energy deficit and a host other factors. In the past few years, industrial load shedding has resulted in loss of 400,000 jobs in Pakistan, whereas in Bangladesh, power shortages account for 1- 2 per cent of losses in its gross domestic product. In Nepal, the load-shedding extends up to 16 hours a day.

In the given situation, the World Bank is also analysing the impact of regional trade on poverty alleviation. Its studies show that the border areas and land-locked countries have maximum level of poverty. This makes an economic argument for boosting regional trade and integration, now hampered by trust deficit among South Asian countries.

South Asia remains the least integrated region. Its trade with other parts of the world ranges between 20- 25 per cent of GDP over the last decade, but intra-regional trade has languished at less than 2.7 per cent.

However, India’s approach towards regional trade is changing as noted by the World Bank Chief Economist for South Asia Kalpana Kochhar. She says the Indian ‘leniency’ towards South Asian countries especially Pakistan in the recent past on trade account is driven by economic factors. The shrinking of demand for international products in the US and EU markets has compelled India to look towards the regional markets.

Whatever are the driving factors, smaller countries in the region are watching the trade liberalisation process between Pakistan and India with deep interest and see it a step forward.

The recent developments have also prompted the World Bank to create a new department under its umbrella, named as “South Asian Regional Integration.

World Bank programme director of the regional integration project Salman Zaheer said economic cooperation hinged on the space being provided by evolving relations between Pakistan and India. From the Indian perspective, he said, until India resolved its regional issues, it could not win a seat in the United Nations Security Council. India is also trying to become a permanent member of the UNSC — a move opposed by Pakistan.

Mr Zaheer said various studies suggested that regional co-operation would boost South Asian economy by three per cent, if the region had an East Asia-type arrangement. At the same time, “it is not enough to just have trade agreements. We have to work on facilitation and logistics,” Kalpana said. The bank is putting a lot of emphasis on trade facilitation and transportation.

Now to create jobs, South Asian countries will have to remove trade barriers. There is a huge potential to produce intermediary goods within South Asian countries and benefit from the transit trade services.

The WB has offered Pakistan to carry out a feasibility study on proposed import of 500MW electricity from India. Also the bank is helping Pakistan to import 1300MW electricity from the Central Asian States under CASA-1000 project.

To improve Pakistan’s infrastructure, the bank is helping Pakistan to revive and restructure the National Trade Corridor (NTC) project for revamping the transport infrastructure, trade logistics and services for regional connectivity especially with China, Afghanistan, Central Asians States and Iran. The project will reduce the cost of doing business and bring the trade and transport logistics and services to international standards.

The World Bank has advised both Pakistan and India to lower trade barriers, ease visa restrictions, improve infrastructure for connectivity — roads, railways, ports, finance etc. It is hoped that the increase in bilateral and regional trade can help create jobs for unemployed youth in the region.