South Asia was considered as the epicentre of the pandemic brought about by COVID-19. The countries in the region have gone through major lockdowns and are slowly emerging out of strict quarantines. Everybody was expecting Asian economies to crumble, but despite the setback, many see the region as a major destination for growth.
While it’s true that a great part of South Asia is considered to be in poverty and at greater risk because of the pandemic, the businesses in the region are on a steady climb. The consequences of the Covid-19 crisis have a long time to play out. But one thing we do know is that coronavirus can strike the world in unexpected ways. Indeed, there is a possibility that South Asia could come through the crisis, stronger.
The COVID-19 pandemic and the associated economic crisis are posing huge challenges. It gives rise to uncertainties and is imposing wrenching trade-offs. Both concerns are global, but their impacts are local. The policy response to both crises needs to be rapid, even if it is rough around the edges. But countries cannot pull this off on their own. The global problems require global solidarity and coordination.
Governments must dramatically overhaul policies and invest in public health, economic stimulus, and social safety nets, to help countries recover faster from the COVID-19 pandemic. The economic report warns that a patchwork of pre-existing solutions won’t work. It points out that governments must coordinate with each other to hasten the recovery. We also understand from it that this is a global crisis and working in silos is not an option.
The report, ‘Position Note on the Social and Economic Impacts of COVID-19 in Asia-Pacific’, calls on countries in the region to avoid returning to the pre-pandemic environmentally unsustainable development path and to capitalize on the opportunity to build a better future.
In 2020, Asia’s GDP will overtake the GDP of the rest of the world combined. By 2030, the region is expected to contribute roughly 60% of global growth. Asia-Pacific will also be responsible for the overwhelming majority (90%) of the 2.4 billion new members of the middle class entering the global economy.
The bulk of that growth will come from the developing markets of China, India and throughout South-East Asia. It will give rise to a host of new decisions for businesses, governments and NGOs. The pressure will be on them to guide Asia’s development in a way that is fair and designed to solve a host of social and economic problems.
Different countries, different prospects
While these estimates paint a picture of massive growth in consumption, the reality is that consumption patterns will emerge differently across markets. The growth rates are dependent on local demographics and other macro factors.
For example, the World Economic Forum’s Future of Consumption in Fast-Growth Consumer Markets work demonstrates that China’s ageing population will negatively impact the population dividend. But, rising wages, urban migration, service jobs and an anticipated drop in household savings rates will boost consumption. India’s massive demographic dividend and burgeoning middle class will spur consumption and aid economic growth.
Meanwhile, Indonesia, the Philippines and Malaysia are set to grow their labour forces significantly. It results in a rise in per-capita disposable income. The rapidly advancing digital marketing in the region will provide additional access to the previously unserved, especially in the time of the pandemic. It will also deliver on consumer demands for convenience and efficiency.
Not only is Asia growing richer; as it becomes more integrated, it is also merging as a constructive force for global governance. They’ve come up with a strong business or marketing strategy despite the pandemic and are on track towards recovery.
This emergence is timely. The world faces myriad challenges that require a multilateral solution. From climate change, demographic crises, technological disruption and yawning inequality are the challenges. Yet, a lack of global leadership and consensus has stalled reform of global institutions, leaving severe governance deficits.
While Asia has benefited enormously from globalization, it also encapsulates many of the world’s problems. Fortunately, there are growing signs that this vibrant, diverse continent can work together and rise to offer some of the solutions.
Towards a more integrated Asia
If this is to be the Asian century, Asians will need to build it by working closer together on their own continent.
Despite Asia’s remarkable rise, its family of nations is often kept apart by difficult geography and difficult history. Efforts to overcome these barriers and deepen regional integration have gained momentum. The mutual benefits of cooperation are becoming more apparent.
It is also evident in the revival of China’s relationships with India, Japan, and South Korea. In the China-Japan-ROK trilateral summit, this fact is again made evident. Regional cooperation platforms such as APEC, ASEAN and the Shanghai Cooperation Organization are also increasing.
Asia is also bucking the global trend for trade fragmentation. It is becoming ever more economically integrated via trade, investment and tourism. Previously, this happened from the grassroots up without any regional free trade agreement. Only such a regional free trade agreement spurred integration in Europe and North America.
Now, Asia is at the heart of the action for multilateral trade liberalization. The Asian leadership revived the reformed Trans-Pacific Partnership (TPP) (also known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership CPTPP). It came into force at the start of this year. Talks are also progressing towards the Regional Comprehensive Economic Partnership (RCEP). These living agreements will continue to evolve and will likely attract new members. It offers a flexible, multi-track path to economic integration in Asia. For example, CPTPP can help to set standards for future trade for advanced economies. At the same time, RCEP will offer a way for developing countries to participate in free trade.
To boost pan-Asian coordination on connectivity and free trade amalgamate the infrastructure initiatives, trade pacts and other groupings. In turn, this can help fuel a virtuous cycle of mutual gain and closer integration.
But, at present, the pandemic has brought in one dissenting factor. China has currently strained ties with twelve of its top twenty export destinations. Leaving these disputes unaddressed, may pose a real risk. It is risky not only to China’s export sector but to China’s overall economic prospects. The effects of which could also spill over to Asia, to some extent.
However, a more integrated Asian community – one that brings together developed and developing countries and various economic systems – could also provide momentum. It will give modalities to renew multilateral cooperation at the global level. Solutions that have been adapted to Asia’s diverse conditions may well prove to be useful templates for the rest of the world.