Summary

Summary | SANEM-World Bank Seminar: Is South Asia Experiencing Jobless Development?

4 April 2024 | BRAC Centre Inn, Dhaka

South Asian Network on Economic Modelling (SANEM) and the World Bank jointly hosted a seminar titled “Is South Asia Experiencing Jobless Development?” on April 4, 2024, from 10:00 AM to 12:00 PM at the BRAC Centre Inn Auditorium, Mohakhali, Dhaka. The session was chaired by Dr. Selim Raihan, Executive Director of SANEM. This panel discussion, held on the occasion of the launch of the World Bank’s April 2024 South Asia Development Update, examined prospects for the region and explored risks to the outlook, including climate risks. During the session, Franziska Ohnsorge, Chief Economist for South Asia at the World Bank, presented the report focusing on job resilience in South Asia. Among the discussants were Dr. Sayema Haque Bidha, Professor in the Department of Economics at the University of Dhaka, Dr. Rubana Haque, Vice Chancellor of the Asian University for Women, and Mr. Bernard Haven, Senior Economist at the World Bank Group, Bangladesh.

Dr. Franziska Ohnsorge highlighted the obstacles to job creation in South Asia and the policies needed to remove these obstacles. The growth outlook for South Asia is better than in other Emerging Market and Developing Economies (EMDEs), mostly due to strength in India and more reliance on the public sector than in other EMDEs. “Private investment is languishing; the growth of private investment is much lesser than in previous years. Its contribution to GDP is much lesser than that of other developing countries.” In response to the question, “What would it take to hand over the baton from the public sector to the private sector?” she states that Trade openness and institutional quality are the most important factors for South Asian countries. Her presentation shows that South Asia has a much lower trade-to-GDP ratio. The Bangladeshi ready-made garment (RMG) sector flourished, and the Indian IT sector flourished, but trade is a much more aggregate term that goes beyond these sectors. “Bangladesh is choking the channels of growth and employment with high barriers on trade,” she comments.

Dr. Franziska highlighted that fragile reserve spheres could face renewed currency pressure. She stated, “When currency crises occurred, in the first one to two months, exchange rates depreciated by 50%. This depreciation caused sustained pressure on borrowing costs and real income,” signifying the immediate effects of the currency crises. Another aspect the presentation highlights is households have less effective climate adaptation strategies than firms. “Farmers migrate as an adaptation strategy from agriculture to non-agriculture, but there isn’t enough job creation in non-agricultural sectors. Merely having a non-zero employment rate is insufficient; employment must grow to accommodate the expanding workforce.” The report shows the female workforce is half that of the male workforce in South Asia, and the overall female employment ratio is much lower than in other EMDEs, but a novel finding is the decline in male employment.

Dr. Sayema Haque Bidisha emphasized various critical aspects regarding employment and economic dynamics. Addressing Franziska’s query, Dr. Bidisha highlighted the disparity in employment ratios between men and women, stating, “The employment ratio of men from 2017 to 2022, according to Bangladeshi data, showed a marginal increase. For women, while there is still an increase, there remains a huge gap with their male counterparts.” Furthermore, she pointed out the shifting trends in female labour force participation, noting that while it’s on the rise in rural areas, it’s declining in urban settings. Transitioning to the Ready-Made Garment (RMG) sector, she highlighted a decline in women’s participation due to automation and the Fourth Industrial Revolution (4IR), leading to what she termed “defeminization” in the RMG sector. Dr Bidisha outlined macroeconomic challenges hindering private investment and job creation, urging a shift towards quality growth rather than merely increasing numbers.

Mr Bernard Haven remarked on the significant growth experienced by Bangladesh over the past decade, alongside a substantial increase in the number of workers going overseas. He highlighted three key priorities for Bangladesh, “Job creation, the quality of created jobs, and the integration of vulnerable populations into the workforce.” Haven emphasized the interdependence of job creation with macroeconomic issues, advocating for increased Foreign Direct Investment (FDI) and the cultivation of a positive business environment. He also stressed the importance of boosting productivity for both firms and workers, highlighting the necessity of greater investment in human capital. He said, “According to the Human Capital Index, a child in Bangladesh will be 46% less productive than if they were raised with full education and healthcare.” In addition, he underscored the need to enhance firms’ management capacity, facilitate childcare to encourage women’s participation in the labour force, reduce migration costs, and expand social safety nets.

Dr. Rubana Haque pointed out, “There’s a notable absence of upskilling and reskilling initiatives in decent jobs and the RMG sector. There are so many same seminars, so many discussions, but nobody is changing the policy.” She raises the question of what constitutes effective upskilling and reskilling, remarking, “Universities have a significant role to play, especially if we consider the evolving landscape.” “Despite efforts, we find ourselves ensnared in low-price vicious cycles,” she said, urging the RMG buyers to take responsibility. Furthermore, she highlights a disconnect between industry and academia, emphasizing the need for a focus on STEM education. She noted that diversification is occurring in a limited form, as we still see the RMG sector solely dominating, stating, “Encouraging incubation and innovation through startups is imperative,” she urged.

Dr Selim Raihan gave the concluding remarks of the session. Regarding South Asia, he stated from the report of the World Bank that the private sector investment growth in South Asia is not very encouraging, although public sector investment plays a big part which is a big area of concern. Moreover, there has been a fall in the employment ratio in both cases of male and female labour force participation. “Regarding Bangladesh, at this moment the most urgent thing for us to see in the upcoming budgets should be the macroeconomic stability,” he voiced. He reiterated the importance of investing in human capital development and policy reform to address the current labour market challenges. He also emphasized the efficiency of public investment and efficient tax collection process for providing better social protection.