Second Freedom South Asian Challenge 2005-2025, 2005
ISBN No. 818826207-2
Once upon a time, South Asia was the wealthiest region of the world, ahead of North America and Europe. About 50 years ago, it had fallen behind the West but was comparable to most parts of Asia. Presently, an average Chinese, Korean, Thai or Malaysian is anywhere from 3 to 30 times better off than an average Indian, Pakistani, Bangladeshi or Nepali person.
- In the last 20 years, South Asian countries have barely doubled their per capita income while China has increased it 6 times and the rest of the East Asian countries have managed to treble or quadruple theirs..
- With the mere exception of Haiti and Yemen, South Asia’s human development indicators are below that of any country in Asia or Latin America, North America and Europe. In other words, South Asia’s quality of life is just better than Sub-Saharan Africa.
- Out of 200 million children below five, about 20 million are going to die in South Asia before they have an opportunity to learn ABCD in their local languages. The proportion of undernourished children is 40-50 per cent, except in Sri Lanka. Thus, approximately 100 million children are undernourished when 50 million tonnes of food grains are lying unused!
- Is it possible to conceive the death and entrapment of families belonging to farmers when the farming community is producing surplus food, in any other democracy? South Asian democracies have provided death and suffering to its farmers in return for the largest number of votes and large quantities of food and milk. Is this the failure of economics or politics? Unless the farmer is freed, it will be impossible to rescue the rural poor from the poverty trap.
- The situation for women in the region is one of the worst in the world. For every 100 men, there are 93 women, against the global norm of 106 women for every 100 men. Girls born in India, Pakistan, and Bangladesh are 30-50 per cent more likely to die before their 5th birthdays.
- South Asia represents a unique paradox. Almost every country in the region with the exception of Nepal has had some woman leader at its helm at some point in time, a phenomenon unparalleled in other regions of the world.
- South Asian countries excel in inequitable performance, the effect of which can be discerned within the provinces within each country. In India, southern and western states are on a dynamic growth trajectory, while the north and north-eastern states are on a low growth path. Nepal too suffers from stark inter-regional disparities. The mid-western districts have the lowest per capita income, low health indices and high infant mortality rates. It is also an area where the Maoist insurgency first found its popular base. The story is repeated in Pakistan where farmers in Sindh and Balochistan face acute poverty.
- Trade within the South Asia region is very insignificant, about a tenth of India’s trade with East and South-East Asia. It is estimated to be around US $5 billion, with India dominating the region’s trade. Informal trade matters more in South Asia! As per latest available estimates, informal trade exceeded US $ 3 billion. India’s informal trade with Pakistan is almost ten times the formal trade, while its trade with Bangladesh and Nepal is equal to the formal trade itself.
- If India and Pakistan, the 2 largest economies of the region grow at six per cent during the next two decades, South Asians will be more than 25 years behind at least 50 countries in the world in 2025. If India grows at 6-7 per cent consistently, it will find it impossible to catch up with the 2001 per capita levels of OECD countries by 2050.
- There is no such thing as the middle class in South Asia! There is a business class; bike economy class and bullock cart economy class. The business class is the segment that can afford to purchase cars, computers and other symbols of the global economy. Those belonging to the bike economy can afford to buy two-wheelers and some basic comforts. The bullock cart segment has no access to markets because of low purchasing power. If the region grows at 6-7 per cent during 2005-2025, there will be 1.2 billion people in the bullock cart economy class in the region in 2025, more than India’s entire population in 2005.
- South Asia in 2025 will have the daunting challenge of over 800 million people in the bullock cart economy in India and almost 400 million in Bangladesh, Nepal and Pakistan. If the rate of GDP growth slides below 6-7 per cent, the number of people living in the bullock cart segment will swell further.
- Nepal and Pakistan have concentrated on enriching His Majesty and His Military respectively. So long as these two institutions dominate the two countries, the rest of the population, except the small charmed circles around the monarchy and military, can be certain of gradual impoverishment.
- India and Bangladesh do not need the monarchy or the military to distort the economy, they have bureaucrats who can inspect, arrest, squeeze entrepreneurs and kill their entrepreneurial spirit. India’s inspection raj will deliver an opportunity loss of US $2000 billion in missed industrial growth in the next two decades. In Bangladesh, the losses for the government alone are expected to be around US $100 billion during the same period.
- In India, an industrial unit needs up to 60 clearances. A small-size industrial unit is subjected to 12-20 visits from various inspectors every year. As the size grows beyond this threshold, the industrial unit can be subjected to 20-40 inspections. In Bangladesh too, the number of visits by inspectors can be anywhere from 10 to 40 per year depending on the size of the unit. It can take anywhere from 6 to 9 months to set a unit due to delays in securing electricity, gas, and telephone connection. Managers in Bangladesh spend five per cent of their time dealing with inspectors.
- The South Asian labour force is expected to be mostly unqualified, outside small clusters of a few million privileged youth. Out of the roughly 800 million labour force in the region in 2025, around 560 million will not have completed their school education and only a few million will have higher professional qualifications to their credit.
- There is great hope in South Asia of information technology, software and related sectors bringing economic prosperity to the region, especially India. In reality, however, out of an 800-million strong labour force in 2025, only 10 million will be employed in these sectors in South Asia.
- A comparison between Nepal and Sri Lanka proves that peace pays while conflict undermines growth in a small country. The economic prospects of the two countries will depend on whether they are at peace or war with themselves during 2005-2025. In 2005, Nepal and Sri Lanka are at the threshold of a civil war and conflict, Sri Lanka has an uneasy ceasefire while Nepal is in the midst of conflict. Politics will determine which trajectory they will choose in the next 2 decades, either way impacting their economies.
- The bilateral conflict between India and Pakistan depresses investment climate to undermine GDP growth rate by 2%. If past experiences are any indicator, then conflict will pull down GDP growth rates by 1-2 per cent in every South Asian country during 2005-2025.
- South Asia has a large terror economy with about 330000 armed combatants and over a million-strong supporting network. The total visible Gross Terror-economy Product (GTP) of the region is US $2 billion. Invisible GTP is normally 3-4 times the visible GTP. If the next 2 decades see a quantum leap, GTP of 2025 could be around 5 per cent of the region’s GDP.
- The end of the Multi-fibre Agreement (MFA) will deliver a blow to Bangladesh and Sri Lanka, while it will benefit India and Pakistan. The clothing and textile sector is significant for all the countries in the region. For Bangladesh and Sri Lanka, the share of readymade garments (RMG) in the exports was 60 per cent and 50 per cent respectively. For Pakistan, cotton accounted for 62 per cent of exports in the same year. These countries had thrived on the quota system under the MFA that ended in January 2005.
- In the post-MFA regime, these countries will witness a closure of inefficient firms that will not be able to compete. In Bangladesh, potential 1-1.5 million workers will be displaced, affecting their families, which imply, on average about 4-6 million people being affected; 600 garment factories will face closure and 800,000 garment workers will be rendered jobless. Sri Lanka has been preparing itself for the post-MFA strategy and is one country that plans to focus on vulnerable items and is reviewing alternatives.
- South Asia’s ambitions for regional trade will completely depend on developing a dependable transport network. If road, sea and air connectivity is improved by five times by 2015, it will facilitate close economic interface in the following decade. Otherwise, come 2025 and SAFTA will still be a subject of academic discourse.
- SAARC wants to promote business, but it is not easy for business travellers to fly directly from one capital or commercial centre to another. The connectivity between seaports is weaker than the air connectivity. Colombo has become a hub port for the South Asian region. There are regular feeder services between Colombo and most South Asian ports but there are no direct calls among the ports of Bangladesh, India and Pakistan. For example, although Karachi port is near Mumbai port, there is no direct call between the two ports.
- While India, Pakistan and Bangladesh are involved in political confrontation, Colombo offers hope for a cooperative journey to 2025. The deviation time for a ship from the main international shipping route to Colombo is barely 8 hours, as compared to 20 hours for India’s nearest port Tuticorin, 31 hours for Mumbai, 35 hours for Chennai and 90 hours for Karachi.
- India and Pakistan will face a growing shortage of oil and gas in the next 2 decades, especially given the rising demand from China. Their supply options will be threatened by their rivalry and antagonistic relations with other neighbours in South Asia.
- Governance in South Asia is at peril with politicians losing their credibility very fast. In the last 30 years, about a dozen heads of government in the region have been assassinated. At this rate, another dozen can be expected to be killed by 2025. Also, religion has made inroads into political systems in all five countries, a trend which is likely to be strengthened in the next two decades.
- In 1995, all the five big countries in the region were democracies. Only Sri Lanka and India can be expected to continue with commitment to the democratic practice from 2005 to 2025.
- The countries that have weak democratic cultures and have shown preference for authoritarian rule – Bangladesh, Nepal and Pakistan, will face uncertainty from 2004-2010 and risk anarchy and breakdown from 2010 to 2025.
- For decades, Nepal’s monarchy, aristocracy and democracy have neglected the Dalits in western districts. Now women and dalit men have emerged as the real force behind the Maoists, who may take over the State by 2010.
- In India’s north and north-east, leftist terror groups are turning into Islamic sponsorship for arms, funds and training. The flirtation of red terror with green terror is bound to turn the entire eastern part of South Asia into a colourful inferno between 2005 and 2025, most likely during the 2010-2015 period.
- There are around 15 Islamic extremist organisations operating in Assam. All of them have links with terrorist organisations outside India for moral and financial support. A grand alliance, AMULFA was reportedly founded with the backing of the ISI to coordinate subversive activities of Islamist terrorist element in the North-eastern region of India. The LTTE might be another source for future linkages between the Maoists and Islamic terrorism. The LTTE has connections with the People’s War Group in India.
- South Asian terrorist groups are likely to replace Al Qaeda as premier global brands of terrorism, especially Harkat-ul-Jihad Islami (HUJI) and Lashkar-e-Toiba (LeT). There are about 170 major terrorist groups in Asia and the Middle East. Out of them 70 are based in South Asia with local, regional and global ambitions.
The report also presents a 60-point charter for the second freedom and an essay on individual initiatives in response to the South Asian Challenge 2005-2025
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