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Investing in People is Crucial to Economic Recovery in Central Asia

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Central Asian economies are on course to contract by 1.7 percent  this year, a sharp reversal from the 4.9 percent growth in 2019, says the latest edition of the World Bank Economic Update for the Europe and Central Asia region released today.

The impact of the coronavirus (COVID-19) pandemic varies across Central Asia. Kazakhstan and the Kyrgyz Republic will see an economic contraction of 2.5 percent and 5.5 percent, respectively this year. Tajikistan and Uzbekistan, on the other hand, will avoid a recession but growth is likely to be tepid at 1.6 percent (from 7.5 percent in 2019) in Tajikistan and 0.6 percent (from 5.6 percent in 2019) in Uzbekistan.

The pandemic-induced contraction in 2020 is also expected to increase poverty in all countries of Central Asia. At the $3.20 per day poverty line, estimates suggest that an additional 1.4 million people may slip into poverty. At the $5.50 per day poverty line, customarily used in upper-middle-income countries (such as Kazakhstan), the increase in poverty could be over 1.8 million people. and, in the worst-case scenario, over 2.6 million could become poor in the region.

In Central Asia, the World Bank projects growth to recover to 3.1 percent in 2021, supported by a modest rise in commodity prices and foreign direct investment as the region deepens its integration with China’s Belt and Road Initiative. However, the outlook remains highly uncertain as the region continues to grapple with negative spillovers from the euro area, Russia, and China through trade, commodity, and remittance channels. As a result, the downside scenario for Central Asia projects a 1.5 percent growth in 2021.

The pace of recovery also depends on the duration of the pandemic, the availability and distribution of a vaccine, global demand for commodities and the degree of improvement in global trade and investment.

In Kazakhstan, growth could recover to 2-3 percent in 2021and return to its pre-pandemic level by 2022. However, the economy remains vulnerable to the course of the pandemic that could affect businesses and restrain employment.

The Kyrgyz Republic is among the countries hard-hit by the pandemic. Growth is likely to rebound to 4.8 percent in 2021, assuming the pandemic is brought under control and external demand improves. Over the medium term, economic performance will continue to be vulnerable to developments in Russia and Kazakhstan – the country’s major trading partners.

Tajikistan is experiencing its slowest economic growth in two decades. Across sectors, hospitality and tourism experienced the deepest hit from the pandemic. Growth could improve to 3.7 percent in 2021. Risks to the outlook primarily depend on the progress in finding a vaccine or a cure for COVID-19 and the restoration of remittances and external trade.

The COVID-19 crisis in Uzbekistan has almost entirely extinguished GDP growth in 2020. Despite the setbacks, the country’s outlook remains positive as reforms continue to shift the economy towards greater resource efficiency and private sector growth. Assuming limited further lockdowns, an easing of the pandemic, and a broader global economic recovery, growth is projected between 4.8-5 percent in 2021.

A special analysis in the Europe and Central Asia Economic Update focuses on human capital, an area that requires serious attention of the governments given the severe impact of the pandemic on health and education. The report finds that improving access to and quality of tertiary education and reducing adult health risk factors, such as obesity, smoking and heavy drinking, are key for a resilient recovery in the countries of Europe and Central Asia. While the region’s countries provide relatively good basic education and health services, as measured by the World Bank’s Human Capital Index, more needs to be done for individuals and countries to succeed in the future.

The report reconfirms that COVID-19 has deeply strained already-weak health care systems in the Central Asia states. It also shows that across Central Asia, more than 16 percent of the population is obese, nearly 12 percent of people are heavy episodic drinkers, and almost 18 percent are current smokers. Prevalence of these risks increases not only the likelihood of conditions such as cardiovascular disease, but also the mortality and morbidity consequences of infectious diseases like COVID-19.

The pandemic has also adversely affected education and learning in Central Asia, threatening economic losses of $44 billion. School closures may lead to learning losses equivalent to one-third to one full year of schooling, and they are likely to exacerbate inequalities, by disproportionately affecting students from disadvantaged backgrounds. In Central Asia, the gap in reading between students from the richest and the poorest households is expected to increase by between 8 and 30 percent. Given the demographic composition of Central Asia, where young people make up over half of the population, the current education crisis will have long-lasting negative consequences.

The World Bank cannot emphasize enough the need for Central Asian countries to focus on improving access to quality education for all students, as well as on recovering learning losses that threaten to keep an entire generation from achieving their potential,” said Lilia Burunciuc, World Bank Country Director for Central Asia region.

Good quality higher education is critical for people to remain competitive in fast-changing labor markets. Improving higher education in the Central Asian states would help them retain their high-skilled labor force in the face of sustained out-migration.

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Corporate Boards are Critical Starting Points for Implementing Stakeholder Capitalism

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COVID-19 has led to global and systemic economic, social and environmental disruption, and an increasing number of companies are recognizing the need for pragmatic approaches to implement the principles of stakeholder capitalism.

A new white paper, The Future of the Corporation: Moving from Balance Sheet to Value Sheet, provides analysis about the important role boardrooms and corporate governance play in addressing the environmental, social and governance (ESG) challenges their companies face. Focusing on practical tools for corporate leaders, the white paper, produced in collaboration with Baker McKenzie, provides a set of actions and stakeholder governance considerations boardrooms can take to reshape their company’s purpose and practices.

This includes leadership-level actions, such as aligning company purpose and incentives with transparent goals and KPIs, increasing board diversity and adopting the common stakeholder capitalism metrics to measure and manage global risks and opportunities related to business, society and the planet.

“Business leaders are increasingly implementing business models that create value based on stakeholder needs,” said Klaus Schwab, Founder and Executive Chairman, World Economic Forum. “While there’s increasing momentum towards stakeholder capitalism, many businesses are also looking for practical solutions to help them fully understand and address the concerns of all their stakeholders. The Forum is committed to providing measurement and governance tools that will help these leaders succeed, thereby advancing stakeholder capitalism globally.”

Effectively aligning a company’s practices with its purpose is another key role boardrooms must play when integrating stakeholder interests into their business models. Setting clear metrics for management, which align with company purpose is an important step for boards.

Ørsted, a company who successfully transformed its business from fossil fuels to renewable energy, is a clear example of how effective governance is critical to company-wide transformation For example, in its transition to being a sustainable business, Ørsted made it a board-level priority to ensure its transformation was transparent, the journey was measured with concrete metrics and it was communicated to all relevant stakeholders.

“The pandemic, climate and inequality challenges of the last year were and continue to be unprecedented. Against this backdrop, how can companies drive long-term value creation and sustainable growth? A good stakeholder governance framework will help companies mitigate risk, build resilience and enjoy sustainable value creation and long-term success; at the heart of good stakeholder governance is clearly understanding who key stakeholders are, engaging with them and bringing their voice into decision-making,” said Beatriz Araujo, Head of Corporate Governance, Baker McKenzie. She added: “There is no ‘one-size-fits-all’ approach; each company must embark on its own stakeholder governance journey and we have suggested some of the steps companies should consider taking on such a journey.”

In addition to the examples above, the white paper provides a stakeholder governance framework centred around four key areas of four key areas of leadership focus. These are:

1) Purpose

Purpose is returning centre stage as an enabler for long-term sustainable value creation for corporate success.

Boards should ensure their companies have a clear and well understood purpose, informed by their key stakeholders’ expectations, and regularly use this purpose as a guide in their strategic decision-making.

2) Strategy

Corporate leaders should ensure their company’s strategy is robust and designed to deliver the company’s purpose.

This strategy needs to be flexible to take account of changing stakeholder considerations. Periodic ESG risk and opportunity assessments are a tool that leaders can use to ensure they are pursuing an appropriate strategy in light of changing externalities and stakeholder feedback.

3) Culture/Values

A company’s culture and values are important in ensuring decisions and daily business practices appropriately reflect their stated purpose.

4) Governance

Effective governance, which regularly addresses stakeholder input, is critical for running a sustainable, resilient business.

Board composition, diversity and inclusion are important factors in ensuring boardrooms are equipped with the skills needed adequately understand and consider the needs of their stakeholders.

Along with input from the Forum’s Community of Chairpersons, the whitepaper is based on interviews with senior leaders at bp, the Cambridge University Institute for Sustainability Leadership, Fidelity International and Ørsted.

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Digitalization crucial to SIDs’ COVID-19 recovery, long-term development

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The upscaling of digital technologies presents a host of opportunities for small island developing states (SIDS) to diversify their economies, boost manufacturing, gain greater access to global value chains, and improve disaster preparedness. However, significant obstacles remain, including inadequate digital infrastructure, insufficient training opportunities for women and young people, a growing digital divide, and a lack of data and policy knowledge. That’s according to an expert panel convened for the Global Manufacturing and Industrialisation Summit’s Digital Series on the topic: “How Information and Communication Technologies can foster inclusive and sustainable industrial development in Small Island Developing States”.

Ralf Bredel, Chief of the Asia-Pacific Regional Programme at the United Nations Industrial Development Organization (UNIDO), said that SIDS share common challenges such as limited resource bases, long distances to primary markets, and vulnerability to climate change.

“ICT has the potential to help SIDS in overcoming some of the challenges derived from the isolation and remoteness. It can support trade in economic diversification. This is even more true under the current circumstances, with COVID-19 and the restrictions on people’s movements and the heavy blow to SIDS’ economies in relation to their continued reliance on tourism,” said Bredel.

Vanessa Gray, Head of the Division for Least Developed Countries (LDCs), Small Island Developing States (SIDS) and Emergency Telecommunications at the International Telecommunication Union (ITU), added, “We know that small islands are naturally prone to disasters caused by earthquakes and severe weather events and are being affected by climate change, resulting in increased tropical cyclones, hurricanes, flood and landslides, to name a few. Connectivity can help address these events by providing remote communities with access to early warning systems, real-time weather information, remote sensing and geographic information systems.”

Gary Jackson, Executive Director of the Caribbean Centre for Renewable Energy and Energy Efficiency (CCREEE), said that countries in the region are “pushing the envelope” towards energy efficiency.

“We have to recognize that islands don’t have what we call a supergrid, don’t have a lot of interconnections that would give us reliability and availability and that’s what people really want,” said Jackson. “So one of the things we have to consider is how we move towards decentralization, decarbonization and some of the things that we need to do to ensure that reliability, availability and affordability are consistent with what people require.”

Michelle Marius, Publisher of the ICT Pulse blog highlighted a continuing gender gap concerning digital employment. “We do have so many girls and women in the workforce. Many of them, sometimes even in management positions in reputable organisations, but somehow we still have not been able to crack that barrier between women in tech and digital entrepreneurship by women” she noted.

Amjad Umar, Director and Professor of ISEM (Information Systems Engineering and Management) programme at Harrisburg University of Science and Technology, said, “We know that, in many cases, SIDS do not have 3G technologies – they are still at 2G range. So, we specifically designed this plan (for the ICT4SIDS Partnership) that produces solutions that would work with very, very low technologies…”

“Digitalization consists of people, processes and technologies,” underlined Umar.

Concluding, moderator Martin Lugmayr, Sustainable Energy Expert at UNIDO, stressed that there is a long way to go towards realizing inclusive and sustainable industrial development in SIDS, particularly in light of current circumstances. “COVID-19 recovery must have a long-term perspective. Iit has to be green, it has to be blue in the case of Small Island Developing States, and it has to be digital,” he said.

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Fewer protections, lower wages, and higher health risks: Homeworking in the COVID era

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Image: European Wilderness Society

The UN’s labour agency (ILO) called on Wednesday for greater recognition and protection for the hundreds of millions of people who work from home, accounting for almost eight per cent of the global workforce even before the COVID-19 pandemic.

Since movement restrictions linked to the global spread of the virus were implement in many countries, the number of people working from home has increased sharply, and that trend is expected to continue in coming years, despite the rollout of vaccines that began in late 2020.

Drop in wages in rich and poor countries

According to a new ILO report, many of these “invisible” workers experience poor working conditions, face greater health and safety risks, and lack access to training, which can affect their career prospects. They are also likely to earn less than their counterparts who work outside the home, even in higher-skilled professions.

“Homeworkers earn on average 13 per cent less in the United Kingdom; 22 per cent less in the United States; 25 per cent less in South Africa; and about 50 per cent in Argentina, India and Mexico”, ILO said in a news release on Wednesday.

The report, “Working from home. From invisibility to decent work”, also showed that homeworkers do not have the same level of social protection as other workers, and are less likely to be part of a trades union or to be covered by a collective bargaining agreement.

Homeworkers include teleworkers who work remotely on a continual basis, and a vast number of workers who are involved in the production of goods that cannot be automated, such as embroidery, handicrafts, and electronic assembly. A third category, digital platform workers, provide services, such as processing insurance claims, copy-editing, or cutting edge specializations such as data annotation for the training of artificial intelligence systems.

Growth likely to continue

According to ILO estimates, prior to COVID-19, there were approximately 260 million home-based workers globally, representing 7.9 per cent of global employment.

However, in the first few months of the pandemic, an estimated one-in-five workers found themselves working from home. Data for the whole of 2020, once available, is expected to show a “substantial increase” over the previous year, said the agency.

The ILO predicts that the growth of homeworking is likely to continue and take on greater importance in the coming years, bringing renewed urgency to the need to address the issues facing homeworkers and their employers.

Poorly regulated

At the same time, homeworking is often poorly regulated, with little compliance with existing laws, and homeworkers usually classified as independent contractors, which means that they are excluded from the scope of labour legislation. In response, ILO outlined clear recommendations to make working from home “more visible and thus better protected”.

Industrial homeworkers should be made part of the formal economy, given legal and social protection, and made aware of their rights, ILO urged. Similarly, teleworkers should have a “right to disconnect”, to ensure the boundaries between working life and private life are respected.

The report also urges governments to work closely with workers’ and employers’ organizations, to ensure that all homeworkers move from invisibility to decent work, “whether they are weaving rattan in Indonesia, making shea butter in Ghana, tagging photos in Egypt, sewing masks in Uruguay, or teleworking in France”.

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