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Could Covid-19 act as a catalyst for Indian MSMEs to become globally competitive?

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Authors: Dr Neha Arora& Rishika Nayyar*

The COVID-19 crisis is a challenge never witnessed before and many economies are bound to shrink as a result of demand and supply shocks. It is expected that COVID-19 crisis could have a far more devastating impact on the world economy than the global financial crisis of 2008-09.Like any other crisis, the present one has exposed the vulnerabilities of existing structures and practices, forced the change in status-quo and, at the same time, opened new window of opportunities.

The Medium, Small and Micro Enterprises (MSME) sector is the most vibrant and crucial industrial sector for the Indian economy. The sector provides employment to over 130 million people and contributes to nearly 30% of GDP. The MSMEs contribute nearly 45% to manufacturing, forming the backbone of the Indian manufacturing economy. MSMEs have contributed significantly towards domestic employment generation, increased revenues and have boosted international trade. Over the years, MSMEs in India have transitioned from manufacturing low-tech labour-intensive goods to medium-tech capital-intensive products and have also entered the services sector in recent past.

The significant contribution of MSMEs to the Indian economy on one hand, and the hard blow that the sector has received from the present crisis on the other, have called for a renewed and carefully thought-out focus on the situation of MSME units. In this background, the present article highlights the pertinent role that a vibrant and dynamic MSME sector can play in helping India capitalize on the opportunities thrown open by the pandemic and aid the process of economic recovery. It also suggests a three-pointer action plan that focuses on technology adoption, rural cluster development programme and strategic partnership development programme to bolster the MSME sector.

Opportunities for India

Supply chain restructuring: An opportunity to be the next global production hub

The COVID-19 crisis has caused widespread and significant disruptions and exposed vulnerabilities in the global supply chain, especially for countries who were excessively dependent on China for sourcing of raw materials, intermediate and finished goods. Over the past two decades, China has played a dominant role as the ‘factory of the world’ for industries such as electronics, automotives, apparel and plastics. However, escalated trade tensions in 2019 between China and the US, in addition to rising labour cost and declining productivity, dimmed the country’s significance as a global production hub. While the relocation of production facilities was already setting in, the current pandemic fueled this fire. Many countries around the world, including the USA, UK, Japan and South Korea, have been incentivizing their companies to move production facilities out of China with  a view to reconfigure their supply chains and  reduce reliance on China. This initiative to reduce dependence on China has become a matter of national priority for some countries, like the UK.

The reconfiguration of global supply chains has opened up a window of opportunity for India to present itself as a business-friendly nation and an attractive, alternative investment destination for companies looking to relocate their production facilities. According to the Reshoring Index released by consulting firm Kearney, because of the COVID-19 crisis,“companies will be compelled to go much further in rethinking their sourcing strategies—indeed, their entire supply chain.” It is this compulsion and urgency that India needs to act upon. If exploited at the right time, this opportunity could provide the much needed boost to Indian Government’s flagship program -Make in India- which has now culminated into the aspiration of making in India for the world.

In a bid to attract foreign companies, the Indian government has rolled out various plans such as developing a land pool of 461,589 hectares (twice the size of Luxembourg) to supplement easier availability of land, improve hard infrastructure through huge investment in national infrastructure pipeline project, and soft infrastructure (i.e. institutions) through implementing business reforms. The Government has also handpicked ten sectors – electrical, pharmaceuticals, electronics, heavy engineering, solar equipment, food processing, chemicals and textiles – as spotlight areas for promoting manufacturing suggesting a much focused approach than earlier.

The MSME sector can be used as an catalyst to exploit the opportunity and realize the dream of making India a global production hub in three ways. First, MSMEs act as complimentary entities by providing intermediate goods to large businesses (both domestic and foreign) in India. They also help them achieve economies of scale by facilitating outsourcing of functions, specifically in labour-intensive activities. Second, they also play a pivotal role in promoting resilience to sector-specific shocks and fluctuations in international markets by diversifying the industrial sector. Lastly, MSMEs are the harbinger of entrepreneurship and innovation which are important pillars for lifting the nation’s capacity in shifting towards the manufacture and exports of sophisticated high tech products, and help move up the global value chains. Thus, to build and sustain competitive manufacturing enterprises, both large and small, and realize the vision of Make in India for the world, MSMEs need to be strengthened and supported.    

Self Reliant India- A shift from excessive dependence to embracing self sufficiency

For the last three decades, Indian economy, like any other open economy, has embraced the benefits of globalisation. Forces of globalisation, including production and trade, based on national comparative advantages have given rise to geographically-spread value chains. In normal situations, the global value chains work as a well-oiled machinery leading manufacturers and nations to be oblivious to the extent of dependency on other nations. A recent article published in Harvard Business Review provides evidence that most of the companies are not as up to speed about the structure of their supply chain. Covid-19 has given a blow to these companies as they struggle to keep a track of which site, parts, products, and suppliers are located in affected areas, leading to a complete halt of production. Automobile industry is a perfect example of this blowout.

Another, and in fact, more appropriate account of  globalisation-driven dependence can be seen in the case of India’s Pharmaceutical Industry. Third largest in the world (in terms of volume), Indian pharmaceutical industry imports 90 percent of active pharmaceutical ingredients (APIs) or bulk drugs, with two-thirds of total coming from only one source- China. Despite being alarmed about the overdependence on China as a national security threat in 2014, only half-hearted measures were taken by the policymakers to make industry as self-reliant as it was in the 1990s when it actually exported APIs and was ahead of China. The stricter regulatory requirements on Indian firms manufacturing APIs, coupled with strong state support given by China’s government to their indigenous manufacturers, resulted in widening of the gap between the cost competitiveness of Indian and Chinese companies- a cause of increased dependence.

While several other examples of products other than APIs, such as computers, mobile phones, medical devices, toys can be given here, the one that boldly underlines India’s dependence in the manufacturing sector is the fact that it struggled to be self-sufficient in the production of something as simple as plastic dispensers for hand sanitizers. The current pandemic has given a wake-up call not only to corporations but also to governments across developed and developing economies.

From the agenda of reducing dependence on foreign imports, including those from China for APIs and  other supplies, to the initial steps in ramping up the production of essential gear like personal protective equipment (PPE) kits, masks, testing kits, alcohol based sanitizers, dispensers, Indian Government’s vision of making India self reliant is echoed in the five pillars of its Aatma Nirbhar Bharat Abhiyaan- Economy, Infrastructure, System, Demography and Demand. The initiatives (present and planned) under each of the five pillars are aimed at getting the economy back on its feet. Needless to mention, focus on strengthening the manufacturing sector is and has to be the centerpiece of any course of action directed to make India self-reliant. 

In realizing the vision of self-reliant India, two things will play a determining role. First is the identification of sectors and/or areas, products, in which the Indian industry is capable of replacing foreign imports and can quickly scale up production, such as textile components and basic medical devices. One sector that is recently identified by the Government is the toy industry. A renewed focus on such sectors implies a renewed focus on  MSME units that have the capability to scale up effectively and efficiently. The second and a related requirement is creating a supportive ecosystem, of which MSMEs are not only viewed as an important part (in the capacity of a partner to big businesses) but also, more importantly, as beneficiaries. So, for instance, while toy MSMEs are going to play a direct and quintessential role in reducing India’s unduly excessive reliance on imports as well as making her self reliant, it is unachievable without a supportive ecosystem that protects innovative and creative works, and streamlines the procedure of obtaining quality certification.

Reverse Migration- An opportunity to boost rural entrepreneurship

The covid-19 situation has worsened the situation of unemployment in India. The stalling of  economic activity has forced businesses to lay off workers.. According to the Center of Monitoring Indian Economy (CMIE), the rate of unemployment in India has risen to over 23 percent as of April 2020 (25 percent in urban areas and 22 percent in rural) up from  7 percent (10 percent in urban areas and 6 percent in rural) in the beginning of the year (January 2020). Even as lockdown restrictions continue to ease, businesses in both formal and informal sectors, including construction, manufacturing, restaurants, travel and housekeeping are facing severe shortages of workforce due to reverse migration from urban to rural areas. According to an estimate by the Confederation of All India Traders traders’, the capital city has already witnessed an exodus of over 60 to 70 percent of its labor force. A similar situation  has been reported from other major states for migrant workers such as Maharashtra, Tamil Nadu, Gujarat, Andhra Pradesh and Kerala. The extent of reverse migration is estimated to be at least 23 million migrants moving back to rural India. The consequences of such an extent of reverse migration are being clearly highlighted and voiced by businesses across urban areas as they grapple with shortages of workforce. However, more concerning aspects of this situation will be faced sooner than we realize as a significant proportion of migrants would be reluctant to return back to cities due to fear of the coronavirus, which is expected to haunt mankind for at least a year, uncertainties and related economic and emotional distress. As migrant workers seek safe haven back in their villages, the already widespread unemployment in rural areas is bound to skyrocket. While some of them would rely on agriculture as a means of livelihood, the sector is not without challenges – low productivity and small size of land holdings – to name a few. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is another alternative but the guaranteed days of work is restricted to just 100 in a financial year and the wages are meager. Perhaps, employment under MGNREGA is generally viewed as a work avenue in the off or lean agriculture season rather than  a primary source of employment. Such a scenario, however, is an opportune moment to direct efforts towards rural industrialization through promotion of rural MSMEs. The process of rural industrialization through rural MSMEs will act as a catalyst to spur the generation of employment and income in the rural areas. A plethora of opportunities can be tapped by MSMEs not only in the agriculture and allied sector, but also in food processing, other traditional sectors such as khadi and village industries, handloom, handicraft and coir. In fact, the present crisis offers enormous potential for rural MSMEs to revive India’s artisan traditions and handicrafts which  is in line with the Government’s latest “Vocal for Local” initiative. Setting up such units and making them operational might take some time and require coordinated support and policy initiatives by private enterprises as well as the Government at center and state level. However, promoting rural industrialization through MSMEs is the most viable option for sustained employment and income generation in rural areas that are home to 66 percent of India’s total population (as of 2018) to foster balanced regional growth, and keep a check on future migration to urban areas thereby decongesting and alleviating  pressure on cities.

Three pillars of action to support, strengthen and scale MSMEs

It is unarguable that MSMEs are going to play an increasingly important role in enabling India to exploit the opportunities thrown open by the pandemic at both national and international level, and to put her on the path of economic recovery.  However, it cannot also be refuted that MSMEs are the worst hit by the pandemic, with many of them struggling to survive, and would probably die down by the time things normalize – partly owing to the absence of any direct support for them in the Government’s 20 trillion stimulus package. For units that will survive the pandemic, a coordinated action plan consisting of support from Government (centre and state), industry associations, as well as strategic agility of units themselves, would be pertinent. Therefore, we suggest three action plans that could help reap the potential of MSMEs by making them more productive, efficient, and competitive.

  1. Technology Adoption
  2. Rural Cluster Development Programme
  3. Strategic Partnership Development Programme

Technology Adoption

As the world embraces the fourth industrial revolution, automation and digitization of business processes has become an absolute necessity for businesses’ survival and growth. According to a recent survey by SME body- India SME Forum -only 7% of MSMEs surveyed (1,29,537 MSME respondents) reported the adoption of technology beyond the use of digital tools to communicate with key stakeholders such as customers, employees, and suppliers. The adoption of technology could play a non-trivial role in overcoming numerous challenges and issues that plague the productivity, competitiveness and profitability of MSME units in India. The potential benefits from adoption are expected to be realized across the value chain and/or network – from procurement of resources, to automation and use of robotics in manufacturing processes, customer engagement, supply chain management, sales force management, integration of business processes etc.

An action plan to increase the rate of technology adoption amongst MSMEs must keep into consideration two important factors- perceived usefulness and perceived ease of use (Davis, 1989)[1]. The intention to use (adopt in this case) the new technology depends on the users’ attitude towards it which is influenced by, in addition to the external forces, the belief that the use of it would result in the improvement of performance and is free from effort.  A Government initiative along with industry body CII, in the form of CII TechSaksham, is a step that underlines the belief about usefulness of technology in improving MSMEs performance (profitability and global competitiveness) and, in turn, their contribution to the Indian Economy. The three-year long comprehensive project is also aimed at addressing the issues revolving around the “perceived ease of use”. The “perceived ease of use” is reported to be a major blockade in MSMEs attempt at technology adoption.

A staggering 70 percent of MSMEs that were surveyed by India SME forum cited lack of knowledge, guidance, skilled manpower, and cost of investment, as impediments to technology adoption. While initiatives like CII TechSaksham can provide a platform to overcome the knowledge barriers, real beneficiaries would be those MSMEs that move swiftly in formulating an effective strategic plan for technology adoption that furthers three As necessary for promoting the “perceived ease of use”- awareness, agility, and adaptability. It is essential to give strategic priority to technology adoption and carry out the implementation in a phased manner. For units facing cost issues and manpower crunch, a viable and cost effective solution is to avail of technology as a service. These services provided by third parties include “Software as a Service (SaaS)”, “Infrastructure as a Service (IaaS)” and “Platform as a Service”, and can go a long way in overcoming the challenges associated with technology adoption by MSMEs.

Rural Cluster Development Programme

India has a rich history of rural entrepreneurship and, to support the growth and build-capacity of Rural MSMEs, the Government should focus on developing industrial clusters specifically designed for MSMEs in and/or around rural areas. By virtue of its support to industrial activity in rural areas, rural industrial clusters can promote employment generation,  which is the need of the hour now since the coronavirus pandemic has resulted in reverse migration of labourers (not just labourers, other blue collar workers as well). According to a recent report, livelihoods of a large percentage of around 40 million internal workers has been severely affected by Covid-19.

In order to combat the impact of Covid-19 pandemic on livelihoods of millions of migrant workers, a model similar to Special Economic Zones (SEZ) could be replicated in rural areas and districts to enhance the industrial capacity of MSMEs by providing them  credit, technical know-how and market support. Additionally, following a cluster development approach towards industrialization efforts in rural areas can help tackle several challenges faced by MSMEs in terms of production, quality control, testing and marketing. For instance, in Indonesia, the government has adopted MSME clustering approach as an important aspect of Rural economy development as the success rate for development of manufacturing SMEs lies in strong inter-firms linkages in clusters and competent external networks and not direct government support. Thus, this could be an ideal time to give support and shape to these rural clusters and come with a workable action plan to encourage formation of clusters in villages.

Strategic Vendor Development Programme

The need for building strategic vendor development programmes stems from the complementarities that multinational corporations (MNCs) and MSMEs can derive from each other. MSMEs constitute an important part of the supply chain as providers of low value-added products, intermediates and components to be used in final production. It is in the interest of foreign MNCs to invest in the upgradation of the capabilities of their supply chain partners in order to ensure the quality of the final product. In order to facilitate that, MNCs often impart training on modern production techniques to the employees of MSMEs and engage in transfer of technological and managerial know-how.

Looking ahead, MSMEs must consolidate and extend relationships with MNCs to leverage their existing capabilities  such as superior knowledge, technical know-how and established processes. One way to achieve such competencies is through formation of Vendor Development Programme wherein  MNCs can provide training and guidance to MSMEs on how to meet quality standards, reduce costs, deliver on time and thus become reliable vendors for them. A successful example of such a vendor development programme is the Ethiopian flower cut industry. Strategic relationships between local vendors (flower growers) and Dutch foreign investors (Dutch Development cooperation) played an important role in the development and growth of the sector.

However, Indian MSMEs face challenges and obstacles in developing strategic tie-ups with large MNCs for at least two reasons. First, there are many Government-regulated performance parameters such as mandatory sharing of critical technologies and stringent rules for local content requirements that discourage foreign MNCs from entering into contractual relationships. Second, the absence of domestic intermediaries that could act as links between foreign MNCs and local MSMEs hinder the capabilities of the former to select the right vendor or partner and exploit the complementarities.

In order to overcome these constraints, there is a need to reduce regulatory bottlenecks and establish organizations that act as intermediaries (brokers) or connecting links between foreign MNCs and local MSMEs. The presence of such intermediaries will play a vital role in overcoming the information voids that characterize emerging markets like India, reduce the cost, effort and time involved in searching for the right vendor and/or partner (in the form of MSMEs) and facilitate the formation of mutually beneficial relationships. The formation of linkages or strategic tie-ups with multinationals from developed countries would go a long way in uplifting the competitiveness and capabilities of Indian MSMEs to serve both domestic and global markets.

Conclusion

To make the best of the opportunities arising from the biggest challenge of this century, Indian economy needs a thriving MSME sector. The substantial contribution that the sector has made to the economy has got it to be acknowledged as the “backbone”. It is also true that this backbone has been hit severely by the COVID19 pandemic and as the economy tries to stand up on its feet, strengthening of the backbone assumes an imperative task ahead for the Indian government.

The article has listed out the three essential pillars of an action plan that involves coordinated efforts from industry associations, policymakers and the MSME units themselves. While infusion of liquidity could help the distressed MSMEs recoup the losses in the short term, in order to really hit the ground running and help the economy realize its potential, strategies and policy actions with a long term vision in mind need to be enacted urgently. The focus has to be widened from the survival in the short-run to building up a productive and competent MSME sector for the future.

*Dr.Rishika Nayyar is an Assistant Professor (International Business) at FORE School of Management.


[1] Davis, F.D. (1989), “Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Information Technology”, MIS Quarterly,  13(3), 319-340. doi: https://www.jstor.org/stable/249008

Neha Arora is an Assistant Professor at International School of Business & Media, Pune. She is a PhD in International Business from Delhi School of Economics, Delhi University.

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Economy

Is Myanmar an ethical minefield for multinational corporations?

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Business at a crossroads

Political reforms in Myanmar started in November 2010 followed by the release of the opposition leader, Aung San Suu Kyi, and ended by the coup d’état in February 2021. Business empire run by the military generals thanks to the fruitful benefits of democratic transition during the last decade will come to an end with the return of trade and diplomatic sanctions from the western countries – United States (US) and members of European Union (EU).  US and EU align with other major international partners quickly responded and imposed sanctions over the military’s takeover and subsequent repression in Myanmar. These measures targeted not only the conglomerates of the military generals  but also the individuals who have been appointed in the authority positions and supporting the military regime.

However, the generals and their cronies own the majority of economic power both in strategic sectors ranging from telecommunication to oil & gas and in non-strategic commodity sectors such as food and beverages, construction materials, and the list goes on. It is a tall order for the investors to do business by avoiding this lucrative network of the military across the country. After the coup, it raises the most puzzling issue to investors and corporate giants in this natural resource-rich country, “Should I stay or Should I go?”

Crimes against humanity

For most of the people in the country, war crimes and atrocities committed by the military are nothing new. For instances, in 1988, student activists led a political movement and tried to bring an end to the military regime of the general Ne Win. This movement sparked a fire and grew into a nationwide uprising in a very short period but the military used lethal force and slaughtered thousands of civilian protestors including medical doctors, religious figures, student leaders, etc. A few months later, the public had no better options than being silenced under barbaric torture and lawless killings of the regime.

In 2007, there was another major protest called ‘Saffron Uprising’ against the military regime led by the Buddhist monks. It was actually the biggest pro-democracy movement since 1988 and the atmosphere of the demonstration was rather peaceful and non-violent before the military opened live ammunitions towards the crowd full of monks. Everything was in chaos for a couple of months but it ended as usual.

In 2017, the entire world witnessed one of the most tragic events in Myanmar – Again!. The reports published by the UN stated that hundreds of civilians were killed, dozens of villages were burnt down, and over 700,000 people including the majority of Rohingya were displaced to neighboring countries because of the atrocities committed by the military in the western border of the country. After four years passed, the repatriation process and the safety return of these refugees to their places of origin are yet unknown. Most importantly, there is no legal punishment for those who committed and there is no transitional justice for those who suffered in the aforementioned examples of brutalities.

The vicious circle repeated in 2021. With the economy in free fall and the deadliest virus at doorsteps, the people are still unbowed by the oppression of the junta and continue demanding the restoration of democracy and justice. To date, Assistant Association for Political Prisoner (AAPP) reported that due to practicing the rights to expression, 1178 civilians were killed and 7355 were arrested, charged or sentenced by the military junta. Unfortunately, the numbers are still increasing.

Call for economic disengagement

In 2019, the economic interests of the military were disclosed by the report of UN Fact-Finding Mission in which Myanmar Economic Corporation (MEC) and Myanmar Economic Holding Limited (MEHL) were described as the prominent entities controlled by the military profitable through the almost-monopoly market in real estate, insurance, health care, manufacturing, extractive industry and telecommunication. It also mentioned the list of foreign businesses in partnership with the military-linked activities which includes Adani (India), Kirin Holdings (Japan), Posco Steel (South Korea), Infosys (India) and Universal Apparel (Hong Kong).

Moreover, Justice for Myanmar, a non-profit watchdog organization, revealed the specific facts and figures on how the billions of revenues has been pouring into the pockets of the high-ranked officers in the military in 2021. Myanmar Oil & Gas Enterprise (MOGE), an another military-controlled authority body, is the key player handling the financial transactions, profit sharing, and contractual agreements with the international counterparts including Total (France), Chevron (US), PTTEP (Thailand), Petronas (Malaysia), and Posco (South Korea) in natural gas projects. It is also estimated that the military will enjoy 1.5 billion USD from these energy giants in 2022.

Additionally, data shows that the corporate businesses currently operating in Myanmar has been enriching the conglomerates of the generals and their cronies as a proof to the ongoing debate among the public and scholars, “Do sanctions actually work?” Some critics stressed that sanctions alone might be difficult to pressure the junta without any collaborative actions from Moscow and Beijing, the longstanding allies of the military. Recent bilateral visits and arm deals between Nay Pyi Taw and Moscow dimmed the hope of the people in Myanmar. It is now crystal clear that the Burmese military never had an intention to use the money from multinational corporations for benefits of its citizens, but instead for buying weapons, building up military academies, and sending scholars to Russia to learn about military technology. In March 2021, the International Fact Finding Mission to Myanmar reiterated its recommendation for the complete economic disengagement as a response to the coup, “No business enterprise active in Myanmar or trading with or investing in businesses in Myanmar should enter into an economic or financial relationship with the security forces of Myanmar, in particular the Tatmadaw [the military], or any enterprise owned or controlled by them or their individual members…”

Blood money and ethical dilemma

In the previous military regime until 2009, the US, UK and other democratic champion countries imposed strict economic and diplomatic sanctions on Myanmar while maintaining ‘carrot and stick’ approach against the geopolitical dominance of China. Even so, energy giants such as Total (France) and Chevron (US), and other ‘low-profile’ companies from ASEAN succeeded in running their operations in Myanmar, let alone the nakedly abuses of its natural resources by China. Doing business in this country at the time of injustice is an ethical question to corporate businesses but most of them seems to prefer maximizing the wealth of their shareholders to the freedom of its bottom millions in poverty.

But there are also companies not hesitating to do something right by showing their willingness not to be a part of human right violations of the regime. For example, Australian mining company, Woodside, decided not to proceed further operations, and ‘get off the fence’ on Myanmar by mentioning that the possibility of complete economical disengagement has been under review. A breaking news in July, 2021  that surprised everyone was the exit of Telenor Myanmar – one of four current telecom operators in the country. The CEO of the Norwegian company announced that the business had been sold to M1 Group, a Lebanese investment firm, due to the declining sales and ongoing political situations compromising its basic principles of human rights and workplace safety.

In fact, cutting off the economic ties with the junta and introducing a unified, complete economic disengagement become a matter of necessity to end the consistent suffering of the people of Myanmar. Otherwise, no one can blame the people for presuming that international community is just taking a moral high ground without any genuine desire to support the fight for freedom and pro-democracy movement.

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The Covid After-Effects and the Looming Skills Shortage

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coronavirus people

The shock of the pandemic is changing the ways in which we think about the world and in which we analyze the future trajectories of development. The persistence of the Covid pandemic will likely accentuate this transformation and the prominence of the “green agenda” this year is just one of the facets of these changes. Market research as well as the numerous think-tanks will be accordingly re-calibrating the time horizons and the main themes of analysis. Greater attention to longer risks and fragilities is likely to take on greater prominence, with particular scrutiny being accorded to high-impact risk factors that have a non-negligible probability of materializing in the medium- to long-term. Apart from the risks of global warming other key risk factors involve the rising labour shortages, most notably in areas pertaining to human capital development.

The impact of the Covid pandemic on the labour market will have long-term implications, with “hysteresis effects” observed in both highly skilled and low-income tiers of the labour market. One of the most significant factors affecting the global labour market was the reduction in migration flows, which resulted in the exacerbation of labour shortages across the major migrant recipient countries, such as Russia. There was also a notable blow delivered by the pandemic to the spheres of human capital development such as education and healthcare, which in turn exacerbated the imbalances and shortages in these areas. In particular, according to the estimates of the World Health Organization (WHO) shortages can mount up to 9.9 million physicians, nurses and midwives globally by 2030.

In Europe, although the number of physicians and nurses has increased in general in the region by approximately 10% over the past 10 years, this increase appears to be insufficient to cover the needs of ageing populations. At the same time the WHO points to sizeable inequalities in the availability of physicians and nurses between countries, whereby there are 5 times more doctors in some countries than in others. The situation with regard to nurses is even more acute, as data show that some countries have 9 times fewer nurses than others.

In the US substantial labour shortages in the healthcare sector are also expected, with anti-crisis measures falling short of substantially reversing the ailments in the national healthcare system. In particular, data published by the AAMC (Association of American Medical Colleges), suggests that the United States could see an estimated shortage of between 37,800 and 124,000 physicians by 2034, including shortfalls in both primary and specialty care.

The blows sustained by global education from the pandemic were no less formidable. These affected first and foremost the youngest generation of the globe – according to UNESCO, “more than 1.5 billion students and youth across the planet are or have been affected by school and university closures due to the COVID-19 pandemic”. On top of the adverse effects on the younger generation (see Box 1), there is also the widening “teachers gap”, namely a worldwide shortage of well-trained teachers. According to the UNESCO Institute for Statistics (UIS), “69 million teachers must be recruited to achieve universal primary and secondary education by 2030”.

From our partner RIAC

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Accelerating COVID-19 Vaccine Uptake to Boost Malawi’s Economic Recovery

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Lunzu market in southern Malawi. WFP/Greg Barrow

Since the onset of the COVID-19 pandemic, many countries including Malawi have struggled to mitigate its impact amid limited fiscal support and fragile health systems. The pandemic has plunged the continent into its first recession in over 25 years, and vulnerable groups such as the poor, informal sector workers, women, and youth, suffer disproportionately from reduced opportunities and unequal access to social safety nets.

Fast-tracking COVID-19 vaccine acquisition—alongside widespread testing, improved treatment, and strong health systems—are critical to protecting lives and stimulating economic recovery. In support of the African Union’s (AU) target to vaccinate 60 percent of the continent’s population by 2022, the World Bank and the AU announced a partnership to assist the Africa Vaccine Acquisition Task Team (AVATT) initiative with resources, allowing countries to purchase and deploy vaccines for up to 400 million Africans. This extraordinary effort complements COVAX and comes at a time of rising cases in the region.

I am convinced that unless every country in the world has fair, broad, and fast access to effective and safe COVID-19 vaccines, we will not stem the spread of the pandemic and set the global economy on track for a steady and inclusive recovery. The World Bank has taken unprecedented steps to ramp up financing for Malawi, and every country in Africa, to empower them with the resources to implement successful vaccination campaigns and compensate for income losses, food price increases, and service delivery disruptions.

In line with Malawi’s COVID-19 National Response and Preparedness Plan which aims to vaccinate 60 percent of the population, the World Bank approved $30 million in additional financing for the acquisition and deployment of safe and effective COVID-19 vaccines. This financing comes as a boost to Malawi’s COVID-19 Emergency Response and Health Systems Preparedness project, bringing World Bank contributions in this sector up to $37 million.

Malawi’s decision to purchase 1.8 million doses of Johnson and Johnson vaccines through the AU/African Vaccine Acquisition Trust (AVAT) with World Bank financing is a welcome development and will enable Malawi to secure additional vaccines to meet its vaccination target.

However, Malawi’s vaccination campaign has encountered challenges driven by concerns regarding safety, efficacy, religious and cultural beliefs. These concerns, combined with abundant misinformation, are fueling widespread vaccine hesitancy despite the pandemic’s impact on the health and welfare of billions of people.  The low uptake of COVID-19 vaccines is of great concern, and it remains an uphill battle to reach the target of 60 percent by the end of 2023 from the current 2.2 percent.

Government leadership remains fundamental as the country continues to address vaccine hesitancy by consistently communicating the benefits of the vaccine, releasing COVID data, and engaging communities to help them understand how this impacts them.

As we deploy targeted resources to address COVID-19, we are also working to ensure that these investments support a robust, sustainable and resilient recovery. Our support emphasizes transparency, social protection, poverty alleviation, and policy-based financing to make sure that COVID assistance gets to the people who have been hit the hardest.

For example, the Financial Inclusion and Entrepreneurship Scaling Project (FInES) in Malawi is supporting micro, small, and medium enterprises by providing them with $47 million in affordable credit through commercial banks and microfinance institutions. Eight months into implementation, approximately $8.4 million (MK6.9 billion) has been made available through three commercial banks on better terms and interest rates. Additionally, nearly 200,000 urban households have received cash transfers and urban poor now have more affordable access to water to promote COVID-19 prevention.

Furthermore, domestic mobilization of resources for the COVID-19 response are vital to ensuring the security of supply of health sector commodities needed to administer vaccinations and sustain ongoing measures. Likewise, regional approaches fostering cross-border collaboration are just as imperative as in-country efforts to prevent the spread of the virus. United Nations (UN) partners in Malawi have been instrumental in convening regional stakeholders and supporting vaccine deployment.

Taking broad, fast action to help countries like Malawi during this unprecedented crisis will save lives and prevent more people falling into poverty. We thank Malawi for their decisive action and will continue to support the country and its people to build a resilient and inclusive recovery.

This op-ed first appeared in The Nation, via World Bank

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