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South Asian Economic Chaos: It’s High Time Rising Above Geopolitics

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Image source: Wikipedia

To depict the overwhelming hunger and economic distress of the Indian subcontinent in the wake of the Second World War, 20th-century Bengali-Indian poet, Sukanta Bhattacharya, wrote- “In the regime of hunger, the earth belongs to prose, the full moon burns like a loaf of bread”. In essence, life under extreme economic hardship has hardly any appeal to the serenity of a poem or the beauty of the moon.

Amid the ongoing devastating war in Ukraine and the pandemic yet to be receded, South Asian nations have been experiencing a staggering level of economic distresses, and consequent political upheavals- problems not spawned out of their fault. Rising commodity prices, disrupted supply chain, dwindling forex reserve and ever-increasing debt burden are already tipping them to the edge of collapse. Under the pandemic-propelled and war-induced economic hardship the South Asian countries going through, the geopolitical competition with no practical value to their problems is out-and-out unnecessary and will add further fuel to their already growing resentment.

Since the United States had begun to shift its strategic pivot to Asia, with an aim to counter China, the Asia-Pacific region has turned into a geo-strategic battleground between the rising power China and the established power US. In what is called ‘ The Thucydides trap’, while the former striving to extend its sphere of influence in keeping pace with its economic rise and the latter to retain its hegemonic primacy, they have locked in an unpropitious power struggle. This evolving geopolitical development has put the smaller South Asian countries, like most others across the world, into an ever-enduring balancing struggle between the emergent blocs.

For a long time, South Asian countries have maintained well-calibrated balancing relations with the competing powers- that has resulted in their national stakes, be it related to trade, security, or investment, having been distributed among the powers. This evenly divided diplomatic approach has been well reflected in their respective position on the UNGA resolutions brought against the Russian invasion. For instance, as an inevitable outcome of its long-pursued balancing diplomacy, Bangladesh’s trade interests in terms of exports are highly entrenched in the Western countries while its import and investment interests are overwhelmingly in China and other East Asian countries, placing it in an ambivalent in-between geopolitical position. Given their huge developmental and politico-economic challenges, countries in South Asia like Bangladesh could hardly afford to get embroiled in the geopolitical contestation or drift to any of the power camps.

Now come to the current chaos. Even prior to the Russian invasion of Ukraine, a number of countries in South Asia were in desperate straits due to the devastating fallouts from the pandemic. The war in Ukraine has further squeezed their post-pandemic recovery space, exacerbating already soaring inflation, increasing fiscal deficits, and deteriorating current account balances.

In response to the acute food shortage, Russia and Ukraine, with Turkey and the United Nations playing the mediatory role, reached a grain deal to facilitate the Ukrainian and Russian food export through the Black Sea corridor. In a gesture of goodwill, The United States and the EU sought “facilitate Russian food and fertilizer exports by reassuring banks, shipping, and insurance companies that such transactions would not breach Washington’s sanctions on Moscow”. But given the sheer size of the ripple impacts across the developing world, the gesture falls substantially short of what actually global powers should do to ease the pain inflicted upon them- particularly from the fuel and debt crisis.

The south Asian region is traditionally a net importer of commodities, with electricity production immensely dependent on imported oil and Liquified Natural Gas (LNG). Like many other cases in South Asia, Bangladesh, having done a tremendous job in the power sector over the last decade, has recently plunged into a severe electricity crisis. But it is not due to any power- generation-capacity shortage, in a country with an installed capacity to generate 25,500 megawatts, but due to the shortage of the primary fuel (natural gas, oil, and coal). The volatile international energy market combined with unprecedented local currency depreciation against the Dollar -both ensued by both the war and subsequent sanctions- has already surged its import bill by 46%, with the current account deficit increased by over 82% in the fiscal year.

Regarding the external debt distress, the picture is even bleaker, with almost all the South Asian countries’ debt-to-GDP ratios having crossed the dangerous limit. From Sri Lanka, the first domino to fall in the face of a global debt crisis, to Pakistan, now Bangladesh, the number of countries seeking loans from IMF amid the rising import bills and widening trade deficit is increasing. With Sri Lanka having plunged into unprecedented political mayhem, resulting, in big part, from the menacing economic spill-over impacts from both the war and sanctions, now the ubiquitous question asked across the region is: which country is next to Sri Lanka?

Given the current cold war spectrum between China and the USA across the Asia-Pacific, a tug of war has been seen on the rise over the decade around pulling the smaller South Asian countries to their respective camp. Now those countries are struggling under the debris of debt, spiraling inflation, and consequent political upheaval. Both the US and China have considerable geopolitical and economic stakes across the region. Given that China is the largest individual creditor in the region and the USA is the supreme stakeholder in the western-led financial and economic institutions, both can in collaboration play major role in salvaging the region from the havoc. But if both powers stick to their narrow geopolitical interests other than collaborating in alleviating the current chaos, smaller countries in South Asia will lose appeal to the much-touted and lofty ideological rhetoric from both contesting powers- US’s ‘prosperous and democratic Indo-pacific’ or China’s shared ‘common prosperity’.    

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Economy

Mosul’s recovery moves towards a circular economy

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Five years since the end of the ISIL(so-called Islamic State in Iraq and the Levant) conflict in 2017, the International Organization for Migration (IOM) in Iraq and the UN Environment Programme (UNEP), with funding from the Government of Japan, has established a debris recycling centre in Mosul. After its initial use, the centre has now been handed over to Mosul Municipality for its continued, sustainable operation.

“On behalf of the Iraqi Government, the Ministry of Environment expresses its gratitude to the Government of Japan for generously supporting this important project and to UNEP and IOM for enabling the sustainable management of the huge quantities of conflict debris and restabilization of the liberated areas in an environmentally sustainable manner,” said Iraq’s Minister for Environment, Dr. Jasim Abdulazeez Humadi.

The handover of the Mosul debris recycling centre marks a significant step in the sustainable management of the huge volumes of debris — an estimated 55 million tonnes — created by the ISIL conflict. It also opens the way for the recycling of routine construction and demolition waste, contributing to ‘building back better’ and an increased circularity in Iraq’s development.

UNEP West Asia Regional Director, Sami Dimassi, emphasized that “by reducing waste, stimulating innovation and creating employment, debris recycling also creates an important business opportunity.” Indeed, construction companies in Mosul have expressed interest in purchasing the recycled aggregate, thereby underscoring the longer-term sustainability of debris recycling.

“This project supports recovery and livelihoods by drawing on principles of a circular economy, wherein waste and land pollution is limited through production processes that reuse and repurpose materials for as long as possible,” explained IOM Iraq Chief of Mission, Giorgi Gigauri. “Collaboration and sustainability are key priorities in IOM’s work toward durable solutions to displacement, and we are pleased to have partnered with UNEP and the Government of Japan so that this is represented not only in the function of the plant itself, but also in its functioning, by supporting local authorities to be prepared to effectively operate the plant moving forward.”

On 28 July 2022, Mosul Municipality hosted an event to officially hand over the debris recycling centre, attended by senior government officials and academia, as well as representatives from IOM, UNEP and the United Nations Assistance Mission for Iraq (UNAMI).

Masamoto Kenichi, Charge d’Affaires, Embassy of Japan to Iraq stated: “We are glad to know that the project funded by the government and people of Japan has contributed to cleanup of debris and reconstruction of Mosul. We would like to commend UNEP, IOM and the city of Mosul for their tremendous efforts of turning the legacy of ISIL’s devastation into building blocks of reconstruction”.

Through the rubble recycling project, nearly 25,000 tonnes of debris have been recovered and sorted, of which around half was crushed into recycled aggregate. Material testing of the recycled aggregate endorsed by the National Center for Structural Tests of the Ministry of Planning confirms its compliance with the Iraqi State Commission for Roads and Bridges design standards for road foundational layers and its suitability for several low strength end-use applications such as concrete blocks and kerbstones.

The project created 240 much-needed jobs through cash-for-work schemes targeting vulnerable persons, including 40 women.

Building on this experience, IOM has set up two other debris recycling operations in Sinjar and Hamdaniya in Ninewa Governorate, and a third in Hawija in Kirkuk Governorate, where a pilot phase using a mobile crusher was implemented in al-Buwaiter Village in 2021. In addition, two other conflict-affected governorates — namely Salah al-Din and Anbar — have  also shown a high-level of interest in replicating and scaling up debris recycling in their own regions. 

UNEP has been supporting Iraq in cleaning up the huge volumes of debris created by the ISIL conflict since June 2017. Initially, this included carrying out technical assessments and planning workshops with UN-Habitat, and subsequently designing and implementing debris recycling pilot projects to support returns in Mosul, Kirkuk and other conflict-affected areas in cooperation with IOM.

UNEP

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Digital Futures: Driving Systemic Change for Women

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Authors: Erin Watson-Lynn and Tengfei Wang*

As digital technology continues to unlock new financial opportunities for people across Asia and the Pacific, it is critical that women are central to strategies aimed at harnessing the digital financial future. Women are generally poorer than men – their work is less formal, they receive lower pay, and their money is less likely to be banked. Even when controlling for class, rural residency, age, income, and education level, women are overrepresented among the world’s poorest people in developing countries. Successfully harnessing digital technology can play a key role in creating new opportunities for women to utilise formal financial products and services in ways that empower them. 

Accelerating women’s access to the formal economy through digital innovations in finance increases their opportunity to generate an income and builds resilience to economic shocks. The recently issued ESCAP guidebook titled, Harnessing Digital Technology for Financial Inclusion in the Asia Pacific, highlights the fact that mechanisms to bring women into the digital economy are different from those for other groups, and that tailored policy responses are important for women to fully realise their potential in the Asia-Pacific region.

Overwhelmingly, the evidence tells us that how women utilise their finances can have a beneficial impact on the broader community. When women have bank accounts, they are more likely to save money, buy healthier foods for their family, and invest in education. For women who receive Government-to-Person (G2P) payments, there is significant improvement in their lives across a range of social and economic outcomes. Access to safe, secure, and affordable digital financial services thus has the potential to significantly improve the lives of women.

Despite the enormous opportunity, there are numerous constraints which affect women’s access to financial services. This includes the gender gap in mobile phone ownership across Asia and the Pacific, lower levels of education (including lower levels of basic numeracy and literacy), and lower levels of financial literacy. This complex web of constraints means that country and provincial level diagnostics are required and demands agile and flexible policy responses that meet the unique needs of women across the region.

Already, across Asia and the Pacific, governments are implementing innovative policy solutions to capture the opportunities that come with digital finance, while trying to manage the constraints women often face. The policy guidebook provides a framework to examine the role of governments as market facilitators, market participants and market regulators. Through this framework, specific policy innovations drawn from examples across the region are identified which other governments can adapt and implement in their local markets.  

A good example of how strategies can be implemented at either the central government or local government levels can be found in Pakistan. While central government leadership is important, embedding tailored interventions into locally appropriate strategies plays a crucial role for implementation and effectiveness. The localisation of broader strategies needs to include women in their development and ongoing evaluation. In the Khyber Pakhtunkhwa province, 50,000 beneficiary committees comprising local women at the district level regularly provide feedback into the government’s G2P payment system. The feedback from these committees led to a biometric system linked to the national ID card that has enabled the government to identify women who weren’t receiving their payments, or if payments were fraudulently obtained by others.

In Cambodia and the Philippines, governments have implemented new and innovative solutions to support remittance payments through public-private-partnerships and policies that enable access to non-traditional banks. In Cambodia, Wing Money has specialised programs for women, who are overwhelmingly the beneficiaries of remittance payments. Creating an enabling environment for a business such as Wing Money to develop and thrive with these low-cost solutions is an example of a positive market intervention. In the Philippines, adjusting banking policies to enable access to non-traditional banking enables women, especially those with micro-enterprises in rural areas, to access digital products.

While facilitating participation in the market can yield benefits for women, so can regulating in a way that drives systemic change. For example, in Lao People’s Democratic Republic and India, different mechanisms for targets are used to improve access to digital financial products. In Lao People’s Democratic Republic, the central government through its national strategy, introduced a target of a 9 per cent increase in women’s access to financial services by 2025. In India, their targets are set within the bureaucracy to incentivise policy makers to implement the Digital India strategy and promotions and job security are rewarded based on performance.

These examples of innovative policy solutions are only foundational. The options for governments and policy makers at the nexus of market facilitation, participation and regulation demands creativity and agility. Underpinning this is the need for a baseline of country and regional level diagnostics to capture the diverse needs of women – those who are set to benefit the most of from harnessing the future of digital financial inclusion.

*Tengfei Wang, Economic Affairs Officer

This article is the second of a two-part series based on the findings of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) Policy Guidebook: Harnessing Digital Technology for Financial Inclusion in Asia and the Pacific, and is jointly prepared by ESCAP and the Griffith Asia Institute.source: UNESCAP

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Empowering women-led small businesses in Nepal to go digital

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People walk down a street of shops in Kathmandu, Nepal. (file) photo World Bank/Peter Kapuscinski

Authors: Louise Anne Sophie Lavaud and Mitch Hsieh*
Throughout the years, Laxmi Shrestha and her husband saw the opportunities that opening an online shop could bring to her family business.

“Looking at the trend of TikTok and other sites, we thought selling online could help us but we weren’t technically sound,” said Laxmi, the owner ofLaxmi Hastakala Store, in Banepa, Nepal, and part of a family of artisans.

As she learned about selling online, she picked up on how to market her shop digitally and, according to Laxmi: “It has surely given our business a push we always wanted. Recently we started selling our products online and we also receive payments online.”

Laxmi Hastakala Store is among the 1,800 women-led micro, small and medium enterprises (MSMEs) in Nepal being trained on digital and financial literacy by Sparrow Pay – one of the winners of the Women Fintech MSME Innovation Fund launched in 2019 by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and the United Nations Capital Development Fund (UNCDF).

Sparrow Pay has created a local digital marketplace where women-led MSMEs can offer products and services to its existing 800,000+ digital payment service users. Additionally, Sparrow Pay is supporting these women entrepreneurs in adopting digital payments and creating a payment history to support access to additional financial services.

MSMEs are a vital source of employment and a significant contributor to a country’s GDP. However, more than 45 per cent of MSMEs in Asia and the Pacific are constrained from accessing finance and other support for their businesses. Socio-cultural norms mean women-led enterprises have to overcome gender-specific barriers to access institutional credit and other financial services.

ESCAP and UNCDF aim to encourage easy access to digital finance for MSMEs in Asia and the Pacific, break the financial barriers surrounding women-led enterprises and support entrepreneur-centric growth and inclusiveness throughout the region. Initiatives by the 10 winning fintech companies are currently supporting more than 9,000 women-led MSMEs in Bangladesh, Cambodia, Fiji, Myanmar, Nepal, Samoa and Viet Nam.

Just like Laxmi, these women business owners plan on successfully growing their companies in the digital area.

The Women Fintech MSME Innovation Fund is part of a regional programme “Catalyzing Women’s Entrepreneurship: Creating a Gender-Responsive Entrepreneurial Ecosystem,” which seeks to support the growth of women entrepreneurs in Asia and the Pacific by enabling a policy environment for such business owners, providing them with access to finance and expanding the use of ICT for entrepreneurship.

*Mitch Hsieh Chief, Communications and Knowledge Management Section

UNESCAP

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