Globalisation in South Asia

Published : Apr 27, 2002 00:00 IST


TO assess the impact of one of the most powerful forces at work in the world today is by no means an easy task and making the assessment in terms of its benefits to the majority segment of the world's population is an even more formidable exercise. The force in question is globalisation, and its impact in South Asia is what is sought to be assessed here. At a time when the critical discourse on the impact of globalisation had more or less receded, the report on "Human Development in South Asia, 2001", brought out by the Mahbub ul Haq Human Development Centre based in Pakistan, manages to revive and draw attention to the debate.

The centre, named after the late Mahbub ul Haq who was the chief architect of the UNDP (United Nations Development Programme) Human Development Reports , brings out annual reports under the broad rubric of 'Human Development in South Asia'. It selects a different theme each year, and this time round the chosen theme is globalisation. The significant aspect here is that unlike other reports, which may not contain a realistic assessment of the impact of globalisation, this one lays bare many of the harsh realities that go largely ignored. Much of its content is devoted to assessing the impact of globalisation in South Asia.

Aptly subtitled "Globalisation and Human Development", the report is an indictment of the stagnation in human development in the wake of the juggernaut of globalisation. While the inevitability of globalisation is not questioned, the risks it poses for nations have been more than adequately considered. It appears that the report would not have disapproved of the concept of globalisation per se if it were guided by certain egalitarian principles. It is the very absence of such principles that the report seeks to highlight. The onus for this situation, as it were, is not only on national governments but also on the international set-up that sets the terms for globalisation. At the outset the overview states that "globalisation, though an inevitable process and an imperative for nations to participate in this process in order to draw its potential benefits, is by no means without its risks. It requires many enlightened policies on the part of national governments, international organisations, private sector and civil society to translate the benefits of economic growth that result from globalisation into enriching the lives of ordinary people".

South Asia's experience of globalisation has not been encouraging so far. In fact, instead of resulting in any improvement in the people's well-being, which after all is what is conventionally expected of such a process, globalisation has only impoverished people further. The benefits go to only a marginal section - the educated urban population. The first message is that at least half a billion people in South Asia have experienced a decline in their real incomes. The social costs in this period of globalisation have been almost entirely borne by the poor. It is a matter of serious concern that the number of people living in poverty has increased and the levels of human development, which had improved after the 1960s, have started to stagnate and even decline. The levelling of incomes that was supposed to occur with the rise in productivity, reforms and an increase in the country's shares in global trade, finance and services, has not taken place.

The second message of the report is that human development and globalisation should move in tandem. This implies that greater investment should be made in quality universal basic education, higher education and skill training in order to enable all countries to compete in the global marketplace. There is definitely a message here for governments that have eagerly opened up their markets without looking at the coping abilities of their populations who are then exposed to the forces of globalisation. Here, given the labour and demographic profile of South Asia, the report strongly suggests that for economic growth to become job-led, the governments' focus should be on labour-intensive as well as knowledge-intensive patterns of production.

Thirdly, the report calls for the strengthening of the mechanisms of regional economic cooperation to enhance South Asia's ability to gain from regional as well as global trade and also to improve its negotiating power in global forums. Unfortunately, this is easier said than done, because of the political schisms that persist in the region. Essentially, in South Asia the globalisation process has focussed almost entirely on market integration without improving the condition of the majority of the people. Therefore, while capital has moved freely, labour has not. Even with labour, skilled labour, mostly from India, has moved out of the region while unskilled or even semi-skilled labour has not got that mobility. Trade too has not been liberalised fully, especially that in goods of particular interest to developing countries.

With markets having been liberalised, domestic industries have been thrown open to global competition, which has led to the closure of several industries. On the other hand, trade barriers imposed by developed nations have restricted the export of labour-intensive goods from South Asia. Skilled workers, especially workers in the information technology sector, who constitute a small fraction of the total workforce, have been the biggest beneficiary, the report says. Added to the crisis in industry and trade, social safety nets have shrunk or weakened owing to the process of structural adjustment, which is under way in South Asia. Exports have remained confined mainly to manufactured goods and services, and the destinations have been mostly the United States and the European Union. Tariff rates fell rapidly and exchange rates depreciated in this period, though the overall foreign investment remained low.

What is significant is that South Asian countries have been forced to open up their economies even as they have been implementing the programmes of stabilisation and structural adjustment of the World Bank and the International Monetary Fund (IMF). As a result of cutbacks on public spending on social services, a general fiscal compression and tariff reductions, human development indicators have suffered. Also, during the globalisation phase, adequate policies were not framed and funding was not made in the fields of social and economic development in order to reduce poverty. This did not therefore have an impact on the levels of population growth. The dictum that development was the best pill for population control was set aside. Expenditures on health were reduced to levels that were lower than those of the pre-globalisation period. It is worrisome that one-fifth of the population does not have access to proper healthcare services. A situation can be envisaged in the future where there is population growth, little or no social spending by the governments, a vulnerable domestic economy and unfettered competition, which ultimately will put the burden on the poor.

THE report exposes the fact that reforms that were conducted in the last one and a half decades have not really led to an acceleration of growth rates. Among the South Asian countries, while Bangladesh and Nepal had modest growth rates, the growth rate faltered in the case of Sri Lanka in the second half of the 1990s while it declined in the case of Pakistan. Only India has been able to achieve a growth rate of above 6 per cent. The sequencing of reforms has not been correct. Before reducing tariffs the tax base could have been expanded, thus improving revenues for the government, but this did not happen in any country. The agriculture sector performed badly as it remained unprotected from the vagaries of the market. South Asia as a region remained unattractive to foreign direct investment.

It is significant that the report advocates a certain economic solidarity among South Asian countries and suggests strong regional trading blocs which would not only promote economic cooperation among members but also improve the competitive position of the group in a globalised set-up. It would facilitate political harmony, which is vital, and also help create a situation that would enable them to bargain collectively at global negotiations.

The report makes an important linkage between the role of global institutions of governance, such as the Bretton Woods sisters, and human development. The experience of South Asian economies is that during the period of structural adjustment, poverty increased and income distribution deteriorated. The structural adjustment programmes, which included the contraction of demand through fiscal and monetary policies, the improvement of productivity and competitiveness through the privatisation and liberalisation of markets, cutbacks in social services and increased costs of debt servicing have not improved the quality of life in any way for the majority of the South Asian population.

The report on globalisation and human development is comprehensive as it touches on all aspects of policy that have a far-reaching impact on the lives of the people. Who bears the social costs of all such policies is the paramount question, and the critique of globalisation lies in the answer to that query. There are detailed studies of economic reforms and globalisation in different countries, which outline the dismal condition of employment, high poverty rates and the decline in fund allocation to the social sectors. There are chapters on characteristics of trade and financial globalisation, the social impact of globalisation and regional cooperation in South Asia. There are also studies on institutions of global governance that detail the experience of the IMF in other parts of the world. The report is a critical statement on all that is happening in the name of globalisation. It is a window to the experiences of South Asia, where political differences and diversity have caused the economic situation to remain more or less unchanged.

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