Could Asia regain its dominant economic position from 300 years ago?
The 1800s are characterised as the British Imperial century, the 1900s are referred to as the American century and the 2000s are projected to be the age of Asia. According to the Asian Development Bank (ADB), by 2050 Asia will contribute at least half of the global gross domestic product (GDP); already 50% of all new investments are made in Asia. Of the 11 countries Goldman Sachs believe to have the potential to become world-leading, economies, eight, including Pakistan, are in Asia.
Despite accounting for 60% of the world’s population, Asia contributes just as much to the world economy as Europe and North America combined, which account for 18% of the world population. It is almost impossible to generalise a landmass that is the biggest in terms of both area and population. Unsurprisingly, there is significant disparity in socio-economic development in certain pockets of Asia, with annual incomes per person ranging from $849 in Nepal to $57,714 in Singapore.
Most Asian projections are based on the economic performance of China, India and other East Asian countries. According to the McKinsey Global Institute, of the 18 countries that outperformed their peers and global benchmarks for economic growth, 11 were in the Eastern sphere of Asia; India was the only nation from the subcontinent and four Central Asian countries made the cut. These outperformers are responsible for 95% of the billion people pulled out of extreme poverty- highlighting development gaps within Asia.
What are the lessons to be learned by the rest of Asia? According to McKinsey, the economies of ‘emerging Asia’ are highly integrated, with 72% of the trade conducted within that region; the corresponding score for South and Central Asian countries stands at a paltry 31%. This highlights the crucial role of ASEAN, which has succeeded where SAARC has failed. The intraregional trade also leads to foreign direct investment from the same players as 70% of Asian venture capital funding remains within the continent.
There is an opportunity for many Asian countries as China phases out from labour-intensive manufacturing. In this respect, Pakistan is strategically placed to leverage this opportunity via CPEC and industrialize a young population where almost half of its citizens are under 25 years old. Having said that, Pakistan has to plan for disruptive technologies to manage the phenomenon of 'premature de-industrialization' as growing automation of processes makes unskilled labour redundant in an increasingly competitive market.
After being dubbed as the ‘world’s workshop’, China has now made Artificial Intelligence a strategic priority and accounted for 40% of the world’s patent applications in 2017. The good news for Pakistan is that 70% of country is covered by 4G and our internet subscribers are growing at a rapid pace thanks to mobile data. Initiatives such as Digital Pakistan’ have the tough task of enabling our workforce to leverage these digital skills for innovation and economic activity in a very short amount of time. There is a dire need for a robust ecosystem to produce thousands of success stories like Airlift.
The ADB believes that by 2050 Asia would regain the dominant economic position it held some 300 years ago, before the industrial revolution. For it to be a truly Asian effort, Pakistan has to solve the dual challenge of not only engaging its labour force, but also of equipping them with the required skills to ensure they remain relevant in the fourth industrial revolution.
Ans Khurram is an insights professional working in the telecommunication industry in Pakistan. firstname.lastname@example.org