How South Asia can seize the opportunity to build a resilient and sustainable future

Home to one-quarter of the world’s population, South Asia has been severely impacted by the COVID-19 pandemic. The magnitude has been particularly acute due to the vast proportion of the population living at the margins, fragmented coverage of social protection, pervasive informality in economic activities and employment, and wide gaps in public health infrastructure.

In South Asia, the pandemic is estimated to have led to 62-71 million new poor in 2020 and 48-59 million new poor in 2021. Tourism, an important sector in all South Asian economies – particularly for the Maldives – has been severely hit too, destroying the livelihoods of millions dependent on it and related activities. The pandemic also severely impacted small and medium enterprises, which are the backbones of South Asian economies and make a substantial contribution to GDP, employment and exports.

The crisis has accentuated historic inequalities and vulnerabilities – and is likely to reverse years, if not decades, of gains in poverty reduction, undermining the progress made by South Asian nations towards achieving the Sustainable Development Goals.

While the economic harm is far from undone, recovery continues in South Asia, with strong growth in production activities and exports. As South Asia recuperates, it has an opportunity to leverage the crisis to build back more equitable, sustainable and resilient societies. Recovery paths and new growth strategies should be informed by lessons learned from – and innovations introduced during – the crisis.

Among other unfolding opportunities, enhanced regional cooperation provides a platform upon which South Asia can build unique clout. Despite the advantages of proximity, structural and cultural familiarities, shared developmental priorities and multiple institutional frameworks for regional cooperation, South Asia is among the world's least economically integrated regions. It has an opportunity to reinvent itself and emerge as an integrated regional economy with improved trade, supply chain and other economic exchanges such as shared infrastructure and cross-border movement of human and capital resources across the region.

Addressing historical mismatches in cross-border trade and labour markets, harnessing the shared internal economy of the region for inputs, markets and consumption, and strengthening regional institutions and agreements could unlock existing and hitherto untapped economic opportunities. With the ongoing redistribution of global supply chains, a regional supply chain could have significant payoffs. In particular, regional economies must collaborate to implement in full the South Asian Free Trade Area (SAFTA). A concerted and shared approach to advancing economic integration can facilitate efficiency-seeking industry restructuring throughout the region to promote economies of scale, specialisation and competitiveness.

Historic opportunities arising in today's moments of crisis will not be available once old patterns take root again. For South Asia, one such opportunity can be the emergence of the new services economy.

With digital technologies taking centre stage during the pandemic, the services economy got a significant boost worldwide. Both directly and through their spill-over effect on other sectors, services play an important role in raising export revenues, boosting productivity and generating jobs. Digital technologies such as 5G, robotics, 3-D printing and virtual reality have made services more tradable, scalable and uniform, independent of the proximity burden. The pandemic also boosted the region’s e-commerce sector, which typifies South Asia’s new digital platform economy.

The new services economy can drive development in South Asia. However, fully unleashing these opportunities relies on reforms in the institutional and regulatory environment, creation of conducive digital infrastructure and relevant reskilling/upskilling. Market-oriented training programmes to improve the quality of technical skills needed for these sectors will be critical.

South Asian countries have another unique opportunity – to place green recovery at the heart of post-pandemic economic planning and build greener and more sustainable cities. Pursuing a green recovery can strengthen South Asia’s long-term economic competitiveness while helping to ensure an environmentally resilient future. Green recovery planning can also foster new collaborations and public-private partnerships within and between South Asian nations.

The COP26 summit recently focused the world’s attention on the urgent need to tackle climate change. Amid consensus on the urgency and magnitude of the transformation needed to decarbonise the global economy and reduce climate impacts, South Asia’s role and contributions will be critical for the world to achieve current targets.

South Asian nations can leverage multiple opportunities for cross-country collaboration in their green transition, such as sharing lessons and best practices, joint capacity-building exercises and regional emissions reduction strategies. Multiple regional economies are already leading on climate-impact mitigation and adaptation:

Going forward, nations need to explore concrete opportunities to integrate green, inclusive and resilient COVID-19 recovery packages into national development plans. Long-term policy changes to support Nationally Determined Contribution (NDC) implementation, mainstreaming adaptation measures to guide national and subnational development strategies and enhancing private sector participation can help South Asia set a robust green recovery agenda.

However, key reforms will be critical for South Asia to pursue a green recovery and growth future, including access to clean energy, green infrastructure and green financing, fossil fuel subsidy reform and pricing, risk-informed urban planning, sustainable infrastructure and transport systems, and local community participation. By working with and supporting each other, South Asian countries can enhance global progress on climate action while unlocking new investments and partnerships for their own green transition.

South Asia has a rare opportunity to not only address the short-term public health challenge but also become an important axis of power and influence in the new global order. The World Economic Forum stands to partner with the region to help shape the contours of a new world order with a better, brighter and more sustainable future for all.