Dr Dushni Weerakoon Shares Key Insights on South Asia’s Economic Landscape
03 October 2023
During the “Toward Faster, Cleaner Growth in South Asia” webinar organised by the World Bank, IPS’ Executive Director, Dr Dushni Weerakoon, shared critical insights into the economic landscape of South Asia.
Dr Weerakoon underscored the region’s vulnerability to external shocks, primarily due to its weak fiscal position and the lack of a diversified and resilient export sector. South Asia, she noted, tends to adopt protectionist measures not only as a short-term risk management tool but also over the medium to long term. She discussed import restrictions, citing Sri Lanka’s example, as potentially justifiable in the short term, especially for non-essential consumer items like vehicle imports. However, she cautioned against their prolonged use, which could adversely affect export competitiveness.
Addressing the evolving landscape of investment flows in South Asia, Dr Weerakoon emphasised the growing influence of geopolitics on trade and foreign direct investment (FDI) flows. She noted that policy consistency and political stability are key factors investors consider when entering a country. Trade agreements, exemplified by the Sri Lanka-India Free Trade Agreement, played a pivotal role in attracting FDI, despite primarily covering goods. Dr Weerakoon highlighted the significance of bilateral and multilateral initiatives to attract investments, particularly for countries facing macroeconomic challenges.
Furthermore, the discussion addressed the challenge of managing debt in South Asia, with Dr Weerakoon advocating for preemptive debt restructuring. She emphasised the need for strong institutional structures to manage debt at the national level and called for a framework for debt restructuring at the global multilateral front.
Lastly, the webinar addressed labour market challenges in South Asia, particularly the high informality in the labour market and the inadequacy of the education sector in upskilling the workforce. Dr Weerakoon stressed the importance of bridging the gap between the labour market and education reforms and urged the importance of political commitment to implement these reforms.
The webinar featured prominent participants, including Martin Raiser, World Bank Vice President for South Asia, Franziska Ohnsorge, World Bank Chief Economist for South Asia, V. Anantha Nageswaran, Chief Economic Advisor of the Government of India, and Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue. The webinar provided valuable insights into the economic policy challenges and opportunities facing South Asia, with a focus on green technology adoption and the labour market implications of the transition to green energy.
Watch the full discussion here.