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HUMAN DEVELOPMENT IN SOUTH ASIA 2003
THE EMPLOYMENT CHALLENGE

 

Overview

 

Employment in South Asia, in fact in most developing countries, is not about paid jobs or even about the rate of unemployment. These indicators are not truly expressive of the way of life that is dominated by informal, casual and home-based work, mostly in agricultural or rural settings, and intricately woven into the daily survival issues of the majority of population. Therefore, in the context of South Asia, when we discuss employ­ment, we are really referring to challenges of livelihood—the challenges that form the basic concern for human security. In fact, employment is one area where the three components of a human-centred policy—human development, human security and human rights—converge. Article 23 of the Universal Declaration of Human Rights states that, ‘everyone has the right to free choice of employment, to just and favourable conditions of work, and to protection against unemployment.’ Mahbub ul Haq interpreted human security as ‘security of all the people everywhere—in their homes, in their jobs, in their communities, in their environment’ (italics added). These ideals have provided the inspiration and courage for this report.

In keeping with the tradition of the Centre’s previous reports, we have analysed the issues of employment from the vantage point of people. Throughout the report concerns are raised about the patterns of growth and trade, the systems of education and training, the protection of the rights of all workers, including women and children, and the implementation of the global trading rules as they impact on poor nations and poor people. The overwhelming concern of the report is the employment security of the poor and an improvement in their capability to move out of poverty. The promotion of employment opportunity for the youth of the region is an imperative, as is the need to enhance women’s ability to get paid jobs with enforceable legal and social protection against discrimination.

The main problem in analysing the issues of employment, unemployment and the dynamics of the labour market in South Asia is the non-availability of reliable and comparable statistics. As the labour market is dominated by the informal sector with casual and family-based workers, the collection and compilation of data concerning employment in these sectors becomes a formidable task. Added to these is the fact that the concepts and definitions of employment, unemployment and underemployment vary among countries and within a country over time. There is, therefore, a need for caution in drawing conclusions from the labour market statistics.

However, we have tried to be as careful as possible in preparing the tables containing data on all facets of employment in South Asia. We have also been very cautious in interpreting these data and deriving policy implications. Based on our analysis, the report comes up with the following messages:

The first message is that without a serious commitment to employment generation and human development, economic growth is neither sustainable nor deliverable in a socially just manner. This strong imperative of growth with social justice has consistently been stressed and highlighted in all our previous reports.

Secondly, South Asian workers, particularly those in the small-scale industrial and agricultural enterprises, have been adversely affected as a result of the opening up of the regional economies to the global markets. Despite gains in employment in textiles and clothing, and in the high-technology sectors, the majority of workers in rural areas and those in traditional manufacturing, have suffered as a result of global competition, especially on account of the high subsidies which are provided to agriculture in the developed countries.

Thirdly, South Asian women bear the heaviest burden of work inside and outside home. Yet they fail to get full recognition for their work whether in employment statistics, or in parity with men in wages, working conditions and occupational status. Gender disparity and discrimination, which we have been discussing in all our previous reports, gets magnified in the job market. Even where women get increased employment opportunities as in export-oriented industries, the conditions of work remain poor, and when there is any sign of improvement in women’s wages or working conditions, there is a tendency to replace women workers with men. The search for equity and equality backfires against women.

Fourthly, the systems of education and training in the region have failed to produce a critical mass of qualified workforce to compete in the global market. The countries need to go beyond primary education to stress on better availability of secondary education and technical training, as well as to enhance the quality of education being currently offered, particularly by the public sector institutions.

Fifthly, despite being signatories to various international conventions and covenants, the South Asian countries have failed to enforce even those few fundamental labour standards which they have ratified. Each country is burdened with traditional practices of bonded labour, child labour and the newly emerging phenomenon of child trafficking, all of which clearly speak of the lack of will on part of the government, and the society at large, to change their situation.

Sixthly, asymmetric demography between the developed and developing countries, provides a window of opportunity to the South Asian countries to benefit from exporting its labour to the developed countries, provided South Asia prepares its labour force with quality education and training.

During the last two decades, the South Asian countries have gone through several economic reform programs. However, their impact on employment generation and human development has been negligible, or even negative, in some cases.

South Asia is the fastest growing region in the world with 22 per cent of the world’s population. The bulk of this population is in the 15-64 age group, which offers a demographic dividend to the region provided economic growth is linked to employment growth and human development. The development strategies followed in the region so far have not been successful in extending the benefits of growth to the majority of population. This has had a negative impact of increasing poverty and income inequality. Employment growth lagged behind both GDP and labour force growth rates.

In South Asia, there exists a large informal sector characterised by low productivity, low wage rates and long working hours. One-third of South Asia is in absolute poverty, and there is a high concentration of working poor. Although the GDP share of agriculture has fallen from 38.6 per cent in 1980 to 24.9 per cent in 2001, it still remains the primary source of employment in the region. Contribution of industry to GDP has remained stagnant along with a falling share in employment. The services sector has shown rapid growth and absorbs most of the incremental labour force. Its share in the South Asian GDP increased from 36.4 per cent in 1980, to 48.7 per cent in 2001.

Unemployment rate for South Asia is not very high when compared to other regions of the world. However, there is a high degree of underemployment in the region. Due to a large population base, a primary-activity based economy, and an education system geared towards providing formal employment, the South Asian labour markets have been associated with a high incidence of unemployment among the youth and the educated during the past decade. The underlying reasons include the diminishing role of the public sector in employment generation, a mismatch between the education offered and the opportunities available, and the lack of marketable skills and training.

Children and women are among the highly vulnerable groups in the South Asian labour market. Women are mostly concentrated in low paying, low productivity jobs. A startling number of child labourers work in all sectors of the economy. The current labour force participation rates of children are over 12 per cent for most countries of the region with the exception of Sri Lanka, where it is just 2 per cent.

The South Asian experience has shown that despite growth in aggregate economic activity, overall employment situation may suffer, pointing to the critical link between employment generation and growth.

The economic experience of most South Asian countries has been remarkably similar, especially during the last two decades. All countries (except Nepal) pursued a set of policies based on the market-based economic paradigm. The main features of these economic reforms were:

(a)  reduction of direct state control in regulation of economic activity;

(b)  privatisation of state assets;

(c)  attempts to reduce fiscal deficits (by curbing public investment, reducing farm subsidies and increasing user charges for public utilities); and,

(d)  trade and financial liberalisation.

The set of economic reforms pursued was based on certain premises that turned out to be over-optimistic. It was thought that the various measures taken would spur economic growth because private enterprise delivers more efficient and dynamic outcomes. This expectation was met successfully in particular export sectors in each of the South Asian countries (readymade garments in Bangladesh; cotton cultivation in Pakistan; IT-enabled services, software and clothing in India; and, miscellaneous exports in Sri Lanka). However, the increased growth and employment in these sectors was more than counterbalanced by the decline in employment in the traditional sectors.

The basic assumptions of economic reform policies were wrong on three counts. Firstly, the conditions in the region were not right for introducing such reforms. The unequal asset and income distribution in the region, coupled with the limited nature of the home market would lead private investment to come up against a demand constraint fairly quickly. Secondly, the link between public and private investment was ignored when South Asian governments cut back on public expenditure. This seems to be a crucial mistake on part of the region’s governments, since public expenditure works towards easing infrastructure and other supply constraints—making private production easier and cheaper. Thirdly, economic reform policies supported the use of more capital-intensive technologies that was not in keeping with the perceived comparative advantage of labour-intensive production in South Asia. The worst affected by the greater openness to trade were small producers, who are the most labour intensive, and cannot compete with the quality and cost standards of multinational producers.

As a similar set of policies was adopted by the countries of the region—quite expectedly—the outcomes were also similar. On the whole, the policies were unsuccessful in generating productive employment for the majority of people in the region. With respect to employment generation, the reforms failed to perform in at least five ways:

(1)  There has been deceleration of employment generation.

(2)  The reforms led to increased inequalities in income.

(3)  There was a stagnation or increase in the levels of poverty.

(4)  There was a relative decline in the manufacturing sector—especially in the small-scale sector with the result that agriculture and services emerged as residual refuge sectors for workers; and, finally,

(5)  The quality of employment deteriorated across the region with an increase in casual and part-time work, as well as greater fragility in contracts, and fewer days of work for day labourers.

Despite clear comparative advantage in the three key sectors, agriculture, textiles and services, post-WTO liberalisation in South Asian countries has failed to significantly expand exports of these sectors. Perhaps the most startling feature of this failure has been the deterioration of the employment situation in the region.

The late eighties and nineties were years of increased global integration for the South Asian countries. This period of increased openness coincided with the formation of the World Trade Organisation (WTO). In fact, the establishment of WTO was one of the reasons that motivated the governments of the region to pursue export-oriented economic policies.

The establishment of WTO brought about an air of optimism in the South Asian region. It was expected that the three key sectors in which they had comparative advantage—agriculture, textiles and services—could grow rapidly after the imposition of a new multilateral trading system. Although WTO promised liberalisation in these three sectors, it also laid two crucial demands on developing countries. Firstly, the developing countries had to accept much stricter patent laws globally, and secondly, they had to remove all non-tariff barriers and reduce tariff barriers on industrial goods. It was expected, however, that the benefit accrued from the export in agriculture, textiles and services would more than offset the losses from the other two areas.

Given the labour-intensive nature of all three sectors (agriculture, textiles, and services), it was expected that export-led growth would lead to rapid increase in employment in these three sectors. However, in the past five years, the unemployment rate has actually gone up for the region. This increase indicates that liberalisation is quite evidently not a painless process. As the pattern of production changes in the developing countries, many workers lose jobs. Such displaced workers may have to go through long periods of unemployment as the economy readjusts. In addition to workers, the firms themselves find it hard to readjust to join the export sector. Very often this requires huge investments, which most small-scale producers cannot make.

The Agreement on Agriculture (AoA) signed by the WTO member countries in 1995 sought to bring discipline in global agricultural trade by removing trade distortions resulting from unrestricted use of production and export subsidies and import barriers. The developed countries had pursued a policy of highly subsidizing their agricultural sector such that the surplus output was usually dumped in the international market. The developing countries, which possessed clear comparative advantage in this sector, were therefore not able to compete with the subsidized produce from the developed countries. Reduced protection of the agriculture sector in the developed countries was expected to create massive employment opportunities for the South Asians. Rural labour demand and wages were expected to rise. Also, rural infrastructure development, which is itself a labour-intensive process, was expected to follow export-led growth in the agriculture sector. However, agriculture did not show the kind of growth that was expected. Some of the reasons for this failure are structural, such as the prevalence of subsistence farming with no potential for cash-crop production; the dependence of farmers on middlemen that sharply increases costs and reduces competitiveness; the adoption of more capital-intensive modes of cultivation by bigger farmers; and, the readjustment costs associated with switching from non-competitive crops to more internationally competitive crops. In addition to these structural issues, there are problems with the way in which WTO is being implemented. The developed countries have not yet responded to the demands made on them by AoA, and continue to subsidize their farm produce. There are indications that domestic farm subsidies might actually increase in the developed countries. Under such conditions, the South Asian countries will not be able to reap the benefits of trade in the agriculture sector. At home, the governments have to work towards developing better and suitable rural infrastructure, which will not only provide rural employment, but will also make rural produce more competitive internationally. And, globally, the developed countries have to fulfil their promises and obligations to reduce the protection of their agriculture sectors.

The Agreement on Textiles and Clothing (ATC) was an attempt by the WTO member countries aimed at bringing the trade of textiles at par with that of other industrial goods. Since the seventies, many developed countries had pursued a policy of establishing quotas on imports of textiles and clothing from more competitive countries. According to ATC, this quota regime is to be phased out by 2005. ATC was seen as a great new hope for the textiles and clothing sector in South Asia. Most countries in the region possess comparative advantage internationally and would stand to gain considerably in a truly liberalized trading scenario. As the sector is labour-intensive, it was expected that it would create much-needed productive employment opportunities for the South Asians. However, eight years after the implementation of ATC, there are very little signs of growth in the sector. The case of Bangladesh is an exception because it is allowed preferential market access by the developed countries. On the whole, implementation of ATC has not been extensive enough to provide substantial gains to the South Asian countries. This is because of three main reasons: first, most of the quotas that were supposed to be eliminated still remain in place in the developed countries. Second, the products on which quotas have been abolished were not commercially significant for the developing countries. Third, the liberalisation so far has only been superficial, since products that were never under quota restrictions are being considered as having been integrated. Other impediments include tariff peaks, disguised trade barriers (such as anti-dumping laws), and preferential trade through regional trading blocks (e.g. NAFTA and EU). Keeping in view all these considerations, it seems that the end of quota restrictions in 2005 will be a mixed blessing for the South Asians. Although it will create access to new markets, it will also expose them to global competition. It is questionable whether the South Asian industry is ready to meet such a challenge. With a dominance of small and medium sized producers, who suffer from outmoded machinery, power failures, management problems etc., it remains to be seen how the industry can cope in the protection-free environment. Again, as is the case with agriculture, the governments at home need to provide support to the industry. Infrastructure needs to be expanded in key areas such as ports, telecommunications, power and highways.

Other manufacturing goods are a significant portion of Sri Lanka’s and India’s export sector. It is thought that in a liberalized scenario, significant employ­ment opportunities can be provided in developing countries through Foreign Direct Investment (FDI). Since most developing countries have cheap labour, manufacturing can be done more cost-effectively by multinational companies in these countries. However, this requires good infrastructure in place, as well as support by the governments in form of tax-exemptions etc. However, it is not clear whether this route would lead to an alleviation of the unemployment problem in these countries. Multinational companies and other large domestic firms tend to employ more capital-intensive technologies. In the manufacturing sector, small and medium sized industries have been the worst hit in the liberalized environment, since they work with very little capital, and face intense competition. A look at the trade restrictions in the area of other manufacturing goods shows that these are much higher in sectors where developing countries have export interest. In addition, tariff escalation and peaks are huge obstacles to the diversification of manufacturing. Hence, the manufacturing sector also seems to have suffered as a result of liberalisation in the South Asian region. It is only the larger firms that will be able to deal with the stiff global competition, and as explained above, these firms are not generally labour intensive.

The services sector currently dominates in the region, accounting for about 49 per cent of the South Asian GDP. Liberalisation of the services sector can be extremely beneficial for creating productive employment for many South Asians. If there is meaningful implementation of GATS, South Asian countries stand to gain in at least the following four areas:

Till now, however, GATS has not been very successful in liberalizing trade in services. The report discusses several impediments, including unfulfilled commitments of developed countries and various conditions and limitations to free trade in services. Given the tremendous comparative advantage South Asian countries possess in the key areas identified above, meaningful implementation of GATS will be crucial for employment generation in the region.

Women face various forms of discrimination in employment. They are engaged mostly in low pro­ductivity employment in agricultural and informal settings. Although they often work harder, and for longer hours than men, their earnings are significantly lower.

Labour market statistics and practices discriminate against women. The low participation of women in economic activity is not a reality but a myth created by the system of patriarchy. The report discusses how statistical invisibility of women is a cause of concern, and why such systematic discrimination against women should be corrected. The South Asian governments have made efforts to address this problem by expanding the definition of economically active women. However, they still have a long way to go before women get full recognition for their work. This recognition in statistics, although only a change in numbers, will have the important effect of making policy-makers aware of the importance of women in employment.

Two-thirds of South Asian women are employed in agriculture or agriculture-related activities. They work in various roles such as agricultural labourers, manager of homesteads, and sometimes even as landowners. However, they are not allowed equal opportunities in this sector in access to credit and inputs, and face discrimination in wages.

In the informal sector, women form the majority of the workers. Two trends have led to the growth of female involvement in this sector. First, in the rural areas where the migration of men to urban centres or abroad has provided opportunities for more female involve­ment in small enterprises. Second, in urban areas, the demand for cheap low-skilled labour has increased over the years owing to export-oriented manufacturing. This trend has been instrumental in providing employment to an increasing number of women. However, women are often hired on exploitative terms. They often work in difficult conditions for long periods of time. They accept low wages, and do not demand permanent contracts. As women become more active in the labour market, their bargaining power also improves. At the same time, however, as women’s work gets more recognition, there is a fear that this might negatively impact on the future employment opportunities for women.

Except in Sri Lanka, the role of women in formal sector employment is very limited (less than one-fifth of total public sector employment). Even when they do find employment, they are mostly relegated to relatively peripheral jobs in education, health and community services.

To link education and training to job market, South Asia needs to improve, both quantitatively and qualitatively, its education and training systems, including investment to promote ICT and other new technologies, and encourage entrepreneurship.

In an increasingly global economic environment, it has become imperative for a country to have people who possess not only the basic skills of literacy and numeracy at a functionally useful level, but also higher levels of education and skills.

The fact that South Asia has the highest number of illiterates in the world should be a cause for alarm amongst the region’s governments. However, education is not an area of priority in the budgets of the majority of governments in the region. The education system is plagued by low enrolment amongst the poor and vulnerable groups, low quality (measured by pupil-teacher ratios and repetition rates), high dropout rates, and high gender disparity. In addition, teachers are not sufficiently trained to impart quality education. The primary level suffers most from these inadequacies.

Given the low quality of education that the majority of literate South Asians are exposed to, it is not surprising that a significant portion of them fail to get productive employment. The startling fact that the unemployment rates are higher amongst the educated class of the region goes contrary to the idea that education leads to productive employment. The main reasons for this situation are the manner in which education is imparted, and a number of external factors (such as the macroeconomic policy environment) which do not produce a conducive scenario for the educated people to be productive. In addition, in the current global economy, it is important for educated people to be creative and innovative. One has to remain in touch with the developments in one’s field, and has to evolve with these. To this end, it is extremely important that entrepre­neurship be included as a significant component of education at post-primary levels.

A key area that needs uplift in the South Asian region is that of technical and vocational education. The East Asian experience has shown very clearly how technical and vocational education can become one of the main solutions to the problems of unemployment. The South Asian training system suffers from at least two major inadequacies. Firstly, such training must build on good foundational skills such as numeracy and literacy. Low literacy and substandard quality of primary education makes subsequent training difficult and useless. Secondly, the training sector is neglected by the region’s governments. The financial allocations are niggardly, leading to a lack of requisite facilities and qualified teachers. In most countries of the region, vocational and technical training is in the hands of a number of departments and ministries such that no one governing body has the responsibility of supervision. South Asia can learn from the East Asian countries in making their training sector viable and progressive. Some important measures that need to be taken are uplifting of primary education; higher allocations to technical education; emphasis on teacher training; involvement of public sector in making training viable; and, planning by the governments to keep the training sector compatible to the needs of the economy.

Entrepreneurship needs to be incorporated in education to induce progressive and creative thinking amongst students. This is necessary for South Asia because a significant portion of the workforce is employed in the small and medium enterprises (SMEs). It is in these enterprises that entrepreneurship can work most successfully in producing competitive goods for the domestic and international markets. A few things need to happen to increase the spirit of entrepreneurship in the region. These include hassle free availability of credit for new businesses, reduction in corruption to make new businesses viable, extension of incentives to new entrepreneurs by the governments, and promotion of business incubation for helping new businesses to succeed. In addition, a very important area that needs attention of the governments is the development of suitable infrastructure. Most importantly, transport, communi­cation network and stable electricity supply need greater investment. Not only is improved access necessary, but also the rates of basic utilities must be lowered for encouraging new business enterprise in the region.

The Information and Communication Technologies (ICT) sector has great promise in providing productive employment to the educated South Asians. The region stands to gain not only by the development of the sector at home, but also by exporting IT professionals to the developed world. There is great optimism that the ICT sector will grow to a massive extent in the region. However, ICT diffusion in the region seems limited. The number of internet users in South Asia is low, and are concentrated in the urban areas. Internet is not being used in the region in vital areas such as business, health, academic and public sectors. Internet, except in India, is used mainly as an email or fax tool. In addition, connectivity and organisational infrastructures are not in place to allow full utilisation of ICT. If these obstacles are dealt with successfully, then South Asia stands to gain tremendously from the ICT sector. The proficiency in English language by the educated in the region gives South Asia a huge edge over other developing countries.

The rights of South Asian workers, though enshrined in each country’s constitution and supported by specific labour legislation, are not protected across the board, especially in case of women and children employed in the informal and exploitative sectors.

In South Asia, the ratification of ILO core labour standards, particularly eight core ILO Conventions, has been very low. Sri Lanka is the only country that has ratified all eight Conventions. Pakistan and Bangladesh have ratified seven, India has ratified four, while Nepal has ratified six of these Conventions. Bhutan and Maldives are not members of ILO. It should be noted, however, that mere ratification does not automatically imply that the rights of workers are being protected in a country. Ratification is merely the acknowledgement that a certain right has to be extended to workers. Implementation of the labour standard, the actual extension of the right, involves greater dedication from the governments. Therefore, there are often gaps between the rights which are promised to the workers, and those that are actually promulgated and imple­mented. The effective implementation of labour standards in the region has been made difficult on three accounts. Firstly, there is the prevalence of a huge informal sector, where protection of workers becomes a difficult task. Secondly, there are minimum-size restrictions for organisations to benefit from these laws. And thirdly, the agriculture sector is usually excluded from the jurisdiction of these laws.

The first fundamental principle is that of ‘freedom of association and collective bargaining.’ These are recognised by the South Asian governments as the fundamental rights of workers. However, they have limited the scope of these rights in several ways. For instance, these rights are restricted in case of government servants (India), and for workers in Export Processing Zones (India, Pakistan, Bangladesh, and Sri Lanka).

The second fundamental principle is that of the ‘elimination of forced labour.’ Forced labour is prevalent in the region mostly in the form of bonded labour. Mostly, this is associated with the structures of land-ownership and caste, which can keep people in bondage for several generations. Bonded labour is pervasive in brick kilns, leather and fish processing, carpet manufacturing, and in agriculture. Several initiatives to end these unacceptable working conditions have been taken both by governmental and non-governmental organisations in the region. However, the practice continues.

The third fundamental principle is that of the elimination of ‘discrimination in employment or occupation.’ In South Asia, people are discriminated on the basis of caste, gender, ethnicity and religious affiliation. Both changes in legislation and a more effective implementation are required to end the discriminatory practices in the workplace.

The fourth fundamental principle is that of the ‘elimination of child labour.’ Child labour and child trafficking are rampant in the region, and are issues that should be on the priority list of the South Asian governments. Although the governments have adopted numerous legislation to protect the rights of children, these have not been implemented widely. Many children work in agriculture, often as bonded labourers, or effectively as slaves. Other children work in hazardous industries such as mining, brick-making, fireworks, brass handicrafts, carpet weaving and gem polishing industries. Although child labour is a global phenomenon, it is much more pervasive in the South Asian region. The report discusses a few initiatives that have been taken to combat child labour (workplace monitoring, product labelling, SAARC initiatives to combat child trafficking etc.). However, much more still needs to be done for protecting children’s rights in terms of providing them with education, training and means to get more wholesome employment.

The report also raises concern about the rights of workers in the export sector. Owing to the informal and flexible nature of this sector, the workforce engaged in this sector is vulnerable to low levels of labour standards. Trade unions have lost their power as the rights of freedom of association and collective bargaining rights are greatly constrained in this sector.

Demographic asymmetry in the world, with populations declining in the developed countries and increasing in the developing ones, provides an opportunity for South Asia to export its labour, which can be an important step towards alleviating the unemploy­ment problem.

By making a dynamic analysis of the process of migration, the report shows that it can actually be beneficial for countries to export labour to regions where it will be more productive. Population statistics reveal many interesting findings which point to a clear demographic asymmetry in the world. Fertility rates have collapsed in the developed countries (in Europe, North America and Japan), and have declined in many parts of the developing world. Even in South Asia, there has been a decline in fertility rates. However, in South Asia, demographic inertia will ensure an increase in the size of the workforce. In the next twenty years, South Asia will add over 500 million people to its workforce. The developed world, on the other hand, will actually face a shortage of workers. Given the present demographic situation in the developed world, the population of most of these countries is actually expected to decrease in the coming decades. Owing to rapidly declining rates of fertility, there has been a virtual explosion of the proportion of older people in the richer economies of the world. This suggests that there is tremendous potential for countries with surplus labour to export it to the developed world, which is most likely to face a shortage of labour.

The report, having established that there is indeed tremendous opportunity for exporting workers from developing to the developed countries, explores how this can be beneficial for the labour-exporting country. The report challenges the assumption that migrants, when the leave their countries of origin, also sever all ties with it. On the contrary, economically, they maintain ties in at least three important ways: firstly, they send remittances to their relatives back home, which are sometimes a significant portion of their incomes abroad. Secondly, they sponsor foreign direct investment in their countries of origin. Thirdly, they assist non-governmental organisations (NGOs) engaged in various developmental and charity work activities. These three economic interactions of diasporas with their homelands usually happen in three phases. New settlers abroad first save significant amounts from their incomes to send remittances to their families. As they establish roots in the new country, however, the proportion of remittances they send back decreases. Later, as they get more successful economically, they are able to make foreign direct investment, and aid NGOs in their homelands.

The developed countries have recognized the huge benefits of importing productive labour from the developing countries. In the recent years, there has been a significant migration of workers to USA and EU. However, 9/11 has caused a major setback to this trend. The western countries (particularly the US), have become very cautious about having foreigners in their countries.

However, whether to allow migration of workers into their countries or not is an important choice that the developed world will have to make. Their decision will have a tremendous impact not only on their own economies, but eventually on the global economy as well. With declining or stagnating populations, the bulk of which will be in the older age bracket, the developed countries face the risk of significant economic slowdown. The report argues that importing productive labour from the developing world is the only way out for the developed world, if it wants to maintain economic growth. The developing countries must also take measures to reap maximum benefits from exporting their labour. For this, they must invest considerably more on human resource development than they are doing at present

There is need for a more humane macroeconomic, trade and social development framework in South Asia that reinstates the critical role of states in pursuing job-led economic growth.

Given the failure of market-based reforms in generating productive employment for the South Asians, this report recommends the following policy measures to improve the employment situation in South Asia. First, more public investment is required in rural as well as in urban areas in job-creating infrastructure, building maintenance and in building capability of people by improving access to and quality of education and training. These measures will also assist and provide a boost to private enterprise.

Second, some degree of protection from global competitive markets is required for domestic producers, especially for small-scale producers.

Third, the governments should take measures to encourage more employ­ment-intensive production.

Fourth, the agriculture sector needs some protection by the governments, as it has been the worst affected by greater openness in trade. In particular, as long as the developed countries continue to subsidize their farm produce, it is imperative that the developing countries protect themselves from this unfair competition.

Fifth, the possibility of directed credit needs to be revived, especially for small-scale producers.

Sixth, the dichotomy in labour markets of the region, with a limited large-scale sector (with protected workers), and a dominant small-scale sector (with little protection to workers), needs to be broken.

Seventh, unemployment/undere­mploy­ment needs to be addressed in more active ways than through legislation alone.

Finally, the potential of regional cooperation must be recognized and realized by the South Asian governments.

ICT has been-and continues to be-a very promising sector, providing growth and employment opportunities to an increasing number of people in the region, particularly in India. Following the rapid success of India in capturing the ICT market, there is great optimism amongst the South Asian countries about this sector. However, a detailed analysis reveals that the scope of ICT in alleviating the unemployment situation in South Asia is more limited than commonly imagined. The ICT sector is dominated by the relatively rich and educated English-speaking minority of the region. The bulk of the workforce is not sufficiently educated to do the kind of high quality work that ICT requires. In addition, the infrastructure requirements for the sector (telephone connectivity and penetration of computers) are still limited in the region. Therefore, to use the tremendous potential of this sector to increase employment for the educated in the region, governments must provide the required infrastructure and incentives to the private sector, to invest more in this sector so that the countries can reap the benefits that ICT promises.

For any real and worthwhile progress, women’s empowerment must always be one of the guiding principles of South Asian human development initiatives. All of women’s work, whether it is performed within the household or outside, must be counted in compiling national income statistics. The realisation that women occupy an important role in the economic life of countries will help in changing perceptions about women’s contribution to economy and society. This, in turn, will help enhance women’s employment opportunities. Trade liberalisation has led to increased employment opportunities for women in export-oriented industries. Although this is a positive trend, the employment conditions of women in this area have to be improved without compromising women’s opportunities and growth prospects with respect to these industries.

The report also suggests several policy measures for improving the education and training systems in order to keep them consistent with the present and future needs of competitive national and global markets. There must be:

Rights of workers must not only be enshrined in constitutions and legis­lations, but must also be enforced in practice. The reach of these laws needs to be extended to informal sector workers, and to workers in export-processing zones.

And finally, the report advocates for equity in international trading rules. The way these are currently designed and implemented works against the interests of poor countries, and poor people within these countries. Globalisation must be guided by ethical considerations if we want to make this process sustainable.  

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