The coronavirus pandemic, at least in its first wave, is
not expected to peak in South Asia until July. But countries in
the region, which have yet to witness a significant outbreak along the lines of
China, the United States or the hardest-hit parts of Europe, are already
loosening their lockdowns. The pandemic is spreading unevenly across the world
for reasons that are not always entirely clear, so it is difficult to predict
the public health impact of easing lockdowns. But what is clear is that the
pandemic will leave South Asia poorer, less democratic and more illiberal. And
China could see net strategic gains from that fallout.
South Asian economies had seen some of the world's fastest growth in recent years, but there are also high concentrations of extreme poverty in the region. Poor or near-poor residents of India and Pakistan were already suffering from a series of regressive economic policies, so for them, the pandemic is the second of a one-two punch. Weak social safety nets throughout South Asia will be inadequate to cushion COVID-19's impact.
Lower- and middle-class Indians continue to reel from Prime Minister Narendra Modi's disastrous demonetization program, which pulled 86 percent of the country's currency out of circulation in 2016, and a new consumption tax that went into effect in 2017. The two initiatives hit small and medium enterprises hard, sending unemployment to a 45-year high last year. In the last quarter of 2019, before the effects of the coronavirus were widely felt, economic growth in India plunged to its lowest rate in over a decade. Much like demonetization, Modi's announcement in March of a strict lockdown to prevent the spread of COVID-19 was abrupt, with only four hours' notice before it went into effect. That triggered a mass exodus of migrant laborers who had lost their jobs in cities, many of whom are still traveling hundreds of miles back to their villages on foot.
Neighboring Pakistan had already been in the first year of a loan agreement with the International Monetary Fund when the coronavirus hit. The harsh austerity policies required by the IMF, as a condition for receiving the loan, had already brought growth nearly to a halt. The virus will now likely drive it into negative territory, and the country could face low growth rates for the foreseeable future. A revival of its exports is essential for an economic recovery, but demand has plummeted in Pakistan's main export markets, including the United States, where unemployment is on par with the Great Depression and the retail sector is in upheaval.
Bangladesh had been in an enviable situation before COVID-19, with an export-led, labor-intensive growth model. But that success story is now in jeopardy. Apparel makes up nearly 85 percent of Bangladesh's exports, and while textile factories are reopening, the industry faces liquidity and supply chain constraints as well as plummeting demand in foreign markets. One way out for Bangladesh is to begin to make the leap from apparel to electronics by accelerating plans to export low-cost mobile phones. Locally assembled units made up around 62 percent of smartphone sales in the country last year, so mobile phone exports could potentially compensate for some of the loss in garment exports.
South Asia is often framed as part of a broader "rising Asia," but the pandemic will probably widen the already stark gap in prosperity between it and much of the rest of Asia. In 2018, the average per capita income of South Asian countries was just $1,900, compared to over $4,500 for members of the Association of Southeast Asian Nations and $9,700 in China, according to the World Bank. With its fast-growing population and comparatively weaker human resource base, India--South Asia's largest economy--will struggle to catch up on a per capita basis with rapidly industrializing countries like Indonesia and Vietnam, let alone China.
As many in South Asia fall into or remain in poverty, the political fallout of the pandemic will keep the region tilting away from democracy. India's ruling Hindu nationalist Bharatiya Janata Party predictably found a convenient scapegoat in the country's Muslim minority. The BJP's online network of trolls and agitators, and its allied media outlets, have spread hysterical falsehoods that Muslims were engaged in an insidious "Corona Jihad" to spread the virus and weaken India. But this blatant bigotry has not harmed Modi's popularity, which insulates him from accountability and stiffens his resolve to maintaining a Hindu nationalist agenda.
In Pakistan, Prime Minister Imran Khan's hold on power will likely continue to diminish as current and retired army officers, as well as army-backed political appointees, assume more executive authority. Army support is critical for Khan's coalition government to maintain its razor-thin majority in Parliament.
At the same time, Pakistan's fiscal crisis and the coronavirus pandemic have renewed debate over modifying the country's constitution, with some advocating a dilution of federalism--by taking away some authority and resources from provincial governments--or even moving back toward a presidential system. Despite the growing chatter, lasting changes are unlikely beyond giving the federal government a greater share of revenue, which may be necessary to avert an economic collapse. Even on this issue, however, consensus between the major political parties looks fleeting. Concentrating more power in Islamabad and moving away from a parliamentary system will make any other future political reforms less sustainable.
While Pakistan continues to have multiple power centers, Bangladesh today is essentially a one-party state. That is unlikely to change anytime soon. Prime Minister Sheikh Hasina's hold on power is due not just to her rigging of elections and jailing of top opposition figures, but also to a bargain the ruling party, the Awami League, has struck with the public: guaranteeing sustained, rapid economic growth. If Bangladesh manages to weather the pandemic, Hasina and the Awami League will become more entrenched. Even if the country faces a prolonged battle with the virus and its economic fallout, the Awami League and its coalition partners hold 96 percent of seats in Parliament, which gives them considerable breathing room.
Slower economic growth in India and Pakistan may boost Chinese influence in the region, but it is not a foregone conclusion, as Beijing's warm ties with Pakistan will be tested by debt. A prolonged period of low growth combined with expensive electric power deals with Chinese companies will strain Pakistan's finances. Despite the pandemic, China has resisted calls to forgive loans to participants in its Belt and Road Initiative, including Pakistan, or renegotiate electric power purchase agreements.
Growing budget constraints, however, mean that India will find it even more difficult to finance the modernization of its bloated defense forces, while China continues to build a lean, modern military. China's military superiority and close ties with Pakistan already allows it to freely move in and out of India's backyard, including the disputed border area where clashes recently erupted between Indian and Chinese forces.
But China's expectations of Pakistan and their partnership may also change, especially if tensions with the United States continue to escalate. Islamabad could find its strategic choices narrowed if Beijing seeks to securitize its physical presence in Pakistan by deploying troops or securing a formal basing agreement. Still, for Pakistan and other smaller South Asian countries, like Nepal, a Chinese presence in the region may be necessary to counterbalance India's dominance.
Wider competition between China and the U.S. will be another challenge, especially if it leads to a more robust U.S. military presence to support India. With its recent peace agreement with the Taliban in Afghanistan, the U.S. has begun reducing its footprint in landlocked regions of South Asia and increasing military activities around the Indian Ocean rim.
The struggle for influence in South Asia may end up being determined more by how China and the U.S. handle the challenge of COVID-19 at home, than what they do in the region. With a fast-aging population, China has a narrow window to become a high-income country in the next decade or so. A weak pandemic recovery would make that quest more improbable, hamper China's ability to fund the Belt and Road Initiative and challenge the control of President Xi Jinping and the Communist Party.
Likewise, prolonged domestic economic woes in America would constrain any administration in justifying greater involvement and investment in South Asia. Ultimately, the race between China and the U.S. to test and produce a coronavirus vaccine, which in turn would allow a large-scale domestic economic recovery, may determine who the future dominant actor is in South Asia.
Author: Arif Rafiq
Source: World Politics Review
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