Avoiding the Middle Income Trap across Asia

A lot of economies were swayed by the enormous wave of the COVID-19 pandemic. Asia, which was severely hit by the reverberations brought by the pandemic, witnessed escalated poverty, spiralled inequalities in the health and education sector, a dearth of employment opportunities, inadequate development of domestic innovation capacity and, a cramped trudge to fulfil global development goals.

Economies were somehow commencing to bridge the gap, but the onset of the Russia-Ukraine conflict created a bedlam and dilapidated the plan of action, obstructing Asia’s economic growth that heavily relied on Russian energy. A notable surge in prices of oil, wheat and corn has further given rise to consumer and producer price inflation.

Although it has become difficult to comprehend obscurities in the context to post covid recovery and global economic growth, the governments of South Asia and Southeast Asia are proactively engaging to implement ways that bring Asia out of the current economic impasse and circumvent the middle-income trap.

In Vietnam, there’s an immense focus on promoting labour productivity led by animal husbandry. The Agricultural Competitiveness Project (ACP) endeavours to reinforce the competitiveness of smallholder farmers in certain provinces by underpinning agricultural technology, stimulating their linkages to agri-businesses and equipping them with vital public infrastructure. The aim is to augment investment in training skilled employees and adopting technologically advanced methods that ameliorate the standard of living in rural areas. The government is ideating pioneering policies and methods that involve innovation, to surpass the middle-income trap and foster sustained growth in the economy, society, and culture. A smart city considers even small innovations, which, if used to their full leverage, could fetch flourishing returns. Innovation must not be limited to science and technology, but it should incorporate a blend of new trends and models of business, management, and leadership. ?

In India, the scope of science and technology is skyrocketing when it comes to improving the middle-income gap. Technological enhancements are a key driver for overall economic growth. It allows for more efficient production of goods and services. The use of scarce resources must be done optimally to retain them, for this, the purpose is to discover solutions that complement innovation and sustainability. India makes use of frugal technology and innovation to cut out the unnecessary costs of production.

While Western European Asia is grappling to reconcile economic and social progress with sustainable development, they must discard the materials they are using for production and transition towards innovation.

The growth that comes from development must be sustained continually. Although technology is a great enabler of growth, it can also be disruptive. For instance, after telephones, the following rush of disruptive technology was mobile phones, which created a whole different market without hindering the processing of telephones. Understanding the vigour and potential of innovations such as information technology or artificial intelligence is paramount as they can proliferate business opportunities and expansion.

During the phase of Independence, India was the 6th largest economy which dwindled by 1991 reaching the 12th position. The Liberalisation policy of 1991 gradually led to enabling India’s access to the global economy, surging foreign trade, generating job opportunities, and mushrooming economic growth. It cleared the way for competition by averting public sector monopoly. Presently, the Indian economy has preceded its spot from 1947 and become the 5th largest economy but continues to stay in the middle-income trap. Witnessing sustained growth over a period, India has accelerated possibilities of empowerment and enhanced per capita income. The Indian government has instigated various schemes like, Make in India, Local For Vocal, and Skill India to furnish economic breakthroughs.

At a macro level, the approach to policy formation must transition from controlling to encouraging the success of everybody, be it through start-up businesses or education, not just confined to the country, but states, cities, provinces, and individuals as well. And at an individual level, one must be conscious of their decisions in relevance to energy conservation and scarcity of resources.

Additionally, human capital along with the 3D’s- demographic dividend, democracy, and demand, play a supreme role to escape the middle-income trap. It is believed that one must be trained during their early stages to fasten the process. Also, the wake of covid has braced the need and growth for skill development in India.

One of the main factors that contribute to innovation is giving importance to connecting with people and giving them value. Better the skills, better the share, better the growth, it’s more of a chain reaction.

For an individual to develop and realise self-actualisation, the emphasis was made on Maslow’s hierarchy of needs. All individuals must be provided education and equitable opportunities to make them useful and productive, 50% of finer opportunities must be imparted to women across all sectors along with equitable growth.

To recapitulate, there must be synergy between Agritech, Information and Communications Technology (ICT), sustainability, policies, and human capital to steer clear of the middle-income trap across Asia.

Panel members:

o?? Asim Abbas , Partner, Luthra & Luthra, India

o?? Ashwani Arora , Executive Director, MarketXcel, India

o?? Akash Mahendra Bhavsar , Co-founder, WaterQuest, India

o??Nguyen Viet Long, Director, Department of Science & Technology, Binh Duong Province, Vietnam

o??Inderdeep Singh, Managing Director, Continental Devices India, India

o?? Toufi Saliba , Chief Executive Officer, Toda.Network, USA

Chaired by:

Pieter Perrett , Professor, University of Applied Sciences Northwestern Switzerland, Switzerland