Asia, the driving force in the global economy

If there is one overarching feature of the shifts in economics, geopolitics and society in the 21st Century, it is the rise of Asia said the 'Sri Lanka: State of the Economy 2014' report - the annual flagship publication of the Institute of Policy Studies of Sri Lanka (IPS).

Unravelling the core theme 'Rising Asia: Opportunities and Challenges for Sri Lanka', this year's report takes a comprehensive look at the potential economic benefits for Sri Lanka from a robust Asian economic revival and the lessons and pitfalls to be avoided in pursuing rapid economic development.

Over the past half century, with Asia continuing to emerge as a driving force in the global economy, the world has witnessed a shift from the more established West to the East.

With this, Asia has seen the most spectacular examples of economic development throughout the years - spanning from Japan to South Korea, to more recently, China and India.

The region which is home to about 60 percent of the world's population, generates around one-fourth of global output and is expected to account for more than 50 percent of global GDP by2050.

While there seems little disagreement that Asia will continue to be a dynamic centre of global growth, the pace at which countries in the region will grow to lay claim to a collective 'Asian Century' is subject to considerable debate.

Ageing populations,rising wages and other costs, environment degradation, and a prolonged and weak recovery in developed economies are only some of the challenges facing the region.

For Sri Lanka, the prospects of an invigourated Asia are significant as the country seeks new development partners, markets and investors in its post-terrorism economic expansion.

With Asia becoming not only the largest consumer, but also the largest producer of goods and services, this year's report argued that Sri Lanka should seize new and expanding opportunities that will come with it - opportunities in trading goods and services that would benefit Sri Lankan businesses and consumers alike.

With the Sri Lankan economy on a path of rapid economic transformation - with a GDP rate of over seven percent - the country is seen as one of the better performing emerging market economies in Asia, and stands to benefit from better regional prospects.

Despite the many opportunities the country can draw from Asia's rise, challenges are inevitable too.

As seen in many Asian countries, Sri Lanka is set to join the ranks where an ageing population is on the rise. In less than 20 years from now, the elderly population of Sri Lanka is expected to reach over 20 percent of the population.

As the report said, with a rising elderly population, the country will face challenges of handling the social protection and health needs of the elderly, which has also become more problematic with a shrinking working-age population.

An ageing demographic profile also means that a shrinking labour force must be fully equipped to serve the needs of a rapidly expanding economy. The importance given to improving the quality of education systems in Asia, particularly in emerging economies such as China, holds important lessons for Sri Lanka.

The best practices of the best performing school systems in Asia highlights the need for better investments and proper management and allocation of resources to meet the global competition for skilled workers.

Changes in income and lifestyle patterns as Sri Lanka experiences a middle income transition is also bringing about issues related to urbanisation and environment management. In this respect, the experiences of more advanced Asian economies such as Japan and South Korea have much to offer Sri Lanka in understanding how best to manage challenges of urbanisation.

Moreover, countries that are struggling to cope with industrialisation-led environment challenges such as China and India too holds lessons for Sri Lanka. Tighter policies and institutional frameworks that govern environmental protection are needed, whereby the implementation of comprehensive policies can help to minimise environmental impact of industrial activities.

Sri Lanka has made significant strides in generating higher growth through a concerted public investment-led infrastructure drive. If the country is to sustain that growth momentum in the long term, challenges by way of weak innovation and skills, low levels of technology, declining standards in education, and rising labour costs need to be given special attention.

The country will then be better positioned to achieve its goal to be the 'Wonder of Asia' - its success judged not only by hard economic numbers, but also by better socio-economic development indicators on multiple fronts, allowing Sri Lanka to meet the interlinked goals of sustained economic prosperity and social harmony in the future.