Top ten risks in South Asia
- Water crises
- Terrorist attacks
- Manmade environmental catastrophes
- Failure of urban planning
- Energy price shock
- Unemployment or underemployment
- State collapse or crisis
- Fiscal crises
- Asset bubble
Water risks and manmade environmental crises rank high across the region, with security concerns also prominent.
Executives in the region ranked “water crises” as the number one risk for doing business in countries in South Asia – the issue rose from fifth place the year before. At a country level, water crises ranked as the topmost risk in India, second in Pakistan and fourth in Sri Lanka.
The issue of water in South Asia has been described as “a problem of scarcity amid abundance” – despite major transboundary rivers, residents in many places must queue for limited supplies of drinking water.66 The region is home to around a quarter of the global population but has less than 5% of the world’s renewable water resources. Low per-capita water availability and a high relative level of water use make South Asia one of the most water-scarce regions of the world. Additionally, water storage is low by global standards, making it difficult to manage the floods and droughts that afflict the region and that are expected to increase with climate change.
India is one of 17 countries that face “extremely high” water stress, and the northern part of the country “faces severe groundwater depletion”.67This year, India has faced a drought in Chennai – the country’s sixth-largest city, which is home to over 10 million people. By 2020, more than 20 cities including New Delhi, will be at risk of running out of groundwater – a scenario that would affect approximately 100 million people.68
Pakistan has the fourth highest rate of water usage in the world, yet at the same time the country is close to being classified as “water-scarce”.69 Part of the underlying challenge is that the country lacks proper infrastructure to deliver clean drinking water to its population. Furthermore, because most of Pakistan’s water comes from a single source – the Indus system – the country is at risk of disruptions from extreme weather events, which will only grow more pronounced as a result of climate change.70
Water also presents geopolitical challenges in the region: While there are bilateral arrangements on the Indus (India and Pakistan) and Ganges (India and Bangladesh) rivers, water is a potential weapon in cross-border disputes, as countries have at times threatened cutting off flows because of outbreaks of violence in disputed territories.71 Additionally, China, from where the headwaters of several major rivers sit, has been building hydroelectric dams that have caused political friction, particularly with India.72
The issue of transnational tension can be seen in the ranking of “terrorist attacks” as the second leading risk in the region. In February 2019, a suicide bomber in Kashmir killed over 40 members of India’s security forces by driving a vehicle filled with explosives into a bus. The incident was the deadliest in 30 years and caused an escalation in tensions between India and Pakistan. Only two months later in Sri Lanka, on Easter Sunday, a series of coordinated attacks aimed at religious centres and hotels in three cities killed almost 300 people and injured hundreds more.
“Manmade environmental catastrophes” ranked as the third risk, as the region is home to three of the world’s four most polluted countries, according to Greenpeace: Bangladesh, India and Pakistan (Afghanistan is the fourth).73 Fifteen of the world’s 20 most polluted cities are in India (where the issue ranked second), and Dhaka, Bangladesh (where it ranked eight), is also on the list.74 Pollution poses health and economic risks to these countries: Each year, Bangladesh loses approximately $6.5 billion and India $5 billion due to pollution and environmental degradation.75 If pollution levels were brought in line with World Health Organization guidelines, life expectancy in Bangladesh would increase by 1.3 years and in India by just above a year.76
Pollution could also explain why “failure of urban planning” ranks as the fourth risk in the region. But the sense of risk around urban planning may include other factors. Urban populations, particularly in Bangladesh (where “failure of urban planning” ranked fifth) and India (where it ranked sixth), are growing rapidly. According to the UN, the populations of both Delhi and Dhaka will increase by more than 10 million inhabitants by 2030.77 Yet the infrastructure of these cities is at risk of failing to keep up with this growth. The World Bank has said that Bangladesh suffers from some of the lowest local spending on urban infrastructure, with most cities offering “inadequate infrastructure and low levels of urban services”.78 In Nepal, where the issue ranked third, Kathmandu is still addressing damage caused by the 2015 7.8-magnitude earthquake that killed approximately 9,000 people in and around the city.
The fifth risk, “energy price shock”, was ranked the leading risk on a country level in Pakistan and Bangladesh. The ranking reflects the fact that there is rising demand for energy in South Asia as populations and economies grow, yet the region is a net importer of crude oil. Furthermore, because the sector is highly subsidized, governments are subject to the repercussions of market fluctuations.