The 9 key challenges of Romania within the next decades

The World Bank has drafted a chart of challenges we face and that will shape the world of tomorrow – and Romania will certainly be fundamentally changed by these global trends. Business Review presents you the main challenges that will change Romania and the businesses in the country within the next decades.

1. In 1990, more than a third of people in the world lived in extreme poverty – living on EUR 1.90 a day or less. In 2015, the most recent year with robust data, extreme poverty reached 10 percent, the lowest level in recorded history.

Over the last three decades, more than one billion people lifted themselves out of extreme poverty, and about half of the world’s countries have reduced extreme poverty to below 3 percent.

From this point of view, Romania is already following the global trend. The number of Romanians living in extreme poverty declined by 4.15 million between 2007 and 2017, as rising employment and wages offered more opportunities to the less fortunate people, but many remain at risk, according to Business Review calculations based on Eurostat data.

2. The window for keeping global warming to 1.5 degrees C is closing – rapidly. In an influential report, the Inter-Governmental Panel on Climate Change warned that the world must accomplish “rapid and far-reaching” low-carbon transitions in land, energy, industry, buildings, transport, and cities to keep global warming to 1.5°C.

According to the report, “By 2100, global sea level rise would be 10 cm lower with global warming of 1.5°C compared with 2°C. The likelihood of an Arctic Ocean free of sea ice in summer would be once per century with global warming of 1.5°C, compared with at least once per decade with 2°C. Coral reefs would decline by 70 to90 percent with global warming of 1.5°C, whereas virtually all (greater than 99 percent) would be lost with 2°C.”

The World Bank Group’s Shock Waves study estimated an additional 100 million people could be pushed into extreme poverty by climate change.

In Romania, the southern part of the country, home of millions of people, is the most exposed to climate change’s negative impact.

3. 91 percent of the world’s population lives in places with poor air quality.

Nine out of 10 people worldwide breathe polluted air, according to World Health Organization data covering 4,300 cities and settlements in 108 countries. The highest levels are in the Eastern Mediterranean Region and in South-East Asia, with annual mean levels of particulate matter often exceeding more than 5 times WHO limits.

According to the latest air quality database, 97 percent of cities in low- and middle- income countries with more than 100,000 inhabitants do not meet WHO air quality guidelines.

WHO estimates 7 million people die every year from ambient (outdoor) and household air pollution, with nearly 90 percent of deaths occurring in low- and middle-income countries. About 4.2 million deaths are attributed to outdoor air pollution whose sources are also sources of high CO2 emissions.

In Romania, people living in large urban areas are increasingly affected by poor air quality and European statistics are already showing the negative effects of this situation.

4. At least 33 percent of waste is mismanaged through open dumping or burning

Adequate waste treatment and disposal is almost exclusively the domain of high and upper-middle-income countries. In low-income countries, 93 percent of waste is burned or dumped in roads, open land, or waterways, compared with only 2 percent of waste in high-income countries.

At a global scale, solid waste contributes to climate change and is one of the largest sources of pollution in oceans. In 2016, the world generated 242 million metric tons of plastic waste—12 percent of all municipal solid waste, according to the What a Waste report.

Some 90 percent of floating marine debris is plastic, of which nearly 62 percent is food and beverage packaging. Although plastics have been mass-produced for only about 60 years, they persist in open waters for decades and even centuries.

In Romania, waste mismanagement is a national problem and solving it could be a main challenge within the next decades.

5. Less than half of students in developing countries meet minimum educational proficiency standards

Globally, we are more educated than ever, but there are dramatic differences in how much children are learning. A new database covering 160 economies harmonizes international and regional test scores to calculate the effective years of schooling that children have experienced. Average test scores range from 600 in the best-performing countries to 300 in the worst-performing ones (with a score of 400 as the benchmark for minimum proficiency).

The reasons for the differences include poorer health and nutrition of children in lower-income countries, fewer years in school (about 260 million children and youth are not in school at all), teacher absenteeism, teachers who don’t meet proficiency standards, and fragility, conflict, and violence.

According to World Bank data, Romania ranks very low in Europe from this point of view, with only 8.81 adjusted years of schooling, the lowest level in the EU and much lower than countries like Russia, Ukraine or Turkey.

6. Demand for advanced skills is rising

While scores of tasks and some routine jobs will be replaced by technology, demand is rising for advanced cognitive skills, socio-behavioral skills, and skill combinations associated with greater adaptability.

New jobs and entire industries are replacing old ones, and technology is changing the scope of many existing jobs. This trend is already evident in developed countries and is now starting to emerge in some developing countries.

In Romania, advanced skills shortage is already a national problem as education quality is among the lowest in Europe.

7. Borrowing by low- and middle-income economies has more than tripled

Borrowing by low- and middle-income economies surged to USD 607 billion in 2017, up from USD 181 billion the previous year — the highest level in three years, according to International Debt Statistics.

Total debt owed to external official and private creditors by these economies rose 10 percent in 2017 to USD 7.1 trillion, a faster rate of debt accumulation than the 4 percent increase in 2016.

While their external debt burdens on average remained moderate, one third had a ratio of external debt-to-gross national income above 60 percent at the end of 2017 — which is considered high for developing economies. Eleven low- and middle-income countries have debt-to-GNI ratios of over 100 percent – meaning their debt is greater than their gross national income.

The increasing debt burdens of low- and middle-income economies come as concern rises about overall global debt, which by some estimates is 60 percent higher than before the 2008 financial crisis.

Romania has currently a public debt of 35 percent of GDP but the current populist policies could have a rapid negative impact on debt burden as the public deficits and rising social spending are putting pressure on macroeconomic stability.

8. By 2050, twice as many people will live in cities than in rural areas

A third of people on Earth lived in cities in 1960. In 2018, the percentage of city dwellers has risen to 55 percent, and the migration to cities continues as people seek jobs, education, and opportunity.

Between now and 2050, 90 percent of the world’s urban population growth will take place in the developing world, with Africa and Asia (or specifically South Asia) the fastest growing continents. And just three countries – India, China and Nigeria – are expected to account for 35 percent of the growth in the world’s urban population between 2018 and 2050.

Cities generate 80 percent of global wealth, but they consume close to two-thirds of the world’s energy and account for more than 70 percent of global greenhouse gas emissions.

The speed and scale of urbanization has accelerated demand for affordable housing, well-connected transit systems and other infrastructure, basic services, and jobs, particularly for the nearly 1 billion urban poor who live in informal settlements to be near opportunities.

Romania, where around 45 percent of inhabitants still live in rural areas, will certainly follow this global trend of urbanization within the next decades due mainly to lower life quality in villages.

9. 2 billion adults have gained access to financial services since 2011

Around 69 percent of adults today have an account with a financial institution or mobile money service – including 514 million people who gained access between 2014 and 2017, according to Global Findex data. In developing economies, the share of adults with an account rose from 54 percent to 63 percent.

But in a world where people must be financially included to participate in the digital economy, close to one-third of adults – 1.7 billion people – still lack access to the financial system. Women in developing economies remain 9 percentage points less likely than men to have an account.

A 2017 survey found that lack of money and documentation, distance, and cost were factors in remaining outside the financial system. Financial products relying on technology as part of an evolving digital economy have the potential to include and expand access to hard-to-reach populations and small businesses.

Romania has now millions of inhabitants without access to financial services and will certainly follow this new global trend.

Tags: global challenges