Asia’s emerging economies are at different stages in combatting the COVID-19 pandemic. For some countries, the light at the end of the tunnel is getting brighter as social distancing measures are being eased and economic activity is starting to ramp up again. Others are still grappling with outbreaks and lockdowns.
Whatever stage they are at, though, these markets must also continue to think beyond the crisis, and about what can be done to safeguard and improve their long-term economic prospects. Developing nations across Asia – Indonesia included – have of course not been immune to the social and economic disruption caused by COVID-19.
Travel restrictions and distancing measures have hit trade and jobs around the globe. Budget deficits have widened and overall levels of debt will continue to increase across much of the region. Any recovery in tourism and business and consumer confidence is likely to be overshadowed by lingering concerns about potential new outbreaks, and by the tough global economic backdrop.
Despite the near term challenges, it’s important to remember the underlying trends that underpin many developing nations’ long-term growth potential.
For one thing, most of emerging Asia enjoys favorable demographics, with under-20-year-olds accounting for more than one-third of the population of India, Bangladesh and Southeast Asia, according to UN World Population Prospects 2019.
For another, the region’s economies are increasingly capable of delivering innovation and higher end manufacturing and services. The emergence of numerous home-grown e-commerce, e-payments and other companies testifies to this.
The COVID-19 fall-out could, if anything, boost the quest for new ideas and technologies, as households, companies and entrepreneurs seek out new ways of buying, selling, banking, learning and communicating with each other.
It’s also important to remember that emerging Asian economies are, broadly speaking, now more resilient to external financial shocks than during the 1997-1998 Asian financial crisis or the global 2008 global financial crisis. Foreign exchange reserves have risen. External debt levels have come down. Current account balances have improved.
And as the 2020 crisis picked up steam, governments and central banks were quick to provide assistance with interest rate cuts and a slew of fiscal, liquidity and other measures to support households and businesses.
In May, President Joko Widodo announced that the government would begin to ease widespread social distancing measures and enter a more sustainable phase of social restrictions. As an intervention to stabilize the economy, fiscal stimulus measures were announced to support healthcare provision and economic recovery. Alongside this, the government pledged to offer more social welfare support for pandemic-impacted low-income communities.
Still, with COVID-related obstacles set to linger, policy makers would do well to supplement their immediate economic support measures with bold steps aimed at increasing their economies’ attractiveness as places to invest and do business in.
There are three broad areas of focus.
First, improving the local operating environment – making it easier to do business. That spans everything from reducing red tape and corruption, to dialing back restrictions on incoming investment, and labor market reforms, for example. Many countries have made laudable progress on these fronts – building on this will stand them in good stead.
Second, boosting competitiveness and productivity through investment. Specifically in transport and energy infrastructure, telecoms and internet connectivity, healthcare, education and smart, low-carbon ways to manage urbanization. All will be key to bolstering developing economies’ long-term growth prospects, and to dealing with technological advances such as robotics and automation, 3-D printing and Artificial Intelligence (see Asian Development Outlook 2018). Building infrastructure well from the outset – and building back better after each upset or crisis – is crucial to each economy’s long-term growth and resilience.
Linked to this is the third area, of climate change preparedness. Southeast Asian and South Asian nations are particularly vulnerable to the effects of climate change, with low-lying megacities like Dhaka, Ho Chi Minh City, Jakarta, Bangkok and Mumbai highly susceptible to storms and sea level rises (see HSBC Global Research: Fragile Planet: Scoring climate risks around the world, March 2008).
Increasingly, a country’s or region’s ability to withstand climate-linked threats – including the ability to raise and direct funding intelligently towards greening and climate-proofing the local economy – will be a factor in where companies and investors direct their business.
The COVID-19 pandemic has taken a human and economic toll that was unimaginable just months ago. Its impact will linger for months, if not years. But like every crisis, it also represents an opportunity for policy makers and business communities to rethink and accelerate their reform agendas. Those that grasp the opportunity could not just move their economies to the proverbial light at the end of the tunnel, but bolster their solid fundamentals for the world well beyond it.
The writer is president commissioner of PT Bank HSBC Indonesia. The views expressed are his own.
Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.