Covid-19 has wrought havoc on Southeast Asian economies. Many countries have imposed tight restrictions on movement, closed schools and workplaces, and instated physical distancing rules. These measures have resulted in plummeting economic activities. Despite prompt and massive policy responses, many Southeast Asian countries are facing the prospects of sharp contractions in their economies.
| Businesses in Asia, and around the world, are struggling to find ways to operate safely amid the pandemic. Photo: Kelly Sikkema |
As the number of new infections wane, countries are preparing to loosen the restrictions. A big question is how to reopen. One way is to target priority sectors with high benefit to the economy and low risk of infection. Alternatively, there can be gradual opening by regions. Areas where the infections have come under control can be opened first. But this could be problematic if the movement of workers is restricted.
Regardless of the approach taken for reopening, physical distancing measures are here to stay for some time, at least until there is a Covid-19 vaccine. Recent research suggests that a large part of the transmission could occur from pre-symptomatic or asymptomatic patients, so relying on self-quarantine based on symptoms may not be enough. Hence, any businesses that are reopening will have to change their operations substantially to minimize risk of infection.
Guidelines for reopening emphasize the need to protect the health of employees and minimize the risk of transmission. While mobility restrictions have lifted, consumers may still be reluctant to go out if the threat of Covid-19 is still there. In adapting to the post-Covid-19 world, the key is to increase confidence among business owners, workers, and consumers that there is an effective system in place for mitigating the spread of the virus while returning to normal activities.
Thus, authorities have to consider three factors that determine risk of exposure in reopening sectors. These factors include proximity to people, duration of exposure, and how confined the environment is. The greatest peril lies where the three overlap such as retailers and restaurants.
Adopting physical distancing measures will mean less store or seating capacity. This will raise costs and put the viability of many businesses into question. Many companies have cited Covid-19 as a factor in their bankruptcy filings. Complying with the physical distancing measures suggest that many businesses will have to redesign their existing workspace or retail space.
For offices, this could mean rotating workers who come to the office or encouraging more work from home arrangements. Shops may transform themselves into spaces where customers can interact and experience the products but with no inventories. Instead, purchases will be delivered directly to customers’ homes.
Given physical distancing measures, serving customers will be a huge challenge for the hospitality sector. Hotels and restaurants need to protect the health of staff and customers while meeting revenue objectives. New technology could help. Roll-out of digital contact tracing tools could help quickly identify those who have come into contact with infectious persons.
For restaurants, drive-through and take-out options are likely to become more popular. And, not just for fast food joints, but also grocery stores and sit-down restaurants. However, this will require capital spending to renovate the establishments. Delivery demand will likely grow, forcing grocers and restaurants to find profitable ways to facilitate that. This could give rise to “cloud kitchens” that specializes in delivery. Smart restaurants may even become mini-grocers, selling related food items as consumers seek to consolidate trips.
One of the sectors most disrupted by Covid-19 is education, as many parents who now are responsible for educating their children can testify. According to UNESCO, there were almost 1.1 billion affected learners or 60.9% of total enrolled learners in 107 countries as of 20 July 2020. To reopen, schools and universities will have to adapt and adjust to the post-Covid-19 realities.
This would likely entail adopting various technology-based strategies as alternatives to the traditional classroom set up to remain viable in a post-Covid-19 pandemic era. There has been a significant surge in digital learning solutions following Covid-19 such as language applications, virtual tutoring, video conferencing tools, or online learning software. Some countries with limited Internet connectivity are using radio programs and national television to broadcast school lessons and educational materials.
Another sector that will have to adapt to the physical distancing measures is public transport. Demand for public transportation has plummeted during the pandemic. Public transport systems are considered a high-risk environment due to the high number of people in a confined space with limited ventilation, no access control to identify potentially sick persons, and a variety of common surfaces to touch (ticket machines, handrails, door knobs, etc.). However, effective public transport is vital to keeping cities running.
Extensive disinfection measures and widespread mask-wearing among passengers have contributed to reducing transmission significantly in Seoul and Hong Kong, China. South Korean health authorities trace pre-quarantine movements of coronavirus patients through in-person interviews as well as scrutiny of phone location data and credit card records. There was also an extensive communications campaign to guide riders on the way to safely use public transportation in Seoul. In Hong Kong, China, robots were rolled out to help disinfect subway stations with a hydrogen peroxide spray.
What does it mean for policymakers? It suggests that while it may make sense to support all firms to keep them operating initially, the impact of Covid-19 looks set to create long term changes.
This means assistance will have to move from liquidity support to supporting firms as they transition to new business models. For example, with food delivery and take-out surging during the pandemic, helping restaurants digitize will be key. Governments can play an important role in developing a digital economy, which can help economies bounce forward.
Authors:
Thiam Hee Ng is Principal Economist, Southeast Asia Department, ADB.
Dulce Zara is Senior Regional Cooperation Officer, Southeast Asia Department, ADB.
