COVID-19 and South Asia: Sequencing of policy options

The spread of COVID-19 infections in South Asia has not been uniform across countries; while some countries were successful in controlling the pandemic, others were not, writes Partho Pratim Mitra for South Asia Monitor

Partha Pratim Mitra Nov 28, 2020
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The COVID-19 crisis has made South Asia face the important question of sequencing mitigation strategies to overcome the twin problems of   human health and the economy. While lockdowns as a preventive measure for people getting exposed to the virus and reduction of pressure on the health infrastructure are unavoidable, they also impose heavy costs on almost every nation in terms of lost jobs and livelihoods. Most South Asian nations have poor healthcare infrastructure and have large numbers of people living below the poverty line. This complex picture sets the background    for battling the   health crises on the one hand   and a bid to resume economic activity on the other. Geopolitically, the pandemic has been viewed as  China’s attempts to deepen its strategic and economic ties within the region in the wider global perspective of US-China peer competition[i]. Playing out of this global geopolitics in South Asia is another  matter, but it’s important to understand the ground realities of the policy options which countries of the region are left  with to pursue. 

Putting it in more simpler terms without reference to the broader geopolitics, which nonetheless is important, the battle against COVID-19 is often viewed as a trade-off between public health and the economy. In this context, the dilemma of public policy could be posed by the proposition that while lockdowns and social distancing aim to minimize widespread infection and prevent hospitals from being overcrowded with patients, the same set of measures immobilise, businesses and factories, lay off people, prevent children from going to schools, and slow down the economy. The trade-off between lost lives—i.e. public health—versus lost livelihoods—i.e. economy—is often mistakenly viewed as a zero-sum option between complete lockdown versus zero restrictions. In reality, there is, however a combination  of a continuum in stringency of restrictions – e.g. social distancing, work-from-home rules, and limits on inter-household interaction – as well as the degree of lockdowns – e.g. stay-at-home orders, community quarantines, and travel bans.. [ii]

The spread of COVID-19 infections in South Asia has not been uniform across countries; while some countries were successful in controlling the pandemic, others were not. Bhutan and Sri Lanka avoided large-scale domestic transmission and experienced only very small numbers of infections per capita. Despite comparable measures, cases surged in Bangladesh and Pakistan. However, after a spike between June and July, they have declined subsequently. In India, cases are now spreading in almost every state and across smaller towns and rural areas. The Maldives has the highest number of confirmed cases per capita, and new infections are high. In Nepal, cases were initially restricted to bordering areas but subsequently  surged also in the urban areas.[iii]

A survey data collected during the months of April to  August 2020, which includes more  than 100,000 businesses across countries, primarily low- and middle-income across the world covering almost all sectors of the economy (i.e. manufacturing, services and agriculture) and a large range of countries with different income levels (i.e. ranging from Afghanistan to Italy) and exposure to the COVID-19 disruption,  suggests that the pandemic affected countries with different degrees of lockdown with equal severity.  While there have been multiple efforts to take stock of current government policies on COVID-19 (for example, the IMF Policy Tracker and the Oxford COVID-19 Government Response Tracker), not much is known about firm-level access to government support globally. Consistent with the growing literature on the impact of COVID-19 on bankruptcy and liquidity challenges among firms  it has been found that   significant  variation  in liquidity constraints across countries. 

In general, it appears that the problem is more acute among countries where financial development is lower (e.g. Nepal and Bangladesh) Covid 19 has brought about a great degree of uncertainty which  depends primarily on health-related aspects (i.e. mortality rate associated with the virus and expectation regarding time to find a successful vaccine) but also to policy responses (i.e. type and length of government support), as well as behavioural responses of economic actors (i.e. consumption and travel patterns). Evidence from previous episodes of crises suggests that temporary support to firms can be effective For instance. 

In Sri Lanka, cash grants helped micro-firms survive the crisis and accelerated their recovery following the 2004 tsunami.   Yet loans do not appear to be effective in alleviating SMEs’ cash constraints or encouraging the reopening of small businesses. More systematic and timely evidence is needed to inform policy debates on how to best support firms during the COVID-19 pandemic, especially when countries are running out of the fiscal policy space to sustain stimulus packages. Where lockdowns have not been resorted to such as in the South Korea, fear of infections rather than lockdown became the main driver of the drop in local employment and suggests the pandemic has struck high-contact industries the hardest.[iv]

The COVID-19 pandemic which soon turned into a global health and economic crisis, sequencing of policy measures to mitigate the health and the economic effects became extremely important. Manufacturing, especially the garment industry in lower and middle-income countries is considered to be a high risk for job losses and decreased working hours due to COVID-19 disruptions in global trade and supply chains. The job losses, furthermore, are likely to disproportionally impact women, who constitute a large segment of the workforce in the garment sector. It is apprehended that the low-skilled jobs lost by women throughout the garment supply chain may never return post covid19. Long-term unemployment for women garment workers could also lead to adverse intergenerational impacts on health and education for children, particularly girls. 

Experience of previous recessions shows loss of women workers’ incomes in lower-income households has a greater longer-term impact when compared to men because women tend to invest more of their income in their children’s health services, education and nutrition. This may negative consequences on the health and education of their children and lead to life-long deficits in their cognitive, emotional and physical development. It is also likely that children, particularly girl children, will take on additional household duties or be pulled out of school for household work. This may also have broader repercussions on a country’s ability to achieve the UN Sustainable Development Goals, particularly on ensuring inclusive and sustainable economies and decent work for alll[v]

An important consideration that weighed in favour of relaxing the lockdown despite the situation not permitting such resumption is the presence of a large informal sector in South Asia. During the COVID-19 crisis, most workers in the informal economy are not in a position to rely on income replacement (e.g. work-sharing schemes) or savings and therefore need to continue earning an income to feed themselves and their families.[vi]

Many workers in the informal economy face the dilemma of choosing between working or losing their income and are compelled to work even when they are sick in order to continue paying their food and basic expenses. This not only jeopardizes their own health but also undermines preventive public health measures to reduce the spread of the virus. Without appropriate policy measures, for many workers getting sick implies a significant loss of income and possibly poverty and hunger as well. The risk of impoverishment gets compounded for those not covered by social health protection schemes, who must bear the costs of health care themselves, and for those who lack income security in the form of sickness or employment injury benefits [vii]Such workers constitute the majority in the South Asia region.

Poverty, under the circumstances, is expected to rise as a result of the loss of livelihoods and employment which has engulfed the region and which may not be fully reflected in the GDP numbers. The number of people in extreme poverty in 2020 in South Asia (with less than $1.90 a day in PPP international dollars) was estimated to comprise 15.5 per cent of the total global extreme poor before COVID-19. Now South Asia’s new extreme poor due to COVID-19 will comprise more than half of the new global poor. The impact on economic activity will depend on various factors: (i) the type of economic activities and the extent to which they require social interaction; (ii) how restrictive and effective containment policies are; and (iii) whether the population is able or willing to follow the lockdown rules. Even if South Asian countries are successful in containing the pandemic in 2020, they may be heavily dependent—through trade, remittances or external financing—on economies   in the rest of the world that are not recovering as quickly, which further adds to  the problem of the region.[viii].

 Sequencing of policy options in South Asia will have to, take into consideration the fact that the prospect of re-imposing lockdowns and other restrictions, while necessary to bring the pandemic under control could have far-reaching economic and social consequences for millions. At the same time, many initial government stimulus plans that provide emergency cash assistance to the most vulnerable are gradually getting exhausted. Temporary basic income and universal healthcare, the two important but difficult  options,  seem to be  necessary to support people for health and livelihood., [ix]Work on both the options would  depend upon the revenue  buoyancy of governments, which in turn would depend on the overall macro performance of the economy. While universal health coverage for citizens have been announced by governments as an important objective, universal basic income as a temporary objective is still a thought-in-progress and this seems to be the crux of the problem to plan a bold economic revival package that would quickly ensure money for people to survive.

(The writer is a retired Indian Economic Service officer who worked in the labour ministry. Views expressed are personal. He can be contacted at ppmitra56@gmail.com)  
  


[i] BY DR. APARNA PANDE Director, Initiative on the Future of India and South Asia, Hudson Institute AMB. HUSAIN HAQQANI Director for South and Central Asia, Hudson Institute November 2020POLICY MEMO Nine Months of COVID-19: The Impact on South Asia, HUDSON INSTITUTE, Washington DC www.hudson.org

[ii] Euston Quah, et al The COVID-19 dilemma: Public health versus the economy. November 24,2020
https://blogs.adb.org/blog/covid-19-dilemma-public-health-versus-economy

[iii] Beaten or Broken? Informality and COVID-p14-15 19https://openknowledge.worldbank.org/bitstream/handle/10986/34517/9781464816406.pdfOctober  2020 International Bank for Reconstruction and Development / The World Bank

[iv] Marie Christine Apedo-Amah, et al Unmasking the Impact of COVID-19 on Businesses Firm Level Evidence from Across the World, Policy Research Working Paper 9434,The World Bank, October 2020,www.worlbank.org

[v] Gendered impacts of COVID-19 on the garment sector,ILO Brief November 2020 https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---sro-bangkok/documents/publication/wcms_760374.pdf

[vi] The role of social dialogue and the social partners in addressing the consequences of COVID-19 in the informal economy October 2020 http://www.ilo.ch/wcmsp5/groups/public/---ed_protect/---protrav/---travail/documents/briefing note/wcms_759383.pdf

[vii] u Extending social protection to informal workers in the COVID-19 crisis: country responses and policy considerations ,ILOSocial Protection Spotlight 08 September 2020 https://www.ilo.org/wcmsp5/groups/public/---ed_protect/---soc_sec/documents/publication/wcms_754731.pdf

[viii] Beaten or Broken? Informality and COVID-19, opcit,p42

[ix]Dhaliwal Mandeep, 

TWO POLICIES WE NEED TO RECOVER FROM COVID- November 18, 202019HTTPS://WWW.UNDP.ORG/CONTENT/UNDP/EN/HOME/BLOG/2020

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