Demand and Supply Implications from COVID-19 in Asia

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Personal Insights on the pandemic across Asia

Little did people know and expect that a small virus could be so dreadful that it would bring a paradigm shift in the way we think and do things in our everyday life. What began as a local pneumonia outbreak in Wuhan, China soon spanned far and wide gripping the entire world in its deathly clutches. It became a pandemic. Mortality rates shot up. Life as we knew it came to a standstill. This virus brought alive the grim memories of the SARS outbreak in 2003, with deeper anxiety in Asia.

Movement of people from one geographic region to another wove its webs of fear all across the world and very quickly, one after the other, economies began to shut their borders down. In the beginning, the South Asian economies were mainly hit by disruptions in cross-border connections. Travel restrictions had decimated tourism and delayed infrastructure projects that depend on foreign workers. When the coronavirus started spreading in South Asia through domestic contagion, local containment policies further disrupted economic activities, multiplying the cross-border shocks.

With the limited knowledge within our grasp, moving out of the house without a mask became a bane and legally outlawed. For the first known time in the human race, there was a legal requirement to distance from each other. We became a ‘socially distanced’ society for the sake of our own safety and the most vulnerable around us.

This virus is having an adverse impact on every sector and sphere of life. Here are 7 ways COVID-19 has greatly disrupted the livelihoods of people in South Asia:

1. Coronavirus has provided a minefield of obstacles for the international economy, especially for the regions located near the early epicenter of the pandemic like China, Singapore, Hong Kong, Malaysia, and others. Some of the hardest-hit industries due to COVID-19 have been hospitality and the food and beverage sector. A mixture of reasons lies behind the current state of these industries, including government regulations, inefficiencies in the supply chain, and consumer behavior.


2. The hospitality industry is vital to attract foreign investors and tourists who spend millions in the local economy. Food distributors and wholesalers in ASEAN can take certain actions to bolster the economy and improve the food supply chain.


3. Many Asian governments in countries like Singapore and Malaysia have imposed severe limitations on the restaurant and hotel industries. Restaurants and the food industry had to take a financial hit when no customers were thronging their outlets and they were ordered to close.


4. Next was the travel industry when traveling was restricted, and cross-border regulations became stringent to prevent the spread of the pandemic. Tourism reeled under this impact and eventually began to dry up.


5. For South Asia, the decrease in service industry activities was especially challenging because of the many low-income, and often informal workers in the hospitality and transport sector.


6. Social panic led to hoarding of food, while food supply might be hampered by logistical disruption. This means that access to basic needs is not guaranteed for the poorest people in South Asia.


7. The unemployment rate has started increasing gradually, as government relief packages are starting to dry up.

Profusion of Challenges for Asian Region

The first task was to prepare the still underdeveloped health-care system for the fight against COVID-19. A robust health-care system was the need of the hour along with trained health-care workers. Another immediate task was, and still is, to secure access to food and basic needs to the most vulnerable people in society.

Governments must ensure that their respective country has a steady flow of masks, disinfecting sprays, and rubs so that the basic safety and hygiene measures are in place for local citizens. For this, the government must encourage and extend support to the local suppliers as well as import from other countries who have excess supply of these goods. The prices of these indispensable goods must be kept under control so that the local people can have easy access to it.

Domestic Transmission Across Countries in South Asia

Singapore is an ideal example of how a country basked in the glory of being a safe haven during this battle against COVID-19. The country reeled under the onslaught of the virus and then managed to contain it successfully within record time. In the initial months of the outbreak of this pandemic, Singapore was able to position itself as an exemplary country for others in the world based upon its measures of being able to contain the virus. Unfortunately, it could not retain this title for long, as a one-off case of a migrant worker went undetected, leading to a big outbreak in its shores.

Nevertheless, the government was fast to react and took stringent measures to contain the virus spread within the society by building makeshift quarantine shelters within a one week and effectively quarantined its 200,000 odd migrant workers. They also effectively mobilized all of Singapore’s resources by building testing capabilities and contact tracing measures by developing apps to trace the movement of its people islandwide. Singapore expanded its healthcare system significantly and mobilized the Home Team and Singapore Armed Forces to help in workers’ dormitories. These proactive measures and by implementing the circuit breaker on time went a long way in slowing down the infection rate on Singapore shores. Today, Singapore can boast that it has successfully managed to flatten the infection curve with the present positive cases tally brought down to single digits.

South Asia has some of the highest population densities in the world, particularly in urban areas. This makes contagion easier, especially among the most vulnerable people: slum dwellers and migrant workers. In India, the time between the announcement of suspension of inland passenger transport and its enforcement was less than a day, which created chaos as migrants scrambled to get back to their provinces, exacerbating the crowding and making enforcement of social distancing impossible. The flow of migrant workers could easily become vectors carrying the coronavirus back to other states and villages.

Government Intervention to Prevent Supply and Demand Constraints

Food prices have been volatile during this crisis. Price rises in local food markets have occurred in reaction to supply disruptions and panic buying. However, there are no signs yet of widespread food shortages, in part because governments quickly took steps to ensure that all basic goods were made available. If the coronavirus spreads further and lockdown measures remain in place for a long period, it will become more challenging to guarantee food security, especially for the most vulnerable in the population.

• Several governments announced a plan to supply substantial quantities of grains from the government’s strategic reserves to mitigate food supply shocks and provide public reassurance.

• Governments decided to operate special open market sales of grains for the poor across all city corporations, pricing rice at a third of its current market price. The government is also operating mobile courts to monitor market prices and prevent hoarding.


• The government also encouraged wholesale and large retailers to ensure continued food supply across the country.

Disruptions in the food market across countries. Nationwide lockdowns, border closures, and social distancing measures to contain COVID-19 in the region resulted in localized supply disruptions and panic buying, resulting in food price hikes. In some countries, the prices of basic grains like wheat and wheat flour rose by almost 15 percent and the price of cooking oil by 9 percent due to supply-side interruptions. Traders also reported increases in the prices of pulses, cooking oil prices, and sugar. In various regions, wholesale food prices surged in the initial days after the lockdown announcement. An import ban on meat, fruits, and vegetables (mainly imported from India) caused an immediate surge of people in markets, until the reversal of the fruit and vegetable ban. Many countries reported shortages of various essential commodities, in part because of bottlenecks as suppliers of essential goods grappled to cope with the sudden surge in demand.

Inadequate food supply, and soaring prices might result in starvation.

South Asia is vulnerable to increasing food inflation with a large segment of the population living near or below the poverty line. Many South Asian countries rank below the Global Hunger Index with high levels of food insecurity and widespread malnutrition among children. Those most affected by food price increases, are the rural and urban poor in South Asia. Low income families struggling to meet ends spend a significant portion of their income on food, increase in food prices could be catastrophic for these families.

Disruptions in inflows of remittances to South Asia.

A lot of countries in South Asia rely on services of migrant workers in industries like, construction, ship building, hospitality, healthcare and domestic help. Migrant workers financially support their families back home by remitting money on monthly basis. Money transfer agencies in either the sending or receiving countries were closed due to lockdown measures. Many migrants have lost their work while struggling to return to their home country. In case of a crisis in their country of origin, migrants tend to send more money home to support their families. In case of a crisis in their host country migrants tend to return home with all accumulated savings. The global nature of the current crisis, has resulted in reduce remittances, aggravating the problem of many countries in South Asia that rely on remittance inflows.

 

The impact of COVID-19 on the world has been unlike anything we have ever experienced.  My prediction is that this too shall pass, but not without further disruption and transformation.  We stand to come out stronger and smarter than we were before – more united than ever.   Keep an eye out for my next blog which will discuss how COVID-19 has shifted B2B business models in Asia across a variety of subsegments.