ASEAN’s economic policy responses to COVID-19 must address short-term relief and long-term survival for businesses while ASEAN is well placed to thrive on post-pandemic trade regionalisation with true economic integration

KUALA LUMPUR, April 22 (Bernama) -- The first online ASEAN Roundtable Series organised by the CIMB ASEAN Research Institute (CARI) brought together business leaders from Malaysia, the Philippines, Singapore, Thailand, and Indonesia to discuss the series of stimulus measures announced by several ASEAN governments in response to the COVID-19 pandemic.

The panellists consist of four of ASEAN’s leading business leaders and expert, Chua Soon Ghee, Partner of Kearney Singapore; Shinta Widjaja Khamdani, CEO of Sintesa Indonesia; Mr Arin Jira, Chairman of the Map Ta Phut Industrial Gasses Co Ltd Thailand and Jose Ma Concepcion III, President and CEO of RFM Corporation Philippines. The panel discussion was chaired by Tan Sri Dr Munir Majid, Chairman of the CARI.

“We should not be in a state of COVID-19 paralysis. Yes, we must first confront the attack on health and lives. We must also, however, open up corridors to livelihoods and economic activity which have been decimated. We must find the median that makes them not mutually exclusive. This calls for imaginative policy implementation and enforcement, as well as for personal and corporate discipline,” noted Tan Sri Munir in his opening remarks. 

1) Policy responses today determines long-term survival of businesses

Shinta Widjaja Kamdani said that even though there are limits to the extent what ASEAN countries can do to save themselves from the economic damages and crisis projection caused by the pandemic, all policy responses and government spending that are aimed at alleviating financial burdens on business, such as reducing tax and credit burdens as well as compliance cost, will translate into survivability for business in the longer term.

“This pandemic has raised the alarm - that regulatory efficiency; the accuracy of the overall economic activities data (particularly the informal ones); interconnectivity and diversification of supply chain, both domestic and cross-border supply chains included - are capital that saves our economy in a crisis. Although the importance of these aspects may vary in each ASEAN country, some will be more pronounced than others in the long run when the industries consider their future business plans,” says Shinta, who is also the Deputy Chairman of International Relations of the Indonesian Chamber of Commerce and Industry, KADIN. 

2) Supply chains diversification and opportunities for ASEAN

The panellists agree that diversification of supply chains also involves reducing the region’s overdependence on Chinese manufacturers and raw materials. Disruptions in the supply of raw materials, labour, and sub-assembly components to ASEAN (particularly from China) had a significant impact on ASEAN industries.

Data shows that ASEAN manufacturers saw their worst month on record in March 2020, with the headline PMI falling from 50.2 in February to a record low of 43.4 in March. This was attributed in part to disruptions in supply chains impacting production and causing delays in deliveries [1].

“The sudden China shutdown triggered a global supply chain shock and will accelerate the movement of some manufacturing from China to ASEAN and elsewhere. China has a 28% share of global manufacturing, while ASEAN is only at 4-5%. For those countries who are prepared with policy tools such as incentives and schemes, this will be a golden opportunity,” observed Chua Soon Ghee. 

3) Stimulus package for MSMEs - go beyond short-term and debottlenecking the help

The panellists agreed that the stimulus measures announced by several ASEAN governments were timely. However, the assistance provided to SMEs is limited and targeted at providing support and relief in the short term.

“Most of the stimulus packages have been focused on ameliorating the pain of a sudden sharp drop in demand, through some combinations of wage assistance, fees rebates or deferrals as well as loan support. New rounds of support should go beyond the short term. With continued social distancing until a vaccine is widely available, there will be reduced demand for industries such as travel, hospitality, F&B, retail, energy, and therefore longer-term support for a year would be required,” said Chua.

He noted that critically, governments need to help SME address cash flow problems directly by providing loan support to keep SMEs afloat until demand goes back to normal. Equally important is the need to debottleneck the assistance to the SMEs due to slow flow through within the channels which are expected to distribute the benefits to downstream companies. The flow-through has been slow in many circumstances and will need to be accelerated through either moral exhortation, legislation, or direct cash to affected individuals and companies. 

[1] IHS Markit, ‘IHS Markit ASEAN Manufacturing PMI: PMI tumbles to record low in March amid global COVID-19 pandemic’, April 2020

4) Acceleration of digitalisation but capacity building needed

The panel observed that the impact of the COVID-19 pandemic has accelerated the speed of digital transformation. E-commerce and online businesses were already growing quickly in ASEAN prior to the outbreak, but most businesses will now consider e-commerce as a necessity rather than a luxury. The acceleration of digitalisation, however, has brought to fore the digital literacy gap in the market, while some businesses are still playing catch up to digitalisation. The panel suggested that policymakers focus on providing capacity building to MSMEs on how to navigate and adjust to the new business environment, in particular on how to leverage digital technologies.

“The lack of digital literacy has to be addressed. Many of the relief funds in Thailand require registration online or on mobile devices but the truth is, the majority of Thai citizens and businesses are not digital literate. Likewise, entrepreneurs must adapt to the new-normal of meeting the surge in fulfilling grocery and food demand as well as delivery through online platforms. Businesses must act on digital preparedness now in anticipation of the market’s returning to normal,” said Arin Jira.

5) The recovery ahead for ASEAN

In closing, Tan Sri Munir urged ASEAN leaders to deepen ASEAN integration in response to the post-pandemic trade order.

“In the aftermath of COVID-19, globalization will be diminished. There will be greater regionalization of the world in which ASEAN is well-placed if it took its chances, and truly established the AEC, that single production base and market long-promised but still fragmented by barriers and nationalist sentiment. The post-COVID-19 economic recovery is entirely in Asean’s hands and in those of its partners in the wider RCEP.” 

About CARI
CIMB ASEAN Research Institute (CARI) was established in 2011 by CIMB Group. CARI is the first independent, transnational research institute dedicated solely to the advancement and acceleration of ASEAN integration.

SOURCE: CIMB Group 

FOR MORE INFORMATION, PLEASE CONTACT: 
Name: Hong Jukhee
Executive Director
Email: jukhee@cariasean.org

--BERNAMA