The pandemic has struck all countries worldwide with equal fervor, but its effect has varied significantly in different regions. In August 2020 the number of cases transmitted per million was 582 across emerging ASIAN countries compared with 16737 in America and 4121 in Eurozone.
Despite experiencing a deadlier blow in terms of health, more developed countries of US and EU had superior infrastructure to deal with crisis and were better positioned to cushion the economic blow. Lesser developed countries, like emerging ASEAN (Indonesia, Thailand, Philippines, Malaysia and Vietnam), weathered the health crisis better, but lacked the infrastructure and the economic ability to embark on the path of accelerated recovery.
McKinsey’s research in the emerging ASEAN region revealed a number of trends initiated by the pandemic. Probing these trends reveals the possible recipe for recovery, provided the stakeholders are ready to reimagine their national economy. Although India is not a part of the region, the geographical proximity makes India vulnerable to the same disadvantages and hence the same recipe for recovery becomes extremely relevant for India.
Five Economic Growth Levers
The pandemic has brought immense transformation in consumer behavior for the long-term and leaders are acknowledging the shift by focusing on reimaging instead of just reopening the economies. Here are five trends that could propel the economic growth in emerging ASEAN in the years to come.
Surging as manufacturing hubs
A global businesses survey by QIMA found, 80% US and 67% EU executives were willing to shift sourcing from China to other Asian countries in their supply chain diversification drive. Labor intensive manufacturing already experienced steady growth in emerging ASEAN in the last two decades and this new development, offers the region a greater chance to pull new investments in the sector. Many countries including Thailand, Malaysia and Vietnam have already taken steps in that direction.
Investing in green infrastructure
Global focus on mitigating the climate change crisis has increased phenomenally in the context of the current pandemic. Several countries in Europe have started investing in sustainable infrastructure in a bid to accelerate economic growth and job creation. Current share of renewable energy in power capacity is 11% in Indonesia, and 22% in Thailand against Asia’s average of 34%. National governments of the region can increase penetration of renewables and energy-efficient technologies to cover the gap while boosting the economy.
Prepping businesses for a digital future
Covid-19 has accelerated adoption of digital technologies and considerable number of first-time online shoppers indicated that they would continue using online channels even after lockdown is lifted. This trend can put SMEs of emerging ASEAN countries in considerable risk if they don’t embrace digital technology. Government thrust to develop digital capabilities of such companies can help in speedy economic recovery and also help the businesses to prosper in future. Private government collaboration to boost digital adoption by masses will also yield desirable results.
Reskilling and redeployment of workforce
Adoption of digital and automation is expected to displace a large number of jobs. National governments must take active steps to facilitate reskilling and training of the workforce (with stipend if possible) so that they are ready for new roles. Proper data analysis should be used to assess the demand of workers in different sectors and accordingly training should be facilitated. Countries like US and Singapore have already started such initiatives.
Creating high-value food industries
Agriculture is a significant contributor to the Southeast Asian economy. In the wake of the pandemic, and economic slump, food insecurity is growing worldwide. Steps must be taken to increase agricultural productivity using technological innovations. Expansion of the agricultural sector to processing, packaging and retail can enhance the scope of the sector boosting the economy and increasing the livelihood options for the people currently employed in the sector.
Asia has experienced a milder pandemic but a harsher economic impact. The present time is marked by transformations and emergence of new trends. Identifying and activating these growth levers can restore the economy and lay the foundation for a brighter tomorrow.
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