On 30 January 2020, the World Health Organization (WHO) declared the outbreak of the novel coronavirus in the People’s Republic of China a global health emergency. Southeast Asia was one of the first regions affected due to its close geographical proximity and business travel, tourism and supply chain links to China. As of 4 May, there were 3,529,808 cases worldwide and over 49,900 cases in Southeast Asia. The number of confirmed cases are still on the rise in the region, but the rate of increase is generally slowing down. Nationwide lockdowns and enhanced community quarantine implemented in a number of countries are gradually being relaxed in some of them such as Malaysia, Thailand and Viet Nam and economic activities are starting to pick up. However, travel restrictions for foreign visitors are still enforced. Singapore and Viet Nam have implemented preventive and containment measures coping with the Covid-19 outbreak that include test, track and trace, which could provide guidance to other countries in the region and farther afield.

In early April, the Asian Development Bank (ADB) revised downward its growth forecasts for the 10 ASEAN countries from 4.4% in 2019 to 1% in 2020.1 Southeast Asian economies were already experiencing the negative effects of global trade tensions when the virus struck. The region will now face the prospects of a global shock and recession. Southeast Asian economies already impacted by supply and trade disruptions from China as well as the sharp decrease in international tourism2 are further affected by lockdown and social containment measures taken by many countries which slowed down considerably economic activities in many sectors of the economy. The SMEs, services and tourism sectors are among the most affected. Southeast Asian governments have introduced stimulus packages, mobilising both fiscal and monetary measures to mitigate the economic impact.

At the regional level, the 26th ASEAN Economic Ministers (AEM) retreat on 10 March 2020 issued a statement calling for collective action to mitigate the impact of the virus, with a particular focus on leveraging technology and digital trade, as well as trade facilitation platforms to foster supply chain connectivity and sustainability. At the Special ASEAN Summit on Covid-19 held on 14 April 2020, leaders of the ASEAN Member States issued a statement calling for a post-pandemic recovery plan and proposed establishment of the Covid-19 ASEAN Response Fund.

The OECD stands ready to leverage its Southeast Asia Regional Programme and country-specific engagement in particular with Indonesia, Thailand and Viet Nam to help mitigate the economic and social impacts of Covid-19.

All ASEAN Member States are feeling the socio-economic impact of the Covid-19. In the early stages of the pandemic, the rapid spread of the virus in China led to the disruption of supply chains and freezing demand limiting the flows of travel, trade, and investment. As the rate of infection rose in Southeast Asia, the impact of the pandemic brought immediate interruption in all sectors of the economic activity, primarily by containment measures imposed through lockdowns, community quarantines, temporary business and school closures, necessitating social protection for the vulnerable population and measures to further assist SMEs and other affected firms

Tourism is a particularly important sector for Southeast Asia. Early on in the crisis, the Chinese government imposed a group travel ban on its citizens. This had an immediate economic impact as the Chinese account for 17% of all tourists.3 In 2018, more than a quarter of the tourists in Thailand (almost 28%) and a third to Cambodia (almost 33%) were Chinese for example.4 The economic impact on the tourism sector in Southeast Asia deepened as the virus spread globally to other countries and regions. Travel restrictions imposed by some Southeast Asian countries on travel to and from Europe and North America further cut into their tourism trade.

The spread of Covid-19 in China has had a disruptive effect on global and regional supply chains. China is ASEAN countries’ biggest external trade partner and investor. In 2018, it had a share of 17.1% to Southeast Asia’s total trade, and contributed 6.5% to the total FDI inflows into the region.5 The Southeast Asia’s supply chains are also heavily integrated with China’s manufacturing sector. Other countries significantly affected by the outbreak, including the US and the EU, are also among the region’s largest trade and investment partners. The WTO has estimated that world trade is expected to fall by between 13% and 32% in 2020, exceeding the decline brought on by the Global Financial Crisis.6

Governments of the ASEAN Member States imposed stringent domestic containment measures. The restriction of large-scale events, restaurants and leisure, as well as school closures and lockdowns are having a negative impact on economic activities. These lockdown measures, although to a different scale and scope, imposed by Malaysia, the Philippines and Thailand, are slowing down or even stopping economic activities in certain sectors, having a ripple effect to others.

Growth prospects are hampered in the region because of these economic consequences (Table 1). Growth in 2020-24 in ASEAN 10 was expected at 4.9% on average, according to the Economic Outlook for Southeast Asia, China and India 2020 (OECD, 2019), released last November.8 However, with the increase in Covid-19 cases across the region, growth prospects are expected to deteriorate severely. The sharp decline in oil prices added to the turmoil triggered by the Covid-19 outbreak. This combination of factors resulted in severe downward pressures on asset prices in both the equity and fixed income markets. Overall, the ongoing uncertainty regarding the capacity of Southeast Asia to rebound from the Covid-19 downturn is likely to drag asset prices further down in the coming months. The start of the year saw a reduction in exports in some Southeast Asian economies, in particular Thailand and Viet Nam. The economic slowdown will also have a significant impact on corporate activities in many countries in the region.

Most Southeast Asian countries have room for active monetary and fiscal policies. Indeed, nearly all countries eased their monetary policy stances. Some authorities intervened multiple times since the start of the infection – by cutting their benchmark interest rates, lowering required reserve ratio, setting up funds to facilitate lending to affected firms, temporary suspensions of loan principal/interest repayments, exclusion of loans related to the Covid-19 from the calculation of the non-performing loan ratio or the lowering of bank charges.

In addition to monetary policy reactions, many countries also unveiled comprehensive fiscal stimulus packages aimed at supporting businesses and households. The composition of the packages varied by country, but included financial subsidies, tax deferral and exemption as well as increases in direct spending. Overall, the composition, timing, and targeting of stimulus packages will be crucial to bringing about the desired growth-lifting effect. Indeed, many countries have put in place targeted policies to support vulnerable sectors such as SMEs. Access to financing for SMEs has been facilitated in many countries through low interest loans (e.g. Cambodia, Malaysia, and Myanmar), deferment and relief on loan repayment (e.g. Malaysia, Thailand), adjustments in prudential regulation to allow for additional loans to SMEs, government guarantees on loans (e.g. Malaysia), and more relaxed credit assessments (e.g. Indonesia) and other prudential regulatory adjustments, backed up by special funds to support SMEs.

Grants and cash assistance have also been provided in the form of salary subsidy (e.g. Brunei Darussalam, Thailand) or facilitation towards rents (e.g. Malaysia). In case workers still had to be laid-off or forced to work shorter hours, assistance such as through social welfare, food assistance (e.g. Indonesia) were provided for them, including in the informal sector (Figure 2).

Covid-19 also has had considerable impact on how people work and consume. Some countries (e.g. Brunei Darussalam, Malaysia and Singapore) are supporting SMEs to adapt to this changing environment, through adaptation to electronic commerce and digitalisation in general.

Countries have also put in place measures to lighten the financial and procedural burden of fiscal and social security contributions. Measures include the extension of tax payment/declaration deadline, certain tax reduction and exemptions, social security payment deadline extensions, lower contributions for both employer and employees, and the extension of payment deadlines and financial reporting by listed firms. In some countries, the prices of public utility have also been lowered.

The economic shocks will have more medium-term impacts on poverty and welfare, especially among the more vulnerable in society and those who work in the informal economy. The public health system is increasingly struggling to cope with growing demand, and the medical sector is overstretched, calling for targeted policy responses. A number of countries in the region have implemented a variety of measures, such as cash delivery to medical personnel; World Bank loans to purchase of medical equipment; or salary increases for medical personnel and the purchase of equipment.

Providing and reinforcing income support for workers facing job loss is more difficult in developing and emerging economies, in part because of the frequency of informal employment. One option is to provide emergency regularisation or to allow informal workers to register for emergency social assistance. Thailand, for example, has introduced a monthly allowance worth THB 5000 (USD 150), available for at least three months from April to June 2020, for workers not covered by social insurance as long as they register with one of three state‑owned banks or online. Another option is to provide cash and/or in-kind transfers to vulnerable groups but not specifically tied to job loss.

Socially vulnerable groups in the ASEAN Member States are affected both directly by the Covid-19 infection as well as by the containment measures taken by governments. The share of informal sector in the region’s employment varies from 10% up to 70%. This segment of population is likely to be affected by their lower access to social security, including healthcare, which would put them at a higher risk to the initial infection itself, but also through the retransmission of the virus within this group that tends to live in a more constrained physical environment. The informal sector will also be affected by the containment measures taken by governments. For instance, lockdown measures would place them in a more vulnerable position with no income, and no savings to stock-up on subsistence goods, and no access to social safety net designed to compensate for lost income. Within the informal sector, the presence of migrant workers poses another challenge, as the lockdown measures and stricter transport and border controls would make it difficult for them to repatriate.

Women also face particular challenges as they are at the core of the Covid-19 response. The pandemic risks curtailing income generation opportunities for women, as they tend to be more frequently employed in the informal sector (and are thus more vulnerable to layoff and less likely to be eligible for support measures and various social security arrangements) and represent a high share amongst migrant workers and hence are exposed to the closure of borders. Women have also tended to take on a greater share of household and childcare duties, and this becomes more relevant as schools close.

As in other regions around the world, Southeast Asia is also seeing an uptick in domestic violence cases and risks as containment policies continue to hold. Singapore’s Association of Women for Action and Research (AWARE) women’s helpline, for instance, had seen a 33% increase in calls related to family violence in February over the previous year. The Indonesian Women’s Association for Justice Legal Aid Institute (LBH APIK), meanwhile, saw a three-fold increase in referral cases from the country’s National Commission on Violence against Women over a two weeks period since the work-from-home order was put in place. It will be fundamental to have a gender lens on investments, policies and programmatic actions in terms of Covid-19 prevention and response and ensure that women are in leading roles in decision-making.9

The WHO warned the Southeast Asian region to “immediately scale up all efforts to prevent the virus from infecting more people,” as the number of confirmed cases has been growing rapidly.10 Given differences in the capacity of providing PCR (Polymerase Chain Reaction) tests across countries, the number of deaths may indicate how health systems are coping with the pandemic, although some countries might struggle to count the accurate number of fatalities caused by Covid-19.11

The WHO concern relates to the fact that some countries reacted with delay to the outbreak. The growing number of infections means that some countries are clearly showing signs of community transmission. This requires more aggressive efforts to delay the spread of the virus. Plans for mitigation measures to reduce pressure on health systems are also needed, such as strengthening public health and primarily health care to avoid unnecessary hospitalisation. The WHO call stated, “of critical importance are continued efforts to detect, test, treat, isolate and trace contacts… However, if community transmission does set in, countries would need to gear their responses to slow down transmission… and health emergency mechanisms would then need to be further scaled up.”12 The latter is particularly significant given that several countries in the region have weaker health systems that could easily become overwhelmed if Covid-19 spreads in a significant way. 

Indonesia has significantly tightened travel restrictions previously imposed to China and most affected countries. A temporary ban on all entry and transit by foreign travellers into the country were in effect from 2 April as part of increased restrictions linked to the Covid-19 pandemic. Some exemptions apply for foreigners, including those with stay permits and diplomats. The government suspended its visa exemption policy for short stay visit, visa-on-arrival and diplomatic visa-free facilities for all countries, for a period of one month. All foreigners who wish to visit Indonesia must obtain a visa from Indonesian missions and provide a health certificate issued by the respective countries’ authorities. On 31 March, President Widodo declared a national public health emergency and the imposition of ‘large scale social restrictions’, closing schools and non-essential workplaces, and restricting religious gathering and non-essential activity in public. In Jakarta, the state of emergency was previously issued on 23 March, halting public entertainment, limiting public transportation, and mandating telework whenever possible. Other governors also adopted similar measures.

So far, Viet Nam stands out in the region as having been able to limit the virus from spreading within its borders by acting quickly and effectively, despite the country’s large population and border with China. The authorities began planning early on for the pandemic and cancelled all flights to and from Wuhan when the first case in the country was confirmed on 23 January. Less than two weeks later, most of the border gates in the northern province of Lang Son were closed. Viet Nam also implemented a strict quarantine and tracing regime for potentially infected patients. The government has taken swift and strong actions against rule-beakers and has provided extensive and accurate reporting to the media so that people are generally well informed about Covid-19 and the preventative measures they should take. The WHO has applauded Viet Nam saying that the “swift response to the emergency was crucial in containing the crisis at the early stages.”13

Early on, the WHO has also applauded Singapore for being aggressive out of the gate14, with similar measures as those implemented by Viet Nam. It has also used technology to verify home quarantine and to trace contacts, such as text and mobile-based software and a new serological test that can establish links between infected patients, which allows the authorities to map out the chain of transmission. The importance of privacy protection will need to be carefully monitored. Given its experience with the 2003 SARS outbreak, precautions were already in place, including ready-made government quarantine facilities and a state-of the-art national centre for managing infectious diseases that opened last year. However, other countries in the region may not be able to replicate Singapore’s response, as it is a small, wealthy nation with a relatively more ample healthcare capacity. Despite its efforts, the number of infected cases rose sharply in Singapore albeit with only 18 deaths thus far.

Concerns in the region have grown following a spike of new cases originating from a mass religious gathering held in Kuala Lumpur on 27 February. The tabligh event, a large-scale Quranic recitation event, was attended by some 14,500 Malaysians and about 1,500 foreigners largely from neighbouring countries, with most of them reporting that nationals tested positive after participating in the event. The authorities in Malaysia have since then followed suit in tightening their response measures, scrambling to raise their defences with border closures, entry bans and lockdowns. Malaysia shut its borders with Singapore and imposed a nationwide movement control order initially until the end of March. The order includes a comprehensive restriction on movements and public gatherings including a ban on all religious, sports, social, and cultural activities.

The entire island of Luzon in the Philippines was placed under an enhanced community quarantine until April 30, and extended it in certain areas, including the capital, until May 15. Any public movement would be restricted to only buying food, medicine and other essential items necessary for survival. The Philippines also stopped issuing visas to foreigners and Philippine Airlines cancelled all domestic flights. The Philippine Food and Drug Administration (FDA) approved the use of five rapid test kits to improve Covid-19 detection.

In Thailand, the government ordered a state of emergency on 26 March, banning all visitors to Thailand, with the exception of diplomatic missions, goods transportation and foreigners with working permits and shutting the borders with its neighbouring countries. The Emergency decree also limited the cross-provincial movement of the population and ordered the closure of leisure and public places including restaurants, department stores, sport complex, museums, libraries, beauty and wellness salons, markets and schools until 30 April. While, the state of emergency has been extended until 31 May, the government has relaxed some restrictive measures, including the reopening of six types of business from 3 May. These businesses are restaurants, markets, dine-in area in supermarkets or grocery stores, public parks and outdoor sport venues, hair salons and pet grooming services.

Meanwhile, growing numbers of patients, shortage of protective equipment for health workers and limited facilities to provide intensive care add to the fears of a contagion in the region that would be hard to control. The pandemic has put a massive strain on Indonesia’s health care system, with reports of inadequate medical supplies and the deaths of hospital workers as the numbers continue to rise. A hospital crisis looms as experts indicate that the combined capacity of the 132 hospitals designated to treat Covid-19 is far from adequate with protective gear for medical workers in short supply, and there are only 1,200 lung specialists across the country who are proficient in examining respiratory illnesses caused by the virus. In response, the government has recently converted four apartment towers from the 2018 Asian Games athletes’ village in Jakarta into an emergency hospital to handle some 24,000 Covid-19 patients. The country also received a boost on 23 March when a military transport aircraft landed from China bringing medical supplies, following earlier support from Singapore of personal protective equipment to the Batam Health Agency.

In the Philippines, health officials acknowledge limited testing for the Covid-19 means that, like Indonesia, its already overstretched health system could be phasing far more infections that the numbers indicate. The Philippines Congress held a special session to consider expanding the government’s powers, including taking control of private utilities, telecoms and transport operators or businesses in the public interest, and by forcing hotels and other venues to accommodate medical workers or the quarantined. With the rapid increase of infections in Malaysia, the federal government has designated more than 400 new sites across the country as quarantine zones for Covid-19 patients including public universities, community colleges, training centres, polytechnics and hotels owned by the government. Following the strained healthcare system due to the increasing number cases, Mercy Malaysia launched the "Covid-19 Pandemic Fund" to support medical services and the essential needs of marginalised groups within the country. In Thailand, the government set up a Command Centre for the Management of the Covid-19 Situation on 12 March in order to respond to the Covid-19 situation, chaired by the Prime Minister. The budget of 6.3 billion THB from central funds reserved for emergencies was approved on 17 March, to ease and response to the impact of Covid-19. This budget will be allocated to line Ministries, in particular public health, transport, higher education and innovation, defence and commerce to support their activities. The Ministry of Public Health have supplied 1,000,000 surgical masks per day to the hospitals. An additional 1.5 million N95 masks and 1.9 million personal protective equipment (PPE) will also be allocated. In addition, the Ministry will supply 40,000 pills of Favipiravir and 220 doses of Remdesivir for Covid-19 treatment. Patients with symptoms common to Covid-19 or with a prescription are eligible for a free test.

While Southeast Asian countries made different policy decisions in response to the pandemic at the onset of the crisis, more recently, there has been an increasing policy convergence and a more united regional response. The 36th ASEAN Summit, which had been scheduled to take place in Viet Nam in April, has been postponed until the end of June due to the Covid-19 pandemic. The increasing policy convergence was facilitated by discussions in the context of ASEAN and its several response mechanisms that had already been in place. ASEAN high-level officials met as early as January to prepare a region-wide response, as seen in the ASEAN Collective Response to the Outbreak of Coronavirus Disease 2019.

During the 26th ASEAN Economic Ministers (AEM) retreat in Da Nang, Viet Nam on 10 March 2020, AEM agreed on a statement “Strengthening ASEAN’s Economic Resilience in Response to the Outbreak of the Covid-19,” which called for collective action to mitigate the impact of the virus by working with external and development partners. The statement focuses on leveraging technology, digital trade, and trade facilitation platforms such as the ASEAN Single Window, to foster supply chain connectivity and to allow businesses, especially SMEs, to continue operations amidst the Covid-19. The statement further includes the need to improve long-term supply chain resilience and sustainability particularly through the implementation of the Master Plan on ASEAN Connectivity (MPAC) 2025. AEM are to continue addressing non-tariff barriers, particularly those that impede the smooth flow of goods and services in supply chains, and refrain from imposing new and unnecessary non-tariff measures.

The ASEAN is also collaborating with their Development and Dialogue Partners. On 20 March, an ASEAN-EU Ministerial Video Conference took place to discuss Covid-19 challenges. Both parties agreed to mitigate social and economic impacts, keep supply chains open and advance relevant scientific research. On 1 April, the ASEAN-U.S. High-level Interagency Video Conference to counter Covid-19 released a statement calling for further steps to strengthen ASEAN-United States collaboration on Covid-19 response, including through high-level engagement and on public health cooperation more broadly. On 7 April, the ASEAN Plus Three (China, Korea, Japan) Health Minister’s videoconference took place.15 Korea, highlighted as the only country in the world that has flattened the curve of new infections without draconian restrictions on movement or economically damaging lockdowns16, has been sharing its experiences with Southeast Asian countries. On 9 April, ASEAN Foreign Ministers held an ASEAN Coordinating Council meeting on Covid-19 to discuss and exchange views on ASEAN collective response to the rapid outbreak of the Covid-19. They called for a Special ASEAN Summit and the ASEAN Plus Three Special Summit on Covid-19, which was held on 14 April via video conference. The statement called for a post-pandemic plan to i) restore ASEAN’s connectivity, tourism, normal business and social activities, to prevent potential economic downturns; ii) ensure ASEAN critical infrastructure for trade and trading routes via air, land and sea ports remain open; and iii) refrain from imposing unnecessary restrictions on the flow of medical, food and essential supplies. As a result, ASEAN proposed to establish a Covid-19 ASEAN Response Fund. Furthermore, the Economic Ministers of ASEAN and Japan had a meeting on 22 April and released a Joint Statement on Initiatives on Economic Resilience in Response to the Covid-19 Outbreak, affirming their commitment to prepare an “ASEAN-Japan Economic Resilience Action Plan.” On the following day, the ASEAN-U.S. Foreign Ministers’ Meeting on Covid-19 took place via video conference to discuss ASEAN-U.S. collaboration in public health emergencies, particularly in the post-pandemic recovery and countering the longer-term socio-economic impacts of the Covid-19.

The increasing policy convergence and a more united regional response was facilitated by discussions in the context of ASEAN and its response mechanisms that had already been in place. ASEAN high-level officials met as early as in January to prepare a region-wide response to the rapid spread of Covid-19. According to the ASEAN post-2015 health sector agenda, there are at least seven mechanisms designed to support regional preparedness and response by ASEAN Plus Three.

Since the first report from China on clusters of unexplained pneumonia on 3 January, the Senior Officials Meeting for Health Development (SOMHD) mobilised these different mechanisms to respond to the pandemic. The ASEAN Emergency Operations Centre Network for public health emergencies (ASEAN EOC Network) has been sharing daily situational updates and providing information on prevention, detection and response measures to the SOMHD of ASEAN (Plus Three Countries), as well as the Contact Points of the ASEAN EOC Network and the ASEAN Plus Three Field Epidemiology Training Network (ASEAN+3 FETN). The ASEAN BioDioaspora Regional Virtual Centre (ABVC) for big data analytics and visualisation recently produced reports on Risk Assessment for International Dissemination of Covid-19 across ASEAN Region, complementing national risk assessments.

ASEAN countries have also discussed capacity needs and gaps in national responses that could possibly be supported through cooperation at national or regional levels with Development and Dialogue Partners. Due to the pandemic, the 36th ASEAN Summit planned to take place in Viet Nam in April was postponed until end-June. Instead, ASEAN organized a Special Foreign Ministers’ Meeting among ASEAN and China on Covid-19 on 20 February, where a joint ASEAN-China emergency response was presented but no concrete commitments were taken. Furthermore, an ASEAN-EU Ministerial Video Conference took place on 20 March to discuss Covid-19, where both parties agreed to mitigate social and economic impacts, keep supply chains open and advance relevant scientific researches.

References

[3] ASEAN (2020), ASEAN Policy Brief, https://asean.org/storage/2020/04/ASEAN-Policy-Brief-April-2020_FINAL.pdf (accessed on 21 April 2020).

[6] Bank of Thailand (BOT) (2020), BOT Press Release No. 21/2020, https://www.bot.or.th/English/PressandSpeeches/Press/2020/Pages/n2163.aspx (accessed on 29 April 2020).

[1] Center for Strategic and International Studies (CSIS) (2020), Southeast Asia Covid-19 Tracker, https://www.csis.org/programs/southeast-asia-program/southeast-asia-covid-19-tracker-0 (accessed on 29 April 2020).

[5] IMF (2020), Policy Responses to Covid-19, https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19 (accessed on 29 April 2020).

[2] OECD (2020), COVID-19 in Emerging Asia: Regional and Socio-economic implications and policy priorities, https://read.oecd-ilibrary.org/view/?ref=130_130765-idjokqfnuf&title=COVID-19-in-Emerging-Asia_Regional-socio-economic-implications-and-policy-priorities (accessed on 28 April 2020).

[4] OECD (2020), OECD Country Policy Tracker, http://oecd.org/coronavirus/en/ (accessed on 30 April 2020).

Contact

Alexander BOHMER (✉ alexander.boehmer@oecd.org)

Notes

← 2. As China accounts for 17% of global GDP, 11% of world trade, 9% of global tourism and over 40% of global demand of some commodities, negative spillovers to the rest of the world [,and especially to Southeast Asia, will be] sizeable. https://oecdecoscope.blog/2020/03/02/tackling-the-fallout-from-the-coronavirus/

← 3. Latest data available is from 2015. ASEAN Secretariat, https://asean.org/?static_post=tourism-statistics

← 8. Updated information on the impact of the Covid-19 in the region will be provided in the forthcoming Update of the Economic Outlook for Southeast Asia, China and India 2020, to be released in June/July 2020.

← 9. Enabling Women’s Economic Empowerment: Unpaid Care Work in Developing Countries, https://www.oecd.org/dac/enabling-women-s-economic-empowerment-ec90d1b1-en.htm

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