How COVID-19 Could Spark a Series of Crises Across Southeast Asia  

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How COVID-19 Could Spark a Series of Crises Across Southeast Asia  

COVID-19 could be just the first in a series of crises that hit the region in the coming months.

How COVID-19 Could Spark a Series of Crises Across Southeast Asia  
Credit: Flickr/Prachatai

At times of crisis, it’s tempting to think that the end is in sight; that things can only get better. Depressingly, though, there’s always lower to sink. In Southeast Asia, the health crisis caused by the coronavirus epidemic is only really beginning. Infection rates across the region started to spike two weeks ago; shutdowns are still fresh; public spirits are still in the come-together-and-fight-this-enemy mood. By June, perhaps, we may be over the worst of the health crisis, even if shutdowns and restrictions of movement have to be in place for several more months.

But that won’t be the beginning of the end; it will only be the end of the beginning. We are now battling on many fronts. The health crisis is, at this moment, the most important. But afterwards will come a far more punishing front: an economic crisis that is likely to decimate Southeast Asian economies worse than the 2008 financial crisis and the 1997 Asian financial crisis. Tens of millions of people will likely fall back into the kind of poverty from which they have been pulled over the last three decades. Unemployment will climb to unprecedented levels. Business closures will be measured in double-digit percentages. The amount of debt that governments will need to incur to bail out businesses and households this year will be inherited by the next generation, who will be paying it off for decades to come.

The World Bank’s latest forecasts for Southeast Asia make grim reading. In the worst-case scenario (and worst-case thinking ought to be the order of the day) even the best performing economies will see their lowest growth rates in decades. Myanmar might see 2 percent growth this year; Vietnam 1.5 percent; Cambodia 1 percent. But this only tells less than half the real story; foreign investment will inflate these figures, masking the collapse of domestic markets and businesses. A worse fate awaits the rest of the region. Thailand, with its economy already failing before the crisis began, could see a contraction of 5 percent this year. Malaysia, Singapore, Indonesia, and the Philippines will likely see GDP contraction as well.

By the World Bank’s worst-case estimates, 11 million people in developing Asian states will be thrown back into poverty, especially those in households tied to highly-affected sectors (“poverty rates could double among households in Vietnam linked to manufacturing reliant on imported inputs,” the World Bank warns.) But the numbers will likely be far greater than that. There’s now even talk of food shortages, which prompted the likes of Vietnam, Cambodia, and Thailand to suspend the export of cheap rice and other staples. According to the latest Global Hunger Index rankings, only Thailand is classified as a “low” severity for hunger.

At such a time of almost unprecedented crisis, citizens are being asked to put their faith in untested governments — and governments that have mostly failed during the health crisis. “If Joko Widodo of Indonesia, Rodrigo Duterte of the Philippines, Prayuth Chan-ocha of Thailand and others failed to remake economies amid stable growth, what makes us think they will be skilled crisis managers?” William Pesek, an author and journalist, recently asked in Nikkei Asian Review. Malaysia now has a new and unstable coalition government, thanks to politicking in February. Timor-Leste – already the region’s poorest nation and which could suffer economic contraction of 4 percent this year, according to World Bank – has seen two coalitions governments fall in as many years because they couldn’t even get their annual budget through parliament. The last government also fell in February.

Most regional governments are in response mode right now. Stimulus packages are updated almost fortnightly as the situation worsens. Policies promised one week have been quickly changed the next. Last month, for instance, Cambodian Prime Minister Hun Sen promised workers in the country’s vital garment manufacturing sector that they will receive 60 percent of the minimum wage (around $114 per month) if laid off because of the crisis. Two-thirds would be paid by the state, and a third by employees. Clearly, factory owners have told the government that they have no way of paying this much, and the government realized its original forecasts of how bad the situation will be were way off the mark. As a result, this week Hun Sen said laid-off garment workers will now only get $70 per month (or 37 percent of the minimum wage), not nearly enough for them to live off, much less send remittances home to family in the countryside (which a good portion of the rural population needs to live.)

If history shows anything, it’s that economic crises tend to result in political and social crises, too. Suharto’s dictatorship in Indonesia collapsed in 1998 because of Asian financial crisis the year before; Thailand had to reform in 1997, complete with a new progressive constitution. Already we see authoritarian governments trying to manage criticism through crackdowns. But repression will only get authoritarian governments so far. Honesty is more important.

Vietnam’s ruling communist party has been uncharacteristically transparent and honest since it began effective responses in January, and has won public applause as a result. Other governments, though, have preferred to infantilize their citizens, telling them everything will be alright when clearly it won’t — something that not only shows how much contempt these  politicians have for their electorates, but also how little faith they have in their own governing capabilities.

As Will Doran recently informed us here in The Diplomat in a comprehensive article on Indonesia’s failed response, its Health Minister Terawan Agus Putranto told people in February “not worry” and “just enjoy, and consume enough food.” In March, he said that country’s lack of infection numbers was for one reason, “prayer.” No one seemed to be answering those prayers as Indonesia’s infection rates spiked in late March. President Joko “Jokowi” Widodo has admitted that “we did not deliver certain information to the public because we did not want to stir panic.”

If telling the public what you think they want to hear during a health crisis is erroneous, doing so ahead of an economic crisis ought to be criminal. Governments need to tell the public, today and emphatically, that once this health crisis is over they will then have to face an economic crisis, which will likely be more impactful on more people.