Country Focus The other development, China’s new Foreign Investments Law (FIL), which has taken effect 1 January, is yet to sow its benefits as Covid-19 quarantine measures are still in place in many countries. The law aims to give investors better access to the Chinese market, and other such opportunities including more flexibility on joint venture terms, opening-up and promotion of foreign investment coupled with liberalisation measures that will prompt opportunities of restructuring and re-investment. Others are concrete steps to protect intellectual property rights, opening up the possibilities of rearranging existing and future intellectual property rights, according to UK-headquartered PricewaterhouseCoopers (PwC). Southeast Asia in the eye of a perfect storm The Southeast Asian bloc had been predicted to reach an economic growth at an average 5.4% and to be the fourth largest economy in the world by 2030. But all this might change. Growth forecasts for Asia in the current situation have now been revised amid the Covid-19 pandemic. Recently, the World Bank (WB) downgraded the economic growth forecasts across Asia this year, even dropping Malaysia and Thailand to likely plunge into recession “even in a best-case scenario”; while Indonesia and the Philippines could follow suit, “in the worst-case scenario”, the US-headquartered financial institution has forecast. With the number of Covid-19 cases increasing, Southeast Asian countries are racing to contain the virus in the shortest span of time. At the same time, the risk of economic slump is not far behind and must be addressed. Households in countries like Vietnam, Thailand and Cambodia that rely on sectors, which are vulnerable to impact of Covid-19 are at risk of falling into poverty, according to WB. Elsewhere in Asia, contraction of production activities, exports, as well as unemployment have been noted. The Asian Development Bank (ADB) noted the spill overs of the economic disruptions from China to other regions including Asia, such as drop in domestic consumption and investment; declines in tourism and business travel; and shifts in health care spending , to cite a few. However, with a scenario that may likely take the lead of the global financial crisis in 2008, and although different factors are at play, the region recovered from the previous 2008 crisis and is anticipated to also navigate through a tightly squeezed economic situation amidst the pandemic. Stimulus remedy: safety nets against economic debacle In the maelstrom from the Covid-19 pandemic, the region’s quick response to the outbreak indicates the region’s crisis resiliency. These include the release of fiscal and non-fiscal incentives and cash hand-outs to buffer the impact of the virus’s plague to industries and household populations. Fiscal interventions in each member state are expected to brace their economies from collapsing totally.
To wit, Indonesia has released two stimulus packages as counter measures – the first package worth US$725 million was out in February to be earmarked for food programmes and subsidy for housing, tourism, and other essential sectors. This was followed by the second package issued in March, totalling US$8 billion, to buffer the economy and the small and medium-sized enterprises (SMEs), particularly in the manufacturing sector. In March, Malaysia bankrolled an economic stimulus package totalling US$58 billion to stem the impact of Covid-19. It includes special allowances for healthcare providers, cash aid for middle and lower income groups, microcredit schemes for SMEs, and other mitigating measures. Meanwhile, Thailand’s US$12.7 billion stimulus package covers soft loans, funds for workers and firms, and tax benefits. The Philippines has announced a US$3.9 billion relief package, claimed to be the largest social protection programme ever launched in the country. It will primarily assist informal sector workers and people who have been affected by the lockdown. It has also announced an economic stimulus package, reportedly to amount 1.5% of the country’s gross domestic product (GDP). Vietnam has also come up with a fiscal package of US$1.3 billion to support businesses at this time, with financial institutions chipping in credit packages to help affected enterprises.
The Philippines is reportedly rolling out an economic stimulus package that amounts to 1.5% of the country’s GDP
Cambodia has implemented tax and loan incentives; while Myanmar has said it will dispense a US$71.6 million support package that covers loans and tax incentives, especially for key sectors like garment manufacturing, tourism and SMEs. The region’s efforts to fight Covid-19 do not end here as it focuses on its long-term growth ambitions as a collective grouping. In the past, Asia has been battered by trade tensions and global financial crises, but has always emerged strong and unscarred. MARCH / APRIL 2020
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