Engaging the Private Sector for a Market-led Recovery
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COVID-19 presents an unprecedented health and economic challenge, which will have lasting impacts, particularly for Australia’s closest neighbours in Timor-Leste, Papua New Guinea and the Pacific. It is critical that any response to the crisis achieves meaningful and lasting results in our region. This paper draws on Market Development Facility’s (MDF) extensive on-the-ground experience in empowering businesses to innovate and adapt to demonstrate how this approach will allow businesses to become more efficient and resilient, creating more equitable supply chains and markets, leading to better development outcomes.
An unprecedented crisis SARS-CoV-2 is highly transmissible and has spread rapidly across an interconnected planet. With no vaccine available, COVID-19 will be an inescapable reality for some time to come.
Governments have responded to the pandemic with mandatory public health measures, including quarantining and social distancing. A health crisis that causes no direct damage to infrastructure has severed socio-economic connections and stalled economies. Economic contagion is now spreading faster than the virus. Disrupted commerce, trade, travel, and consumer behaviour are affecting all economies in ways that are likely to be radical and long lasting. Developing countries are being impacted differently. Most are imposing lockdowns, but few have the resources to deliver stimulus packages without incurring heavy debts. Many of their citizens rely on daily wages and do not have recourse to social safety nets. They will have no choice but to keep working. They will be exposed to the virus in greater numbers, but with scant access to healthcare.
There is an increasing possibility that global supply chains, particularly for food, will experience some level of disruption. If just one large commodity exporting country imposes restrictions or price controls it could result in global shortages and price spikes similar to those in 2007-08. Even if supply chains are not severely disrupted, plummeting exchange rates for the worst affected countries will drive prices higher in relative terms. Once again, poor people are most likely to be priced out of supplies of essential goods. They will be hardest hit as sources of informal credit and remittances dry up. The numbers of the poor will expand, as middle-income families in developing countries are pushed into poverty by unemployment and bankruptcy. In some countries it could result in large numbers of poor being forced into subsistence lifestyles. History suggests that the unemployed and bankrupted ‘new poor’ will recover more slowly as their asset base is depleted. It also suggests that women will be impacted particularly severely in this crisis. Often employed in insecure jobs in vulnerable industries such as hospitality and manufacturing, women are likely to see the economic and social gains of the last decade recede.
Responses to the health and economic crisis have been positioned as two distinct sets of actions. Control the spread of the virus and maintain essential supplies, then restart the economy. Health and the economy cannot be disconnected, however. For the poor, the availability of medical and food supplies has no benefit if people cannot afford them. Essential goods cannot move if critical links in supply chains have been disrupted. For instance, agricultural supply chains rely on transport that is often an integral part of other sectors, such as construction. If the latter is locked down, so is the former. If imports of fertiliser do not flow smoothly, next year’s food supply is reduced. Lay-offs in ‘non-essential’ sectors shrink aggregate demand and kill off other firms that are part of essential supply chains.
Opportunity out of the crisis
Health and economic measures must be balanced concurrently. A vital dimension in minimising the impact of COVID-19 will be supporting businesses to survive and adapt in the short term and position for recovery. Measures might also be taken to turn crisis into opportunity. Supply and demand shocks will accelerate existing trends, disrupt established players, foster innovation, and increase receptivity to new ways of working. While the COVID-19 economic shock is unprecedented in many ways, it is familiar in one important respect: it will unleash a wave of destruction and creation from which some countries and industries will lose, while others will benefit handsomely. There will be opportunities for fleet footed countries, industries, and businesses to ‘build back better’: to be more efficient, resilient and fair—particularly for women by integrating strong female participation from the outset, rather than trying to retrofit this within established, rigid business models. But they will need to think about smart—not just rapid—recovery.
