The economic implications of lockdown in Emerging Asia

By Kensuke Tanaka, Head of Asia Desk, OECD Development Centre and Mario Pezzini, Director, OECD Development Centre and Special Advisor to the OECD Secretary General on Development  


This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.


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Kuala Lumpur, Malaysia. Health workers prepare to conduct a COVID-19 test for people at Flat Selangor Mansion, Masjid India. Photo: Shutterstock

First detected in China, COVID-19 has spread rapidly to other countries, infecting more than 2 million people worldwide and killing more than 127,000 to date (14 April).  From mid-March, Southeast Asian countries started to see their number of cases climb (Figures 1 and 2). As of 14 April, India confirmed over 11,000 cases, though the sharp increase can partly be attributed to more testing. Malaysia and Indonesia each surpassed the bar of 4,800 confirmed cases, while the Philippines has counted over 5,200 as of the same date. The rapid evolution of the disease has prompted authorities to announce various measures including putting entire cities and countries into lockdown to stop the virus. As early as January in China and March elsewhere, many Emerging Asian countries have imposed local or even nationwide lockdown and curfew measures (Table 1), with varying durations, geographical coverage, and scope. Lockdown measures contribute to containing the spread of the virus, but they also prevent economic activities that would otherwise take place. As the debate in countries turns to when and how to end a lockdown and restart the economy, the health and economic implications of lockdown measures need to be considered carefully.

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Africa’s Development Dynamics

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By Mario Pezzini, Director of the OECD Development Centre and Special Advisor to the OECD Secretary-General on Development


Learn more about this timely topic at the upcoming
18th International Economic Forum on Africa


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The launch this week in Addis Ababa of the new flagship joint report Africa’s Development Dynamics 2018 alongside the African Union Commission reflects a fundamental commitment to an ongoing conversation on Africa, with Africa and for Africa. Thus, we did more than unveil a report on paper about the challenges of growth, jobs and inequalities. What we are also doing is strengthening an inclusive platform for policy dialogue on how best to turn Africa’s own vision and strategy for its development as captured in the African Union’s ambitious Agenda 2063 into reality and practice. And it is a platform in which we envision engaging with and involving more and more diverse actors to tap their expertise and add their perspectives to drafting future editions of our joint analysis.

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Services, informality and productivity in Africa

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By Tabea Lakemann, Research Fellow, GIGA Institute of African Affairs and University of Göttingen, and Jann Lay, Acting Director, GIGA Institute of African Affairs, and Head of GIGA Research Programme Growth and Development


Learn more about this timely topic at the upcoming
17th International Economic Forum on Africa


Services, informality and productivity in AfricaEconomic development and a sustained, broad-based increase in living standards on the African1 continent are critically connected to the capacity of African economies to create decent jobs at a rate that keeps up with the rapid growth of the workforce. This, in turn, depends on the ability of African governments to develop innovative, tailor-made strategies towards private sector development taking full advantage of countries’ comparative advantages. Private sector development strategies require governments to recognise the significance of informality and to look beyond industrialisation — to the service sector — for private sector growth and job creation.

The potential of informal firms

On average, the informal economy is estimated to make up almost 40% of GPD in Africa.2 Informal firms are typically much smaller than formal ones, but even when controlling for size, they are on average less productive, less likely to access external finance and have less educated managers.3 At the same time, heterogeneity between informal firms is considerable. Some firms exhibit very high marginal returns to capital, and between 28% and 58% of informal entrepreneurs in West Africa are identified as “constrained gazelles” with low capital stocks, but some unrealised growth potential.4 Many informal firms thus have the likely potential to provide an improved livelihood to their self-employed owners and family members engaged in the business.
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Youth Employment and Inclusive Growth: Part of the same coin in Cambodia

By Emmanuel Asomba, Development Policy Researcher, and Ji-Yeun Rim, Youth Inclusion Project Co-ordinator, OECD Development Centre

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Courtesy ©UNV Cambodia May 31, 2016

Some countries in the South Asia and Pacific region are experiencing a rapid increase in the number of working-age people. This will create some opportunities as it will contribute to reducing the dependency ratio and increasing the possibilities for social cohesion policies. But if these people fail to find decent jobs, then per capita income may slow down. With less income, people face lower living standards and difficulties accumulating capital and assets. For young people, these changes potentially bring significant challenges. Take, for example, youth in Cambodia.

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Green Industrialisation and Entrepreneurship in Africa

By Milan Brahmbhatt, Senior Fellow, New Climate Economy (NCE) and World Resources Institute1


Explore this topic further with the upcoming launch of the
2017 African Economic Outlook: Entrepreneurship and Industrialisation in Africa.
Stay tuned for details


Solar salesman in Gulu Uganda Photo credit James Anderson
Solar salesman in Gulu, Uganda. Photo credit: James Anderson

Policy makers across Africa have embraced industrialisation and economic transformation as keys to accelerate inclusive growth. They also increasingly see the need for economic transformation to deliver green growth – growth that does not endanger Africa’s natural environment in ways that reduce the welfare of present and future generations. Economic transformation and green growth depend on doing new things: making risky investments in new, unfamiliar sectors or products or adopting new, unfamiliar methods, processes, technologies, inputs or business models. All this depends crucially on the activity of entrepreneurs, who drive change through their innovation and risk-taking. Fostering entrepreneurship, including green entrepreneurship, is thus a key policy aim for African countries.

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Habitat III decisions crucial for the future of Africa’s cities

By Greg Foster, Area Vice-President, Habitat for Humanity, Europe, Middle East and Africa

habitat-3Africa will have some of the fastest growing cities in the world over the next 50 years. Unless something is done, and done soon, millions more will flood into unplanned cities and live in already overcrowded informal settlements and slums. It would appear as if the United Nation’s Habitat III conference, which happens every 20 years, and New Urban Agenda couldn’t come at a better time.

Habitat III’s goals sound simple — develop well-planned and sustainable cities, eradicate poverty and reach full employment, and respect human rights. Being able to leverage the key role of cities and human settlements as drivers of sustainable development in an increasingly urbanised world, the meeting will seek political commitment to promote and realise sustainable urban development. This could be a watershed moment for Africa’s cities. But critical challenges stand in the way of making Africa’s cities economic powerhouses, centres for exchanging ideas, and places that meld cultures and peoples. Three actions are needed. Continue reading

Myanmar can flourish by sowing seeds of agricultural prosperity

By Deirdre May Culley and Martha Baxter, policy analysts at the OECD Development Centre

MyanmarDEVmattersOn 30 March, Htin Kyaw, a long-time adviser and ally of Aung San Suu Kyi – whose National League for Democracy party achieved a historic victory in recent electionsbecame the first elected civilian to hold office in Myanmar since the army took over in 1962.

The NLD won the democratic battle and enjoys unparalleled political capital and legitimacy. It must now deliver on exceedingly high expectations, build a cohesive multi-ethnic state and improve citizens’ lives. Economic progress will be indispensable if the country is to overcome years of ethnic armed conflict and move towards a common future. So what can the new government do?

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China’s economic slowdown: Good or bad news for Europe and Central Asia?

By Maurizio Bussolo, Europe and Central Asia Chief Economist Office, The World Bank Group

 

China-Dev-MattersChina’s economy looms large in global markets. After decades of sustained economic growth, the country became the world’s largest exporter in 2007 and today sells abroad 60% more goods and services than the United States and 75% more than Germany – the second and third largest exporters, respectively. In addition, China is the second largest importer of goods and services in the world, after the United States.

Because of China’s importance in the global economy, news of its economic slowdown and financial sector turmoil have caused many observers to worry. In fact, at the beginning of 2016, some were explaining the plummeting of stock markets as anticipating a growth collapse in China (also reflected in very low oil prices). Continue reading

A 21st century vision for urbanisation

By Dr Joan Clos, Executive Director, UN-Habitat

UrbanRuralWorldIf urbanisation is one of the most important global trends of the 21st century, with some 70% of the world’s population forecasted to live in cities by 2050, then urbanisation in Africa – and the ways in which that growth occurs – marks one of the most significant opportunities for achieving global sustainable development.

By 2050, cities in the developing world will absorb more than two billion new urban residents, representing 95% of global urban growth. African cities will take the lion’s share, in some cases increasing twice as fast as any other urban population worldwide. By mid-century, the urban population in sub-Saharan Africa alone is expected to quadruple, ushering in 1.15 billion new urban residents. How Africa prepares for its urban future will have far-reaching social, economic and environmental impacts – not only for the continent, but also for the world.  Continue reading

Can the G20 make a difference for development?

By Federico Bonaglia, Senior Counsellor to the Director at the OECD Development Centre

Can the G20 really make a difference for development? The short answer is yes. The long answer is that the G20 can actually do more and should not miss the opportunity offered by the SDGs to deepen its engagement on global development. How can we upgrade the development agenda? In a two-part Development Post, the author explores the first question here. Look for a second submission that delves into the G20’s forward-looking agenda for development.

With the tragic Paris events weighing on their minds, G20 leaders gathered in Antalya last week and reaffirmed their commitment to strong, sustainable and resilient growth for all, including low-income and developing countries. Why does this matter for development and the recently approved Sustainable Development Goals? The reasons are substantial. First, the sheer size of the G20 economies and the transmission mechanisms that link their actions, or inaction, to the development prospects of the rest of the world cannot be ignored. Second, G20 leaders possess convening and agenda-setting power and their like-minded approach to development demands attention. Third, the value of each G20 country’s own respective development experiences can contribute to inform developing countries in their efforts.

Indeed, development has a special place in the G20. Different from other fora, the G20 has not evolved into a pledging platform for development initiatives. Just think of the 2005 G8 Gleneagles Summit, with its ambitious plans to double aid and undertake massive debt relief, or other G7/G8 initiatives on water (Evian), food security (L’Aquila), maternal health (Muskoka) or the Middle East and North Africa transition (Deauville). The G20 countries representing 85% of the world’s GDP are focusing instead on promoting an enabling global environment to spur development and enhance the role of developing countries as new poles of growth[1].

For its part, the OECD has been involved in the design and implementation of the G20 development agenda since the adoption of the G20 Seoul Multi-year Action Plan on Development. And the G20’s own progress reports offer information on whether commitments in the development field are on track. Consider the impact of some of the G20’s actions on developing countries:

Lifting G20 growth: The Brisbane Growth Strategies, which outline structural reforms to lift growth in each G20 country, would raise G20 GDP by roughly 2.1% by 2018 if fully implemented and have potential spill-over effects on developing economies. Lifting the growth of G20 countries – or failing to do so – will ultimately affect developing countries through trade, investment, migration and technological channels.

Coordinating macroeconomic policies: Macroeconomic coordination is likely to have – at least in the short term – a much larger effect on developing countries than structural reforms in G20 countries. While we understand the implications of these policies for the G20, the implications for developing countries, through interest rates, global liquidity and capital flows, have yet to be fully explored.

Reforming the international tax system: Developing countries stand to benefit from the G20-OECD Base Erosion and Profit Shifting (BEPS) project, set to end double non-taxation of multinationals and increase transparency through the automatic exchange of information. G20 leaders’ call to action to strengthen tax capacities by offering officials as Tax Inspectors Without Borders or supporting the strengthening of tax revenue statistics is welcome. These measures will help developing countries harness the potential created by reforms to the global tax system, such as tackling tax evasion and reducing tax loopholes.

Lowering the cost of remittances: Remittances to and from G20 countries account for almost 80% of global remittance flows. G20 countries announced measures to reduce the cost of sending remittances, including enhancing competition among money transfer operators. Globally, remittances totalled U.S. $436 billion in 2014, more than three times official development assistance, and are the largest source of private external finance for several developing countries. By taking steps to promote effective intermediation, receiving countries can further amplify impact.

Boosting infrastructure investment: The G20 was instrumental in placing infrastructure bottlenecks on the development agenda. The actions taken are wide-ranging, from calling multilateral banks to modify their internal procedures and incentives for financing infrastructure projects to identifying priority projects with developing countries. With support from the OECD and the World Bank, the G20 has distilled principles and indicators to help countries mobilise private investment for infrastructure. The G20 is also committed to working with investors and developing countries to better appraise the risks and returns of these investments.

Enhancing global food security: The G20 Action Plan on Food Security and Sustainable Food Systems is the culmination of five years of intense discussions and initiatives. Since its inception, the G20 debated the volatility of commodity prices and lagging agricultural productivity growth. It convened relevant organisations to develop a consensus on causes and possible remedies and established a global monitoring system for food stocks. This plan has the potential to help advance food security in developing countries and globally.

Sharing knowledge: Many G20 development deliverables are global public goods and contribute to knowledge sharing. These are distilled into databases and toolkits to support better policy making in developing countries. Consider, for example, the development of indicators on skills and of toolkits to design inclusive green growth strategies or enhance agricultural productivity.

Assessing the impact of G20 actions on development outcomes is not easy and, to the best of our knowledge, no rigorous attempt has been made so far to that end. Challenges include:

  • identifying relevant G20 actions or inputs and quantifying their magnitude;
  • choosing a baseline, such as GDP growth, well-being or jobs, for the appropriate outcomes to be measured in partner countries;
  • mapping the transmission channels from G20 actions to development outcomes in terms of finance, trade, migration or technology;
  • estimating the net effect of different and maybe offsetting actions; and
  • distinguishing between the G20’s direct attribution versus its contribution to observed outcomes.

Yet, efforts to address some of these concerns have been made. The Turkish presidency released a framework mapping the whole-of-G20 contributions to development. But given such challenges, the yardsticks to identify impact will have more to do with the convening and consensus-building power and the effective implementation of commitments rather than quantitative economic assessments. Closely monitoring implementation and involving developing countries in discussing the G20’s development agenda and its impacts will have to remain a priority for future presidencies.

[1] In 2010, G20 leaders acknowledged that “narrowing the development gap and reducing poverty are integral to [the] broader objective of achieving strong, sustainable and balanced growth and ensuring a more robust and resilient global economy for all.”