Respondents to a PECC survey do not anticipate a swift rebound from the crisis in 2021 with growth levels for the Asia-Pacific remaining below 2019 levels for the next 3-5 years.

The survey of 710 policy experts from business, academia, government and civil society was conducted from 19 May to 12 June, 2020. An analysis of the responses also provides insights for further commentary on the regional outlook and the strategies available for transitioning out of the current situation.

One of the great uncertainties is when and how to leave the lockdowns that have been the first response to the virus that would help to restart economic growth.

The response was clear - the top pre-conditions for leaving from lockdown were all related to public health issues such as the medical capacity to deal with the number of cases and evidence that number of new cases was reducing. After the medical conditions came the economic considerations and the need for international cooperation highlighting the nature of the pandemic as a global concern.

“The extraordinarily pessimistic view amongst respondents has important consequences. International cooperation would send a strong signal about the future even as governments and societies deal with the crisis. Without a vision to provide a long-term strategic framework for regional governments and stakeholders to plan for the future, there is a risk that the recovery will be much slower than need be” said Mr Eduardo Pedrosa, one of the authors of the report.

One immediate set of short-term signals will come as APEC convenes regional trade ministers to discuss their response to the Covid-19 pandemic.

“Trade has been an essential part of the toolkit for dealing for the pandemic. Keeping borders open is and facilitating the movement of these products is part of the pandemic response,” said Christopher Findlay from the Australian National University, co-author of the report.

Another recommendation was to build better information about where medical supplies are and their supply chains. The breakdown in supply chains, the surge in demand as well as the adoption of export restrictions during the crisis has made this a problematic issue. The report suggests the creation of a Medical Equipment Market Information System.

Furthermore, even when medical supplies are available they need to be transported across the world and those shipments are done by people working along the supply chain – air and sea crew. The lack of international agreements on the movement of essential workers could lead to blockages in these supply chains.

Respondents identified lasting consequences of the Covid-19 crisis for business in the region. A total of 98% agreed that the crisis would lead to the accelerated growth of the digital economy. While the digital economy has been a lifeline for millions during the crisis, millions more are at risk of exclusion with restrictive policies and the lack of international cooperation slowing the adoption of technology.

 “Unlike previous economic crises, connectivity has been badly hit. To stop the spread of the virus borders have been closed and as the report shows this has had repercussion not only for tourism but also trade. Conversely people have become even more connected via digital platforms. This makes progress on the region’s agenda for connectivity an enormous challenge – to keep people safe as economies re-open and to promote economic growth. Amidst unprecedented challenges, we should call for stronger international cooperation and grasp new opportunities,” said Ambassador Su Ge, co-chair of PECC.

 “The findings the report make it clear that what is needed is a long-term strategic plan for the region. Prior to the crisis we were working on a post-2020 vision for the Asia-Pacific – the exigencies of the crisis make that vision all the more important. Millions of people and business are out of work and as shown by the results of our survey, people are pessimistic. A vision that makes it clear that regional economies will stay the course towards reform in the pursuit of sustainable and inclusive growth will provide a strong signal for stakeholders,” said Don Campbell, co-chair of PECC.

 Download:

State of the Region Report: Impact of the Covid-19 Crisis

CONTENT

I MESSAGE FROM THE CO-CHAIRS OF PECC

II EXECUTIVE SUMMARY

III CHAPTER 1: THE ECONOMIC IMPACT OF THE COVID 19 CRISIS

OUTLOOK FOR THE ASIA PACIFIC REGION

• Figure 1.1: Daily and Total Number of Infections
• Figure 1.2: The Spread of the Virus Across Regions
• Figure 1.3: Impact of the Covid-19 Crisis on Asia-Pacific Economic Growth
• Figure 1.4: Impact of the Covid-19 Crisis on Unemployment in the Asia-Pacific

WILL THE RECOVERY BE A V, W, A U OR A SWOOCH? 

• Figure 1.5: Perceptions of Economic Growth over the next 5 years
• Figure 1.6: Average Asia-Pacific Weighted Growth Index

RISKS TO GROWTH

• Figure 1.7: Risks to Growth
• Figure 1.8: Comparison of Risks: 2019 and 2020 
• Figure 1.9: Protectionism as a Risk to Growth
• Figure 1.10: Forecast for World Trade Growth
• Figure 1.11: Global Growth During the Great Depression
• Figure 1.12: Impact of the Global Financial Crisis on Merchandise Trade Growth
• Figure 1.13: Impact of the Covid-19 Crisis on Merchandise Trade Growth

IV CHAPTER 2: FROM SURVIVAL, STIMULUS AND EXIT STRATEGIES

FISCAL RESPONSES AND FINANCIAL MARKETS

• Figure 2.1: Change in Policy Rates since the Crisis
• Figure 2.2: Fiscal Stimulus by Asia-Pacific Economies
• Figure 2.3: Indicators of Financial Vulnerability
• Figure 2.4: Asia-Pacific Composite Index of Equity Markets (1/1/20=100)
• Figure 2.5: Asia-Pacific Composite Index of Exchange Rates (1/1/20=100)

THE MECHANICS OF LEAVING THE LOCKDOWN

• Figure 2.1: Change in Policy Rates since the Crisis
• Figure 2.2: Fiscal Stimulus by Asia-Pacific Economies
• Figure 2.3: Indicators of Financial Vulnerability
• Figure 2.4: Asia-Pacific Composite Index of Equity Markets (1/1/20=100)
• Figure 2.5: Asia-Pacific Composite Index of Exchange Rates (1/1/20=100)
• Figure 2.6: Factors for Consideration for Exiting from Lockdown
• Figure 2.7: First and Second Order Issues for Exiting from Lockdown
• Figure 2.8: Differences between Emerging and Advanced Economy Responses on Priority Issues for Exiting from Lockdown

LONG TERM IMPACT ON BUSINESS

• Figure 2.9: Please indicate your level of agreement/disagreement with the following statements about the lasting consequences of the COVID-19 crisis on the ways in which business is conducted Long Term Impact on Business

THE ACCELERATED GROWTH OF THE DIGITAL ECONOMY

• Figure 2.10: Business App Downloads Figure The Accelerated Growth of the Digital Economy
• Figure 2.11: The Link Between Business App Downloads and Workplace Closures Opportunity for More Inclusive Education with Digital Technology

OPPORTUNITY FOR MORE INCLUSIVE EDUCATION WITH DIGITAL TECHNOLOGY

• Figure 2.12: Video-Conference Downloads
• Figure 2.13: The Link Between School Closure and Video-Conference Downloads Will Supply Chains be More Localized?

WILL SUPPLY CHAINS BE MORE LOCALIZED?

• Figure 2.14: Will Supply Chains be more localized? Better Living Conditions for Migrant Workers
• Figure 2.15: Improved living and working conditions for temporary migrant workers Connectivity: Jobs and Trade

BETTER LIVING CONDITIONS FOR MIGRANT WORKERS

CONNECTIVITY: JOBS AND TRADE

• Figure 2.16: Impact of Covid-19 on International Travel
• Figure 2.17: International Tourism Receipts as Percentage of GDP
• Figure 2.18: Asia-Pacific International Travel Restrictiveness
• Figure 2.19: Evolution of Adoption of Travel Restrictions in the Asia-Pacific Rebuilding Confidence in Travel: Bubbles and Fast Lanes State Support for Air Transport The Role of Government in the Post-Crisis Era 

THE ROLE OF GOVERNMENT IN THE POST-CRISIS ERA

• Figure 2.20: Government management is likely to cover almost all aspects of the economy, including international trade and the domestic economy to cover almost all aspects of the economy, including international trade and the domestic economy
• Figure 2.21: Government management is likely to be targeted on safeguarding people’s lives and measures to ensure essential health supplies
• Figure 2.22: Change in Government Expenditure % GDP for Selected Regional Economies Figure 2.23: Government Expenditure % GDP for the Asia-Pacific

V CHAPTER 3: AGENDA FOR COOPERATION

• Figure 3.1: Priority Issues for Regional Cooperation

PANDEMIC PREPAREDNESS PRACTICES

VACCINE DEVELOPMENT

TRADE POLICY ISSUES

• Figure 3.2: Trade Restrictive Measures Adopted by Asia-Pacific Economies
• Figure 3.3: Trade Liberalizing Measures Adopted by Asia-Pacific Economies

INFORMATION SHARING

• Figure 3.4: First and Second Order Priorities for Regional Cooperation

PROTOCOLS ON THE INTERNATIONAL MOVEMENT OF WORKERS INVOLVED IN SUPPLY CHAINS

• Box: APEC's Key Role 

CONTACT TRACING

• Figure 3.5: Government is encouraged to apply ICT and other innovative technologies to contact trace to control the spread of COVID-19
• Figure 3.6: Smart Phone Penetration: Selected Asia-Pacific Economies
• Figure 3.7: Evolution of Contact Tracing Policies in the Asia-Pacific

CAPACITY BUILDING FOR RECOVERY

• Figure 3.8: Rating of Capacity Building Activities for a Post-Covid Recovery

STRUCTURAL REFORMS

• Figure 3.9: Structural Reforms
• Figure 3.10: Digital Social Payments
• Interview with Cindy Hook, Chief Executive, Deloitte Asia Pacific

VI CHAPTER 4: IMPLICATIONS FOR A POST-2020 VISION FOR APEC

Recommendations

VII APPENDIX: RESULTS OF SURVEY OF ASIA-PACIFIC POLICY COMMUNITY

In 1994 APEC Leaders committed to the Bogor Goals to achieve free trade and investment in the Asia-Pacific region by 2020. That commitment underpinned substantial efforts over the last 25 years to open up trade, and the higher levels of economic integration and interconnectedness that have provided significant economic benefits across all APEC economies.

Today in the face of considerable new challenges, including rising trade tensions, real threats to the multilateral trading system, the impact of the digital economy and new technologies and the challenges posed by climate change, it is imperative that APEC commit to a Vision for the next twenty years - a Vision that embraces all sectors of society in an inclusive way.

This PECC signature project proposes a Vision for APEC Beyond 2020 and recommends a set of key priorities for APEC. The proposed Vision is deliberately broader than the goal of freer trade and investment. It envisages

“An Asia-Pacific community of open interconnected, and innovative economies cooperating to deliver opportunity, prosperity and a sustainable future to all their peoples.”

Read more...

(A Vision for APEC 2040 report can be downloaded here)

EXECUTIVE SUMMARY

The mood across the Asia-Pacific has soured since this time last year with expectations for global growth turning distinctly negative. Regional economic growth is expected to slow from 3.8 percent growth in 2018 to 3.3 percent growth this year. However, it is the dramatic slowdown in the external sector that is of most concern with export growth slowing from 4.0 percent to just 0.9 growth this year for Asia-Pacific economies. While governments are acting to moderate a slowdown through stimulus measures, primarily interest rate cuts, other actions also need to be taken.

Sixty-eight percent of respondents to PECC’s annual survey of the Asia-Pacific policy community expect weaker or much weaker growth for the global economy next year. The top five risks to growth identified by our survey of the Asia-Pacific policy community for their economies are:

• Increased protectionism and trade wars
• A slowdown in world trade growth
• A slowdown in the Chinese economy
• A slowdown in the US economy
• Lack of political leadership

The list of risks remains the same as in 2018, with one exception, a slowdown in the US economy has entered the top 5 list. The US economy has been going through its longest ever economic expansion overtaking the boom that lasted from 1991 to 2001 that ended with the bursting of the dot com bubble. Related to the slowdown in the major economies is the potential for spillover or contagion risks from the top two risks in this year’s survey - increased protectionism and trade wars and the slowdown in world trade growth.

Out of a list of 15 possible priorities, the top 5 selected by the regional policy community for discussion by APEC leaders when they meet in Santiago are:

• The China-US trade conflict and rising trade tensions
• The future of the WTO and multilateral trading system
• The emergence of anti-globalization & anti-trade sentiments
• Progress towards the Bogor Goals and the Free Trade Area of the Asia-Pacific (FTAAP)
• Progress on the APEC growth strategy to promote balanced, inclusive, sustainable, innovative and secure growth

Chapter 2 addresses APEC Beyond 2020 and what lies ahead. Next year APEC economies will reach the deadline of 2020 for the Bogor Goals of achieving ‘free and open trade in the Asia-Pacific’, relations among key member economies are marked by a degree of suspicion and hostility not seen in over half a century. To be sure, periods before this, even after APEC’s establishment in 1989, were not free of disputes. Disagreements, however, were managed and not escalated to full-on conflicts.

After a slow multi-year recovery from the 2008 Global Financial Crisis, the green shoots of economic growth are being weighed down by unprecedented policy risks and uncertainties. The
multilateral rules-based trading system is also being furtherdegraded in fundamental ways. Equally significant issues of inclusiveness, environmental sustainability and the onset of the digital and technological revolution are rising to the fore. The overarching question that APEC now faces is how it can and should address them. Casting an APEC Post 2020 Vision was always going to be challenging, but recent developments may well be rendering it an impossible zero-sum exercise. APEC was established on the basis that positive-sum cooperation was essential to sustain the region’s economic dynamism and progress.

Contrary to those who would write it off, APEC as an institution is still regarded by its key stakeholders as highly relevant in the coming decades. In contrast to the 1994 Bogor Goals, however, APEC’s remit is now clearly broader then when the Vision was first conceived. Within the trade and investment agenda, investment and services liberalization and e-commerce and digital trade are now central areas of work. Issues of inclusiveness and sustainability have moved from being ancillary to become important joint goals to
be achieved. Within these, the human resource development and structural reforms to capitalize on emerging digital technologies and improve connectivity and investment in infrastructure are critical underlying subthemes.

APEC’s primary strategic value lies in its being an overarching platform for cooperation rather than negotiating and resolving policy differences. If there is one key to the post 2020 agenda for APEC it lies in the term ‘robust dialogue’. It is clear that APEC needs frank, realistic and rational discussions to inject fresh political commitment into what will become its core agenda. This is critical to dispel any doubts that APEC does not have the interest and wherewithal to perform this role.

Chapter 3 presents the findings of PECC’s work to construct an index to measure connectivity in the region. In 2013, regional leaders recognized that the achievement of the vision of an
Asia-Pacific community required seamless physical, institutional, and people-to-people connectivity. They agreed to establish “a seamlessly and comprehensively connected and integrated Asia-Pacific” by 2025 through the APEC Connectivity Blueprint, with a mid-term review to be conducted by officials by 2020. While the Blueprint sets ambitious targets to realize its vision, it only provides a high-level framework to organize the relevant work streams. In other words, how to measure, monitor and evaluate in concrete terms what progress APEC is making toward achievement of its goals is currently missing from the Blueprint. Against this backdrop, the Standing Committee of the Pacific Economic Cooperation
Council (PECC) established a task force to develop a Connectivity Index (the Index).

For the Asia-Pacific region, physical connectivity accounted for 41 percent of connectedness followed by institutional at 35 percent and people to people at 24 percent. While there are some differences at the level of individual economies, the pattern was fairly common across all regional economies no matter the level of development.

The objective of constructing the index was to provide an objective basis for assessing the state of connectivity in the Asia-Pacific. The work led to several conclusions. The first is the importance of the hypothesis that was reached after an extensive literature review
and discussion: that the three pillars are self-reinforcing and interrelated. The second is that no one size fits all – no matter how one looks at the data – economies in the region are pursuing different models and approaches. As this index looks a single point in time
this effort will need to be repeated to measure progress. The third, based on the index findings, is the priority areas for work. At the aggregate Asia-Pacific level: for physical – transportation and infrastructure; for institutional – trade facilitation and intellectual
property; and for people to people – educational mobility and labor exchange. However, these are the aggregate results, there is no reason why these should apply to all regional economies. These are simply the headline numbers from the index. Each economy can look at whether these apply in its own specific circumstances.

While considerable thought and discussion amongst a group of experts went into the selection of indicators and identification of the sub-indices under each pillar. This is one way to measure connectivity. These are not issues just for economists and statisticians but critical to helping policy-makers get a sense of priority for the key issues – improving people’s quality of life and increasing opportunities. Free and open trade are necessary but not sufficient conditions for this. Improved connectivity goes some of the way to addressing some of the gaps.

(Click here for full report)

A series of regional and global financial crises highlighted the need to enhance the resilience of social infrastructure against sudden shocks, particularly for those categorized as vulnerable groups. More recently, a persistent and widening social divide that casts a shadow on the stability of national and global systems presents a serious challenge, and more social policies need to be developed to mitigate this gap.

In response to these challenges within the Asia-Pacific regional context, the Japan National Committee for Pacific Economic Cooperation (JANCPEC) has been conducting the Social Resilience Research Project (SR Project) as a Pacific Economic Cooperation Council (PECC) International Project since 2010. The SR Project aims to shed light on the importance of social security and to closely examine its role in the domestic economy. In addition, the SR Project is the first ambitious attempt by the APEC/PECC family to discuss social policy dimensions, as APEC and PECC have traditionally focused on trade and investment liberalization issues.

The first and second SR Projects have a four-fold focus: pensions, health insurance, unemployment insurance, and macro-analysis. The first final report, entitled “Towards a More Resilient Society: Lessons from Economic Crises,” was published in October 2010, and the second final report was published in March 2012. Since 2012, we have attempted to conduct a case study of each Asia-Pacific economy. As the economic and social circumstances in each economy of this region are significantly different, a bottom-up approach is needed to identify the issues and challenges for the future development and reform of social security systems.

In this report, the SR Project 2015-2017 covers Singapore and Indonesia. The studies focus on specific issues in these economies, such as coverage for informal workers and the evolution of social security systems in an age of slow economic growth.

Report of the Social Resilience Project 2015-2017