Economy in the aftermath of COVID 19 : points to ponder «

Economy in the aftermath of COVID 19 : points to ponder

There was thinking among the china baiters that the virus shall led to factory jobs returning from China, the factory of the world. But hat logic has since evaporated as everybody seems to rely on China for their N 95 masks and protective overalls. China remains factory of the world, although their credibility has taken a severe beating. Only time will tell whether the China baiters or China admirers will have upper hand in shaping their national policy.

Most, if not all, nations, seemingly have put human life over economy and gone for severe lockdowns. They are telling people to remain inside their houses, maintain social distancing (stay 2 meters apart), wash hands every hour, wear masks, however uncomfortable it may turn out to be and get wrapped in plastics if you are going near to the people who are proven to have the virus and you expect not to acquire the viral dose.

Factories are closed, The cranes stand still, most manufacturing has stopped, shutters are down, buses, planes and cars have halted, the hotels, stadiums, party venues and eateries are shut, and most of all, the workers both employed and self-employed (most of our poor are self-employed as daily wagers, street side vendors, cleaners and so on) are staying idle. The poorest of the poor cannot stay idle for long. It may not be long before the hunger taking over the virus in terms of causing death.

There may not have been any fatality (at least officially) in Nepal but Nepalese around the globe are suffering and dying.

The poorest of the poor whether they are in city slums or village huts do not possess any dwelling worth mentioning which can keep them inside simply cannot remain inside for long. Their dwellings resemble cans and can become sauna chamber in summer. The social distancing has no meaning for those who live like sardines (10 persons sharing one room). It is the middle class people like us live our lives inside a house or apartments and perform our jobs inside premises ( office buildings), for whom the social distancing or remaining inside is an option. The poor live, eat, work and socialize outside and that too mostly in close proximity. They simply cannot follow the social distancing dictat of our governments. The richest of the rich will have their bungalows and farmhouses, and would not need to remain inside for social distancing.

Every crisis comes not only with misery, but also with opportunity. The virus will leave us sooner or later, but we have to be clear, with the end of virus the opportunity will also cease to exist and as such we have to act now to seize it.

The main sectors to loose most from pandemic:

· hospitality and tourism related

· Passenger transport, Travel

· Restaurants and Eateries

· Large retail outlets

· Events and Entertainment (cinema halls, sporting events)

· Manufacturing with large employment (sweatshops)

· Automobiles

· Aviation(planes manufacturing) and Parts,

· Traditional Banks Financial services

· Foreign Trade

Sectors likely to gain :

· Online retail,

· Delivery

· Personal care(soap, sanitizers etc)

· Food Processing targeted on home consumption (people need to eat whether lockdown or not)

· Specific pharmaceutical and personal security equipment making

· TV based entertainment

· Financial services based on new technology

· AI based Manufacturing and services.

· IT enabled services

Sectors likely to have lesser of impact (No gain no loss)

· Agriculture/food and vegetable production

· Food Processing

· Mining/Quarrying

· Textile and Clothing

· General pharma

· Gadgets making

 How the future will look in the world?

· Travels (international and national) will take a big hit.

· Border controls/ quarantine will once again gain eminence

· Countries will turn more protectionist both in terms of allowing migrant workers and importing products

· There may be need to produce health certificate including proof of vaccination for entry into countries

· China as emerging power will attract much more negativity if not open hostility

· Xenophobia if not open jingoism will be much more common

Likely Impact for Nepal

· Foreign employment will lose the sheen

· There will be pressure on Foreign exchange earnings

· There will be surge of unemployment (my rough estimate is that about 500 k Nepalis will lose jobs in receiving market and will come back to Nepal)

· There will be huge shortfall in government revenue

· Price will escalate, Inflation will rise

· The tourism and foreign employment sectors will be the biggest looser.

· The NRN community would not be of much help in bringing investment as most of them will be struggling

· Tourism Industry will take will take at least 3 years to regain the last year’s status. . industry would not be able to

What needs to be done for easing the economic impact

· Give breather space for businesses especially for those who have suffered most

· Increase capital expenditure

· If investment leads to a little more budget deficit, so be it to some extent

· Focus on commercialization of Agriculture, Introduce the long term lease concept for use of land

· Focused extension services for enhancement of productivity

· Inputs provision / internal production or

· Mechanisation of production processes in agriculture

· Encourage investment in Food processing

· Introduce strict hygienic norms for Food Industry and also in agriculture use

· Provide protection based on the magnitude of value addition (higher the level of Internal value addition, higher the amount of protection )

· Focus on investment in FMCG and textile and clothing? (Encourage New Technology)

· Seamless execution of Infrastructure projects ( Do not allow disturbances on smallest of pretexts)

· Allow (give) breathing space to tourism and passenger transport Industry)

· Make staying back in villages attractive for village folks

· Make towns and cities more hygienic spend on cleanliness

· Focus more on meeting and creating internal consumption

· Foreign employment in higher skill higher earning (mid level Personpower like operators, trained care giveres, specialized security professionals, skill trades, teachers, chef) rather than manual workers.

Suggestion for Government

· Institute sort of a war room/think tank with core professional management – not a bureaucratic set up

· Do mathematical modeling and orient policies accordingly

· Cut back on bureaucratic processes

· Provide breathing space for businesses

· Encourage investment in industries with short waiting time for giving return

· Spend in infrastructure, Create employment

· Do not indulge in too much redistribution, encourage people to work. No Income guarantee/ but employment guarantee sort of things

· Introduce facilitating system

Hemant dabadi