Economies on the brink: The Covid-19 effect

Fiji’s capital Suva has been in and out of Covid lockdowns over recent weeks, and my Netflix got a workout. I watched a TV show called “Cooked with Cannabis”. Admittedly there were a few baked hippies, but the cooking was good. Jokes aside, the show revealed the sophisticated and lucrative global cannabis industry, projected to grow to an extraordinary US$90.4 billion internationally by 2026.

Watching the show also got me thinking about Fiji’s economy as the country fights through a second wave of the pandemic via containment measures and a vaccination drive. Fiji has taken an almighty hit. GDP was slashed to approximately $4.3 billion in 2020, with growth falling by 19%, according to the International Monetary Fund. Foreign tourists have vanished, all non-essential businesses have been forced to close, and the much mooted Pacific travel bubble is likely to be off the cards for the immediate future. With national debt levels soaring, a nasty storm is brewing.

Fiji needs to diversify its economy away from a reliance on tourism. Despite the government’s best efforts to provide relief through food ration deliveries and a $90 emergency payment to families affected by Covid, these well-intentioned initiatives have arguably fallen short. Many people complained that calls to the food-ration hotline went unanswered, or the deliveries never arrived, while the need for Fijians to provide tax details in order to claim the relief payments meant those in the informal sector were all but left behind.

That’s where cannabis presents an opportunity.

Currently marijuana or saba (pronounced “samba”, yes, like the dance) is illegal in Fiji. But of course the leaf is grown. One of my favourite news pieces from 2020 was about villagers shooting down police drones with spear guns to hide their marijuana plantations on Kadavu, an island south of Suva. The police still managed to haul in crops said to have a street value of FJ$86 million (A$50 million) in a four-week operation and amount to the largest seizure ever in the country. 

But it seems ironic that at a time when some families can’t afford to put food on the table, millions of dollars worth of this currently illegal crop would be uprooted.

The over-reliance on tourism, comprising almost 40% of Fiji’s GDP before the pandemic has left economic void. Rebooting the agricultural sector is an area the Fijian government has identified as one which could be strengthened. Fiji has a solid history of agricultural exports. In the 1970s sugar exports accounted for 70% of the country’s export earnings. More recently, yaqona (kava) has been targeted as a growth opportunity in the sector, due to its widespread use in the region for relaxation and stress relief. Unfortunately, yaqona takes several years before it can be harvested. Like other agricultural products, it is also exposed to heightened risks of environmental damage, for example cyclones.

But “weed” is different. As the name suggests, cannabis is a resilient crop and capable of harvesting after three months. As the “spear gun incident” attests, it clearly grows well in Fiji.

With an ideal climate, remote islands capable of quarantining cannabis operations, a world renowned “brand Fiji” offers a special opportunity for economic diversification. Just look at Fiji Water.

The idea of a marijuana industry in Fiji is not new. The idea was debated most recently in March at a Nadi Chamber of Commerce roundtable. The government was adamant in response it has no plans to legalise marijuana.

But “legalisation” need not mean we all get “cooked with cannabis”. Fiji could do what other countries have done, legalising marijuana for medicinal and hemp fibre production, while banning recreational use. Such a move would follow similar regulation in countries including Malawi, Lesotho and Uganda, as well as Thailand in Southeast Asia, among others.

A permit system could be created for growing marijuana on designated islands in Fiji. Alternatively, the government could create a stated owned company to manage production ­– afterall if there is a Fiji Sugar Corporation, why not a Fiji Cannabis Co.?

A cannabis industry in Fiji would not be limited to growing the crop. A whole value-add supply chain could be created, for example, through hemp fibre production (Fiji’s garment manufacturing industry has also felt the pinch under Covid), as well as labs to extract the valuable CBD oil, which is used for pain relief and various other ailments. This could all be carried out in Fiji and create jobs for Fijians.

There will be concern about any partial legalisation leading to greater recreational use of cannabis among the local population. It cannot be ruled out, but the same “slippery slope” argument can also apply to tobacco and alcohol as gateways to substance abuse. Those partial to the saba are still likely to partake, whether it is legal or not. These are the types of risks the government should be able to manage with responsible regulation and enforcement.

From a business perspective, there is a chance for Fiji to be the region’s “first mover” in the cannabis industry. Research and a feasibility study should be first undertaken to determine the viability and opportunity that a cannabis industry could present. From there, a better judgement can be made about what would be required to regulate it.

And just maybe the volatility of the pandemic could be the catalyst for Fiji to innovatively diversify the economy and generate a new export market to its advantage.

While the Covid-19 pandemic proved to be the perilous equaliser of humankind, regardless of race and nationality, the vaccine for it however revealed the disturbing inequality between the advanced and developing economies.

In a speech last month, the Director-General of the World Health Organisation Tedros Adhanom Ghebreyesus warned of the unequal access to vaccines:

More than 39 million doses of vaccine have now been administered in at least 49 higher-income countries. Just 25 doses have been given in one low-income country. Not 25 million. Not 25,000. Just 25.

The lone country referred to was Guinea, which inoculated a handful of its senior officials last December. However, nobody was vaccinated after them, which was the reason Our World in Data stopped tracking Guinea’s vaccination efforts since it does not represent “the start of a real national rollout.”

Since January, the majority of the more than 80 million Covid-19 vaccines available worldwide have gone to only a few high and middle-income countries like US, China, Israel, UK and the United Arab Emirates. India is the exception, with its domestic vaccine manufacturing capcity. With their vaccination campaigns underway, wealthy nations have also pre-purchased access to supplies that can cover more than their populations. As a result, high-income countries with only 16% of the world’s population currently hold 60% of the vaccine doses.

Such hoarding has left the rest of the world scrambling for supplies, while the low-income economies have no choice but to wait potentially for years to be able to inoculate much of their populations. This is reflective of the unfortunate cycle that repeats itself during a global pandemic: “Rich countries benefit from new health technology first, while poor countries have to wait years or decades for it to trickle to them.” It is estimated that about 85 countries will not have widespread access to the vaccines until 2023, while mass immunisation might not happen until 2024.

This is especially true for countries in Southeast Asia. As a high-income economy with a small population, Singapore will likely achieve widespread vaccination by the end of this year. Meanwhile, Vietnam, Brunei, Thailand and Malaysia are expected to follow suit in 2022, then Indonesia and the Philippines in 2023. However, poorer countries such as Cambodia, Laos and Myanmar may not be able to achieve widespread vaccination within the next five years.

To address this concern, a global effort to support the equitable distribution of vaccines was launched called Covax, which carries the largest and most diverse portfolio of Covid-19 shots. More than 190 rich and poor nations signed on to gain access to vaccines to cover 20% of their population. However, this facility is being undermined by many wealthy countries that have also struck “side deals” with pharmaceutical companies to guarantee their supply. Most of these bilateral deals were arranged in advance of the vaccines’ approval, whereas Covax has been hesitant to order stocks prior to approval. This consequently increases vaccine price and reduces the global supply of doses meant for Covax.

Such hoarding is reflective of the apparent vaccine nationalism among rich countries, as state leaders prioritise their country over the planet. While understandable, it is nonetheless irresponsible to turn a blind eye on the rest of the world. In fact, vaccine nationalism not only prolongs the global pandemic, but it also delays the world’s economic recovery.

Failure to fully vaccinate developing countries (which comprise more than half of the global population) may cause mutation and new strains of the virus that current vaccines do not protect against. This may lead into future outbreaks that risk reinfecting those wealthy countries that have hoarded vaccine supplies. Vaccine nationalism is also economically counterproductive if poor countries miss out on mass immunisation. Global supply chains, particularly in agriculture and manufacturing industries, will continue to suffer as developing countries struggle to produce raw materials and electronic parts or components needed by multinational companies in advanced economies.

And without the vaccines to protect their health, the poor in the developing world will continue to be out of work and have less money to spend, causing a reduction in sales for exporters in North America and Europe. Such a grim outlook proves that the world’s economy is interconnected and its recovery is dependent on a healthy global economy – and not just of individual rich countries. 

Generally, most of the discussions among advanced economies on how much vaccine they can spare to the developing world (if any at all) are framed as a moral dilemma – balancing their responsibility to their citizens, while considering the global common good. However, a study by the National Bureau of Economic Research challenges that notion and concludes that the equitable distribution of vaccines is in every country’s public health and economic interest.

International Chamber of Commerce Secretary General John Denton has said “purchasing vaccines for the developing world isn’t an act of generosity. It’s an essential investment for governments to make if they want to revive their domestic economies.” Thus, in their race to vaccinate their people, rich nations should likewise be compelled not to leave their poor neighbors behind.

Malaysia is in a quandary, desperately trying to figure out how to resolve political and economic questions.

The fragmentation of the Malaysian market for votes is at a point it has never before experienced. In a country where ethnic politics have long dominated, there are the Malays, who are divided at least five ways, and the Chinese, with at least three parties to choose from, and the Indians (who electorally carry much less weight) with three choices. Then there is the increasingly vociferous East Malaysian segment, which is undecided as to whether to seek its fortunes by demanding increasing autonomy or by aligning with the dominant parties that succeed in controlling Peninsular Malaysia.

The divisions are not based on any clear grounds of economic ideology – or if there is, it is well hidden. The one party that has a distinct outlook is, of course, Parti Islam Se Malaysia (PAS), the national Islamic party, with the party that broke off from it being Parti Amanah Nasional, the National Trust Party. The Parti Keadilan Rakyat (PKR) or People’s Justice Party claims to be a reform-based part but has failed to elaborate and develop upon the nature of its reforms – PKR has neither articulated nor detailed its reform agenda.

The fuzzy characteristics of the parties do little to set them apart along definite lines. This gives a great deal of flexibility to politicians, allowing them to explore innumerable permutations and combinations. In the absence of other separating planes, race and religion occupy a significant space, one that is perhaps given undue importance.

The economic sphere is no less muddy. The Malaysian economy has been grappling with the middle-income trap, the presence of a disproportionately large migrant force and the lack of adequate technological innovation and upgrading. As much as these factors have been consuming policy debate at the macroeconomic level, other issues have been disturbing people, among them the question of affordable and convenient healthcare, affordable housing and high household debt.

Disturbing as these challenges are, the arrival of Covid-19 has only compounded the problems. Alongside the aggressive political jockeying, the pandemic has spelt uncertainty and a lack of direction, economically speaking. This disturbing scenario has not gone unnoticed.

Recently, the credit ratings agency Fitch downgraded Malaysia to BBB+, only a few notches above that for junk bonds. The downgrade was, arguably, a result of the political uncertainties that abound. A disappointed Finance Minister Tengku Zafrul responded by claiming Fitch had not given due recognition to the country’s Covid-19 response efforts.

Yet the downgrade was mainly because of the shifting political ground and governance problems. There could not have been a more damning reason for the decision. After all, most countries have been afflicted by the economic damage wrought by the panademic and have needed to resort to expansionary budgets with increased government debt. All that would have been necessary for Malaysia to convince the ratings agencies would have been a sensible roadmap to get the country out of its fiscal deficit and high government debt, along with a commitment to return to a state of fiscal balance. Either Malaysia failed to do this in adequate measure, or the ratings agencies judged the political climate to be an obstacle to achieving fiscal stability.

Even so, the downgrade is a temporary glitch. The Malaysian economy, in all likelihood, will recover in 2021 – provided the pandemic is under control. The World Bank expects that the economy will record a growth rate of about 6%, taking the country out of its fiscally distressing position.

There is concern that some investments have been going to neighbouring countries. Some of the investments that have been diverted away from the country have been viewed with concern, indicating possible investor aversion to Malaysia. Samsung and Apple factories are going to Vietnam, Amazon is building its data centre in Indonesia, an electric car battery factory from China is setting up a factory in Indonesia, and so is Hyundai.

Yet the outlook on foreign direct investment (FDI) may be less negative. All political parties know that FDI is Malaysia’s lifeline, and while the pressures of the times might take a toll on speed of responsiveness – slowing down approvals, for instance, with ministerial change priorities – those investors who have sunk their FDI in Malaysia will not pack up and leave, or at least they will not leave solely because of political uncertainties.

Undeniably, political stability is valuable. Prime Minister Muhyiddin Yassin has made clear the need for certainty, saying he wants to hold snap elections once the pandemic is over. Nobody knows when that will be – parliament is suspended under emergency decree until at least August, while there is agitation whether this restriction should be lifted. All of which means that the Malaysian economy will have to put up with economic uncertainty for a while longer.

Finding one’s political self is not without cost.

From the first days in January this year, the question that dominated the outbreak was how upfront Beijing had been about the novel coronavirus that became known as Covid-19. Richard McGregor:

So far, the handling of the crisis seems to have underlined one of the ongoing problems with the authoritarian strictures of the party-state, which places a premium on the control of information in the name of maintaining stability … Could the virus have been contained, and its spread limited, if officials in Wuhan had levelled with both their bosses, and the public, earlier? It is impossible to say, but at the moment, it certainly looks that way.

Still, the warning signs about the rapid spread of the virus – and what would result in more than 1.7 million deaths so far – did not translate into public trust, particularly in already politically stressed Hong Kong. Vivienne Chow:

An unprecedented level of panic is caused not just by fear, but by the lack of trust. Reactions of the people of Hong Kong and the international community are a vote of no confidence in the authorities’ abilities to protect people and contain the virus. Authorities here are not only the Hong Kong and the Chinese governments, but also the World Health Organisation, which is supposed to “lead partners in global health responses”.

Australia began to react with travel restrictions, buying time at a cost to the education and tourist industries, but Dominic Meagher warned “that time must now be used effectively”.

Three things must be done: eliminate panic, develop some form of treatment, vaccine, or cure, and put in place more sustainable policies to slow down the virus.

But by late February politics and prejudice had complicated the response around the world over. Audrey Jiajia Li:

With 28 countries so far reporting confirmed cases of the virus, caution over the mysterious deadly illness is expected and natural. Yet it is important to emphasise that Chinese people are the victims, not the culprits, of this epidemic.

South Korea, Europe, the United States, India and almost everywhere saw spiking rates of infection. The Tokyo Olympics were soon abandoned, Indonesia struggled and Pacific island nations feared the danger as lockdowns spread. Leaders felt the pressure to rise to the occasion. Michael Fullilove:

There has been a lot of discussion about the communications tools, including websites and texts, that governments are employing to speak with their nations about the coronavirus pandemic … The media noise being generated about Covid-19 is deafening – but the single note of a good speech, well delivered, can penetrate it.

And by the end of March, it was increasingly clear the virus would hold momentous consequences for the world. Daniel Flitton. 

The crisis will affect everything in some way, whether budget assumptions, global supply chains, or the trappings of power … drastic change [may be] later assimilated into a “new normal”, the point was still a major readjustment and far-reaching – and lasting – implications not only for the community, but also for relations between nations.

So The Interpreter examined the cross-cutting influence of the virus had on existing international challenges, whether the Hong Kong protest movement, poverty in India or the Philippines, migrant workers in Singapore, insurgency in Thailand, fighting the remnants of Islamic State, conflict in Afghanistan or tensions on the Korean peninsula. The crisis had a disproportionate impact on women, while the cost to the global economy was also manifesting. Roland Rajah:

The social distancing required to slow the virus – both voluntary and mandated by governments – means the economic hit is going to be large, and there’s probably not much that traditional demand-stimulus policies can do to materially counter it. In part, that’s because people won’t go out to spend the money, but it’s also because the virus is an intensifying supply-side shock as well – with big disruptions to normal business activity and many workers pulled out of work, either for health reasons or as workplaces and schools are temporarily shut down.

And if a first step to combating a problem is first understanding it, disinformation and conspiracy online was certainly no help. Natasha Kassam:

The dilution of information on the internet is currently posing a risk to global health and safety. Much like globalisation has extended the reach of the virus, social media has extended the reach of fake news. And the stakes are higher.

Bright spots emerged. Enterprising Indonesians mixed their own hand sanitiser, and Bob Kelly – aka BBC Dad – had some helpful advice for those staring at a Zoom meeting working from home:

This will be a slog for the next several months, and my guess is that for all the convenience of telework, most people will enjoy going back to an office when this situation finally breaks.

Nick Bisley wondered at the future power dynamics in Asia. Mark Beeson asked what the crisis might hold for the vaunted international order?

Any of the big issues that collectively confront us – including climate change, economic disadvantage, and, of course, controlling pandemics – would seem to necessitate some form of institutionalised international collaboration.

Countries raced to develop vaccines while wrestling with the rights to privacy when tracing the virus spread. The future design of cities was questioned, we wondered about spies and the warning signs, protecting political leaders from the virus or whether they could strike a global bargain to do better next time?

Jennifer Hsu charted the growing power China’s Xi Jinping amid the pandemic, while Erin Hurley watched Donald Trump shrivel before the challenge. Meantime, Stephen Howes urged the world to remember those most vulnerable:

Covid-19 is hitting at a time when the number of displaced people is at its highest since the end of the Second World War. What if the virus takes hold in a massive refugee camp in Africa, the Middle East or Asia?

Should the world have been better prepared? Shahar Hameiri:

Used to financing and implementing limited interventions far from home, developed states’ governments were suddenly fighting huge contagions on the home front, for which they were often poorly prepared. And since very limited collective capacity had developed previously, their full focus immediately turned inwards, thus producing a fragmented, “zero-sum” response globally.

Or did the world overreact? Ramesh Thakur:

Health professionals are duty-bound to map the best- and worst-case scenarios. Governments bear the responsibility to balance health, economic and social policies. Once these are included in the decision calculus, the political and ethical justification for the hard suppression strategy is less obvious.

Perhaps, in the end, planning doesn’t matter. Gordon Peake and Christian Downie:

Magnified exponentially by these last few weeks, there seems something both absurd yet strangely comforting about feeling emboldened enough to guess a course for endpoints years away … [looking back] planning documents are proof-positive of that old Yogi Berra maxim that the most difficult thing to predict is the future.

Let’s see in 2021 if nature cares that humans can count in years.

Main image via Flickr user 7C0

The horror year that has been 2020 is thankfully coming to an end with a dose of welcome optimism, now that vaccines are on the way. But the end is still far from within sight for many of Australia’s Pacific island neighbours.

In a new Lowy Institute policy brief, we argue that the Pacific is staring at a potential “lost decade”, owing to the economic damage wrought by the pandemic. Many more Pacific islanders will be left unable or struggling to meet their basic needs, and the prospects for a more stable, prosperous and secure region will be greatly reduced.

None of this scenario would be in Australia’s interests and would reflect poorly on the country as a friend in the region. Australia should do all that it reasonably can to avoid it.

Remoteness has helped the Pacific escape the worst of the health implications from the pandemic. Yet the grim reality is that the economic devastation is still set to be among the most severe anywhere in the world. This is owing to the region’s heavy reliance on key income sources badly affected by the crisis, especially international tourism, and the inability of Pacific governments to mount anywhere near the fiscal firepower needed to limit the damage, as richer nations have done. Fiji’s tourism-dependent economy is the worst affected and expected to contract by more than 20%.

The costs of the crisis are also likely to be especially long-lasting. By our projections, average income per person in the Pacific will not recover to its 2019 level until 2028 – a Pacific lost decade. And there remain plenty of downside risks to this outlook.

While overcoming the pandemic is the top priority, fiscal stimulus will be the key to enabling a strong post-pandemic recovery. We estimate that the Pacific will need at least A$5 billion (US$3.5 billion) over the next few years in additional stimulus spending to fully recover from the economic impact of the pandemic.

Most would need to go towards productive investments that can be quickly scale up in areas such as infrastructure, capital maintenance and climate change adaptation. Some should also go towards social priorities (for which the economic pay-off is more long term) such as health, education and income support for struggling households.

Pacific governments will not be able to finance this themselves – having little access to private capital markets and being reliant on overseas aid. It will therefore fall to the region’s development partners to play the leading role in financing the Pacific’s recovery.

Expanded international debt relief could play a useful role in some Pacific island economies to free up the necessary resources. This mostly relates to large loans from China to Samoa, Tonga and Vanuatu. Increased financing from the multilateral development banks is also an option via either the adoption of less conservative capital adequacy rules or new financial contributions from donor governments.

Regardless of what others do, Australia has a special interest in helping the Pacific. The Australian government is already doing a lot. It has in particular already increased its international financial assistance via the establishment of a special A$300 million Covid-19 response package for the Pacific and committed half a billion dollars to roll out vaccines in the Pacific and Southeast Asia.

These are significant measures. Nonetheless, it still does not come close to matching the scale of a once-in-a-century crisis nor Australia’s interest in minimising the damage this inflicts to the region.

We argue Australia should establish a $2 billion Covid-19 recovery financing facility for the Pacific. Australia normally provides about 40% of all financial assistance to the region, so this would be in line with Australia’s “fair share” and role as the Pacific’s leading development partner.

The facility should provide funding in the form of outright grants as much as possible. However, as political appetite may be limited, the use of appropriately structured loans is also feasible as a lower cost option in helping reach the full scale of financing required. From a Pacific debt sustainability perspective, the economic returns from recovery spending can offset the cost of increased future debt service payments associated with borrowing to finance the recovery.

The arguments for Australia establishing a recovery financing facility for the Pacific are similar to those justifying the huge increase in domestic Australian government spending that has taken place in response to the pandemic – historically low long-term government borrowing costs and high returns to investing in the recovery now, in order to avoid the far worse alternative of allowing economies, and societies, to be permanently set back.

Having made its own fair share contribution, Australia would then be in a strong position to advocate for others in the international community also to step up in helping the Pacific avoid a lost decade.

Many women fight wars every single day within their homes. This is not the violence of wars that features on the nightly news, but something far more insidious – a hidden conflict that is far more costly. Domestic violence is rampant, within both developed and developing countries, yet is a problem too often ignored. As the world marks the 20th anniversary of the groundbreaking Women, Peace and Security Resolution, which recognised internationally the gendered impacts of war, it is a chance to fix this.

Around one in three women worldwide experiences sexual or physical violence, most likely perpetrated by a former or current male partner. Economist Anke Hoeffler has found that violence against women costs the world more than civil wars and terrorism. Instances of intimate partner violence, overwhelmingly against women, cost the global economy around $4.4 trillion – nearly half the total cost of all forms of violence. In Australia, the cost is put at $21.7 billion. These costs come from direct factors such as medical care, but also indirect factors such as loss of potential earnings. Strikingly, this figure is likely an underestimate of the true cost of domestic violence, because most survivors do not seek help.

A narrow understanding of violence has come at the expense of not only who is paid attention to, but also where they live. According to the OECD, more than 35% of women living in countries such as the United States, as well as more progressive nations such as New Zealand, have experienced intimate partner violence. But developed nations do not prioritise preventing domestic violence in the same way as fighting wars in other countries. In the United States, government spending on the Office on Violence Against Women equalled less than 1% of annual expenditure on defence in 2020, and less than 1% of the economic cost of domestic violence. In National Security Advisor Robert O’Brien’s statement marking the Women, Peace and Security Resolution’s anniversary, the physical insecurity of women living in the United States was not even mentioned.

A narrow understanding of violence is also costing women their lives. Globally, the United Nations predicts that 137 women are killed by a family member every day. Women are even killed by men in nations considered safe by global standards. In Australia, where researchers claim women have “fairly high levels of physical security”, every single week one woman, on average, is killed.

Ending wartime violence and ending violence against women are not mutually exclusive. Covid-19 must serve as a reminder of the need to broaden the understanding of violence to include the experiences of all women. Because Covid-19 has made the war women are fighting worse.

For many women, shelter-in-place policies created to limit the spread of Covid-19 limited their freedoms. It forced them to be locked indoors with the very men who abuse them. Many women were unable to seek assistance through traditional means, such as hotlines, due to constant monitoring by abusers. Covid-19 also created new triggers for violence against women to fester – from loss of control to economic stresses. Many service providers have reported an increase in severity of instances of violence.

Nearly every single country with data has reported an increase in calls to hotlines. When Covid-19 hit, the UN Population Fund predicted that an additional 31 million instances of domestic violence will take place if lockdowns continued for six months. In the first few weeks of its March lockdown, France saw an increase in reported domestic violence of 30%. Similarly, Spain experienced a 47% increase in calls to hotlines in the first two weeks of April this year. A recent Australian study found that one in ten women experienced emotional violence and one in 20 experienced physical violence during the shutdown. Most of these women had never experienced violence before.

While the United Nations has called on governments globally to make women’s safety a priority during Covid-19, most have not responded adequately to this call. For those that acted, they did the bare minimum by declaring shelters as essential but with reduced capacity or by providing additional funding to hotlines. In the UK, where up to 47 women are suspected to have been killed during the first lockdowns, the government’s response has been inadequate. Service providers have called for more support to housing, legal services and hotlines which have not been “prioritised”.

It’s taken the struggle with Covid-19 for some governments to recognise the violence in the lives of women. France and Spain have adapted to the moment by creatively responding to the unique circumstances of Covid-19. As people were only able to leave their homes for essentials, these governments created pop-up counselling services and asked survivors to seek assistance using code words at essential businesses such as pharmacies. While this is not enough to end violence against women, it’s an important step that should have been taken regardless of a war. These nations should continue these programs post–Covid-19 to help ensure women can seek assistance safely whenever they want.

It is time to rethink what peace and security looks like for women. How can nations be at peace when women continue to fight wars within their homes?

Australia is lending A$1.5 billion to Indonesia to help it get through the economic crisis unleashed by Covid-19. This is welcome news and another sign of Australia stepping up to assist key partners in the region during an extraordinary global crisis.

The Australian loan will help the Indonesian government finance its budget deficit. As in all countries, effective response to the pandemic-induced recession requires a massive increase in the government budget deficit. Earlier in the year, Indonesia’s ability to finance this was extremely uncertain. Indonesia experienced violent capital outflows in March and April as investors worldwide reacted to the scale of the unfolding crisis. Foreign investors dumped Indonesia’s government bonds, and the rupiah plummeted. Because foreign investors normally fund a large part of the budget deficit, this threatened a severe problem. Thankfully by mid-year the outflows had subsided. But inflows never really returned in the way needed, especially given the substantially enlarged budget deficit that required financing.

With limited international help available, the Indonesian government turned to Bank Indonesia, the central bank, to directly fund a large part of the budget deficit. At the time, this was a big gambit. Unconventional monetary policy, in various forms, was already the norm in many advanced economies. But the idea that emerging economies could also engage in such practices without triggering an even more negative market reaction and further currency depreciation was not widely accepted.

In the end, the market reaction was muted. Perhaps because investors had already acclimated to the extraordinary policy actions of rich country central banks and accepted this as a relevant emergency response to the pandemic. Or perhaps it simply reflects the search for yield triggered by those enormous injections of liquidity that only assets in emerging markets can satisfy. Regardless, Indonesia had found a financial lifeline, even if this still carried some of its own risks.

So where does the Australian loan fit in?

I have advocated for some time that Australia should be willing to extend Indonesia a large standby loan facility, prospectively for as much as A$15 billion, in response to the pandemic crisis, which could be drawn upon if Indonesia had difficulty financing its budget deficit. This would have been a scaled-up version of previous A$1 billion standby facilities, ultimately never drawn upon, that Australia had provided Indonesia during past episodes of global market turmoil in 2008–09 and 2013.

The idea of a standby loan was to serve as an insurance policy. It would help to boost market confidence – making it easier for Indonesia to raise funds from the market – while providing an assured source of funding should this be needed. Such a facility would be particularly useful if there were another serious dislocation in global financial markets, especially as this could make relying so heavily on budget financing from Bank Indonesia much more difficult.

In the end, Australian assistance has taken the form of an outright loan for A$1.5 billion. This is not enough to be a game changer for Indonesia, which needs to raise as much as US$10 billion each month. But it will help. And there are several reasons discussions between Australia and Indonesia could have led to this particular outcome – a moderately larger loan than in the past but provided on an outright, rather than standby, basis.

On the Australian side, there would likely have been some political reluctance to providing a multi-billion dollar facility, given Australia is also battling its own domestic recession. In reality, the facility could be structured to come at little or no cost to the Australian budget. But the “sticker shock” may still have been too much for the government’s domestic political calculus. If this was the main limitation, then a standby loan of only A$1–1.5 billion would have been too small, given the scale of the current crisis. It would have been a minimal gesture on the part of Australia, simply keeping up with what had been done on previous occasions. Whereas an outright loan represents a bigger commitment by putting real Australian money on the table.

Indonesian preferences would also have been very important. President Joko Widodo may have preferred the tangible outcome of an immediate loan rather than the abstract insurance-like benefit of a larger standby loan facility. More generally, Indonesia’s policymakers now seem more focused on containing the government’s rising interest bill – which will reduce the space available for priority development spending such as infrastructure investment – rather than managing the risk of another severe bout of capital outflows. The interest rate on the bilateral loan has not yet been disclosed but will likely be quite cheap compared to Indonesia’s normal borrowing costs. It will also reduce some of the burden on Bank Indonesia in helping to fund the budget deficit.

Australia could arguably do more to assist. The need to sustain large budget deficits during the recovery phase ahead means Indonesia’s financing challenges could persist for some time while another bout of severe capital outflows remains a risk, even if this seems to have substantially receded for now.

Overall, however, the announced loan is a sensible and welcome step-up in Australian support.

Amid concerted global efforts to mitigate the economic and social consequences of the Covid-19 pandemic, there is a growing interest in promoting a “green recovery”. Green recovery encourages a closer link between economic restoration and transition towards a more sustainable economic model which includes more ambitious climate policy and renewable energy. While the concept is appealing in theory, the international community needs to pay attention to its potential risks, particularly for developing countries.

The idea for green recovery has strong support from European countries. In June, Germany unveiled a fiscal stimuli package which included US$46 billion of special allocation to support investments in sustainable economic activities. The European Union adopted an environmentally friendly recovery plan, which was widely seen as a continuation of the European Green Deal, which has an aim to make Europe climate-neutral by 2050.  

International financial institutions have also pledged their support for green recovery. The International Monetary Fund, for instance, has announced the availability of $1 trillion in lending capacity, along with its commitment to promote the green recovery. Some countries and international NGOs began to advocate for the adoption of green recovery as a globally accepted path for post-coronavirus economic revival, among others through the 5th Session of the UN Environment Assembly, to be held in Kenya next year.

But how do developing countries, such as Indonesia, see the green recovery concept?

A report titled “Asia’s lamentable green response” by the ING Group criticised Southeast Asian countries for not sufficiently including green stimulus measures in economic recovery packages. Developing countries, many of which have to deal with severe environmental problems, indeed understand that the green recovery is relevant to contemporary development challenges. It will attract more investment in long-term sustainable projects and help reduce their dependence on extractive industries and commodity sectors.

There is plenty of enthusiasm about the potential of a green recovery, to both revive the economy and build resilience. Indonesia, for example, offers tax incentives for investment in renewable energy to help meet a renewable energy target of 23% by 2025, along with $47.6 billion fiscal stimuli.

However, there are some concerns about the unintended risks of green recovery. Although green recovery is initially intended as a domestic economic strategy, the implementation of green recovery in one country could have a lasting impact on other countries through trade and investment relations. Subsidies given to various sectors included in the green recovery project in developed countries, for example, will unfairly put developing countries at a disadvantage. Developing countries are lacking financial and technological capabilities to match developed countries in assisting their green sector.

Moreover, specific subsidies and support to the green recovery, such as for research and development, could be inconsistent with World Trade Organisation rules. Together with new standards and regulations in a greening global economy, the extensive subsidies for the green economy will only make developed countries more economically competitive than developing countries. Imposing policies inconsistent with non-discrimination principles for the sake of environmental protection is possible under Article XX (b) and (g) of the WTO. However, the application of such environment-related trade measures will add a further burden to developing countries that are experiencing a drastic decline in export volumes.

Also, there has always been a great debate determining what amounts to an environmental good. Crop-based biofuels, such as from palm oil, for example, are considered environmental goods by developing countries, as they can be used as suitable alternatives to fossil fuels. In contrast, the EU has its own classification on which biofuels are sustainable or not. As a result, there is a potential for irreconcilable views on whether subsidising biofuels can be categorised as one of the green recovery projects.

The international community should take coordinated action to mitigate the unexpected consequences of green recovery, as well as exchange views on how the green recovery concept can be beneficial for all countries, especially by discussing the following three matters.

First, international forums and international organisations should develop widely accepted regulation and guiding principles which will prevent green recovery from creating trade barriers, new environmental standards and unfair subsidies. None must merely use the green recovery as a tool to gain market access using environment pretence.

Second, international support needs to be made available to enhance developing countries’ capacity to harness economic opportunities within the global green economy. Indeed, in recent years some emerging economies have become increasingly prominent producers of environmental goods and renewable energy. In aggregate, however, the green market is still dominated by multinational corporations based in developed countries. Companies from developing countries, especially small businesses, face enormous challenges in meeting complex environmental standards of the green market.

In that context, programs such as “Aid for Trade” need to offer a specific project to help developing countries build trade capacity and resilience in producing and exporting green products. Through Aid for Trade and other similar activities, developing countries can be integrated more into global supply chains of green technologies, particularly by supplying intermediate inputs to high-tech green products produced by developed countries.

Third, the international community needs to develop a multilateral framework to help least-developed countries raise resources for green recovery, including through debt restructuring. These countries have tremendous difficulty in mobilising funds for sustainable economic activities, due to weak fiscal capacity and substantial external debts. One example of debt restructuring is debt-for-environment swaps, in which donors or international financial institutions agree to annul part or all of the outstanding debt in exchange for spending in environmental preservation. 

Most of all, the green recovery strategy should include perspectives of developing countries to anticipate its unintended consequences better. Accommodating concerns of developing countries through constructive dialogue is crucial to ensure broad support for the global implementation of a green recovery.

Main image courtesy of Flickr user Engineering for Change.

Photos of empty supermarket shelves became commonplace in the first weeks of the Covid-19 pandemic. The shutting down of borders and decreasing trade have affected many countries, especially those that heavily rely on imports and exports.

It is understandable that countries may restrict the flow of goods including food to safeguard their own interests during a crisis. For instance, Vietnam temporarily halted rice exportation to ensure that there was sufficient food consumption food domestically.

“Food security” is measured through the accessibility of food and the ability of an individual to have access to it. Singapore is a compelling example. Although it has been ranked as the most food-secure country in Asia Pacific under the Global Food Security Index (GFSI) 2019 Asia Pacific regional report, Singapore is susceptible to disruptions in the global supply chains since it imports more than 90% of its food. Singapore has witnessed how the uncertainty has triggered panic and resulted in hoarding of household supplies. It took contingency plans by issuing a joint ministerial statement with six Asia-Pacific countries in March 2020 to keep the global supply chains intact to enable the flow of goods during the pandemic.

New area of cooperation for Singapore and Sri Lanka

Covid-19 has opened new opportunities for Singapore and Sri Lanka to collaborate. The Singapore government has donated medical supplies including test kits, thermal scanners, surgical masks, surgical gloves, medical goggles and non-contact infrared thermometers to assist Colombo to keep the pandemic at bay. The two countries have also worked closely together to repatriate Sri Lankans stranded in Singapore. Singapore wants to project itself as a dependable and resourceful partner that taking the initiative to assist others in times of need.

This extends to food security. A webinar organised by officials in Colombo and Singapore in July to discuss agribusiness and digitalisation was an effort by the two countries to strengthen their relations in food management. Their long-standing trade relations have been exemplified by the high total volume of total US$883 million in 2019. Singapore was also Colombo’s fifth biggest investor in the same year.

Many Singapore organisations have sought opportunities in Colombo’s growth sectors, including food and beverage, tourism, infrastructure and consumer goods. There are approximately 100 Singaporean companies operating in Colombo. Prima group was the first Singapore company to set up operations in Sri Lanka as early as 1977 and has become a household name over the years. It has also made Trincomalee its South Asia hub. In 2018, several local businesses signed MoUs to establish their presence in Colombo. For instance, Art Holdings signed an agreement with Beijing Genome Institute to set up a crab farm in Sri Lanka.

Despite the challenges, Covid-19 has propelled countries to reimagine existing opportunities and leverage new ones. Colombo, a key exporter of rubber, tea and fresh/processed food, has been affected by the disruptions in the global supply chains. The new area of cooperation between Singapore and Colombo is likely to benefit both countries. As Singapore tries to diversify its food imports to remain as food secure as possible, Colombo is seeking to capture new markets, along with regaining the lost ones.

A stepping stone for Sri Lanka’s economy

Following the Gotabaya Rajapaksa government’s landslide victory in this year’s parliamentary elections, Colombo is likely to adopt an Asia-centric foreign policy. The government’s reorientation also reflects a change in the balance of powers that is moving eastwards. Sri Lankan Foreign Secretary Jayanath Colombage has said that Colombo should focus on its neighbourhood and move away from Western-centric diplomacy.

Asian countries may be better positioned to assist Colombo to reduce its foreign debt and boost economic spending. The current government is of the view that forming strategic partnerships with Asian countries could pose fewer challenges than with its Western counterparts, who are more inclined to raise issues of human rights.

Historically Sri Lanka has focused heavily garment exports to the West. However, its economy that is highly dependent on tourism, exports of garments and foreign worker remittances, has contracted further since the Covid-19 pandemic. Although senior analysts Hemant Shivakumar has said that the government’s pivot towards its neighbourhood would not happen by jeopardising its relations with Western countries, it cannot wholly rely on the US and European Union as the main export destinations for its garments industry.  

Although the agricultural sector has contributed relatively less to the GDP, it has employed approximately a third of the labour force, especially among the rural population. The new area of collaboration between Singapore and Sri Lanka in food security could be a stepping stone for Colombo to develop its local economy and increase its food exports to other Asian markets that are trying to remain as food secure as possible.

China is another key market, given that it has seen major food shortages in the past. Although Beijing has made substantial improvements to increase its agricultural capacity, it still faces threats to food security. Colombo’s pivot to Asia and interest in increasing food exports could help overcome the disruptions in current food supplies.

Finding a consistent stream of agricultural labour in Australia has long proved a challenge. With Australians often unwilling to accept this type of work in the numbers required to get food to market, the government has sought to use visa schemes to remedy the problem, welcoming foreign labour. Yet in doing so, they have pivoted the industry’s labour market towards one specific visa category, and created an unfair competition between different visa holders. This situation now has serious implications for Australia’s foreign policy.

First, a little history. In 2005, the government thought it had struck upon an innovative solution to its agricultural labour shortage problem. Thousands of young and physically capable people entered Australia each year through its Working Holiday Maker scheme (known as the “backpacker visa”). This visa is open to people aged between 18 and 30 from European, North American and East Asian countries, allowing them to work in Australia for a year (citizens of Canada, France and Ireland have an age limit of 35). The scheme proved incredibly popular, and many people used it as an opportunity to advance their careers or find a pathway towards permanent settlement in Australia.

Capitalising on this sentiment, the Australian government decided to offer the chance to gain a second year-long visa if people first spend three months working in the agricultural industry in a rural setting. Subsequently a third year-long visa was made available after a further six months of agricultural labour.

Yet the upshot was to completely skew the agricultural labour market towards a group who weren’t actually committed to the regions they were working in – people who would simply disappear after meeting their minimum requirements. At the same time, it created a captured market for employers. This led to numerous instances of worker exploitation in both wages and conditions.

Fast forward to the present and the Covid-19 pandemic, and the restrictions on movement to Australia have meant the reliance on this visa group has also created a serious labour shortage in the agricultural industry.

In competition with these backpackers is one of the central pillars of Australia’s “Pacific Step-up”, the Seasonal Workers Program (although the scheme itself pre-dates the “Step-up” branding). The seasonal workers program aims to create agricultural job for citizens of Australia’s Pacific Island neighbours, as well as those of Timor-Leste.

Providing labour market access to developed economies for the citizens of developing nations has long been understood as the most effective – and least paternalistic – tool to enhance their livelihoods. Pacific Island governments have sought such access for some time. In contrast to backpackers, these seasonal workers return each harvesting season, understand the requirements of the work, and because they are supporting families in their home countries ­– rather than just ticking a box ­­– are regard as more committed and productive. 

According to the World Bank, following several months within the seasonal workers program, Pacific Islanders typically send back around $8,000 (US$5,700) to their families in their respective countries. This can be as much as three years worth of wages that they would earn at home. Tongans are the largest group who utilise the seasonal workers program, in per capita terms, and it has been estimated that their net earnings exceed the combination of Australia aid to Tonga and Tonga’s exports to Australia – an indication of why the scheme is so valued through the Pacific.

Yet the seasonal workers program has significant barriers to entry for agricultural businesses. Employers must be pre-approved by the government, and all positions they have must face labour market testing. Employers also must also provide accommodation, and be responsible for worker welfare outside of work hours. This helps mitigate against the chance of exploitation (although not completely), but it also leads some employers to baulk at using the program for their labour needs, seeing the framework around the scheme as too burdensome, especially when hiring backpackers involves none of these provisions.

These barriers to the seasonal workers program actually serve as a sheet anchor holding back one of the primary aims of Australia’s foreign policy: to foster the stability and prosperity of its Pacific neighbours. With the Covid-19 pandemic decimating the region’s tourism industry, the seasonal workers program will be even more vital for Pacific Islanders once borders gradually reopen.

Yet Australia should be looking for more ways to further encourage the agricultural industry to use the program to meet their labour needs. The most obvious solution would be to reconfigure the backpackers visa to reduce its agricultural components. However, the visa should not be completely abolished, as some unions are advocating in a misguided belief that Australians would rush to take these jobs instead. They won’t. The working holiday scheme remains an important instrument to attract young and educated people to Australia.

Reducing the unbalanced competition this visa creates in the agricultural labour market should be a priority for the government. There is currently a strong alignment of needs between Australia and the Pacific in this area. Allowing the seasonal workers program to flourish is in Canberra’s interests just as much as those of Pacific Islanders.