As COVID-19 will drive up poverty rates in ASEAN, affecting some countries more than others, experts are worried it could undo years of hard work.
Nobody will escape the impact of the COVID-19 pandemic. Some will feel worse consequences than others, depending on their age, social status and location. There are now fears, however, that ASEAN’s poor could be among the worst affected.
In a report published at the end of March, The World Bank made some eye-catching and gloomy predictions about poverty in its East Asia and the Pacific region, which includes all of ASEAN except Brunei and Singapore.
The headline numbers are stark: 24 million fewer people will escape poverty in 2020 and an additional 11 million people will fall into poverty—defined as living on US$5.50 or less per day—in the worst-case scenario.
“Countries in East Asia and the Pacific that were already coping with international trade tensions and the repercussions of the spread of COVID-19 in China are now faced with a global shock,” said Victoria Kwakwa, World Bank’s Vice President for East Asia and the Pacific.
According to the World Bank, economic growth in the region will stall and Indonesia, Malaysia, the Philippines and Thailand will all see negative growth. Though the report outlines recommendations for how states can reduce the impact of the slowdown, this will have a knock-on effect on all sectors and those with the least look set to lose the most.
ASEAN was working hard to reduce poverty—and achieving results
Countries in the region have pushed hard in recent years to lift as many people out of poverty as possible. In September, The World Bank highlighted several schemes that were bearing fruit, from programmes in Thailand that reduced stunted growth in children from 25% to 11%, to Vietnam’s commitment to education reform and Singapore retraining and reemploying older workers.
Nevertheless, there was still a long way to go. According to the World Health Organisation and UNICEF, 25.7% of children in Southeast Asia under the age of five are still affected by stunted growth. Literacy rates are poor, and 15% of 15-year-olds will not reach the age of 60.
More worryingly, as economic growth slowed in 2019, so did the rate of poverty decline in southeast Asia. In Thailand, despite positive economic growth, poverty increased. Now, COVID-19 looks set to slow the rate of decline further and may set ASEAN back decades in its fight against poverty.
COVID-19’s impact will vary from country to country
The outlook in each country will be slightly different, although poverty rates are expected to rise throughout the region. The World Bank notes that in Indonesia, those without adequate social protection are at risk of falling into poverty.
The downturn in tourism due to COVID-19 will hit Cambodia, Laos and Thailand particularly hard. With 68% of its labour force concentrated in agriculture, Myanmar could, the report claims, “lose the gains in poverty reduction achieved in the last decade.”
The World Bank expects Thailand to see no reduction in poverty this year, and by 2022, there could be more people in poverty in the country than there were in 2015. In Vietnam, World Bank economists expect a temporary rise in poverty before the decline resumes again in the longer term.
Overall, however, the prospects are bleak. “The poor will get poorer—and there will be more of them—and even rich countries will struggle to keep businesses and households afloat,” warned Karishma Vaswani, BBC’s Asia business correspondent.
Can anything be done about the impending poverty crisis?
Despite its pessimistic outlook, The World Bank believes governments can do something to mitigate the impact of the pandemic on the region’s poor.
“The good news is that the region has strengths it can tap, but countries will have to act fast and at a scale not previously imagined,” Kwakwa said.
Governments must, the report urges, now invest in healthcare and subsidies for its workforce—to provide sick pay and healthcare, for example. They must take a long-term view. Governments could also offer easier access to credit facilities. This would boost consumption and keep economies moving. They could consider investing more in education—one of the key drivers in lifting people out of poverty.
Most countries in the region have already pledged some investment to resuscitate their economies, but those funds will mostly be used in the short term to boost medical supplies and testing capacity.
Indonesia appears to be following the World Bank’s recommendation, as the government committed to spending US$24.8 billion on medical supplies and social support programmes—on top of an $8.1 billion package to bolster the economy against the pandemic’s impact. Time will tell whether it will make a difference.
In terms of spending, some countries in the region are better placed to find additional funding for their health care systems than others. For example, Singapore has already pledged more (US$558 million) than Cambodia (US$70 million), Myanmar (US$200,000) and Vietnam (US$51 million) combined.
ASEAN nations must continue to work together to limit the damage
Furthermore, the World Bank believes a coordinated and cooperative approach is necessary. “Deeper international cooperation is the most effective vaccine against this virulent threat,” Aaditya Mattoo, World Bank chief economist for East Asia and the Pacific, claimed. “Countries in East Asia and the Pacific and elsewhere must fight this disease together, keep trade open and coordinate macroeconomic policy.”
ASEAN nations have already clashed trying to align responses to COVID-19 but when it comes to poverty, they have historically worked well together. Late last year, there was further cross-region commitment to share knowledge and resources to better combat poverty. “Disparity, poverty, education and health remain a challenge [sic] in ASEAN,” said then-ASEAN Secretary-General Lim Jock Hoi in September. “We have to make human capital development an integral part of our development.”
COVID-19 will test ASEAN leaders’ commitment to that cause more than any other regional or global challenge. It seems inevitable that the pandemic will both prevent people from escaping poverty and suck others in. Depending on how long the pandemic lasts, some countries could see their recent gains erased, wiping out years of good work in human capital development.
Recent examples have shown that once tourism dries up, poverty increases. The World Bank noted that in 2018, following a reduction in tourism after a boat accident, Phuket was the sole province in Thailand that saw poverty rise.
The drop-off in visitors from abroad is particularly concerning for Cambodia, Laos and Thailand, whose economies depend heavily on tourism, an industry which employs huge numbers of their citizens. On top of declining agriculture and manufacturing, this paints precisely the picture the World Bank has laid out. COVID-19 will make escaping poverty in ASEAN a harder challenge than ever.