By Anbound Malaysia (ANBOUND)*
Like other parts of the world, the current COVID-19 pandemic has taken ASEAN by surprise with some member countries imposing major lockdowns in order to contain the spread of the disease. Such approach, of course, has its absolute relevance in public health discipline and is even required to contain the pandemic from spreading further to the wider populace. On the other side of the coin, however, any major lockdown will definitely have wide-ranging socio-economic impacts as alerted by many analysts, as well as political risks that have not been intensively argued by ASEAN pundits at large.
Wide-ranging Socio-economic Impacts
As far as economic impacts are concerned, the COVID-19 lockdowns impacted different ASEAN countries in four distinctive ways. First and foremost, any lockdown results in ASEAN-wide supply chain disruptions that have been impacted by the earlier lockdowns throughout China. Following China’s suspension of production for the past two months, the regional supply chain has been severely disrupted with ASEAN countries such as Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines, have seen their production lines impacted at varying degrees, as theirs are closely connected with that of China’s. Given recent lockdowns in Malaysia, the Philippines and Thailand as well as potential ones in Indonesia and Vietnam in the coming days, the disruption of supply chain has now been extended into ASEAN region-wide — resulting in job losses and income reduction of the workforce within the production chain.
Second, ASEAN countries are still reeling from the ban of Chinese tourists that in turn, adversely affected the former’s tourism sector and local players. As Jayant Menon highlighted, the country most affected is Thailand which received the most Chinese tourists among other ASEAN peers. Now with the broad lockdown throughout Thailand, it is even more difficult for the country to receive Chinese tourists and not to mention the latter shying away from visiting the Land of Smiles even if China lifts its travel ban in the foreseeable future. Again, with such scenario, job losses and income reduction of the tourism workforce are imminent as local tourism players are struggling to weather through this difficult period even after the pandemic is over. And this is not to mention those in the informal sector who make their ends meets from the tourists, especially those from China.
Third, the fall of oil prices which indirectly induced by the deterioration of global oil demand, is also hitting hard on oil-producing countries in the ASEAN region. This is particularly relevant for Indonesia, Malaysia and Brunei which are major oil producers in Southeast Asia. With fall of oil prices, these ASEAN countries are faced with declining national revenues from oil selling and with that, governments of these nations will be left with constricted room for public spending to distribute monetary aid to the populace during the lockdown period and after the end of it.
Last but not least, the high levels of Chinese investments and aid as witnessed in certain ASEAN countries are also facing downward pressure in light of potential economic slowdown in China as the global economy (Beijing’s major export destinations) is taking a big hit from the COVID-19 pandemic. Despite its expected domestic economic recovery in the coming months, the widespread and significant reduction of global demand has made it more challenging for China to resurrect its national economy in the shortest period of time. With some Chinese companies facing cash flow problems in the post-lockdown era, those planning or already investing in Cambodia and Laos may even find themselves at stretch in maintaining their scales of investments and aid in these two Mekong countries as had been the case before the pandemic. Yet again, this will prevent more job creations and income level improvement in these host countries.
Three Potential Political Risks
Unlike the wide-ranging socio-economic impacts as explained above, the political risks are not straightforward as the former. In fact, these risks will only become realities once the lockdowns become longer than expected due to inability to contain the COVID-19 pandemic within the desired period of time. Henceforth, should such situation occur, governments of ASEAN countries should be wary of the political risks that resulted from such protracted scenario. Having such projection of political risks will help them to make better decision-making and roll out policies that will prevent any decline of status quo in their countries.
The immediate political risk is domestic political instability that emanated from mass lay-offs and income reduction of affected workers during and after the end of lockdown period. For many ASEAN countries which have relatively lower healthcare capacity in responding to this unprecedented public health crisis, a prolonged period of pandemic may become the outcome of such weakness. Without international assistance/aid, such protracted situation warrants an even longer period of national lockdown which in turn, magnifies the abovementioned socio-economic impacts in terms of job losses and income reduction. In the advent of these situations,
waves of anti-establishment social unrests will unfold, threatening not just the political regimes but also, the overall political stability in these countries. If such anti-establishment wave can occur in Europe, there is no reason that it will not occur in Southeast Asia.
By extension to that, the rise of populism is another political risk that can be utilised by aspiring politicians to gain power by utilising the dissension among those who lost their jobs and higher income during the lockdown period. As highlighted by Anbound Malaysia in the past, though populist politics have yet to become a determining force in ASEAN’s mainstream politics, its appeal to the wider populace remained there long before the COVID-19 pandemic. But with COVID-19 pandemic sweeping across the region and jeopardizing the economic prosperity enjoyed by many ASEAN countries, the rise of populist politics will no longer exists as mere imagination. Once its criteria ⸺ deteriorating socio-economic conditions and large-scale public dissension on existing political regimes ⸺ are met, certain politicians will be aspired to utilise such opening and ride on populist politics in order to gain power. From what the European cases have shown, such riding of populism will trigger chain of reactions that are beyond the control of political regimes themselves.
Finally, racial tension is the other political risk for certain ASEAN countries with sizable minority (local) Chinese population or foreign workers coming from China. As underscored by Jefferson Ng, Indonesia is a typical case of such situation. With history of racial riots, Indonesia’s racial tension has been papered down by economic prosperity in the country for the past decade or more. That said, there is no guarantee that the Chinese (be them local or foreign) in Indonesia will not be singled out as ‘COVID-19 carriers’ as had been in the US recently. Depending on the severity of socio-economic impacts following the potential national lockdown or even post-COVID pandemic, local and foreign Chinese community in Indonesia may face higher racial discrimination or even racial violence in the country that has the history of racial riots. Similar to the rise of populist politics, it is equally difficult to dissect the far-reaching repercussions if racial tension is resurrected in similar ASEAN countries that have a history of racial violence against the Chinese. This is something which international pundits should observe in the coming months or year.
*ANBOUND Research Center (Malaysia) is an independent think tank situated in Kuala Lumpur, registered (1006190-U) with laws and regulations of Malaysia. The think tank also provides advisory service related to regional economic development and policy solution. For any feedback, please contact: [email protected]