ASEAN’s stimulus measures must go beyond short term — Kearney Singapore partner
21 Apr 2020
Stimulus measures announced by several ASEAN governments were timely, but the assistance provided to the small and medium enterprises (SMEs) is limited and targeted at providing support and relief in the short term, according to panellists at a web seminar.
They were speaking during the first online ASEAN Roundtable Series organised by the CIMB ASEAN Research Institute (CARI) today with the theme “ASEAN’s Response to COVID-19: Medium-term Outlook and Urgent Stimulus Measures for the Business Sector”.
Kearney Singapore partner Chua Soon Ghee said most of the stimulus packages have been focused on alleviating the pain of a sudden sharp drop in demand through some combinations of wage assistance, fees rebates or deferrals as well as loan support.
New rounds of support should go beyond the short term, he said.
“With continued social distancing until a vaccine is widely available, there will be reduced demand for industries such as travel, hospitality, food and beverages (F&B), retail, energy, and therefore longer-term support for a year would be required,” Chua said.
His views as well as those of other panellists were contained in a statement issued by CARI on the webinar, which brought together business leaders from Malaysia, the Philippines, Singapore, Thailand, and Indonesia.
In the statement, Chua was further quoted as saying that critically, governments need to help SMEs address cash flow problems directly by providing loan support to keep them afloat until demand returns to normal.
Equally important, he said, is the need to de-bottleneck the assistance to the SMEs due to slow flow-through within the channels which are tasked to distribute the benefits to downstream companies.
The flow-through has been slow in many circumstances and will need to be accelerated through either moral exhortation, legislation, or direct cash to affected individuals and companies, he opined.
Additionally, the panellists agreed that diversification of supply chains also involves reducing the region’s overdependence on Chinese manufacturers and raw materials.
Disruptions in the supply of raw materials, labour, and sub-assembly components to ASEAN, particularly from China, had a significant impact on ASEAN industries.
“The sudden China shutdown triggered a global supply chain shock and will accelerate the movement of some manufacturing from China to ASEAN and elsewhere.
“China has a 28 per cent share of global manufacturing, while ASEAN is only at 4-5 per cent. For those countries who are prepared with policy tools such as incentives and schemes, this will be a golden opportunity,” Chua said.
Meanwhile, Sintesa Indonesia chief executive officer (CEO) Shinta Widjaja Khamdani said that although there are limits to the extent what ASEAN countries can do to save themselves from the economic damages and crisis projection caused by the pandemic, all policy responses and government spending that are aimed at alleviating financial burdens on business, such as reducing tax and credit burdens as well as compliance cost, will translate into survivability for business in the longer term.
“This pandemic has raised the alarm that regulatory efficiency; the accuracy of the overall economic activities data (particularly the informal ones); interconnectivity and diversification of supply chain, both domestic and cross-border supply chains included, are capital that saves our economy in a crisis,” said Shinta, who is also deputy chairman (international relations) of the Indonesian Chamber of Commerce and Industry.
Other roundtable panellists were Map Ta Phut Industrial Gasses Co Ltd Thailand chairman Arin Jira and RFM Corporation Philippines president and CEO Jose Ma Concepcion III.
The panel discussion was chaired by CARI chairman, Tan Sri Dr Munir Majid, who said ASEAN countries should not be in a state of COVID-19 paralysis.
While confronting the attack on health and lives, they must also open up corridors to livelihoods and economic activity, he said.
“This calls for imaginative policy implementation and enforcement, as well as for personal and corporate discipline,” he added.