As a way to combat the spread of the Covid-19 epidemic, governments around Asia have been implementing ways that minimize face-to-face interactions. Following in the footsteps of China, the governments of Malaysia and the Philippines instituted lockdowns in major cities, with other states contemplating similarly drastic measures.
The increasing implementation of physical lockdowns puts Asian economies in a bind. The government-instituted halting of people’s movements represents devastating news for Asian countries whose economies depend on close physical interactions, primarily through tourism and manufacturing. Tourism makes up more than US$2 trillion of the overall economy of the Asia-Pacific region, while factories and workshops contribute 27.63% of Asian gross domestic product.
The case of Thailand is particularly illustrative. Foreign tourist arrivals plunged by 44% in February in a country where tourism revenues represent 21.6% of the overall economy. Factories are also forced to cut back production, exacerbating overall economic difficulties, as manufacturing represents another 26.92% of Thai GDP. Stringent orders of lockdowns practically shut down half of the economy.
As the labor-intensive tourism and manufacturing sectors suffer disproportionately from “social distancing” measures, some are pinning hopes on the possibility that the less physically interactive parts of the Asian economy can pick up some of the slack. Online platforms of traditionally bricks-and-mortar finance, health-care, and media industries are promised to show accelerated growth, while e-commerce is tipped to emerge as a potential winner from the Covid-19. The logic goes that the growth of firms remotely providing products and services will offset slumps faced by operators of physical shopfronts.
Yet such analyses ignore the fact that providing products and services to consumers remotely often still requires workers to get together in physical spaces. Workers in warehouses storing goods for e-commerce firms face the same risks of contracting the Covid-19 as their counterparts in factories.
Even white-collar workers cannot simply trade their office cubicle for the living room. For instance, even though 72.24% of the Japanese labor force is employed in the services industry, a Japan Times article quotes a 2018 government survey showing that only one in five Japanese firms considers itself ready for remote work and a mere 10% of employees have any experience or training in same. The same article argues that stringent intra-company security measures and a culture of long work hours act as barriers for implementing work from home.
An office-centric work culture can disrupt even parts of Asian economies that do not provide products and services to consumers face-to-face.
With government-instituted lockdowns in the face of the Covid-19, it will remain difficult for Asian economies dramatically to reduce reliance on workers and consumers meeting physically to transact. Even beyond the persistence of office-centric work styles, present-day business culture in Asia does not go well with sustained lack of physical contact.
Business consultants point to the importance of personal relationships, maintained through trust-building face-to-face meetings, as the key to succeeding in the Asian business scene. No amount of Zoom and Skype calls can replicate such physical relationship exercises. Simultaneously, global manufacturing giants find themselves unable to shift their factory work to other parts of the world despite the risk of relying exclusively on “Factory Asia.”
Therefore, it is important for business leaders in Asia to remain skeptical that remote work and the online economy can act as a buffer that at least partially absorbs the “coronavirus shock.” Not only is a significant portion of the economy dependent on tourism and manufacturing sectors that simply cannot do without physical interactions, but office and warehousing work that underpins the IT sector also cannot shift to work from home at the snap of fingers.
Business leaders, as such, are better off assisting government authorities in any way they can to speed up the containment of the Covid-19 to minimize the duration of lockdowns.