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BR Research

Corona and Pakistan’s on-demand economy

  In all likelihood, Pakistanis will have to co-exist with COVID-19 for at least several months. There is p
Updated 19 Mar 2020

 

In all likelihood, Pakistanis will have to co-exist with COVID-19 for at least several months. There is panic all around, from media to markets. Some panic is justified, given that lack of “universal testing” makes it impossible to know the scale and location of people that are carrying the silent infection. The only viable strategy is to slow the viral spread by observing precautions at personal, social and national level.

The fallout for households and the economy will be suffering over impending period of lockdowns. But this is about survival, and technology can help in blunting the crisis severity. The obvious cases of tech-related mitigation include a section of the white-collar workforce being able to work from home, children taking online lectures at home, and doctors engaging in telemedicine to advise vulnerable patients.

Perhaps, the greatest potential lies in the increasing reliance on Pakistan’s billion-dollar “on-demand economy,” which can really come into its own during this crisis. If “social distancing” becomes the norm in Pakistan over coming weeks, the demand for “survival goods” – that is, essential items relating to foods, medicines and hygiene supplies – can be met through online marketplaces that specialize in meeting consumer needs at their doorstep.

Necessity is the mother of invention, they say. Even better, necessity could become the grandmother of behavior change, as enough people may soon realize that avenues already exist to make survival purchases without stepping out. There is online shopping, so simply order groceries at doorstep; there are digital payments, so no more ATM visits; and there is home delivery, if cooked meals are in order.

In a way, the online economy can help to keep the wheels of offline economy running. The potentially higher usage of digital solutions may be among the legacies that this health crisis leaves in its wake. But can the system cope with the demand coming from millions of upper- and middle-class households? Daraz, the leading e-tailer, delivers about 50,000 packages per day, on average. The food delivery market is estimated at Rs27 million per day, roughly 55,000 food packages at Rs500 average order size.

So, it appears that a locked-down, but hungry demand-side will overwhelm the supply-side of digital economy. Also, the health of workers in this gig economy, who will be exposed to the elements, is of concern; however, something can be learnt from global e-commerce giants that have issued SOPs to keep their workers safe. Another worry is the likelihood of overall shortages of essential foods, medicines and hygiene products. If the supply-chains of essential products somehow keep on running smoothly, can the online marketplaces beef up their capacity in a limited time to meet a likely surge in demand?

That’s where the government, which needs to turn the market into a responsible ally during this crisis, has a role to play. The least the authorities can do at this moment of peril is to ensure that hoarding and smuggling of essentials does not reach alarming levels in the supply chain. Besides, digital economy must be fiscally and procedurally incentivized so that the key players find it attractive to add infrastructural and human capacity to respond to the challenging market opportunity.

Be that as it may, the on-demand economy may end up fulfilling the needs of better-off, better-educated, and better-connected consumers across socioeconomic classes. These are the people who may already be better equipped to ride out the crisis, taking precautions. That leaves majority of the population, which is financially and digitally excluded, locked out of any digital remedies to ease their circumstances. That’s another reminder how technology may exacerbate existing inequalities.