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BR Research

Trials, tribulations and opportunities: COVID-19

    Governments around the world are like the deer caught in the headlights. They are trying to man
03 Apr 2020

 

 

Governments around the world are like the deer caught in the headlights. They are trying to manage a crisis they do not fully understand, and most are floundering. That’s a global pandemic for you. Economies are getting hit, more people are sliding into poverty, borders are closing, and global supply chains are scrambling to find cover. Domestic situation is no better. So, is there any silver lining? It really depends on us.

As per a recent PIDE bulletin, authors — Naseem Faraz and Muhammad Nasir — estimate that global trade disruptions in a scenario where there is a 20 percent decline in Pakistan’s imports and exports could lead to a 4.6 percent loss in GDP. That’s huge and this is not counting the impact of the current ongoing lockdown, the decline in FDI, remittances and hit to sectors such as aviation, tourism and hospitality.

Businesses in Pakistan, particularly SMEs are cash-strapped and facing a distinct demand slowdown as lockdown continues. Exporters are aggravated, demanding the government to cover their dollar hedges gone bad (which the government should not), and getting particularly hit in key markets as exports orders are drying up and/or being cancelled (a legitimate concern).

But here are other facts: according to a trade analysis note, every month, frontline health responders around the world need 89 million masks, 30 million gowns, 1.59 million goggles, 76 million gloves, and 2.9 million hand sanitizers. Then, there is the souring demand for medical equipment including ventilators.

Another fact. Some of the main suppliers of Personal Protective Equipment (PPE) such as China, United States, Germany, Malaysia and Vietnam are introducing measures to restrict or ban the export of these highly urgent goods. European Union has introduced a license and permission scheme for exports to ensure these supplies are available internally.

So, here’s a completely crazy idea! Let’s be the first responders. The SBP is making financing available to businesses. Firms need to think beyond existing business models. Aside from specialized medical equipment, the demand right now is for relatively low-tech products, and businesses have the resources available to make them.

The good news is that Murree Brewery is making hand sanitizers, Pakistani designers are making protective gears and auto parts manufacturers are making ventilators. In fact, auto vendors are currently at the testing stage of these important life-saving medical equipment (Read more: “War on Coronavirus: Businesses must say aye”, March 30, 2020). All this needs to be dialed up to 200!

Yesterday, Hussain Dawood pledged a billion rupees towards PM’s Corona Relief Fund – a generous gesture. A lot of companies are pulling together CSR funds to donate hygiene products and rations; but commerce must also persist.

Pakistan has a large SME sector and a huge labor force that cannot get financial assistance from the government to cover more than a month’s worth of food. The current cash handout of Rs12,000 (meant to cover 4 months) will likely be consumed in the first month. People need jobs, and they are out on the streets looking for them despite the lockdown. Of course, factories will have to recalibrate production processes to incorporate hygiene and safe distancing. But this is the time for business intellectuals and foreign MBAs collecting big paychecks to wear their creative hats. What can be done?

The economic decline is coming and it will be catastrophic for most. But if coronavirus is war, Pakistanis needs to “go to the mattresses”—to use a Godfather reference. They need to take the fight to the rival. Complacency won’t cut it anymore.