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How to revive economy under the New Normal

A.K. Enamul Haque | November 10, 2020 00:00:00

Business has really been dealt a blow since the outbreak of coronavirus in Bangladesh in March — FE Photo

Covid19 has battered the world economy and the cost of the pandemic is that the world has lost more jobs than any other single event in the recent past. Countries across the world lost control of their respective economies. By April 2020, both retail and manufacturing output dropped by nearly 40% from that of December 2012. The biggest loser surprisingly is India, which lost nearly 67% of its total manufacturing output, the least loser is China which lost only 2% of its manufacturing output. US lost about 21%, Brazil 30% and so on. In terms of retail sales France lost nearly 34%, China 9.0%, Brazil 20% and so on. With second wave (possibly third wave in US) of pandemic attack coming, the situation is rather gloomy for many countries. However, by August China recovered its manufacturing output to its December 2019 level and the rest are still trailing. On retail sales, US, Japan and Germany recovered by June.

On the agricultural front, pandemic did not significantly affect output. So, the manufacturing and the service sectors of the economy remain the key candidates for the recovery. This is probably the most important message from this pandemic and it also provide a clue on how to revamp the economy in the quickest period of time. While the economic and political gurus are working overtime to find a solution to the economic downturn, to me, the solution seems to be rather simple. Bring back the manufacturing output and mobilise the service sector.

However, the task is not simple. As of now, the pandemic shows no sign of retreat. The health cost to the economy is still heavy and countries are losing a generation due to the pandemic - a generation of old but wise people. Given the fact that there is no sign to find a medical solution to the problem, countries are taking a detour - may be to find a social solution to the problem. In the east and south east Asia, the solution seems to be simple - wear the mask, keep the distance, trace the patients, and wash your hands. This is perhaps the least costly solution that exists today.

Meanwhile, International Monetary Fund (IMF) has given an outlook that has put everyone on alert in South Asia. It has predicted that with a fall in income in India, the per capita income of Bangladesh is about the go above India. The success of Bangladesh to surpass India and also Pakistan is a miracle. It has done so not only in terms of income but also in terms of other social accounts - be it women empowerment, literacy, health, or even life expectancy. It is in this context; Bangladesh needs to be careful and must steer its economy into growth rather than become complacent with the success.

I still remember the days when we used to write 'Population is a Problem" for Bangladesh. The pandemic has shown that it is not the problem rather it is the density of population that kept the economy running despite months of lockdown. Of course, there are other factors. The biggest surprise for Bangladesh, however, is its low rate of death from Covid infections. No one yet could explain this phenomenon properly. While we wait for the scientific community to explain the low death rate of Covid-19 patients in Bangladesh, I would like to talk about how we can recover quickly.

Bangladesh economy is now up and running ever since the government lifted the complete lockdown rule. By now research have shown that lockdown does not work either it reduces spread or promotes economic sustainability. So far, Bangladesh's RMG export has recovered above the 2019 level in July and by August Bangladesh has also recovered from its initial loss of remittance inflow. These are real good news for Bangladesh.

However, the government must now consider further steps to ensure that the motion of the economy is back to normal. The risk however is to ensure that the Covid remains under control. The solution lies with that of China, Korea, Vietnam, and Japan. Let us see, what the Chinese did to recover their economy quickly. First, they used contact-tracing to ensure that infected people stay at home for a period of 14 days once they are detected or exposed. Second, they locally quarantined the communities once a case is detected. During this period, they ensured supplies of food and other daily essentials to the people. The cost of this is much less than that of releasing them to expose others. Third, they prepared the health system to deal with it efficiently.

Vietnam, on the other hand, did surprisingly well compared to others. They quarantined all the incoming passengers from abroad for 14 days since January. This effectively stopped spread of the virus into the population. The result is stunning - almost zero death. Bangladesh did the same in case of returning students from Wuhan. However, it failed in case of Italians. The returnees violated the government order and left their quarantine location in March. The impact was devastating.

Bangladesh economy went into 'coma' since March 17. The cost was heavy for the economy. The value of quarantining the returnees cannot be underestimated. It is true that we did not provide a good environment for the returnees but they could have pay for this. This shall be the rule until we have found strategies to deal with this deadly disease.

Korea did the same. The asked any travelers to stay in hotels in self-isolation for a period of 14 days upon arrival. They also ensured contact tracing and stopped public gathering of people to reduce spread. They, however, like others in east Asia, did not go under a complete lockdown.

Japanese actions are rather astonishing. Legally, the Japanese government cannot prohibit its population to stay home or put under any mobility restrictions. They, however, had a social capital - their citizens. Japanese people have a high trust on their government and so despite the fact that the government cannot stop people to come out of home and expose to the infections, they provided advisory notification to their citizens. They 'requested' their citizens to wear masks, keep the distance and remain inside if possible. Miraculously, the Japanese people listened to this advisory. The result is equally miraculous - the country recovered quickly and did not lose much.

Given these experiences, Bangladesh must learn how to revive its manufacturing and the service sectors to ensure that we allow the growth trajectory as planned. Major service sectors in the economy include a) transportation, b) hotels and restaurants, c) retail and wholesale trades, d) entertainment services; e) education services and f) healthcare services. Many of these are already open and has contributed to boost Bangladesh economy except education.

It is now important for Bangladesh to provide a roadmap to bring back the economy in order. First, no mask no entry rule must be implemented in all public places, shopping centers, transport networks without exception. This is 'the key' for success. The cost of violating this directive must be high enough so that people have incentives to follow them. Since monitoring is also costly and cannot be done for every instance of violation, the financial cost must be high once a person who is caught. The operator of the business like airlines, bus-owner, shop or shopping mall owner etc., must be brought under the penalty for not ensuring this. This will give incentive to them to provide free masks to everyone who cannot afford or did not bring a mask and avoid the penalty. This rule shall be applied to all operators of public places.

Second, educational institutions must also learn how to survive during Covid. The first solution is to use online delivery system. However, there are limitations. So the educational institutions must be brought under a strict accountability rule. The class size must behalved to ensure distance inside classroom. School entry must be staggered to avoid crowding during entry and exit. Mask and hygiene rules must be applied to all staff and students. Schools must not admit students from outside their locality - a principle globally known as 'school district'. This will ensure that parents can walk their children to the school. With such a heavy density of population this is not exceedingly difficult to implement. There are 100,000 people live in one square kilometer in Dhaka city for example. It will increase number of schools or force existing schools to open branches and so it will create jobs. For the time being this is a must. It will also reduce need for parents and students to use public transportation and so reduce density in the transport system. Exception may be granted to schools which provide school bus service to their students.

Third, public examinations shall be limited and only top 50% of the class may be allowed to put under public examination system. Examination shall be held in the same school with invigilators from outside. Fourth, the government will rank schools based on the performance in this exam. There shall not be any public examinations prior to Class X. Since schools are under public grants, the government must impose penalty on low performing schools. This will ensure that schools still are careful to select their top 50% students for public examinations.

Fourth, public services must be brought under digital networks. This will reduce crowds in offices and will create jobs in rural areas who will use third party operators like financial services, application services, etc.

Fifth, all manufacturing units must be brought under rules of hygiene, mask and distance. At the same time. Government must bring them under an Covid accountability system so that they ensure the following - in-campus contact tracing, temperature monitoring at the entry and exit, provide mask and handwashing facilities in their premises. A similar rule must also be used in the tourism sector, religious services, as well as in social or family gatherings.

Finally, health services are in big trouble. All health care facilities must have Covid-diagnostic system to operate otherwise, health service will be normal. A strict protocol to deal with incoming patients must be prepared and maintained in all health-care facilities.


Dr. A.K. Enamul Haque is Professor of Economics, East West University. E-mail: [email protected]

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