Asia’s economic future and the role of the state in a post-COVID world

James Crabtree
The bestselling author and journalist talks about the far-reaching impact of the coronavirus on Asia’s economies and societies, and how people’s expectations of their governments may change as a result
An interview with
Associate Professor of Practice at the Lee Kuan Yew School of Public Policy, Singapore

The bestselling author and journalist talks about the far-reaching impact of the coronavirus on Asia’s economies and societies, and how people’s expectations of their governments may change as a result

As governments around the world start easing their lockdowns and their stuttering economies limp back to a degree of normalcy, there is realisation that a lot has changed. The prospects of economic growth across Asia, while brighter than the prospects of growth elsewhere, are still grim and threaten to set back by years the development journeys of many of the region’s countries.  

In the first part of this conversation with Unravel, James Crabtree, journalist and author of The Billionaire Raj, and an Associate Professor of Practice at the Lee Kuan Yew School of Public Policy, speaks with Siddharth Poddar and Shivaji Bagchi about the socio-economic implications of the growth outlook for Asia, the changing relationship of people with their governments in the context of the economic role and powers of the state, and the long-term challenges for the region.

Unravel: The Asian Development Bank expects developing Asia to grow by just 0.1% – the lowest growth rate expected for the region since 1961. What are some of the key implications for developing Asia?

James Crabtree: The outlook for Asia is dreadful until you look at everywhere else. Both the ADB and the World Bank outlook say that East Asia is going to be the only region that is not going to have a crunching recession – and that’s mostly because of China. While it’s a dreadful outlook and one that has all sorts of profound implications for poverty rates and economic development in a nutshell, when looked at from what’s expected in other parts of the world, this doesn’t look too bad actually. Within this region, both South Asia and Southeast Asia are also expected to see a contraction in economic activity.

Unravel: Of course, we are expecting East Asia to emerge from this reasonably better than South Asia. Speaking of poverty reduction and economic development, one of the things that comes to mind is that these countries—particularly in South Asia—really need to make investments in the delivery of healthcare services and infrastructure. How is this going to set the region back in terms of investments, given it was already crying out for these investments prior to COVID-19?

Mr Crabtree: Generally speaking, poorer countries are going to be the worst hit by this pandemic. Emerging markets—with a few exceptions like Vietnam and Thailand—are struggling, and regions like South Asia are facing the heat in particular. The way things are now, almost a generation’s worth of progress in areas like reducing absolute poverty are going to be reversed as emerging markets struggle to deal with COVID-19.

But a lot of money is going to go into healthcare systems in an attempt to manage the pandemic. And so, it maybe that healthcare funding isn’t as badly hit as some other areas. In the process, however, many other areas that governments might want to spend in, they are going to discover that they are struggling to find money because their economies were already in such a bad shape. And these countries are struggling across most social indicators, not just those directly affected by the pandemic. This is going to be an extremely challenging time.

The way things are now, almost a generation's worth of progress in areas like reducing absolute poverty are going to be reversed as emerging markets struggle to deal with COVID-19.

Unravel: One of the themes we’re interested in is regionalisation. In this region, while at an institutional level there’s no one formal body that encompasses the ASEAN+3 countries, we do see initiatives such as the Chiang Mai Initiative and various trade and investment related agreements, for example. Going forward, do you think we are going to see other such regional arrangements forming?  

Mr Crabtree: You will see closer integration between Southeast Asia and China’s economy. That’s one of the things that comes out of this. ASEAN is now China’s largest trading partner. The EU or the US has been China’s most important trading partner since forever, but it is now Southeast Asia. So that’s one on an economic level. We will also see increasing integration between the economies of China and Southeast Asia as they are complimentary.

In terms of the region, I do think we could see more regional initiatives of this type. I mean something like the ASEAN+3 was born out of the Asian Financial Crisis. Beyond the pandemic, we could see more regional configurations.

We could also see some of these things being developed without China, or because of China. For example, more groupings like the Quad or some other strategic groupings.

I think this could become a time of institutional innovation in which you get new groupings. You’ve seen this during the crisis already, when you had a couple of groupings setup with countries like New Zealand, Australia and Singapore to maintain trade flows.

Similarly, you’re also going to get groupings around travel. These will be minilateral groupings of countries that are developing standards around post-COVID travel and will result in the creation of travel bubbles that only allow cross-border travel within those bubbles. I think you could also see other groupings emerge around pandemic early warning systems in the region.

But I don’t think you’re going to see anything deeper than that. I don’t think that this will drive a spurt in deepening the powers of ASEAN+3 as an institutional body, for instance. 

Unravel: More disparate groupings for different things?  

Mr Crabtree: Yes, more random, disparate, ad-hoc groupings set up as and when they might be helpful. In essence, this also means that the famous spaghetti bowl of Asian agreements just gets more complicated. 

Unravel: Changing track a little bit. Do you think the relationship between governments and people more broadly will see a change as a result of this pandemic?

Mr Crabtree: We are entering a period of much greater state power in which people are going to expect their governments to do things that were previously—or not for a long time—expected. The whole lockdown period has been a great experiment in learning what citizens will put up with. And it turns out that citizens will put up with quite a lot – and across different areas, ranging from the economic packages that have been introduced to try and keep economies afloat, to surveillance, and through to other areas like schooling.

Publics are going to want greater action from their governments to fix things. Some groups have been hit much harder than others. For example, the elderly in care homes need far greater protection – the pandemic has shone a light on this problem. So medically, you now have a stronger case for much more protection for the elderly. Similarly, the young are being disproportionately hit by the pandemic in terms of their economic position. And with their lack of wealth, there needs to be redistribution from the rich older population to the less prosperous younger population. In a sense, that builds on debates about inequality and intergenerational inequality, particularly in the West.

We are entering a period of much greater state power in which people are going to expect their governments to do things that were previously—or not for a long time—expected.

We’re already seeing things that were earlier considered very fringe ideas like the universal basic income becoming much more mainstream, and we’ll see the same with things like wealth taxes. Here in Asia—not so much in South Asia, but in Southeast Asia—I also think that this will be a real moment in which the size and scope of the state is going to increase quite dramatically. Traditionally, countries like Singapore and Malaysia have been led by politicians who have believed in a small state and have been very sceptical of European-style welfare states. In the aftermath of this pandemic, a lot of that might also begin to change. There will be several new programmes introduced by governments, and people may raise questions on the long-term efficacy of Asian small state conservatism. I do think voters will begin to question that.

Unravel: Coming specifically to the question of surveillance, particularly in this part of the world, we see that the use of high-tech surveillance and tracking technologies have arguably resulted in better management of the virus’ spread. Given that some of the countries that have done a better job of managing the virus, having employed tools such as these, do you think this experience is going to change perceptions around surveillance and privacy? And do you think this is going to be abused by governments?

Mr Crabtree: I think given the choice between a return to economic normalcy and sharing some personal data, most people would be completely unfussed about sharing their data. Moreover, people are already giving away tonnes of their personal data anyway. So, I think it could be justified and even broadly popular in many countries, barring some that have particularly strong feelings about privacy, like Germany for instance.

The question, though, is whether or not what seems like a kind of simple equation will actually work in practice, because it’s not immediately clear that some of the technology that we might be using is working. So far, at least, the evidence is fairly thin that contact tracing apps have actually been useful in augmenting traditional contact tracing.

And yes, there is clearly a risk. I don’t think this is of the contact tracing app that is run by Apple and Google. But in other circumstances in which you give large amounts of data to the government, the government may very well keep that data and find useful things to do with it. There is definitely a risk element. For example, recently in South Korea, it emerged that patient data from the Middle East Respiratory Syndrome (MERS) outbreak in 2015 was kept thinking it could be quite useful to have at some point in the future. They just kept it and were sitting on it. There definitely is a risk that governments that take powers to keep and analyse data in the time of pandemic will not give those powers up afterwards. And for the ultimate example, just look at China where there are very few restrictions on what the government and government-associated or linked companies can do.

In Southeast Asia, I think that this will be a real moment in which the size and scope of the state is going to increase quite dramatically. There will be several new programmes introduced by governments, and people may raise questions on the long-term efficacy of Asian small state conservatism.

Unravel: Given all that we are seeing, what would you say are the biggest challenges for emerging economies in Asia at the moment?

Mr Crabtree: There are two big challenges. The first is obviously managing the pandemic. That is much more difficult in an emerging economy than it is in rich economies. When it started out, it seemed the pandemic is going to hit rich countries worst given their older populations, but that really hasn’t turned out to be the case. This is a very long-term battle, and having resources and efficient governments becomes much more important. The records of Kerala in India or Thailand show that middle-income countries can do just as well as rich countries like New Zealand or Germany in terms of how they have managed this. But in general, managing a pandemic is much more difficult for a state that isn’t well funded and often has low capacity.

The second challenge is to manage the economic fallout of this pandemic. Richer countries can do many things with monetary policy. They can borrow very cheaply and afford to spend large sums of money to cushion the blow. That’s much more difficult if you’re India or Pakistan or Bangladesh. And as if that isn’t already a big enough problem, you have a global economic outlook that looks much less rosy than it did say 10 years ago. Back then, we thought emerging economies as a group could grow at 6% or 7%, but now those projections are substantially lower.

There’s been a marked slowdown in global growth and that makes it much more difficult for poorer countries like Cambodia or Myanmar. Over the longer-term, it is also now much more difficult for these countries to follow the kinds of economic development paths that Thailand, Malaysia or South Korea took a generation ago, because the economic system that a lot of these countries thrived in, isn’t working in quite the same way.

The second part of the conversation can be read here.

Print Friendly, PDF & Email
Author profile
Associate Professor of Practice at the Lee Kuan Yew School of Public Policy, Singapore

James Crabtree is a Singapore-based author and journalist, and an Associate Professor of Practice at the Lee Kuan Yew School of Public Policy. His best-selling book, The Billionaire Raj: A Journey Through India’s New Gilded Age, was released in mid-2018. It was short-listed for the FT / McKinsey book of the year. Prior to academia, James worked for the Financial Times, most recently leading coverage of Indian business as Mumbai bureau chief, between 2011 and 2016. He is now a columnist for Nikkei Asian Review, and also a non-resident fellow at the Asia-Pacific programme at Chatham House.

You may also like