Economic crises are not new to human. The phenomena is going on from unknown times. In past recession were triggered due to supply or demand shock, or bad performance or mismanagement of financial sectors. We can quote numerous examples from known history of human kind like great recession of 1930s or the latest recession of 2007-8. World had become used to and devised a set of tools to counter the impacts but COVID-19 triggered economic turmoil has introduced entirely new dynamics.
The crisis triggered by COVID-19 has two distinguish characteristics, which make it different from the past, 1) the closure of economic activities, 2) reduced or no mobility. The closure of economic activities is new dimension of problem. Markets are closed. Services sector is on standstill. Production facilities has been closed. Trade has gone down substantially, and shipping industry is going through worst crisis of its history. The closure of production sector is about to give birth to supply shock. The situation will be further complicated due to demand shock, as joblessness is increasing which will lead to lower consumption.
On other hand mobility is entirely a new problem, which humanity never faced before. Lock down across the world has confined people inside homes. Reduced or no mobility has introduced a plethora of problems. Services sectors are going through record losses. Like, aviation industry is expected to lose hundreds of billions of dollars (153-273 billion). Tourism industry is also facing severe problems due to lack of mobility. The accumulative loss would be in trillion of dollars for tourism industry. It has been predicted that only Middle East will loss about US$ 40 billion in next few months. Lack of mobility has also introduced problem of joblessness at mass scale. The most impacted section in services is daily wagers. Governments across the world are struggling to find a viable option to stop the process but without any success.
Pakistan can start building alliances with these countries to provide them food in exchange of investment in agriculture sector. It will also be good source of earning
Although all countries are suffering but the least developed and developing are bearing the worst impact and Pakistan is no exception. The closure of economic activities has brought the economy under tremendous pressure, which was already struggling to revive. Millions of people have already lost the job. Lack of mobility has introduced multi-dimensional problems. Supply, chains are disrupted, and food supply chain is under great pressure. Supply chains in Pakistan are dominated by human and only a small portion is mechanized. The over dependence on human resource has exposed the country to possibility of wider spread of COVID-19, if not deal with proper planning. It would be challenging for government to keep supply chain functional without the spread of COVID-19.
The second, problem is loss of jobs in services sectors like barber, transport, sanitary workers etc. Hundreds of thousand of people have lost jobs already. Transport sector is one of the biggest hit sector and least discussed sector. The daily wagers are another category, which has been impacted. It is adding to poverty. Government is trying to help these people by diverting resources in billions, but the problem is huge and beyond the capacity of government.
Moreover, the traditional tools to combat economic crisis are also not working. Government will have to look for innovative ways and new technologies to tackle the problems. World is already moving towards new means to tackle the issues. These problems at global level especially in developed world are paving for e new economic order. It is introducing new means of production and services. The elements of fourth revolution like artificial intelligence, information technology, big data blockchain, robots have started to dominate the markets. Technology is taking over mobility problems in these countries. It has given impetus to the march toward Fourth Industrial Revolution by applying modern technologies.
However, Pakistan neither have financial resources nor have required skills to benefit from the new opportunities. Rather, it will bring new challenges for Pakistan as Pakistan is even struggling to benefit from the third industrial revolution. Therefore, it has been foreseen that the situation will become further complicated in coming days. To catch up the world Pakistan will have to look for ways to shift to modern technology. Unfortunately, Pakistan does not have any base to produce instruments of new modern technology. Hence, the import bill will increase substantially. But situation also provides Pakistan a set of new opportunities, to benefit from those Pakistan will have to devise a smart policy. However, most of the opportunities will be available in post-COVID-19 scenario.
The first opportunity will emerge from agriculture and livestock sector. In post COVID-19 era world will be looking for reliable sources of food, especially food deficient countries like Middle East, China, etc. will be on forefront. Pakistan can exploit this situation in its favor. Pakistan can start building alliances with these countries to provide them food in exchange of investment in agriculture sector. It will also be good source of earning.
Second opportunity would be skilled human resources for information technology, big data and others. Huawei Pakistan is already working with government of Pakistan to impart skills. Huawei has also employed a good number of young professionals for operation in Middle East, South Asia and other parts. Pakistan can further strengthen its efforts and exploit the its youth bulge in this direction. It will help Pakistan to counter negative impacts on remittances.
Third, timely completion of CPEC route will also provide opportunity of good earning. It will encourage China to use the route for trade with Middle East and North Africa and Europe. It would be win-win proposition, as China can save billions of dollars on transport and Pakistan can earn by providing services.
Lastly, government will have to invest in new technology through CPEC. A wise strategy would be to dedicate a special economic zone (SEZ) for technology development and negotiate with China to start work on it on urgent basis. It should also include the capacity and skill development in the fields of fourth industrial revolution like robotics, artificial intelligence, ICT etc.
Director, Asia Study Center SDPI
Source: https://dailytimes.com.pk/615058/economic-crisis-with-new-characteristics/
