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Southeast Asia's drastic coronavirus response squeezes trade

ASEAN sacrifices advantages of economic integration to block contagion

A health officer checks the temperature of an arriving passenger at Jakarta's Soekarno-Hatta International Airport. (Photo by Ken Kobayashi)

SINGAPORE/HANOI -- Strict border controls meant to fight the coronavirus pandemic are limiting the advantages of Southeast Asia's economic integration, putting the region's four-year-old effort to promote cross-border trade and investment under pressure.

As of Tuesday, about 4,000 cases of the new coronavirus had been reported in the 10 member states of the Association of Southeast Asian Nations, with some 100 deaths.

These figures account for only 1% of the global total, but the region's governments have since mid-March enacted strict measures, including almost full lockdowns as they fear a new wave of the virus imported from Europe and America.

Malaysia and the Philippines currently bar foreigners from entering the country; Singapore bars all short-term visitors from entering or transiting through the city-state; Thailand and Vietnam require a health certificate that verifies all visitors have tested negative for the coronavirus.

As such, many businesses based in the region, from tourism to manufacturing, have suffered, adding to the weakening demand since the virus outbreak.

On Tuesday, few people were seen at Singapore's famous Merlion Park, which is normally crowded with tourists. Singapore welcomed a daily average of about 50,000 visitor arrivals last year. But from Monday late evening, no visitors are allowed to enter the country.

With such a drastic measure being put in place, Singapore Airlines will be cutting 96% of capacity until the end of April, resulting in the grounding of 138 of its 147 aircraft, whereas Jetstar Asia, a Singapore-based budget carrier, suspended all flights from March 23, until April 15.

Singapore's popular Merlion Park has been nearly empty due to the country's entry bans on visitors. (Photo by Kentaro Iwamoto)

All four Vietnam carriers that fly overseas, including Vietnam Airlines, Vietjet Air, Jetstar Pacific and Bamboo Airways, had to temporarily suspend international flights until the end of April. Vietnamese carriers are expected to suffer at least 30,000 trillion dong ($1.27 billion) in lost revenue in 2020 due to the coronavirus, according to initial estimates from the aviation authority.

Meanwhile, Bangkok Metropolitan Administration's decision to close 26 industries, including shopping malls and dine-in restaurants, from Sunday took away vigor from Thailand's capital.

Some 80,000 people gathered Sunday at Mo Chit bus terminal in northern Bangkok, seeking to flee the capital to their home provinces or even neighboring home countries. In contrast, the streets of Bangkok on the weekend were desolate. The city infamous for its gridlocks were free of major traffic.

Business sectors had voiced their willingness to cooperate ahead of the closures. "Operators in the tourism sector are willing to support the government's policies as strict as country lockdown in stopping the COVID-19 outbreak," the Tourism Council of Thailand said in a statement. "If it could help the country and preserve the tourism sector we are ready to sacrifice."

The organization estimated that tourism will take a 1 trillion baht ($44 billion) hit if the current pandemic continues. "This will not result in good outcomes in the bigger picture as well, especially considering at least 650 billion-baht debt incurred to the tourism sector with commercial banks," it said. "Nonperforming loans will increase exponentially, if the government does not initiate any urgent measures."

ASEAN countries welcomed 135 million visitor arrivals in 2018, of which about 50 million were from within the 10 member states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Strict border controls not only dampen millions of business and leisure travelers, but also could have an effect on more crucial issues: the flow of labor and goods.

Cambodia relies on Vietnam for agricultural imports. But Vietnam closed borders with Cambodia from March 15, while Cambodia later said it would stop all travel, including flights, between the two countries. As a result, produce prices may increase in Cambodia, according to a local logistics operator.

"Cross-border controls can adversely affect food security, income and employment," Cassey Lee, senior fellow at Singapore-based think tank ISEAS-Yusof Ishak Institute told the Nikkei Asian Review. He said "bilateral consultations are very important at this stage" to mitigate the effect of travel curbs, adding that deeper coordination and joint discussions involving relevant ministries, such as trade, agriculture, labor and immigration, should be struck to handle movement of essential goods and services.

Border controls also significantly affect global companies that have supply chains in the region. They capitalize on the region's relatively low labor cost and free trade agreements within the ASEAN.

The world's biggest smartphone maker, Samsung Electronics, which produces about half its handsets in Vietnam, failed to send engineers for OLED panel production to Vietnam due to the entry restrictions for South Koreans. Vietnam allowed entry of some 200 Samsung employees on March 13 as a special consideration, but airlines connecting Vietnam and South Korea are suspended.

ASEAN's manufacturing sector is already showing signs of weakening. According to the region's manufacturing Purchasing Managers' Index (PMI) in February, compiled by IHS Markit, factory activities in Vietnam deteriorated from a month earlier for the first time since late-2015. PMIs for Singapore, Malaysia, Thailand and Myanmar also showed contraction.

Governments in the region have been rolling out fiscal stimulus packages to support businesses, while central banks are rushing for monetary easing to buoy the economy. However, most countries will likely see slower growth or even contraction in 2020.

Over the years, the bloc has integrated economies, promoting freer movement of people, goods and investment within the region, including visa exemptions for member states. In 2015, it established the ASEAN Economic Community, accelerating deeper integration through measures including lowering tariffs and facilitating easier customs for trade.

On March 10, ASEAN economic ministers recognized the adverse effects the pandemic has on sectors from tourism, manufacturing, retail and financial markets. They agreed restrictions on cross-border movements "should be based on public health considerations, and should not unnecessarily restrict trade within the region," the said in a joint statement.

This year's first ASEAN summit meeting, originally scheduled in April, however, has been postponed to late June.

Additional reporting by Tomoya Onishi in Hanoi and Masayuki Yuda in Bangkok.

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