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Friday, June 14, 2024

A shift in economic profile is needed

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When services and plenty of industries are being devastated and almost paralyzed by Covid-19, a short-term shift in economic profile should be carefully scrutinized. Subsequently, the agro-forestry-fishery sector ought to be prioritized in the immediate future because not only it is Vietnam’s traditional strength but also its output is secured to a certain extent.

Two key approaches are possible with which countries across the globe can cope with Covid-19, either imposing draconian containing measures from the very start of the outbreak, or doing nothing at all or implementing measures for form’s sake as risks were downplayed or herd community was chosen in hope that the epidemic would climb rapidly to its peak and then decline.

Up to the moment of speaking, the second choice seems to be erroneous as many countries—having witnessed the uncontrolled spread of the coronavirus and terrible death tolls—have been forced to resort to hurried social distancing and lockdowns. The following chart from Vietnam’s CDC (Centers for Disease Control and Prevention) indicates that given their limited resources, those nations picking the first approach may expect lower human losses at the expense of a longer epidemic time.

From the economic point of view, nations accepting a wild outbreak may be subject to a more catastrophic effect in the short term, when all domestic production is totally paralyzed, because of not only the nationwide lockdowns imposed by the government but also the growing apprehension among communities as the death toll announced increases on a daily basis due to the overloading of the health care system. What comes next is that import of these countries will surge dramatically, particularly necessaries, food, medicine and medical equipment.

On the contrary, nations capable of containing or prolonging the spread of the pandemic to spare the health care system from overloading while helping production avert a crisis will likely have more opportunities for boosting export to other countries on the condition that the trade flow must be maintained. A case in point is China, which, after having successfully contained the coronavirus, has significantly bolstered her export of face masks and medical equipment to European countries.

What’s more, raw and processed foods will be among the most in-demand commodities during the current crisis provoked by the coronavirus. This argument is testified by scenes of empty racks at European supermarkets. Therefore, nations that are still maintaining their agricultural production may have an edge over others in the current situation. History has proved that agriculture has always played an important role in any nation. Even the world’s most developed economies have sustained their agricultural production in any phase.

As an agriculture-based country, Vietnam is said to enjoy advantages in soil and climate with which cultivation and husbandry can be brought into full play in addition to a long coastline favorable to the diversity of agricultural, forestry and fishery products. In this sense, while Europeans may be obsessed by a possible shortage of food due to the disruption of the supply chain or a longer time of transport, the majority of food products can be made in Vietnam where the geographical distances between cities and rural areas are not so far.

A “wartime” approach chosen

The Vietnamese Government has mustered up all the resources available to combat Covid-19 and is proactive from the very start of the outbreak. Up to the moment of speaking, despite the crippling effect of Covid-19, Vietnam has shown good results in dealing with it while still maintaining part of her production activities compared to the collapses seen in some other nations.

However, when Vietnam’s service sector and a host of industries are in fact almost moribund, a shift of the economic structure in the short term should be perused. Subsequently, the agro-forestry-fishery sector should be given a priority in the immediate future because not only it is Vietnam’s traditional strength but also its output is secured to a certain extent. It is also crystal clear now that everybody worldwide is practicing thrift, thus minimizing the demand for luxuries, while spending big on his or her food storage.

If Vietnam can retain her agricultural production, she may stand an excellent chance of exporting farm produce to countries presently grappling with food shortages, given the context that wheat prices are expected to soar in the short term. However, as mentioned earlier in this article, if Vietnam considers this move a long-term battle, then the choice of a “wartime” economy should also be seriously taken into account when the self-supply of some selected products must be ensured.

In the combat against the coronavirus, medical equipment and food are the top priorities. Therefore, that some nations have actively stored food or restricted food export is inevitable as nobody can tell what will happen next with Covid-19.

Vietnam has recently imposed a temporary ban on rice export to ensure her food security. However, this policy has been faced with strong criticisms. Some have referred to mistakes in the crisis unfolding 10 years ago when rice prices surged, but the Government, afraid of the in-coming crisis, restricted rice export. Opportunities were said to be wasted. Nevertheless, is it appropriate to make use of a past scenario to predict what may happen in the future now? Don’t forget that things change all the time and every crisis is different from others in one way or another.

In concrete terms, the crisis happening 10 years ago resulted only in a demand shock. Governments worldwide then soon rushed to pump enormous amounts of money into the economy to enhance consumer confidence and accelerate economic recovery. It’s different this time around, though, when the world has to confront a double shock, both on supply and demand. Under the influence of the fear for the coronavirus, many choose to sit motionless and opt for isolation. In such a context, money pumped into the economy by governments may not restart the economy as planned. However, despite the state of a “frozen” economy without virtually no shopping or production, people have to eat and therefore need food.

It’s impossible to predict what Covid-19 will develop. Just more than one month ago, when Vietnam was able to contain the coronavirus cases at 16, optimistic people called for the authorities to set the hospitality industry in motion right away and combine tourism with health care to promote the country as a safe destination during Covid-19. Yet Vietnam has now almost stopped her entry/exit operations.

Another story relates to whether students should come back to school. There once were intense debates which argued that other countries were keeping schools operational, requesting the authorities to reopen schools. The reality now is Vietnamese students have to stay at home and many workers have to work at home, too, to avoid health safety risks, whereas quarantined areas have become ever wider. Many countries which ignored warnings about a wide spread of Covid-19 have had to shut down schools. It is obvious that things are indefinite and nothing can be predicted now.

As regards rice export, economists may calculate its economic pros and cons, agricultural experts may tackle the issue from farmers’ point of view, and interest groups may be in support of what is most beneficial to them. Policymakers, however, should only formulate policies only after having scrutinized the common interest of the entire society and practical changes in different times. The priority of a single market segment or a specific group of interest must be ruled out.

Granted, if the Government chooses to temporary ban rice export out of the fear for a food shortage, then it must quickly buy out all the rice necessary for high food security, taking into account the current situation, at market prices. The authorities concerned have to do all which is needed to prevent attempts to take advantage of the current rice export ban to undercharge farmers, or carry over losses of rice exporters having signed rice export contracts at lower prices over to farmers as have been warned by some analyses.

Last but not least, food security concerns not only rice but also other raw and processed foods. Policies on their long-term development should therefore be shaped as soon as possible.

By Ho Le

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