COVID-19 International Developments: Daily Scan, April 14, 2020
Prerna Gandhi, Associate Fellow, VIF
Economic
IMF cancels debt payments for 6 months for 25 poor nations

The International Monetary Fund approved $500 million on April 13 to cancel six months of debt payments for 25 of the world's most impoverished countries so they can help tackle the COVID-19 pandemic. IMF Executive Director Kristalina Georgieva issued a statement saying the IMF executive board approved the immediate debt service relief for 19 African countries Haiti, Afghanistan, Nepal, Solomon Islands, Tajikistan and Yemen. The 19 African countries to receive debt relief are: Benin, Burkina Faso, Central African Republic, Chad, Comoros, Congo, The Gambia, Guinea, Guinea-Bissau, Liberia, Madagascar, Malawi, Mali, Mozambique, Niger, Rwanda, Sao Tome and Principe, Sierra Leone and Togo. She said the money will come from the IMF's revamped Catastrophe Containment and Relief Trust, which will use recent pledges of $185 million from the United Kingdom and $100 million from Japan. She urged other donors to help replenish the trust's resources.

G20 finance ministers, central bank governors to hold a meeting on April 15

The G20 finance ministers and central bank governors will hold a meeting on April 15, the Saudi Press Agency reported on April 12. The meeting will continue to discuss and take urgent actions needed to address the global challenge presented by the novel coronavirus. Traditionally, the April's meeting of G20 finance ministers and central bank governors is held in Washington D.C. on the side-lines of the International Monetary Fund and World Bank Group Spring Meetings. Given the circumstances, G20 meetings are currently held virtually and more frequently. In their last meeting held on March 31, G20 finance ministers and central bank governors agreed on a roadmap to respond to coronavirus.

24% of world's large companies risk running out of cash

Using data from QUICK-Fact Set, the Nikkei Asian Review calculated the cash flows of over 3,400 listed companies and discovered that a quarter of them will run out of liquidity if a 30% year-on-year drop in sales lasts for six months. If sales fall 10% over three months, 9% of large companies will run out of liquidity, assuming companies do not roll over maturing debt. In case sales drop 30%, 24% of the companies will run out of liquidity in six months, and 38% in 12 months. Under normal circumstances, companies would deal with cash flow issues by slashing dividends, refinancing debt, or issuing bonds. However, even if debt refinancing is factored into the estimate, 9% of the companies would run out of liquidity if the 30% plunge in sales continues for six months. This rises to 32% if there is a 60% plunge for 12 months.

SoftBank warns of historic loss as value of tech start-ups collapses

Soft Bank warned on April 13 that it expected to post its first operating loss in 15 years because of a collapse in the value of its flagship tech investments. The Japanese company said it expected an operating loss of 1.35 trillion yen ($12.5 billion) in its fiscal year through March 31, 2020. That compares with an operating profit of more than 2 trillion yen the previous year. The Vision Fund is expected to report losses amounting to 1.8 trillion yen ($16.7 billion) due to "the deteriorating market environment," the company said in a statement. The markets have been roiled by uncertainty over the coronavirus pandemic. Big losses on other SoftBank investments held outside the $100 billion Vision Fund, notably bankrupt internet satellite start-up One Web, and troubled co-working provider We Work, are also expected to weigh heavily on earnings, it added. All in all, more than 7,300 people lost their jobs across a dozen SoftBank-backed start-ups in the four months ending in February, according to a CNN Business tally.

The pandemic is playing to almost every one of Amazon's strengths

As the coronavirus pandemic has forced people to stay inside, few companies have proven themselves as essential as Amazon. From groceries to cleaning supplies, shipments from Amazon (AMZN) have become lifelines for many who are steering clear of supermarkets and other physical retail stores. Company executives have likened the surge in demand to the annual holiday shopping crush. But e-commerce isn't the only sector where Amazon is booming. Analysts say its cloud business, Amazon Web Services, faces higher demand as people turn to some of its biggest clients -- from Zoom (ZM) to Netflix (NFLX) -- for work and play. Thanks to its existing advantages in scale and efficiency, Amazon stands to emerge from the pandemic stronger than many of its competitors, experts say. Amazon could pull in as much as an additional $4 billion in revenue this year, though added costs of managing the pandemic may cut into Amazon's profits, said Bank of America in an investor note earlier this month.

Virus sets off China Inc’s biggest clash

China’s biggest corporate showdown has kicked off. Alibaba, Tencent and Ping An Insurance dominate e-commerce, video games and insurance respectively. Now the trio, worth a combined $1 trillion-plus in market capitalisation, is converging on healthcare. Before Covid-19 hit, China’s medical system suffered from chronic under-investment. Healthcare expenditure, of which the government accounts for over half, was just 5.2% of GDP in 2017, data from the World Health Organization show, far lagging 17% in the United States. Alibaba and Ping An, as well as the Tencent-backed We Doctor, see potential for profit in filling the gaps left by overstretched, overcrowded hospitals. All three offer cheap online consultations, which have spiked in the wake of the coronavirus outbreak. They are racing to develop all-encompassing apps offering diagnosis, prescriptions, referrals, appointment bookings, 1-hour drug delivery and even insurance.

Saudi Arabia may tap debt markets as oil cuts squeeze income

Saudi Arabia is likely to sell new international bonds soon as April 12's historic deal to cut oil output among major producers puts further pressure on revenues already hurt by the collapse in crude prices, four banking sources said. Riyadh increased its debt ceiling to 50 percent of GDP from a previous 30 percent in March. Qatar and Abu Dhabi emirate successfully sold a combined $17bn of bonds last week. "It's the logical next step (for Saudi to issue after Qatar and Abu Dhabi) ... they may wait a bit for the oil market to react to the cuts as their name is more closely associated with oil," said a debt banker. A spokesman for the Saudi finance ministry did not immediately respond to a Reuters News Agency query on debt issuance plans. Cuts pledged by Saudi Arabia, the world's top oil exporter, under April 12's pact could wipe nearly $40bn from state revenues this year, according to one analyst who based that projection on an average oil price of $40 a barrel.

How Shanghai showed China how to deal with coronavirus

Shanghai was once especially vulnerable to the new coronavirus, due to its status as a transportation hub and its close economic ties with central China's Hubei Province, epicentre of the deadly outbreak. However, the megacity of 30 million people has done better than most at managing the outbreak. Shanghai has weathered an array of infectious disease outbreaks, including a hepatitis A crisis in 1988, SARS in 2003 and H7N9 in 2013, amassing extensive experience along the way. In early January, Shanghai started training doctors to ensure they were armed with the right knowledge before the first patient with COVID-19 -- the disease caused by the new coronavirus -- appeared. "As early as Jan. 5, we believed the disease was contagious," Lu Hongzhou, the centre’s party secretary, said in an interview with Caixin. By then, Wuhan had already reported 59 confirmed cases but still denied the existence of human-to-human transmission and any infections among medical workers. "Prior to official recognition of person-to-person transmission [on Jan. 20], we had studied the features of virus-related CT images and advised medical staff to pay extra attention to such cases," Lu said. Shanghai had also deployed 550 public health officials to trace the close contacts of 1,071 suspected patients.

Chinese carriers transform fleets to operate cargo-only flights

Chinese carriers are switching to cargo-only services amid a downturn in passenger demand as airlines including China Eastern Airlines, China Southern Airlines and Xiamen Airlines have all started to transform their operations. On April 12, a twice-weekly passenger flight operated by China Southern flew from Shenzhen, South China's Guangdong Province, to Sydney, only this time as a cargo service, according to a note China Southern sent to the Global Times on Monday. Xiamen Airlines is expected to operate its passenger-turned-cargo flight from Xiamen, East China's Fujian Province to Manila on April 14, and the carrier completed a cargo flight from Kuala Lumpur on April 17. It is planning to fly to more cities such as Los Angeles, Vancouver and Sydney with cargo-only services. The trend toward cargo-only services comes as international passenger flights have dropped, while demand for international freight services has remained at a high level during the epidemic, China Southern said.

Diamond sector grinds to halt as India’s lockdown bites

India has steadily muscled out competitors such as China to dominate the global diamond manufacturing trade, importing almost $20bn worth of rough diamonds a year. Surat, one of the world’s fastest-growing, is the global hub of diamond manufacturing. Ninety per cent of all diamond cutting and polishing is done in India, mostly by artisans in Surat. But with no stones left to cut, many of these people left. About 200,000 diamond workers have departed to towns and villages in the surrounding state of Gujarat, according to Dinesh Navadia, head of the local industry association, as the global industry ground to a halt. “We need India to open up,” said Stuart Brown, chief executive of Canadian miner Mountain Province Diamonds. India has in recent decades cemented its status as the global industry’s indispensable middleman, buying up rough diamonds mined by the likes of De Beers in southern Africa and Russia’s Alrosa and pumping out polished gemstones or finished jewellery for sale in the US, China and across the world. Miners have cancelled sales in diamond trading hubs such as Antwerp and scaled back operations in South Africa and Canada.

China’s exports, imports fell in March but not as much as expected

China reported that its dollar-denominated exports and imports both fell from a year ago in March, but they were better than what economists had expected. China’s exports fell 6.6% in March from a year ago, while imports slipped 0.9% in the same month, data from the General Administration of Customs showed on April 14. Economists polled by Reuters had expected exports from China to fall 14% in March from a year ago, while imports were projected to fall 9.5% over the same period. The country’s March trade surplus was $19.9 billion, as compared with the $18.55 billion that economists polled by Reuters had expected. The China-U.S. phase one trade agreement is gradually being implemented, said Li Kuiwen, spokesperson for the General Administration of Customs, according to a CNBC translation of his Mandarin-language remarks at a press conference.

Strategic
Brussels seeks to prevent repeat of fragmented response in early stages of crisis

Brussels this week will urge national governments to co-ordinate their exit from coronavirus lockdowns, as it seeks to prevent any repeat of the jumble of national steps that marked the start of the crisis. According to an internal paper, the European Commission will advise governments to give each other advanced warning of plans to relax border controls, reopen shops, and relax confinement restrictions. The four-page paper, circulated to national capitals on April 13 and entitled “European Roadmap Towards Exiting from the Covid-19 Pandemic”, sketches out the commission’s position ahead of its publication this week of official guidelines on Europe’s exit strategy. “At a minimum, member states should notify each other and the commission in due time before they lift measures and take into account their views,” the document says. “It is essential that there is a common approach and operating framework.” Ursula von der Leyen, European Commission president has criticised the uncoordinated border closures that led to truck tailbacks of up to 40km and unilateral restrictions on cross-border sales of medical equipment. Brussels suggests that internal border restrictions within the EU should be relaxed first and that “external border reopening should happen in a second stage, in a co-ordinated manner at EU level”.

Sanders backs Biden as ex-rivals join forces to beat Trump

Bernie Sanders endorsed Joe Biden's presidential campaign on April 13, encouraging his progressive supporters to rally behind the presumptive Democratic nominee in an urgent bid to defeat President Donald Trump. "I am asking all Americans, I'm asking every Democrat, I'm asking every independent, I'm asking a lot of Republicans, to come together in this campaign to support your candidacy, which I endorse," the Vermont senator said in a virtual event with Biden. Biden, 77, has already made some overtures to progressives by embracing aspects of Sanders' and Sen. Elizabeth Warren's policies. The day after Sanders exited the race, Biden came out in support of lowering the Medicare eligibility age from 65 to 60 while pledging to cancel student debt for many low- and middle-income borrowers. He's also previously embraced Warren's bankruptcy reform plan.

Coronavirus disruption has put back clock on UK-EU agreement over future relationship

The EU and UK will return to the Brexit fray on April 15 to figure out how to salvage negotiations on London’s future relationship with the Brussels in the face of disruption caused by the coronavirus pandemic. Michel Barnier and David Frost, the two chief negotiators, will have their first official contact since Mr Barnier, leading the EU team, announced on March 19 that he had tested positive for Covid-19. Mr Frost, his UK counterpart, went into self-isolation soon afterwards after displaying symptoms. The goal of the call will be to fix dates for rounds of virtual negotiations on the future partnership. By this stage three full negotiating rounds were supposed to have been completed. April 15’s phone call will not address the elephant in the room: the possibility of extending Britain’s post-Brexit transition period beyond the end of this year.

Russia, Iran discuss anti-virus cooperation

Russian and Iranian foreign ministers discussed cooperation in combatting the coronavirus pandemic in a phone talk on April 13, according to an official statement. "The ministers paid special attention to the tasks of multilateral coordination in the fight against coronavirus infection, including the rejection of illegal unilateral sanctions and other restrictions on the supply of medicines and essential goods," read the statement. Lavrov and Zarif also discussed the recent developments in Afghanistan and Yemen, stressing the necessity of boosting the UN efforts to settle the conflicts. The situation in Iran is complicated, as the government cannot buy necessary drugs and medical equipment because of the U.S. sanctions. Russia repeatedly called on the U.S. to loosen the restrictions at least for the time of pandemic for humanitarian purposes.

Beijing faces a diplomatic crisis after reports of mistreatment of Africans in China causes outrage

Beijing is facing a diplomatic crisis in Africa after reports of alleged coronavirus-related discrimination against African nationals in China sparked widespread anger across the continent. African students and expatriates in the southern Chinese city of Guangzhou were last week subject to forced coronavirus testing and arbitrary 14-day self-quarantine, regardless of recent travel history, amid heightened fears of imported infections. Large numbers of African nationals were also left homeless, after being evicted by landlords and rejected by hotels in the city. Having reportedly contained the virus within China, concerns have grown in recent weeks over a so-called second wave, brought into the country by overseas travellers. In Africa, however, governments, media outlets and citizens reacted angrily to the apparent rise in anti-foreigner sentiment, as videos of Africans being harassed by police, sleeping on the streets or being locked into their homes under quarantine circulated online. The fallout threatens to undermine China's diplomatic efforts in Africa.

Taiwan sees doors open in Europe as virus response earns respect

The list of Taiwan's formal diplomatic ties in Europe is short: It begins and ends with the Vatican. But the coronavirus pandemic, which has underscored the island's isolation and sparked an escalating feud with the World Health Organization, may be opening up some diplomatic opportunities for Taipei. Earlier this month, Taiwan inked an official partnership with the Czech Republic on fighting COVID-19 -- its first such arrangement. President Tsai Ing-wen's government has also donated 7 million face masks to Europe, including 5.6 million to nine European Union states, earning an unusually high-profile thank you from European Commission President. Taipei has long been excluded from the international community at the behest of Beijing, which claims the island as a wayward province. This freeze-out includes the WHO, prompting loud complaints from Taipei. EU officials and analysts stress that governments are unlikely to switch recognition from China to Taiwan anytime soon. Some experts, however, see a possibility of more informal diplomacy with Taiwan in the months ahead.

States Move to Coordinate on Reopening Plans

US death toll nears 22,000, but daily rate has slowed over the past three days. Two groups of governors said they would coordinate efforts to gradually reopen businesses and ease social-distancing guidelines, even as President Trump said he had the ultimate authority over when to restart the economy. The announcements by the governors on the East and West Coasts come after a decline in daily U.S. infection rates in recent days has prompted some officials to express cautious optimism that infections may be hitting a plateau as mitigation efforts take hold.

Israel Struggles to Form Unity Government as Deadline Looms

Israel’s Prime Minister Benjamin Netanyahu and his rival Benny Gantz are struggling to agree on terms for a unity government, leaving the country in political limbo and raising the spectre of another do-over general election, as the nation grapples with a coronavirus lockdown. Israel's president, Reuven Rivlin, on Aril 12 rejected a request to extend coalition talks between the country's two most powerful political parties. Rivlin last month gave Gantz the task of forming a new government, after a narrow majority of lawmakers endorsed him as prime minister in the wake of March 2 elections. But in an abrupt about-face, Gantz accepted an invitation from Netanyahu to form a "national emergency" government to confront what was then a burgeoning coronavirus outbreak. Gantz froze the anti-Netanyahu legislation and accepted the post of parliament speaker as he began talks on a rotation agreement in which both men would serve as prime minister. The turnabout prompted Gantz's main partner — the secular and middle-class Yesh Atid party — to bolt, causing his Blue and White alliance to disintegrate and leaving it at less than half its original strength. In the meantime, unity talks with Netanyahu stalled, reportedly over issues that have little to do with the pandemic.

Coronavirus upends Putin's political agenda in Russia

Spring is not turning out the way Russian President Vladimir Putin might have planned it. A nationwide vote on April 22 was supposed to finalize sweeping constitutional reforms that would allow him to stay in power until 2036, if he wished. But after the coronavirus spread in Russia, that plebiscite had to be postponed an action so abrupt that billboards promoting it already had been erected in Moscow and other big cities. Now under threat is a pomp-filled celebration of Victory Day on May 9, marking the 1945 defeat of Nazi Germany in World War II. The holiday has become the most important on Russia's calendar, and this year is the 75th anniversary, with world leaders invited to a celebration highlighting the country's exceptional role in history. Every year, thousands gather in Moscow, including many elderly veterans proudly wearing their medals. Initially underestimated by Russian authorities, the pandemic has posed an unexpected challenge for Putin, whose political standing now depends on whether he can contain the damage from it.

Medical
Public statement for collaboration on COVID-19 vaccine development

On 31 December 2019, the World Health Organization (WHO) was informed of a cluster of cases of pneumonia of unknown cause detected in Wuhan City, Hubei Province of China. Chinese authorities identified the SARS-CoV-2 as the causative virus on 7 January 2020, and the disease was named coronavirus disease 2019 (COVID-19) by WHO on 11 February 2020. As part of WHO’s response to the outbreak, a Research and Development (R&D) Blueprint has been activated to accelerate the development of diagnostics, vaccines and therapeutics for this novel coronavirus. Under WHO’s coordination, a group of experts with diverse backgrounds is working towards the development of vaccines against COVID-19.The group makes a call to everyone to follow recommendations to prevent the transmission of the COVID-19 virus and protect the health of individuals. The group also thanks everyone for putting their trust in the scientific community. There is no Indian on the group.

For Further Reading:
  1. Mainichi: IMF cancels debt payments for 6 months for 25 poor nations, https://mainichi.jp/english/articles/20200414/p2g/00m/0bu/026000c
  2. Xinhua: G20 finance ministers, central bank governors to hold meeting on April 15, http://www.xinhuanet.com/english/2020-04/13/c_138969961.htm
  3. Nikkei Asian Review: 24% of world's large companies risk running out of cash, https://asia.nikkei.com/Spotlight/Datawatch/24-of-world-s-large-companies-risk-running-out-of-cash
  4. CNN: SoftBank warns of historic loss as value of tech startups collapses, https://edition.cnn.com/2020/04/13/tech/softbank-vision-fund-losses/index.html
  5. CNN: The pandemic is playing to almost every one of Amazon's strengths, https://edition.cnn.com/2020/04/09/tech/amazon-dominance-coronavirus/index.html
  6. Reuters: Virus sets off China Inc’s biggest clash, https://www.reuters.com/article/us-china-healthcare-breakingviews/breakingviews-virus-sets-off-china-incs-biggest-clash-idUSKCN21W07Q
  7. Al Jazeera: Saudi Arabia may tap debt markets as oil cuts squeeze income, https://www.aljazeera.com/ajimpact/saudi-arabia-tap-debt-markets-oil-cuts-squeeze-income-200413134812350.html
  8. Nikkei Asian Review: How Shanghai showed China how to deal with coronavirus, https://asia.nikkei.com/Spotlight/Caixin/In-Depth-How-Shanghai-showed-China-how-to-deal-with-coronavirus
  9. Global Times: Carriers transform fleets to operate cargo-only flights, https://www.globaltimes.cn/content/1185506.shtml
  10. Financial Sector: Diamond sector grinds to halt as India’s lockdown bites, https://www.ft.com/content/faba7167-9511-438d-b0db-a6a0c04624c7
  11. CNBC: China’s exports, imports fell in March but not as much as expected, https://www.cnbc.com/2020/04/14/china-reports-march-2020-trade-exports-imports-data-amid-coronavirus.html
  12. Financial Times: EU calls for co-ordination of lockdown exit strategy, https://www.ft.com/content/ec1ddc00-88dc-4461-b3d6-026ba11b44c7
  13. Mainichi: Sanders backs Biden as ex-rivals join forces to beat Trump, https://mainichi.jp/english/articles/20200414/p2g/00m/0in/006000c
  14. Financial Times: Brexit negotiators try to pick up pieces as talks resume, https://www.ft.com/content/7e3a2598-69ec-44f3-82c4-dbadc1d8efb7
  15. Anadolu Agency: Russia, Iran discuss anti-virus cooperation, https://www.aa.com.tr/en/asia-pacific/russia-iran-discuss-anti-virus-cooperation/1802984
  16. CNN: Beijing faces a diplomatic crisis after reports of mistreatment of Africans in China causes outrage, https://edition.cnn.com/2020/04/13/asia/china-guangzhou-african-blacklash-hnk-intl/index.html
  17. Nikkei Asian Review: Taiwan sees doors open in Europe as virus response earns respect, https://asia.nikkei.com/Politics/International-relations/Taiwan-sees-doors-open-in-Europe-as-virus-response-earns-respect
  18. Wall Street Journal: States Move to Coordinate on Reopening Plans, https://www.wsj.com/articles/u-s-coronavirus-cases-rise-as-officials-weigh-when-to-restart-the-economy-11586774781?mod=hp_lead_pos1
  19. Wall Street Journal: Israel Struggles to Form Unity Government as Deadline Looms, https://www.wsj.com/articles/israel-struggles-to-form-unity-government-as-deadline-looms-11586789631
  20. Mainichi: Coronavirus upends Putin's political agenda in Russia, https://mainichi.jp/english/articles/20200413/p2g/00m/0in/089000c
  21. WHO: Public statement for collaboration on COVID-19 vaccine development, https://www.who.int/news-room/detail/13-04-2020-public-statement-for-collaboration-on-covid-19-vaccine-development

Image Source: https://cdn.pixabay.com/photo/2020/04/02/19/11/covid-19-4996393_960_720.png

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