COVID-19 International Developments: Daily Scan, June 01, 2020
Prerna Gandhi, Associate Fellow, VIF
Economic
Protectionism Spreads Globally With the New Coronavirus

Alongside growing opposition to Chinese investments, protectionism is widening. Nine of the world’s 10 largest economies have introduced new measures restricting foreign investment since 2017, according to the UN Committee on Trade and Development (UNCTAD). At least 20 deals valued at a total of more than $162 billion have been blocked or withdrawn on national security reasons in 2016-2019, according to UNCTAD. Governments have expanded the number of sectors under scrutiny and lowered foreign-investment thresholds that trigger reviews. The US in February expanded the powers of its Committee on Foreign Investment, allowing CFIUS to block foreign purchases of minority stakes, not just takeovers, and widening its jurisdiction to cover more sectors, including real estate. President Trump in April issued an executive order formalizing an advisory group of federal agencies known as Team Telecom to block unwanted foreign investments. Other developed nations including Japan, Canada, Australia, Germany, France and Italy in recent months have also tightened foreign-investment regimes amid fears of hostile takeovers during the coronavirus slump. North Atlantic Treaty Organization Secretary-General Jens Stoltenberg warned about geopolitical effects of the pandemic. “Some allies are more vulnerable for situations where critical infrastructure can be sold out,” he said during a conference call with the military alliance’s defense ministers in April.

EU budget chief seeks backing for business levy to fund recovery

The EU’s budget commissioner has called on member states to back new taxes including an annual levy on 70,000 big companies to access the single market, as part of a package of measures to help fund the bloc’s recovery. Johannes Hahn said that there was no practical alternative but to hand the European Commission new sources of direct revenue — or “own resources” — to service the debt it would take on under the €750bn recovery plan unveiled last week. These could include a mooted €10bn annual levy that Mr Hahn said would affect 70,000 companies in Europe with global turnover exceeding €750m. “What we are aiming at is — at the latest by the end of 2027 — that we will have a functioning, steady flow of new own resources to our budget,” the commissioner said in an interview, adding that he was ultimately targeting €15bn-€20bn a year. The only options other than raising these new revenues would a politically unacceptable squeeze on spending or higher budget contributions by the member states, he explained. “I don’t see real alternatives”, he said. “A smaller budget will not be acceptable for the huge majority of member states. And concerning future contributions, I do not see appetite [from] anybody.”

70% of Japan execs plan changes to supply chain: Nikkei survey

Seven out of 10 Japanese companies with domestic plants will revise their supply chains, a Nikkei survey shows, highlighting corporate efforts to find a new normal in light of continuing risks from the novel coronavirus. The survey, of presidents and other top leaders of major companies, was conducted May 25-28, after Japan lifted the last remnants of a nationwide coronavirus state of emergency. Responses were received from 132 businesses. Of companies that operate factories in Japan, 72.1% cited a need to alter supply chains. Asked what they intend to change, 65.3% said they want the ability to switch sources with greater flexibility in case of a crisis, and 57.1% indicated they will stop purchasing from a single country in order to diversify sources. The pandemic also is changing how people work, as 90.9% of the companies plan to continue a telecommuting policy for offices.And 89.4% intend to introduce flexible hours to reduce the density of people at the workplace. The survey revealed widespread concern that the economic slump will drag on, as 41.5% of the companies do not expect their markets to return to pre-pandemic levels for a year. A two-year recovery was anticipated by 29.3%.

Southeast Asia leans on new taxes to plug coronavirus shortfalls

Southeast Asian countries have turned to new and higher taxes to offset falling government revenues due to the coronavirus pandemic, walking a fine line between securing funding and further straining economies. The pandemic has dealt a heavy blow to the Southeast Asian economy, squeezing government revenues across the region. Philippine President Rodrigo Duterte in May issued an executive order that slapped an additional 10% tariff on imported crude and petroleum products. The new tariff would add 6 billion pesos ($119 million) to government coffers if kept in place through the end of the year. The money will be used to secure medical equipment and to assist low-income households. Some Philippine lawmakers are also pushing for a value-added tax on digital services provided by the likes of Facebook, Google and Netflix. Indonesia is one step ahead. Netflix, Zoom, Amazon.com and more will be subjected to a 10% value-added tax in the country starting July, as part of emergency measures announced back in March. The tax is expected to bring in 10.4 trillion rupiahs ($700 million) a year or the equivalent of 0.5% of the government's total revenue in 2019. Meanwhile, the Thai government is weighing a new entry tax for foreigners once travel picks back up, which will be used to help tourist-related businesses hit hard by the coronavirus.

China to promote poverty alleviation with digital platforms

China has launched a special poverty relief initiative to be executed through digital platforms.From late May to the end of September, the operation jointly initiated by the Ministry of Human Resources and Social Security (MHRSS) and the State Council Leading Group Office of Poverty Alleviation and Development aims to provide job opportunities to poor migrant workers and 52 poverty-stricken counties with the support of digital platforms. Local human resource and poverty alleviation departments will coordinate with companies to offer jobs including express and take-out delivery, warehouse management and vehicle repair, the MHRSS said. In the meantime, online jobs like part-time customer service shall be provided, while entrepreneurship in the services, logistics and other sectors will be encouraged and supported. The operation also aims to help promote sale of farm produce in poorer areas through live streaming sales and opening up green channels to increase farmers' incomes. Human resources and poverty alleviation departments at all levels will strengthen cooperation with various digital platforms and offer more policy support to provide employment opportunities for the poor labourers, said an MHRSS official.

No capital controls, dollar convertibility unchanged: HK Monetary Authority

Hong Kong will not impose capital controls, the Hong Kong Monetary Authority (HKMA) said on Saturday, as experts predicted that the stability of the Hong Kong dollar exchange rate will be maintained. The HKMA noted on its official Facebook page on May 30 that "Free flow of capital and free convertibility of the Hong Kong dollar will continue to be safeguarded by Article 112 of the Basic Law." It noted that Kong Hong has the capability, resources and determination to safeguard Hong Kong's monetary and financial stability. "The financial system of Hong Kong is robust and resilient. We are well-positioned to withstand shocks," the HKMA said.According to the HKMA, the city's foreign reserves exceed $440 billion. The banking system is also highly capitalized with an adequacy ratio of 20 percent. The liquidity coverage ratio stands at 160 percent. The HKMA reiterated that it sees no need and has no plan to change the well-established Linked Exchange Rate System (LERS), which was implemented in 1983. The system ensures that the Hong Kong dollar exchange rate remains stable within a band of HK$7.75-7.85 per US dollar.

Stung by oil slump, Middle East wealthy become more risk averse

High net worth individuals in the Middle East have become the most risk averse among wealthy investors in emerging markets after being hit by the oil price crash, an executive at Barclays Private Bank told Reuters news agency. The bank's rich clients across emerging markets are shifting towards perceived safer investments, such as dollar assets, equity-paying dividends or selective fixed income, but risk aversion is not as intense as during the global financial crisis, said Salman Haider, Barclays Private Bank's head of global growth markets. Haider said risk sentiment was also down in Russia, another oil-rich economy, while appetite was subdued in India. Clients were a bit bolder in other parts of Asia, he said. The private bank's clients typically have more than £20 million ($24.7m) in assets available to invest." A lot of focus has been on making sure their businesses are able to sustain liquidity needs, working capital and so forth," said London-based Haider. There was a broad consensus by clients to shift portfolio flows to sectors such as healthcare and technology, and away from areas more exposed to the pandemic, such as travel and entertainment, he said. For the larger family offices and mega-wealthy there was an appetite for investment in distressed assets, ranging from bank loans to healthcare and technology assets, in the US and Europe, Haider said.

Is remote learning a model for the future?

Since mid-March, schools and universities worldwide have faced the challenge of converting their learning instruction to ICT (information and communications technology) almost overnight. Most teachers, whether at university or school, recognise that some of these digital methods will be adopted in the long term. But during the experience thrust on education sector in the last two months, gaps are visible where personal presence is irreplaceable. One area is in ensuring fair and viable exams. Where online exams taken at home have resulted in a pass, there’s always the nagging question: how can there be surety that there was no cheating? While the experience was rated positive, one cannot jump to conclusions. After all, more has changed for the students than just the switch from face-to-face to distance learning: the shutdown of public life ruled out a number of alternatives to studying, so most young people will have spent more time at their studies than usual. Also, students who had no problems with learning at normal times will also thrive with distance learning. Those who require more intensive supervision will fall behind – and to what extent depends on the commitment of teachers and parents.

Pandemic sets back fight against single-use plastic

Concern about infection has driven consumers back to throwaway packaging, while bans on disposable items have been delayed in the UK and US. At the same time, the switch from eating out to buying food to have at home has also pushed up demand for packaging. A steep rise in demand for cleaning and hygiene products has required yet more plastic. The British Plastics Federation said its members that supply packaging for food and drink, bleach, handwash and medicines were operating at record capacities. Lids and bottles for hand sanitiser are in especially high demand.About 300m tonnes of plastic waste are produced globally each year, less than a tenth of which is recycled. Plastic also contributes to climate change. Just as the economic downturn of 2008-2009 setback action on climate policies, campaigners are worried that the same could happen now for plastic. Dave Lewis, chief executive of the UK’s largest supermarket Tesco, said that the trend for customers to avoid packaging had gone into reverse: “Before the crisis, people were looking for more unpackaged, loose produce, [but] people are interestingly going back to pre-packed produce because they believe that’s a safer purchase,” he told the BBC.

Strategic
Anger and Unrest Sweep across U.S.

The worst civil unrest in decades erupted in cities across the U.S. this weekend as anger sparked by the death of a black man in Minneapolis police custody touched off demonstrations nationwide as protesters torched vehicles, smashed windows and defaced buildings. The Minneapolis clashes began after the death of George Floyd, a black man who died during an arrest after a white police officer kept his knee pressed into his neck during an event that was recorded on video. This has come after other recent killings of African-Americans and amid severe economic stress in the wake of the coronavirus pandemic, creating a highly combustible mix. Virus infections and job losses have taken an outsize toll on minorities. The National Guard said about 5,000 of its personnel were activated in 15 states and Washington, D.C., to aid law enforcement with protecting lives and property, as clashes that began last week spread beyond Minnesota. President Trump attributed violence in Minneapolis to left-wing radical groups, without offering evidence. Attorney General William Barr said in a statement on May 31 that any violence would be treated as domestic terrorism and that federal officials would work with state and local law enforcement to identify instigators.

Israel-Iran attacks: ‘Cyber winter is coming’

In early April, municipal workers at a water pumping station in central Israel noticed a warning from their computer systems — a few pumps had been malfunctioning to trick the computers into increasing the amount of chlorine added to the treated water that flows to Israeli homes. A piece of Iranian-written code had travelled around the world, passing through servers in the US and Europe to hide its origins, and finally to the commercially manufactured software controllers that operated the water pumps, according to four Israeli officials and a western intelligence official briefed on the findings. An Israeli official said the suspected attack — the latest salvo in the four-decade hostility between the two countries — had opened the door to “an unpredictable risk scenario”. The official added that it had created a precedent for tit-for-tat cyber-attacks on civilian infrastructure that both countries have so far avoided. An Iranian regime insider dismissed the allegations. “Iran cannot politically afford to try to poison Israeli civilians. And even if Iran did so, where is the Israelis’ appropriate response?” Israel officials said the Jewish state retaliated last month for the alleged Iranian attack. Under orders from Naftali Bennett, then acting defence minister, Israel carried out a small, but sophisticated attack on the Shahid Rajaee Port, which handles nearly half of Iran’s foreign trade.

Japan braces for double punch of coronavirus, natural disasters

Local governments in Japan are waking up to the need to prepare for a worst-case scenario -- a natural disaster and a coronavirus outbreak hitting their areas at the same time.Japan is prone to natural disasters such as earthquakes and typhoons, and local municipalities have response plans. But this year, they are scrambling to prevent emergency shelters from becoming a hotbed for coronavirus infections. The north eastern Japan city of Kesennuma, Miyagi Prefecture, has decided to increase the number of schools and community centres that will provide shelter mainly to elderly residents who begin evacuating earlier than others in cases of disasters such as flooding, from the current 12 to 25. Kesennuma has a total of 96 facilities ready to serve as emergency shelters in the aftermath of disasters including an earthquake or tsunami. The plan is aimed at avoiding the overcrowding of emergency facilities by dispersing evacuees and lowering virus transmission risks as Japan is calling for avoiding the "three Cs" -- confined and crowded places and close contact with others. People in shelters need to keep a distance of 2 meters and use disinfectants, according to the city's operational guidelines. But a city official acknowledges that help from outside entities such as local residents' associations may be necessary to run the facilities.

Trump seeks to shape world opinion on China with expanded G-7

U.S. President Donald Trump hopes to invite Russia, South Korea, Australia and India to the next Group of Seven summit, signalling his desire to find partners as he blames China for the novel coronavirus pandemic. Trump said on May 30 that he will postpone the G-7 summit from June to September, around the time that the United Nations General Assembly meets. But he also suggested it could be held after the U.S. election in November. "So it might be a G-10, G-11, and it could be after the election is over," he said. Notably missing from the invitation list is China. American lawmakers on both sides of the aisle are taking a harder line against Beijing. The U.S. chairs the G-7 organization of leading industrial nations this year, so Trump is free to extend invitations. He has suggested that Russia, which was expelled from the group in 2014 following its annexation of Crimea from Ukraine, should be allowed to join. Other G-7 nations have rebuffed that idea. Trump said he does not "feel that as a G-7 it properly represents what's going on in the world," calling it a "very outdated group of countries."

US-Japan military drills go on despite virus, with eye on China

The coronavirus has not stopped the U.S. and Japan from holding joint military exercises, as the allies keep watch on China's increasingly assertive maritime manoeuvres in the East and South China seas amid the pandemic. Two U.S. Air Force B-1 bombers and 16 F-15 and F-2 fighters from Japan's Air Self-Defense Force held joint drills over the Sea of Japan and around Okinawa last week. "These are very important as we further strengthen the deterrence and capabilities of Japan and the U.S. acting jointly," said Gen. Yoshinari Marumo, chief of staff for the Air Self-Defense Force. The latest joint exercise was the third since April. "This mission is a demonstration ... that we have the ability to operate from numerous locations across the globe, even during the global pandemic," Gen. Tim Ray, commander of the Air Force Global Strike Command, said after a drill in late April during which a B-1 flew to Japan from the contiguous U.S. and teamed with Japanese fighter jets. The allies also seek to hold the Rim of the Pacific international maritime warfare exercise hosted biennially by the U.S. Navy, despite concerns that the event will be cancelled due to the coronavirus. Plans call for holding RIMPAC in August at a smaller scale and shorter duration that usual.

UN Security Council extends mandates of missions in Somalia, Iraq, Darfur

The Security Council on May 29 adopted resolutions to renew the mandates of peacekeeping or political missions in Somalia, Iraq and Sudan's Darfur, and to extend sanctions against South Sudan. Resolution 2520 authorizes African Union member states to maintain, till Feb. 28, 2021, the current level of 19,626 uniformed personnel, including a minimum of 1,040 police personnel, for the African Union Mission in Somalia, to support security preparations for elections due at the end of 2020 or the beginning of 2021, and to conduct tasks in line with an updated Somali-led transition plan and the handover of security to Somali security forces. Resolution 2521 decides to renew for a year, till May 31, 2021, an arms embargo on South Sudan, and a travel ban and asset freeze against individuals. The Security Council decides to carry out a midterm review of the measures no later than Dec. 15, 2020, and expresses its readiness to consider adjusting the measures to respond to the situation. Resolution 2522 decides to extend the mandate of the UN Assistance Mission for Iraq till May 31, 2021. Resolution 2523 decides that the United Nations-African Union Hybrid Operation in Darfur (UNAMID) shall maintain its current troop and police ceilings till June 3, 2020, and that during this period UNAMID shall maintain all team sites for mandate implementation.

China and Pakistan joint efforts to win wars against locusts and pandemic: Chinese agricultural diplomat

As all-weather strategic cooperative partners, China and Pakistan are using all the technology tools at their disposal to strengthen cooperation to win the war against desert locusts while dealing with challenges from the coronavirus, China's first agricultural diplomat in Pakistan said last week. "In my opinion, desert locusts might continue to affect Pakistan for several years," Gu said. As of the end of April, the Chinese government had provided Pakistan with 300 tons of malathion pesticides and 50 vehicle mounted high-efficiency sprayers to help Pakistan fight the locust disaster. The two countries' agricultural departments are actively implementing a Memorandum of Understanding on strengthening cooperation on plant pest and disease control, which aims to improve the ability and level of sustainable management of locusts. Also a virtual salon on joint efforts to control locusts, part of the hotline campaign for China-Pakistan Economic and Trade was facilitated on May 20, right before the 69th anniversary of the establishment of diplomatic relations between the two countries. Gu told the Global Times that the cloud salon attracted almost 170 delegates to discuss cooperation between China and Pakistan in locust control. They also shared insights on the application of pesticides for locust control to audiences from Pakistan, Rwanda, Bangladesh and Nigeria during a video conference.

Russian military, diplomats to negotiate agreement with Syria on more facilities & maritime access

President Vladimir Putin ordered Russia’s defense and foreign ministries on May 29 to hold talks with Damascus, with a view to Moscow obtaining additional facilities and maritime access in Syria. A protocol could be signed to the agreement with Syria on deploying Russia’s air task force, which stipulates the transfer of additional facilities and water area to the force, according to the president’s instruction posted on the government’s legal information web portal. The ministries were instructed to hold negotiations with the Syrian side and, upon reaching an agreement, sign the protocol on Russia’s behalf, allowing minor amendments to be made to the draft with the Russian government’s approval, TASS said. Russia and Syria had earlier inked an agreement for a term of 49 years on deploying the air task force at the Hmeymim air base in the Latakia province. Russia, a close ally of Syria, also has a naval facility at Tartus, in the Mediterranean.

3 years of ‘isolation’: Qatar denies rumours it plans to exit Gulf bloc

Qatar has denied that it plans to quit the Gulf Cooperation Council (GCC), as Doha prepares to mark three years of isolation led by the regional bloc’s heavyweight Saudi Arabia. The gas-rich state cautioned, however, that the effort to isolate Doha economically and politically meant people in the region “doubted” the GCC. Rumours of Qatar’s imminent departure from the GCC, founded in 1981 and headquartered in Riyadh, have been swirling in Gulf capitals in recent weeks. Qatar’s Assistant Foreign Minister Lolwah Al-Khater told AFP that “reports claiming that Qatar is considering leaving the GCC are wholly incorrect and baseless.” “As we are reaching the third year of the illegal blockade on Qatar by Saudi, the United Arab Emirates and Bahrain, there is no wonder why the people of the GCC are questioning the GCC as an institution,” the official said. Saudi Arabia, the UAE and Bahrain, along with non-GCC member Egypt, abruptly cut diplomatic, economic and travel ties with Doha in June 2017 over their insistence that Qatar was too close to Iran and was backing radical Islamist movements. Qatar rejected the charge and refused to budge on any of the 13 demands made by its former allies.

Medical
Is It Safe to Reopen Schools? These Countries Say Yes

Authorities in many hard-hit countries such as Italy and the U.S. have so far resisted reopening schools for fear of triggering an increase in infections. Researchers and European authorities said the absence of any notable clusters of infection in reopened elementary schools so far suggested that children aren’t significant spreaders of the new coronavirus in society. They acknowledged that their findings might change with the onset of winter and cold weather, and a recent outbreak at a Jerusalem high school affecting students and staff was a reminder of the higher risk to teenagers and adults. But Denmark, Austria, Norway, Finland, Singapore, Australia, New Zealand and most other countries that have reopened classrooms haven’t had outbreaks in schools or day-care centres. Denmark has imposed a number of precautions on teaching establishments, from maintaining air circulation to rules on distancing and hygiene. In Norway, the government won’t close schools again even if the number of cases starts rising in the country because there have been no negative consequences from reopening schools on April 20, said Education Minister Guri Melby. Schools in some German states have been open for almost a month. While Germany has since experienced outbreaks at slaughterhouses, migrant shelters, a church and a restaurant, schools have been spared.

Fight over rights to Covid-19 drugs puts Switzerland in a tough spot

Recent calls by global health advocates and some governments to loosen patent protections during the Covid-19 crisis to make drugs and vaccines widely available have caused some unease in Switzerland. The Alpine country’s economy and its self-professed identity as an innovation powerhouse rely heavily on the rights and rewards attached to patents. It has the most European patent applications per capita and performs well in rankings of patent quality, a large portion of which are in the biomedical field. At the World Health Assembly in Geneva a couple of weeks ago, the Swiss government supported a resolution that called for the “voluntary pooling and licensing of patents to fight Covid-19”. But other calls to override or eliminate patents completely through compulsory licensing, open licensing or a so-called “People’s Vaccine” have not been as welcome. “Switzerland takes intellectual property rights very seriously and will not undermine the regime so easily,” Gaétan de Rassenfosse, a professor of Innovation and intellectual property policy at the Federal Institute of Technology in Lausanne (EPFL), told swissinfo.ch. Covid-19 is bringing the issue back to the forefront with added urgency as billions in taxpayer money, including from Switzerland, is funnelled into vaccine research and clinical trials. This has created a nationalistic domino effect as a growing number of countries stake claims on R&D efforts.

For Further Reading:
  • Protectionism Spreads Globally With the New Coronavirus, https://www.wsj.com/articles/protectionism-spreads-globally-with-the-new-coronavirus-11590779442
  • EU budget chief seeks backing for business levy to fund recovery, https://www.ft.com/content/b9ff37b1-29b4-40ea-8b01-b4b82acc8ccf
  • 70% of Japan execs plan changes to supply chain: Nikkei survey, https://asia.nikkei.com/Business/Business-trends/70-of-Japan-execs-plan-changes-to-supply-chain-Nikkei-survey
  • Southeast Asia leans on new taxes to plug coronavirus shortfalls, https://asia.nikkei.com/Economy/Southeast-Asia-leans-on-new-taxes-to-plug-coronavirus-shortfalls
  • China to promote poverty alleviation with digital platforms, http://www.xinhuanet.com/english/2020-05/31/c_139102772.htm
  • No capital controls, dollar convertibility unchanged: HK Monetary Authority, https://www.globaltimes.cn/content/1190084.shtml
  • Stung by oil slump, Middle East wealthy become more risk averse, https://www.aljazeera.com/ajimpact/stung-oil-slump-middle-east-wealthy-risk-averse-200529160152614.html
  • Is remote learning a model for the future?,https://www.swissinfo.ch/eng/opinion_is-remote-learning-a-model-for-the-future-/45795838
  • Pandemic sets back fight against single-use plastic, https://www.ft.com/content/c479a718-36a6-48e2-8632-a77290fc223a
  • Anger and Unrest Sweep Across U.S., https://www.wsj.com/articles/george-floyd-protests-minneapolis-11590844180
  • Israel-Iran attacks: ‘Cyber winter is coming’, https://www.ft.com/content/3ea57426-40e2-42da-9e2c-97b0e39dd967
  • Japan braces for double punch of coronavirus, natural disasters, https://mainichi.jp/english/articles/20200531/p2g/00m/0na/040000c
  • Trump seeks to shape world opinion on China with expanded G-7, https://asia.nikkei.com/Politics/International-relations/Trump-seeks-to-shape-world-opinion-on-China-with-expanded-G-7
  • US-Japan military drills go on despite virus, with eye on China, https://asia.nikkei.com/Politics/International-relations/US-Japan-military-drills-go-on-despite-virus-with-eye-on-China
  • UN Security Council extends mandates of missions in Somalia, Iraq, Darfur, http://www.xinhuanet.com/english/2020-05/30/c_139099530.htm
  • China and Pakistan joint efforts to win wars against locusts and pandemic: Chinese agricultural diplomat, https://www.globaltimes.cn/content/1189637.shtml
  • Russian military, diplomats to negotiate agreement with Syria on more facilities & maritime access, https://www.rt.com/newsline/490172-russia-syria-air-facilities/
  • 3 years of ‘isolation’: Qatar denies rumors it plans to exit Gulf bloc, https://www.rt.com/newsline/490132-qatar-rumors-gulf-bloc/
  • Is It Safe to Reopen Schools? These Countries Say Yes., https://www.wsj.com/articles/is-it-safe-to-reopen-schools-these-countries-say-yes-11590928949?mod=hp_lead_pos5
  • Fight over rights to Covid-19 drugs puts Switzerland in a tough spot, https://www.swissinfo.ch/eng/patent-protection_the-fight-over-the-rights-to-covid-19-drugs-puts-switzerland-in-a-tough-spot/45781430

  • Image Source: https://pixabay.com/illustrations/corona-virus-coronavirus-virus-4932576/

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