With the enforcement of lock-downs across ASEAN countries, one of the main concerns that follows, is the economic repercussions of the strict measures and the fear that it would have a long lasting impact on social well-being and economic performance.
It was just a matter of time before ASEAN, which has a close proximity and relationship with China – the epicenter of the COVID-19 outbreak – suffered the same fate as its larger neighbour. Governments in ASEAN for their part have now put stringent measures in place to contain the virus outbreak. While this is obviously good for the well-being of people, it is not so for economic growth in the short term.
The measures are already stalling economic growth in major markets. Equity markets in ASEAN, already suffering from foreign outflows earlier, are now at the brink of witnessing bear markets as the coronavirus induced sell-off continues.
In Malaysia, according to reports in local media, retailers are experiencing drastic sales declines at their outlets especially for those outlets located at tourist zones, following concerns of the COVID-19 outbreak and the government’s movement control order.
According to a spokesperson at Bonia Corp Bhd, an international luxury fashion retailer based in Malaysia, sales for its Bonia branded goods have declined as much as 77 percent in at least one location.
Due to the pandemic, retailers in Malaysia have pleaded for all shopping malls and shop-house owners to give tenants a six-month rental rebate, from 30 to 50 percent from March onward.
Neighbouring Singapore also saw the worst blow to its retail sector since 2013. Amid plummeting sales, more than 300 retailers in the island state have gathered together to ask their landlords for a lifeline.
Can retailers stay afloat?
According to an analysis done by The Bain Macro Trends Group (BMTG), businesses should activate first level contingency procedures that include mitigating immediate threats to staff, such as reviewing and even deferring nonstrategic investments, restricting non-essential travel, and planning for a business environment which is equivalent to a quarter of a year recession.
One key advantage of private sectors is that they have the resources and ability to act much faster than their respective governments to ensure the safety of employees as well as protecting their business interests. Many private companies have moved to partial or full work from home policies. For those countries in ASEAN such as Thailand, Cambodia, and Indonesia which have yet to enforce any kind of movement control, this is especially relevant.
At time of writing, ASEAN has recorded more than 2,300 cases, with Malaysia having the highest reported number of cases at 900 while Cambodia’s number stands at 37. Myanmar and Laos have yet to report any cases, but that may be due to underreporting and under-testing of the population for COVID-19.
In February, when the crisis grew exponentially in China, 80 percent of Chinese consumers expressed a preference for online grocery shopping, though only about half could make purchases due to supply shortages.
Therefore, one huge challenge for most companies is supply chains. Due to forced extended holidays and quarantined workers, production and distribution activity slowed down significantly in China. Restrictions on travel networks certainly did not help the case. These constraints have left some suppliers unable to meet the surge in demand for staple items.
For retailers, supply is likely to become the biggest issues. It is recommended that companies take preparatory measures at the earliest stage. In most critical categories, businesses would need to compromise for what would normally be unacceptable , such as loser payment terms.
Over the coming weeks, leadership teams should be more focused on cash flow. The increased focus on cash can go hand in hand with measures to reinforce the balance sheet, which includes drawing down all existing credit lines and stopping or postponing nonessential capital spending.