Covid-19, a ‘black swan’ event

Covid-19 continues to instill in us that all politics is local and the opportunity provided by the crisis is to get local governments to do their basic tasks: cleanliness and public order. The basics have a way of getting harder to get done, unless leaders do their job proactively. Is the Philippines ready in this era of epidemics? What are our economic contingency plans? Are the cities ready? Or will we be like the mayor of Wuhan?

Note: This column originally appeared in The Manila Times on March 3, 2020.    

In a health crisis, trust plays an important role in getting everyone to cooperate and find a solution. But it is easier said than done in a world dictated by geopolitics. The coronavirus disease 2019 (Covid-19) has done what no war has achieved, getting the global powers to talk and help each other logistically and putting together containment protocols that are politically neutral and acceptable, in case of travel bans. Amidst the business world being rocked, “financial markets are into correction territory by more than 10 percent.” The spinning though has created a very alarming downward trend with everyone scrambling to get a hold of the situation.

The Covid-19 has changed governance in almost all nations where the virus has landed, causing a lot of changes in travel, business, tourism, health and education, among others. “[The] coronavirus is a type of common virus that can infect your nose, sinuses or upper throat. They can spread much like cold viruses. Almost everyone gets a coronavirus infection at least once in their life, most likely as a young child. Most coronaviruses are not dangerous, but some are. Those that cause Middle East respiratory syndrome or severe acute respiratory syndrome (SARS) can be deadly.”

The World Health Organization (WHO) has made it official: Coronavirus is the first “global health emergency” of our new era of major power competition. It will “affect global markets, as well as geopolitics” and we are all in a quandary on how it can best be contained.

Coronavirus is a “black swan” event that might nudge everyone toward global recession after the world economy’s worst year in a decade in 2019. Markets are convulsing and the United States is falling by more than 600 points.

Black swan is an extremely rare event with severe consequences. It cannot be predicted beforehand, though many claim it should be predictable after the fact. These “events can cause catastrophic damage to an economy and because they cannot be predicted, can only be prepared for by building robust systems. Reliance on standard forecasting tools can both fail to predict and potentially increase vulnerability to black swans by propagating risk and offering false security.”

China is the second largest economy of the world and is the companies of the world. China accounts for “16 percent of the global output,” according to the World Bank. In epidemics, “90 percent of economic loss comes from the fear of people being infected from the disease through contact.” This leads to people abstaining from offices and places of work, shutting down of retail and no business activity. The problem in China is magnified by the shutting down of cities and provinces. The province of “Hubei, where Wuhan is located, has been shut down totally except for emergency medical activities. Hubei supplies 4.5 percent of China’s GDP (gross domestic product).”

The spread of coronavirus is fast. Originating in a Wuhan wildlife wet market, it has resulted in “more than 210 deaths and more than 10,000 confirmed cases in 19 regions of China and 20 countries around the world. The cases now include the first person-to-person transmission in the US, and a rare State Department Level 4 advisory of “do not travel” to anywhere in China.

If the health crisis runs into summer in China, “the cost could be a 2-percentage-point decline in Chinese growth to 4 percent or lower this year. First quarter growth figures in China could fall to 2 percent year-on-year — which would be the lowest in decades, and down from 6 percent in the last quarter of 2019.” The impact on the global economy will be far more significant than during the SARS pandemic of 2003, which is estimated to have provoked a “global economic loss of $40 billion and a hit of 0.1 percent on global GDP.”

The enormity of China shows how big the panda is in global affairs. China’s share of “global GDP has quadrupled to 16 percent from 4 percent — and fully a third of global growth has been coming from China. Tourism markets will take an outsized hit, as about 163 million Chinese tourists in 2018 accounted for nearly a third of travel retail sales worldwide. Thailand, for example, has already reduced its 2020 GDP forecast, based on expected revenue losses of as much as $1.6 billion from 2 million fewer Chinese visitors, should travel restrictions continue for a further three months.” Where is the Philippines in all these?

Then the political fall-out on the leadership of Chinese President Xi Jinping and the Communist Party he leads are increasingly being zeroed in. In fact, hard questions have been made regarding the slow response made by Wuhan Mayor Zhou Xianwing. It will be recalled that Xianwing explained his slow response as, “after I get this kind of information I still have to wait for authorization before I can release it.” Andy Xie of the South China Morning Post characterized Xianwing’s action: “Wuhan’s failure shows up the systemic weaknesses in the top-down structure of the China model, where everyone in the hierarchy is accountable to someone above.” The Economist pointed out, “The reputation of the Communist Party and even of Xi Jinping may be more lastingly affected. The party claims that, armed with science, it is more efficient at governing than democracies. The heavy-handed failure to contain the virus suggests otherwise.”

Though there was rapid response to the outbreak and for sharing information with the international community, China has done little on the social impact on the 56 million people of Wuhan, who have been held in a state of lockdown since Jan. 23, 2020. While “enormous progress has been made in responding to public health emergencies of communicable disease and coordinating action internationally, much more needs to be done to better understand the repercussions of the measures taken on citizens and ensure their welfare.”

The economic impact of the coronavirus has been estimated to likely top “…$40 billion worldwide as theme parks, restaurants and theaters go dark.” Buying patterns change and so is tourism experiencing slow growth with flights being affected and airport operations about to belly up. The tech industry felt the effects first with the migration of big companies from China. These include the likes of Apple, Microsoft and Expedia, among others. Big tech conventions are canceling, from the MWC Barcelona to Facebook’s annual F8 conference, while Amazon has been watching the developments in China.

Covid-19 continues to instill in us that all politics is local and the opportunity provided by the crisis is to get local governments to do their basic tasks: cleanliness and public order. The basics have a way of getting harder to get done, unless leaders do their job proactively. Is the Philippines ready in this era of epidemics? What are our economic contingency plans? Are the cities ready? Or will we be like the mayor of Wuhan?

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About the Author
Malou Tiqiua is the Founder/General Manager of PUBLiCUS Asia Inc. A noted political management expert in the Philippines and Asia, she brings over 20 years of professional experience in public, private and the academe combined. Author of the comprehensive book on electoral campaigns in the Philippines, "Campaign Politics", Malou is a graduate of the University of the Philippines with a Political Science degree and a Master of Public Administration. She completed her second master's degree (MA in Political Management) from the Graduate School of Political Management, George Washington University.
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