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Mekong and the Covid Crisis – A success story

When Covid-19 began to spread from China in mid-January, people in Thailand — the favorite destination of Chinese tourists — feared the worst. Thousands of Chinese tourists had visited the country for the Chinese Lunar New Year holiday, including around 7,000 visitors from Wuhan. Not surprisingly, Thailand was the first country outside of China to report a case of the virus; a Chinese tourist. In the following weeks, many expected the outbreak to explode, much as it did later in Europe and the US. Yet, to date, Thailand has recorded 3,022 cases, a 96% recovery rate and just 58 deaths. There have also been no new domestic cases for the last 29 days, despite a nearly complete reopening of the economy.


Thailand is not the only Covid-19 success story in the region; Vietnam and Laos, both of whom share extensive borders with China, have only recorded 349 and 19 cases respectively. Neither has had a confirmed death related to Covid-19. Cambodia, which had over 2 million visitors from China in 2019, also reported just 129 cases and no deaths.


This ‘success’ becomes starkly evident when one compares the explosive rates of infections in the U.S., Europe, and Brazil. To put it into context, Germany, one of Europe’s best performers, recorded 181,288 infections and 8,498 deaths in a country of 83 million (versus 70 million in Thailand and 97 million in Vietnam). And in Asia, if we go by the numbers, Thailand, Vietnam, Laos and Cambodia have all done far better than Japan, South Korea and Singapore, which are often written about as success stories.


Some sceptics have questioned the region’s official figures, mainly due to a lack of widespread and systematic testing, but there have been no reports of hospitals being overwhelmed with patients, nor has there been any discernible surge in pneumonia or other fatal illnesses. There certainly hasn’t been a spate of Facebook or Twitter posts with photos of dead bodies lining the streets or secret mass graves. With a relatively free press and an even freer social media, officials would find it very difficult to censor or hide any sudden rash of cases.


So why is it that the Mekong region has fared so well during this crisis, particularly when we compare it to far richer countries? It could be that the population has some kind of protection from a previous Corona virus or that the Corona virus strain that hit the Mekong region was less aggressive and viral. Perhaps it was the heat and humidity at this time of year. Time will tell. There are some key common traits, however, that probably contributed to this success.


One of the key things that occurred across the region was the swift action by governments to contain the outbreak, notably the closure of borders, contact tracing and mandatory quarantining (for 14 days) for all international arrivals. When the number of Covid-19 cases in China sharply increased in the last week of January, Vietnam decided to seal its northern border. On January 28, major tourist destinations such as Da Nang and Nha Trang stopped receiving Chinese tourists all together. Although Thailand, Laos and Cambodia only closed their international borders in mid-to-end of March, health screening at airports and mandatory registration of arrivals, as part of an active contact tracing program, had begun in late February, while quarantine regimes were put into place soon after for all international arrivals.


At the end of March, Thailand, Cambodia, Laos and Vietnam had all decided to impose a quasi-‘lock down’. Restaurants, cafes, shops, and businesses catering to the public were shut down and street vendors were encouraged to stay home. Although the region’s notoriously bad traffic and air pollution improved markedly, people still went about their daily business, most offices remained opened and there was no ban on movement, aside from a late-night curfew in Thailand (which has since been lifted). Governments encouraged people to practice social distancing at this time, but were no draconian measures applied by the authorities. People, in general, simply complied with the advice.


The region’s so-far-mild Covid-19 experience probably also owes to a unique mix of other factors, including a successful appeal to nationalism, where stay-at-home and social distancing orders were portrayed and obeyed as a patriotic duty. That is clearly apparent in near universal adoption of mask-wearing since very early in the crisis, with Western tourists and expats often the only maskless ones. But they too have largely fallen into line, in part due to social pressure but also due to regulations requiring the wearing of a mask to enter most public places.

The tentative success could also be in part due to culture: Thais, Cambodians and people from Laos traditionally greet without touching, using the “wai”, while hugging and kissing in public is rare throughout the region.


Another key factor is Thailand and Vietnam’s universal public health care systems, that many consider to be regional, if not global, role models, with low cost medical treatment available nationwide. That includes village-level rural health volunteers in all four countries, who even in non-pandemic times, have their fingers on the pulse of local communities. This allowed authorities to trace and contain outbreaks early. From the beginning of the crisis the Thai and Vietnamese governments also guaranteed that all Covid-19 cases, even foreigners, would be treated free of charge. This encouraged people to visit hospitals early, as there was no concern over the possibility of large medical bills.


A popular explanation going around about why Asian countries have done better dealing with COVID-19 is that they have authoritarian governments that could quickly muster a centralized, unified response from above. This view is superficial, indeed extremely so. Though governments did adopt emergency decrees, the battle against the pandemic was led in all these countries by public health authorities deploying a strategy of persuading people to use face masks and hand sanitizers, observe social distancing, and stay at home.


Polite visual and audio reminders were ubiquitous in public places and in the media. On television, COVID-19-related advice was pervasive, and one of the most watched spots in Thailand was the daily 11 a.m. update of the Center for COVID-19 Situation Administration (CCSA) led by a medical doctor, Dr. Taweeslip Wisanuyothin, who provided detailed reports, 7 days a week. He laid out the numbers, offered assessments of the national and international situation, and used the opportunity to boost popular morale. There was never an air of fear or any scare mongering by officials or the press, just data and information. This went a long way to reassuring the populace that things were under control and one could go about his/her daily rituals without too much hassle. This contributed to people’s willingness to go along with recommendations from public health officials.


Despite the success in containing Covid-19, economic activity throughout the region has, not surprisingly, slowed down due to the early restrictive measures and partial lockdown. It hit hardest the travel and hospitality sectors, particularly in Thailand and Cambodia where tourism accounts for up to 20% of GDP. Most hotels were closed and domestic flights were halted for several months. The poorest part of the population, such as street vendors, day laborers and hawkers suffered the most. This was mitigated to some degree by generous government subsidies to businesses and financial handouts to individuals. Free face masks and rice from the so-called ‘rice ATMs’ located in Vietnam’s main cities also became a hallmark of the crisis. Thankfully, the region’s geography and large agriculture base has also helped people survive the crisis with many simply choosing to head back home to the provinces and return to the family farm. With most businesses reopen, most have gone back to their previous jobs, as the traffic jams will attest…



Rice ATM in Vietnam


The quasi lockdown has ended and the region has reopened for business. While the optimism in the streets is palpable, it will doubtless take a while for things to return to ‘normal’. Domestic flights have resumed and passenger numbers are rising quickly, yet international travel is still limited. Discussions between regional governments are in full swing and many expect that a ‘travel bubble’ will soon be in place for the region and perhaps a few other countries where the virus appears to have come under control (Australia, New Zealand, Japan, Taiwan and Korea). In the most likely scenario, this should begin as early as mid July. This should give a much needed boost to the travel industry. Despite this, restaurants and shopping malls are again filling up and recent data suggests that things are returning to normal quickly; retail and recreational (shopping centers, restaurants and theatres) visitations in Vietnam were down just 15% as of June 14, -18% in Thailand, -19% in Cambodia and -9% in Laos, according to a recent Community Mobility report conducted by Google. This compares to -34% in New York, -63% in the UK, -31% in Switzerland and -33% in Germany. Anecdotal evidence supports this; Mega Bangna, Bangkok’s largest mall, has recently reported that average spending per shopper was Bt3,000 in May, the same level prior to the Covid outbreak. Similar numbers have been reported by retailers, restaurants and public transportation across the region.

Bangkok and Saigon traffic back to normal…

While the future remains uncertain, the Mekong region’s successful handling of the Covid crisis has allowed it to reopen its economies much sooner and much faster than most, suggesting that a ‘V’ shaped recovery is still possible in this region. This, together with relatively strong public sector balance sheets, healthy banking systems and a resilient private sector should continue to underpin a strong recovery in the economy and the region’s capital markets. This will be helped by significant trade flows within the region; intraregional trade accounts for 25-30% of all external trade with China, Japan, Korea and Taiwan accounting for another ~30+%. This suggests that the Mekong economies will not need to wait for Europe or the US to reopen and recover for its export industries to return to some state of normality. Moreover, it can be argued that this may stimulate even more rapid growth in regional economies.


The Mekong fund had benefited significantly from this recovery, up 5.4% in the first 5 months of 2020. This is a result of a number of situations working out for the fund in the early part of the year and the fund looking through the market panic and deploying the realised capital in good companies that trade very cheaply relative to assets and earnings. The fund’s strategy continues to deliver results largely uncorrelated to overall market moves and the managers believe that the portfolio is well positioned to continue benefiting from the regional recovery.


This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Probus Group to discuss these matters in the context of your particular circumstance. Probus Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.


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