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SE Asia growth drivers key to boosting recovery
Covid disruptions catalyst to improving tourism, agriculture, electronics, digital trade
The Asset 13 May 2022

Transforming Southeast Asia’s established tourism, garments and agro-processing industries, and leveraging advances in electronics and digital trade, could support the region’s recovery from the Covid-19 pandemic, according to a recent report.

The pandemic has created new challenges for the tourism industry, according to the report published by the Asian Development Bank (ADB). There are indications that the pandemic could lead to a fundamental decline in long-haul international travel, an issue exacerbated by the adoption of digital tools for meetings and events. To rebuild the industry, the report recommends restoring tourism demand through strong marketing campaigns, safer travel standards, more diversified tourism offerings, better paid and more skilled workers, and stronger crisis management response to build industry resilience.

While the agricultural sector was less affected by Covid-19, the report urges governments in the region to add higher value agro-processing activities that can support a post-pandemic recovery. Strengthening this sector will require harmonized food standards, efficient and transparent supply chains, the use of technology and improved processes to raise product quality, streamlined regulations and effective partnerships.

Structural challenges also face the region’s electronics sector. These include narrow diversification across electronics supply chains, low value-added products and processes, disruptive technologies which could bring negative employment impacts, and rapid changes in technology and consumption trends. To raise the dynamism of the electronics industry, the report highlights the need to develop industry‑specific supportive policies, such as smoother coordination between local business, international firms and governments, technological upgrading of special economic zones for electronics, incentives for greater research and development (R&D) and the development of skills and human capital.

Digital trade, the report states, has strong growth potential in Southeast Asia. Much of the region’s digital trade now concentrates on digital marketplaces and information technology and business process outsourcing (IT-BPO), while software development is picking up in some countries. As demand for digital products and services grows, it is important to enhance digital connectivity, invest in logistics and distribution facilities, develop an IT-BPO road map, support skills development and training, and rethink digital regulations to protect consumers.

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With the boom in e-commerce, upgrading the garment sector – a significant employer of women – is also critical. Improving competitiveness through simplified business regulations, faster digital technology adoption, stronger R&D, a greater focus on culture-related garments, skills training, and establishing more flexible production and business models could support the industry’s growth.

“Covid-19 has been both a major disruptor and a catalyst for change,” says Ling Hui Tan, head and lead economist for regional surveillance, AMRO Group. “After two years and counting, some extent of scarring is unavoidable – although it will take different forms in different economies and some economies will be more affected than others. On the other hand, the pandemic has spurred innovation in sectors, such as retail finance, and health care, which might lift the region’s economies in the long run toward higher productivity-driven growth.”

Ramesh Subramaniam, director-general for Southeast Asia, ADB, adds: “Recovery prospects in Southeast Asia are encouraging, but not without persistent risks. Supporting industries with the competitive advantage to propel a green, resilient, and inclusive recovery will not only require sector-specific interventions by governments, but crosscutting measures that encourage an enabling business environment, improved infrastructure and stronger intra-regional linkages.”

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