Why COVID-19 impacts are potentially worse in developing economies
By: Sijan Thapa
Tags: Crisis, Nepal, Institutions, Developing Countries, Covid 19

Photo by CDC on Unsplash

When the second wave of COVID-19 crisis hit Nepal, it became one of the worst covid-19 affected countries in the world, with an infection rate hovering between 40%-50% and the ratio of infected population to total population as bad as that of India, the COVID-19 hotspot at the time. The government’s efforts to procure vaccines and inoculate the general public had failed owing to several domestic and external reasons. In fact the government’s inability to deal with the crises became blatant in the wake of the ever-rising number of cases, not to mention the official statement released by the Ministry of Health and Population stating that the situation has gone beyond its control, with an intonation of ‘giving up’, probably unprecedented and unheard of in any other part of the world. The situation was at the worst the country had witnessed.

But Nepal is not alone. The onslaught of covid-19 pandemic may have hit the developed nations like USA and UK first and the severest, but developing countries are now facing the brunt of the second and third waves. These cases include nations like India, Indonesia, Sri Lanka, Malaysia, Thailand, and so on. Moreover, the impacts of covid-19 have been worse in developing nations because containing the pandemic and charting out the road to recovery are difficult because of several fractures and systemic fault lines that exist in these economies. These fractures tend to become more visible, intensified even, during crises that impede the abilities of these economies to overcome them.

Institutions and governance

A country’s resilience to emergencies like covid and its ability to successfully respond to them depends greatly on the quality of the institutions and governance it has in place. The failure to deal with Covid-19 in Nepal mostly stems from these shortcomings, compounded by the uncertainty surrounding the new strains and variants. Firstly, the healthcare system and healthcare infrastructures are not well-developed to directly deal with the increasing infected populations. Few indicators to gauge the health infrastructure system are hospital bed and doctor density i.e. number of hospital beds and doctors available per 10000 population. In Nepal, there are only 3 hospital beds and 7.5 doctors available per 10000 people according to the latest data available from World Bank. This inadequacy has become glaring now. We have seen hospitals running out of beds, ICUs, PPEs, oxygen cylinders, necessary medicines; we have seen patients getting treated on the floor of the hospitals, and people setting up tents in the periphery of the hospitals because they couldn’t get admitted.

Since a large segment of the population in developing economies is still poor, reliance on the public healthcare system and the government becomes imminent. But their incompetence, inefficiency and insufficiency means that the public often have to turn to the private sector. Access to the private sector can prove exorbitant, requiring huge amounts of deposits for just admittance and expensive daily fees on top of that leading many to years of debt. In developing economies like Nepal, the private sector is also already ridden with bad practices and is unaccountable, which potentially worsens the woes of the general public.

Poor governance is another key issue that makes a crisis worse than it should be. When a crisis such as a pandemic hits, there are other consequences that follow. Because the supply cannot match the increasing demand in the short run, blackmarket for essential medicines and oxygen tanks/cylinders spring up. Dupes in the market become common, as well as unethical and unjustified price hikes of essential items including food. In both India and Nepal, we have seen black markets of Remdesivir medicines burgeoning, oxygen tanks being sold with much higher markups, fake medicines being advertised and so on. In the absence of strong consumer forums and quality control authorities, which is often the case in developing economies, these problems continue unabated.

In emergencies like the covid-19 pandemic, the role of government is also to disseminate information and raise awareness. However, due to lack of credible information and necessary guidelines, people rely on cheaper and convenient, but not necessarily correct sources, like social media posts and whatsapp forwards. People tend to self-treat themselves through OTCs till the situation gets much worse or they self-diagnose themselves for common flu and cold and do not get tested. In fact, it would not be a surprise if the actual number of infected population in Nepal was much more than what the official statistics suggest.

Fiscal constraints

Developing economies often don’t have enough resources to deal with the direct costs associated with containing the covid-19 pandemic. Some of the countries that have successfully managed to limit the impact of covid-19 like China, New Zealand, Singapore, Taiwan, and South Korea aggressively undertook measures like mass-testing, contract tracing, lockdowns and strict quarantine requirements. Since lockdowns take away livelihoods from people, especially informal workers which make up a large segment of the workforce and for whom working-from-home is not a possibility, they should be complemented with social assistance programs like cash transfers, unemployment benefits and other in-kind measures. For instance, Japan opted for a universal USD 930 cash handouts, South Korea provided Covid-19 relief funds to small businesses and other vulnerable groups while the Philippines introduced a large-scale cash transfer program that covered around 70% of the entire population. Without such institutional support, there are adverse socioeconomic impacts on a large section of the population.

Other factors

Several other political factors also indirectly determine the severity of the impacts of covid-19. Political responsiveness, and bureaucratic capacity and autonomy to undertake actions in the interest of the public, while being free from political pressures, are two such key factors. These factors are often augmented by earlier experiences with epidemics like Ebola, SARS, MERS etc. Countries in Southeast Asia like Laos, Vietnam and Cambodia, despite being lower middle income countries, were therefore quick to respond to the covid-19 pandemic and were successful in keeping the infection rates low. On the other hand, in India and Nepal we have seen lackluster efforts from political leaders to tackle the situation who at critical points have downplayed the situation and even ignored its severity, and instead focused on their own political agendas.

Crises are inevitable, both natural and man-made. Despite crises hitting every year in the form of natural disasters, i.e. floods and landslides, and also a massive earthquake fresh in our memory, the Nepali government still seems unprepared for emergencies like covid-19. However, this pandemic could be an opportunity to turn things around and introduce provisions and policies that could facilitate prompt response in the future. A recently published World Bank report that studies national emergency public procurement systems in around 103 countries found that those with experiences with previous epidemics “had in place 14 percent more of the critical emergency procedures to face the COVID-19 crisis” and that such experiences allowed governments to ready and strengthen their procurement systems for emergencies. Nepal has suffered severely because of procurement related issues. It failed to procure a significant number of covid-19 doses because of a clear case of imperfect competition in the market. This could be a learning opportunity. Resilience needs to be built, institutions need to be strengthened so that a similar government failure like that of covid-19 can be avoided in the future.