Eight new development challenges triggered by Covid-19

Covid-19 has brought about an unprecedented crisis in human history in terms of its dimension and scale. It involves not only pandemic-related health issues but also a deep socioeconomic crisis triggered by large-scale job losses, a sharp rise in poverty and vulnerability, and widening inequality. It is also important to note that impacts in some other areas (like education) are still unfolding.

What makes the effects of Covid-19 different from those of past pandemics? What development challenges has it brought about?

First, the global public health crisis caused by the pandemic has been unprecedented. The virus reached almost all countries in the world. This rapid and widespread outbreak occurred due to the globalisation of connectivity and people's mobility through air transport which flourished in recent decades. The immediate response from the governments of the affected countries was to impose extraordinary travel restrictions to contain the spread of the virus.

Second, the public health systems of most developing countries are in an underdeveloped state. These countries cannot provide necessary health care because of high deficiencies in financing, efficiency, quality and equity. The private healthcare systems also largely failed to provide necessary support given the enormity of the crisis. There is no denying that developing countries will have to invest significantly in their healthcare systems and infrastructure in the coming days.

Third, Covid-19 has exposed numerous institutional challenges and barriers in managing the health crisis in developing countries. True, many European and other developed countries also witnessed a high number of infection cases and deaths due to various factors—one of them being the age structure of the populations in these countries. But better management and infrastructure of their health systems, compared to a large number of developing countries, will eventually make a difference in mitigating long-term adverse effects on their populations. By contrast, the developing countries are likely to struggle in this regard. To help cushion the pandemic's long-term impacts, they need to reform their health systems including by significantly enhancing the allocation of resources to public healthcare, ensuring transparency and accountability in public health spending, and restructuring relevant institutions for implementing proper health policies and programmes.

Fourth, to cope with the crisis, poor people in developing countries are making intergenerational adjustments when it comes to the choice between current consumption and savings for future consumption or investment. With varying degrees of government support, poor people across the developing world are trying to cope with the situation using their personal savings, rearranging priorities (i.e. spending less on education, health, entertainment), decreasing their daily intake of food and getting less support from families and friends who are also struggling. These coping strategies may work for some people for some time, but if economic recovery is slow and insufficient, it will mean huge suffering for many. Most of these strategies involve high trade-off and high opportunity cost. The crisis is forcing poor households to focus on survival instead of developing the human capital of their families for the future. Thus these households are being made to sacrifice the prospects for better health, better education and a better life. Nutritional deficiencies caused by insufficient food intake will have a long-term intergenerational impact. Also, as schools and other educational institutes have remained closed for over half a year now, students from distressed families are likely to bear a higher burden, and many of them may permanently be out of the education system. All these will also have a long-term negative intergenerational impact.

Fifth, governments in most countries announced some rescue or stimulus packages to support affected economic sectors. However, the operationalisation of stimulus packages remains a big problem for many developing countries. The operationalisation procedure involves identification and selection of the affected firms/industries, disbursing credit through the banking or other channels, and monitoring of the overall process to ensure proper execution of the plan. All these steps, however, suffer from numerous institutional challenges in developing countries. Identification and selection of affected firms can be problematic. While many firms have sought the benefit of stimulus packages, in the absence of any systematic process of assessment, many eligible ones may fall through the cracks. By contrast, firms with powerful political and lobbying links may end up getting a large share of the pie even if they don't need such incentives. To counter this, institutional reforms are vital to ensure formulation and implementation of a broad, comprehensive industrial policy.

Sixth, achieving long-term development targets, especially those under the SDGs (by 2030), has become uncertain in most developing countries. The decade-long achievements in poverty reduction are under threat. At the same time, inequality is likely to rise during this crisis period. Therefore, there is a need to rethink approaches to attaining SDGs given the new challenges brought about by Covid-19. The situation also calls for a renewed global discussion on development paradigms since the post-pandemic world is not going to be the same as the pre-pandemic one. 

Seventh, economic recovery in many developing countries remains contingent on the availability of reliable Covid-19 vaccines, among other factors. Availability of vaccines in some countries would not help recover business and trade confidence worldwide. There is a need for a fair distribution of vaccines across all countries. Given that the world trade is heavily dependent on global value chains, unless business confidence rebounds in all segments of the value chains, the world trade will continue to remain depressed.

Finally, as we are talking about the new normal, new production process, and changed lifestyles, Covid-19 has sped up the process of integrating the virtual life—with so many online platforms and IT-based services—into people's regular life. However, access and opportunities from these new features are unequal in most of the countries. This inequality is likely to escalate the existing economic and social inequalities within and between countries.

Dr Selim Raihan is a professor at the Department of Economics, University of Dhaka, and Executive Director, South Asian Network on Economic Modeling (SANEM). Email: selim.raihan@gmail.com