ReliefWeb

FROM: ALEXANDER GOGOBERIDZE , ZENEBE B. URAGUCHI – 04. AUGUST 2020

Let’s start with the obvious: Covid-19 has triggered a global crisis like no other. In addition to an enormous human toll, it's leading to the deepest global recession since the Second World War. The full picture of the impact is still uncertain. But the pandemic will result in output contractions across the vast majority of emerging markets and developing economies.

There are several Covid-19 impact assessments. Yet, no systematic regional assessment exists. That is what we have tried to do. Helvetas is partnering with the Swedish International Development Cooperation Agency (Sida) to facilitate an inclusive economic development program in 12 countries in Eastern Europe (Belarus, Moldova, and Ukraine); South Caucuses (Armenia, Azerbaijan, and Georgia); and Western Balkans (Albania, Bosnia & Herzegovina, Kosovo, Montenegro, N. Macedonia, and Serbia).

Exposed and fragile: across-the-board….

We looked at different data sources and spoke to different people. Our analysis in the 12 countries of the region shows that the impact of the Covid-19 crisis is widespread. The impacts, on different sectors of the economy, range from medium to serious affecting:

• 11 out of 12 countries in hotels, restaurants, catering;
• 7 out of 12 countries in manufacturing (mostly textile);
• 5 out of 12 countries in transport and logistics;
• 4 out of 12 countries in trade; and
• 2 out of 12 countries in construction

Countries that rely heavily on foreign direct investment (FDI), like Albania, Montenegro, and Serbia, where FDI constitutes more than 7% of the gross domestic product (GDP), are at higher risk of substantial erosion of investment opportunities. The estimates are a decline of 30-40% in 2020-21. This is constraining the region’s post-crisis recovery. In Serbia alone, the crisis has affected around 85% of SMEs. As of 15 June, the number of reported job seekers in Kosovo rose by six times between January and April 2020 compared to the same period in 2019.

Then come remittances. There is a high share of the population abroad. There is also increasing unemployment globally. This has led to a steep drop in remittances. About 16% of the populations of the six Eastern Partnership (EaP) countries live abroad. Armenia (33% of the population) and Moldova (28%) have the region’s largest migrant populations. Many migrant workers are stranded in foreign countries without work. They are unable to support their families back home. This could increase the economic downturn. Personal consumption heavily depends on remittances as a source of income.

Services that require direct contact between customers and service providers have forgone virtually all their revenues because of the restrictions on movement. The hospitality industry that employs a large number of young people has borne the brunt of the impact. For the next two years across all countries, businesses would face the challenge of maintaining their activities. In Georgia, for example, the number of international arrivals grew from 2.8 million in 2001 to 9.3 million (including 5.1 million of tourists) in 2019.

Going beyond sectors, we’ve also found out that learning at all levels is affected. The impact is serious, especially on adult education, work-based learning, non-formal education, and Technical and Vocational Education and Training (TVET). The crisis has upturned course schedules and attendances, disrupted teaching and learning, frustrated examinations and assessments, delayed certification, and will likely affect the immediate and future careers of millions of learners.

In addition to the closure of colleges, work-based learning is being maintained in very few countries and in sectors like finance and ICT where commercial activities continue through teleworking. This part of non-formal and formal education is the most affected by the pandemic, and its impact is highest in countries where it’s a compulsory part of the curricula.

5 opportunities for turning the tide

1. The future of work is increasingly becoming a thing we do, not a place we go to

The crisis has led to a major ‘cultural shift’ in the collaboration between workers and organizations through ‘working from home’. This isn’t a substitute for working in the office or outside the home. We shouldn’t underestimate the importance of informal conversations in workplaces that lead to new productivity.

There is increased use of technology and digital services in all countries. Our regional program shall carefully explore challenges, opportunities and keep the risks in mind and support economic recovery, and afterward inclusive economic development. The pandemic resets major work trends. It’s obvious that employers need to rethink workforce and employee planning, management, performance, experience and strategies.

Many businesses have shed off their workforce due to the crisis. Others are in urgent need of workers. Such changes in the labor market create opportunities for the regional program to support women and youth for decent employment. This allows employers to make sufficient savings (office running, transportation, etc.), which creates an opportunity to turn informal employees (mostly women and youth) into formal, that will ensure social protection, income benefit in case of sickness, and access to universal health care. The program can pilot the encouragement of such attempts by employers.

2. Different skills and competences are needed in the future job market

The Covid-19 crisis has also demonstrated the importance of certain skills and professions. Digital and non-cognitive skills (e.g. communication, planning, teamwork) are increasingly necessary to seize emerging job opportunities. More employment opportunities will need a combination of technological know-how, problem-solving, and critical thinking as well as soft skills such as collaboration.

Women and young people, thus need improved access to learning to acquire skills. The sphere of teaching and learning has undergone a fast transformation, in particular, showing the importance of blended learning. The crisis offers opportunities for upskilling and reskilling programs that have proven effective in the past. We believe that increased knowledge of skills development should be consolidated and shared regionally, given the similarities of the countries in the region in terms of legal frameworks, teaching materials, or teacher training. The Sida program offers a unique opportunity.

3. Accelerated financial and business services are required for effective response, recovery, and resilience

Many SMEs in the region have experienced some of the highest levels of credit constraints. Opportunities exist both in broadening or diversifying the type of financial services and tapping into fintech as a more efficient delivery mechanism.

Broadening or diversification means looking at a range of financial services from institutions that manage cash and non-cash types, including credit unions, microfinance institutions, banks, credit card companies, insurance companies, accountancy companies, consumer finance companies, and investment finance.

The COVID-19 pandemic has quickened the pace of digitalization. Fintech landscape (including voice-led fintech application) remains important in the region to maximize the gains from digital financial services. It’ll disrupt and transform traditional banking and financial inclusion paradigms. The regional program will solicit proposals (through ‘Innovation Challenges’) to identify and provide funding support for ideas that have the potential to deliver positive and impactful change in the business sector, predominantly in the hospitality and recreation industry sector and private sector development in the green economy.

Digital financing may reduce the high cost of providing financial services. To effectively tap into the opportunities, it’s important to consider the needs and capacities of women and other disadvantaged groups; they’re likely to have low or no digital skills and are at greater risk of being socially and economically excluded.

4. ‘Greening’ is no longer a choice but an economic imperative

The vast majority of countries in the region are acting on green economic development, but aggregate efforts to reduce greenhouse gas (GHG) emissions set out in countries’ Nationally Determined Contributions aren’t sufficient. Drivers such as environmental knowledge and awareness, recognition of the business case for a green economy, and environmental regulation and legislation are contributing to a shift in public policies and private sector enterprises to focus on the ‘double dividend’: the intersection of activities that both decarbonize the economy and lead to inclusive economic development.

A skilled workforce is necessary if we’re to realize the opportunities a green economy offers and to support green growth. These include technology-driven green sectors, green building, renewable energy and environmental services, eco-friendly food systems (production, processing, and supply), to mention a few. It isn’t fair to blame the informal economy in the region for polluting. Businesses and people in the informal economy have been innovative, resilient, and resource-efficient than their formal counterparts. Policy actions and business ideas/models to achieve inclusive and resilient economic development should, therefore, be rooted in a sound understanding of the informal economy – especially if such efforts are to be inclusive and to benefit those who are disadvantaged and excluded.

The program will explore ‘green finance’ as is one of the financial instruments to promote and support the flow of financial instruments and related services towards the development and implementation of sustainable business models, investments, and trade. We will also support business and economic services for incentivizing, through a business case for a green economy, private sector enterprises to invest in innovative technologies and smart concepts like the circular economy and to stimulate green jobs and incomes.

5. Advocacy for improved governance systems needs tailored strategies

There are stark differences among countries in terms of their policies and regulations towards the business environment, education, and labor market reform. Countries in the region generally rank poorly. Strengthening the capacity of private sector actors and groups as well as civil society groups to advocate for reforms is crucial, including the generation and use of evidence through research.

Governments at all levels face a ‘tsunami’ of need due to the crisis. COVID-19 has forced us to reflect on the nature and effectiveness of governance systems. Governance models in the region have been put to the test. To succeed, associations and advocacy organizations must combine traditional strategies and tactics with new technology-enabled innovations. Going forward, this may include hosting video advocacy events for association members instead of applying traditional methods. Private sector enterprises and citizen groups may be encouraged to experiment with new ways to protect the interests of their members.