In the global battle against COVID-19, with cases and casualties soaring in five and six-digit numbers in the most developed countries, the two small, landlocked countries of South Asia, Nepal and Bhutan have managed to keep their heads well above water with low case-counts, sans any casualties. While it remains to be seen if the countries will successfully fight off the pandemic or it is only a matter of time before they join the bandwagon of corona-soaked countries, currently, their most pressing concerns emerging from COVID-19, are more ‘economic’. For small, landlocked economies, dependent largely on foreign employment, tourism and trade, a pandemic that has literally shutdown economies worldwide, spells crisis.
With more than 3.47 million cases across 185 countries, including 2,44,106 deaths, as on 2nd May 2020, the fight against COVID-19 continues unabated, and emerging as an impressive region, so far, has been South Asia. In a battle against which ‘physical distancing’ is the most potent weapon, South Asia, housing 24.89% of the world’s population and being the most densely populated region of the world, has recorded only 2% of the total cases. Particularly revealing is the low case-count in Bhutan, which, as on 2nd May 2020, had only 7 cases with 5 recoveries and no casualties, followed by Nepal which stood at 59 cases, including 16 recoveries and no casualties. However, while mass casualties may not be the Himalayan countries’ most urgent threat in the battle against COVID-19, a declining economy surely is- given their massive economic dependence on India, China, Middle-East, Europe and America. The current global economic situation, with the mobility of capital, goods and labour restricted, international trade and tourism on a pause, and foreign aid severely compromised due to struggling donor economies, resembles a closed economy worldwide. This has both, Nepal and Bhutan, worried for their respective economies, evident most recently in their requests to India to resume cross-border trade.
In this background, an analysis of COVID-19 in Nepal and Bhutan, their containment strategies, economic pressures and the role that India can play to help its landlocked neighbours, is relevant.
An ‘Economic Pandemic’ in our Himalayan neighbourhood.
Nepal promptly sealed its borders as soon as its first case was detected in early January 2020 and immediately after the detection of its second case on 22nd March, it declared a lockdown from 24th March, recently extended till 7th May. Nepal’s foresightedness and prudence in its containment, when most countries undertook measures only after the disease exploded, is commendable. Consequently, the World Health Organization (WHO) reclassified the country from ‘Very Vulnerable’, due to its geographical proximity to the outbreak’s epicentre, China, to ‘less at risk’. However, despite a seemingly lower prevalence of the virus, Nepal is beset with two major challenges in its fight against coronavirus: a poor health infrastructure and a struggling economy.
Nepal is the worst sufferer of the pan- South Asian diagnostic limitation, scoring 22 in the ‘testing and reporting’ category of the Global Health Security Index 2019, way below the average of 41 and the lowest in South Asia. The fact that the country, with a population of 2.9 crore, had tested only 53,534 people, even till 27th April 2020,underlines the alarming possibility of under-reporting of cases. Even otherwise, Nepal’s laboratory systems, real-time surveillance and reporting, health equipments, hospital infrastructure and epidemiology workforce are less than robust, casting worries over its ability to sustain its battle against COVID-19 for long, even with a modest disease-burden. According to The Kathmandu Post, before the pandemic, hospitals in Nepal had few ICU beds, no isolation wards, inadequate ambulance services, and Teku Hospital, the only one designated for handling infectious diseases, lacked experts to maintain the required standards. As news of COVID-19 broke, concerns over the high potential risk and a severe lack of necessary medical facilities, propelled Nepal, in a very positive step, to quick preventive measures. Since then, medical equipment and medicines are being imported, laboratory facilities are being upgraded, quarantine centers, temporary hospitals with isolation wards and ICU units in hospitals are being setup across the country, but whether they will be adequate to sustainably tackle the pandemic, remains to be seen. In such a scenario, Nepal must remain proactive and keep its efforts high at all times to keep its case-counts low, as it may not have the adequate health facilities to tackle a mounting caseload.
The greater worry in Nepal currently, however, is the economic impact of the pandemic-induced shutdowns. Nepal is landlocked by China and India and its economy largely depends on external factors, pillared as it is on tourism, remittances and foreign trade. The World Bank deflated Nepal’s GDP growth-rate projections for the current fiscal year to 1.5-2.8 %, from its pre-COVID-19 projection of 6.4%. Even more worrisome is that, according to World Bank, Nepal is unlikely to bounce back even in the next two years with the forecast hovering between 1.4-2.9% for the next fiscal year and 2.7-3.6% for 2021-22. Considering that the country was stuck on an average growth rate of under 4% for as long as 45 years up till the 2015 earthquake, post which it laboured to clock an average growth of 7.3% per annum since 2016, the current pandemic threatens to put Nepal back into an economic quagmire.
Nepal's tourism sector, which supports more than 1.05 million jobs directly and indirectly and contributes up to 7.9% of its GDP, will be its worst hit economic sector, already reeling under pressure due to the absence of Chinese tourists, and the various travel restrictions imposed globally. 2020, in fact, had been designated as the ‘Visit Nepal Year’, targeting to double the foreign tourists’ arrivals of 2019, in what would have been a major boost-period for Nepal Tourism. But the pandemic-caused slump has given a sudden unforeseeable jolt to Tourism, as well as its allied sectors, with ‘Hotel Association of Nepal’ projecting a 90% decline in the country’s hotel business income in 2020, owing to COVID-19. Manufacturing and construction sectors are also suffering owing to the shortage of imported raw materials and the absence of labour. Additionally, the pandemic-induced depreciation of Indian currency- to which Nepalese currency is pegged, is also hurting Nepal’s import-related sectors. The situation is most exacerbated due to an expected 14% decline in remittances, contributing 26% to Nepal’s GDP. Nepal’s suspension of issuance of work permits for all countries, and lockdown in Middle-east which is its biggest source of remittances, has left it with a large unemployed migrant population as well as a starved remittances-dependent economy. Add to that, the United Nations World Food Programme’s (WFP) concerns over Nepal’s import-dependent food security, and the challenge of a large stranded diaspora population, and Nepal has an uphill task ahead.
Thus, while the lesser prevalence of cases in Nepal is encouraging and its quick measures praise-worthy, not only does its health status continue to stand on slippery grounds between a possible under-reporting and an inadequate health infrastructure, but it is also staring at a more obvious challenge of averting the economic onslaught of COVID-19 in the country.
Bhutan, a small landlocked country with many infrastructural challenges, has emerged as an outlier among the countries up against COVID-19, with a single-digit case-count; and while it shares the pan-South Asian diagnostic limitation, the near-negligible disease-burden in the country requires a deeper explanation.
With a small population of 7.355 lakhs, as per the 2017 census, Bhutan is naturally lesser susceptible to an infectious disease like COVID-19, than other affected countries, whose population-counts run in millions and billions. The biggest reason for Bhutan’s stability, however, is the priority it attaches to healthcare. Free health-care services to all is a part of its National Health Policy and is implemented diligently in the country, the same being extended in the current times of COVID-19. Additionally, helming the leadership, the Prime Minister, Foreign Minister and Health Minister of Bhutan, are all medical doctors making their strategy scientific and sound. Since the very outset of the outbreak, Bhutan sincerely followed WHO’s technical guidance and promptly undertook precautionary measures- it sealed its borders and quarantined all citizens coming from abroad, and owing to such quick measures, the country has not yet felt the need of a lockdown. Further, there exists a sound, ecologically sustainable, bottom-up and inclusive approach to tackle problems in Bhutan. Citizens worked along-side the authorities, marking ‘quarantine zones’, installing public hand-washing stands across the country, and everyone, right from farmers to parliamentarians, contributed to the COVID-19 fund created by the Bhutanese Government.
Thus, while the future course of the pandemic remains uncertain, if Bhutan keeps up its low case-counts, staying mindful of its limited resources, it is in a stable state, capable of shielding its citizens from the pandemic, as far as their physical health is concerned, at least.
It is the country’s economic health that is more threatened, with World Bank deflating Bhutan’s GDP growth-rate projections to 2.2-2.9% from the pre-pandemic projection of 6.5%. Tourism, hydropower and agriculture are Bhutan’s economic mainstays and all stand to majorly suffer.
Bhutan shut itself to all tourists immediately after its first detection on March 5- a necessary containment move but one that stands to compromise the livelihood of around 50,000 citizens who depend on Bhutanese Tourism or the allied sectors. The pandemic-induced disruption in completion of hydropower projects and decline in Bhutan’s electricity exports, which is a saving grace to its huge trade-deficits and foreign exchange reserves, is also worrisome. The lockdown in India is especially detrimental to Bhutan, as while the cross-border supply of essentials currently continues, prolonged suspension of imports from India, especially food related, and investment could be disastrous for Bhutan, given that 82% of its imports and 50% of FDI comes from India.
Steps Taken and the Road Ahead
To battle the dual challenges of health and economy, Nepal and Bhutan are employing a sound balanced strategy of boosting their health facilities for efficient containment and providing economic relief measures to its citizens to brave the pandemic. Efforts at resuming limited bilateral economic engagements are also underway.
Nepal is upgrading its health facilities with friendly countries aiding the process. India, the United States and Germany have been supplying medicines while Singapore’s Temasek Foundation has provided 10,000 PCR test kits to aid Nepal’s diagnostic abilities. European Union has also offered a €75million aid package to Nepal.
On the economic front, on 26th April 2020, Nepal’s cabinet decided on a relief package, as an economic cushion, including discounts on electricity and telecommunication services, temporary relief on tax-payments and discount on essential supplies to those suffering daily-wage losses. The government is also maintaining salary-payments to its organised sector employees and has asked private companies to do the same, landlords to not demand one month rent from daily wage earners and, private schools not to charge one month fee. To tackle dwindling food security, Nepal’s Agriculture Ministry has lifted the import-ban on food items from China, Italy, Iran, Japan, South Korea, France, Germany and Spain, citing reduced risk of virus-transmission from food items. Further, to assuage tourism sector’s losses, Nepal has decided to promote domestic tourism as it did after the earthquake in 2015 and provide temporary incentives to the tourism entrepreneurs.
Many areas are left needing more attention though, in the times ahead in the pandemic. Nepal’s large migrant population is left unemployed and stranded across the country, due to the lockdown, urgently requiring more economic and shelter relief from the government. Further, the economic sector is demanding a restricted re-opening of industries and infrastructure projects as temporary economic-relief can only sustain up to a limit. This period can also be seized as an opportunity to reduce Nepal’s import-dependence, starting with food self-reliance, by engaging the unemployed migrant youth in government-aided agriculture, also providing livelihood to its stranded migrants. Going ahead, safety of the large Nepalese diaspora, and arrangments for their eventual return, are also matters to be given attention.
As for Bhutan, the Bhutanese government has created a National Resilience Fund (NRF), an important initiative under which is DrukGyalpo’s Relief Kidu. Primarily a cash grant for those facing pandemic-caused livelihood losses, Relief Kidu has been expanded to include accommodation and potential return of Bhutanese students’ abroad. Other major initiatives under the NRF include interest and loan payment relief for 3 months, fast-track implementation and re-prioritisation of the 12th Five-Year Plan, and other fiscal and monetary interventions.
Going ahead, mechanism to boost safe domestic tourism, agriculture-boosting measures and steps to sustain electricity supply need to be given more attention.
Overall, while the immediate measures being undertaken by both Nepal and Bhutan are sound, the pandemic has exposed the many similar fundamental problems that they face, necessitating long-term solutions. Despite Bhutan’s exemplar health management, that both the countries have very limited resources for socio-economic welfare, cannot be denied. Additionally, their economic hinging on only a few sectors, especially those that are dependent on other countries, puts both Nepal and Bhutan in a very tight place when those few sectors face contraction, making their economic health as vulnerable as their physical health during pandemics. Boosting resources and health capacity and balancing import substitution with economic diversification should thus, be the long-term goal to get through emergencies in the future.
It is in times of international and regional crisis that smaller countries expectantly look up to their stronger allies, particularly in the neighbourhood, becoming opportunities for the latter to prove their reliable support and deepen their relationship. As neighbour-countries land-locked by India, the most significant power in South Asia, Nepal and Bhutan are looking at India for assistance, both medical and economic, and India has so far been quick in coming to their aid, upholding its ‘Neighbourhood First Policy’.
In a much-awaited bold move, the Indian Prime Minister initiated the resurrection of South Asian Association for Regional Cooperation (SAARC), which includes both the Himalayan countries, as a regional force to help South Asia battle out the pandemic, together. Besides offering technical and medical assistance, India initiated the creation of SAARC COVID-19 Emergency Fund, pledging USD 10 million to it.
Prioritising the Himalayan countries’ needs above other countries, India has been supplying essential goods and medicines to them, most prominently hydroxychloroquine, an anti-malarial drug that is experimentally being tried out in the treatment of COVID-19. It is also set to supply 14000 MT of rice to Bhutan and is readying separate ‘rapid response teams’ to dispatch to its friendly countries, including Nepal and Bhutan.
While India’s assistance has been hailed in both the Himalayan countries, the fact that it itself is pandemic-ridden and in a lock-down, makes for further complexities. One issue that India will have to tackle is the resumption of cross-border trade with the landlocked neighbours. While India is maintaining essential supplies to both Nepal and Bhutan and has lifted restrictions on inter-state cargo movement, important transit states such as West Bengal and the North-Eastern states have expressed apprehension over movement of goods trucks through their territory during the pandemic. In such a situation, India will have to walk the tightrope, balancing international commitments with national requirements.
While multi-pronged pressures amid a pandemic are universally experienced, these become especially acute for small and landlocked countries, with limited resources and huge dependence on other countries. The fate of Nepal and Bhutan’s fight against COVID-19 is as linked to the coping speed and strategies of India, China and Middle-East as it is to their own domestic measures, and that is quite a challenging situation to be in.
The balanced approach adopted by both the countries is prudent and their current best bet to protect both health and economy against the pandemic. Bilateral arrangements to facilitate limited economic restart can also be explored but the overall safety factors will have to be given utmost priority, at all times. As the subcontinent is yet to peak in terms of infection spread, while the lesser incidence of cases in Bhutan and Nepal is very encouraging, efforts should be taken diligently till we see the very end of the pandemic.
Lastly, every struggle comes, bearing with it, lessons for the future. That both the Himalayan countries need to, in the longer-term, boost their resources and reconfigure their economic relations with other countries, endeavouring to reach a position of greater security and self-reliance, is more than clear by now. Beyond that, while Nepal seems to have its work cut out to improve its health infrastructure and capacity for a safer tomorrow, Bhutan appears to be emerging as an exemplar model of how consistent and cooperative efforts, a bottom-up approach and a prompt leadership goes a long way in tackling health emergencies, even with limited resources, a lesson that most of the countries today can benefit from.
*Isha Roy, Research Intern, Indian Council of World Affairs.
Disclaimer: The views expressed are that of the Researcher and not of the Council.
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