Policy Actions for COVID-19 Economic Recovery

A Compendium of Policy Briefs

Ramesh Subramaniam, Alfredo Perdiguero, Jason Rush, Pamela Asis-Layugan

• Publisher: Asian Development Bank
• Year: 2021
• ISBN:
  9789292629267
• Topic: Medicine
• Subtopic: Infectious Diseases

The Policy Actions for COVID-19 Economic Recovery (PACER) Dialogues were held from June to September 2020 as the coronavirus disease (COVID-19) pandemic accelerated around the world. They shared cutting-edge knowledge and best practices to help countries in Southeast Asia and the People's Republic of China strengthen cooperation to mitigate the devastating effects of COVID-19 and accelerate their economic recovery. This compendium of 13 policy briefs summarizes the discussions, recommendations, and actionable insights from the PACER Dialogues.

CHAPTER 1
Tackling the Impact of COVID-19

Policy Lessons from a Pandemic: The Korean Experience

Kwangchul Ji

Director of International Financial Institutions Division

Ministry of Economy and Finance, Republic of Korea

COVID-19 testing. A drive-through screening center in Incheon collects specimens for COVID-19 diagnostic testing (photo by iStock/Goldcastle7).

Introduction

When the World Health Organization (WHO) officially declared the coronavirus disease (COVID-19) outbreak as a pandemic on 11 March 2020, the Republic of Korea was already reporting more patient recoveries than new cases. The country responded quickly and undertook several policy measures to “flatten the curve” and reduce the number of new cases daily. As the health crisis threatened to infect its real economy as well, the Republic of Korea implemented a more coordinated approach at the local, national, and international levels to cushion its economy and its people from the COVID-19 fallout and took these extraordinary measures:

1. The Government of the Republic of Korea focused its capacity and resources on containing the spread of the virus through a three-pronged strategy of Test, Trace, and Treat (3Ts).

2. It adopted fiscal and monetary policies to boost the economy and domestic consumption, support vulnerable sectors, and protect markets from external shocks.

3. It set its priorities clearly—from identifying COVID-19 patients who needed immediate treatment to assisting vulnerable individuals and distressed businesses. The government also provided industry-specific support to its most vital industries as well as to microbusiness owners and the self-employed.

Context

On 19 January 2020, the Republic of Korea announced its first confirmed COVID-19 case. The government immediately recognized the need for prompt and comprehensive action and swiftly responded by conducting large-scale testing.

Its quick response shows how the Republic of Korea has learned its lesson from previous health crises such as the severe acute respiratory syndrome (SARS) epidemic in 2004 and the Middle East respiratory syndrome coronavirus (MERS-CoV) outbreak in 2015. Since then, the country has strengthened its capacity for disease control, including training public health staff at the national and local levels on contact tracing and epidemiological investigation, enabling the government to rapidly deploy testing stations and trace and treat patients during the outbreak.

The Republic of Korea also relied on its modern and affordable health-care system and public adherence to national health advice such as wearing face masks and social distancing. Its digital infrastructure also came in handy for contact tracing, health diagnosis, and information dissemination.

Strong cooperation between the public and private sectors played a huge role in the country’s COVID-19 response. The government swiftly eased regulations so private medical companies can produce and distribute test kits faster to meet the growing demand. As early as January 2020, with only four confirmed cases, test kits were already developed in the country; by March, they were being exported to 81 countries.

As soon as the government raised its crisis alert level to the highest (Level 4) on 23 February 2020, it immediately assembled the Central Disaster and Safety Countermeasure Headquarters, headed by no less than the Prime Minister, to set priorities and coordinate policy responses at the local, national, and international levels. Policies are immediately cascaded down to the local governments to ensure the adequacy of hospitals and beds for patients. If the cases are beyond the capacity of local governments, the central government provides the necessary resources. This clear delineation of responsibilities led to rapid response and policy actions.

Policy Implementation

For the Republic of Korea, early detection is key to preventing the virus from spreading. Its 3Ts strategy is done through these measures:

• Special entry procedures. The government adopted special entry procedures that required all inbound travelers, including Korean nationals, to undergo a 14-day self-quarantine or isolation, a body temperature check, and other measures. A self-quarantine safety protection app or self-diagnosis app was made available for people to monitor and report symptoms of infection during their stay in the country from their mobile phones. Each local government (city or province) is provided with a list of inbound passengers for closer monitoring.

• Screening and testing stations. To easily detect infected patients, the government made diagnostic test facilities widely available. Aside from screening clinics at public health centers and health-care institutions, it rolled out testing facilities, drive-through centers, mobile facilities, and door-to-door visits for specimen collections. Travelers can also get tested in walk-through facilities at Incheon International Airport and get their sample collected in 5 minutes or less.

• Contact tracing. The central and local governments conducted prompt epidemiological investigation and quarantine of contacts. In addition to obtaining basic information on the confirmed patients’ whereabouts and interviewing health-care workers and family members, the government also gathered data from medical records, mobile GPS, CCTV footage, and credit card records. Medical institutions also had access to patients’ overseas travel history.

• Patient management system. The order of treatment of confirmed COVID-19 patients is based on the severity of their cases. To ensure the availability of medical facilities for non-COVID-19 patients, the government designated COVID-19 protection hospitals. It also allowed nonrespiratory patients to receive medical advice and prescriptions by phone to avoid exposure to the virus.

To cushion the pandemic’s economic fallout, the government adopted fiscal policies to

protect jobs, vulnerable
groups, and businesses;

promote consumption and industries; and

prepare for the shift to the “new normal” with new business regulations and the “Korean New Deal.”

To protect the economy

Four financial stimulus packages and other emergency relief, amounting to $210 billion or equivalent to 13% of the country’s GDP, were released. These will fund programs designed to help businesses survive, ease borrowers’ payment burden, avoid a credit crunch, among others.

A historically high supplementary budget of W11.7 trillion ($10 billion) was passed by the National Assembly to aid in disease prevention and treatment, small business loans, household support (including day care vouchers), livelihood support, and relief for hard-hit sectors.

To promote economic recovery

Industry-specific emergency financing is given to four vital industries: airlines, shipping, tourism, and the arts.

Incentives are provided to entice domestic consumption, such as extending emergency relief to all households; doubling income tax deduction for credit or debit card use; expanding local governments’ gift certificates issuance; and issuing leisure and tourism coupons, as well as maternal health-care coupons.

To prepare for economic recovery

The government will improve business regulations in 10 sectors that will be highly in demand in the new normal: big data or artificial intelligence, future cars mobility, health care, financial technology (fintech), medical technologies, recycling, venture start-ups, industrial complexes, tourism, and e-commerce. Remote health care and education and online businesses will also be a focus.

The government unveiled the Korean New Deal, a W76 trillion ($62 billion) spending plan to establish a digital infrastructure and create new jobs to prepare the economy for the new normal.

Complementing these fiscal measures were the following monetary policies:

Reduce interest rates.

Raise the trading limit on foreign exchange futures to prevent sudden volatility in the swap market.

Engage in a bilateral currency swap with the United States Federal Reserve.

Ensure an unlimited supply of liquidity to Korean financial institutions.

Extend financing for special purpose vehicles to purchase corporate bonds and other market stabilization measures.

Policy Outcomes

On 29 February 2020, the Republic of Korea recorded the highest number of COVID-19 patients of any country outside the People’s Republic of China—909 cases—mainly due to a religious gathering in Daegu City. By the end of March 2020, however, the number of new cases dropped to 78.

The country of over 50 million managed to bring down the number of cases dramatically in just a month without resorting to restricting movement or shutting down borders. It took immediate recognition of the problem from the top; clear-cut and decisive policy actions; close cooperation with local and national authorities; sharing of vital information; and preemptive, bold, and sufficient steps to revive the economy beyond the COVID-19 pandemic.

Lessons

The Republic of Korea’s COVID-19 response offers lessons for countries facing similar challenges:

1. Act swiftly and decisively. When the pandemic started, the government did not have a budget for its COVID-19 response as its budget priorities were already in place. To fund its response and the economic relief...