Business24 Newspaper Mar.25-2020 by Business24 Online

EDITION B24 | 22

WEDNESADAY MARCH 25, 2020

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Present emergency budget now—ACEP

Develop emergency food security preparedness plan—Group demands

…to accommodate oil price drop, COVID-19 impact BY DOMINICK ANDOH

Government should present an emergency budget in the coming weeks that will accommodate the effect of the sharp decline in oil prices and the fiscal impact of the coronavirus (COVID-19) pandemic, the Africa Centre for Energy Policy (ACEP) has said, backing calls from the IMF and some academics. The energy policy think-tank, analysing the implications of low oil prices on Africa’s oil producing economies, said Ghana needs to follow the example of Algeria by preparing and presenting a supplementary budget—and not waiting till the mid-year budget presentation in July—to take stock of the impact of these two global developments on its fiscal health. “A new budget that accounts for the extraordinary drop in oil prices is required for oil producing countries in Africa. It is encouraging to see that Algeria has already recognised this fact and is preparing a supplementary budget that will help manage the effects of the low oil price. “This also recognises that a midterm budget will be too late for many countries to accommodate the full effect of the oil price drop and the

BY PATRICK PAINTSIL

Civil society group Alliance for Science Ghana is asking government to, as a matter of urgency, put in place measures to ensure food security and sustainability amid fears of food shortages in the wake of the coronavirus pandemic. MORE ON PAGE 8

Mid-year budget review to reveal fiscal impact of COVID-19 BY EUGENE DAVIS

BENJAMIN BOAKYE, EXECUTIVE DIRECTOR, ACEP

MORE ON PAGE 05

INTERNATIONAL MARKET

*EXCHANGE RATE (INT. RATE)

USD$1 =GH¢5.6896*

EXCHANGE RATE (BANK RATE)

USD$1 =GH¢5900.*

*POLICY RATE GHANA REFERENCE RATE *INFLATION RATE PRODUCER PRICE INFLATION:

14.5%* (YET TO BE SET) 7.8%* 11.8%

BRENT CRUDE $/BARREL NATURAL GAS $/MILLION BTUS GOLD $/TROY OUNCE CORN $/BUSHEL COCOA $/METRIC TON COFFEE $/POUND:

91 DAY TREASURY BILL INTEREST RATE

14.7586%

SUGAR $/POUND

AVERAGE PETROL & DIESEL PRICE:

GHc 5.13*

SILVER $/TROY OUNCE:

-2.50 ($26.23) -0.10 ($1.63) -39.50 ($1,486.30) -8.75 ($335.25) -34.00 ($2,284.00) +5.70 ($108.30) -0.22 ($10.67) -0.50 ($12.00)

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MONDAY MARCH 23, 2020

News/Editorial 1

Wash your hands 2

Editorial: Escalating COVID-19 cases: adhere to safety protocols The rapid spread of the coronavirus (COVID-19) across the globe requires that citizens, religious bodies, and businesses follow directions given by their respective governments and health care professionals so we can contain this disease. The sudden increase in the number of reported cases in Italy, Netherlands, Germany, France, UK and US should serve to warn other countries.

If you are sick, wear mask Brought to you by

the rise, despite massive public education about the disease and the initial advice by government that Ghanaians living abroad should seriously consider not traveling to Ghana to minimize any potential spread of the disease. Confirmed cases, as at press time on Tuesday were 52 with 2 deaths. This advice was not heeded and led to our first two imported cases. Others still travelled from countries with significant reported cases of the disease back home. The confirmed cases in Ghana

on Monday, he explained that the real impact of the virus on the fiscal position of the country can be properly assessed when the Finance Minister presents the mid-year fiscal policy review in July at the latest. The mid-year budget review is a legal requirement enshrined in the Public Financial Management Act that was passed in 2016. Mostly, it is expected to cover an overview of macroeconomic developments, analysis of revenue, expenditure, and financing performance for

2019 and the first half of 2020; a revised fiscal outlook for the remainder of the financial year; and an overview of the implementation of the 2020 budget. The Finance Minister, Ken Ofori-Atta, in a statement to Parliament recently, indicated that even though events of the coronavirus are still unfolding, preliminary analysis undertaken by the Ministry of Finance shows that the virus will impact negatively on petroleum receipts due to the collapse of international crude oil prices, custom receipts, expenditures (especially health-related), and financing conditions on the fiscal front. “Measures are being put in place to close a possible

financing gap in the 2020 budget that could result from the impact of the virus. These measures may include withdrawal from the Ghana Stabilisation Fund, occasioned by anticipated shortfalls in the Annual Budget Funding Amount (ABFA),” Mr. OforiAtta said. Ghana became the first subSaharan African country to cut interest rates a week ago in response to the coronavirus pandemic. The monetary policy rate was reduced to 14.5 percent from 16 percent, the first cut since January 2019. Growth in gross domestic product could decline to 5 percent and could even slow to 2.5 percent in a worst-case scenario, said the central

Copyright @ 2019 Business24 Limited. All Rights Reserved. Editorial Team Dominic Andoh: Editor Eugene Kwabena Davis (Head of Parliamentary Business & Commodities) Benson Afful (Head of Energy & Education) Patrick Paintsil (Head of Maritime & Banking) Marketing Alexander Lartey Agyemang (Business Development Manager) Ruth Fosua Tetteh (Dept. Business Development Manager) Gifty Mensah (Marketing Manager) Irene Mottey (Sales Manager) Edna Eyram Swatson (Special Projects Manager ) Events Evelyn Kanyoke (Snr. Events Consultant) Finance/Administration Joseph Ackon Bissue (Accountant) Ampomah Akoto (Director of Operations)

bank. The International Monetary Fund’s most recent growth forecast for Ghana was 5.6 percent, and the government had projected an expansion of 6.8 percent in the 2020 budget. Dampened global demand could significantly weigh on earnings from crude, while export restrictions from advanced economies and emerging markets may create supply-chain shortages for Ghanaian businesses, said the central bank. This is expected to have “severe consequences” for economic growth and tax revenue that could become more severe by the third quarter.

Present emergency budget now—ACEP continued from page 1

LIMITED

then shot up to six, then nine, 16 and now 21. Business24 will like to entreat everybody that this is a global health threat that threatens our very existence as a people and the existence of businesses. It is imperative that we listen to what authorities have to say, obey what we are told and live to see tomorrow. Stay home, stay safe, everything else can wait.

Mid-year budget review to reveal fiscal impact of COVID-19 continued from page 1

Cover you cough

Indeed, citizens and businesses went about their daily routine even when the first case of COVID-19 pandemic was reported in those countries, ignoring warnings by the WHO and their home governments. Today, there is huge pressure on public health care systems in these countries. Large spaces have had to be converted into a temporary health care facility to cater for the growing number of infections. COVID-19 cases in Ghana are on

impacts of the COVID-19 outbreak on the national budget,” ACEP said in its analysis. The call by ACEP follows similar calls by the International Monetary Fund (IMF) last week that an emergency budget may be needed to adequately manage the situation. “The emergency budget would take stock of the overall fiscal cost deriving from the priority of ‘saving lives and safeguarding livelihoods’, especially in a new scenario with lower global and domestic growth and completely different commodity prices,” said Dr. Albert Touna-Mama, Resident Representative of the IMF in Accra. The benchmark price of crude oil used to project the government’s petroleum receipts for 2020 is now

clearly an overshoot. The price projection for oil was US$62.6 per barrel, and the gas price for 2020 was also projected at US$4.31 per MMBtu. Based on these price projections, the total petroleum revenue expected for 2020 is US$1.6 billion, made up of royalties (US$254.4 million), carried and participating interest (US$817.8 million), corporate income tax (US$493.3 million), and surface rentals (US$1.6 million).

However, Brent crude—which was trading around US$60 per barrel barely two months ago—has dropped to about US$26; gold, US$1,486 per troy ounce; natural gas, US$1.63 per million BTU; and cocoa, US$2,284 per metric ton. ACEP argues that: “The plummeting global crude oil price in recent times has become an alarming situation that threatens the cash flow of oil companies and revenue of governments. Brent crude oil price has declined

dramatically from US$66.25 to US$26 per barrel between 2nd January 2020 and 21st March 2020. “This fall in oil price is linked with the outbreak of COVID-19, which has affected global economic growth and demand for oil, thus creating excess oil supply. “In ACEP’s estimation, governments’ projection of oil revenues will experience a shortfall of between 40 to 55 percent in oil producing countries in Africa. Projected oil prices in the 2020 budgets of these countries is about US$55 to US$68 per barrel. Given the current global economic condition, effects of COVID-19, and Russia’s quest to sustain oil price below the marginal cost of shale production, oil price recovery is expected to be in the region of US$45 per barrel by the end of 2020. Therefore, the likely average oil price is estimated to be about US$40 per barrel for the year.”

NEWS

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WEDNESDAY MARCH 25, 2020

WACSI builds capacity of CSOs in community mobilisation The West Africa Civil Society Institute (WACSI), in partnership with the Wilde Ganzen Foundation and the Change the Game Academy, has organised a training programme to build the capacity of Civil Society Organisations (CSOs) in Ghana to enable them better engage duty bearers at the local level. Civil society organisations (CSOs) in Ghana play a vital role in influencing policies in the country. They also play key roles in ensuring adequate service delivery to deprived communities. As influencers of change and development at the national and sub-national levels, CSOs have the mandate to support community dwellers to be able to demand their basic rights and to demand accountability from duty bearers on the extent of delivery of basic services. However, their role in galvanising inhabitants of the underprivileged communities they work in is not significantly felt. This critical role CSOs need to play requires appropriate skills to influence change and

policies from bottom up. The three-day training sought to help achieve this to further enable CSOs play critical roles at the local level. Gervin Chanase, Programme Officer, Monitoring Evaluation and Learning Unit of WACSI, noted that : “A lot of grassroots organisations have inadequate capacity or skills to be able to engage duty bearers at the local level. With this training,

we want to move CSOs away from just being service providers to having the ability and capacity to empower right holders, to be able to realise their rights from duty bearers”. The training addressed issues related to human rights, legal frameworks and the role of social media in the work of CSOs. Participants became aware of the necessity of

appealing to donors by framing the needs of their target community in terms that relate to human rights and legal texts. They also strengthened their mobilising capacities by learning the ways to increase the visibility of their work through social media. They were guided on how to mobilise grassroots communities to demand

for basic services that are enshrined in their basic human rights. “the training, based on both theoretical and practical sessions, allowed participants to acquire a lot of skills such as how to communicate, to pitch ideas, to advocate, to negotiate, to identify allies and opponents, how to analyse and dissect problems, Chanase added. Participants were satisfied with the training because it enabled them to have a better appreciation of the legislative environment at the community level. “This training gave me an overview of legal texts and encouraged me to research more. I now know more how to make an argument to donors and how to take the needs of beneficiaries into consideration. After the training, we will organise another training for the whole team to learn. I am confident that this will open up opportunities for us to give support to the community,” a participant who wished to remain anonymous said.

Mining industry in West Africa gets major boost with new SGS Lab The mining industry in Ghana and the entire West Africa sub-region has received a major boost, following the establishment of a world-class Geochemical Laboratory at Tarkwa in the Western region of Ghana by SGS Ghana Limited. The facility will complement the existing facilities available in the country by ensuring that clients receive full scale geochemical analytical services at the highest quality and promptness that is required. The Client Liaison Manager of SGS Ghana at Tarkwa, Wilfred Appiah, who made the announcement at the just-ended maiden edition of the Ghana Gold Expo held in Takoradi said, the facility is one of SGS Ghana’s top notch laboratories in the sub region. With a network of what some have described as super labs, clients in the mining industry can enjoy various standardised and validated methods and techniques using state of the art equipment that spurs growth and reaches desired targets timeously. Players in the mining industry can also get enhanced services offered by sister labs for MMI (Mobile Metal Ion) analysis, multi-element analyses by ICPAES, ICP-MS and XRF. SGS also invested in FAST technology (Field Analytical Services & Testing) using the pXRF,

FTIR and ED-XRF scanning instruments for mineralogical sample analyses. Carbon and Sulphur analyses are offered from SGS Maslab in Tema which is also fed from the new SGS environmental feeder, lab recently opened in Cyanide area in Tarkwa. Mr. Appiah noted that SGS Ghana is part of the global entity SGS, which is recognised as a global benchmark for quality and integrity and the world’s leading inspections, verification, testing and

certification company with offices worldwide including Accra, Tema, Tarkwa, Takoradi, Damang, Ahafo, Akyem and Obuasi. SGS which was established in 1878 in Europe, opened its Ghana operations in 1960 in Ghana and provide services in the following sectors; Oil, Gas and Chemicals, Agriculture, Food and Life, Certification and Business Enhancement, Environment, Health and Safety, Government and Institutions, Industrial and

Minerals. The company has a network of 2,600 offices and laboratories and more than 94,000 employees around the world. The Convenor of the Ghana Gold Expo, Dr. Steven Blessing Ackrah, expressed excitement about the new facility adding that it was a good effort at ensuring responsible mining as the theme of the Expo indicates; “Promoting Responsible Gold Mining and Zero Mercury.” “Contributions to the

facilities in Ghana, such as the Geochemical Laboratory in Tarkwa by SGS continue to place Ghana favourably for responsible gold mining in the region,” he added. He observed that the enthusiasm and overwhelming representation by stakeholders in the mining industry was testament to the “strength of gold in the current market and the high level of interest in doing business in Ghana”. Gold price have hit US$1667 as of March 11 and have shown strong recent gains amid stock market crises worldwide. Henry Treku who is charge of Strategy and Partnerships for Ghana Gold Expo also noted that the high level investors who attended the expo are in the right place at the right time if they were interested in producing gold responsibly and sustainably. “Ghana is good for such opportunities,” he stressed. He thanked SGS for sharing the news about the new laboratory and extending an invitation to key stakeholders to witness the world-class facility. However we have been informed that due to the Covid 19 outbreak, and the recent press release of 2 cases in Ghana, SGS was compelled to postpone the opening function which was scheduled to be held on the 18th of March in Tarkwa.

WEDNESDAY MARCH 25, 2020

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WEDNESDAY MARCH 25, 2020

Jumia supports COVID-19 containment efforts in Ghana Africa’s leading e-Commerce platform Jumia, has offered the support of its integrated ecosystem which include a marketplace, logistics and online payments to the Government of Ghana and other countries in Africa, as part of the global action against the coronavirus (COVID-19) pandemic. “We are proud to partner with relevant authorities to help fight against COVID-19 and support our communities which continue to support us. E-commerce platforms like ours, with e-payment and last mile delivery capabilities, are uniquely positioned to be part of Africa’s response strategy to this pandemic and we are swiftly taking actions. “Our Jumia Heroes - delivery and warehouse operations staff - are at the frontlines taking all necessary precautions to ensure our customers receive their orders safely”, said Diana Owusu-Kyereko, CEO of Jumia said. Jumia’s actions to support governments in their fight against COVID-19 include: Facilitation of social distancing by enabling consumers to buy online. By offering contactless delivery options, it eliminates physical contact and potentially reduce person to person infection. The company is also providing access to affordable basic foods and sanitary essentials on the marketplace platform.

By partnering with thousands of vendors, like Reckitt Benckiser and others, it is able to maintain fair prices and fight against speculation. Jumia has waived the commission on specific sanitary products to help consumers get them

at the lowest price and implemented measures to control prices. Jumia is also offering logistics networks to help health pamphlets & key products to where they are needed. Additionally, Jumia provides safe

deliveries to consumers everywhere, including remote and rural areas, with Jumia’s integrated logistics network. This is important especially for elderly and sick people at home. The e-Commerce company is also helping in sourcing and

distribution of face masks. Leveraging its access to supply, in particular through its network of vendors outside Africa, Jumia is donating certified face masks to Health Ministries in Ghana, but also in others countries like Kenya, Ivory Coast, Morocco, Nigeria and Uganda. Jumia has also offered to coordinate the distribution across healthcare facilities and workers, leveraging the company’s last mile distribution. In most countries where JumiaPay operates, it has offered special discounts for all payments done via Jumia Pay to promote cashless transactions. The company, is enhancing the visibility of key health instructions. Jumia attracts millions of customer visits and searches on its platform. As such, it is collaborating with the Ministries of Health in Ghana, by using its online platform to share important health messages from the Ministries. “We are also engaging with the Health Ministries in other countries where Jumia operates to offer the same. We anticipate that as the pandemic evolves, Health authorities may need to address different areas of concerns and a platform like Jumia can amplify the reach of much-needed information,” Owusu-Kyereko noted.

Restructure loans to save SMEs from collapse - Minority The Minority Caucus has called on the government to immediately put in measures that will provide some relief for small and medium scale enterprises as the country battles the coronavirus pandemic. SMEs can be described as the backbone of Ghana’s economy, making up about 85% of businesses in the country. The sector contribute an estimated 70% of Ghana’s Dross Domestic Product (GDP). The travel ban and rising cases of COVID-19 in the country, have caused a lot of apprehension amongst the populace, leading to low sales and closure of most SME businesses. Interacting with some journalists on the sidelines of Parliamentary sitting on Monday, March 23, 2020, the Ranking Member on the Committee on Trade & Industry and Tourism, Emmanuel Armah Kofi-Boah, said even though government has started engaging captains of industry on over how best they could support their business, an initiative he commended, he said players in the SME sector must be engaged by managers of the

economy to see how best their businesses could be supported. Mr. Kofi-Buah who is also the NDC MP for Ellembele, said the brunt of the coronavirus

pandemic on the Ghanaian economy both short and longterm, will be dire, thereby, necessitating an urgent support to prevent them from collapsing.

For instance, he said the Ministry of Finance together with the Bank of Ghana should engage players in the financial sector, especially, the various banks to see how

best they could repackage the loans contracted by the small and medium scale business to enable them stay in business. That notwithstanding, he said interest rates should also be reviewed and scaled down for players in the SME sector. “Government must be commended for taking bold measures by engaging captains of industry such as the Association of Ghana Industries. It has also engaged players in the pharmaceutical industry, which is a step in the right direction. “However, it must make public the outcome of these engagements. We in the Minority would also like the government to put in place measures that will support small and medium scale businesses stay in business in the midst of this coronavirus pandemic. “Loans must be restructured and spread considering the impact the coronavirus will have on our economy in the short and long terms. They must also see how best they could reduce interest rate for SMEs. All these will help our brothers and sisters in the SME sector stay in business”, he noted.

WEDNESDAY MARCH 25, 2020

NEWS

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The Emirates Group’s business response to COVID-19 Since the COVID-19 outbreak began, Emirates and dnata have been adapting operations in line with regulatory directives as well as travel demand. The airline has aimed to maintain passenger flights for as long as feasible to help travellers return home amidst an increasing number of travel bans, restrictions, and country lockdowns across the world. It continues to maintain vital international air cargo links for economies and communities, deploying its fleet of 777 freighters for the transport of essential goods including medical supplies across the world. With many of its airline customers dramatically reducing flights or ceasing services altogether, dnata has also significantly reduced its operations, including temporarily shutting some offices across its international network. HH Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive of Emirates Group said: “The world has literally gone into quarantine due to the COVID-19 outbreak. This is an unprecedented crisis situation in terms of breadth and scale: geographically, as well as from a health, social, and economic standpoint. Until January 2020, the Emirates Group was doing well against our current financial year targets. But COVID-19 has brought all that to a sudden and painful halt over the past 6 weeks. “As a global network airline, we find ourselves in a situation where we cannot viably operate passenger services until countries re-open their borders, and travel confidence returns. By Wednesday 25 March, although we will still operate cargo flights which remain busy, Emirates will have temporarily suspended most of its passenger operations. We continue to watch the situation closely, and as soon as things allow, we will reinstate

our services.” Having received requests from governments and customers to support the repatriation of travellers, Emirates will continue to operate passenger and cargo flights to the following countries until further notice, as long as borders remain open, and there is demand: the UK, Switzerland, Hong Kong, Thailand, Malaysia, Philippines, Japan, Singapore, South Korea, Australia, South Africa, USA, and Canada. The situation remains dynamic, and travellers can check flight status on emirates.com. Sheikh Ahmed added: “Emirates Group has a strong balance sheet, and substantial cash liquidity, and we can, and will, with appropriate and timely action, survive through a prolonged period of reduced flight schedules, so that we are adequately prepared for the return to normality.”

GTA orders closure of all beaches

The Management of the Ghana Tourism Authority (GTA) has orders the closure of all beaches to the public until further notice, as part of efforts to contain the coronavirus (COVID-19) pandemic. The GTA with the support of National Security and the Ghana Police Service, have also began patrols of the beaches from Tuesday, 24 March, 2020, to ensure compliance with the closure order. “Under the auspices of the Ministry of Tourism, Arts and Culture, the GTA would like to remind the public about the

Government’s directives suspending all public gatherings. The authority had urged the public and tourist business operators to be mindful of the precautionary measures announced by the President to fight the COVID-19 Pandemic,” the GTA said in a statement issued in Accra. Currently, Ghana’s coronavirus confirmed cases have risen from 27 to 52 within three days with 2 deaths. The remaining 50 patients are receiving treatment in isolation, the Ghana Health Service has said.

Cost reduction measures The Emirates Group has undertaken a series of measures to contain costs, as the outlook for travel demand remains weak across markets in the short to medium term. This includes: Postponing or cancelling discretionary expenditure, a freeze on all non-essential recruitment and consultancy work, Working with suppliers to find cost savings and efficiency, encouraging employees to take paid or unpaid leave in light of reduced flying capacity, a temporary reduction of basic salary for the majority of Emirates Group employees for three months, ranging from 25% to 50%. Employees will continue to be paid their other allowances during this time. Junior level employees will be exempt from basic salary reduction. Presidents of Emirates and

dnata – Sir Tim Clark and Gary Chapman – will take a 100% basic salary cut for three months. On the decision to reduce basic salary, Sheikh Ahmed said: “Rather than ask employees to leave the business, we chose to implement a temporary basic salary cut as we want to protect our workforce and keep our talented and skilled people, as much as possible. We want to avoid cutting jobs. When demand picks up again, we also want to be able to quickly ramp up and resume services for our customers.” The Emirates Group has strong liquidity, with a healthy cash position but it is prudent that it take steps to reduce costs at this time. Emirates remains committed to serving its markets and looks forward to resuming a normal flight

schedule as soon as that is permitted by the relevant authorities. Safeguarding customers, employees, and communities Emirates Group closely monitors the situation and keeps in regular contact with all relevant authorities, so that it can implement the latest guidance to keep travellers and its employees safe and healthy. The company has strongly discouraged its employees from non-essential travel, implemented work from home policies for all employees where operationally feasible, enhanced cleaning and disinfection protocols at its facilities, introduced temperature screening at its key office entry points, and launched internal educational campaigns on hand hygiene and health practices to reduce risk of COVID-19. Over the past weeks, the airline has also implemented enhanced cleaning and disinfecting measures on all of its aircraft departing Dubai as a precaution, and worked closely with airports to implement screening measures as required by the local authorities. Frontline employees such as crew and airport teams have also been provided with support to stay safe while on duty, including providing hand sanitizers and masks where required. The Emirates Group fully supports all initiatives to safeguard the health of communities in every market where it operates, including the UAE’s national COVID-19 response. Sheikh Ahmed said: “These are unprecedented times for the airline and travel industry, but we will get through it. Our business is taking a hit, but what matters in the long run is that we do the right thing for our customers, our employees, and the communities we serve. With the support and unity that we have seen from our employees, partners, customers, and other stakeholders, I’m confident that Emirates can tackle this challenge and come out stronger.” (Source: Emirates)

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WEDNESDAY MARCH 25, 2020

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Develop emergency food security preparedness plan—Group demands continued from page 1 The group is worried over the failure of the government to announce plans or strategies seeking to increase food production in these difficult times. According to the group, comprised of farmers, agronomists and scientists, the coronavirus pandemic could erode the massive gains that have been achieved in the agricultural sector under the Planting for Food and Jobs programme, if the right measures are not put in place. “Ghana is virtually sitting on [a] food security time-bomb, and it will be prudent if the state took a look at other important sectors which would equally play vital roles in these hard times; the agricultural sector stands out in this. “We need to see action to ensure there is food security in these times, especially when a good immune system is the surest bet to recovering from [the] Covid-19 infection,” the group said in a statement

Agric Minister Dr. Owusu Afriyie Akoto asked to ensure food security amid Covid-19 scourge

copied to Business24. Specifically, the group is urging the government to come clear on how it intends to increase investments in local agriculture, commercial farming and greenhouse

setups for increased food production, marketing and storage as well as other postharvest operations and technologies. “The food security plan should detail out a strategy

on how Ghana intends to substitute for the more than US$100 million worth of food we import into the country on monthly basis—rice, wheat and poultry—now that we can’t depend on those countries we

used to import from. “It should also map out a strategy with agric value chain actors in a manner that ensures that food supply is not cut even in times of [a] potential lockdown, and that it would be possible to get food delivered to homes even if people are forced into quarantine or isolation,” the statement further indicated. The coronavirus scourge has grossly impacted all sectors of the economy, with a ban on public, social and religious gatherings currently in force. Some businesses have asked their staff to work from home, with others monitoring the situation carefully. According to the group, the agricultural sector will not be spared the harsh impact of the outbreak, urging the Food and Agriculture Ministry to act immediately. They argued: “It is highly possible that food- and nutrition-related challenges could cause more illness and deaths in these difficult times than the coronavirus itself, if care is not taken.”

Fracas over new single window system continued from page 1 The president of the Ghana Institute of Freight Forwarders (GIFF), Edward Akrong, has revealed that the UNIPASS system has recorded only one transaction since the directive from the Senior Minister to start operations at all 49 entry points in the country. This, according to him, is a clear indication that Ghana Link and its overseas partner, CUPIA Korea, do not have a tried and tested system to take over the country’s single window operations from GCNet and West Blue. Mr. Akrong, in an interview with some selected journalists in his Tema office, said: “As we speak now, only one declaration has gone through the UNIPASS since the Senior Minister’s directive. You can’t be proud of one declaration going through a system; it took about five days. So what will happen if you have about 20,000 declarants hitting your system at the same time? “If the system is not working, we cannot hide the fact, we have to speak up. We know the system is not ready. We do not have anything against government’s policies and programmes, but if a decision will take a hit on the Ghanaian trader and importer then we have to speak up.” Mr. Akrong said importers, freight forwarders and other

IMANI’s petition

stakeholders continue to use the GCNet and West Blue system He urged government not to rush things if the UNIPASS is not ready, stating “if they are not ready, we should not push it because it’s going to bring total chaos at the ports.” Mr. Akrong reiterated that Ghana Link has not done endto-end testing of its UNIPASS system using all the customs regimes, adding “they have to run a pilot, and a stress test has to be done to be sure the system is robust enough to carry all the pressure that will be put on it. All of these have not been done, so how will the system work?” However, Ghana Link has

refuted the claims of the GIFF boss, insisting that the UNIPASS system was working well at the various points where it is being run. “What we know is that the system is working. We have clearing agents who are currently using the system. At Takoradi Port, we have about three shipping lines that have agreed to release their manifests through the UNIPASS platform for the clearance process to begin,” a source at the company told Business24. He also indicated that the company will officially publish a report on the success of its trials at the various border points in due course.

IMANI Africa, a policy thinktank, has petitioned the presidency to look into the circumstances surrounding the abrogation of the contract of African Link Inspection Company Limited (ALIC), a subsidiary of Ghana Link, in neighbouring Sierra Leone. The petition, dated March 20, questions why a company owned by Ghana Link failed to implement an end-to-end customs management system for over seven years in Sierra Leone, but that Ghana Link is now being mandated to operate the country’s single window system. “It is important to note that Ghana’s trade and finance ministers and their deputies continue to make the case for Ghana Link to replace existing systems that are working perfectly fine on the basis of Ghana Link’s superiority in implementing the two functions mentioned and promised in Sierra Leone, but which, evidently, [it] has failed [at] for six years, eventually leading to termination of its agreement. “They were meant to develop a single window and this is yet to be implemented after six years. This could only mean one thing–Ghana Link did not have the capacity to simultaneously implement the

components they signed up to,” IMANI said in the petition, a copy of which is available to Business24. GCNet questions rationale

gov’t’s

The General Manager in charge of Technical Administration of Ghana Community Network Services (GCNet), Carl Sackey, has questioned the government’s rationale in the deployment of the UNIPASS single window system. He argued that “whatever problem that the government intends to solve with the introduction of the UNIPASS system was its own (government’s) creation.” Kwaku Kwarteng, Deputy Minister of Finance, recently claimed that there were trials in Takoradi and Tema before the government rolled out the UNIPASS contract. Mr. Sackey has strongly refuted the claim, however. “I think you need to go on the ground to see. The Minister was actually not telling the truth—because to date, the system being used are systems provided by current service providers, GCNet and West Blue,” he said in an interview recently on Accra-based Peace FM. Additional reporting by Patrick Paintsil

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WEDNESDAY MARCH 25, 2020

TOURISM

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COVID-19: Unique and once in a lifetime opportunity for destinations, tourism industry

BY THOMAS MULLER #StayHome, for now, is happening all over the world. For the #hospitality and #tourism industry, it is a huge and hardhit and challenge. The Corona #COVID19 crisis, the #travel ban, the closing of borders and all the other measures governments globally put in place, will change everything in this industry forever. Nothing will be the same as it was before. But this is actually a good thing for #Destinations and the Hospitality and Tourism Industry. This crisis is a once in a lifetime opportunity for the industry if Hoteliers, Activity Providers, In-Destination Tour Operators, and entire Destinations see the current situation as a unique opportunity to come out of the crisis and restart their business much better off than they have entered into this crisis. This unique opportunity and time is NOW while the entire travel, hospitality and tourism industry has reached the level of almost ZERO occupancy and revenue. This quiet time provides the opportunity for all of us to rethink the way forward. Everybody will be starting at the very same level. Since Online Travel Agents such as booking.com and others have become market-dominant, Hotels have paid 60% to 80% of their profit to them,

plus they have handed over the customer ownership. For quite some time it was not sustainable anymore for Hospitality and Tourism businesses. However, since the Hospitality and Tourism Industry has been very slow for the last 10+ years in the adoption of new technology and to obtain new market opportunities while the customer behavior changed, Online Travel Agents took over and Hotels around the world have become dependent on them and paying a premium. In fact, in many cases an OTA makes more money with a booking than the Hotel itself hosting the guest, providing breakfast etc. Now in this Corona crisis, which has hit Hospitality and Tourism instantly and harder than many other sectors, Hotels around the world are furious with Online Travel Agents such as booking.com. Obviously all OTAs and many other platforms have been completely overwhelmed and could not at all cope with the number of requests and enquiries received from their customers. Guests in their desperation went directly to Hotels asking for assistance. Hoteliers tried to handle customer requests for cancelations and refunds as gently as possible in order to retain every possible guest one way or another, providing solution such as vouchers, credit the amount for a year, free re-

booking etc. At the same time booking. com just decided and published on their website to simply 100% refund all cancelation requests regardless of the Hotels policy and regardless of what the guest might already have agreed with the Hotel. This behavior clearly confirms that those companies neither care for their so called â&#x20AC;&#x153;partnersâ&#x20AC;? nor for the destinations as it has hurt them even more at a time where they really needed the support. It is clear to see that those companies run their business model on the back and the account of the suppliers. This can be avoided in the future. When #TravelTomorrow takes place within the next few months, it is high time now to make sure that destinations and their hospitality and tourism businesses do not enter the same trap again. It is high time for hospitality and tourism businesses and destinations to take back control of their visibility, their digital presence and reputation, their marketing communication and advertising and most importantly and foremost their distribution. There is absolutely no need for them to again lose the direct contact to their source markets and guests, to get again dependent on foreign and market dominating value chains where most of the tourism spend is not being con-

tributed to the destination, its businesses and people, but to global conglomerates having no interest in the destination and their suppliers, but only their own balance sheet and shareholder value. It is now the right time for all suppliers such as Hotels, Lodges, Guesthouses, B&Bs, Activity Providers, In-Destination Tour Operators etc. but also the Tourism Authorities and Associations in Destinations to make sure the sector is fully supported and enabled to keep more tourism spend in the destination and to take back control. Digital Transformation is the ideal way to achieve just this. Now is the time to engage and to create and provide the local capacity, education and training, democratizing of the respective technology etc. to enable all hospitality and tourism businesses in the destination and to take back control for a sustainable tourism development, when all are starting at zero again. The @UNWTO Digital Transformation Strategy provides a great framework and platform for their member states, destinations and the hospitality and tourism industry globally. Rainmaker digital as a social enterprise, focusing on a positive impact through tourism, has invented and deployed the VISTA Destination Network. An Open Platform and Ecosystem democratiz-

ing technology to seamlessly integrate all hospitality and tourism businesses in destinations. It was always our vision to keep more tourism spend in destinations for sustainable tourism development and to contribute to the Sustainability Goals. #tourism4sdgs. As the largest industry in the world, tourism is everything and everything is tourism. Only with a sustainable and healthy hospitality and tourism sector, communities, regions and its people as well as many other industries are positively impacted as tourism directly contributes 1 out of 10 jobs and about 10% to the GDP globally. We believe that the time for #TourismGetsEnabled is now. We herewith invite all destinations to enquire for our unique Public-Private-Partnership model and our freemium business model, democratizing technology. Affordable and feasible for all emerging, small, medium independent hospitality and tourism businesses to become enabled. The destination is enabled to launch a digital transformation initiative to take back control, to keep more tourism spend in the destination for sustainable tourism development. ( the author is the Founder and CEO of Rainmaker Digital)

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1.37 billion students now home as COVID-19 school closures expand As school closures impact nearly 80% of the world’s student population, UNESCO on Monday convened an online meeting of an ad hoc group of education ministers who shared information about scaled-up measures deployed in their countries to support teachers, parents and students in coping with home learning. They also pointed to emerging challenges that require global cooperation. The ad hoc Group, set up after the first online meeting of education ministers organized by UNESCO on March 10, consists of 11 countries from all regions: Costa Rica, Croatia, Egypt, France, Iran, Italy, Japan, Mexico, Nigeria, Peru and Senegal. Over the past 10 days, the number of students affected by school and university closures in 138 countries has nearly quadrupled to 1.37 billion, representing more than 3 out of 4 children and youth worldwide. In addition, nearly 60.2 million teachers are no longer in the classroom. Opening the meeting, UNESCO Director-General Audrey Azoulay stressed that the “the responsibility to act is a collective one,” and announced the forthcoming establishment of

a Global Covid-19 Education Coalition to further mobilize the expertise of multiple partners and strengthen support to national educational responses. While the focus during the early days of school closures was on deploying distance learning solutions, the spotlight has shifted to supporting teachers and families. “More than ever, learners need to be accompanied as much academically as emotionally,” said Stefania Giannini, UNESCO’s Assistant Director-General for Education. “This is a wake-up call for education systems to place dedicated efforts on socio-emotional skills – empathy and solidarity,” she said. “We cannot replace the presence of teachers and pedagogical relationships, but we have no choice and must do our best to support principals, teachers, parents and learners while ensuring their safety,” said Italian Education Minister Lucia Azzolina. “We are using social media tools to keep alive the relationship between teachers and students, and keep up their motivation.” Costa Rica is using social networks to relay daily reading plans for students and parents and challenge students to de-

velop campaigns to contain the spread of the pandemic. Iranian Minister of Education Mohsen Haji Mirzaie described a “new triangle of learning connecting teachers, parents and students” via virtual classrooms supported by social networks. In addition to virtual platforms, all countries are using public television to provide courses for students of all ages as well as training to teachers. “Only 60% of students have internet so we had to provide a mix of distance education with open TV to reach everyone,” said Mexico’s Minister, Esteban Moctezuma Barragán, who added that his country is also exploring strategies to reach children with special needs. While the duration of school closures remains uncertain, countries are concentrating efforts on empowering teachers. “We are very focused on giving teachers responsibility for the process of learning and offering virtual learning courses,” said Costa Rica’s Vice Minister Melania Brenes. Croatia’s Minister of Science and Education Blaženka Divjak shared her country’s approach which first prioritized tailor-made contents for

teachers and is now increasing support to help them develop learning materials independently, take ownership of the process, and feel secure in a digital environment. Actions to counter inequalities were raised by several ministers. Italy announced an €85 million package to support distance learning for 8.5 million students and improve connectivity in isolated areas. Peru translated contents into 10 indigenous languages and developed materials on the socio-emotional aspects of education to help learners deal with isolation. Nigeria’s Education Minister Adamu Adamu called for a national upscaling of UNESCO’s “School Meets Learner” programme, which uses technology to reach out of school girls and women in the northeastern part of the country. The sudden generalization of distance learning is bringing new challenges to the forefront. Egypt’s Minister Tarek Shawki urged action around the governance of “the digital ocean of materials that are not accredited by the Ministry or any credible institutions.” France’s Education Minister Jean-Michel Blanquer stressed the need for global collabora-

tion around the appropriate regulation of digital learning providers to ensure adherence to rules on the collection, management and use of data, especially the personal data of children and youth. Meanwhile, several ministers highlighted that the current crisis is also ushering in new thinking around the practice of education. “We have made more progress with digital and distance learning in the past 10 days than in the past ten years. Without a doubt this crisis will change the way we think about the provision of education in the future,” said Egypt’s Minister Tarek Shawki, while France’s Minister underlined the impact of new approaches and mindsets. “Education is a key answer to the crisis and to the rebuilding of our societies after.” Minister Koichi Haguida from Japan noted that school closures had improved national mechanisms to protect children. While maintaining a high level of caution, he said the country plans to open schools next month for the new academic year and is closely liaising with health experts on the process. (UNESCO)

Media urged to help flush out Delta Agro Limited Donates to unaccredited tertiary institutions University of Ghana

Dr. Kingsley Nyarko, Executive Secretary, NAB

National Accreditation Board (NAB) has appealed to media practitioners to assist flush out fake or unaccredited tertiary institutions in the country. Dr. Kingsley Nyarko, Executive Secretary of NAB, who made this appeal bemoaned that owners of unaccredited institutions had been succeeding in inflicting untold hardship on unsuspected students they offered certificates to without any meaningful jobs. The Executive Secretary made the appeal at a day’s seminar in Tamale on Monday for a cross section of journalists from the Upper East, Upper West, Northern, Savannah and North East regions. He stated that media practitioners were in a better position to assist in checking the mushrooming of unaccredited tertiary institutions in the country by exposing directors

or owners of such institutions. The seminar was part of the NAB’s efforts to inform and educate participants on its mandate and operations. The Executive Secretary of NAB also advised prospective applicants to always cross- check statuses of private tertiary institutions before seeking admissions from them. He said the students and the parents could verify from the status of the private tertiary institutions from NAB website. Dr. Nyarko entreated individuals and groups intending to establish tertiary education institutions in the country, to venture into the Science, Technology, Engineering and Mathematics (STEM-based) programmes. He explained that the STEM-based programmes were focused areas the country needed to succeed in terms of industrialization. Dr. Nyarko said the NAB was willing to accredit STEM-based programmes in the country. He argued that STEM-based programmes could help reduce the high unemployment level in the country as graduates of such programmes could create jobs for themselves. Mr Yakubu Abdul-Majeed, Northern Regional Vice Chairman of Ghana Journalists Association urged the NAB to intensity monitoring of tertiary institutions to weed out unaccredited institutions. He also entreated the executive secretary of NAB to apply punitive sanctions against individuals who operate unaccredited tertiary institutions in the country. NAB

Management of Adage Media in collaboration with its client Delta Agro Limited, a leading manufacturers of Made in Ghana antiseptic liquids and antibiotic soaps, has donated a range of products to the University of Ghana at a brief ceremony at the University’s main campus. In his introductory remarks, Mr. Fadi Fattal, Chief Executive Officer, Adage Media indicated that the donation had become necessary due to the company’s desire to partner with the University in its efforts to combat the coronavirus (COVID-19) pandemic and ensure a safe and conducive environment for students and staff. Presenting the items, Mr. Fares Gerges, Business Development Manager, Delta Agro Limited, expressed appreciation to the University for the opportunity to donate to the University especially at this point in time. He disclosed that apart from the need to support the University in its efforts to combating the coronavirus disease, Delta considered the gesture as part of the company’s social responsibility towards “Our homeland Ghana”, he noted. Items donated includ-

ed Maram antiseptic original, Oro antiseptic original, Maram aloe vera soap, Maram lemon soap, Maram rose soap and Maram shea butter soap. The total number of cartons was 135 while the number of pieces was 6,480. Receiving the donation, Prof. Nana Aba Appiah Amfo, Pro-Vice Chancellor, Academic and Student Affairs (ASA), expressed immense appreciation on behalf of Senior Management to Adage Media and Delta Agro Limited for the donation. She was confident that the variety of products donated will go a long way to contribute towards the hygiene and disinfecting of the atmosphere in a bid to fight the coronavirus disease which has become a global pandemic. Present at the ceremony was Professor Ebenezer Oduro Owusu, Vice-Chan-

cellor;Professor Samuel Agyei-Mensah, Ag. Pro-Vice-Chancellor (RID); Mrs. Mercy Haizel-Ashia, Registrar; Rev. Professor Patrick Ayeh-Kumi, Provost, College of Health Sciences; Professor Daniel Kwadwo Asiedu, Provost, College of Basic & Applied Sciences; Professor Michael Ayitey Tagoe, Ag. Provost, College of Education; Mr. Daniel Oheneku Baidoo, Director, HRODD; Mr. Kwasi Odame, Acting Director of Finance; Mr. Bright Obeng-Yeboah, Deputy Director of Finance; Mr. Owusu Addo, Acting Deputy Director of Finance; Mr. Samuel Nkrumah, College Finance Officer, CHS and Mr. Joseph Oduro Nkansah, Deputy Registrar. Also present from Delta Agro Limited was Mr. AlRoz, Marketing Manager and Mr. Kennedy Agbekoh, Sales and Marketing Executive.

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Insuring the survival of post-pandemic economies BY ROMAN FRYDMAN AND EDMUND S. PHELPS

Lockdowns of entire cities. Panic in financial markets. Bare store shelves. Hospitals short of beds. The world has entered a reality unknown outside wartime. By mandating that people isolate themselves at home, policymakers hope to slow, and then reverse, the rate at which COVID-19 is spreading. But a lockdown alone, or a burst of money creation, will not stop the pandemic or save our economies. We need government intervention, but many current proposals appear misguided, some woefully so. Others move in the right direction but are too piecemeal. The very possibility of millions dying as the economy is crippled justifies substantially scaling up the extent and scope of government action. This action should be viewed as an unprecedented form of short-term systemic insurance for our lives and livelihoods. Given the absolute value we place on both, citizens and governments should be prepared to pay what might appear an extravagantly high premium for such insurance. The systemic insurance that is needed demands a government-led effort in four main areas: • Redirecting the economy’s existing productive capacity to overcome the rapidly growing shortages of equipment and services required to respond effectively to the pandemic. • Supporting firms that are not directly involved in efforts to combat the crisis, so that they can continue to supply essential goods and services. • Ensuring that the population has sufficient means to purchase these goods and services. • Creating a financial facility to help those unable to pay

their mortgage and meet other obligations, thereby mitigating cataclysmic risks to the financial sector. Such systemic insurance goes well beyond current proposals to spend trillions of dollars, much of which is earmarked for policy initiatives that misdiagnose the crisis as one of deficient aggregate demand or as the result of an ordinary supply shock. Moreover, substantial sums are being dedicated to bailouts without explicitly conditioning the money on a firm’s participation in the effort to combat the health crisis and its economic consequences. So, as officials around the world consider large outlays to combat the COVID-19 crisis, the most immediate questions that we face are whether the policies currently under consideration provide sufficient insurance against the systemic risks that are now mushrooming. The criteria are straightforward: • Is government spending sufficiently laser-focused on overcoming the public-health crisis? • Is the economic rescue package adequate to sustain the population’s wellbeing? Considering the second criterion first, government injections of so-called helicopter money (direct cash handouts) to help keep the population afloat should be recurrent, rather than the one or two disbursements now being discussed. Expanded unemployment benefits, together with expanded eligibility for food stamps and other such payments, would also help provide the means to pay for essential goods and services. Policies aiming to stimulate employment, such as the cuts in corporate or payroll taxes advocated by US Senate

Republicans, certainly won’t help combat the pandemic and its consequences for the supply of goods and services. Employees who are sick or apt to be sick, and thus a hazard to others, cannot be relied upon to maintain the production of goods and services. What is now painfully clear is that there is a supply shortage of an unprecedented type: medical equipment and facilities. And it is equally clear that the policies under consideration in the US, which mostly rely on voluntary repurposing of existing manufacturing capacity, are woefully inadequate to close the growing gap. Re-equipping factories to produce ventilators for patients and personal protective equipment (PPE) for medical personnel, for example, takes time. So these measures must be scaled up without delay. Moreover, such retooling requires substantial financial outlays, which are hard to make in a collapsing economy. In order to repurpose existing capacity, the government should condition support for any private firm on the firm’s commitment to producing vital equipment (specified by a body of medical experts) and meet its payroll at reasonable wages. To avoid price-gouging, medical supplies must be priced at pre-crisis levels. This conditionality should not only apply to firms producing equipment. The systemic insurance approach to allocating taxpayer funds would require that large service-sector companies such as airlines or hotel chains receive bailouts only if they repurpose their capacity to support the fight against the pandemic. Rather than standing idle waiting for passenger travel to resume, airlines should be pro-

vided funds to re-equip their airplanes to transport medical supplies and equipment, or to move sick patients to locations with the capacity to care for them. Similarly, hotel chains should be supported by the government only if they agree to repurpose their hotels to serve as temporary hospitals. Beyond repurposing existing capacity, systemic insurance would require that employees of bailed-out companies continue to be paid an adequate wage. The bailouts should not be allowed to be diverted to management pay raises, stock buybacks, or dividends. What makes the systemic insurance unprecedented is that it requires not just government spending – which can be thought of as the cash part of the premium – but also large-scale government-led interventions in how our economies produce and distribute goods and services. This move toward state action is much more encompassing than the mobilization for World War II – a frequently invoked parallel – ever was. But such a reorganization of our economies poses more than operational difficulties, especially in the US, where government has historically strictly limited its direct intervention in productive activities. Although governments’ intervention in modern economies takes many forms, ingrained ideas about the balance between the state and the market are even now impeding an adequate response to this crisis. President Donald Trump and US policymakers have thus far favored piecemeal measures, especially when it comes to the state directing – indeed, reorganizing – the private sector. Their instinctive belief in the superiority of the market and

private initiatives, regardless of the circumstances, leads them to recoil from the scale of government intervention needed to save our lives and livelihoods. Lingering shibboleths about the state’s proper role must not become roadblocks to mitigating the grave systemic risks that we face. Governments’ poor track record on addressing another existential threat – that of climate change – does not inspire optimism.

Roman Frydman

Edmund S. Phelps

Roman Frydman, Professor of Economics at New York University, is the co-author of Imperfect Knowledge Economics and Beyond Mechanical Markets (Princeton University Press). Edmund S. Phelps, the 2006 Nobel laureate in economics, is Director of the Center on Capitalism and Society at Columbia University and the author of Rewarding Work. Copyright: Project Syndicate, 2020. www.project-syndicate.org

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COVID-19 FALLOUT:

NAB suspends university accreditation BY BENSON AFFUL The National Accreditation Board (NAB) has suspended accreditation related activities in all tertiary institutions across the country. The country’s law mandates every tertiary institution to get institutional accreditation as well as program accreditation before it can operate. Tertiary Institutions (Establishment and Accreditation) Regulations, 2010 (L.I 1984), it is the body vested with the authority to accredit tertiary education institutions and their programmes in Ghana. A statement by the board which is copied to the Busi-

ness24 states that “due to the COVID-19 pandemic and recorded cases in Ghana as of March 16,2020, it has become necessary to put on hold all accreditation related activities and services in compliance with the President’s directive to close down schools and universities to control transmission through social contact.” In the light of this, the NAB said all institutional and programme assessment activities have been suspended till the President’s directive is reversed. “All scheduled programme assessment exercises have therefore been cancelled until further notice,” the board

said. Presently, there are 68 accredited tertiary institutions in the country operating as public and private universities. Out of this number, only 16 are chartered degree-awarding universities, which by law have the powers to confer degrees. Valley View University, Trinity Theological College and Akrofi-Christaller Memorial Research Institute, Central University and Ashesi University are the only chartered private tertiary institutions, which are eligible to award degrees. In general, enrolment in university has accelerated since

the 1990s when there were only government-owned institutions. The number of people enrolled in university -- including public and private -- stood at 183,687 in 2012/13, with public universities accounting for 70 percent of all students. In 1990/91 there were barely 10,000 people attending university in Ghana. This means that the demand for higher education in the country has increased tremendously, and for teaching staff to meet the demand experts believe universities must start sponsoring people to attain the qualification requirement, and thus enable more people to lecture in those institutions.

President Nana Addo Dankwa Akufo-Addo earlier this month directed schools in the country to shut down in a move to stop the spread of the COVID-19 pandemic in the country. The President gave the order when he addressed the nation on Sunday, March 15, 2020. “All Universities, Senior High Schools, and basic schools, i.e. public and private schools, will be closed Monday, 16th March 2020, till further notice. The Ministry of Education, in collaboration with the Ministry of Communication, has been tasked to roll out distance learning programmes,” he said.

Saudi Arabia’s radical new oil strategy BY BERNARD HAYKEL Saudi Arabia’s recent decision to crank up oil production represents a dramatic shift in its thinking about energy markets and its own reliance on oil revenues. Gone are the days when Saudi oil reserves were prudently managed for future generations. By no longer maintaining a specific oilprice band or retaining spare production capacity, the Kingdom is stepping away from its longstanding role as the market’s swing producer. The change reflects Crown Prince Mohammed bin Salman’s (MBS) view that Saudi Arabia has a relatively narrow window of opportunity to monetize its large oil reserves. He has embarked on a policy of capturing market share rather than trying to set the price, once again breaking with longstanding policies that he believes are no longer useful. If MBS persists with this strategy, he could significantly alter the dynamics of global energy markets. By keeping prices depressed, Saudi policy will not just drive more expensive forms of oil production out of the market; it will also make it harder for renewable energy to compete with fossil fuels – at least in the near term. The new strategy became clear on March 7, a Saturday, when Saudi Arabia decided to cut its official selling price and increase its oil production to above ten million barrels per day, with output in April likely to be near 11 million, up from 9.7 million in recent months. When markets reopened the following Monday, oil prices suffered their largest single-day decline since 1991. Officially, the Saudi action was a response to Russia’s refusal to agree to voluntary oil production cuts at an OPEC+

meeting on March 6. Since 2016, the Russians and the Saudis have been coordinating their production to keep prices elevated at around $50-$60 per barrel. Yet the net effect of this cooperation has been to help the US shale industry boost its own production and sales, thereby capturing most of the world’s incremental demand. Having suffered declining exports since 2016, the Saudis were probably hoping that a reduction in output would shore up prices at a time of weakening global demand, owing to the coronavirus outbreak. Why the change of tack? Commentators have offered various explanations, including the intimation that Saudi Arabia might be colluding with Russia to undermine the US shale industry. But such collaboration is highly unlikely. There is little trust between MBS and Russian President Vladimir Putin, who has not forgotten that Saudi Arabia’s oil-market machinations in the 1980s may have played a role in the collapse of the Soviet Union. Moreover, Saudi Arabia already tried and failed to take on the shale industry in 2014-2016, when it badly

underestimated US shale producers’ technical competence and ability to operate at low prices. Rather than pursuing a shortterm tactical win, MBS may instead be focusing on several longer-term development goals. He knows that he has only limited time – perhaps just a couple of decades – to extract maximum value from oil, because climate change has fueled a global push toward de-carbonization and renewable energy. Saudi Arabia has well over 50 years’ worth of recoverable reserves; most of that will become a stranded asset if it is not produced more quickly. Although the Kingdom will face serious technical and financial hurdles in pursuit of its new, highly ambitious production targets, the deeper point is that the old rules no longer apply. And under the new dispensation, the Saudis may also start running the state-owned oil giant Saudi Aramco more like a profit-maximizing international company – producing as much as possible – rather than like the global oil market’s central bank. There are strong arguments for why the Kingdom should

pursue this path. For starters, Saudi oil is cheaper to extract and transport than many other reserves. It is also “cleaner” than that produced by Canada’s tar sands, and emits little methane compared to Russian oil. And Saudi Aramco is one of the world’s most technologically advanced and technically competent oil companies. In other words, Saudi oil has multiple comparative advantages over the competition, and therefore is perfectly placed to hold a privileged position in the global clean-energy transition. Moreover, the Kingdom has been signaling its intended change in strategy for several months. In December 2019, it proceeded with the initial public offering of 1.5% of Saudi Aramco, which represents one way of monetizing the upfront value of its oil reserves, while also signaling the shift toward maximizing profit. After many years of disputes, the Saudis also have reached an agreement with Kuwait over oil production in the Neutral Zone, which will allow production to increase by up to 500,000 barrels per day. Lastly, Saudi Arabia recently announced plans to develop a massive un-

conventional gas field called Jafurah, which will make even more oil available for export. The Kingdom’s policy shift should give pause to American politicians who boast that the United States has achieved energy independence through shale. In an all-out war for market share, US, Canadian, Russian, and other oil producers will have a hard time competing with the Gulf, given its lower costs and other competitive advantages. The question, of course, is how long Saudi Arabia can maintain this strategy before the new low-price environment drains its own coffers. A back-of-the-envelope calculation suggests that it can hold out for two years. MBS may be gambling that he can outlast the competition. But given the structural features of the oil market and the world’s inevitable transition to renewables, he probably sees no other alternative. OPEC quotas and production agreements with the Russians have not delivered the results he needs. Whether the new policy can produce more tangible benefits remains to be seen.

By Bernard Haykel Bernard Haykel, Professor of Near Eastern Studies and Director of the Institute for the Transregional Study of the Contemporary Middle East, North Africa, and Central Asia at Princeton University, is co-editor (with Thomas Hegghammer) of Saudi Arabia in Transition. Copyright: Project Syndicate, 2020. www.project-syndicate.org

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This Time Truly Is Different BY CARMEN M. REINHART

While pandemics are comparatively rare, and severe ones rarer still, I am not aware of a historical episode that can provide any insight as to the likely economic consequences of the unfolding global coronavirus crisis. This time truly is different. A key feature of this episode that makes it unique is the policy response. Governments around the world are giving priority to measures that limit the spread of disease and save lives, including the complete lockdown of a region (as in China) and even of entire countries (Italy, Spain, and France, for example). A much longer list of countries, includ-

ing the United States, have imposed strict international travel bans and prohibited all manner of public events. These measures could not be further from the policy response to the deadliest viral outbreak of modern times, the 1918-19 Spanish influenza pandemic (see chart). That pandemic, which claimed 675,000 lives in the US and at least 50 million worldwide, occurred against the backdrop of World War I. This fact alone precludes drawing any meaningful comparisons regarding the effects of the COVID-19 pandemic per se on the US or global economy.

In 1918, the year in which influenza deaths peaked in the US, business failures were at less than half their pre-war level, and they were lower still in

1919 (see chart). Driven by the wartime production effort, US real GDP rose by 9% in 1918, and by around 1% the following year even as the flu raged.

With COVID-19, by contrast, the vast uncertainty surrounding the possible spread of disease (within the US and globally) and the duration of the near-economic standstill required to combat the virus make forecasting little different from guessing. But, given the scale and scope of the coronavirus shock, which is simultaneously cratering aggregate demand and disrupting supply, the initial effects on the real economy are likely to surpass those of the 2007-09 global financial crisis (GFC). While the coronavirus crisis did not start as a financial crisis, it may well morph into one of systemic severity. At least until reduced economic activity results in job losses, US household balance sheets do not appear problematic, as they were in the run-up to the GFC. Banks, moreover, are much more strongly capitalized than they were in 2008. Corporate balance sheets, however, look far less healthy. As I observed over a year ago, collateralized loan obligations (CLOs), issuance of which has expanded briskly in recent years, share many similarities with the notorious subprime mortgage-backed securities that fueled the GFC. The search for yield in a low-interest-rate environment has fueled waves of lower-quality lending – and not just in CLOs. Unsurprisingly, therefore, the recent stock-market crash has exposed high leverage ratios and increased default risks. As if the coronavirus shock were not enough, the Saudi-Russian oil war has nearly halved oil prices, adding to the predicament of the US energy sector. With much of manufacturing hit by supply-chain disruptions, and broad segments of the service sector more or less paralyzed, corporate defaults and bankruptcies

among small and medium-size businesses are set to spike, despite fiscal and monetary stimulus. Furthermore, as the 2020 coronavirus crisis unfolds, the similarities between highyield corporates and developing-country sovereigns appear to be sharpening. While the financial and debt crisis of the 1980s affected emerging markets, the GFC was a financial crisis (and in some cases also a debt crisis) in advanced economies. China’s average annual GDP growth of over 10% in 2003-2013 lifted global commodity prices, boosting emerging markets and the global economy. And, unlike advanced economies after the GFC, emerging markets enjoyed V-shaped economic recoveries. In the last five years, however, emerging-market balance sheets (both public and private) have deteriorated, and growth has slowed significantly. Other things being equal, the US Federal Reserve’s recent significant interest-rate cut and other measures in response to the pandemic should ease global financial conditions for emerging markets, too. But other things are far from equal. For starters, the classic flight to US Treasuries in times of global stress, and the surge in the VIX volatility index, reveal a sharp increase in risk aversion among investors. These developments usually coexist with sharply widening interest-risk spreads and abrupt reversals of financial flows as capital exits emerging markets. In addition, the crash in oil and commodity prices reduces the value of many emerging-market exports, and hence affects these countries’ access to dollars. In the more extreme (but not unique) case of Ecuador, for example, these

risks have translated into a sovereign spread approaching 40 percentage points. Finally, China’s economic growth was an important driver of its significant lending to over 100 lower-to-middle-income developing countries in the last decade, as I showed in a recent paper with Sebastian Horn and Christoph Trebesch. The spate of weak Chinese economic data for early 2020 thus raises the likelihood of substantially reduced outward loans. Not since the 1930s have advanced and emerging economies experienced the combination of a breakdown in global trade, depressed global commodity prices, and a synchronous economic downturn. True, the origins of the current shock are vastly different, as is the policy response. But the lockdown and distancing policies that are saving lives also carry an enormous economic cost. A health emergency can evolve into a financial crisis. Clearly, this is a “whatever-it-takes” moment for large-scale, outside-the-box fiscal and monetary policies.

Carmen M. Reinhart is Professor of the International Financial System at Harvard University’s Kennedy School of Government. Copyright: Project Syndicate, 2020. www.project-syndicate.org

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