5 Key Sectors Can Boost Post-Pandemic Recovery in Southeast Asia

Southeast Asia’s tourism industry saw impressive growth with tourist arrivals of almost 144 million in 2019 from only 37 million in 2005. Interest in the region’s history, culture, and natural landscapes was boosted by low-cost air transport, rising incomes, and targeted tourism investment. However, COVID-19 and pandemic-related travel restrictions halted the robust growth in the sector. Foreign visitor arrivals in 2020 dropped by 50% to 80%, with some declining by almost 100% in some popular destinations, like Bali in Indonesia.

As the tourism sector reels from the devastating impact of the pandemic and moves toward recovery, it will likely put more emphasis on health and hygiene, proximity tourism (domestic and short-haul international travel), and environmentally sustainable tourism.

Recommended policy actions

• Restore demand by developing domestic marketing campaigns and improving coordination of procedures to reduce information gaps.
• Build new channels of demand by developing more tourism destinations, including areas for ecotourism and coming up with policies on halal certification and facilities.
• Build capacities to support future demand by providing digital and non-digital skills development and leveraging new technologies.
• Increase industry resilience by improving communication channels between the private sector and the government and creating a permanent crisis management task force.

The share of agriculture in Southeast Asia’s gross domestic product has been decreasing, but it remains a major employer in many countries in the region. Challenges that hindered growth in agro-processing even before the pandemic include inconsistent supply of raw materials and low level of automation and technological adoption. COVID-19 exacerbated these challenges. Travel restrictions and closed borders shifted demand for food and beverage products to domestic markets, disrupted supply chains, and increased food protectionism policies.

Although the pandemic had less impact on the agriculture industry than on other sectors, it highlighted the need to shift focus to value-added activities, such as agro-processing.

Recommended policy actions

• Enhance the efficiency and transparency of supply chains by harmonizing standards for food products as well as investing in reliable information and communications technology infrastructure.
• Strengthen the industry’s added value by expanding the food product range and sales channels, such as digital platforms.
• Raise productivity, quality, and safety by focusing on research, enabling policies to ensure a more consistent supply of raw materials, adopting processing equipment, and enabling digital transformation.
• Build industry resilience by streamlining regulatory functions, strengthening the local agro-processing ecosystem, promoting partnerships among stakeholders, and pursuing food-related circularity policies.

Relatively low labor costs, strategic location, preferential market access, and supportive government policies have made many Southeast Asian countries competitive in the textile, apparel, and footwear manufacturing industries. However, they are vulnerable to supply chain disruptions due to a heavy reliance on a few key suppliers of raw materials; insufficient reliability, timing, and scale of local input production; and irregular electricity supplies. The health crisis added more challenges as it led to supply chain disruptions, prompted consumers to reuse garments rather than buy new ones, and intensified widening inequalities in the garments sector.

Governments have implemented short-term measures such as wage support to mitigate the adverse impacts that the garments industry faces. In the longer term, there is a range of policy responses that could address the identified challenges as well as support the industry to achieve higher and more sustainable growth.

Recommended policy actions

• Improve competitiveness by reviewing policies that restrict growth, such as high raw material tariffs; expanding access to training; and promoting the adoption of digital technologies.
• Expand markets by developing more end markets, pursuing product differentiation, and producing higher value-added garments.
• Raise industry resilience by promoting domestic production, supplies, and markets of related agricultural products, and ensuring demand for sustainable manufacturers.
• Pursue more flexible production and business models through research and development.

Electronics manufacturing in the region covers a diverse range of products being sold in overseas and domestic markets—from capital-intensive products, such as hard drives, to more labor-intensive products, such as electrical components.

Although the pandemic is accelerating global digital transformation, it has also burdened the electronics sector. The rising demand for consumer electronics could not be met as supply chain interruptions caused delays in production.

Recommended policy actions

• Upgrade special economic zones by clustering electronics firms to maximize industry linkages that would foster collaboration and creating supportive sector-specific policies, like promoting electronics export in free trade agreements.
• Develop human capital by creating specific programs and government agencies for upskilling and reskilling of workers and incentivizing local companies to engage in research and development.

As more activities shift online post-COVID-19, the new and emerging digital trade industry has tremendous potential for future growth. Much of digital trade in Southeast Asia is currently focused on information technology and business process outsourcing (IT-BPO) although software application development has also increased in some countries. Pre-COVID-19 challenges to the sector include threats posed by automation, limited connectivity, and low level of digitalization in small and medium enterprises (SMEs).

Although digital trade has shown more resilience to the pandemic than other industries, an enabling environment is needed for its growth.

Recommended policy actions

• Develop an IT-BPO road map that reflects an understanding of emerging technology opportunities, skills requirements, and detailed policies.
• Enhance connectivity by investing in network infrastructure and increasing affordability of mobile and fixed broadband connectivity.
• Support skills development through financial incentives for employers.
• Enable SMEs to transition to digital by designing tool kits to assess digital readiness.
• Rethink digital regulation to enhance cross-border trade by localizing data and minimizing unnecessary processes and duties and adopting bilateral or multilateral approaches to data flows.

Support for sectors hardest hit by the COVID-19 pandemic and investments in new growth areas could help economies get back on track. Measures must include investments to spur digital transformation in addition to fortifying infrastructure and improving the business environment. A stronger collaboration between governments and businesses will enable economies to address many of the challenges and ensure a sustainable and inclusive recovery.

ASEAN Statistics Division. ASEAN Visitor Arrivals Dashboard (accessed 11 March 2021). Jakarta.

B. Seng et al. 2021. Supporting Post-COVID-19 Economic Recovery in Southeast Asia. Manila: Asian Development Bank.

International Trade Centre (ITC). COVID-19 Temporary Trade Measures (accessed 6 March 2021).

M. Richetti and R. De Palma. Will COVID-19 Accelerate the Transition to a Sustainable Fashion Industry? United Nations Industrial Development Organization. 9 October.

R. R. Mufti and A. W. Akhlas. 2020. Tourism Recovery Still a Long Way Off Despite Slight Increase in Visitors in May: Experts. The Jakarta Post. 2 July.