COVID-19 Insights from OIST＃8 - The New Normal: Economy
COVID-19 OIST Insight 8
OIST is collaborating with Ryukyu Shimpo for a series of column articles related to COVID-19 on weekly basis. The 8th story was written by President Peter Gruss.
Article is in Japanese, but please see below the original draft in English.
The New Normal: Economy
The spread and potential resurgence of SARS-CoV-2 has the world holding its breath.
This virus has been absolutely devastating for global health, but it has also plunged the global economy into jeopardy.
Many countries have suffered rapid and unprecedented recession, leading very sadly to lay-offs and job losses.
More than 40 million Americans have filed for unemployment benefit in recent weeks. Japan is comparatively better off but estimates still predict the loss of up to a million jobs.
To soften the fallout the Government has provided stronger employment subsidies, a tax moratorium, and financial aid for struggling companies.
Service sector jobs – and the travel industry in particular – have been especially hard hit. Okinawa published that the income from the tourism industry covers 16% of GDP in Okinawa. However, we can safely assume that approximately 10% of the GDP is generated indirectly. Hence, the need to establish a ‘New Normal’ suggests that Okinawa should move decisively to broaden and diversify its economic base.
But what alternatives can be considered?
This pandemic has revealed just how vulnerable global supply chains can be. Businesses which rely on just one or two suppliers, and which are concentrated in one country, are extremely fragile.
Former US Treasury Secretary Lawrence Summers says “economic strategy will need to put less emphasis on short-term commercial advantage, and pay more attention to strategic advantage in the long-run.” He stressed the need for resilience, advising countries “to not be dependent on China and potential adversaries for goods that are going to be crucial.”
One example of this is technology, where China has dominated the development and roll-out of technology for the 5G network crucial to the future.
COVID-19 looks set to spur more rapid adoption of new technologies.
Videoconferencing, virtual classrooms, and telemedicine are all growing at pace and automation will expand briskly. This creates opportunities for entrepreneurs. However, many Japanese people I talk to about this issue point out that Japan’s budget is already overstretched, and the stimulus package relies on borrowed money.
Borrowing to finance consumption is indeed unsustainable. But if the money is invested in ways that earn a higher return and provide a way to meet the costs of debt, it could offer a positive and sustainable way forward.
What path should Okinawa pick to walk towards a bright future?
Moritake Tomikawa, Vice Governor of Okinawa, said recently that “when looking ahead 10 years, Okinawa needs to be able to develop on its own by co-operating with OIST for technical innovation”.
Currently, the Prefecture has proposed five key strategies for growth: world-class tourism; an aviation-related industry-cluster; an international ICT base; new manufacturing to serve Okinawa and the wider region; and an internationally competitive logistics base to connect Okinawa and the rest of Asia.
These goals were all defined in the pre-COVID era.
Now, it is clear they should be reviewed. Okinawa can broaden its industrial base by developing high-tech industry. As OIST President I fully agree with the Vice Governor’s statement and I can also offer assistance and partnership.
Analysis of the most successful and creative high-tech clusters around the globe shows that they flourish when they are created close to an intellectual centre. Ideas come from the best minds and can be translated into innovations and cutting-edge products.
OIST’s academic strength is a magnet for the brightest people to come and work in Okinawa, not just in an academic institution, but in applied research and start-up companies.
We are discussing with Onna Village and OPG the exciting prospect of a new, high-tech innovation park immediately north of our campus, with fully considering the environment.
This park would contribute to critical global sustainable development goals by using or developing the latest technologies. Towards this end we are discussing with investors a venture capital fund to help finance the necessary start-ups. We know that young start-up companies are now generating 75% of new jobs in the US. With adequate funding, dedication and patience, the COVID-crisis can provide opportunities for Okinawa. OIST wants very much to be part of bringing them to fruition.