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The Ken Southeast Asia's Strait Up newsletter
Good morning Dear Reader
 
Welcome back to Strait Up, our weekly newsletter that makes sense of what’s going on in Southeast Asia.
 
This week, we’re touching upon the slow shift towards ethical consumption. With the plight of migrant workers in Singapore and Malaysia magnified during Covid-related lockdowns, will employers finally take this opportunity to reflect on their welfare policies for foreign labour?
 
We’re also taking a closer look at the Philippines’ plan to relax corporate tax rates, and whether
Grab’s new measure to combat Covid-19 will lead to an abuse of the system.
 
Let’s dive in.
The most vulnerable in Southeast Asia

Kay and Ben
 
The plight of migrant workers is finally getting the attention it deserves. Sure, it’s taken a global pandemic that has killed hundreds of thousands and brought economies to their knees, but in a world starved for positives, we’ll take what we can get.
 
In Southeast Asia, the eruption of Covid-19 cases among migrant workers in Singapore and Malaysia highlighted their precarious living and working conditions. It also revealed the constant discrimination migrant workers faced in foreign countries where they make a living.
Workers – who are predominantly from South Asia – are treated in a way that deliberately fosters dependence on actors that disempower and dehumanise them through a quest for their own gain
Undervalued and overlooked: the dehumanisation of migrant workers during the COVID-19 crisis, Impactt
Ironically, industry and business groups have been vocal about the importance of migrant workers, namely in “enabling businesses to remain competitive”. T. Chandroo, the chairman of the Singapore Indian Chamber of Commerce and Industry, even called migrant workers the backbone of Singapore’s construction, marine shipyard and process sectors. And if that’s the case, Singapore has terrible posture.
 
Like many countries around the world, migrant workers in Singapore and Malaysia often take on blue collar, or “dirty” jobs. Like construction or janitorial work, which locals shun in favour of white collar jobs. And while they do the jobs no one else wants to do, their wages are far lower than what locals earn. The Malaysian Trades Union Congress said many migrant workers earn well below the minimum wage of RM1,200 (US$280) per month set by the government. In Singapore, they could earn less than S$25 (US$17.8) a day. 
The plight of migrant workers in Singapore. [Photo: Rob O’Brien/Flickr]
 
For all of this, though, they remain essential to the growth of both countries. Now, with issues like mistreatment of migrant workers coming to the fore, the governments of Singapore and Malaysia are vowing to do more to protect their welfare. All the laws in the world, though, mean little if the businesses who actually employ them don’t come onboard.
 
For most businesses, migrants are an economic necessity. Automation—often proposed as a substitute to cheap migrant labour—requires substantial investment to implement. Migrants are seen as the cheaper option. But as long as cost saving remains the primary imperative, companies willing to tackle modern slavery and function in a transparent manner will be few and far between.
 
This corner-cutting approach, though, is slowly changing. The novel coronavirus pandemic seems to be ushering the world into an era of ethical consumption. Private equity investors, especially, are starting to hunt for companies that are closely intertwined with the theme of sustainability. Yes, social returns are a thing now.
 
Investors are looking beyond PR-friendly corporate social responsibility activities that make for social media fodder. They now want to know all about supply chains to ensure there is no worker exploitation or illegal practices taking place even with third-party subcontractors. And corporations are being forced to sit up and take notice.
 
UK-based grocer Tesco has set a sterling example by releasing a Modern Slavery Statement. It commissioned independent human rights consultancy Impactt to assess migrant workers’ rights in its stores and distributions centres in Malaysia and Thailand. It subsequently discovered that hundreds of Tesco workers in both countries were abused.
Quote
It understands that the type of transparency needed to tackle exploitation isn’t general disclosure designed to tick a box of legislative requirements, but open and frank disclosure about what is really happening in supply chains. This gives everyone, including other companies, the information they need to act to ensure workers are respected
Patricia Carrier, UK Modern Slavery Act registry project manager at Business & Human Rights Resource Centre
Now, all eyes are on the new owner of Tesco Malaysia and Thailand, Thai conglomerate Charoen Pokphand. Will it ensure that the welfare of workers is taken care of? One would hope so.
 
Positive change, though, comes at a cost.
 
A shift towards more ethical processes could see prices rise as the cost of doing the right thing is passed down the supply chain. That instant noodle cup might cost more, but it will also come with the knowledge that no one was hurt or exploited to make it. A fair trade, wouldn’t you say?
Misplaced priorities

Jum
 
Philippines President Rodrigo Duterte’s administration is pushing for a Covid-responsive corporate income tax (CIT) reform package to stimulate the economy. If passed by Congress, this will immediately slash CIT to 25% from the current 30%—the highest in Southeast Asia.
 
Look, will a lower CIT incentivise doing business in the country and help corporations ride out the current crisis? Sure. But that isn’t the point of this cut. It’s meant to stimulate the economy, and on that count, economists are less confident. They think that implementing the cut during a pandemic is not only inefficient, but also inequitable.
 
The pandemic, along with the country’s lockdown, has made it hard to do business, to say the least. So the effects of a tax cut as a stimulus will be limited, said non-profit research group Action for Economic Reforms (AER). “From previous recessions, the gains from the tax cut are not necessarily used for consumption.”
 
Corporations could use this relief to ride out the pandemic. Or buy back stocks. If any CIT reduction is implemented, it has to be with conditions, like preserving or creating jobs.
 
Slashing CIT also helps the haves of the business world far more than the have-nots. While large corporations stand to benefit, micro, small and medium enterprises (MSMEs), which are most vulnerable to the current situation, won’t gain a thing since they are unincorporated.
 
Already, the government has breached anything resembling a manageable budget deficit ceiling. The estimated revenue lost from the planned cut, worth US$842 million in 2020 alone (and US$12.5 billion in the next five years), could well be used to fund the country’s inadequate Covid-19 testing and treatment capacities.
 
Does this mean a CIT cut shouldn’t happen? Not in the least. The move has been on the cards for a while now and it is generally accepted that, with the stiff tax competition in Southeast Asia, the Philippines needs these cuts to continue to attract foreign businesses.
Image by Asia Briefing
 
But should it happen now, at a time when the pandemic-induced global recession means foreign firms are unlikely to come rushing in anyway? Not really.
Safe digital distancing
 
Jon
 
For the last few months, businesses have been praying for an end to lockdowns. But now that lockdowns are finally easing up, it’s fast-becoming apparent that it won’t be business as usual anymore. The threat of a second Covid-19 wave is growing. Indeed, the second wave of the Spanish Flu in the 1910s killed more people than the initial outbreak. So, even as businesses shake off the inertia of the past few months, they must balance safety concerns, too.
 
Everyone’s trying to put systems in place. In the restaurant business, examples include social distancing by reducing seating capacity, contactless dining, and sanitisation protocols on steroids.
 
Ride-hailing giant Grab is also trying to Covid-proof its business. Starting 15 June, it is adopting a new cancellation policy for its ride-hailing service. Grab drivers and passengers will be allowed to cancel a ride if the other party isn’t masked up or appears to be unwell. Passengers won’t be charged cancellation fees, while drivers will not be penalised for rejecting a customer either.
 
As well-intentioned as this may be, it remains to be seen how the policy will work once rolled out.
Grab’s current cancellation policy is far from ideal. It penalises the driver or passenger if a ride is aborted five minutes or longer after it’s booked. This often leads to unpleasant standoffs and misunderstandings.
 
For example, when there’s heavy traffic and a cab is taking longer than expected to arrive, drivers and customers tend to bicker over who makes the cancellation. On occasions, drivers refuse to cancel to avoid getting a strike, while passengers are reluctant to cancel and get hit with a penalty. Those who consistently cancel can get their accounts banned, even if they had legitimate reasons to do so.
 
These concerns only magnify with the new Covid-related cancellation policy. Grab told The Ken it will limit the number of these new cancellations per day—there’s no set figure at this point—and that persistent cancellations would face a temporary suspension. While we’d all like to believe the best in people, I can’t help but cynically wonder how heavily a free pass for cancellations will be abused.
SEA Briefs
 
As expected, Southeast Asian countries that need income from tourism are starting things up by promoting domestic trips first. Thailand earmarked money from its stimulus package for travel perks. The first beneficiaries, and this is something we can all get behind, will be health workers and volunteers.
 
In Indonesia, commercial life is coming back in phases this month. Schools, though, aren’t open yet and will likely stay shut across the country for the rest of the year. The government indicated it wants the education sector to be the last to reopen after other restrictions are lifted.
 
The controversy over hydroxychloroquine hit a new peak. The WHO urged countries like Indonesia that use the drug as a Covid-19 treatment to stop doing so, citing studies that point to worrying side-effects. The Guardian then uncovered that these studies were based on flawed data. Hydroxychloroquine might not be as bad after all, but that doesn’t mean it’s effective either. Another study this week found the drug doesn’t help with Covid, at least not when used as a preventative treatment.
 
Whether they like it or not, technology companies and internet providers in Southeast Asia are in a position of power and responsibility. In Singapore, Facebook complained about the country’s draconian misinformation laws, which require the social media giant to mark and correct user-generated posts the government opposes. In Indonesia, internet providers had complied with a government order to shut down access in the Papua province to curb civil unrest. Local courts now ruled that this was illegal and that the government has no right to order internet shutdowns.
 
Plans in Malaysia to roll out 5G permits were delayed this week after public backlash. The problem was the lack of a transparent tender process.  
 
Startups in Southeast Asia are still attracting funding, even as the economic outlook remains uncertain. A Singapore-headquartered e-scooter startup, Beam, was able to secure US$26 million in funding from Sequoia India, even though scooters are largely banned in Singapore. Beam will have to target other markets, like Australia and South Korea.
 
Indonesia saw an impactful strategic deal come together. Global giants Facebook and PayPal both confirmed taking stakes in Gojek’s GoPay wallet. We discussed the implications of this in yesterday’s story.
Something for the weekend
 
With a pandemic in the picture, work from home has become the norm. While that may mean more time to relax—especially for those who used to endure long commutes—for some, it can get insanely busy. One must switch between being a parent, a spouse, a homemaker, and a worker.
 
Sometimes, tasks come at you all at once, and every one of them seem critical. Which ones do you prioritise?
 
Drawing from her experience as an emergency doctor, Darria Long has tricks to share that can help you take the “crazy” out of “crazy busy” and handle your stress levels better.
 
I’m no ER doctor but I find her 14-minute TED Talk helpful and applicable to daily life. Hope you do, too.
That’s it for this week.
 
Wash your hands, take a walk around the house and stay sane. We hope you have a productive weekend.

Take care,
Kay
kakay@the-ken.com
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