ANDREW DAVIS: Competitiveness of economies: is COVID-19 widening the gap?


As we surface from the COVID pandemic, we are finding once again that there will be clear winners and losers. Developed economies and inventors of vaccines will recover more quickly economically speaking, while those in emerging and developing economies (such as Mexico, Brazil, India, or South Africa) will struggle to attract investment for high-value activities such as research and development in certain fast-moving industries and services (the IMF in its October 2021 World Economic Outlook Update does not expect output in emerging economies to recover to 2019 levels before 2022 at least).

Emerging economies such as China and Russia are developing their own vaccines, so they are in a different position altogether; Russia is using its vaccine development as a diplomatic card as it is faltering economically and politically, and China as an accessory to making a spectacular economic recovery, complimentary to an exemplary COVID-19 sanitary control (indeed some may say due to more draconian measures).

Overall, the initial development of vaccines has been surprisingly swift, however predictably certification by international regulators such as FDA and EMA is a sluggish process. Vaccines created in developed countries such as Pfizer, Moderna, and AstraZeneca have been the first to be approved by such bodies. Governments in these countries have of course prioritized providing domestic herd immunity. Those vaccines developed in emerging economies are paradoxically still in phase three development and are being largely used for emergency purposes in emerging or developing economies such as Mexico.

The production of vaccines has logically been sluggish to attend to the demands of the population at large in an emerging economy such as Mexico, due to a scarcity of competing products available on the market. To a large extent, the availability of globally approved vaccines is still limited to the countries of vaccine development, and only when licensing agreements or other international ventures kick in, will we see a serious increase in supply and a real chance of reaching herd immunity in all markets.

During the lockdown, the makeup of developed economies allowed for formal lockdown and the operation of key activities from a home office. This was due to the robust nature of their formal economies. In an emerging economy such as Mexico, the government was unable to completely shut down informal economies due to its inability to support inactive personnel through a welfare system. Employers in the informal sector required activity as their only lifeline. This has presented a considerable sanitary risk for such economies, as we are witnessing in countries such as India and Brazil, where they are experiencing yet another sanitary crisis.

Government policy has been another factor that has created a widening gap during the COVID-19 crisis. Although it is more than apparent that developed economies have suffered badly from bad crisis management during the pandemic, the inoculation stage is teaching us that many emerging and developed countries are suffering from bureaucratic and infrastructural deficiencies which are hampering the rollout. Mexico is already under suspicion of signing dubious buy-sale contracts for vaccines, injecting faulty vaccines, and reporting false inoculation results. Much of this may be speculation as a result of frustrated pundits; the country is after all farther down the pecking order for vaccines.

During an international negotiations lecture I was conducting, I decided to experiment with my students. As I have exchange students in the class, I decided to look up the share of people who received at least one dose of COVID-19 vaccine in each of their countries of origin, just to show how the vaccine rollout performance changes according to the development of economies, whether economies are creating vaccines, and whether economies are producers or importers of vaccines. The results were: the United Kingdom 54.1%, Belgium 34.3%, Spain 32.8%., 30.1%, and Mexico 12.1% (Our World in Data, May 18, 2021.)

The good news is that the pharmaceutical industry estimates the world could be vaccinated by the end of March 2022 (BBC World Service May 2021). What is needed to get to that scenario, especially with the onset of strains we are currently faced with? More licensing agreements, joint ventures, giving up patents, easing government regulations and bureaucracy in host economies, waiting on technology transfer, more cooperation from governments in developed economies, speeding up training skilled labour in developing economies. It is a complicated process, perhaps involving more red tape than developing the vaccines themselves, however, it is worth waiting for!

Andrew Davis is a full-time professor and consultant at the International Business and Logistics Faculty at the Tec de Monterrey University in Santa Fe, Mexico City.