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The Role of Trust in the COVID-19 Economic Recovery: Lessons from Asia

We believe that trust will play a crucial role in economic recovery after the COVID-19 crisis. To build this trust, leaders can look to important lessons from the East.

Across the globe, COVID-19 is disrupting all aspects of society. However, at some point, the containment phase of the crisis will end, and the focus will shift to the economic rebound. The transition period between containment and full operation may take up to 12–18 months, since it will either depend on the development of a vaccine or ample immunization. During this period, there will be a fine line to walk between managing a health crisis and an economic one. Focusing on the economic consequences, there will be no “victory day”. Continuous work will be required to limit the length and depth (difference from full operation) of the economic downturn during this transition phase. We argue that trust will play a crucial role in limiting both.

We believe that for building this trust, the East offers important lessons. So if Western economies are to learn from Asia, what are Asian economies doing right? Many point to digital applications, which indeed have proven their merits. However, while digital and AI can be powerful enablers, trust requires more than apps. We look at three Asian economies that were able to sustain economic activity, while limiting the spread of the virus: South Korea, Taiwan and Singapore. While we can clearly not predict the remainder of the epidemic nor its impacts, up until now these countries have been remarkably successful. Any lesson, of course, needs to be applicable in the West. With South Korea and Taiwan’s similar democratic systems, and all three countries’ commitment to privacy, we are confident learnings will be relevant.

Trust is essential for a strong economic recovery

COVID-19 is testing the systemic resilience, but also adaptability of businesses, institutions, governments and entire societies. The fabric of trust provides the means by which systemic coordination and collaboration can be achieved. Such collaboration can drive behaviors that, although uncomfortable, are essential to bring an economy up to speed again.

Trust is essential for businesses to regain capacity to operate (supply). Employees need to take up work, but may not immediately trust the safety of their business environment. Measures such as temperature checks and social-distancing workplaces can help. But trust is also crucial to drive customer demand. Places linked to contamination risks, such as theaters, restaurants and planes may be avoided for some time. Booking systems that take into account social distancing by e.g., leaving additional space between seats can provide help. Finally, trust will be crucial to enable certain orchestrating institutions to function again. Take public transportation for instance, which is so essential to most people’s commute. With typically crowded transportation systems, people may be hesitant to return to old routines. Reducing capacity can help to keep commuters’ trust up.

To increase trust in COVID-19 times, we propose four drivers

We define trust as the expectation that a target agent upon which trust is placed will deliver on promises and/or behave according to expectations or agreed shared norms. Trust is driven by several elements which we have grouped into four clusters (see Exhibit 1).

Making choices on the combination of these drivers will play a crucial role in the rebound. To understand the role they can play, ask yourself the following questions:

  • Transparency: Is data and information being shared, at the right level of detail, and in a timely fashion?
  • Security/Privacy: Is the right trade-off being made between data sharing and data security/privacy?
  • Reliability/Credibility: Are commitments and forward-looking communication balanced with risk of under-delivery?
  • Proximity/Intimacy: Is the right balance found between relying on community trust vs. individual’s rational behavior?

The answers to each can guide estimations of current levels of trust. Even more importantly, they provide guidance on where to improve.

It is unlikely that any rebound will happen in a ‘big-bang’ fashion. Rather, a staged and de-averaged approach — with some activities coming back sooner than others, driven by readiness and criticality, is the most likely scenario. Managing such a de-averaged transition will not be trivial. The very concept of ‘critical’ or ‘ready’ are controversial.

Key agents in that process are businesses and institutions. Their challenge is to plan, enact, track and adjust the rebound process. Governments will play a notable role, given their role as meta-orchestrators, capable of shaping behavior of other agents. We therefore start with lessons for government, followed by proposed lessons for businesses.

What can Western governments learn from Asia on trust?

1. Transparency

Shift towards real-time transparency on the spread of the virus.

Western governments mostly rely on daily press conferences, or static maps with city-level spread of the virus. While these have gone a long way in sharing the spread of the virus, digital applications can even further increase transparency. Clearly, there is a trade-off with privacy, but more can be done without risking personal identification.

Our Asian economies provide a wide spectrum of options. All publish real-time and detailed infection maps, raising people’s trust in unaffected locations. South Korea even shows the detailed movement of confirmed cases after diagnosis, and in Singapore Bluetooth-enabled apps allow for high-precision contact tracing. As Korean Vice-Minister Lee Tae-Ho states “trust can only be earned and harnessed through full openness and transparency”.

Truth be said that learning has played an important role, including for the Asian examples. During the 2015 MERS epidemic in South Korea, transparency was lower. With the majority of transmissions happening in hospitals at the time, there was no need to panic, nor to slow down the economy. Nevertheless, that was exactly what ultimately happened as people lost trust due to a lack of transparency.

Closely track the rebound, and feed back to businesses and citizens in real time

For an economic rebound to be successful, businesses and citizens need to plan. For this, they need to understand the ongoing dynamics of the economy, and society as a whole.

Imagine a restaurant allowed to re-open in 14 days, which has to place orders with suppliers. In many Western economies in lockdown, the task is near impossible today. In the uncertainty that will characterize the rebound for months, correct, real-time and transparent information is crucial. Usual metrics (e.g., GDP) will be late, and detailed early warning signals must be installed. For example in the case of China, coal consumption and congestion are used as early signals for economic activity. Those leading indicators are crucial to build trust on plans and directions provided by businesses and governments.

2. Security / Privacy

Dynamically adapt the balance between transparency and security / privacy.

Naturally, transparency needs to be balanced with security and privacy– taking into account the specific circumstances of the COVID-19 crisis. It is still possible to learn from the pandemic peak to improve in the rebound period. Emergency adaptations of privacy regulations may be helpful, but need to be applied with care.

In South Korea, for example, citizens are truly empowered by digital applications. Consequently, they are even sharing more information than required through voluntary apps. This exemplifies that the balance can shift towards increased transparency, without breaching trust. Clearly, citizens made concessions on privacy during times of epidemics. But they did so explicitly, with a trade-off on transparency in return, and with clear timelines on the cessation of these more flexible privacy regulations. And after the crisis, they will still “own their data” (e.g., in South Korea the right to “be forgotten”).

It is a fallacy that in Western economies such dynamic application of the balance between transparency and privacy is not possible. In Europe and the US, telecom carriers already share (anonymized) data to track people’s movements. For example, in a certain NYC park, an unauthorized gathering of people was detected using this data. However, care is in order: if the balance shifts too far, it will be incredibly harmful. Citizens’ trust will be further broken, and they will take actions to avoid being detected (e.g., leaving phone at home, not reporting symptoms) — a disaster for containment efforts.

3. Reliability/Credibility

Consistently communicate both good and bad news and avoid unrealistic promises.

Expertise plays a crucial role in establishing credibility. However, Western countries managed to mobilize topic experts to a similar extent as Asian economies. We believe the main difference lies in inconsistency of messaging, which harms credibility and drives a feeling of unreliability.

In most Western economies, government communication went from mere advice to lockdown in less than a week. For many Western countries, this dramatic change in government policy occurred mid-March, long after the early effects of the virus had been evident. Such 180-degree shifts in messaging are incredibly harmful for credibility. At the other end of the spectrum, many Asian countries have been upfront about the severity of the crisis from the start. Real-time communication on what is going well and not so well has been crucial in keeping trust high.

Many governments have insisted facemasks are not effective, if the person wearing it does not show symptoms. While the goal — to save masks for healthcare professionals — has been the intent of these communications, in some cases citizens have been skeptical, damaging trust.

Consistent and truthful communications is crucial for credibility. Governments should treat citizens as partners in the effort. Indeed, sugar coating does not help: Crisis communication specialist Arjen Boin warns to avoid a “paternalistic sense of ‘children that need to be shielded from bad news’” and instead advises to treat citizens “as adults that are going to make a long-term effort”.

Plan and implement a staged and de-averaged rebound

A staged and de-averaged approach has already earned its stripes in many Asian economies throughout the containment process. Singapore, for example, progressively escalated measures from the very start. Travel restrictions were installed in different stages with notice given and schools managed to stay open for a long time, with the calculated decision logic explained. By balancing health and economy strategically from the very onset, businesses, society and the economy were able to adapt over time. Only on April 7th 2020, over 70 days after the first confirmed case, more restrictive measures were taken. Up until now, Taiwan and South Korea have even managed to avoid lockdown.

Planning needs to provide visibility beyond the next few days/weeks. Some countries are already relaxing restrictions, and give ~1 week timeline for the measures to be implemented. This is a good first step, but more clarity about relaxations and even longer timelines will be essential.

4. Proximity/Intimacy

Nurture a sense of community, as rational individual actions will not be optimal for society: solving a Prisoner’s Dilemma

A successful ramp-up will be de-averaged, with some sectors and activities coming back before others. Tightly engineering such a de-averaged landscape will likely be close to impossible. On the one hand, for some, it may be the rational decision to stay home another week, even after guidelines change, but this is clearly detrimental for a strong recovery. On the other hand, some may prefer to go to work while containment guidelines prescribe to stay at home. The individual’s preferred action may even be directly opposing society’s desired behavior.

Such a Prisoner’s Dilemma can be solved by enhancing trust amongst players, and in this case, trust amongst entire communities. This trust can shift the balance from reliance on strict rules and individualistic behavior to a more dynamic regime. Taiwan and South Korea’s approaches exemplify this. While hard restrictions are imposed on people diagnosed with the virus, most other guidelines have remained “soft”. People’s sense of community has driven them to act responsibly. The earlier mentioned example of people voluntarily sharing more information than required is also very relevant here.

“Sense of community” goes beyond a “naïve” altruistic view. Prioritizing long-term impact over short-term benefits may actually re-align society’s incentives with people’s perceived incentives. Engraining an understanding that “in the end, if the economy does not go well, I will be negatively impacted as well”, may help governments in their efforts.

Businesses need to complement government actions to reinstate trust

Clearly, businesses are crucial actors in the rebound process as well, and they too should learn. First, they need to complement and support government actions as described above, as both need to be aligned for the optimal outcome. But best practices go further.

Enhance trust for employees

To nurture trust for employees, employee safety must be put first. Whenever possible, companies need to minimize physical contact. A great example is Taiwanese Semiconductor Manufacturing Company (TSMC). Even before the Lunar New Year, temperature checks were made mandatory, and people with fever were asked to self-quarantine for 14 days.

Another example shows the importance of going above and beyond early. SKT, a large South Korean Telecom player, was extremely fast to allow flexible working for all employees. With all conglomerates following soon, SKT’s leadership has strongly contributed to employees’ trust in company leadership.

Enhance trust for customers

Customer preferences will shift at least temporarily (e.g., towards remote purchasing) — and likely to some extent permanently. On top of this, volatility of behavior will be the new normal, further adding to uncertainty. Companies will therefore need to shift gears rapidly. One great example is Taiwanese electronics company ASUS. By extending the warranty for its products expiring during the crisis, it drives customer trust, also beyond this crisis.

Another good example from Taiwan can be found in the retail industry. From the onset of the crisis, people’s temperature were checked when entering malls. Rather than closing down entirely, they made the conscious decision — in alignment with the government — to stay open. While there are epidemiological reasons to take temperature, there is the positive impact on the trust as well. Consumers continued to visit malls — albeit to lesser extent — as trust in businesses inside was kept at high levels.

Enhance trust for value-chain partners

Also from a value-chain point of view, uncertainty is likely to play an important role. Therefore, it is crucial to optimize the supply chain early on for resilience. For example, an Asian noodle producer quickly refocused on e-commerce, smaller stores, and digitization, while reviewing supply and demand planning on a daily basis. By doing so, and communicating strongly, it has given more comfort to its entire supply chain.

Another strong example of driving trust in value-chain is Samsung, which provided over $2B in no- or low-interest loans to suppliers affected by the COVID-19 crisis. Doing so establishes trust with supply chain partners in these difficult times, but also cements it for the long run, when things return to normal.

Without a strong focus on trust, economic recovery will be weak

Lessons from Asia showcase the need for governments and businesses alike to increasingly focus on trust. Fully embracing digital applications will be essential. From information access to enable transparency and proximity, through analytics and policy respecting security and privacy, to effective actions enabling credibility and reliability: digital is omnipresent.

Still there is more to enabling trust than just digital. Interwoven applications of digital and non-digital is the path to capture the full potential of trust. It will be crucial to humbly acknowledge the limitations of technology/governance and its need to rely on trust. Therefore, drivers of trust are to be incorporated as design principles of interventions that seek to safely accelerate economic ramp-up.

The COVID-19 rebound will likely happen gradually and in a de-averaged manner, requiring empowerment of the whole population to steer individual-led decentralized autonomous decisions. Governments and businesses are pivotal in the process and if they are to make a difference, they need to act quickly and apply the practical trust lessons from countries that are ahead in the process.

Sources & Notes