Covid-19 implications and how companies...Source: McKinsey surveys of global executives McKinsey &...

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20 August 2020

Covid-19 implications and how companies could support economic recovery

McKinsey & Company 2McKinsey & Company 2

Potential corporate support for Covid-19

economic recovery

01

02Appendix: Additional 6 Thought Starters

for Company’s contributions to Thailand

Economic Recovery

Contents

McKinsey & Company 3

Key messages

Thai Economy is expected to be severely hit by the Covid -19 impact ( 2-9% GDP decline in 2020, 2-3

millions unemployment, >1 millions SMEs affected)

Thailand needs to increasingly focus economic recovery efforts on “Reimagine/Reform” to ensure

scalable and sustainable impact with following 8 priorities

— 5 Sector focus ( Tourism/Hospitality, Health Care and Food/Agri security, Global Supply Chain,

Environment & Sustainability)

— 2 Segment focus ( Worker Reskilling, SME Productivity) and 1 Enabler Focus (Digitalization/Industry 4.0)

Globally, corporates are moving from unsustainable short-term relief/subsidy to longer-term

innovation-based support for the countries. Four potential themes for Thai energy companies;

— Reskilling/Digitalization – Create/expand its capability/digital programs to support Thailand worker/farmer

reskilling and SME productivity

— Core business investment – Accelerate EE/Energy transition investment as well as support its Thai SME

vendors/customers to capture global supply chain opportunities

— New business investment - Leverage its own innovation units to join force to build end-to-end platform for

Tourism/Hospitality/Health/Agri & Food

— Integrated Theme of all above – Opportunities to revisit the ongoing “Integrated Smart/Energy Village”

approach which could create tech jobs, farm income while investing for the future EE/Energy transition

McKinsey & Company 4Source: McKinsey surveys of global executives

Shape of the COVID-19 impact: the view from global executivesThinking globally, please rank the following scenarios in order of how likely you think they are to occur over

the course of the next year; % of total global respondents1

Updated June 9, 2020

1. Monthly surveys: April 2–April 10, 2020, N=2,079; May 4–May 8, 2020, N=2,452; June 1–5, N=2,174

Virus

spread

and public

health

response

Effective response,

but (regional) virus

resurgence

Broad failure of

public health

interventions

Rapid and effective

control

of virus spread

Knock-on effects and economic policy response

Ineffective

interventions

Partially effective

interventions

Highly effective

interventions

A3

A1 A2

A4B1

B2

B3 B4 B5

World April → May → June surveys

15→13→16%

11→14→12%

3→2→2%

16→17→19%

31→36→33%

9→7→7%

6→4→5%

6→5→5%

2→1→1%


Scenario A1: cross-country comparison

Updated June 9, 2020

110

105

80

90

85

95

100

Q2Q1 Q2 Q4Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q3

Real GDP, indexedLocal Currency Units, 2019 Q4=100

Thailand

World

United States

China

India

2019 2020 2021

Source: McKinsey analysis, in partnership with Oxford Economics

1. Seasonally adjusted by Oxford Economics

2021 Q4-4.4%China

2023 Q2-9.0%United States

2022 Q3-8.1%World

2020 GDP

Growth

% Change

Return to Pre-

Crisis Level

Quarter (+/- 1Q)

2022 Q4-9.7%Thailand

2022 Q3-9.2%India

-2.2% in A3 scenario


Key questions to be addressed to help Thailand manage the crisis and restart the economy through the 5 stages

Resolve

Resilience

Return

Reimagination

Reform

Contain the virus and

minimize lockdown

period

• How to rapidly increase

testing and tracing

capabilities?

• How can Thailand

maximize healthcare

capacity?

• How do we better track

performance and spread?

Reactivate the

economy mindfully

• What are the criteria to

help determine when,

which parts, and how the

economy can safely

reopen?

• What are key protocol

examples from other

countries – Education,

Manufacturing, F&B?

Implement policies

to support the “next

normal”

Safeguard the

vulnerable segment

• How much economic

stimulus is enough and is

Thailand in a healthy

financial position to

support?

• What types of economic

stimulus should be used

and who do they target?

• What can Thailand learn

from other countries?

Reform country’s

structural change to

preempt a future health

and economic crisis

Crisis management Restart the economy

Roles of private sector to support the nation to manage the crisis:

• What roles could private sector play to support in crisis management and nation building

• What can Thailand do to build national resilience and seize

future opportunity for growth?

• What are the structural changes that need to be

considered to accelerate Thailand growth, e.g., education,

digital economy and digital governance?


CONFIDENTIAL AND PROPRIETARY ANY USE OF THIS MATERIAL WITHOUT SPECIFIC PERMISSION OF THE OWNER IS STRICTLY PROHIBITED DOCUMENT INTENDED TO PROVIDE INSIGHT BASED ON CURRENTLY AVAILABLE INFORMATION FOR CONSIDERATION AND NOT SPECIFIC ADVICE

Reimagine/Reform - The accelerated future creates opportunities and implications for Thailand

Potential implications for Thailand to leverage for economic recovery

3

2

1

9

8

6

7

5

4

Growth of e-commerce and

e-services

Acceleration of Industry 4.0Digitalization Industry 4.0: Reposition Thailand as an “ASEAN I4.0 hub” via targeted value chain

or sub-sector promotion and investments.

B2C & B2B marketplace: Enable farmers and SMEs to connect directly with local

and international customers online, supported by nationwide logistics + cold chain

Increased focus on health

system resilience

Increased focus on

food security

Healthcare: Enhance resilience in healthcare systems; Expand into high value-

added healthcare manufacturing and digital healthcare models (e.g., telemedicine)

Food/Agri security: Drive productivity through investments in agri-tech and

shifting production to high value products.

Growing emphasis on qualityChanging

consumer

preferences &

Resilience

Elevated role of remote

working

Need for intensified reskillingFuture of

work

Workforce Reskilling: Reskilling schemes for jobs of the future; Job matching

support; Partnerships with public and private sector

SME productivity: Build capabilities; Incentives for automation and digitization

Travel flows return slowly

Social and governmental

corporate agendas expand

Environmental sustainability

goalsESG goal

expansionEnergy transition: Drive energy transition for the economy for decarbonization and

energy efficiency; Diversify into renewables and alternative fuels

Flows of R&D, services, data

& innovation outstrip goods

Supply chains efficiency

Global trade flows growInternational

flows

Tourism: Set up national E2E digital tourism platform to capture local tourism,

expand into niches (e.g., affluent, medical, wellness) and support local operators

Global Supply Chain: Set up Thailand-Global B2B supply chain platform to help

mfg. SMEs participate in “Global to Local Supply Chain” reorientation after COVID

Global “Next Normal” trends

10

11

12

13

5 Sectors

focus

2 Segments

focus

1 Enabler

focus


A combination of forces are driving corporate contributions /initiatives on covid-19 response

Description

Business views itself

as an accountable

entity with a

commitment to

society

Industry has

normalized an

action and a

business not aligning

may result in

customer backlash

Disruption in the

supply chain,

employees and/or

customers is

impacting the reliable

of business’

ecosystem

Prospect of

advancing brand

recognition and

ultimately acquire

need customers

Prospect of

innovating to

improve the

efficiency of its

operation or untap

market value

Example of

contribution

motivated

Endesa, designed a

Public Responsibility

Plan, endowed with

~$27 million, for

donation of materials

and service, special

conditions of energy

supply, and financial

donations

Masmovil, followed

Telefonica and

Vodafone, giving

more broadband data

and TV packages for

free during quarantine

KT Corp lowered rent

for small businesses

using their buildings

for the next three

months

Mattel to produce

face masks fashioned

with Fisher-Price

fabric for health care

workers

LG U+ began

applying various

digital services

(chatbots, customer

center apps) to

reduce average call

waiting time

Source: Press clippings, Capital IQ, IHS Global Insight, CDC, company’s website

Corporate

social

responsibility

Peer pressureEcosystem

concern

Branding

opportunity

Driving

force

Business

opportunity

McKinsey & Company 9Source: Press clippings, Capital IQ, IHS Global Insight, CDC, company’s website

McKinsey Study on

Corporate Contribution to

Country Covid Response

400+ company

contributions/initiatives to

Covid-19 Response were

collected and analyzed

Cover 6 major countries

affected (China, South Korea,

Singapore, Italy, Spain, U.S.)

Cover 4 major sectors (

Consumer, IT&Telco,

Manufacturing, Financials)

Company contributions are moving from donation/subsidy in early outbreaks to product/service innovation in the recovery stage

Co

mp

lex

ity o

f im

ple

me

nta

tio

n

Resilience/Return Reimagine/Reform

Financial donation

Employment/

Partner

benefits/training

Free access to

own products/

services,

Donation of

general &

medical supplies

New product or

service, core

business

New product or

service, non-core

business

More

Less

Horizon of actionImmediate Longer-term

Analysis matrix of all contributions, all countries

# of contributions/initiatives, sample size: 410

98 14

39

61

75 43

49

2

1

5

22 1

A Most of corporate focus during early

outbreak stage but proven to be

unsustainable

B Current shift of

corporate support

focus toward

innovation C Emerging trends

Resolve


Selected example of energy companies contribution to Covid-19 response

Co

mp

lex

ity o

f im

ple

me

nta

tio

n

Resilience/ReturnResolve Reimagine/Reform

Financial donation

Employment/Partner

benefits/training

Free access to own

products/services,

Donation of general &

medical supplies

New product or service,

core business

New product or service,

non-core business

More

Less

Horizon of actionImmediate Longer-term

Produced hand sanitizer

for and helped provide

food for lower-income in

Africa

Increase production and

subsidize plastic toward

medical equipment

sector.

Puma Energy

Holdings

Partnership with Uber Eats

to expand food delivery

capacity

Seed funding for All On, an off-

grid start-up to provide solar to

remote health centers in Nigeria

Provide experts/training to

help Global Medical Global

Provided its industrial supercomputer infrastructure and its

molecular modelling skills to run molecular modeling

simulations of the virus in for a drug-project with a

biopharmaceutical company, non-profit research centers,

universities, and the Italian Ministry of Education

Donated its supercomputing capabilities to the US

government, leading universities, and tech companies like

Amazon, Google and Microsoft to help accelerate research

into COVID-19 drugs. set up a new long-term supply chain

for all Covid-19 medical equipment

across U.S.

A Most of corporate focus during

early outbreak stage but

proven to be unsustainable

Current shift of corporate

support focus toward

innovation

B Emerging trendsC


Reimagine/ReformResilience/Return

Thailand Economic Recovery Needs ( 5 sectors, 2 segments, 1 Enabler)

How can energy companies in Thailand contribute to country economic recovery ?

Illustrative – Thought Starters for Discussion

Reskilling

Workers

SMEs

Maintain core local

energy investment

Vendor/Customer

credit/cash flow support

TBDFinancial donation

Free access to own

products/services,

Donation of general &

medical supplies

Core Business

investment

Non-core business

investment

Employment

benefits/training

Maintain headcount/

recruiting

Short-term subsidy on

tariff/fuels

TBD

Digitalization

Industry 4.0

B2C/C2C

Health/Safety

Health care

Food/Agri Security

Environment &

sustainability

Tourism &

HospitalityGlobal

supply chain

Short-term relief

Workers

Business

Co

rpo

rate

Co

ntr

ibu

tio

n l

eve

rs

Digital/I4.0 transformation

to share saving with

public ?

Accelerate

EE/Energy

transition

investment ?

Leverage own Innovation units to

support Tourism/Health/Agri

platform ?

Proven to be unsustainable in

other countries under study

Reskilling programs for

internal/external talents as well as

SME vendors/customers ?

Support vendors/

customers to set up

Thailand Global

B2B market place ?

Detailed integrated examples

next pages


India Example: Andhra Pradesh “Smart Village”Open innovation ecosystem to address farmers’ pain points

Farmer’s pain pointsSmart village support approach

16,000 farmers trained in 647

villages in Andhra Pradesh

40 India's corporates

solutions, expertise, services, funding

46 program staff

train

570 villages interns

coach

Benefits of the ecosystem

Cost elimination

Time efficiency

Speed to market

• Risk sharing

• Yield improvement

• Data richness

Time Crop cycle

Happiness index /

profitability

Open innovation agricultural platform

Ecosystem of corporate

pain reliever

Education

Access

Costly

Time consuming

Quality

Pre-Harvest

Timely information

Access to resources

Financing

Planning assistance

Growth Management

Lack of labor

Yield prediction

Disease prevention

Irrigation

Post-Harvest

Market transparency

Middle man issues

No storage facility

Inaccessible market

1 2 3 4

1 2

3

4

Source: Smart farming in Andhra – white paper, Haas School of Business, University of California Berkeley


India Example: Corporate solutions/expertise contribution, including energy players for Smart VillagesSelected example

Education

Pre-harvest

Growth &

management

Post-harvest

IT Staffing IT / Hardware Artificial

Intelligence

Design

Thinking

Automotive Electronics Employment

& Skill

Development

Healthcare Construction Agriculture Agriculture &

IOT Systems

Loan

Farm analysis and advisory

(Drone/Satellite, Sensor, Imagery, Analytics) Agri input and equipment

Monitoring & management (Drone, Sensor, Imagery, Analytics) Energy provider

Harvest

R-Tech

Market access Supply chain excellence

ShotPut ripe.lo

1

2

3

4

Solar solution Biogas IOT / microgrid

Source: Smart farming in Andhra – white paper, Haas School of Business, University of California Berkeley


Germany Example: Energy village/region

Generation

decentralized

and renewable

Electricity is primarily generated decentrally from renewable

sources

Promotion of innovative technologies

Energy efficiency Energy efficiency actions are promoted and implemented on site

Balancing at

local level

Generation and demand balanced out at the local level

Electricity imported only at peak load times

Economics

Energy regions finance themselves over the medium term

with no subsidies

Use of innovative business models

Local

participation

Inclusion of local players (residents, businesses, etc.), e.g., by

participating in the planning process and in profits

Ecological

sustainability

Resource utilization in harmony with sustainable regeneration

capabilities of the ecosystem

What characterizes an energy village/region? > 146 100% renewable energy village/

regions

> 25 million

inhabitants

100%-renewable energy regions

100%-renewable energy starter regions

Source: BMU, 2013; Netzwerk der 100ee-Regionen, 2016


Feldheim is the first 100%-renewable village energy in Germany

The village shows

stellar economic

success

SOURCE: New Energy Forum of Feldheim, Kommunal Erneuerbar

Renewables-based

generation

43 wind power stations (74.1 MW)

Biogas installations (4,000 MWh/year)

Solar park with around 9,000 modules (2,748 MWh/year)

Economics

Power production for > 600 households

Investment of EUR 2.2 million for separate power and district

heating network (amortization time: 5 to 10 years)

> 25 jobs created

Inclusion of local

players

Alliance of households/businesses in operator company

Founded a development association

Reduced consumption Joint development of energy efficiency initiatives

Facts145 residents, 37 households

Objective: generate regenerative electricity and heat

Balancing generation

with demand

Currently building a new battery storage facility

Wood chip heating plant for additional heating requirements

Ecological

sustainabilityBuilt up an environmental education center in the village

Strong support can be generated based on direct participation of residents in profits

Germany Example: Energy village/region

McKinsey & Company 16McKinsey & Company 16

Potential corporate support for Covid-19

economic recovery

01

02Appendix: Additional 6 Thought Starters

for Company’s contributions to Thailand

Economic Recovery

Contents


1. Arcstone – MES system, Garuda Robotics – Drones with Advanced analytics, Evercomm – energy consumption analytics

SOURCE: McKinsey Digital Capability Center Singapore

17McKinsey & Company

Thought Starter 1: SME Industry 4.0 Capability Upgrade

Singapore

Industry 4.0

Digital

Capability

Center

Research &

Academic

Public

Sector

SMEs

Large

Corporate

Startups1 and

Tech

Providers

Supply requisite skills for

Industry 4.0 and initiate

R&D for new technologies

Provide industrial problems

and use case requirement

Singapore

Industry 4.0

DCC: Creating

the new

Ecosystem for

Technology

Testbeds

Capability

Building

Physical

Showcase

Provide inorganic

innovation, flexible, agile

and typically cheaper

solutions

Participate in industry 4.0

capability upgrades

Provide funding and regulatory

incentives to create conditions

for initial investmentsin I4.0


Thought Starter 2 – Workforce reskilling

What is GenerationExample of program in Singapore and success so far

Diversion of Generation to help on Covid recovery

A non-profit organization focuses

on preparing, placing, and

supporting underemployed

people into life-changing careers

that would otherwise be

inaccessible

13 locations across America,

Asia and Europe,

38K graduates

>80%secured a job in 6

months

>84% of graduates

outperformed peers

2-6x increase in student

income post program

Established in mid 2018, a

partnership between Generation

and SkillsFuture (a unit under

Ministry of Education) has

delivered 20 cohorts of gradates

for new career e.g. Digital

Marketing, Engineering 4.0 and

placed graduates into >180

private sector employers

As part of Covid response,

Generation is collaborating with

public and private sectors

focusing on in-demand tech jobs

End-to-end project

management

Catalytic funding, tech

assistant, aggregation of

employers

Running cost funding

Tech curriculum

assistance , potential job

openings

Implementation and

delivery of training



Many countries have allocated COVID-19 stimulus

packages to support sustainability efforts

Source: Reuters, Garrett-Peltier, Green versus brown; Comparing the employment impacts of energy efficiency,

renewable energy, and fossil fuels using an input-output model (2017)

Such investments support job creation in addition

to sustainability

Thought starter 3: Accelerating EE/Energy Transition

1. Total stimulus package equals to €750bn

35

30

80

91

Renewable energy

Industry

Buildings

Transport

236Breakdown of

sustainability

focused

elements in

EU’s stimulus

package1,

Billion Euros

Job creation, directly and indirectly, per US$1 million in

spending

7.77

7.49

6.76

2.65

Energy efficiency retofits

Renewable technologies

(wind, solar, hydro and others)

Fossil fuels (oil, gas and coal)

Smart grid



Thought Starter 4: Support companies/SMEs to participate in Global to Local supply chain re-orientation after COVID

1. Duty Free Trade Zone

Malaysia (March, 2017)

Alibaba and DFTZ1 alliance

has empowered Malaysian

SMEs and facilitated sale

of agricultural produce to

global market through

ecommerce channels

China (Oct, 2017 | June, 2019)

Hangzhou customs and Alibaba’s,

eWTP pilot zone to promotes

trade between Hangzhou and the

world through innovative steps in

tax refunds, exchange settlements

and more efficient trade practices

Rwanda (Oct, 2018)

Rwandan coffee producers

are now able to sell directly

through e-commerce to

more customers while

bypassing costly

intermediaries

Belgium (Dec, 2018)

Alibaba-owned Cainiao Smart

Logistics Network signed a deal

with Belgium’s Liege Airport to

build 220k m2 logistics hub at the

airport to support cross-border

trade for SMEs.

Ethiopia (Dec, 2019)

The eWTP hub, will serve as a

gateway for Ethiopian products

to China and new markets and

offer support in smart logistics

and fulfillment, and talent

training, e-commerce.

Source: Web search - https://www.ewtp.org , https://www.alizila.com/

eWTP by Alibaba

(Global B2B

platform founded

in 2016, endorsed

by G20 China)

Reduce cost, particularly labor

arbitrage

Mitigate country risk

Capture trade benefits

Improve product design

Use standard parts, instead of specially

designed per sourcing region or supplier

Reduce specification complexity

Review supplier qualification and speed

Optimize footprintExplore back up options

Look for trusted back up supplier

Measure and manage tier 2,3 supplier risk

Order backup tooling/equipment

for production continuity

Focus expanded to help companies diversify their supply chain to stay competitive


Thought Starter 5: B2B Agri/food supply platform connecting farmers directly with restaurant customers

50%

Farms

Directly

sourced

from

farms

Distributors

50%

Sourced

from

distributors

30

distribution

centers

covering

~200 cities

~8000 freelance

driver fleet deliver

to restaurant

outlets

~2.73M

small

restaurant

outlets

E-commerce

platform

Launch

and predict

orders with

big data

analyticsOrder online

MeiCai has recreated a simplified food

supply chain ecosystem, allowing farmers

to sell more directly to cities

Developer of an online fresh food aggregation

platform designed to connect farmers and

restaurants

Services offered in ~200 cities in China

No of Employees: ~30,000 (as of Jul, 2019)

Pain point Meicai solves

• For farmer = access to buyers with better prices +

logistic services

• For restaurants = fresh quality supply at doorstep

SOURCE: Company website; Web and press search

How Meicai works


Thought Starter 6: Thailand end-to-end Tourism platform

3 platform architypes Supporting evidences

Potential mission for Thailand Tourism Exchange Platform

(TTX)

A number of new health standards are

required post-COVID (e.g., Touchless

traveling, sanitization, reduced sharing

accommodation — Airbnb)

38 websites are visited on average for trip

planning

Post-Covid health and hygiene standard promotion

Tailored experience to fit source market (and possibility

to extend to personalized marketing promotion)

One-stop-shop for all travelling needs to Thailand (i.e.,

visa, emergency contacts, VAT refund)

Promote

Thailand to

target travelers

52% of travelers found it is time-

consuming and not worth the effort to

book a room directly from operators (e.g.,

unattractive loyalty program, no customer

reviews)

OTAs normally charge 15-30% from sales

SMES are suffering with less than 10%

occupation rate under COVID crisis

Direct channel to end-travelers

Access for SME to list service with relevant large OTA

and potentially with better pricing

Comprehensive support tailored to local Thai SMES

regardless of digital literacy level

Support local

Thai SME

operators

$170 million is budgeted for destination

marketing and promotion to help recoup

tourism industry after COVID

>20% of Google ads revenue coming

from travel-related search

Better source of merchants to be on-boarded

Easier merchants’ management

Center to coordinate for national tourism promotion

Ease of doing

business for

global operators

Information-only platform

Only serve travelers as a channel

for basic information and

announcement such as facts

about the country, regulatory

processes, transportation, etc.

Full-fledged platform

Provide comprehensive functions

which allow travelers to complete

booking transaction for all services

end-to-end (e.g., visa, hotels,

excursions, flights, etc.)

Selected transaction platform

Recommend packaged trips that

can be booked for selected

services (e.g., hotels and local

transportation) and sometime re-

directed to suppliers’ sites

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