Economic Update

Published 18 May 2020

In emerging markets, limited ICT infrastructure can compound the challenges of remote working amid coronavirus-related social distancing and lockdown measures. Nevertheless, broadly successful outcomes may lead businesses to consider expanding or formalising work from home arrangements once the effects of the pandemic have subsided.

There are a number of potential advantages associated with an increase in remote working. These include lower overheads for businesses, increased autonomy and ingenuity on the part of employees, and various benefits to the wider economy, including a reduction in traffic congestion.  

Parallel to this, the phenomenon of the co-working space could bridge the gap between office-based and home-based work for companies looking to downsize their use of traditional office space.

Remote working challenges

Managing employees remotely, and ensuring they remain engaged, may become increasingly complex as the pandemic continues.

One concern is that remote workers collaborate less efficiently, missing out on both planned and unplanned ‘face time’, for which – some argue – digital connectivity is a poor substitute.  

Furthermore, possible challenges of home working have been accentuated for many workers by school closures and other lockdown measures.

Working from home can be particularly problematic in high-density domestic settings, which characterise a number of the high-potential economies in OBG’s ‘yellow slice’ portfolio. For example, Oman has an average of eight members per household, while Algeria and Bahrain each average 5.9, and Papua New Guinea stands out in the Asia-Pacific region with 5.3.

A further challenge is the inadequate digital infrastructure seen in some emerging economies.

ICT infrastructure hurdles

Before Covid-19, authorities in a number of emerging markets had already identified the improvement of ICT infrastructure as a key priority, in terms of both provision and cost of service. The Philippines, for instance, implemented a number of plans to address connectivity shortfalls and to lower service costs.

Such efforts notwithstanding, the pandemic has substantially increased the burden on networks and servers. Some of this drag can be attributed to remote working, with video services being one of the biggest drains on bandwidth.

The use of video conferencing has expanded globally as business and social interactions have moved online: communications technology provider Zoom has reported a twenty-fold increase in daily users, while in some countries voice calls have tripled and the use of communications apps doubled, the World Economic Forum (WEF) reported in mid-April.

While such burdens on bandwidth have been offset to an extent – Google, for example, reduced automatic YouTube video quality universally in mid-March – authorities in several economies took early steps to help ensure citizens could continue to access internet services for work and education.

ICT interventions

Some emerging economies that have benefitted from responsive policies to address internet connectivity shortfalls include Ghana and Tunisia, which saw the allocation of emergency spectrum; the Philippines, where fees for spectrum usage were lowered; Egypt and Saudi Arabia, whose students received SIM cards and tablets; and Oman and Dubai, which lifted a prohibition on some voice over internet protocol applications – including Zoom, Skype for Business and Google Hangouts Meet – to enable the continuation of business activities during the pandemic.

Meanwhile, Thailand, Oman and the UAE are amongst the best performers for boosting fixed broadband speeds during Covid-19, seeing increases of 19%, 16% and 16%, respectively.

Pre-paid mobile data services provide an alternative method of accessing online services. This is often the preferred mode of connectivity in areas where the growth of mobile services has outpaced fixed broadband services, as well as among people who do not have access to a personal computer.

Remote workers may benefit directly from mobile data services by ‘hotspotting’ their mobile device, or indirectly, if activity is transferred from home networks onto cell towers.

Private telecom operators have also contributed to facilitating remote working and learning during the pandemic.

For example, Senegal’s Sonatel – in which Orange holds a controlling stake – increased bandwidth speed and offered corporate clients 3 GB of mobile data, valid for one month and free of charge, and also enabled students to claim a free 1-GB pass to access education content. 

While lags in connectivity are likely to inhibit online work capacity in the short term, the shift to remote working has helped to propel the issue onto the global economic stage. In an April 2020 report the WEF predicted that the pandemic will “catalyse sustained collaboration between the public and private sectors to increase internet access beyond the current crisis”.

Towards a remote future

The implementation of work from home policies has shown that many tasks can be fulfiled remotely.

Leading global technology companies, including Facebook and Google, have announced they will allow staff to work remotely until the end of the year, while Twitter employees will have the option to do so indefinitely.

A commitment to remote working can also allow a company to recruit from a much wider talent pool, rather than being constrained by geography.

Parallel to this, an increase in remote working could have a significant knock-on effect in terms of traffic congestion, and may even encourage some ‘de-urbanisation’, or relocation outside of urban centres.

Congestion is of particular concern in a number of emerging markets, where the development of transport infrastructure has been outpaced by rapid urbanisation. Excessive traffic weighs heavily not only on economic productivity, but also on the environment and, in turn, on public health – another key concern for economies whose health care infrastructure was already under pressure before the emergence of the novel coronavirus.

Many governments had implemented ambitious transport infrastructure development programmes to tackle the issue, although some of these have been stalled amidst the global pandemic. Indeed, some funds may end up being reallocated from such projects to cover Covid-19 stimulus packages, or expand health care provision. Facilitating a boost in remote working therefore offers an attractive solution to physical infrastructure issues. 

A turn to shared office space

Co-working spaces could provide a flexible option to companies seeking to integrate at least some degree of remote working into their business operations.

Designed to offer versatility in terms of cost and service, many co-working spaces include not only communal spaces for work and socialising, but also private offices and meeting rooms  – and even virtual offices, in the form of a listed business address that can be used to receive mail.

Some emerging markets were experiencing growing interest in co-working spaces before the pandemic.

South-east Asia is a standout example, where the appeal of co-working solutions is connected to a flourishing start-up network in, for example, Indonesia, where nurturing the start-up ecosystem is high on the government agenda.

In some cases, co-working spaces are part of regional groups, while others are managed by a local developer, such as Ayala Land in the Philippines, which offers co-working facilities across the capital under its Clock In brand. Global operator WeWork has a foothold in the region.

In some emerging markets, the co-working segment is characterised by serviced offices more than communal spaces. While many open-plan spaces were closed in the early stages of the pandemic, some providers of serviced co-working offices – which are less communally-oriented and may include office suites as well as partitions between work stations – were able to remain open for longer periods, with enhanced hygiene procedures.

It remains to be seen how far the experience of the pandemic will lead to a shift in consumer demands, and how this might impact the co-working landscape.

The future of co-working

Alongside increased assurance over hygiene standards, consumers may lean towards facilities with greater separation between work stations, resulting in a redesign of the communal areas that constituted a key attraction for some entrepreneurs and start-ups.

Once economies begin to reopen, co-working spaces could be used to house non-core departments or to enhance continuity planning for businesses looking to reduce their brick-and-mortar footprint.

Such spaces can also serve to optimise employee engagement. In a 2017 report, US analytics firm Gallup found that the employees who had the highest levels of engagement were those that spent 60-80% of their time working remotely. In light of this, companies could reduce their overheads by renting co-working space for one or two days a week, giving employees the opportunity to interact while at the same time enjoying the autonomy of remote working.  

The various possible benefits and savings – for companies, employees and the broader economy – associated with an increase in remote working, combined with encouraging outcomes from ongoing experiments, will lead many companies to consider extending work from home measures after the pandemic has subsided. As long as ICT infrastructure can keep pace, remote working is thus likely to play a significant role in defining the post-pandemic office space ecosystem in emerging markets.