Vaccination Investment

10.03.21 Publication:

Anyone in business will know that it is very rare to find ratios of risk to likely return that are
highly favourable and carry a high degree of certainty. Any economist working for
government or the private sector will know that cost-benefit analyses of new investment
projects most often show a high degree of certainty about the costs and a great degree of
uncertainty over benefits. Yet right now, one year into the COVID-19 pandemic, we are
seeing just such a very rare case. The strange thing is that governments are not reacting to
this rare case with enthusiasm, energy or any kind of adventurous spirit. Businesses should
be lobbying them hard to do so.

The case I am referring to is the case for investment in research, development, production
capacity and distribution capacity for vaccines against COVID-19. Every day that countries
need to impose lockdowns or other movement restrictions on their citizens, every day that
a country like Japan has to keep its borders closed to tourists and all but a handful of other
travellers, brings costs in terms of lost economic output and lost tax revenue not just in
billions of dollars but trillions.

An investment capable of shortening such restrictions and border closures has an easily
measurable return. The only risk is of the vaccine not working to provide immunity against
the coronavirus. But we now know that several vaccines do work. Spend a few billions of
dollars to produce vaccines and inoculate citizens, and the result is that a country can save
hundreds of billions, and the world can save trillions. The cost-benefit analysis is absolutely

One year ago this was less certain, for it was not known how long it would take to develop
and rigorously test vaccines against this novel coronavirus. It was only on January 10 th last
year that the genetic details of the new virus were shared by Chinese scientists. Yet
inventions, using both tried and tested vaccine techniques and the innovative methods of
Messenger RNA, happened remarkably rapidly. As soon as that became evident, which was
really March or April 2020, governments needed to provide billions of dollars to invest in
manufacturing capacity and to produce vaccine doses. Some of this might have been wasted
if some vaccines turned out to be ineffective. But it would still have been worth it to
accelerate development, production and, crucially, deployment of vaccines, since some
were bound to work.

The US government invested US$18 billion in vaccines and treatments in its project entitled
Operation Warp Speed. This was undoubtedly a success. Partly as a result, as of February
10 th more than 13% of the US population had received at least one dose of vaccination. Yet
what if the investment had been twice or three times larger? It would have produced more
vaccines, more quickly, and the share of population vaccinated would be larger. It sounds
expensive. But let’s remember that the cost of a single US aircraft carrier is estimated at
US$13 billion. So spending US$30 billion – $40 billion on vaccines would not be a lot, when
compared with the economic benefits, which are a lot easier to calculate than for an aircraft

Vaccinating just one country is not enough, however. The risk of viral mutations, of new
strains emerging to force new deaths and new restrictions will be high until a very large
proportion of the whole world has been vaccinated. This also means that the benefit of                                      spending further billions on research and development of new or adapted vaccines to deal
with viral mutations will also be high.

In June 2020 the UK hosted a Global Vaccine Summit to raise money from governments
around the world for vaccines to be made and distributed in developing countries. It raised
US$8.8 billion, which was hailed as a spectacular success. Yet the real need is for at least
US$88 billion, which is only six or seven aircraft carriers, after all.

Japan has been one of the slowest advanced countries in the world to begin any vaccination
programme. This is surprising given the economic importance of hosting the Tokyo Olympic
Games in July this year. Moreover, Japan’s contribution to the global vaccines effort has
been small: just US$306 million at the Global Vaccine Summit, followed by a further US$130
million contribution to GAVI, the global vaccine alliance. This is helpful but will do fairly little
either to get the world vaccinated or to boost Japan’s global reputation.

China, India and Russia are all engaged in very active vaccine diplomacy, donating or selling
vaccines cheaply to poorer countries in their regions and all over the world. Compared with
this effort, Japan is falling badly behind, both in its domestic vaccination and in its
diplomatic efforts.

But it is not too late. It is time for Japanese government and business to show leadership on
vaccinations. Following the UK’s lead, Japan should announce it will host another Global
Vaccine Summit, even as soon as March, and it should make a generous opening pledge, of
several billion dollars at least, so as to encourage others to follow suit.

This is the most crucial economic, business and diplomatic issue of 2021. The cost-benefit
analysis is crystal clear. So is the case for Japanese leadership, at home and abroad.