How Covid arbitrage became the trade of the year

It was a warm spring evening in Taipei and more than a hundred celebrities, founders, venture capitalists and tech executives gathered for cocktails and hors d'oeuvres. The headline event, a fireside chat, was just an excuse for Taiwan's best-connected people to socialise, enjoying the kinds of freedoms the rest of the world lacked amid another wave of Covid shutdowns. 

Notable was that many in the crowd weren't long-term Taiwan residents. While quite a few were born there, or had family connections, most had spent little time in their ancestral homeland while building their lives in Silicon Valley's tech hub, the academic institutions of New England, or on Wall Street. But as Covid spread around the world, these same people grabbed their Taiwan passports or scrambled for an exclusive Gold Card visa and headed to that one sanctuary where life remained normal. 

A similar scenario was playing out for the privileged and well-connected around the world. With money, passports and flexible employment, they managed to pull off the greatest trade of all: Covid arbitrage. The choice of where to live, how to work and which international schools to attend provided relative comfort for the rich, while billions of others scrambled for vaccines and grappled to balance the demands of their jobs and homeschooling. 

For wealthy Indians, escaping the ravages of the pandemic involved chartering private jets while their home nation was brought to its knees, as waves of Covid-infected patients gasped for oxygen. Bollywood stars were spotted heading to the tropical archipelago of the Maldives, while entire families decamped to Dubai where one-way flights from New Delhi cost $20,000 per person. The Emirati municipality has become so popular among Indian expats that it's jokingly referred to as the "safest Indian city."

The uber rich in other parts of the world, from the US to the UK, also found ways to hide. Jetting off to far-flung New Zealand, seeking out doomsday bunkers, or simply retiring to holiday homes far from the crowds.

In Taiwan, which shut the border for foreigners by March 2020, passport holders and authorized residents could re-enter after completing a mandatory two-week isolation. Having taken early action to combat a virus that originated in neighboring China, Taiwan's government managed to steer its people through a mix of restrictions, such as mask mandates, while maintaining a degree of flexibility that ensured most institutions and entertainment venues remained open.

And so parents seeking to ensure their kids didn't miss any class time, and well-heeled young professionals wanting to enjoy the party life of Taipei's nightclubs and KTVs started flooding in. Within six months of the U.S. experiencing its first wave of lockdowns and school closures in early 2020, the city's elite international schools had reached full capacity.

Foreign tourists arrive at the airport when Phuket reopened to overseas tourists, allowing foreigners fully vaccinated against the coronavirus disease Covid-19 to visit the resort island without quarantine, in Phuket, Thailand July 1, 2021. Photo: Reuters

The flipside of this transaction came to bear when Taiwan, having managed to keep Covid at bay for more than a year, suffered a spike in numbers this past May, after a few cases broke through its quarantine defenses. Suddenly, more than 2,000 new infections within a week was seen as a national disaster (India reported 311,170 in a single day during the same period), and shops, schools and businesses were ordered closed or curtailed. After enjoying a golden summer in 2020, Taiwan residents were left facing a socially distanced summer in 2021 with clubs and bars closed and dining severely restricted.

The flipside of this transaction came to bear when Taiwan, having managed to keep Covid at bay for more than a year, suffered a spike in numbers this past May, after a few cases broke through its quarantine defenses.

Coupled with a shortage of vaccines, caused in part by political pressure from China, those same people with money and means hopped on flights back to the US, where inoculations were widely available and schools ready to reopen. With outbound departures in the months of May through July double those inbound, data showed that Taiwan had served its purpose. 

Now, governments around the region are facing pressure to open their borders for returning nationals, visiting business travelers and tourists. Vaccination rates above 90% emboldened Australia's federal government, and state leaders who have control over their own territories, to let citizens and qualified visa holders back in. Thailand began experimenting with a 'sandbox' strategy that allows tourists back into the resort island of Phuket while keeping the rest of the nation largely isolated. 

Meanwhile, Taiwan remains cautious. Business leaders and chambers of commerce want the government to ease up, citing the impact on foreign trade and its robust exhibition and conventions industry. With vaccination levels rising and local Covid cases hovering near zero for more than a month, Taipei may well relax controls.

Yet many Taiwanese don't want the borders to reopen. Instead, they want to hold onto that most precious of pandemic pairings: freedom and safety. In a world of Covid arbitrage, many realize the value of playing both sides of the trade. 

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

Disclaimer: This article first appeared on Bloomberg and has been published by a special syndication arrangement.