By: Teng Xin Yi Editor: Akshat Daga
This article will look at the long-term impact of COVID-19 around the world by exploring how the global pandemic is reshaping supply chains, what businesses can do to thrive in this crisis, and as a society, what are our reflections on COVID-19.
Half a year down the reporting of the first case of COVID-19, there has been an outbreak of an unprecedented level: the global pandemic has caught the world off-guard, strained every resource we have, and aggravated scarcity to an unparalleled extent. As a matter of fact, this strain has threatened every system known to man and sent the markets into a frenzy of restructure, and hopefully, rejuvenation.
1. Global Supply Chain
It is evidently clear that global supply chains of food, commodities, goods and manpower have been severely disturbed. The World Trade Organisation (WTO) estimated recently that global trade could plunge by a third this year due to the COVID-19 pandemic. The crisis has presented itself as an excellent opportunity for us to examine the deficiencies in our existing global supply chain, laying bare the inherent risks of reliance on inventory and single-sourcing models driven exclusively by cost control (World Economic Forum, 2020).
It is understandable that in times of crises, governments have a primary duty to safeguard the welfare of their own citizens before they can afford to help those beyond their boundaries. This was best illustrated by the spat on social media, involving the “cryptic response” of Ho Ching, Singapore’s First Lady, allegedly over Taiwanese mask donation after a decision by the Taiwanese authorities to impose a month-long halt on exports of medical-grade face masks. German officials also accused the United States of “modern piracy” after Berlin-bound masks were diverted to the US. However, these two countries were not alone.
WTO revealed that eighty countries have banned or limited the export of face masks, protective gear, gloves and other goods to mitigate shortages since the COVID-19 outbreak began. This is especially worrying given global exports of COVID-19 related goods are concentrated in a few countries: over 86% of global exports are from just 20 countries (Baker McKenzie, 2020).
These measures, intended to offset domestic shortages in these exporting countries, are raising global prices as demand for such products surges. The pressure on the healthcare industry is not too different from what some other industries are facing, with demand surpassing supply. Citizens emptied supermarket shelves worldwide, hoarding food, toilet paper and cleaning supplies. Measures to control or mitigate COVID19 outbreaks are disrupting global food supply chains as well. Border restrictions and lockdowns are slowing harvests in some parts of the world, leaving millions of seasonal workers unemployed, while also obstructing transport of food to markets, especially for labor-intensive industries. As a result, many people in urban regions now struggle to access fresh fruits and vegetables, dairy, meat and fish (World Relief Web, 2020).
Managing limited resources to create optimum output has always been paramount to what governments, businesses and the social sector do — success is determined by how skillfully they manage this chronic challenge. Yet in this time of acute scarcity, how do we ensure we all get what we need when it seems like there is not enough to go around? How do we ensure we will not be faced with these vulnerabilities in the future?
To address this, the present situation could be the catalyst to a new era of government policy aimed at self-sufficiency and open supply chains in sectors of the economy deemed to be of strategic importance, including agriculture, pharmaceuticals and medical equipment, and commodities (Hintze, 2020). A good example would be at home where the current COVID-19 situation has underscored the importance of local food production. As 90% of our food supply is imported currently, Singapore has reinforced its plan to ramp up its local food production capabilities in order to achieve its target of producing 30% of its nutritional needs locally during the COVID-19 period. (Singapore Food Agency, 2020)
Additionally, we can expect countries to diversify their production and import sources, considering beyond cost minimization and efficiency, to reduce risk of single-suppliers disruption. Not only is this deeply important following the COVID-19 pandemic, but is also apparent given wider shifts in globalization, amid increasing unpredictability around US-China trade tensions and Brexit negotiations.
2. Businesses revamp
Buoyed by the COVID-19 crisis, we have seen an acceleration of the shift towards the adoption of technology for many industries and businesses (APEC, 2020), ushering in the arrival of a future we were likely already on track to realize.
Though the travel restrictions and closures of brick-and-mortar stores have challenged traditional business models, they have not dampened consumers’ shopping urges in the comfort of their homes, given the increased focus on personal hygiene and social distancing. Likewise, to compensate for losses offline due to significant drop in foot traffic, many retailers have entered the online market – selling online, leveraging digital marketing tools, digitizing their supply chain – to weather the crisis. Detail Online, a leading European e-commerce auditing company reported that the share of consumers that do 50% or more of their total number of purchases online has increased dramatically on all three of Europe’s biggest e-commerce markets. 60% of consumers say that they will continue to buy as much online as they do today after the pandemic has passed (Semeuls, 2020).
Firms which are able to take advantage of the crisis to adapt into “omnichannel” businesses and become adept at both online and in-store services will stand to benefit even after the spread of the virus is contained (OECD, 2020). In fact, we are seeing firms that invested in digital prior to and during COVID-19 thriving, and businesses that underinvested in the shift to digital falter.
The COVID-19 pandemic has also put a renewed urgency behind automation and the use of robotics in production across the region given the growth of remote working, which is likely to linger even after the economy is reopened. As the nature of work changes with automation, it is inevitable that lower-skilled workers will face structural unemployment. The need for skill-set upgrade to create a relevant workforce will be more important than ever.
While we can lament that these transformative forces are likely to lead to many business failures in its aftermath, we should also understand that the closures will enable the opportunity to create new firms during the subsequent recovery. With this perspective, one could argue that the process we are seeing is an acceleration of the creative destruction that is an inherent part of economic evolution—a cornerstone of economic theory since the 1940s.
3. Societal Impact
COVID-19 has cast a harsh light on the stark gap between classes. The well-to-do can hoard masks and food, and US celebrities have used their status and wealth to get tested fast and early. More privileged workers could stay home with protected salaries as societies shifted towards remote working arrangements, but for contract employees or those in essential services, self-isolation is impossible if they want to maintain their livelihoods. Reports show that 70 per cent of gig workers who are already struggling with limited access to unemployment benefits have been laid off, while low-wage service staff like delivery drivers and cashiers face greater risk of contracting the virus (Semuels, 2020).
Similarly, with the global lockdown of educational institutions, the quality of home-based learning differs starkly depending on access to resources. In Singapore, more than 20,000 students, particularly those on financial assistance schemes, had to receive loans for devices to facilitate online learning from their homes (Ang, H. M., 2020), and many from vulnerable backgrounds endured unconducive home environments, with cramped spaces and spotty Internet connections. The virus has revealed how deeply societies are rifted by inequality, even resulting in society becoming balkanized class fault-lines.
The COVID-19 crisis has forced us into an immediate pause to reflect on our habits. At least for the next two years, we have a genuine opportunity to shift the conversation in the country to look at what we need to do to safeguard our supply chains, what industries or sectors require strengthening, and how we can be prepared for the emergence of threats. Rather than viewing the situation as an onerous burden, we can amass the power of community to change the trajectory of the pandemic by ensuring our most vulnerable community members have the resources and assistance to survive and thrive beyond this crisis.
Ang, H. M. (2020, 20 April). About 12,500 laptops and tablets loaned out to students for home-based learning: MOE. Channel News Asia. https://www.channelnewsasia.com/news/singapore/covid19-laptops-schools-moe-education-home-based-learning-12658828
Baig, A. & Hall, B. & Jenkins, P. & Lamarre, E. & McCarthy, B. (2020, 14 May). The COVID-19 recovery will be digital: A plan for the first 90 days. McKinsey Digital. https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-covid-19-recovery-will-be-digital-a-plan-for-the-first-90-days
Beyond COVID-19: Supply Chain Resilience Holds Key to Recovery. (2020). Baker McKenzie. https://www.bakermckenzie.com/-/media/files/insight/publications/2020/04/covid19-global-economy.pdf
Here's how global supply chains will change after COVID-19. (2020, 6 May). World Economic Forum. https://www.weforum.org/agenda/2020/05/this-is-what-global-supply-chains-will-look-like-after-covid-19/
Hintze, M. (2020, 14 April). How the COVID-19 Crisis Could Spark an Era of Economic Self-Sufficiency. Milken Institute. https://milkeninstitute.org/power-of-ideas/how-covid-19-crisis-could-spark-era-economic-self-sufficiency
Levelling up Singapore’s food supply resilience. (2020, 14 April). Singapore Food Agency. https://www.sfa.gov.sg/food-for-thought/article/detail/levelling-up-singapore-s-food-supply-resilience
Local food systems and COVID-19: A look into China’s responses. (2020, 8 April). Food and Agriculture Organization. http://www.fao.org/in-action/food-for-cities-programme/news/detail/en/c/1270350/
Policy Brief: The Impact of COVID-19 on Food Security and Nutrition, June 2020. (2020, 9 June). World ReliefWeb https://reliefweb.int/report/world/policy-brief-impact-covid-19-food-security-and-nutrition-june-2020
Semuels, A. (2020, 5 May). 'It's a Race to the Bottom.' The Coronavirus is Cutting Into Gig Worker Incomes as the Newly Jobless Flood Apps. Time. https://time.com/5836868/gig-economy-coronavirus/
Trade Interdependencies in Covid-19 Goods. (2020, 5 May). OECD. www.oecd.org/coronavirus/policy-responses/trade-interdependencies-in-covid-19-goods-79aaa1d6/