To be honest, I thought the COVID-19 crisis would start slowing down right about now, particularly when the number of daily new cases in China began to decline slightly. But, of course, there was no reason to let our guard down.
As I write this, there are indications that the World Health Organization might declare a pandemic – an increased and sustained transmission of a disease across the world’s population. New cases have emerged in Europe and the Middle East, with some of those cases involving people who have not travelled outside of their home countries at all. South Korea and Japan, meanwhile, look set to be the disease’s next hot spots. With a vaccine still over a year away, by many estimates, it looks like this won’t be over.
The good news is that COVID-19’s mortality rate is low, and most recorded cases have shown recovery. The bad news is that the impact of the disease will lie elsewhere: in the growth of the world’s economy. China virtually closed its borders (or had its borders closed for them) once the gravity of the outbreak became clearer. This meant a significant disruption to global value chains, particularly now that more countries and doing trade with China, and more businesses are tapping Chinese resources and manpower to produce their products. Writing last week for the Guardian, Harvard professor Jeffrey Frankel posited that the chances of a global recession has dramatically increased due to the COVID-19 outbreak, alongside other factors such as protectionist economic policies.
2018 figures from the International Trade Centre shows that China is one of our top trading partners. We import USD 22.5 billion worth of goods with them; if you count Hong Kong, that number goes up to USD 25.8 billion. Imagine access to all that disappearing because of well-meaning measures to control the spread of the disease. Our other major trading partners – South Korea and Japan – are also heavily affected by the disease.
As we mentioned in past columns, some companies are starting to have issues with the supply of either raw materials for production, or finished goods for selling. Shipments were delayed as China closed its doors around the Lunar New Year to stem the disease’s spread. As work correspondence was also delayed, measures could not be put in place to mitigate the impact of the disease on our supply chains. The initial results of our survey sent to our members across the country show that these delays have led to production stoppage and lower sales. And it’s just been a month since the initial outbreak: if this drags on for longer, we imagine our supply chains will hit a critical level and our ability to deliver our products and services to customers will be severely impaired, if not completely cut off.
These delays are starting to have a ripple effect across this country’s logistics networks. As the Philippines is an import-reliant country, we have to contend with being unable to ship out empty containers due to limited shipping routes. I imagine the glut of delayed shipments entering the country will also overwhelm our major ports. Between this, and our lingering issues with road congestion and inadequate capacity, we just might face port congestion all over again. This means higher logistics costs, which means higher prices to our end consumers.
While consumption wasn’t adversely affected in the past year when inflation levels reached record highs, the potential supply issues that the COVID-19 outbreak has triggered might mean a slowdown in consumption, and perhaps, a slowdown in our economic growth.
Companies are, of course, working round the clock to ensure that these issues are quickly addressed. But once again, it’s time to bring together all stakeholders to make sure our response to this health issue turned threat to the competitiveness of our economy is quick and decisive. We have sent the Department of Trade and Industry a letter requesting all concerned groups in the private and public sectors meet to raise these issues and propose solutions. We will continue to tap into our members’ experience to better understand the impact of the COVID-19 outbreak on our work. This is a clarion call to Philippine supply chain: we must come together, or else we suffer the consequences.
Henrik Batallones is the marketing and communications executive of SCMAP. A former board director, he is also editor-in-chief of the organization’s official publication, Supply Chain Philippines. More information about SCMAP is available at scmap.org.