Keeping supply chains open is one key global priority in the wake of Covid-19: MAS chief

COUNTRIES should resist the temptation to retreat behind respective borders, even as Covid-19 revealed how dependent - and vulnerable - countries are on global supply chains, said Ravi Menon, managing director of the Monetary Authority of Singapore (MAS) on Monday.

Instead, the more effective way to build resilience in a post-Covid world is through greater supply diversification and building redundancies in global value chains, he said in a keynote speech at the Caixin Summer Summit 2020, via video conference.

Amid the lockdowns and disruptions in global supply chains, there is "naturally a temptation" for countries to shorten supply chains, or bring onshore the production of essential goods, or impose export controls to conserve supplies for domestic use, he noted.

"There will likely be a shift in supply chains, with a rebalancing from efficiency to resilience," he said. "This is not necessarily bad, knowing what we now know about our vulnerabilities."

However, insulation or in-shoring would diminish the world's collective resilience to shocks rather than to enhance it, said Mr Menon.

The pandemic has shown how important it is for countries to keep markets open, trade flows smooth, and supply lines intact, he pointed out.

A NEWSLETTER FOR YOU

Friday, 8.30 am

SGSME

Get updates on Singapore's SME community, along with profiles, news and tips.

Sign Up

He urged the audience to make a renewed commitment to keep supply chains open and to coordinate actions to minimise disruption and enhance recovery.

"We must agree on common protocols for reopening our borders in a safe manner, lifting travel and trade restrictions, and restoring air and shipping routes," he said. "We cannot wait for global leadership or multilateral agreements to do this."

Like-minded countries must come together, make things happen, and blaze a trail for others to come along, added Mr Menon.

Singapore has been part of such efforts to keep global supply chains open. For instance, its first "fast lane" arrangement has been launched with China to facilitate essential business and official travel between the two countries.

Arrangements like these, with protocols and agreed measures, will build confidence in managing the risks of importation of the Covid-19 virus, and allow countries to reopen to trade and travel, he noted.

Another key priority for international cooperation in the wake of Covid-19 is the need to strengthen data connectivity, with the pandemic having accelerated the use of digital services.

One area that could "clearly benefit" from digital and data connectivity is cross-border trade, said Mr Menon.

This comes as there is a large number and variety of parties involved in an international trade transaction, and the process is highly fragmented, paper-based, slow and cumbersome.

Harmonising and digitising trade documents and putting them through a seamless digital platform will help to make trade more efficient and secure, he said.

Food safety -an area that will be of high priority as the world emerges from the pandemic - will also require traceability in supply chains that span multiple countries.

In particular, one important dimension of digital connectivity is cross-border data connectivity.

"Covid-19 has shown that the ability to leverage the cloud to store and access data is critical for business continuity and cybersecurity, amid travel restrictions and office closures," he said.

Agreements to enable cross-border data flows in a secure and seamless manner need to be put in place so that digital transactions can take place efficiently, he added.

In light of Covid-19, the way forward for the international community should be one of even closer cooperation and deeper integration, Mr Menon concluded in his speech.