Covid-19 a timely wake-up call for Singapore logistics

LIKE the rest of the world, Singapore is grappling with the Covid-19 pandemic. The circuit breaker has been extended to June 1, even as some countries including China and Vietnam are already easing restrictions and allowing businesses - and life in general - to resume some form of normalcy.

We have been reading for weeks about a marked reduction in air and ocean cargo from and to China and the rest of the world affecting supply chains globally.

To compound this, with the rise in Covid-19 infections among Singapore's foreign worker population, labour flows have also been impacted.

The International Monetary Fund has sounded the warning bells about the immediate and long-term damage to the global economy, and Singapore will not be spared.

Silver lining

Covid-19 has accelerated the so-called "Anywhere But China (ABC)" movement. Two weeks ago, Japan announced that about US$2.2 billion of the country's record economic stimulus package will be used to help companies move production away from China.

For over a decade, both multinational and Chinese firms have looked to escape rising labour costs in China by moving operations to new locations in South-east Asia and beyond.

The US-China trade war that has been subsumed by Covid-19 has led to a further de-coupling from China-centric supply chains and have resulted in the construction of new manufacturing and assembly facilities in places like Vietnam, Malaysia, Thailand and as far afield as Mexico.

Firms, countries and even geographic supply chains will look very different after businesses awaken from this period of supply chain hibernation.

The silver lining is not the ABC movement, but rather that firms are now forced to explore alternatives that may well stay in place for a prolonged period.

It is a timely wake-up call that supply chains must always be evolving. For those that are able to leverage this constant change in the business landscape, there are many opportunities for them to seize.

Belt & Road Initiative

Much has been written about China's Belt & Road Initiative (BRI) in the last few years but we have heard little of this lately.

The BRI has not disappeared. Rather, it is forging ahead but under the radar of many people. As the BRI develops, Singapore's relevance as a major transhipment port will be eroded.

We can continue building the huge container terminal in Tuas in the western part of Singapore, but whether there will there be sufficient transhipment cargo to make this a necessary and viable initiative is anyone's guess. It does not appear to be the case.

As the BRI takes shape, cargo will simply bypass Singapore and we will slowly see volumes and capacity heading elsewhere, much as we have seen happening in Hong Kong in the past few years.

Singapore is a strategic logistics hub not simply because of the amount of cargo it handles. It's a major factor, but there are many others that need to be in place before we can even think of being considered as such.

When I was working on a project in Oman a couple of years ago, experts there had the grandiose plan to make the country a logistics hub but they lacked the wherewithal to execute it.

To usurp the likes of Dubai, Abu Dhabi and even Qatar as a logistics and transhipment hub means more than just giving lip service, let alone having the requisite cargo volumes.

Strategic value in global supply chain

While simultaneously adjusting to the realities of de-coupling and restructuring of global value chains, Singapore now needs to strategically, tactically and operationally turn to more diversified and well-balanced domestic and international strategies to not just maintain but leverage its strengths.

Singapore's importance as a regional logistics hub puts it at the centre of a dramatically changing business landscape.

We have the opportunity to help ensure that the world's leading businesses will continue to turn to us to meet new and evolving supply chain and economic needs.

There are many benefits in Singapore's favour. One is a good and stable government. Some may gripe about the local political landscape. However, it is this same government that has made us a global standard for transparency, stability and safety in the region.

The value of the latter cannot be discounted as many companies value being able to place personnel and their families in Singapore as compared to other countries in the region.

And with its clear and efficiently-executed rules and regulations, Singapore is widely regarded as an excellent place for firms to set up their regional and global headquarters, and expand in the Asia-Pacific region and beyond.

With trade and supply chains, finance must flow and Singapore is a global financial centre augmented by a good legal infrastructure and framework that supports international business.

With regards to talent, the excellent education system churns out a labour force second to none.

Singapore's Networked Trade Platform (NTP) is a model of efficiency for a trade and logistics IT ecosystem.

NTP connects businesses, community systems, platforms and government systems. Additionally, Covid-19 has highlighted the global economy's vulnerabilities to diseases and pandemics.

Automated factories and intelligent supply chains reduce risks and enable more diversified and better coordinated supply chains and this is another area in which Singapore can excel from an innovation perspective.

Decoupling and diversification

As Covid-19 forces companies to double down on de-coupling and value-chain relocation, Singapore can become imbedded in these new capacity-building solutions and take on an even larger role on the global supply chain stage.

There is high demand in the market for next-generation, technology-enabled value chains.

Singapore, which has allocated US$19 billion under the Research, Innovation and Enterprise 2020 plan and topped it up at Budget 2020, is well-placed for participation in these advanced manufacturing and engineering areas.

This will allow Singapore to become a prime destination for leading multinationals that are seeking an edge in this area.

In the near term, Covid-19 will bring challenging economic times to Singapore.

These local challenges will most certainly be met and overcome by a proactive government, but Covid-19's lasting effects will be more pervasive and long-term as Singapore adjusts to a new and promising role in a shifting economic landscape.