Globalisation has been struck a deadly body blow – one from which it may be permanently crippled. But this is not its first hit. The 9/11 terrorist attack and the 2008 financial meltdown were the one-two jabs that softened it perfectly for Covid-19’s near-knockout punch.
Since the disintegration of the USSR and the end of the Cold War, globalisation has been embraced whole-heartedly, with many extolling its unending merits. To a large extent, they weren’t wrong.
For decades, globalisation has been a force for good, helping lift nearly 1.1 billion people out of extreme poverty across the globe. It opened up access to global markets, allowing corporations to utilise and often empower people who would have been living hand-to-mouth otherwise.
It allowed these corporations to set up shop in countries with the cheapest labour force and the most favourable business environments, enabling them to produce goods cost effectively.
But for all its virtues, globalisation has some fatal deficiencies which Covid-19 has done an exemplary job of exploiting. Globalisation incentivises companies to concentrate all their manufacturing might in one place – or in laymen’s terms – put all their eggs in one basket.
This ensures economies of scale and subsequently allows these companies to price their products aggressively enough to stay competitive in their respective industries.
Another practice enshrined in the sector is “just-in-time” manufacturing. It ensures parts arrive just as they’re needed so as to avoid excess inventory buildup. This discourages redundancy in the system – redundancy that can often be a literal life-saver during a crisis.
It’s almost like the system was specifically designed to have a single point of failure (SPOF), the stuff of nightmares for engineers everywhere. It means if a critical part or subsystem fails, it knocks the entire system out.
An analysis by Deloitte perfectly encapsulates this: “A decades-long focus on supply chain optimisation to minimise costs, reduce inventories, and drive up asset utilisation has removed buffers and flexibility to absorb delays and disruptions”.
And sure enough, this is exactly what Covid-19 did, paralysing China’s and subsequently the rest of the world’s manufacturing and supply chains, which are the lifeblood of companies worldwide.
According to global data analytics firm Dun & Bradstreet, the areas in China worst affected by the pandemic were home to 90% of all its active businesses. Five million companies around the world have suppliers based in these areas and that includes 938 of the Fortune 1000 companies.
Malaysia, too, is dependent on other nations for many of its needs and has faced supply-chain disruptions due to the lockdowns caused by the pandemic here and abroad.
The pandemic has brought to the attention of many that China and India account for the production of 80% of all active pharmaceutical ingredients. This has rightly caused concern among medical experts in Malaysia, prompting them to ask the government to attract pharmaceutical companies to set up manufacturing bases here.
Malaysian Medical Association (MMA) president Dr N Ganabaskaran said: “Malaysia is a net importer of drugs and we need to be concerned as it (pharmaceutical factory closures in China and India’s drug export restriction) may affect this country too. If the situation persists, we foresee an increase in price (of drugs)”.
Malaysian Pharmaceutical Society president Amrahi Buang agrees. According to him, “we have the expertise and resources to make this plan a reality. The government needs to encourage companies to see Malaysia as a pharmaceutical manufacturing hub”.
They’re right on the money.
Another crucial industry that needs to be further localised is food production. Just last year, Malaysia imported a whopping RM50 billion worth of food. For a country so blessed with fertile, arable land, isn’t it rather odd that we are so dependent on food imports?
We only produce 71% of all the rice, 66% of fruits, and a lowly 40% of vegetables that we need. How is it that although agriculture is the third biggest contributor to our gross domestic product, we’re not able to grow enough to feed our own people?
Former deputy agriculture and agro-based industry minister Sim Tze Tzin sounded the alarm recently in light of the Covid-19 pandemic: “… we import a lot of onions from India but now India is undergoing a national lockdown. Farmers there have difficulty transporting their onions from the rural areas to the cities and ports and finally to Malaysia.”
Driving home the point, he said: “Wheat (imported from Australia) is used to make bread and when wheat cannot reach us, then bread supply will be affected.” Even our staple food might be threatened: “… Vietnam is our major source of rice imports but now they have stopped new contracts. We don’t know when they will reopen contracts.”
This is a precarious position to be in – one we should vow to not find ourselves in in the future. Food security is national security. We can’t have one without the other.
Moving forward, the Malaysian government needs to step in to architect the incentive structure necessary to localise these critical industries and make us more resilient to disruption.
We have become complacent thanks to our recent, relatively peaceful global climate. But this “big nap” we’ve experienced for the past few decades is an anomaly. Most of history has been marred by pandemics, warfare and strife of all kinds.
If the current pandemic has a silver lining, it’s that we’ve come face-to-face with the reality of how fragile the systems we’ve built are. Let’s take this as a lesson and make the world a more resilient place, shall we?
The views expressed are those of the author and do not necessarily reflect those of FMT.
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