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APEC Could Play A Role In Bolstering Supply Chain Resiliency


The COVID-19 pandemic has caused significant disruptions
to supply chains in the APEC region and has highlighted the
need for governments to consider strategies for greater
resilience, according to the latest APEC
Regional Trends Analysis
report launched on
Thursday.

“Most of the concerns raised about supply
chain resilience have been echoed by the business community,
but more can be done to manage resilience at the policy
level,” says Dr Akhmad Bayhaqi, a senior analyst with the
APEC
Policy Support Unit
.

The APEC region has
been producing close to 60 percent of global manufacturing
value added (MVA) over the past two decades, spread mainly
across four main hubs. When COVID-19 lockdowns affected
these hubs, it led to severe supply chain disruptions. In
the first four months of 2020 alone, the APEC region saw a
6.3 percent decrease in exports and a 5.5 percent decrease
in imports compared to 2019.

“Businesses’ attempts
to reduce supply chain costs by focusing on lean
manufacturing, offshoring and supplier consolidation seem to
have increased overall global supply chain risk and reduced
flexibility,” explains Satvinderjit Kaur Singh, a
researcher with the APEC Policy Support Unit. “This has
led to calls for greater resilience in the aftermath of
COVID-19.”

However, improving resilience is not an
easy or cost-free exercise, the report highlighted. Global
supply chains were formed based on the business linkages
that would provide the most cost-efficient outcome, so that
businesses can position themselves competitively in the
global markets. The recent disruptions have brought forward
the difficult conundrum for businesses in choosing between
efficiency and greater resiliency.

“While the
concepts of relocation and reshoring were widely considered
in the earlier part of the pandemic, it comes with higher
production costs and hurts the long-term global outlook,”
explains Singh.

“There is a need for investments in
order to build more resilient supply chains,” Dr Bayhaqi
adds. “Improving just-in-time manufacturing, combined with
the right technology and other strategies such as creating
cushions in the form of inventory, capacity or lead times
and designing contingency plans for possible supply chain
shocks can boost resiliency.”

The report calls
for governments to avoid policy interventions that may
disrupt the efficient configuration of global value chains.
Rather than looking at trade as the root cause of supply
chain’s vulnerability, the report suggests policymakers
look at global trade as part of the solution to achieving
resiliency.

“Governments can focus on promoting
digitalization and supply chain visibility; and by enhancing
regional cooperation on trade, connectivity and economic
openness,” says Dr Bayhaqi. “Customs operations and
cooperation can be improved by applying automation and
digitization through platforms such as the Single Window
System.”

Governments should leverage knowledge
transfers and productivity spillovers gained from global
value chains for local firms and support them in maintaining
the skills and know-how that they have acquired from their
supply chains networks.

Structural reforms could also
play a crucial role in developing a stable and predictable
regulatory environment that allows global value chains to
operate and recalibrate their network structures during
recovery from a pandemic.

“There is no easy fix for
supply chain disruptions,” says Dr Rebecca Sta Maria, APEC
Secretariat’s Executive Director. “The focus for
economies today is to build long-lasting resilience by
looking at their supply chains more holistically,
harmonizing regulation, digitizing processes and creating
some level of redundancy to allow
flexibility.”

“The important thing moving forward
is to ensure that stronger trust in trading partners and
deeper regional integration, by involving micro, small and
medium enterprises, form an integral part of APEC’s
strategy toward a resilient and inclusive economic
recovery,” Dr Sta Maria concludes.

View
the latest
APEC
Regional Trends Analysis, May
2021

See the
Economy
in 2020 and the Recovery Ahead
infographic

See the
COVID-19
Crisis Calls for Resilient Supply Chains
infographic

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