WEF official: COVID-19 pandemic resets globalization in a new way
By Wu Zheyu
As the COVID-19 pandemic severely jeopardizes the global supply chain and makes many experts ponder the future of globalization, a World Economic Forum official said there's a need for fostering "great reset" of globalization and digitization plays an essential role in building effective supply chains.
The pandemic undoubtedly disrupted globalization, but markets and supply chains have been so interwoven so far, many analysts are worried that globalization is really under serious threat.
According to forecasts by the International Civil Aviation Organization, the World Trade Organization and United Nations Conference on Trade and Development, the pandemic is causing the largest and fastest decline in international flows in modern history.
These forecasts pointed to a 13 to 32 percent decline in merchandise trade, a 30 to 40 percent reduction in foreign direct investment, and a 44 to 80 percent drop in international airline passengers in 2020.
World Economic Forum said a "great reset" in a dire need, as the pandemic will deepen and leave the world even less sustainable, less equal, and more fragile, there's a need to build entirely new foundations for global economic and social systems.
Sean Doherty, the Head of International Trade and Investment of World Economic Forum, said the globalization is still there but in a new way.
"We've seen a sharp drop in trade and foreign investment, but in certain sectors, we would expect growth. We should be expecting faster growth in digital services, cross-border e-commerce, and more diversification of value chains. I think the fundamentals have remained in natural resources, markets, labor cost skills that are spread around the world, and globalization helps to connect those elements," he added.
Doherty also pointed out that the pandemic has shown us the essential role that migrant workers play in our societies. "That is something which is only going to increase as our societies age."
According to data from the World Bank, in 2019, an estimated 200 million people in the global migrant workforce sent home 715 billion dollars. Of this, it's estimated 551 billion U.S. dollars supported up to 800 million households living in low- and middle-income countries (LMICs). While the remittance flows to LMICs are projected to fall by almost 20 percent in 2020, one of the sharpest declines in history.
Supply chain lessons from pandemic
An article centered on the "great reset" concept published on World Economic Forum's official website also said that the changes we have already seen in response to COVID-19 prove that a reset of our economic and social foundations is possible.
During the pandemic, the world has witnessed sudden land large swings in supply and demand. For instance, there was an explosion in demand for masks, while a great demand for cars is disappearing. Conney pointed out that a flexible and diversified supply system is essential to tackle such challenges.
A McKinsey report on the implications of the pandemic for businesses suggests that companies could "stabilize their supply chains" in multiple ways such as enlisting new suppliers, boosting inventories or invest in omnichannel distribution that includes online sales.
Doherty further concluded that digitization is really critical for building effective supply chains both for goods and services.
"So in terms of education, healthcare, entertainment and for goods, whether that's the ordering goods online for delivery, tractability, customs clearance, the digital element is essential," Doherty added.
Doherty also wants to justify a misunderstanding among the public and emphasize the true competitiveness of the supply chain. "It is a good idea to have emergency stocks and certain capabilities. But real resilience comes from diversity and flexibility because we don't know what the next emergency might be."
"And if everybody goes out and builds respirator factories, for example, that's gonna be no good if the next crisis demands something else. The key to secure supply chain resilience is flexibility and diversity," he added.