Despite the COVID-19 pandemic, international trade flows have not decreased as much as expected, according to a global private sector outlook study commissioned by global logistics company DP World and conducted by The Economist Intelligence Unit.
The recently released document showed that international trade flows have not fallen as much as expected. It reveals that 38 percent of companies in the Middle East have managed to expand their international sales and 32 percent in Africa.
According to report, reconfiguring the supply chain is a priority for many companies as they work to overcome the negative effects of the pandemic.
Globally, 83 percent of companies are reconfiguring their supply chains. But from a regional perspective, the Middle East has the highest proportion of respondents (96 percent) which companies are reconfiguring their supply chains. In addition, 84 percent of African companies responded that they were already doing so, slightly higher than the global average of 83 percent.
The study also analysed the impact of the pandemic. On this point, the largest proportion of respondents in the Middle East (48 percent) indicated that a demand shock (defined as the difficulty of selling products to customers in international markets) had had the greatest negative impact on their company’s international sales. In Africa, the highest proportion of respondents (48 percent) indicated that it was the impact of the crisis on supply chain management (defined as difficulty in organising transport or logistics services) that would have had a much greater negative effect on their businesses.
Gathering the views of business leaders in six regions (North America, South America, Europe, the Middle East, Africa and Asia-Pacific), the study showed that on average, companies have allocated 32 percent of their first-half 2020 turnover to help them switch suppliers or logistics providers and change production or purchasing locations. Middle Eastern companies expect to restructure their supply chains in 7.4 months, compared to 8.6 months in Africa and 8.5 months globally.
In addition, Middle Eastern companies are reallocating around 30 percent of their H1 2020 revenues to reconfigure their supply chains, which is in line with the global average (32 percent). However, respondents in Africa reallocate less – on average about 24 percent of their H1 2020 revenues.
The data also revealed particular sectors that helped sustain international trade during the pandemic. Supported by data from the International Trade Centre (ITC), South African exports of pulp (the raw material for toilet paper) increased by 163 percent. In Europe, in the first half of 2020, exports of cereals (especially to the Middle East) and pharmaceuticals from the continent increased by 23 percent and 12 percent respectively.
Respondents in Africa argued that the diversification of their supplier base is among the top two factors expected to drive international trade transactions through 2025. African companies may find opportunities for supplier diversification in the region since a new trade agreement, the African Continental Free Trade Agreement, came into force earlier this year.
To optimise business operations during the pandemic and beyond, African companies have relied on a mix of advanced technologies: Internet of Things (48 percent of respondents), cloud computing (26 percent) and data analytics (20 percent).
In the Middle East, 56 percent believe that big data and analytics will have a significant positive impact on their ability to trade across borders in the next 3-5 years. In addition, 43 percent believe that the Internet of Things (IoT) will have a similar impact and 32 percent indicate that both block chain and the cloud will have an impact on international trade.
“International trade has shown remarkable resilience during the pandemic and will play a key role in facilitating global recovery. The business community is more optimistic about the future than many expected, and the supply chain challenges exposed by the pandemic have acted as a positive agent for change. We believe this will result in more efficient and robust global trade flows,” the CEO and chairman of DP World Sultan Ahmed Bin Sulayem said.
To stay ahead of the curve, he added, Middle Eastern and African companies will continue to invest in digital solutions and work towards a more efficient, diverse and secure supply chain environment.
“Creating buffers in their supply chain, deepening relationships with existing suppliers and working more closely with domestic suppliers can be important elements of a companies’ strategy,” Sulayem said.
TE/id/lb/abj/APA