Covid-19 impact on trade: How are the regional supply chains faring?
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Covid-19 impact on GCC trade: How are the regional supply chains faring?

Covid-19 impact on GCC trade: How are the regional supply chains faring?

As a key international trading partner, how is the region protecting its supply chain during the current crisis?


Trading has historically been an essential lifeline for the growth of the GCC region thanks to its central location – the bustling port at Dubai’s Deira area [pre-coronavirus] offered a glimpse into how wooden boats (or dhows) used the emirate as one of the main hubs to export and import goods in the past. Huge shipping yards and massive airports have since surfaced to carry forward that tradition, as they seek to cater to huge volumes of goods being transported from one region to another.

Just looking at Dubai, the emirate’s non-oil foreign trade values rose nearly 6 per cent to reach Dhs1.02 trillion during the first nine months of 2019, while volumes also grew by 22 per cent to reach 83 million tonnes during the period. Although the Covid-19 pandemic has practically halted international travel, cargo and freight operations have managed to continue functioning – albeit with restrictions – to fulfil the demand for essential goods.

The pandemic is expected to impact the global merchandise trade to the extent of 31.9 per cent under a pessimistic scenario and up to 12.9 per cent under an optimistic scenario in 2020, according to the World Trade Organization (WTO).

While most regions across the world are expected to see double digit trade declines between 12 to 17 per cent even under an optimistic scenario, the Middle East and Africa region is anticipated to see a more muted impact at 10 per cent this year, states Gopal R, global vice president, Transportation and Logistics Practice at consultancy Frost & Sullivan.

“The impact is likely to be more in case of extended shutdowns, mainly triggered by lower imports, in a pessimistic scenario,” he adds.

Looking at the GCC region, restricted movements in recent weeks have impacted the flow of goods by up to 60 per cent due to freight capacity limitations on land, air and sea routes.

“Logistics and freight service providers are working on mitigation strategies to ease capacity limitations, which would help in improving the trade handling ability for the region,” Gopal explains.

With digitisation the new mantra across the economic spectrum to deal with the current crisis, trade and supply chain operators are also rapidly finding solutions via automation to continue functioning.

The region’s busiest port operator – and among the largest in the world – Dubai’s DP World launched in late April new online logistics tools and services, covering sea, land, and air shipping around the world.

The connected ecosystem of platforms will enable freight forwarders and businesses to book shipments of cargo from and to anywhere in the world, by any combination of sea, land and air. DP World, which has more than 150 operations in over 50 countries, said it accelerated the already planned roll-out of platforms to help companies meet the challenge of the Covid-19 crisis and keep trade flowing – including vital food and medical supplies.

The launch came following DP World’s acquisition of digital cargo transport platforms, and

The company also created the Digital Freight alliance, an online association to connect all freight forwarders globally on one platform.

“Our new platforms are moving the management of moving cargo online. It will enable our customers to be more efficient and increase the visibility and predictability of supply chains. This will help them to grow their businesses, and ultimately keep countries supplied with the vital goods they need in the crisis,” said Mike Bhaskaran, DP World’s COO for Logistics and Technology.

Sultan Ahmed bin Sulayem, group chairman and CEO, DP World added: “This technology is a direct business enabler. Digitising trade will help companies do more business, more efficiently.”

Locally, DP World UAE is also ensuring that its operations adhere to precautionary measures by segregating workforces, increasing cleaning and disinfection, and arranging accommodation for employees near their place of work. Ship crews, arriving or departing at Jebel Ali Port are required to pass through thermal cameras, provide health updates and obtain the harbour master’s approval before boarding or deboarding vessels.

Meanwhile, Abu Dhabi Ports also joined 19 of the world’s leading port authorities to sign a virtual declaration last month which calls on members to allow merchant ships to berth and carry out cargo operations to maintain the global supply chain.

The Ports Authorities Roundtable (PAR) declaration also commits the maritime sector to ensure the safety of seafarers when dealing with coronavirus cases.

“It is important for industry participants to adopt a Respond-Reset-Rebound strategy to counter and adapt to the current scenario. Key is to be able to sustain troughs and peaks with scalable resources, both capital as well as assets. This will be critical to be able to adapt to current as well as any future situations of similar nature,” opines Gopal.

Respond: Focus on addressing current issues, keeping teams and capabilities in force, setting up quick response teams and tackling capacity challenges for clients.

Reset: Put in place systems to gain advance demand visibility, understand the diversification of supply chain by customers and prepare for it, and adapt with digital connectivity solutions to compensate and improve productivity.

Rebound: Evaluate source of future opportunities, re-strategise business models to create flexible solutions that can withstand contraction as well as scalability and build contingency plans.

So, when will the trade sector rebound?

“The Covid-19 challenge is expected to have an acute impact on demand and supply for close to three months and it will possibly take another three months to recover,” projects Gopal.

Based on this, most companies will face an average of 40-50 per cent of lost business opportunities on an annualised basis. Hence reviving demand to ensure sustained growth will possibly require another two quarters.

“From a supply chain and logistics perspective, things are likely to rebound in Q3 in terms of freight capacities across key trade lanes. Storage needs may nevertheless undergo shifts in location and pattern of requirement. It is likely the composition of future freight modes will also likely see changes as recovery sets in. The demand pattern will also see changes, both in consumption pattern as well as supply locations. These will need to be considered when realising the new norm,” he explains.

Post-pandemic, the industry is likely to see long-term changes such as increased digitisation as well as greater reliance on autonomous applications and big data.

“Digital connectivity will rationalise, replace and reinvent physical and social connectivity and accelerate innovation in new business models,” adds Gopal.

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