Does the COVID-19 (coronavirus) crisis mean the end of globalization? Have we become too vulnerable and dependent? And what awaits us? These are questions that also concerns me as CEO of the World Trade Center Twente – The Netherlands.
I do not believe that we are heading for a deglobalization, because our chains worldwide are too strongly connected for that. And in the Netherlands, we are too dependent on international trade. However, this crisis means that we will see international business and cooperation amongst partners interact differently. It creates a global shift.
The current situation forces companies to think about their production processes. Where am I in the production process chain? Can I find suppliers closer to home? Or should I, as a supplier, make an end product myself? You see companies that have already found alternatives. Take high-end technology supplier Demcon, for example, who used to supply only the heart of respiratory ventilator – they have now developed a complete machine in a short period of time. People and companies have become more innovative.
For years, the focus has been on cost-effective production and as a result, more and more production went to Asia. Now, companies are looking at how to spread their production, across multiple continents and countries, or how to keep production closer. I expect that this will also increase robotization. With the use of robots, we cannot only produce closer and more cost-effectively, but also produce more innovatively. We are looking for a new balance.
You can also apply this across risk spread in sales markets by attracting customers from different continents. Will your salespeople spend 75 percent of their time on the plane again, or will you develop other sales methods? The digitization that we are now embracing by necessity offers plenty of opportunities to reduce the need to travel and thus saving costs and time. You can now make the contacts in preparation.
At the same time, protectionism is emerging. You see that now especially in the allocation of medical equipment and protective equipment. For example, in the U.S., we see President Trump who wants to keep everything produced in America within his own country, and in France, where officials recently stopped a load of protective masks on the way to Spain. Several questions arise – why do we not make those products closer or domestically? And why are we, the Netherlands, dependent on one supplier for test materials? Governments are now considering whether to invest in the local production of these strategic goods. However, solutions will probably be found at the regional European level. Consider, for example, the production of a vaccine in various places in Europe. In short, collaboration and close production are becoming more important.
After this pandemic, an economic crisis will follow. We cannot escape that. The International Monetary Fund (IMF) forecasts a global economic contraction of three percent this year — the worst blow since the 1930s. According the European Commission, it is expected that the economy in the Netherlands will shrink by nearly seven percent in 2020. In 2021, there is hope for a slight growth. Just as we saw in the aftermath of the banking crisis in 2008, we have resilience. To recover from the effects of this pandemic, we need to prepare and pick up the thread again as soon as possible. And, most importantly, maintain the collaboration between companies, education/universities and government that is now emerging.
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