THE Covid-19 pandemic, which is expected to be prolonged and drawn out at least until a vaccine is readily available, has rekindled the call for Asean, a market of nearly 700 million people with a growing middle class, to further forge and foster regional integration.
At the same time, Covid-19 has also been a catalyst in exposing the critical need for business and commerce to further digitalise and explore usage of new technologies. The one geo-economic factor that will blend these two together — regional integration and digitalisation — is supply chain reconfiguration (SCR).
SCR means the rearrangement of supply chain structures to reflect current exigencies, such as disruptions and shocks.
When the supply chain adapts and adopts digitalisation and new technologies, connectivity will not only resume but become more resilient.
This is best highlighted by Jamari Mohtar in his article, "Tackling MCO's economic paradox and its aftermath".
SCR, therefore, will be a pivotal driver in the momentum towards closer and deeper regionalisation amidst the expected-to-be prolonged Covid-19 crisis.
Towards that end, it's also dependent on Asean states in enhancing and boosting connectivity and the supply chain.
They could set up a common supply chain fund, perhaps in the form of an Asean "Business Infrastructure Bank".
Funds would be pooled from member states, which will be proportionately reflected in the shares held as well as financing support from the Asian Development Bank and even the Asian Infrastructure Investment Bank.
The fund or bank will provide financing to governments and the private sector to develop and promote SCR and enhanced trade connectivity in the region and beyond.
This includes digital adaptation and adoption as means to promote digital convergence and supply chain confluence as exemplified, for example, by e-commerce.
There is also the need for a common protocol that will obviate problems arising from supply chain disruptions, a point made by Hanim Hamzah, senior fellow of the CIMB Asean Research Institute.
This common protocol should encompass all aspects in the supply chain management — legal, technical, digital and financial. By the same token, it should reflect SCR and its building-blocks for future developments.
For example, the common protocol should make use of block-chain to enhance regional participation in the supply chain and thereby boost regional integration.
McKinsey's report, Blockchain technology for supply chains – A must or a maybe? (2017), outlines three benefits to be had from a SCR that's operationalised via blockchain, namely replacing slow, manual processes; strengthening traceability; and, reducing supply-chain IT transaction costs.
As such, SCR will allow member states to enjoy efficiency gains as well as reduced costs over time with blockchain playing a role as part of the digital economies of scale.
In turn, this will contribute towards greater regionalisation as member states are put on a more level playing field, so to speak, in terms of digital adoption and adaptation leading to enhanced supply chain connectivity.
Following on from digitalisation, SCR can also take the shape of new technologies that introduce the logistics of the future – looking forward and ahead. The mushrooming in e-commerce as a result of the impact of the Covid-19 outbreak will lead to greater usage and competition for urban traffic space within domestic borders as shown in studies on urban logistics systems.
Digitalisation — Internet of Things (IoT), Big Data, precision analytics, business algorithms and artificial intelligence (AI) and not least 5G wireless technology — plays a crucial role in the processing and coordination of operations and orders in a timely, targeted and expeditious manner.
This means that SCR in terms of the new logistics can be leveraged by Asean member states to promote horizontal and vertical integration across borders even as the latter could be instrumental in driving the dynamism of the former.
In the final analysis, SCR is also about the reconceptualising and readapting the physical assets and infrastructure of the supply chain to strengthen intra-regional connectivity.
That would then yield spillovers and serve as building-blocks for future logistics which in turn will further deepen regional integration.
The writer is Head of Social, Law and Human Rights at EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research.
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times