Thursday, May 6, 2021

Globalisation comes under the spotlight of Covid-19

The pandemic is forcing global economies and industries to rethink the way they function, suggesting national autonomy is the way forward.

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For the past 15 years, Malaysian Faheem Ahmad has been living in Guangzhou, China.

He went there to study Mandarin in 2006 and was supposed to return to Malaysia and teach the language but found a small but lucrative niche in the world of international trade.

While completing his master’s degree, he started a company, Hijrah Trading, with the aim of supplying Chinese goods to Malaysian clients. It took off almost immediately.

“We focus on small businesses that don’t know how to import goods from China. We show them how to do it,” he told MalaysiaNow. “Mostly, I guide them to find manufacturers or suppliers of the goods they want.”

That was pre-pandemic when he used to come home frequently. Since Covid-19 struck, he has been marooned in Malaysia for over a year.

Silver linings are still possible though, even in pandemics, and last year his business was profitable as the import of face masks and sanitisers from China boomed.

Faheem’s progress from international student to cross-border entrepreneur embodied globalisation: worldwide travel and trade; global businesses and supply chains; and mixing of cultures as the world became more connected economically, digitally, and socially.

Globalisation, the process of interaction and integration among people, companies, and governments worldwide exploded with the industrial revolution due to advances in transportation and communication technology.

For over 200 years globalisation was the model for world manufacturing and trade.

Then along came Covid-19.

But even before the pandemic, globalisation had taken a knock when Donald Trump surfed to the US presidency on the wave of “Make America Great Again”, alarming world economies.

However, the pandemic and its fallout has disrupted the foundations of globalisation more than any superpower change of tack could.

In just one year, freedom of movement, global supply chains, and interconnected markets all suffered huge hits.

The IRIS Institute is an independent non-profit research centre that focuses on the causes of conflicts and crises in the Islamic world and their resolution.

CEO Syed Ahmad Israa’ Syed Ibrahim told MalaysiaNow that the abrupt decline of globalisation is only temporary because the international financial system is built on it.

“The protectionist policy implemented by the superpowers is to manage the temporary losses suffered by multinational companies. In this case, a country like Malaysia is among the biggest losers,” he said.

“Globalisation has always safeguarded the interests of companies and capitalist countries and has not benefited producers of raw materials such as Malaysia.”

He explained that when raw material supplier-countries like Malaysia lose their market, they’re in deep trouble without their own strong national economic ecosystem.

“When we lose our markets, it’s like the First World War when the colonialists suddenly abandoned us because they wanted to maintain their own economies. Back then, the bulk of our economy was from selling rubber and suddenly we couldn’t sell it. The same happened with tin.

“As a result, the country suffered severe loss of income and we had to borrow to save our economy.”

Fast forward to today and the same pattern can be seen with Malaysia’s palm oil, since the country still depends on foreign markets and buyers.

This dependence can be reduced, he said, by developing a bigger palm oil-based domestic industry capable of using the supply.

He urged Malaysian leaders to see the situation as a chance for a real shift in economic development models.

“We need to create a strong domestic and regional market, and reduce our dependence on foreign markets,” he said. “We should reduce foreign ownership and develop local technologies to cater to expanded national industries.”

CEO of Berjaya University College in Kuala Lumpur, See Hoon Peow, spoke of a possible future realignment of countries.

“Currently, Malaysia is trying to take a neutral stance, which is wise for a small country,” he told MalaysiaNow.

He said Malaysia must invest more in technology so that it will not be so dependent on other countries for critical supplies.

“Malaysia should learn from the spat between the US and Huawei. Chips and operating system are essential components in phones. The US controls these technologies. Huawei prepared over 10 years ago for the disputes of today.

“Countries must invest in key technologies if they want to prosper. A country should also be independent in essentials like food and energy. The cost may be high but at least it’ll be sustainable,” he said.

The decline of globalisation, assisted by the pandemic, is also seeing the rise of what is termed “new nationalism”.

See said that in Malaysia, internal factors are stronger than international influences.

“Conservative forces in the country are trying hard to counter globalisation influences, thus we hear more noise from them. How people will receive things depends on many factors.

“In the short run, I think the tension will be strong, as no party is secure. When a final winner emerges, things will stabilise, and tensions will ease.

“When people are insecure, they tend to protect what they consider their core identity and are unwilling to change.”

Teacher-turned-trader Faheem agrees. From his experience, he can see how China has seized on and exploited globalisation more successfully than Malaysia.

“Malaysian manufacturers also face too many hurdles and a lot of red tape when they want to export their products to China.

“It’s expensive, there are too many barriers, and our system benefits Chinese factories more than our own businesses,” he said. “We simply do not produce as many products as other countries.”

In 2020, Covid-19 hammered a nail into globalisation’s coffin lid. Maybe more than one.

But with people like Faheem around, it won’t be the final nail.

Countries are already being forced to develop more autonomous economies

But the only question really is, how long before the world economy goes global again?

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