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Coronavirus

Silver linings emerge from the coronavirus gloom

Supply-chain reform, telework and sustainability are likely long-term benefits

A man wearing a mask takes a photograph at a Han River park in Namyangju, South Korea, on March 7.   © Reuters

TOKYO -- Thousands of people are being infected and dozens are dying every day as the spread of the new coronavirus puts the world on edge.

Markets are nose-diving; cities are locked down, medical facilities are overwhelmed; sports events and concerts have been canceled; travel plans are in tatters; and consumers are panic buying essentials.

But amid the gloom, there are potential silver linings that may bring longer-term benefits.

We are likely to see companies diversifying supply chains, more opportunities for developing nations, and greater environmental sustainability. Workers may be able to telecommute more. Governments might place a higher priority on health care. We will all be more aware of personal hygiene. And the likely trigger of the outbreak -- the trade of wild animals -- has already been banned in China.

Even before the epidemic, political risks such as the U.S.-China trade war were forcing multinationals to reroute supply chains from China, either back home or to a third country.

Now the virus crisis is accelerating that trend.

Google and Microsoft are speeding up efforts to shift production of phones and computers to Southeast Asia, the Nikkei Asian Review learned last month. Japanese companies such as Komatsu, a construction equipment maker, and Daikin Industries, an air conditioner manufacturer, are weighing similar moves.

"Over the longer term, supply chain diversity is likely, and that's a good thing," said Dan Wang, a Beijing-based technology analyst at Gavekal Dragonomics, a research company.

"The political risk with the new coronavirus was that China acted in a very extreme way, basically shutting down much of the country," Wang told Nikkei. "If a similar pandemic breaks out again in the next decade or so, companies won't want to be caught in such a strong vise again."

Wang added that while "there is not another China to replace China," emergent nations could benefit from a reordering of the global supply chain.

"A shift of production to developing countries such as India or Bangladesh would give people in those [countries] experience in producing tech products," he said. "And once they have that, they can join in the next round of innovation."

A cable factory in Guiyang, China: The coronavirus outbreak is likely to lead to more diverse, less China-reliant supply chains.   © Reuters

While the outbreak's impact on industrial output and flights may be short term, it is likely to lead to greater sustainability.

"Because of supply chain disruption, there will be more companies re-shoring, bringing back production sites closer to consumption," said Nobuko Kobayashi, transaction advisory services managing director and partner at Ernst & Young -- Japan. "This will reduce the amount of goods being flown around the world. ... This is a plus for carbon neutrality."

The virus-induced increase in telecommuting in places such as Japan, China and South Korea may temporarily help lower carbon emissions. The presenteeism culture of companies in East Asia has long impeded more flexible working practices, but there are signs this is changing.

Large Japanese corporations such as Sony, Takeda Pharmaceutical, Toshiba and SoftBank Corp. are urging employees to work from home. Japanese Prime Minister Shinzo Abe said last month that "teleworking is an effective solution."

"Japan is particularly slow to change because of its homogeneity. We have a huge inertia in the way we carry out business," Kobayashi said. "Only a shock of the magnitude of a coronavirus outbreak can snap us out of the old ways and move the needle.

"When the norm crumbles down, it makes room for a more progressive approach."

Kobayashi also sees more medical, education and government services being shifted online, allowing consumers more choices. Indeed, Japan's education ministry put some learning materials on the internet after schools across the country closed March 2 for an indefinite period.

For wildlife, meanwhile, the virus might be a life saver.

Suspecting that the disease spread from exotic animals to humans at a Wuhan wet market, China last month banned the trade of wildlife such as toads, bats and pangolins, which are sometimes eaten as a delicacy.

Peter Li, China policy specialist at Humane Society International, told Nikkei that Beijing's move could be a step toward phasing out other components of the industry, and have spinoff effects throughout the region.

"China outlawing wildlife trade will encourage similar actions in China's neighbors like Vietnam and Thailand," Li said. "These other countries would lose an excuse to continue their illegal operations."

The epidemic has also raised public awareness of the importance of personal hygiene, leading people across the world to spend more time washing their hands with soap and hot water -- helping to prevent other viral infections such as influenza.

Schoolchildren wash their hands in Jakarta. The outbreak is already encouraging better personal hygiene habits.    © Reuters

At the same time, the virus is testing the limits and exposing weaknesses of health care systems across Asia.

Richard Coker, a Bangkok-based professor emeritus of public health at the London School of Hygiene and Tropical Medicine, said he hoped the epidemic would lead to reform and better funding of national health systems and global bodies such as the World Health Organization.

"Trust in institutions is critically important during a pandemic. I hope the social momentum to generate this trust forces political change," Coker told Nikkei. "Part of the institutional alignment, I hope, will mean that infectious diseases are seen not only as a public health threat but also a security threat.

"In the longer run I hope we see more profoundly the sense that we are all connected and dependent upon each other."

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