By Olawale Rasheed
The world system is unravelling as nations vigorously pursued national interest in defiance of multilateral institutions and structures. A war is on, devoid of tanks, war planes and nuclear arsenals. The struggle to secure medical supply has pitched nations against nations, raising nationalism to new level and undermining previous gains in the push for globalisation.
The unfolding scenario continues the rivalry between the top leader and the emerging leader of the world. In strange times, New York Governor, Andrew Cuomo commended China for supplying ventilators to USA. President Donald Trump even at the height of his American First campaign acknowledged that medical materials are being imported. The pandemic is rattling the greatest power on the face of earth.
Even when demonization of China is unrelenting, Chinese hand is popping up around the world and increasingly right within the United States. China in pursuance of peaceful rise amidst pandemic is offering much needed assistance to Europe, Africa and many Asian nations. The global medical power play sees the Chinese flying masks and ventilators all over the world at a time the United States is bogged down by lacklustre response to the pandemic. In this fatal outbreak, the Chinese are assuming global leadership with many western nations resorting to nationalism in the midst of an unrelenting enemy.
Nationalism was so hated previously; open border and globalized production value chain are the pride of world economic system. The European Union was almost emerging as a federal system even as various sectors of the EU economy are assuming a centralized management system from Brussels. Nobody reasons that a pandemic can so devastate a uniquely built system that prides itself in unity, oneness and integration. Covid-19 destroys or weakens integration efforts and compels European nations to remember their national identities.
Suddenly, Italians remember the national flag they had largely abandoned for the EU flag. The EU probably or indeed let Rome down as the devastated nation was left initially unaided to counter the rampaging virus. Other EU nations quickly shut their national borders ,restricting movements and transportation. Belgians, Dutch, French and others retreated to their national enclaves. EU is perceived to have failed to rise to the rescue until it was too late.
One major development was the production of medical equipment and materials. Germany issued the red alert first, stopping export of medical materials to other countries .This is right at the heart of EU. Soon other nations followed suit, with national interest superseding any vague idea of European unity. Before long Hungary, Poland and others who have all along being skeptical about EU federal project seem vindicated. National security in term of control of basic medical production facilities emerges as principal issue in the current medical war.
As the global production value chain is inter- continental, with production processes taking place in bits and pieces across continents, current disruption is a new phenomenon. China had in recent times emerged a pivotal player with India and others playing key role before finished products reach Europe, North America and other parts of the world. This system is under threat right now .
The reason is not the American push to regain control of world economy; it is an emerging reality that integration is an impractical concept during emergency. As much as Trump’s disruptive policies have shaped a new tone for world economy, Covid-19 has specifically called to question the sustainability of existing global production value chain. If any, coronavirus has accelerated what President Trump started— the reversal of global economy towards national interest as a plank for global economic practices.
Regional unions pushing for integration have suffered serious setbacks in the face of current pandemic. The EU is struggling to regain initiatives. Trans Atlantic alliance is suffering haemorrhage as Germany accused the United States of hijacking mask ships at the sea. The African Union has restricted itself to providing mere advocacy guidance without any serious steps on supply of medical equipment to needy member states. The sub-regional groups are not even pretending to lacking capacity to make a difference under this fatal outbreak.
So I can identify four basic consequences of Covid-19 on global production chains. First is the urgent need to review concentration of critical global production hub in one country or continent. That model is likely to change in favour of a more decentralised system probably domiciled in each continent even if ownership is still multinational. China as the factory of the world may have to metamorphose to regional production points even if Chinese expertise will still play key role in such regional production hubs.
Secondly, nationalism may become a new fad. This won’t be in the old form but in specific areas of national survival. Current experience may convince ardent believers of integration that a measure of nationalism is key to survival in major crisis. How come Italians remember their national anthem and flag when the virus struck with such ferocity? No doubt, regional integration efforts may become weakened and in its place may rise a new generation of nationalists with weak belief and trust in greater integration.
Thirdly, the rise of China may be further enhanced. The recent conspiracy theory that 5G is responsible for coronavirus reflects how jittery subsisting powers are about the rise of China. Even if China won’t be the factory of the world in the present form, its presence across the regional hubs may be further strengthened. China may also reconsider its existing policies in relating to other nations. Its projects financing model is expected to change; its transparency model may have to be adjusted and its insistence on government to government may give way for a large measure of people to government interaction. Those reviews may help Beijing to escape the expected onslaught of western nations which is presently at its preliminary stage.
Fourth likely outcome is the push for national capacity in critical sector such as phamarcomedical production value chains. Covid-19 allows the world to know that even the USA depends on medical supply chains from China to India. Same for Europe and many Asian nations and even worst for countries like Nigeria and other African nations. Nigerian Pharmaceutical and Allied Sector including its ancillary value chains are heavily foreign dependent, constituting a serious threat to national security in times of emergency. Almost all Active Pharmaceutical Ingredients (APIs) used in Nigeria are imported, mainly from India and China. Pharmaceutical grade starch is currently imported primarily from China and there are local companies which produce industrial grade starch. Only about 25 per cent of excipients are locally sourced. Most of the machinery and virtually all the quality control analytical equipment are imported, mainly from Asia and Europe respectively. Some of the drug manufacturers fabricate a few spare parts but most are imported. Nigeria and other disadvantaged nations are already working on local alternatives.
Beyond all the above, serious national leadership are frantically studying the implications of the ongoing medical war. For Abuja, four major recommendations can be made. First, a marshal plan to enhance local production capacity is urgently needed. Subsisting low manufacturing and production capacity weakens national security and dependence on external production value chain is proving to be injurious to national survival.
The second focus for Abuja now should be an executive order to mandate compulsory production of basic medical materials. The multinational drug companies cannot help in this respect. Abuja must identify and support over 100 registered drug and medical firms in Nigeria to start work on masks, ventilators and materials badly needed across the medical production value chains. Medical SMEs should be prioritised. This should be treated as a national emergency.
The third area is in the aspect of production financing. As much as many interventions fund exist with Central Bank of Nigeria, the conditionalities destroy the objectives of such funds. The simple reality is that the fund are not accessible to many firms that seriously deserve funding to pursue innovative production facilities. Reports from the business community confirms this negative outcomes. To ramp up local production capacity, access to financing should be simplified, depoliticised and treated as a national priority.
There is also the question of bipartisan approach to national emergency. Politicians find it hard to unite even during emergency. What China lacks in conventional rule of law, it gains in unity of action, discipline, zero-corruption and mobilisation of national efforts. The party in power and those in opposition must find a platform to collaborate to tackle the pandemic and the attendant callouts especially in the area of creating national production capacity across the various sectors of the economy.
In this strange times, preparation for a post-coronavirus world has commenced even before the defeat of the virus. Beijing is planning major economic package to regain and retain growth post – Covid-19. The United States is planning major infrastructural package to jumpstart its ravaged economy. Several European nations even under the siege of the virus are already mapping out plans for a post-outbreak world. Permutations are on to win the geopolitical medical warfare which will reflect on the balance of economic powers worldwide.
How is Africa reacting? How is Abuja and Pretoria, the two biggest economies on the continent, preparing? As we plan to win the pandemic war, we must design our scheme for a post -COVID-19 world.
Olawale Rasheed, policy director at Abuja Chamber of Commerce and Industry, sent this piece from Abuja.