Not only has the global supply chain been severely disrupted because of the present coronavirus crisis, but global politics, especially US-China trade relations, have been greatly impacted. This creates opportunities for business prospects and policy reforms in other countries. The COVID-19 has triggered the relocation of manufacturing companies out of China, as they have been blamed for exporting the deadly virus around the world. Governments around the world are likely to boost their own domestic capacity and self-sufficiency amidst this supply chain disruption amidst the corona outbreak. 

The disruption-hit companies have to find out alternative production bases across the world. Japan has already announced an initiative to set up a fund of 240 billion yen ($2.2 bn) of its record economic stimulus package to help its manufacturers shift production out of China as the coronavirus disrupted supply chain between the major trading partners. It is noted that production of 20 percent parts and partially finished goods of Japanese companies is produced in China but due to the pandemic imports from China slumped as the disease had shuttered factories, in turn starving Japanese manufacturers of necessary components. Now, Japan wants to reduce their reliance on China, which is already facing global backlash and could soon see its long reign as the 'factory of the world' tag slipping.

Developing countries  like Vietnam, Thailand, Indonesia, Philippines, India and some African countries like Morocco, Tunisia, and Egypt are in the race to capture this opportunity. Bangladesh is also one of the potential destinations.

Competition among ASEAN, SAARC and African countries

The Association of Southeast Asian Nations (ASEAN) countries are already in a better position with their policy guidelines and satisfactory working conditions. Vietnam, blessed by the US and one of the emerging economies in the world, has absorbed manufacturing capacity that China has lost because of their 50 percent less labour cost as compared to China. They have captured the present market of manufacturing medical equipment; particularly PPE and mask and they exported these current necessary items to European countries. 

US tech giant Apple has recently started producing its AirPods Pro cases in Vietnam rather than in China. Moreover, Vietnam is successful in combating COVID-19 in spite of being close to China. Vietnam’s plans to simplify administrative procedures, including investment and business procedures and ease of doing business position (70th) would positively attract quality foreign investment. Thailand is viewed as another best alternative for relocating business. Toyota’s recent proposal of assembling 7000 HEVs each year, along with 70,000 batteries for EVs and a range of other vehicle components, totaling 9.1m units per annum. This marks a significant expansion of Toyota’s existing operations in the country.  Japanese company Nissan’s proposal of investing BT11bn (($346m) and Honda’s BT5.8bn ($182.4m) will help in creating a big opportunity for Thailand, which is the 13th largest automotive parts exporter and the sixth-largest commercial vehicle manufacturer in the world, and the largest in ASEAN.

From the South Asian Association for Regional Cooperation (SAARC) countries, India is emerging as one of the top alternative manufacturing destinations. India enjoys good relations with the US, and this will provide it with the opportunity to capture the global market. Indian media has reported that the Indian government has reached out to more than 1,000 US companies and offered them incentives through its overseas missions. These include medical devices giant Abbott Laboratories. India exported 50 million hydroxychloroquine tablets to the US. This not only helped in strengthening the bilateral relations between the two countries, but also played an important role in getting India an advantage in its bid to seize the sizable market from China. Furthermore, Indian government has a massive plan of developing 462,000 hectares of land to attract relocating manufacturing companies of electrical, pharmaceuticals, medical devices, food processing and textiles.

African countries such as Egypt, Tunisia and Morocco are also possible destinations of the European companies looking for overseas production bases. Morocco - the existing manufacturing hub - attracted the European market because of their well-established trade links and timely response to coronavirus by producing medical equipment, including PPE. Apart from the cheap labour, robust industrial base, strategic location and geopolitical relations also reinforces Morocco’s position as a manufacturing destination. 

Where Bangladesh stands

Political stability, huge unemployed active workforce, effective communication system, well-planned government policies, low-priced electricity and water, and government focussed on launching development programmes seems to provide Bangladesh the necessary conditions to seize the opportunity and attract investment. Bangladesh should prioritise efforts to attract global supply chains. The first step is to communicate with those companies planning to relocate from China. It should also set up a tripartite system between the Bangladesh government; Federation of Bangladesh Chambers of Commerce & Industries (FBCCI) and the relocation company. However, necessary actions are also needed for doing business easily in Bangladesh. The current 176th position in ease of doing business status may dismay foreign companies to relocate. 

The government should also negotiate so that the process brings a win-win result. Modern but labour-intensive companies may engage our returnee migrant workers to ease the volatile overseas employment market. By attracting these manufacturing companies to Bangladesh, it will help in creating the opportunity of shifting business paradigm from the present garment industry to heavy industry. Bangladesh Economic Zone Authority (BEZA) is a dedicated public organisation that works for industrial development of the country. BEZA’s current initiatives of building 100 economic zones in the country, including three dedicated zones for Japan, India and China, along with offering a seven-year tax holiday for $100m investment and 10 years for $200 m can help in attracting the global market.

Bureaucracy needs to play a catalytic role by emphasizing business philosophy rather than lengthy and troublesome administrative procedures. Diplomatic overtures should be made to Japan as Japan has greatly contributed to developing Bangladesh through its various projects implemented through Japan International Development Fund and Japan International Cooperation Agency.

Will businesses relocate?

If the Chinese vaccine works or vaccines invented by any other country helps as an effective preventive treatment for COVID-19,  multilateral relations may change. Relocation of industry is not easy. It means investing a lot of money. Moreover, China is the supplier of 50 percent of the raw materials of manufacturing companies. These issues may hinder the relocation process of these companies. 

Expansion of production bases around the world may sustain the world market. It also enhances multilateral relations between developed and developing countries. In this case, the US-Mexico relations can be a good example. If many international companies relocate from China to other parts of the world, China may also attempt to restore the global supply chain process by providing various trade benefits, which may be challenging for developing countries to compete with. Furthermore, because of the coronavirus crisis, thousands of manufacturing companies of Europe and the US may also be facing financial challenges, thus forcing them to re-think about relocating from China.

(The author is a faculty member at Bangladesh Public Administration Training Centre, the apex-training institute for civil servants in Bangladesh. He can be contacted at reza@bpatc.org.bd.)