Deglobalisation and regionalisation of value chains are not an immediate outcome of the Covid-19 pandemic or its impact on the current global economic production system. The financial crisis of 2009 previously demonstrated the shortcomings of the globally interdependent financial sector and its severe implications for the real economy.
The trade war between the Trump administration and China also resulted in many critical moments for governments and multinational corporations alike, forcing them to at least reflect about different options for their global setups. The uniqueness of the Covid-19 pandemic, however, lies in its radicality.
An almost complete global standstill in the movement of people, goods, services and financial liquidity forced governments and companies to scrutinise the fundamental elements of their status quo.
Undoubtedly, many African countries suffered immensely from the pandemic shock to their economies. However, the vulnerability in key sectors, such as the pharmaceutical industry, with export restrictions in China, India and other countries, unveiled deeper structural shortcomings, particularly among the poorest nations.
Building local or regional production capacities in such cost- and knowledge-intensive sectors will need much more than optimisation of trading framework through the African Continent Free Trade Area (AfCFTA) Agreement. Africa’s biggest economic partners, the EU and China, need to provide the necessary financial and structural support to develop a self-sustaining healthcare system with local pharmaceutical capacities.
Even the rich Gulf Cooperation Council countries are not spared from structural changes caused by the pandemic. Apart from a severe impact on trade, tourism, hospitality and the transportation sectors, food security is a key strategic challenge. While governments invested heavily in Africa’s agricultural sector as a possible solution after the financial crisis, today the main focus is on agritech.
The UAE already has a small ecosystem of homegrown agritech startups that scored a $100m investment from Kuwait. A major part of the UAE’s newly established $10bn investment fund with Israel is also allocated to the development of agritech solutions.
Undoubtedly, urgently needed structural changes are easier to achieve when the necessary funds are available. However, a long-term strategic vision of devoted and honest political governance is sometimes more important than money.
Mazdak Rafaty is managing partner of Ludwar International Consultancy and SME adviser to the joint Emirati-German Chamber of Commerce. E-mail: email@example.com
This article first appeared in the April/May print edition of fDi Intelligence. View a digital edition of the magazine here.