Covid-19, the new national security threat

The Covid-19 pandemic has exposed the dependancy of many countries on materials and manufactured products outsourced to offshore companies located around the world. This includes the import of essential items like rice grown in other countries.

The world has just woken up to the fact that Chinese pharmaceutical companies supply more than 90% of US antibiotics, vitamin C and ibuprofen, among others, according to Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations.

The common argument is that China dominates all aspects of the supply chain using the same unfair trade practices that it has used to dominate other sectors – cheap sweatshop labour, lax environmental regulations and massive government subsidies.

Over the past decades, with globalisation in place, companies outsourced non-core activities to offshore plants to reduce costs and increase their own competitiveness. Companies eventually became comfortable with outsourcing more and more of their core competencies and transferring technology to offshore companies located in China.

It’s a fallacy to assume that the reason Apple assembles its phones in China is because of lower cost. Apple CEO Tim Cook has debunked these general assumptions, saying he needs a “rare” combination of skill, sophisticated robotics and computer science for manufacturing of Apple devices.

“There’s a confusion about China,” Cook said. “The popular conception is that companies come to China because of low labour cost. I’m not sure what part of China they go to, but the truth is China stopped being the low labour-cost country many years ago. And that is not the reason to come to China from a supply point of view. The reason is because of the skill, and the quantity of skill in one location and the type of skill it has.”

Although US President Donald Trump has insisted that companies like Apple relocate to home countries, this cannot be done without incurring high costs and investments in developing new skill sets for US workers. Such a move would drive up the price of Apple products, making the company uncompetitive.

Currently, China has all the advantage – the skills, the technology, and a disciplined workforce built over the years. Huawei’s dominance in 5G, which the US has tried to disrupt, is the result of decades of outsourcing core competencies and
learning from reverse engineering, like Japan did many years ago.

Before the spread of Covid-19, the hot topic at seminars and forums were things like food security. Today, the topic is the security of pharmaceuticals, medical equipment or even simple face masks and sanitiser.

Going by the shortage of face masks and protective equipment, countries like Malaysia depend on imports. All kinds of face masks and sanitiser with dubious origins and without proper certification are now being sold at pharmacies and retail outlets at exorbitant prices.

China is not the centre of everything. Malaysia’s Karex Bhd makes one in every five condoms globally. A global shortage of condoms is looming, the world’s biggest producer said, after a coronavirus lockdown forced it to shut down production. This shortage of condoms could could very well lead to another baby boom.

Malaysia is also the world leader in medical and latex gloves production, and the lockdown has affected production and world supplies.

A few days ago, the agriculture and food industry ministry said that Malaysia, a net rice importer, had enough rice to last two and a half months after Vietnam suspended exports to feed its own people amid the coronavirus epidemic. Vietnam, the third largest rice exporter, said it would not sign any new rice export contracts to ensure sufficient domestic supplies, raising concerns about global food security.

In the US, the Strategic Petroleum Reserve stores the supply of petroleum held by the Department of Energy for emergency fuel. It is the largest emergency supply in the world, and its underground tanks in Louisiana and Texas have a capacity of 797 million barrels.

The US started the petroleum reserve in 1975 after oil supplies were interrupted during the 1973-74 oil embargo, to mitigate future supply disruptions. While it has done well in maintaining the emergency fuel supply, it has not done well in the case of medical emergencies.

The US is a prolific organiser and participant in war games but not where it matters the most. The same can be said in most advanced countries where more money is spent defending the countries from perceived enemies than a new phenomena like a global pandemic on the scale of Covid-19. Recently, it was reported that the US military had curtailed another major military exercise, Defender-Europe 20, which was anticipated to be one of the largest US military drills in Europe since the end of the Cold War, in response to Covid-19.

How prepared are we for Covid-19? The shortage of face masks, sanitiser and protective medical coverings and ventilators show the world that we are ill-prepared for a pandemic. The new frontliners are not foot soldiers with advanced weapons but doctors, nurses and medical staff. They are the new marines.

While we may be prepared for natural emergencies like floods, hurricanes and earthquakes, we are ill-prepared to fight an invisible enemy that targets everyone.

War games are useless when an invisible enemy can defeat nations and bring them to a standstill. We need to look at the big picture and include pandemics as part of our natural disaster planning, and derive lessons on how to deal with a pandemic situation. -FMT