Whilst much has already been written about the impact of COVID-19 on the Pacific, the severity of certain global issues such as disrupted trades routes and pressurised supply chains has impacted the region tremendously.
For the past 18-months, the impact of COVID-19 on trade routes and supply chains across the globe has been felt heavily by Pacific consumers and businesses alike, as identified by the recent Pacific Trade Invest (PTI) Australia’s 2020 Export survey where almost 40 per cent of Pacific exporters from across the South Pacific cited challenging logistics and shipping routes as a major issue. This unprecedented disruption to global economy and world trade has felt more arduous than ever as production, consumption, and trade routes have been scaled back, rerouted, or ceased. This has presented significant challenges for the Pacific Islands, a region of nations known for the ocean that both unifies and isolates them.
Within supply chain circles, there is a phenomenon known as the ‘bullwhip effect’ where a small impact in one part of the supply chain has a large and disproportionate impact as it travels through the extended supply chain, creating variability and uncertainty. Over the last 18-months, several bullwhip events have severely impacted global supply chains, and in turn, the Pacific.
In early 2020, COVID-19 acted as the initial catalyst and bullwhip event, with an immediate and direct effect on air cargo capacity and cost. With the distinct majority of Pacific airfreight being carried in the belly-hold of passenger crafts, the reduction in weekly international passenger flights had a significant and immediate effect of imports and exports throughout the region.
Compounding this, the lack of tourist travel began to drive an increase for consumer goods across most modern economies. Globally, this resulted in disproportionately higher volumes of imports in Europe and North America which then absorbed a substantial proportion of available shipping and container capacity, while also causing shortages in sea freight capacity and bottlenecks at key sea-ports around the globe.
These seaport constraints have been further accentuated by labour shortages, industrial disputes as seen in key Australian ports, operational productivity declines, and other surprise events like the Suez Canal incident in March 2021 that disrupted shipping schedules between Europe and Asia, exacerbating the already strained container shortage and supply chain disruptions.
These global supply chain issues have all had a trickle-down effect into the Pacific, with 86 per cent of exporters believing that COVID-19 has negatively impacted their local economy, according to the PTI Network’s July 2021 Pacific Business Monitor.
There are also signs of optimism, however, particularly as Maersk begins to resume shipping to Fiji after a seven-year absence, bridging a gap between New Zealand and the Pacific once more and increasing capacity on the Southeast Asia route. Alongside this, the introduction of the Trans-Tasman and NZ-Cook Islands travel bubbles will also allow for an immediate impact on additional services across several carriers.
With global sea freight supply chains expected to take anywhere from 6 to 12 months to stabilise, we know the road to recovery will be slow. That said, we also know that resilience and optimism are key characteristics of Pacific Islanders and that most importantly, that the Pacific will recover.
When global demand does return and supply chains stabilise, I expect to see an immediate increase in business for Pacific Island exporters, and I’m hopeful this will happen in the coming months. In the meantime, we must do all we can to support our Pacific neighbours through this recovery. As an organisation, PTI will strengthen its efforts to help exporters grow their online presence by providing data, knowledge, training, and technology so that Pacific exports may be able to better withstand the aftershocks, perhaps due to further isolation and lockdown measures in the world as a result of subsequent waves from the COVID-19 pandemic.
More broadly, solutions must be found on key challenges being faced by Pacific Island exporters such as access to cost-effective small parcel logistic services. In 2020, the global PTI network also launched the Pacific Business Monitor, a series of surveys aiming to capture the evolving sentiment among Pacific businesses on their economic and financial conditions as well as the Freight Assistance Package, a monetary grant providing tangible relief to businesses facing the unprecedented pressures the COVID-19 economic crisis has presented.
Despite the current uncertainty faced by the people and businesses of the Pacific, I retain a great sense of optimism for the future and endorse the sentiments of Jonathan Pryke, Director of the Pacific Islands Program at the Lowy Institute, who writes in the foreword to the 2020 PTI Export Survey:
“If there is any silver lining, it’s that Pacific exporters are accustomed to doing it tough … despite these significant headwinds, many exporters not only prevailed but prospered. Let’s hope that resilience continues.”
