As a new normal in global trade diversification emerges, off-shoring opportunities arise in the region. But Cambodia might lose out in the fight for a larger slice of the investment pie
In past months, the novel coronavirus pandemic has accelerated the need to diversify and strengthen supply chains to ensure security.
This, as trade becomes fragmented on the back of a slowly forming protectionist global economy because of restrictions on trade, investments and technology transfers.
No doubt sombre, this scenario would effectively be an overarching objective of governments and companies, which overtakes cost and efficiency considerations, a recent Moody’s report said.
“High reliance on a single supplier [whether a single producer or a group of producers from the same country] creates the potential risk of supply shortages for companies and economies during pandemics, natural disasters and geopolitical conflicts.
“A major source of concentration risk is reliance on producers from China, which accounted for 20 to 25 per cent of advanced economies’ total imports in 2019,” it said.
Therefore, Asian countries ex-China are likely to benefit from diversification from that country, provided they have sound economic fundamentals, reliable infrastructure, sufficient human capital stock, and local geopolitical and supply security risk.