Policy support crucial to manufacturing sector’s recovery from pandemic identified

Global distribution issues and increasingly complex supply chains are forcing companies to modernize the tools they use in forecasting demand and planning how to meet this demand.

A new study on Asian manufacturing productivity recommends implementing policies that will enable manufacturers to recover from the pandemic fallout and bolster the sluggish pace of productivity growth.

Daehong Kim, senior research associate at the Center for International Development of the Korea Development Institute (KDI), shared in an April 5 online presentation the findings of the APO Productivity Outlook 2021, a joint publication by the Asian Productivity Organization and KDI.

Covered by the study are a handful of Asian nations, including the Southeast Asian countries of Vietnam, Thailand, Indonesia, and the Philippines.

Kin noted that the ongoing pandemic has severely disrupted manufacturing activities across all countries, particularly in the second quarter of 2020, mainly due to the strict lockdown and quarantine measures.

“Unsurprisingly, the impact of the COVID-19 crisis on manufacturing activities has been profound in the second quarter of 2020, consistent with the patterns of mobility restrictions driven by containment measures,” he said.

“Notably, a decline in manufacturing activities was most pronounced in all middle-income countries, especially low middle-income countries, with a notable halt in mobility in the given period.”

Further, for these middle-income countries, “the accompanying unintended, negative consequences would have a lasting impact on productivity growth,” Kim said.

The outlook has also found that there is a gradual but uneven recovery to pre-pandemic levels, especially in the first quarter of 2021, but full recovery remains uneven, largely due to the potential risk of further large-scale contagion as well as the outbreak of new variants such as the omicron.

Looking ahead, Kim said the pandemic will likely deepen the prolonged growth slowdown of the manufacturing sector, requiring policies that will tackle the challenges and support recovery and growth.

These policies should address two areas in particular: disruption of global supply chains and accelerated adoption of digital technology.

Supply chain disruptions could lead to the shutdown of manufacturing facilities, thus weakening investment and supply chain linkages. Leading manufacturing industries will be the most affected, and this will reduce trade volumes greatly.

The accelerated adoption of digital technology is also expected to continue as a result of the pandemic. “The adoption of new digital technologies—digitalization of industry—has been at the forefront of industrial transition,” Kim remarked.

But he added: “Without the necessary preconditions, COVID-19-induced technology adoption would exacerbate productivity gaps.”

To address the challenges of global supply chain disruption, Kim said what are needed are well-targeted instruments that would reinforce the disrupted production activities in light of country-specific conditions.

Also important are policies that would build resilient institutions and promote a growth-friendly business climate in order to enable firms to join global value chains, Kim said.

To tackle digital technology adoption-related issues, Kim said it is crucial to provide education and technology training to workers to equip them with digital-related skills needed to complement the introduction of new ICT and manufacturing technologies.

Moreover, these issues will require policies that support investment in the upgrading of digital infrastructure (for example, high-quality broadband network) and better targeted R&D support.

Close Menu