Strike the right balance on building supply chain resilience: PM Lee

Prime Minister Lee Hsien Loong speaking to the media at Hotel de Russie in Rome on Oct 31, 2021. ST PHOTO: LIM YAOHUI

ROME - Even as countries seek to become more resilient and self-sufficient in the wake of the Covid-19 pandemic, they should be careful to avoid actions that result in unintended consequences, said Prime Minister Lee Hsien Loong.

"If it goes too far, it could prompt reactions and unintended consequences - for example, the deep bifurcation of global trade and technology," he said at the Group of 20 (G-20) Leaders' Summit, which drew to a close on Sunday (Oct 31). "And this could leave us all poorer off and less secure."

PM Lee was speaking during a meeting convened by US President Joe Biden on resolving global supply chain bottlenecks.

The United States has been facing a prolonged supply chain crunch, with Mr Biden announcing earlier this month that the Port of Los Angeles would begin round-the-clock operations to ease congestion.

It is not the only country under such pressure. Supply chain woes have led to price increases all around the world and resulted in the International Monetary Fund trimming its 2021 global growth forecast to 5.9 per cent from a 6 per cent forecast in July.

In his speech, PM Lee noted that Covid-19 disruptions have exposed the complexity and weakness of global supply chains. In seeking to strike the right balance for their countries, there are several factors that leaders can consider, he said.

First, it is clear that all countries wish to maintain some domestic production for certain essential and strategic items, such as food.

"But domestic production, or stockpiling, is not a silver bullet, especially for more complex supply chains," PM Lee observed. For instance, it is too costly and challenging for any one country to replicate the entire ecosystem needed to design and manufacture semiconductor chips.

The same goes for biomedical research and vaccine production, he added.

Next, there is the issue of source diversity.

The pandemic has prompted a rethink of production networks, and a shift of mindsets from "just in time" towards "just in case". It is crucial for countries to broaden their range of sources and trusted partners to ensure supply chains can shift flexibly when any source is disrupted.

"But there are considerations of economic cost and fair competition," he observed. "Diversification will involve governments intervening in commercial decisions, and it should be carried out in a transparent and even-handed manner."

Guidelines and rules will have to be developed, preferably within a multilateral framework like the World Trade Organisation, he said.

Lastly, countries should consider network reliability as transport nodes like Singapore play an important role.

The Republic takes its role as a trusted logistics, transport and energy hub very seriously, PM Lee said.

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During the pandemic, it never restricted the export of any goods - such as N95 masks and vaccines - produced in or transshipped through the country, even when it desperately needed these products itself.

Both its air and sea ports stayed open throughout, ensuring the uninterrupted flow of critical supplies.

In fact, the country increased port capacity to help shippers expedite urgent cargoes and connect with other ports, PM Lee said. It also used digital platforms to help shippers and cargo owners track shipments more efficiently, and vaccinated port workers and ship crew.

"This is how Singapore strives to be a reliable node, " he said. "I am sure many others are doing the same. Hopefully, in time, countries and industries will assess the nodes in the network, the reliable ones will establish their reputations, and a secure and resilient global network will emerge."

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