Global pandemics were being discussed in recent years after a series of flu virus spread over globally and killed people. In history, there are also lots of examples of this kind of events that killed millions of people even without globalization. Globalization has positive and negative effects on Covid-19 event. Information about virus spread immediately throughout the world. On the other hand virus itself spread throughout the world too. As discussed in the paper, some of the countries operated the pandemi better than the others based on some characteristics of the nations, financial capabilities and infrastructural capabilities. Except those capabilities and charateristics of countries, some measures have taken by almost every country to keep the pandemi controlled in their territories like ban on assembly, restrictions on movement of people, state of emergency laws, closing or limiting the custom duties and customs. These measures made this crisis different from we have seen before. We were seeing financial crises caused supply shock eventually effecting real economy. In Covid-19 crises, economies faced both supply and demand shock together, it was coming directly from real economy. Quarantines of workers, restrictions on movements and closures of customs created cuts on supply chains. On the other side of the story, people stopped consuming unnecessary items mostly everything other than food. Some industries effected more like tourism or automobile industry, some industries even effected positively like pharmautical or food industries. Extreme uncertainity even in developed countries stopped both household investments and commercial investments. Decrease in sales and revenues of SME’s is expected to result in insolvency of %25 globally. Government fiscal stimulus packages for decreasing the effect of this crisis is not enough to save all of the commercial institutions in most of the countries. Even in EU, there are huge differences in governmental funds and also effects of the pandemi. Policies of European Central Bank is not welcomed by all of the european countries. Measures were seen as not enough to cover the loss. On the other hand, EU is relaxed its criterias on economic indicators that members should follow. It means that this pandemi is created and will create change in the political scene. Politicians will be probably judged by their policies on healthcare and economy during the pandemic in internal politics.
This pandemic changed the structure of world economy. And its effects on economy will continue in the future. Governments and industries are expected to follow protectionist policies to avoid cuts in supply chain and shortages in important supplies. Companies also should be careful about their markets and supplies, also their finance managements to survive as well as governments.
What will be the effect of pandemics on international trade in general and in Shoe manufacturing industry?
As IMF & Coface reports showed, there is %4,3 decrease in international trade, %25 of corporate insolvencies, %12 loss in corporate revenues, %1,3 decrease in world GDP. And also pandemic slowed the circulation of goods in all phases: transportation, custom clearance, storage and sales. Seaway transaport did not effected much, but airway transportation is highly effected due to the closings of air spaces which is turning to normal in terms of transportation of goods.
Export companies are facing delays in deliveries and cancellations of orders from both sides according to the pandemic levels of countries of importer and exporter. Cuts in supply chain, restrictions and demand issues can stop production. At the start of the process companies can get money that reached its maturity. But, in forecoming months they will face liquidity problems because of non-producing period and maybe the charges or fees based on their sales contracts. Companies also probably look for extra and local suppliers to avoid cuts in supply chain in case of any kind of pandemics in near future.
When we focus on the shoe manufacturing industry, manufacturing countries who have international suppliers effected more in this pandemic like Italy. According to the World Footwear estimations for Europe (-27%) are a bit more worse than estimations for North America (-21%) and Asia (-20%) deacreases are expected in shoe sales. This is the effect of demand shock of this pandemic. On the other hand, #stayathome measures, harden the production for alarmed countries and companies who have leather or shoe parts suppliers in those countries. Its effect on walk-in shoe stores are the worst in the world. Online shoe stores are in a better condition than the others.
How will international trade finance methods be affected from Covid-19?
Probably we will see high demand in international trade finance methods of factoring, forfaiting, credits, working capital loans caused by the decrease in both domestic and international trade and revenues. I think, It is possible to see new types of finance methods covering losses for these kind of situations in near future. Cash flow and liquidity problems of SME’s will result lots of bankrupcies in some sectors if they do not use or not available to use these tools. This loss need to be covered, and should be prevented happening again in the future.
What are the suggestions/advices to export companies during Pandemics?
For further crises, export companies should focus on different markets all across the globe. The logic behind this is simple actually. Virus started and spread from far east, their economy stopped and turning back to normal. While they were at decreasing level after peak point, Europe was coming the peak point. The same relations happening between American continent and Europe. It takes time for virus to reach other continents. While one market is closed, other one is working. If you have customers in each market that have potential to cover your liabilities for short term with their imports, you probably get through this process with less harm. On the other hand, rather than short term loans, companies should focus on long term loans.
On the other hand, companies should plan different supplier operations – including local suppliers – to continue production. While doing this, company should create corporate policies to keep these pandemi out of the company. On the other hand, company should focus on sales contracts to avoid charges and fees based on these kind of pandemis. I think we clearly see that, companies should not trust governments about fiscal stimulus packages. They can help in some points, but companies should have financial ability to handle the situation themselves with their assets even while using the government funds. Also they should use trade finance methods in case of any need like working capital loans, factoring and special credits for exporters. They should also use export credit insurances to secure themselves.
On the other hand, if their product is available, they should focus on e-retailers as customers. Even the shops are closed, with a decrease, online sales continues. And for production, if they have ability, they should focus on industry 4.0 based investments to decrease the number of employees – unfortunately-.
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