CEE to benefit from post-pandemic supply chain risk reduction

Central and eastern European (CEE) countries are looking increasingly like beneficiaries of the impact of Covid-19 on global trade and supply chains, as European Union companies seek to bring their sources of supply closer to home. But companies in the CEE cannot rely on cheaper labour alone to take advantage of any post-pandemic supply chain shift. They will need to invest in skills, technology and digitalisation to be competitive and raise productivity. These are the findings of the latest report from France-based international credit insurance group Coface. It says that the Covid-19 crisis has triggered a “discussion” on increasing supply chain resilience to foreign supply shocks, and this represents an opportunity for CEE countries as EU companies seek to limit their future risk. “Before the pandemic’s arrival in Europe, a lockdown of factories that temporarily suspended manufacturing in China put the supply of intermediary goods at risk. In order to limit such risks, supply chain managers are likely to diversify their sources of supply. While China is not expected to lose its position of global supplier, the aftermath of the pandemic could bring opportunities for Central and eastern European countries in this diversification process, with a higher share in global supply chains,” states Coface. The insurer points out that foreign trade and inclusion in supply chains already increased in recent years in this region. This process was supported by the access to EU membership gained by most CEE countries in 2004. The educated workforce, geographical proximity to western Europe, low labour costs, relatively good infrastructure and stable business climate also attracted various investments. “In recent years, the CEE region has switched to an 'assembly line' for western European companies, with the intention to avoid remaining in the lower value chain of production. The region could be well positioned in the after-crisis review of global value chains and their potential relocation. However, competing with lower labour costs compared to western Europe is not sufficient,” states Coface. “The CEE region has already made progress in enhancing its productivity by a wider usage of automation and 'robotisation'. Nevertheless, this process is only beginning and further investments are needed to be in a favourable spot. Further automation and digitalisation are key issues to remain competitive amid increased productivity. CEE countries could not only benefit from the pillar of manufacturing – the automotive industry – once they pass through the coronavirus shock and cyclical weaknesses, but they would also be able to attract the relocation of other industries,” continues the insurer. Coface says that key beneficiary industries in the region could be electric and electronics equipment production, but adds that relocation would not be limited to these sectors alone. “There is also potential in machinery, chemicals, transports and storage. The region could rapidly adapt to demand, when supply chains of specific industries would be willing to increase their share or enter the region. Many years ago, the core CEE countries attracted investments in low value-added sectors. A similar opportunity could arise for the western Balkans this time around. Those countries have already attracted investments in automotive, electrical equipment, machinery, chemicals and metals, and they are well positioned to gather further relocations across the manufacturing industries,” states the credit insurer. “Moreover, there is a significant opportunity to outsource services to CEE thanks to digitalisation and a large ICT talent pool. The recent pandemic confirmed that many jobs could be done from home, which means that they can be located elsewhere than the original domestic location of the workplace. If CEE countries further invest in digitalisation, the inflow of services could be boosted, particularly in the Baltics and the most developed CEE countries, including the Czech Republic (Czechia), Hungary, Poland, Slovakia and Slovenia,” concludes Coface.

CEE to benefit from post-pandemic supply chain risk reduction

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Mapfre Global Risks boosts profit by 58% despite reduced premiums

Ferma members told AI will bring risk and reward for corporate insurance buyers

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Mapfre Global Risks boosts profit by 58% despite reduced premiums

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Mapfre Global Risks boosts profit by 58% despite reduced premiums

Related Articles