Just how vulnerable the global economy can sometimes become to its interdependence is graphically reflected in the threatened worldwide and seemingly worsening flooding currently afflicting Thailand.
Apart from the fact that Thailand is the world’s largest rice-exporting country, accounting for around 30 per cent of global rice exports and therefore a critical link in the global food chain the country is also home to a number of hi-tech manufacturing companies including some of the leading international players in the auto, computer and food processing industries. Several of those firms operate from huge industrial parks set up in Bangkok and other parts of the country and the severity of the flooding has meant that many of them have been completed inundated and have therefore been abandoned.
There are differing views on the extent to which the flooding of several of Thailand’s rice fields will affect global supplies in the period ahead. One school of thought suggests that a recently introduced government rice mortgage intervention scheme under which farmers are now paid a fixed price for their paddy that is almost 50 per cent higher than the market price has already reduced the competitiveness of the country’s rice on the global market and that countries like India have already been filling the void. The argument here, which incidentally, is being made by an official of the International Rice Research Institute (IRRI) is that the effects of the flooding In Thailand are unlikely to affect global rice supplies more than the intervention by the government has already done.
Another school of thought suggests that worsening indications of global food shortage suggest that Thai rice exports will continue to be critical to global food supply even making allowances for the correctness of the argument about a lack of competitiveness since it is availability – given global food shortage issues – rather than price that is now the critical factor.
No such debate, however, attends the concerns that have already been expressed over the anticipated impact of the floods in Thailand on the global information technology industry. About a quarter of the hard drives, an indispensible memory component in the manufacture of computers are manufactured in Thailand and some of the biggest global manufacturers of hard drives including Western Digital and Seagate have already been affected by the flooding, the former to the extent that it has now closed its operations there completely.
The problem that arises for the global computer manufacturing industry is immediate and severe. The supply chain culture in the IT sector demands the continual production of hard drives and other components since computer manufacturers, rather than hold large quantities of costly components in stock, prefer to secure sustainable supply contracts. The upshot of this is that many of the big players in the industry have been caught cold. In the United States, for example, some companies have already increased computer and computer component prices while distributors, have in some cases, ceased to supply components.
One might not have thought, of course, that Guyana was likely to be in the least affected by flooding in Thailand. That, as it happens, is not the case, for two reasons. First we cannot detach ourselves from the increasingly interdependent nature of the global economy not from the effects of the contemporary supply chain culture. Secondly, as far as the supply chain is concerned Guyana, in terms of the global IT industry is pretty much at the bottom of the ‘food chain’ so that the impact of events in Thailand as those relate to the supply problems in the IT sector will inevitably affect us, though to what extent, is unclear just now.
Some of the smallest players in the local IT sector still appear blissfully unaware of the problem, its scale and its implications.
A few of the larger companies are already forecasting price hikes and parts shortages ahead of the Christmas period. The further prognosis is that the restoration process which the manufacturers in Thailand will have to pursue once the floodwaters subside could take as many as three to six months in some instances and that even when production of key computer components like hard drives is restored to what it was prior to the flooding, the distributors that supply countries like Guyana with those components will have to wait until the demand of the ‘big players’ in the global IT sector like Samsung, Hewlett Packard and Lenovo are met before their own supplies can be restored.
The Thai flood crisis and its effects in the global IT sector have, for Guyana, come at a time when there is evidence of increasing growth locally and when, moreover, the government appears to be on the threshold of commencing the distribution of its one laptop per family. Additionally, we are on the threshold of Christmas, when computer sales would have been likely to increase.
Beyond these considerations, any protracted drying up in the supply of computer components is bound to affect, to varying degrees, a local business sector that has now come to depend – heavily in some cases – on information technology to manage their operations; then there are the small service centres that have sprung up across the country and which now provide employment for perhaps several hundred Guyanese but which may well be put on a protracted hold if the worst comes to the worst.
The point about all this is that while increasing tight and seemingly inefficient supply chains that ‘hive off’ specific areas of production to specific countries and entities sometimes make for a better-ordered economy, there is a downside to that kind of specialization, particularly when, as in the current case of Thailand and the earlier case of the devastating tsunami in Japan, key producing countries are vulnerable to natural disasters and other forces.
Perhaps there is a parallel right here in the Caribbean where the current regional discourse on greater Caricom dependence on Guyana’s potential as a major food supplier also raises questions as to whether that discourse ought not to take account of the country’s vulnerability to flooding and the need to take account of that consideration is the ongoing discourse on regional food security.
