The latter was above all, manifested in the May US NFIB Small Business Optimism survey, which showed 93% of companies surveyed reporting few or no qualified applications for open positions, implying considerable skills shortages. The latter is not that surprising, in so far as skills shortages were long evident in quite a number of sectors even before the pandemic, given that the structure of labour demand and skills requirements are probably changing due to the pandemic, along with advancing technology, and which national and education mandates are struggling to keep up with. It is also likely that a good many workers in those recreation and leisure sectors, that have been hit hardest by pandemic restrictions have sought and found other forms of employment, while others have or are reconsidering how they want to work for any number of reasons including greater flexibility, or even health security concerns, be that in working hours or location. Some employers will clearly need to adapt, as will employees to what will be quite substantial and lasting changes to the workforce and the workplace. It serves as a reminder that vaccine roll-out is anything but a panacea for returning economies to a more ‘normal’ modus operandi. This will present many challenges in gauging what ‘normal‘ demand will be in many sectors, and is likely to signal rapid changes, and a great deal more fluidity rather than predictability, in turn increasing the need for agility and flexibility, which Asia and to some extent the USA are likely to be better at capitalizing upon than Europe.


In terms of physical goods and raw materials, there are a number of themes that are emerging, many of which were nascent pre-pandemic, and others symptomatic of a world, which has been too complacent about supply chain security and concentration risk, just as it was about health and cyber security. This short article does not pretend in any way to be comprehensive, but rather to highlight some examples and underline that many are structural, rather than cyclical or transient. The semiconductor shortage is impacting a broad swathe of industries, and is both a function of production concentration risk, as well as a desire to


IT IS ALSO LIKELY THAT A GOOD MANY WORKERS IN THOSE RECREATION AND LEISURE SECTORS, THAT HAVE BEEN HIT HARDEST BY PANDEMIC RESTRICTIONS HAVE SOUGHT AND FOUND OTHER FORMS OF EMPLOYMENT.


become less dependent on output from China, in no small part due to US sanctions on companies like Huawei. It has to be said that both the US and Europe have been naïve in assuming that it was merely a question of looking elsewhere, without formulating and implementing plans to re-shore some of this. A look at ASEAN China trade also reveals that China has been quick to respond by increasing its FDI in ASEAN countries to boost capacity in a wide range of industries, with its share of FDI (in ASEAN) rising from ca. 10.0% in 2016 to some 40% in 2020. This serves two purposes, firstly to draw ASEAN more closely into its economic orbit, secondly to circumvent sanctions and anti-China sentiment, as well as reducing production (above all labour) costs in some cases. It also serves as a reminder that that the sort of linear, goal oriented thinking that all too often neglects a lateral and critical thinking perspective on systemic issues. It is, as has already been seen, a recipe for systemic bottlenecks; it is equally a product of modern era politics, where policies are formulated for short-term political gain and gratification, with almost no consideration of how a country’s needs and development are best served in the longer run.


There are other issues, for example it could end up resulting in a build-up of excess capacity, and by extension inventories, which could in turn be the seedbed for the sort of boom bust cycle that has not been seen in manufacturing for many a decade, as globalization and ‘just in time’ production and delivery along with globalization had largely obviated, even eliminated such vulnerabilities. As much as the pandemic has resulted in hoarding (short-term phenomenon) and will continue to encourage establishing alternative supply chains, some of which will be redundant, this comes with a cost in terms of corporate capital allocation. To be sure, a super low interest rate environment and in some cases fiscal subsidies can offset this cost base increase, but could present risks going forward, when rates rise or subsidies are withdrawn. Many will argue that increased use of automated technology will provide a further offset, but this in turn comes at the price of creating less employment, which as the recovery from the pandemic gains traction will be a key consideration, as governments unwind employment support schemes, and companies re-assess demand profiles and revenue prospects,


14 | ADMISI - The Ghost In The Machine | Q2 Edition 2021


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