Newsletter March 2020 (Part I)
Coronavirus: Impact on the Contracting Business
First, it was SARS (Severe Acute Respiratory Syndrome) in 2003 and now COVID-19!
As the world is slowly being affected by COVID-19, starting from its epicentre in Wuhan, China, this series of short articles first examine the impact it has on the contracting world. Then, we will make practical suggestions on how our industry (recruiters, contractors, management companies) can weather this storm.
Beginning With Wuhan, China
The decision to lock down the epicentre cities (Wuhan, Chongqing, followed by Beijing etc.) was necessary to contain the spread. Consequentially, it hindered operations within these major cities… especially Wuhan, being the manufacturing and technological hub.
This has a cascading impact in a globally interconnected world, spreading to South Korea, Japan, Italy and eventually the US. Some of the impacts are:
- Supply Chain Disruptions: Manufacturing of products sold globally is affected. For example, Apple and Microsoft cited supply chain disruptions.
- Retail Disruptions: Most stores in China are closed, depriving the much needed revenue in an already difficult economy.
- Other sectors affected include tourism, retail, food & beverage amongst others.
Impact in the Contracting Space
1. Project Impact
Projects will be held back throughout the region. Telco projects like Huawei, already facing headwinds from the trade war, is further afflicted. This also applies to energy projects as economies contract. Hence, we are seeing a marked decrease in “project type” kind of bids since January.
2. Protectionist Impact
Even prior to the virus, countries are already beginning to guard the employability of their own citizens. These include Australia, Singapore, Indonesia and Japan. The impetus is further strengthened now as the virus infected economies are resulting in business contractions and further job losses.
In Singapore, for example, the penalty for favouring expatriates for job positions has moved from mere rejection of Employment Pass (EP) applications to companies being placed on Watchlists (with unilateral suspension of all approvals) to expulsion of existing EP holders to potential jail for directors.
3. Contractor Mobility Impact
For a start, many countries have banned the entry of China citizens since the virus outbreak. If they should be allowed in, there is usually a 14-day quarantine period. Given the extent of China projects favouring Chinese placements, we see this as a strain on available resources to match project requirements.
4. Timing Impact
Most of these effects will not be felt immediately due to the existing contractors already onboarded. However, the notable impact will be felt in approximate two to three months later as decommissioned contractors are not to be replaced.
In the next mailshot, we will share some of the defensive measures, drawing from our survival from the SARS saga.
Should you need assistance in Asia Pacific, we would be pleased to hear from you.
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