SMES need to find niche to fend off tech gi­ants: Kerry Glob­alink

The Myanmar Times - Weekend - - International Business - THOMP­SON CHAU t.chau@mm­times.com

LO­GIS­TICS and e-com­merce will of­fer op­por­tu­ni­ties for small and medi­um­sized en­ter­prises in Myan­mar that are able to de­velop a niche and of­fer cus­tomised so­lu­tions, a lead­ing lo­gis­tics ex­pert said.

At the sev­enth Asian Lo­gis­tics and Mar­itime Con­fer­ence in Hong Kong last week, The Myan­mar Times spoke to Sid­dique Khan, CEO of Kerry Glob­alink Lo­gis­tics about the im­pli­ca­tions of regional trade ini­tia­tives and tech­nol­ogy on Myan­mar’s lo­gis­tics and ecom­merce in­dus­try.

Kerry Glob­alink Lo­gis­tics is a joint ven­ture be­tween sup­ply chain so­lu­tions provider Kerry Lo­gis­tics Net­work and freight for­warder Glob­alink Lo­gis­tics.

The Myan­mar Times: For the lo­gis­tics sec­tor, would Belt and Road al­low smaller economies like Myan­mar to reap sub­stan­tial eco­nomic re­wards?

Sid­dique Khan: The lo­gis­tics sec­tor is ser­vic­ing the trade, and as the trade grows, lo­gis­tics busi­nesses grow – hand-in-hand. For the Belt and Road, it’s also about trade fa­cil­i­ta­tion. China is mov­ing west­ward, in­vest­ing in Cen­tral Asia, Pak­istan – even Afghanistan, the Cau­ca­sus and Rus­sia. In­vest­ing means that China is not go­ing to start ex­port­ing fin­ished goods, they’ve al­ready been do­ing that.

China is go­ing to be fo­cus­ing on lo­cal man­u­fac­tur­ing and as­sem­bling be­cause some places in Asia like Viet­nam or Myan­mar are a lot more at­trac­tive in terms of labour costs – whereas China’s labour costs, over the last 10 years, has tripled or more. As the Chi­nese GNP grows, so too does the cost of man­u­fac­tur­ing ba­sic goods. That means that China has to re­ally shift their assem­bly and man­u­fac­tur­ing out­side of China. And of course, neigh­bour­ing coun­tries and Cen­tral Asia will have di­rect ben­e­fit which will go to­wards small and medium-sized en­ter­prises [SMES] who are at the fore­front of trad­ing.

SMES don’t have to go deeper into China to se­cure their goods; China’s goods are com­ing closer to them. That means a lot more trad­ing fa­cil­i­ties and cross-bor­der trade – this is where lo­gis­tics comes in. As the busi­ness grows, the trade vol­ume grows – lo­gis­tic ser­vices will grow along­side. For a busi­ness to scale from small to medium, or medium to large, it is not easy – there is al­ways a ques­tion of sup­ply and de­mand.

Ten years ago, small en­ter­prises who were sell­ing niche prod­ucts didn’t have enough re­sources to dis­trib­ute be­yond their cities. But the e-com­merce plat­forms that we see, small-time man­u­fac­tur­ers who are niche, are able to put their prod­ucts on those plat­forms. Some very ba­sic things made in Asia are bought in Europe by e-com­merce plat­forms – it’s not about those four to five global gi­ants. Of course, they [global gi­ants] were the early in­vestors. But fu­ture-wise, it’s about a lot of SMES who are ben­e­fit­ing from e-com­merce dis­tri­bu­tion plat­forms which is more at­trac­tive than phys­i­cal dis­tri­bu­tion.

We have a cus­tomer which is a nice man­u­fac­turer of cos­met­ics. Their reach now is about as big as a global brand be­cause they’re us­ing e-com­merce plat­forms to reach out to their con­sumers. That’s why we see Belt and Road driv­ing in­fra­struc­ture de­vel­op­ment. It’s mak­ing the cost of mo­bil­ity more at­trac­tive, cross-bor­der trade is be­ing pro­moted, and this is where SMES will use e-com­merce more to in­crease their sales. Again, it’s a whole cy­cle, mul­ti­ple fac­tors that will con­trib­ute to SMES’ de­vel­op­ment.

There are con­cerns that big tech gi­ants would be com­ing into the re­gion and dom­i­nate the game. Do you think that will hap­pen or will smaller com­pa­nies in South­east Asia still have room to play?

For now, that’s the trend: big tech gi­ants have the re­sources and are ex­pand­ing rapidly. But at the same time, a larger size loses flex­i­bil­ity and cus­tomised so­lu­tions.

You would see global gi­ants like those in the au­to­mo­tive sec­tor, but then you also have niche mar­ket play­ers who are also pro­duc­ing au­to­mo­biles who have their own mar­ket­place. E-com­merce is for play­ers who will find their niche and com­pete with big tech gi­ants but can of­fer more cus­tomised so­lu­tions

Could you ex­plain why con­nec­tiv­ity and com­mon plat­forms are the two so­lu­tions for in­ter­na­tional trade?

Con­nec­tiv­ity - we feel that we can eas­ily build the econ­omy of scale and re­duce the cost of do­ing busi­ness in many of th­ese coun­tries. But you see a lot of wastage: cost of dis­tri­bu­tion de­pends on qual­ity of in­fra­struc­ture – land or sea-based.

We also see in­creased ef­fi­ciency in law en­force­ment, cus­toms, bor­der con­trol and im­mi­gra­tion and how they cre­ate bot­tle­necks and how the cost is paid.

Com­mon plat­form means that ev­ery coun­try that wants to take the ben­e­fit of global e-com­merce have to build soft in­fra­struc­ture. There is so much in­vest­ment go­ing into ‘hard’ in­fra­struc­ture, there are many in­stances where there are per­fect roads, but then the dig­i­tal so­lu­tions around cus­toms, doc­u­men­ta­tion, bor­der cross­ing is not there.

This is where soft in­fra­struc­ture needs to com­pli­ment clas­sic in­fra­struc­ture – the dig­i­tal back­bone needs to be built and where pub­lic-pri­vate part­ner­ships( PP P) needs to be fos­tered. There are in­stances in Belt and Road coun­tries where law en­force­ment and cus­toms are to­tally de­tached from the eco­nomic de­vel­op­ment in the coun­try. It has to be a more in­clu­sive plat­form: eco­nomic de­vel­op­ment has to go hand-in-hand with leg­isla­tive de­vel­op­ment which cre­ates ease of do­ing busi­ness.

By not har­mon­is­ing your var­i­ous laws, you’re only in­creas­ing the cost of mo­bil­ity, which is then passed onto the con­sumer. Con­sumers are the ones who are pay­ing the price.

Kyauk­phyu has been ear­marked as the site for a deepsea port to be built by the Chi­nese.the port is ex­pected to be a strate­gic as­set used to fa­cil­i­tate trade and lo­gis­tics be­tween China and Myan­mar.

Photo: EPA

Sid­dique Khan, CEO of Kerry Glob­alink Lo­gis­tics.

Photo: Supplied

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