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