Asia's Maritime Trade Torpedoed Nehginpao Kipgen & Ankit Malhotra

The declaration of Coronavirus (Covid-19) as a global pandemic by the World Health Organisation has prompted China to issue a record number of force majeure certificates in an attempt to exempt local exporters from fulfilling contracts with overseas buyers.

The move has hit the maritime sector hard, particularly in Southeast Asia where local restrictions are adding to the impact.

The Indonesian Ministry of Maritime Affairs and Fisheries has placed restrictions on the import of fisheries and related products from China to curb transmission of the virus. Jakarta has also tightened the monitoring of frozen fish imports from China to mitigate any potential risk.

Similarly, the Maritime and Port Authority of Singapore has started temperature screening at all sea checkpoints, including ferry and cruise terminals, PSA terminals and Jurong Port for inbound travellers. It has also taken additional precautionary measures such as prohibiting shore leave for personnel in Chinese ports, mandatory temperature checks, keeping a log of crew movements and restricting staff travel to China, among others.

The pandemic has resulted in slumping demand and difficulties in sea delivery. According to Maersk, the world's largest maritime transport company, freight supply is expected to slow further due to loss of demand for containerised goods.

The virus is stopping work at China's shipyards, where dozens of oceangoing vessels are undergoing repairs or are scheduled to be retrofitted with sulphur-trapping exhaust systems in line with the mandatory global maritime directive to drastically cut ship emissions.

Goldman Sachs uses the 2003 Sars outbreak as a reference case to model the potential impact of the coronavirus outbreak on the oil and jet-fuel markets. It estimates a decline in demand for oil of 260,000 of barrels per day (kb/d), primarily driven by a fall in demand for jet fuel of 170 kb/d, with petrol demand also impacted. Oil prices are also expected to drop further.

Shipping companies are reducing transport by seaborne vessels, which is affecting supply chains at all levels. Given that over 90% of international trade is carried by sea, the intra-Asian and global supply chain is suffering a tremendous impact from coronavirus.

Not only are ships unable to enter Chinese ports, they are considered to be "floating quarantines", held in docks with their crews subject to inspections, cancellation of shore leave, and other restrictions.

The countries of Southeast Asia exchange a broad range of goods by sea, in international trade which is connected to China. It is evident that the global shipping business, including that of Southeast Asia, has been one of the biggest casualties of the coronavirus pandemic. More tonnage of container ships is idling around the world now than during the global financial crisis, according to Alphaliner, a shipping data service.

Daily rates to charter tankers and bulk freighters have plummeted more than 70% since early January, as China buys less oil, iron ore and coal.

Nonetheless, as the novel coronavirus spread, foreign ministers of Asean and China met in Vientiane, Laos on Feb 20 to discuss joint measures to combat the pandemic. The meeting was remarkable for tackling not only the health dimension of the crisis but also its social and economic impacts. By promoting this template of cooperation, Beijing set a tone for turning the crisis into an opportunity that could now be shared with its northeast Asian neighbours, Japan and South Korea. The huge social and economic toll of Covid-19 warrants a more concerted regional and global strategy.

In a joint statement, the Southeast Asian countries have agreed to step up cooperation in sharing medical and health information and best practices, to enhance emergency preparedness and response. They have also underscored the importance of cooperation in risk communication and community engagement to ensure that people are promptly and correctly informed about the outbreak, thus thwarting misinformation and fake news.

The meeting also stressed the need to strengthen Asean-led and Asean-China cooperative mechanisms in combating infectious and communicable diseases, recognising the varying levels of development of each member country's public health system.

The parties agreed to minimise supply chain disruptions for urgent medical products and to promote research and development for medicines and vaccines. They also highlighted the value of policy dialogue and exchanges to keep abreast on the latest developments in the control and treatment of the virus.

These steps may help in contributing to institutionalising health cooperation that can go beyond the present crisis. Asean and China are also committed to reducing the adverse impact of the coronavirus on the regional economy and social development.

It is imperative that nations come together to fight against the threat of Covid-19. All people of this globalised world must collectively and concertedly stand together against the pandemic. Everyone should stop the shaming game, irrespective of one's country of origin, racial or ethnic groups. After all, no shore or port is immune to the virus.

Nehginpao Kipgen, PhD, is associate professor, assistant dean and executive director at the Centre for Southeast Asian Studies (CSEAS), Jindal School of International Affairs, OP Jindal Global University. Ankit Malhotra is an LLB student of the university and a Research Assistant at CSEAS.

This article was published in the Bangkok Post dated 20 March 2020. Republished with permission.