The corona virus pandemic has caused numerous disturbances around the world, which, in addition to huge health consequences, has also caused problems in the production and transportation of goods, which has had consequences for almost every inhabitant of the planet. And while some people profited greatly from the pandemic, these disruptions had a big impact on the pockets of ordinary people, which was especially felt by the citizens of the region.
Even after production began to recover after a few months of break, disruptions in transport two years after the outbreak of the pandemic are still ongoing, which continuously leads to a rise in prices.
Economic analyst Igor Gavran points out that there is almost no segment of the economy that is not affected to a certain extent by these disturbances due to globalization and the interconnectedness of economic flows. Even those economic entities that are not directly engaged in international trade have experienced disruptions in the availability of raw materials and raw materials that they procure from domestic intermediaries, as well as in the reduction of demand for their products and services due to higher costs that their customers are exposed to in other business segments, explains Gavran.
Although the price increases were not of the same extent in all affected sectors, the general trend is an increase in the prices of products and services due to increased transport costs and disruptions in its development.
Long-term expert in the field of transport, Prof. Ph.D. Velibor Peulić says that it is almost impossible to give a simple and one-dimensional answer to what led to the global disruption in transport, which cascaded to a series of problems for ordinary citizens.
Global supply chains, and shipping as an important link, was, and still is, at risk due to an unprecedented crisis, driven by a dramatic increase in demand, various COVID-19 restrictions, a lack of free shipping capacity to fulfill supply chain orders, and the emergence of supply chain bottlenecks , and those events, along with drastic fuel price increases, represent the basis of the ideal influence for creating a `storm` of supply chain disruptions and up to record transport prices in 2021, explains the transport expert.
Consequences for citizens
The above has consequences that end customers feel very much in their pockets.
`If we add other costs to these variables, for example ship taxes for passage through the Suez Canal, it is to be expected that in the first quarter of 2022, ship transport costs will reach a maximum price increase of 25-30 percent. The calculation of the prices of goods and services that are part of such supply chains, in proportion to the increase in costs, will directly affect the increase in the price of goods and services that are connected to the chains`, says Professor Peulić, who reminds that the supply chain also includes road transport in its structure, which is was also exposed to disturbances.
As he says, road transport is an indispensable link in the supply chain, whether it is inbound or outbound, and it is certainly irreplaceable in the realization of the `door to door` strategy.
`The road transport sector has also faced stormy disruptions to the global supply chain, from the congestion of European ports, in the retail and manufacturing sectors across Europe we are seeing exponential growth in demand, capacity shortages have increasingly become a feature of the European road transport market, various COVID restrictions that have slowed down, generational change of drivers, lack of drivers, globally 24 percent of driver jobs are unfilled, in European countries there is an average shortage of around 700,000 drivers, rising fuel prices, `free time - danguba` waiting at border crossings...`.
`In order to improve road transport, it is necessary to unblock flows, reduce the costs of administration, terminals and minimize waiting time at border crossings, speed up and simplify procedures by applying the NCTS (New Electronic Transport System), find a model for influencing the price of fuel with the aim stabilization of the road transport system`, explains the transport expert.
According to him, it is necessary to start digitizing documents immediately with the application of NCTS, in order to reduce the costs of transport.
In the past two years, these disturbances, although a large part of them occur far away, were well felt by everyone, including the citizens of the region.
`whiplash effect`
In the theoretical consideration of conflicts and disruptions in supply chains, the so-called `whiplash effect` is known, which means that consumers are already paying the price of this chaos in the supply chain, says Peulić.
`It is necessary to coordinate, both at the global, regional and local levels of the executive authorities, to react immediately in order to avoid delays and shortages of products, and to mitigate disruptions through the optimization of possible costs resulting from existing time and space capacities. The reference index Q3 2021 European Road Freight Rate was 107.6, which is three points more than in Q3 2020, and we expect that the price of road transport in these circumstances will continue to grow in the first quarter of 2022 by a minimum of six percent, and if we add growth in other modes of transport, the cumulative burden of the price of transport directly applies to all segments from producers to consumers`, he states.
For the citizens of the region, an objectively poorer part of Europe, solving these disorders as soon as possible is of the greatest interest.
Certainly, the solution to these disturbances should help to stabilize and then lower costs and consequently the price of products and services proportionally to the share of transport costs and the impact that transport flows have on certain segments of the economy, says Gavran.
`However, prices in principle have the characteristic of remaining at a higher level after the original increase, because other factors also work in the meantime, and the inflationary trends accompanying the recovery from the pandemic crisis contribute to price increases, regardless of transport costs. Therefore, it is not realistic to expect an imminent general drop in prices or their complete return to the initial level, but the resolution of these disturbances and the drop in costs should lead to positive trends and improvement of the current situation`, he explains.
Like the rest of the world, he adds, the region is affected by trends caused by disruptions in transport, with the emphasis that it could not influence the key and global ones in any way, but only accept the consequences of such developments and try to facilitate its business with alternative supply routes and reduction of other costs.
Economic situation
`Citizens can expect positive effects only when there is a global and then regional stabilization of trade terms and a significant recovery of the economy, but in our region the economic situation was not good even before the pandemic, so citizens will remain faced with long-term economic and other problems and low standard of living for other reasons that improving supply chains cannot solve`, says Gavran.
And the solutions for the disruption in transport and the return to the situation before the pandemic are not yet in sight.
`There are no simple and quick solutions, that is, it is realistic to conclude that we will not return to the supply chains from before 2019, but that we will witness the establishment of a new supply chain. In other words, nothing will be the same`, says Peulić.
According to him, `we are witnessing the creation of new supply chains, it is necessary for logistics services to invest in people, it is necessary for the digitalization and simplification of procedures to start immediately with implementation, it is necessary for the coordination of those responsible for transport policy to offer more efficient solutions in procedures, and to free up transport operators taxes on the price of fuel (excise duty)`.
`Alternative suppliers are already starting up, and the production of certain components, which formed the backbone of the security level of stocks, will be redirected to the `return home` line. We can probably hope that the third quarter of 2022 will lead to the normalization of the supply chain, of course in a modified form and balanced costs`, he explains.
A potential opportunity for the region
As for the expectations for our part of the world, when it comes to the consequences of these disruptions, Professor Peulić says that the region could expect the launch of new plants for the production of components that are currently produced in some other markets.
`Disruptions in supply chains create a chance and an opportunity for the region to impose itself in certain branches of industry, and certainly the word `cooperation` would be desirable in the links between the CEFTE countries. Will we take the chance? It depends exclusively on us`, believes Peulić.
What is certain, he adds, is that in the transport sector the region must immediately:
Liberalize the market of CEFTA countries, without conditions and without permits;
Introduce the digitization of documents and the application of the NCTS system in the CEFTA region, in order to reduce retention and eliminate unnecessary costs;
Harmonize legal acts related to Intermodal transport, define container terminals in the region;
Jointly act towards the EU in the negotiation process, based on the quality charter fulfilled by transport operators, with the aim of removing barriers to market access (maximum increase in the number of permits);
Proactively get involved in EU Mobility Packages programs;
Establish routes of route trains with the aim of connecting the Adriatic ports and the interior;
Minimize unnecessary detentions and `routine control` controls;
Harmonize tax policy in transport;
Enable cabotage between CEFTA countries;
Simplify procedures and mutual recognition of certificates and documents in the form of digital certificates.
If the countries of the region do not start implementing common points, Professor Peulić expects the following:
Accelerated departure of drivers, train dispatchers, train drivers and other workers to EU countries for jobs in logistics; (based on research, almost 12,500 workers from BiH are already in Slovenia working in logistics);
Capital migration and investment in Slovenia and Croatia, 2,500 new rolling stock or almost 125,000,000 euros were purchased in Slovenia from Bosnia and Herzegovina alone;
Domestic production will depend exclusively on international carriers or will develop its own transportation capacities, which is an outdated model of supply chain management.
