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by EOS Intelligence EOS Intelligence No Comments

COVID-19 Unmasks Global Supply Chains’ Reliance on China. Is There a Way Out?

Dubbed as the factory to the world, China is an integral part of the supply chain of a host of products and brands. From manufacturers of simple products such as toys to complex good such as automobiles, all are dependent on China for either end products or components. However, China’s ongoing trade war with the USA and the COVID pandemic have made several brands question their supply chain dependence on this country, especially in some industries such as pharmaceuticals. Moreover, aggressive investment incentives offered by countries such as India and Japan have further cajoled companies to reassess their global supply chains and reconsider their dependence on China. However, with years of investment in the supply chain ecosystem, a shift such as this seems easier said than done.

China emerged as the manufacturing hub of the world in the 1990’s and hasn’t looked back since. Owing to vast availability of land and labor, technological advancements, and overall low cost of production, China became synonymous to manufacturing. Over the past decade, increasing labor and utility costs, and growing competition from neighboring low-cost countries such as India, Vietnam, Thailand, etc., have resulted in some companies shifting out from China. However, so far this has been limited to a few low-skilled labor intensive industries such as apparel.

The year 2020 has changed this drastically. The COVID pandemic along with the ongoing trade war between the USA and China made companies realize and question their dependency on China. In the beginning of last year, COVD-19 brought China to a halt, which in turn impacted the supply chain for all companies producing in China. Moreover, several pharmaceutical companies also realized that they are highly dependent on China for few basic medicines and medical supplies and equipment, which were in a considerable shortage throughout 2020. This pushed several companies across sectors such as pharmaceuticals, automobiles, and electronic goods, to reconsider their global supply chains to ensure reduced dependence on any one region, especially China.

Currently, several companies such as Apple, Google, and Microsoft are looking to shift their production from China to other South Asian countries, such as Vietnam and Thailand.

Some of the companies looking to reduce dependence on China:

Apple

In November 2020, Apple, along with its supplier Foxconn, expressed plans to shift assembly of some iPad and MacBook to Vietnam from China. The facility is expected to come online in the first half of 2021. Moreover, Apple is also considering shifting production of some of its Air Pods to Vietnam as well. In addition, it has invested US$1 billion in setting up a plant in Tamil Nadu, India to assemble iPhones that are to be sold in India. Apple and Foxconn are consciously trying to reduce their reliance on China due to the ongoing USA-China trade war.

Samsung

In July 2020, Samsung announced plans to shift most of its computer monitor manufacturing plants from China to Vietnam. The move is its response to hedge the supply chain disruptions it faced due to factories being shut in China during the early phase of the pandemic. In addition, in December 2020, the company shared its plans to shift its mobile and IT display plants from China to India. Samsung plans to invest about US$660 million (INR 48 billion) to set up the new facility in Uttar Pradesh (India).

Hasbro

Hasbro has been moving its production out of China into Mexico, India and Vietnam over the past year. It aimed to have only 50% of its products to be coming out of China by the end of 2020 and only 33% of its production to remain in China by the end of 2023. In 2019, about 66% of its toys were produced in China, while in 2012, 90% of its toys were manufactured in the country. The key reason behind the consistent switch is the souring trade relations between the USA and China.

Hyundai

During the past year, Hyundai Motors has been looking at developing India into its global sourcing hub instead of China in order to reduce its over-reliance on the latter. It has been encouraging its vendors, such as Continental, Aptiv, and Bosch, to ramp up production in India so as to move their supply chain away from China. It plans to source its auto parts from India (instead of China) for its existing factories in India, South America, Eastern Europe as well as planned facility in Indonesia.

Google

Google is looking to manufacture its new low-cost smartphone, Pixel4A, and its flagship smartphone, Pixel5A in Vietnam instead of China. In addition, in 2020, it also planned to shift production of its smart home products to Thailand. This move has been a part of an ongoing effort to reduce reliance on China, which in fact gained momentum post supply chain disruptions faced due to the coronavirus outbreak.

Microsoft

In early 2020, Microsoft expressed plans to shift the production base of its Surface range of notebooks and desktops into Vietnam. While the initial volume being produced in Vietnam is expected to be low, the company intends to ramp it up steadily to shift volumes away from China.

Steve Madden

In 2019, Steve Madden expressed plans to shift parts of its production out of China in 2020, given growing trade-based tensions between the USA and China. However, due to the COVID pandemic, it could not make planned changes to its supply chain. In October 2020, it again expressed plans to start shifting part of its production away from China by spring 2021. It plans to procure raw materials from Mexico, Cambodia, Brazil, and Vietnam to reduce reliance on China.

Iris Ohyama

The Japanese consumer goods player expressed plans to open a factory in northeastern Japan to diversify its manufacturing base, which is based primarily in China. The company made this move on the back of increasing labor cost in China, rising import tariffs to the USA, along with the supply disruptions it faced for procuring masks for the Japanese market. In 2020, it also set up a mask factory in the USA. In addition, the company plans to open additional plants in the USA and France for plastic containers and small electrical goods to cater to the local demand in these markets.

Nations using this opportunity to promote domestic production

In August 2020, about 24 electronic goods companies, including Samsung and Apple, have shown interest in moving out of China and into India. These companies together have pledged to invest about US$1.5 billion to setup mobile phone factories in the country in order to diversify their supply chains. This move is a result of the Indian government offering incentives to companies looking to shift their production facilities to India.

In April 2020, the Indian government announced a production linked incentive (PLI) scheme to attract companies looking to move out of China and set up large scale manufacturing units in the electronics space. Under the scheme, the government is offering an incentive of 4-6% on incremental sales (over base year FY 2019-20) of goods manufactured in India. The scheme, which is applicable for five years, plans to give an incentive worth US$6 billion (INR 409.51 billion) over the time frame of the scheme.

In November 2020, the Indian government subsequently expanded the scheme to other sectors such as pharma, auto, textiles, and food processing. In addition, it is expected to provide a production-linked incentive of US$950 million (INR 70 billion) to domestic drug manufacturers in order to push domestic manufacturing and reduce dependence on Chinese imports. Apart from incentives, India is developing a land pool of about 461,589 hectares to offer to companies looking to move out of China. The identified land, which is spread across Gujarat, Maharashtra, Tamil Nadu, and Andhra Pradesh, makes it easy for companies looking to set shop in India, as acquiring land has been one of the biggest challenges when it came to setting up production units in India.

On similar lines, the Japanese government is providing incentives to companies to shift their production lines out of China and to Japan. In May 2020, Japan announced an initiative to set up a US$2.2 billion stimulus package to encourage Japanese companies to shift production out of China. About JNY 220 billion (~US$2 billion) of the stimulus will be directed towards companies shifting production back to Japan, while JNY 23.5 billion (~US$200 million) will be given to companies seeking to move production to Vietnam, Myanmar, Thailand, and other Southeast Asian countries.

In the first round of subsidies, the Japanese government announced a list of 57 companies in July 2020, which will receive a total of US$535 million to open factories in Japan, while another 30 companies will be given subsidies to expand production in other countries such as Vietnam and Thailand. The move is a combination of Japan looking to shift manufacturing of high value-added products back to the country and the initial disruptions caused to the supply chain of Japanese automobiles and durable goods manufacturers.

Similarly, the USA, which has been at odds with China regarding trade for a couple of years now, is also encouraging its companies to limit their exposure in China and shift their production back home. In May 2020, the government proposed a US$25 billion ‘reshoring fund’ to enable manufacturers to move their production bases and complete supply chain from China preferably back to the USA and in turn reduce their reliance of China-made goods. The bill included primarily tax incentives and reshoring subsidies. However, the bill has not been passed in Congress yet and now with the leadership change in the USA, it is expected that president Biden may follow a more diplomatic strategic route with regards to China in comparison to his predecessor.

In addition to individual country efforts, in September 2020, Japan, India, and Australia together launched an initiative to achieve supply chain resilience in the Indo-Pacific region and reduce their trade dependence on China. The partnership aims at achieving regional cooperation to build a stable supply chain from the raw material to finished goods stage in 10 key sectors, namely petroleum and petrochemicals, automobiles, steel, pharmaceuticals, textiles and garments, marine products, financial services, IT services, tourism and travel services, and skill development.

Similarly, the USA is pushing to create an alliance called the ‘Economic Prosperity Network’, wherein it aims to work with Australia, India, Japan, New Zealand, Vietnam, and South Korea to restructure global supply chains to reduce dependence on China.

COVID-19 Unmasks Global Supply Chains’ Reliance on China by EOS Intelligence

Is it feasible?

While these efforts are sure to help companies move part(s) of their supply chain out of China, the extent to which it is feasible is yet to be assessed. Although the coronavirus outbreak has highlighted and exposed several supply chain vulnerabilities for companies across sectors and countries, despite government support and incentives, it will be very difficult for them to wean off their dependence on China.

Companies have spent decades building their manufacturing ecosystems, which in many cases, are highly reliant on China. These companies not only have their end products assembled or manufactured in the country, but also engage Chinese suppliers for their raw materials, who in turn use further Chinese suppliers for their inputs. Therefore, moving out of China is not a simple process and will take tremendous amount of time as well as financial resources.

While companies such as Google or Microsoft are looking to shift their assembling plants out of China, they are still dependent on China for parts. This is all the more relevant in case of high-technology products, such as automobiles and telecommunication infrastructure, where companies have made significant investments in China for their supply chain and are dependent on the nation’s manufacturing capabilities for small, intricate, but technologically advanced parts and components.

Moreover, despite significant efforts and reforms from countries such as India, Vietnam, and Thailand, they still cannot match China in terms of availability of skilled labor, infrastructure, and scale, which is required by many companies especially with regards to technologically advanced products. That being said, more companies are looking at a strategy where they are maintaining their presence in China, while also developing relatively smaller operations outside the country to have a fallback and to reduce total dependency on China. This is also dubbed as the China + 1 strategy.

Another reason going in China’s favor has been its capability to bounce back from the pandemic and resume production in a short span of time. While production had been halted in January to March 2020, it ramped up April onwards and was back to normal standards within no time. This reinforced the faith of many companies on Chinese capabilities. Therefore, as some companies are already cash-strapped due to the pandemic, they are not interested in investing in modifying their supply chains when in most cases normalcy resumed in a relatively short span of time.

EOS Perspective

Companies have been looking to diversify their supply chains and reduce dependence on China for a couple of years now, however, the trend has gained momentum post the coronavirus pandemic and growing US-China trade tensions. The onset of the COVID-19 outbreak exposed several vulnerabilities in the supply chain of global manufacturers, who realized the extent of their dependence on China. Moreover, several countries realized that they relied on China for key medicines and medical supplies, which cost them heavily during the pandemic.

Given this situation, several nations such as Japan, India, and the USA – together and individually, have started giving incentives to companies to shift production from China into their own borders. While this has resulted in several companies, such as Apple, Microsoft, Sanofi, Samsung, etc., to expand their manufacturing operations out of China, it does not necessarily mean that they are moving out of China. This is primarily due to heavy investments (in terms of both time and money) that they have already made into developing their intricate supply chains as well as the inherent benefits that China provides – technologically skilled labor, sophisticated production facilities, and quick revamping of production after a calamity.

That being said, it has come into the conscience of companies to reduce their over-reliance on China and while it may not impact the scale and extent of operations in the country in the short run, it is quite likely that companies will phase out their presence (at least part of it) in China over the coming decade.

A lot depends on the level of incentives and facilities provided by other nations. While countries such as India, Vietnam, and Thailand can offer low cost production with regards to labor and utilities, they currently do not have the technological sophistication possessed and developed by China. Alternatively, while Japan and the USA are technologically advanced, without recurring incentives and tax breaks, cost of production would be much higher than that in China. Thus, until there is a worthy alternative, most companies will follow the China +1 strategy. However, with growing trade tensions between China and other nations, and ongoing efforts by other nations to encourage and support domestic production, China may risk losing its positioning as the ‘factory of the world’ in the long run.

by EOS Intelligence EOS Intelligence No Comments

Crippled by COVID-19, Tourism Gears Up to Rebound

COVID-19 has disturbed practically every business vertical across the globe, and travel and tourism sectors were one of the first ones to fall prey to the devastating effects of the pandemic. Complete lockdowns made taking a leisure trip or planning a vacation impossible for a long time to come. Not only were people unable to travel, but also multiple businesses serving in the tourism sector closed down temporarily, with some shutting their doors for good. Recently, leisure travel started to resume, but at a snail’s pace. In many countries, businesses, local authorities, and government agencies are developing a coordinated approach to aid economic recovery of the sector. The actions and approaches taken in these uncertain times will lay the foundation for the future of the tourism sector.

The travel & tourism industry contributed US$ 8.9 trillion to the global economy in 2019. Leisure travel made up the majority of total travel & tourism revenue standing at 78.6%. The trend was expected to follow in 2020 but the coronavirus outbreak crippled the entire leisure tourism sector as travels were canceled globally for at least three months (mainly from April to June, though in many locations those cancellations have continued at least till autumn, and again at the end of the year).


Read more on the pandemic impact on business travel in our previous Perspective: Business Travel: On the Mend but Long Recovery Ahead


Travelers evolving preferences

Demand for domestic leisure travel is expected to rise as people are likely to be less inclined to travel to international destinations due to safety, hygiene, and uncertainty concerns. Unwillingness to spend on international travel in the immediate future also suggests that people are less inclined to make trips to international destinations. Self-driving trips to nearby destinations and weekend getaways are likely to increase in popularity.

In terms of traveler type, the group travel segment (irrespective of the size of the group) has always generated higher revenue for the global leisure travel market, in comparison to the solo traveler segment (in 2018, group travel segment contributed nearly 73% of revenue to the global leisure travel market). Travelers were always able to take advantage of group discounts offered by hotels, resorts, airlines, and vehicle rental companies.

It is anticipated that group travel will continue to be a common practice among travelers (both during the pandemic and post-pandemic). However, to avoid crowded places, it is highly likely in the future, travelers would need (and perhaps also desire) to travel in smaller groups. This trend is expected to continue in the distant future mainly due to the growing acceptance of social distancing norms as the new normal for sanitation and hygiene purposes globally. However, whether or not this type of travel arrangement will be monetarily favorable to various market stakeholders (in terms of discounts and margins when compared to larger group travels) and what discounted rates would consumers receive is yet to be seen.

It is highly likely in the future, travelers would need (and perhaps also desire) to travel in smaller groups. This trend is expected to continue in the distant future mainly due to the growing acceptance of social distancing norms as the new normal for sanitation and hygiene purposes globally.

Demand for private charter flights is also rising among leisure travelers. Wary of flying with regular flights, people are turning to charter planes for taking a vacation trip to safe destinations (for both short and long-distance locations). However, this trend is expected to be short-lived mainly because only upper-class travelers will be able to afford such travel and most of the demand for charter flights come from business travelers (which is also limited to need-only basis, for now at least).

Moreover, interest in trips to off the beaten path locations and niche tourism (such as adventure tourism, wellness tourism, and heritage tourism) is also expected to grow as these locations are likely to be considered safer to travel to in comparison to famous tourist locations, at least for some time in the foreseeable future.

Crippled by COVID-19, Tourism Gears Up to Rebound by EOS Intelligence

Governments to the rescue

Travel and tourism businesses have been hit hard as they had to temporarily close business operations (many small and medium-sized business players are permanently out of business) and suffered heavy revenue losses. To mitigate the impact of coronavirus (on both the travel and tourism sector and economies), many governments have offered aid packages to help the sector.

Governments globally have taken a range of measures to revive the sector in order to shield the economy and to protect employment. For instance, Italy, one of the most popular tourist destinations and also one of the worst-hit economies by the first wave of pandemic, announced a relief package to revive businesses in the travel sector. The package includes a US$ 645.7 million fund for the aviation sector, a US$ 129.1 million fund to support regions that generated lower revenue owing to lower number of people paying tourism taxes, US$ 19.3 million for tourism promotion, and subsidies worth US$ 129.1 million for museums and other cultural sites to recover lost ticket revenue for 2020, among others.

Similarly, under the Hong Kong government’s Anti-Epidemic Fund, licensed travel agents will receive a subsidy ranging from US$ 2,580 to US$ 25,803, travel agents’ staff and freelance tourist guides and tour escorts will receive a monthly subsidy of US$ 645 for six months, licensed hotels will receive a subsidy of US$ 38,705 or US$ 51,607 (depending on the size), and tour coach drivers a one-time subsidy of US$ 1,290. Additional US$ 90.3 million has been allotted to the Hong Kong tourism board for tourism promotion.

New Zealand announced that for the losses borne by travel agents for canceled travel plans by their consumers, the government will pay 7.5% of value for cash refunds or 5% of credit value to be capped at US$ 31.4 million.

In another example, the Australian government allotted a package of US$ 177.2 million for regional tourism which will include US$ 35.4 million to support businesses in regions heavily reliant on international tourism and remaining US$ 141.8 million to boost local infrastructure in regional communities, of which US$ 70.8 million will be used for tourism-related infrastructure. For regional tourism rebound, the Western Australian government has allotted US$ 10.2 million in the form of two funds – US$ 7.3 million as one-off cash grants of US$ 4,608 to up to 1600 individual small businesses and US$ 2.8 million as grants of US$ 17,723 to US$ 70,894 for tourism operators.

To revitalize tourism, some countries are assigning special reserves for campaigns as well. The UK initiated a US$ 12.9 million ‘Kick Start Tourism Package’ for the recovery and renewal of the tourism sector wherein businesses can access government grants of up to US$ 6,462 to restart operations. Similarly, Norway allocated US$ 19.9 million for rebounding the country’s internal tourism businesses while Denmark assigned US$ 7.8 million for international tourism campaigns.

Various employee training programs and digital technology management processes are also being implemented to support the sector. One such example is the Singaporean government’s move to fund up to 90% of the training course and trainers’ fee for employee upgrading and talent development through its Training Industry Professionals in Tourism fund.

With minimal to no action happening in the travel and tourism segment, all these efforts are likely to not only protect jobs but also give the necessary push to restart the businesses, albeit from ground zero, in some cases.

Tourism-dependent least developed economies in deep waters

Considering that out of the 47 least developed countries identified by United Nations, 45 consider travel and tourism of significant relevance to their economies in terms of job creation, growth prospects, and overall development, COVID-19 has a real potential to adversely affect these vulnerable countries.

In January 2020, through the ‘Visit Nepal Year 2020’ campaign, Nepal expected to attract two million visitors and generate US$ 2 billion in revenues in 2020. It should be noted that in normal circumstances, travel and tourism contributes nearly 6.7% to Nepal’s GDP. However, with the onset of the pandemic, not only was the campaign suspended but also the tourist arrivals declined drastically – 177,975 tourists visited Nepal up until August 2020, only 24% of what had arrived during the same period in 2019 (739,000 tourists arrived between January and August). Also, nearly 20,000 tour and mountaineering guides risked losing jobs due to the cancellation of all mountaineering expeditions.

In Cambodia, where travel and tourism contribute nearly 26% to the nation’s GDP, the effects of the virus have also been damaging. The country may lose up to US$ 3 billion in revenues as the inflow of international travelers was down by 52% to 1.16 million in between January and April 2020 (2.41 million visitors in 2019 during the same period). Up until May 2020, more than 45,000 jobs had been affected due to the pandemic.

Likewise, for countries such as Kiribati, Gambia, Sao Tome and Principe, Madagascar, Tanzania, Solomon Islands, Rwanda, and Comoros, travel and tourism sector forms a key contributor to their economies by contributing 18%, 17.7%, 16.2%, 11.8%, 10.7%, 10.5% 10.2%, and 10.1%, respectively, to the countries’ GDPs.

In normal scenario, majority of the travel and tourism revenue in these countries is generated by leisure travel (for most of these countries leisure segment generates >50% of the revenue) as against business travelling. The sudden onset of the pandemic prohibited the entry of travelers (for vacationing purposes) within these countries stopping cash inflow thus hampering revenue generation.

Governments in most of these countries, through relief funds and aid packages, attempt to cushion the negative impact of the virus on the sector and the livelihoods of people involved. However, they are far from being able to fully offset the devastating repercussions, considering that these economies had already been at a disadvantageous position with limited growth and development even prior to the pandemic.

EOS Perspective

Covid-19 has altered most travelers’ perspective on vacationing, a fact that is unlikely to change in the short term. It is now upon the various stakeholders operating the leisure tourism sector to ensure that travelers will have an easy and reassuring path back to the sector’s services.

In the current scenario, regions where governments have been able to contain the spread of the virus, even if to a small extent, leisure traveling is slowly resuming. However, reduction in disposable income (due to unemployment), safety concerns, and overall economic slump are causing people to plan affordable regional trips rather than international vacations.

Globally, the impact of the pandemic on leisure tourism has been detrimental to the latter’s growth, to say the least. In some regions, people are slowly keener on booking vacation trips again but the volumes are low. They are likely to remain so, at least in the near future, especially with the returning spikes in number of infections and increased travel restrictions that follow.

Safety is not the only factor holding people back from traveling. Equally important is the financial crunch, fueled by the job losses and uncertainty about the future. Travel and tourism industry stakeholders are observing this trend and trying to alter their strategies and business models, in collaboration with government agencies, to survive in these changing, challenging, and uncertain times.

Safety is not the only factor holding people back from traveling. Equally important is the financial crunch, fueled by the job losses and uncertainty about the future.

More so, partnerships among tourism industry stakeholders’, regional communities, government authorities, and private sector enterprises would also contribute to the sector’s recovery. For instance, in October 2020, Nigeria Tourism Development Corporation (NTDC) partnered with Google to launch Goggle’s Arts & Culture collection called ‘Tour Nigeria’ which is an online exhibition that includes videos, photographs, and commentaries highlighting the country’s scenic beauty and cultural festivals. This collaboration aims at providing online training programs to small businesses and impart digital skills training to individuals in order to support the local tourism sector. As part of the initiative, a video series named ‘Explore Nigeria’ was also launched wherein social media influencers are roped in to publicize ‘best of Nigeria’ in order to reach large number of viewers via influencers’ social media followers.

Post the lockdown, stakeholders in the travel and tourism landscape restarted their operations by evolving their product offerings (hotel stay packages with increased flexibility or airlines not flying to full capacity thus practicing social distancing), experience services (such as tours and excursions or offering upgrades at no or minimal fee), and overall business approach. However, in some regions, this re-opening was short-lived, and was paused by the second wave of pandemic (with the third one on the horizon for spring 2021).

In the foreseeable future, it would not come as a surprise if the customers can book a service provider for a leisure trip based on hygiene and sanitation rating associated with it. Businesses are therefore being promoted on the basis of adopting upgraded cleaning procedures. It is highly likely that the pandemic may push tourism councils and governing bodies to come up with a hygiene assurance standard, either on a global or national level, that all players in the travel industry might need to abide by – this could be a bit of a stretch but such an initiative, if taken, is very likely to be embraced by many travelers.

Automation, though already at the forefront of travel and tourism, is likely to pick up pace. Travelers can expect to witness increased contactless interactions such as contactless check-in or check-out and usage of mobile apps as hotel room keys, virtual reality for sight-seeing, and chatbots and robots for concierge services. Usage of contact tracking apps to monitor traveler’s health and automatic disinfectors will also increase.

Adoption of digital identity and biometric tools will drive the travel industry in the future. Consolidated technology solutions offering transparent and seamless flow of information ensuring travelers’ safety are essential. One such digital identity tool is the Known Traveler Digital Identity (KTDI) that holds the potential to offer a secure and seamless travel experience. An initiative by the World Economic Forum, KTDI not only aims at optimizing passenger processing experience but also manages risks in real-time by monitoring a traveler’s health records.

Nevertheless, while it is optimistic to think that once the vaccine is widely available, the virus will be eradicated and travel will resume as before, one thing that the pandemic has brought to the forefront is that adaptability and adjustment is the key for travel and tourism sector players to keep their businesses running.

by EOS Intelligence EOS Intelligence No Comments

Business Travel: On the Mend but Long Recovery Ahead

To contain the spread of coronavirus, many governments globally implemented country-wide closures resulting in discontinuation of large part of business activities. As a result, business-related travels also came to an abrupt halt as flights got cancelled and hotels temporarily shut down. Even after partial reopening, the continuing travel restrictions and the fear of contracting virus while travelling have restrained people from taking work-related trips. The shift towards working from home and conducting meetings virtually furthers the need to not travel. Thus, to revive the business travel sector, various stakeholders are devising new short and long-term strategies to minimize the impact of COVID-19 on corporate travel.

Business travel spending was expected to reach US$ 1.6 trillion in 2020. However, as per Global Business Travel Association’s estimates, due to coronavirus, the global business travel market is expected to lose US$ 820.7 billion in revenue in 2020. China, the epicenter of the pandemic, is expected to lose US$ 404.1 billion followed by Europe (US$190.5 billion) in revenue from corporate travel.


Read more on the pandemic impact on leisure travel in our next Perspective: Crippled by COVID-19, Tourism Gears Up to Rebound


Innovative travel protocols to the rescue

For the most part of 2020, tourism sector took a beating due to the multifaceted crisis presented by coronavirus. Governments globally are devising new travel practices to facilitate economic recovery for the business travel industry. This new form of international travel consists of green lanes, travel bubbles, and air bridges which essentially facilitates the reopening of international air travel between countries where the COVID-19 outbreak is under control. Furthermore, each business traveler must go through strict health screening at entry and exit points to ensure safe travel.

Governments’ globally are devising new travel practices to facilitate economic recovery for the business travel industry. This new form of international travel consists of green lanes, travel bubbles, and air bridges which essentially facilitates the reopening of international air travel between countries where the COVID-19 outbreak is under control.

The key idea behind these new travel corridors is primarily to bestow normalcy to the tourism sector with travels currently being reserved for business travelers for whom travel is a necessity rather than an option. Such planned travel movements are an effective means to give the necessary push to tourism sector, thus economically aiding the countries, even if to a small extent.

Singapore is one such country which carefully weighed its reopening options and as of late September had the following agreements in place:

  • Fast Lane Agreement with China and South Korea – enabling essential business and official travel between both countries for travelers carrying a Safe Travel Pass issued by a company or government agency of the respective country
  • Reciprocal Green Lane (RGL) with Malaysia, Brunei, and Japan – facilitating short-term essential business and official travel between both countries for up to 14 days carrying a Safe Travel Pass issued by a company or government agency of the respective country; RGL with Japan is also referred to as Business Track
  • Periodic Commuting Arrangement (PCA) Agreement with Malaysia – permitting residents of both countries holding work passes in the other country to enter that country for work
  • Air Travel Pass with Brunei and New Zealand – allowing short-term visitors (including foreigners who have remained in either of the two countries in the last consecutive 14 days prior to entry in Singapore) entry into Singapore and the travel reason may extend beyond official business

Under all agreements, all travelers entering Singapore have to abide by strict health measures such as pre-departure and post-arrival testing (to be paid by the traveler), serving stay-home notice, using the TraceTogether app (that allows for digital contact tracing by notifying the user if they have been exposed to COVID-19 through close contact with other app users), and adhering to a controlled itinerary for the first 14 days of stay (being prohibited from using public transportation).

Other than Singapore, Thailand had also planned to allow foreign business travelers from Hong Kong, Singapore, South Korea, Japan, and some provinces of China into the country from July as part of its business bubble travel approach. However, the discussions were delayed amid rising cases of coronavirus in East Asian countries where previously the outbreak was under control.

Business Travel: On the Mend but Long Recovery Ahead by EOS Intelligence

Hospitality players bending rules to appeal to corporate travelers

Business travel is of great importance for both airlines and hotels. Corporate travelers purchase high-value airline tickets, airport lounge access memberships, and reside in business hotels forming a major chunk of their clientele. However, hotel and airline industries have taken a major hit due to the ongoing pandemic.

Also, travelers currently show an unprecedented concern about their health and safety, and demand assurance that they can get on a plane or check into a hotel without worrying about the risk of infection. For hotels and airlines, safety has gone up their priority list, as they are developing premise-scrubbing protocols and ensure clear information about cleaning and safety procedures to their guests.

For years, hotel industry had been rigid in regard to guest’s arrival and departure timings, cancellation policies, etc. However, in the current scenario, corporate travelers’ expectations for hotels to offer flexibility have greatly increased. Thus, hotels are focusing on extending flexible services such as round the clock check-in/check-out option, accommodating refunds in case of room cancellations, and being more pliable to room upgrades (for free or at a minimum charge) so that guests can still work in case of event cancellations (or if they have to be in quarantine when traveling internationally for longer durations).

Other than offering generous discounts on flight tickets and hotel stays, airlines and hotels are highly likely to offer extra perks and bonuses such as fee waivers, extension on rewards redemption dates, bonus reward points, and upgrades, among others, as part of loyalty programs for corporate clients. Extension on expiration date of loyalty programs also make business travelers feel welcomed.

For hotels and airlines, safety has gone up their priority list, as they are developing premise-scrubbing protocols and ensure clear information about cleaning and safety procedures to their guests.

Corporates shake up travel maneuvers

Traveling priorities changed overnight during the coronavirus pandemic driving companies to reconsider their travel protocols and develop contingency plans. It is expected that 5-10% of business-related travel will be permanently eliminated as companies reduce their travel budgets and embrace virtual interactions, wherever possible, avoiding the need to travel. Moreover, companies are working on developing robust travel policies to account for safety before sanctioning any trip.

As a result of these changes, reliance on travel management companies for corporate travel is likely to increase, however, working with a trusted partner will be key to ensure travel safety. Companies will look for partners that can help them strategize travel plans, prioritize safety, and monitor spending. Round-the-clock travel support staff, flexibility to authorize last-minute itinerary changes, ability to track employee location online via an app, and expansive portfolio of hotels and travel partners to choose from in case of replacements, sudden cancellations, etc., are some of the key requirements corporates would expect their travel partners to offer. Availability of a single digital platform for travelers, agents, and company travel managers comprehending all travel-related information will make it easy to plan and track employee’s movement.

Availability of a single digital platform for travelers, agents, and company travel managers comprehending all travel-related information will make it easy to plan and track employee’s movement.

Many companies plan to resume their travel plans on a need-only basis with sales and marketing related trips being the first ones to recommence. Companies are keen to adopt a remote work location approach, wherever applicable, to limit the number of trips their employees take and to keep them safe. Additionally, including specific COVID-19-related do’s and don’ts around booking trips (via air, rail, or road), lodging, and rentals in the travel policy will prevent companies from being at litigation risk.

Business Travel On the Mend but Long Recovery Ahead by EOS Intelligence

Corporate events take a backseat

Restrain on public gatherings and travel bans hit the corporate event industry the hardest. Many events were cancelled or postponed indefinitely while many events gradually shifted to virtual platform. It is anticipated that between mid-February and mid-March 2020, the corporate event and conferences industry globally lost US$ 26.3 billion and US$ 16.5 billion in potential contracts and revenues, respectively. With the rising number of virtual events, some of which might never return to the real world, the corporate events industry is in troubled waters, at least in the foreseeable future.

As of now, the fear of contracting the virus at an event and the comfort of participating in an event remotely will continue to stifle the recovery rate for the event industry. However, in the medium term, a blended approach (in-person attendance and digital medium) may offer some respite. Organizing multi-location small gatherings, wherein small groups of people (located in a particular area or smaller region) connect online with other such groups to form a larger event could be a successful model for conducting corporate events.

EOS Perspective

Demand for business travel is most likely to elevate gradually. Domestic travel entailing client meetings and site visits are likely to resume first. Even when travelling within the country, travelers will prefer to undertake self-driven trips and same day return tours to avoid using public transport or rental vehicles and staying at hotels. International trips are likely to take much longer to rebound owing to diverse government regulations and quarantine procedures in each country. Moreover, it is highly probable that travel related to global events and conferences may never return to pre-pandemic levels.

It can also be expected that for some time, the business travel industry will revolve around the degree of flexibility and sanitation standards offered to customers. Business travel industry stakeholders will have to continuously readjust their business policies, product offerings, and day-to-day functions as situation improves (or worsens) to accommodate changing customer needs. For instance, while some hotel chains may decide to temporarily shut their properties, others may offer them for quarantine purposes for travelers visiting for longer work durations.

Similarly, it is up to the airlines to decide which routes to fly, how frequently to fly, and how much to charge (they can offer to sell premium and business-class tickets at much discounted rates to attract travelers, to at least recover some costs, if not to make profits). Modifying their offerings to appeal to business travelers (when travel is neither necessity nor priority) during these uncertain and volatile times would be of great merit for players operating in this space.

Nevertheless, the road to recovery for business travel sector is bumpy. Business travel will certainly pick momentum but the recovery is likely to be slow. However, whether the sector will reach pre-COVID revenue levels (and how many years it will take) is still debatable. This being said, stakeholders in the business travel industry who are adaptable and operate around customer expectations are the ones who have a higher chance to sail through this less damaged.

by EOS Intelligence EOS Intelligence No Comments

EdTech’s Growth Fueled by Coronavirus

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For years, tech adoption has been relatively slower in the education sector than in many other sectors. This has considerably changed when COVID-19 hit in early 2020 and triggered the closure of educational institutions all over the world. With classroom doors closed and conventional methods of education taking a setback, e-learning gained momentum like never before. From virtual classes to tutoring and conducting meetings online to learning new skills, the pandemic propelled EdTech into the spotlight, putting it on a growth trajectory.

Changing face of EdTech market

To control the spread of coronavirus, nearly 190 countries had implemented temporary school closures by the end of March 2020, disrupting education of more than 1.5 billion students. Over the coming days, as the count of people affected by the virus multiplied hourly, all educational institutions (including schools, colleges, universities, vocational training centers, and skill development institutions) were directed to remain shut until the situation improved, driving students to shift to online learning. This sudden change away from classroom learning has led to the adoption of online learning on a large scale.

Before the coronavirus pandemic, EdTech sector was estimated to reach a value of US$ 342 billion, growing at a CAGR of 13.1% between 2019 and 2025. The forecast revisions accounting for the impact of COVID-19 pandemic predict the global EdTech market to reach US$ 404 billion, with a CAGR of 16.3% by 2025. The sudden adoption of e-learning across educational institutions as well as an increasing need for upskilling courses by working-class individuals are driving the tech embracement in the COVID-19 pandemic scenario.

Moreover, with uncertainty still looming on reopening of educational establishments, technology will need to play a critical role across all aspects of education – content generation, knowledge consumption, and assessments. This is expected to intensify the pace at which digitization happens in the education sector.

Investment at an all-time high

Over the last decade (from 2010 to mid-2020), global EdTech venture capital funding stood at US$ 36.8 billion, of which more than 50% occurred since 2018. Investment in EdTech has sky-rocketed over the last few years – the sector witnessed investment of merely US$ 0.5 billion in 2010 but reached a striking figure of US$ 7 billion in 2019, 14 times more in a span of nine years. Even during COVID-19 pandemic, companies globally attracted US$ 4.5 billion in funding between January and July 2020, which is the highest ever funding raised during a comparable period in the last decade. It is expected that the trend will follow and the investments will grow further, anticipated at US$ 87 billion over the next decade.

During the coronavirus outbreak, the demand for e-learning increased manifold accelerating the investment spree in EdTech. While the USA is home to nearly 43% of the world’s EdTech companies’ (followed by India – 10%, Brazil – 9%, UK – 8%, and China – 3%), as of 2020, the companies that received the high value funding deals during COVID-19 period were situated elsewhere.

India-based online tutoring firm Byju’s raised more than US$ 1 billion from January through September 2020 (US$ 200 million in January from Tiger Global Management, USA-based investment firm; US$ 200 million in February from General Atlantic, USA-based equity firm;  US$ 23 million in June from Bond Capital, USA-based investment firm; US$ 122 million in August from DST GLobal, Hong Kong-based investment firm; US$ 500 million in September from Silver Lake, USA-based equity firm) to become the first company in the EdTech domain to reach a valuation of US$ 10.8 billion.

The second company was China-based Yuanfudao, an online live course platform, which raised US$ 1 billion in March 2020 from Hillhouse Capital (China-based private equity firm) and Tencent Holdings (China-based technology conglomerate).

Another noteworthy deal was also scored by China-based Zuoyebang, an online education tutoring provider, which received US$ 750 million funding from FountainVest Partners (private equity firm based in Hong Kong) and Tiger Global Management.

Moreover, mergers and acquisitions are also likely to grow in the near future considering many small players will not have the necessary finances and expertise to revamp their business model to the changing market needs and are likely to merge with or acquired by larger players.

EdTech’s Growth Fueled by Coronavirus by EOS Intelligence

Increased adoption of advanced technology

Short-term rush in additional demand for EdTech solutions brought by COVID-19 is also expected to give headway to increased adoption of advanced digital technologies in the future. Solutions based on technologies such as artificial intelligence (AI), augmented and virtual reality (AR/VR), and blockchain (we wrote about the role of blockchain in virtual education in our article Blockchain Scores Well in the Education Sector) are likely to gain more momentum and be integrated into core education delivery.

It is expected that by 2025 AR/VR market in EdTech will reach US$ 12.6 billion from US$ 1.8 billion in 2019, growing at a CAGR of 38.3%. AI is expected to observe CAGR of 40.29% between 2019 (from US$ 0.8 billion) and 2025 (to US$ 6.1 billion). Other technologies that will see a spike include robotics (expected to grow from US$ 1.3 billion to US$ 3.1 billion during the six-year period) and blockchain being increasingly incorporated into learning processes (expected to grow at a CAGR of 34.8% from US$ 0.1 billion to US$ 0.6 billion).

EOS Perspective

COVID-19 has proved to be a turning point for the EdTech industry and acted as a push for change that was already underway in the education sector. The pandemic downrightly disrupted the education system making online learning an essential part of the way we learn; however, it is unlikely that digital learning will become the new norm. Now, whether e-learning becomes the sole mode of education or blends with physical classes, the EdTech market has growth potential and the investment angle also looks bright.

Whilst a large number of players in EdTech sector were able to capitalize on the need for education during the pandemic, not all digital learning platform providers will stick around. In the long term, players with a clear-product concept and a well-defined monetization policy will emerge winners. They must also be thoughtful of the fact that the unforeseen growth the sector witnessed during the pandemic is only transient and once educational institutes reopen, the demand for online learning is likely to shrink (even if by a small percentage).

In terms of user adoption, EdTech companies saw significant growth by offering free access to their platforms. However, this is not a sustainable strategy that firms can adopt in the long run. Once things get back to normal and the free trials end, companies will need to attune their product pricing and come up with more affordable plans. Nevertheless, emerging on the winning side of the pandemic will not be easy for the players as they walk a very thin line in between offering innovative learning models and meeting market demands, while still being able to generate revenue and remain profitable.

Moreover, while the new users multiplied quickly, retaining them is easier said than done. Emphasis on service quality and overall delivery experience would be crucial to convert current free subscribers into paying customers.

Bearing in mind that the current momentary spike in demand for online tools is not directly proportional to increased business, EdTech companies need to revisit their business strategies to achieve long-term growth. As the competition increases, companies must tweak their commercial business model to adapt to changing customer requirements and to fulfil the need for on-demand educational lessons.

Additionally, the importance of collaborative partnerships with educational institutions (for their need of customized curriculum, creating teaching modules, and courses to train teachers) and corporates (need for upskilling employees on technical competencies) cannot be underestimated. Business models based on such partnerships are likely to open new avenues of revenue generation. This will also negate the per student acquisition cost for EdTech players.

Nevertheless, though the growth path for EdTech sector may have a few roadblocks, in the hindsight, the overall outlook towards the sector’s growth in the near future appears to be optimistic.


Read our other Perspectives on coronavirus here


 

by EOS Intelligence EOS Intelligence No Comments

Blockchain: a Frontline Warrior in Battling Coronavirus Pandemic

SARS-COV-2 has brought the world to a standstill. Technology and its creative uses have been playing a pivotal role in sustaining lives during the pandemic as well as combating the crisis. One such technology that has been in the forefront of the pandemic is blockchain. From mitigating supply chain issues with medicines and protection gear to facilitating transparency in donations to effectively tracking the spread of the virus and protecting patient privacy, blockchain technology is being applied across the spectrum to contain and manage the outbreak.

The current pandemic has brought to light many inefficiencies and limitations of the existing global healthcare systems, wherein governments across the globe are grappling to control the outbreak, challenged by the lack of a unified interconnected and trusted network to share data and track cases. Blockchain has several inherent properties, such as decentralized ledger, transparency, immutability, that make it suitable for handling and managing various aspects of containing the pandemic.

Outbreak tracking

Global health authorities and governments across the globe are having a hard time gathering authentic data regarding tests and patient numbers, hospital beds, recoveries, etc. Currently, most of the data circulating is disparate, and comes from multiple sources, such as hospitals, labs, public, and media, instead of one authorized source. This is extremely damaging since this results in the creation of a great amount of inaccurate and duplicate data, which if trusted, makes the process of tracking and containment both time consuming and ineffective. This is counter-productive to the management of a disease that is as fast spreading as COVID-19.

Blockchain technology can come to play in effectively tackling this issue. Owing to its distributed and immutable nature, blockchain can provide a feasible solution for tracking the outbreak. Blockchain-based apps facilitate organizations across the globe to form a single connected network where data can be shared in real time and securely. Moreover, since data stored in blockchain is immutable, it is protected against unauthorized changes and its distributed nature ensures protection against fraudulent data (since each entry requires consensus algorithms and smart contracts). Lastly, blockchain efficiently manages high volumes of data (as in the cases of the COVID pandemic) in a real time basis, which cannot be managed using human resources.

However, in addition to these factors, the aspect that stands out the most and makes blockchain technology ideal for monitoring and managing outbreak-related information is the level of privacy it offers. People do not wish for their information to be shared publicly or be used for other purposes. Thus it is a challenge to get patients to collaborate with governments and healthcare institutions to share information regarding their condition and wellness. For instance, the Israel government recently permitted healthcare institutions to track citizens’ mobile phones to control the spread of coronavirus. This has raised concerns from human rights organizations as citizens are not comfortable with sharing their personal information.

Since blockchain uses a distributed ledger, which ensures accountability and transparency with regards to access to its stored data, the information shared through blockchain cannot be extracted or misused. Moreover, information stored in a blockchain cannot be hacked. This encourages patients to share information regarding their condition, symptoms, location, and underlying health conditions without fear of the information being misused or shared with any third-party.

Furthermore, information shared by patients in a blockchain network may not only be used for tracking the outbreak but also facilitate health centers study the disease characteristics and patterns to develop treatment and solutions.

For instance, WHO has been using a blockchain-based data streaming platform, called MiPasa, which facilitates the sharing of information amongst need-to-know organizations such as state authorities and health officials. The platform is built on top of Hyperledger Fabric and partners with IBM for blockchain and cloud platforms. The application cross-references siloed location data with health information to track and prevent the spread of the outbreak, all while protecting patient privacy.

In another example, Atlanta-based developer of blockchain-enabled healthcare applications, Acoer, developed an application called HashLog, which allows real time logging and data visualization of the spread of the infection. HashLog provides real-time updates on the spread of the disease by tracking movement of infected people to identify potential outbreaks and prevent further spread. The application uses the Hedera Hashgraph distributed ledger technology and each entry is recorded through a verified hash reference on the ledger, ensuring that the data is correct.

Donations

In addition to tracking and preventing outbreaks, blockchain also plays an important role in securing donations. From hospitals and state authorities with insufficient funds for medical supplies to economically-weaker sections of the populations losing source of income due to lockdown, the current pandemic has displaced a huge number of people across the globe. Thus in such times, donations play a critical role in sustaining livelihoods and providing healthcare supplies to the affected people. However, given fraud associated with donations in recent times, lack of trust is a common factor affecting success of donations. Several individuals want to help and donate, however, are discouraged due to fear of their money being misused.

For instance in India, the government and police warned citizens against several fake relief schemes that have been floating in the name of COVID-19 relief, some even mirroring the Prime Ministers Relief Fund. These kind of activities deter willing people from donating.

Blockchain technology can be used to effectively combat this issue. Since all transactions in blockchain are secure, transparent, and traceable, donors can track their funds and see where they are utilized. This gives confidence to donors that their funds are being used for the exact purpose that they intended.

One such example is Hangzhou-based blockchain startup Hyperchain, which built a blockchain-based donation tracking platform for supporting government and hospitals (such as Tangshan People’s Hospital, Jiayu People’s Hospital and Xiantao No. 1 People’s Hospital) in the donation process. The platform has attracted more than US$2 million in donations.

 

Blockchain a Frontline Warrior in Battling Coronavirus Pandemic by EOS Intelligence

Supply chain tracking

Blockchain technology has been deemed extremely useful in managing and tracing the supply chain in several sectors as retail (for more insights on this read our article Blockchain Paving Its Way into Retail Industry). However, given the current pandemic, the technology can also utilize similar functionalities and play a significant role in tracking of medical supplies.

Given the pace of spread of COVID-19, authorities and healthcare organizations across the globe have faced a shortage of medical supplies, such as masks, sanitizers, PPE kits, ventilators, testing equipment, as well as some medicines. This drastic increase in demand has resulted in distribution of large number of counterfeit and faulty products. Blockchain technology can play a significant role to combat this. Given the data provenance in blockchain and its immutable nature, it is possible to identify and trace back every touchpoint of the medical supplies to ensure its authenticity.

In addition to filtering counterfeit products, blockchain also helps streamline the supply chain process to ensure hospitals and doctors secure timely supplies to treat patients. Blockchain can provide real-time updates regarding demand so that medical manufacturers can adjust production levels accordingly. In addition, it can help fast-track supply chain contracts through the use of smart contracts, and facilitate faster payments, thereby improving the overall efficiency.

In February 2020, China-based AliPay, along with the Zhejiang Provincial Health Commission and the Economy and Information Technology Department, launched a blockchain-based platform to facilitate the tracking of medical supplies required for fighting SARS-COV-2. The platform has improved trust within the medical supply chain since it records and tracks the entire provenance of preventive supplies including masks, gloves, and PPE kits.

Apart from medical supply chain, blockchain can also help limit supply chain disruptions faced by several other industries due to lockdown in several parts of the world. However, companies that are using blockchain for managing their supply chain have an advantage as they have better visibility into their complete supply chain and thereby can identify points of disruption in a timely manner.

Avoiding future pandemics

Blockchain is on the front line for fighting the current pandemic, but it also has the potential to prevent future disease outbreaks. Most of current healthcare surveillance systems across the globe are outdated and lack the required timeliness and efficiency in sharing information with local as well as international health enforcement organizations. Moreover, sometimes there is a question of deliberate delay in sharing of critical information.

To this effect, blockchain-based health surveillance systems can help mitigate future outbreaks. Since they operate on a decentralized ledger, the surveillance data is transparently available to health organizations across the globe in a real-time manner, without the fear of any political disruptions. Timely knowledge of a potential outbreak is the first and most critical step in preventing a similar situation in the future.

In addition to the above mentioned applications, blockchain companies along with institutions are developing creative solutions that help reduce challenges faced by people due to COVID in their day to day living. For instance, Toronto-based blockchain company, Emerge, launched a public safety app called Civitas, which assists the citizens and local authorities across Latin America. This app matches one’s official ID to confidential medical records stored in the blockchain to identify whether the person is allowed to leave the house or not. Thus the app allows police to verify if the person has a travel permission just on the basis of their government ID and without gaining access to the person’s medical records. The app also determines the safest time and day for going out for essentials for people who are experiencing COVID-like symptoms.

Moreover, as discussed in our previous article (Blockchain Scores Well in the Education Sector) blockchain also is extremely useful in the virtual education scenario, which is now the new way of schooling for large part of students across the globe.

EOS Perspective

Blockchain technology has several inherent properties that make it ideal for helping to manage and combat the current pandemic. Its decentralized, traceable, and immutable properties make is especially desirable for managing contact tracing and outbreak tracking, which are critical in handling a pandemic efficiently. Moreover, the benefits of blockchain are further amplified when used alongside other technologies, such as artificial intelligence, cloud computing, and big data.

However, despite its several uses, the issue of scalability plagues blockchain adaption at a larger scale. Blockchain is still a nascent technology and lacks high-level scalability. With COVID affecting most of the world, the current blockchain companies do not have that level of scalability to provide all-encompassing global level solutions.

Furthermore, blockchain technology does not operate alone and it needs to be configured with the operating legacy system at companies and other stakeholders. However, most legacy systems are relatively old and therefore do not support blockchain technology. Updating or reconfiguring a legacy system is a tedious process (both in terms of time and money) and companies may not want to tie up resources for that at the current time.

Given these drawbacks, blockchain may not be deployed at a global-scale level during this pandemic, however, its inherent benefits have made companies, authorities, and global health organizations ponder, explore, and evaluate its potential in managing such situations in the future. While the COVID-19 pandemic has caught the world largely unprepared, organizations and companies across the globe are gearing up to ensure this history is not repeated and blockchain technology has emerged as a critical part of the solution.

by EOS Intelligence EOS Intelligence No Comments

Blockchain Scores Well in the Education Sector

Blockchain has now been widely accepted as a technology offering superior capabilities when it comes to data security, transparency, and immutability. This has made it extremely relevant in industries, such as finance and healthcare, where security is critical. However, after getting a foothold in such industries, the technology is extending its reach beyond current uses into other sectors. One such industry is education, where blockchain can facilitate a safe, secure, and auditable ledger covering all education-based data and transactions. However, since blockchain is still new and relatively unexplored in this space, its wide applicability and commercial acceptability is yet to be proven.

Blockchain is fast finding its ground across several industries and education industry seems to be no exception. While still behind in terms of implementation, especially when compared with other sectors such as finance and healthcare, education sector is exploring various blockchain-based applications that can improve data security, facilitate degree verification, and prevent plagiarism, among other things.


Read our other articles on blockchain where we talk about the technology gaining prominence in several industries, including healthcare, retail, banking, car rental, and aviation.


Data breach/security

Industries such as finance and health have been using blockchain to protect their customers’ data. Blockchain can find similar application in the education sector, which is also highly susceptible to data breaches. As per Gamalto, a Netherlands-based international digital security firm, in 2017, the education sector was third (after finance and healthcare industry) with regards to the highest number of experienced data breaches, accounting for 13% of all data breaches across industries.

The use of blockchain to protect student information and records can help mitigate the issue of data breaches. With schools and universities storing data digitally on blockchain, they would be able to store and share student data without making it accessible to hackers. Moreover, data stored on blockchain would help improve transparency and accuracy, reduce human errors and paper-based processes, and eliminate fraudulence.

With schools and universities storing data digitally on blockchain, they would be able to store and share student data without making it accessible to hackers.

Data being stored on blockchain also helps employers be assured that the candidate or student seeking employment has authentic degrees and qualifications.

In February 2019, the Maltese government signed a contract with blockchain startup, Learning Machine, to store all educational records and certificates in the country on a blockchain. The project is a two-year pilot project and aims at ensuring that all educational certificates, including university and secondary school certificates (encompassing state, church, and independent schools), are issued and stored on blockchain. The project is expected to minimize bureaucracy and provide greater security for students’ private data.

Data access and verification

Currently, most institutions store student data within their own systems and the student needs to approach the university to obtain the certification. Alternatively, prospective employers need to verify the authenticity of a candidate’s certificates from the respective university/institution. In cases where a student has multiple degrees and certification, this process becomes cumbersome and susceptible to errors.

Blockchain-based diplomas can offer an easy solution to this issue. With certifications being stored on a blockchain, students can obtain fast and easy access to their records and can share them with potential employers without the latter being concerned about their authenticity.

With certifications being stored on a blockchain, students can obtain fast and easy access to their records and can share them with potential employers without the latter being concerned about their authenticity.

Moreover, in case a university closes down or the credential records are destroyed due to extraordinary circumstances (fire, earthquake, war, etc.), student’s certifications still hold merit and would be verifiable based on blockchain records.

In 2017, MIT introduced a pilot program under which it offered digital diplomas to 111 graduates in addition to the traditional diplomas. These graduates were given an option to receive their diplomas on their smartphones via an app, called the Blockcerts Wallets. The pilot project, which was a partnership between MIT and Massachusetts-based software firm, Learning Machine, enabled students to quickly and easily share a verifiable and tamper-proof version of their diploma with prospective employers, other schools, as well as friends and family.

Apart from MIT, several other institutions offer digital credentials through blockchain. For instance, Open University’s Knowledge Media Institute (KMI) was awarded about US$550,000 (GBP 450,000) in 2018, to develop and employ blockchain technology to allow learners to manage and verify their educational and employment records.

Copyright and plagiarism

Plagiarism is a big issue in the academic world, with people having easy access to other people’s research or educational resources for free over the Internet. However, the use of blockchain can effectively address this problem. One of blockchain’s key characteristic is that information can be securely stored without being tampered with. Thus, academic materials stored in a blockchain-based platform can be accessed by public but cannot be altered or plagiarized. Moreover, any contention regarding originality of information can be tracked and protected with a time stamp.

One of blockchain’s key characteristic is that information can be securely stored without being tampered with. Thus, academic materials stored in a blockchain-based platform can be accessed by public but cannot be altered or plagiarized. Moreover, any contention regarding originality of information can be tracked and protected with a time stamp.

This also helps publishers keep track of reuse of their material and be rewarded based on actual use and reuse of their papers (similar to how they are rewarded for citations of their research material), thereby eliminating any free-use of their materials on the Internet.

Taking things a step further, teachers or publishers could be awarded crypto-coins for the reuse of their material through smart contracts. This way publishers would not have to use intermediaries such as research journals, which charge high fees and thereby limit access to the material.

Creation of decentralized education marketplaces

Education industry still operates in a closed and centralized way with universities and education providers giving credentials for courses through their own diplomas and degrees. Even in case of digital education solutions, there is always a body providing credentials for the course undertaken. Due to this, education remains relatively expensive and not approachable by all.

However, blockchain-based platforms can help solve this problem by creating decentralized education marketplaces, where the quality of education provided is validated by students and educators participating in the course. Using blockchain, these marketplaces connect students and professors who in turn use smart contacts to undertake the course they are interested in. At the end of the course the student receives an immutable certificate of completion and the ledger records the professor who taught the course.

An example of such a company is Switzerland-based ODEM, which was founded in 2017. ODEM is a blockchain-based decentralized marketplace for educational products and services, wherein professors and students come together to teach and learn various courses. The two parties engage through smart contracts and the ODEM ledger recognizes the courses a student has taken or a professor has taught, which boosts their reputation on the ODEM platform. Moreover, ODEM creates ‘skill badges’ for professors and students who complete courses in their network. This helps the decentralized platform as more students wish to undertake courses with professors who have multiple skill badges (thereby higher proficiency in the subject), while professors are also more interested to work with students with multiple badges (i.e. have displayed interest to learn and expand their skill set in the subject).

Several other blockchain-based education marketplaces have emerged. In February 2018, a blockchain-based university, called Woolf University was founded, which allowed any accredited educator to launch and teach courses that would advance users toward a degree.

Blockchain Scores Well in the Education Sector by EOS Intelligence

Other solutions

In addition to this, blockchain increasingly finds application in other educational areas across the globe. In Kazakhstan, the government is using blockchain to manage the national school enrollment of young children to kindergarten. In Kazakhstan, all parents need to apply for their children’s enrollment in local kindergartens, which results in waiting lists for several such institutions, and these lists are managed by the state. In February 2019, the government decentralized the system and put it on a blockchain in order to optimize the waiting list and make the process more transparent.

Similarly, blockchain is also being used for test prepping and learning. Blockchain-based platforms can assist students in preparing for tests as this helps students keep track of their progress. One such example is a chatbot app by Opet Foundation, wherein students can ask questions regarding any subject, the app recommends resources for further studies based on current proficiency, and tracks learning progress through blockchain technology.

Blockchain is also being applied to improve and expand school library systems. With blockchain, schools can create and manage a distributed metadata system for libraries that would allow peer-to-peer sharing of books and other reading material. Also, it will assist in management of libraries as the technology keeps detailed logs of what books are going out and which ones are being returned in an error-free and meticulous fashion. In November 2017, the Institute of Museum and Library Services gave a US$100,000 grant to the San José State University, School of Information to explore blockchain applications in libraries encompassing building an enhanced permission-less metadata archive, supporting community-based collections, and facilitating better digital rights management.

EOS Perspective

Blockchain-based applications are gaining momentum across industries and the education sector is no exception. As in many other sectors, blockchain has the potential to revolutionize the industry, especially with regards to storing data and sharing credentials. Several start-ups have entered this space and are already challenging industry norms.

More so, blockchain-based start-ups in the education sector are becoming even more relevant as the world struggles with calamities such as bush fires or the coronavirus pandemic. As schools and universities shut down due to the ongoing pandemic, blockchain-based platforms play an important role in ensuring that education is not disrupted. Recently, blockchain-based educational platform, Odem, has offered its online integrated learning platform and certification management system free of charge to schools and educators that have shut down due to the virus scare. In the midst of the pandemic, the platform has received interest from Italy, Ireland, Germany, Cairo, and the USA, with a US-based University discussing uploading about 500 courses onto the Odem blockchain to combat class time lost due to the outbreak.

While blockchain appears to be in a strong position to reinvent the education sector, it is easier said than done. Blockchain requires alterations in industry-wide business processes, which not only require significant amount of investments but also involvement of government bodies to develop blockchain regulations as well as build the requisite infrastructure for the technology. Currently the cost of processing and storing data through blockchain is high and scalability remains an issue.

Moreover, currently most schools across the globe have their own systems to store and manage student’s information, progress, and certifications. These would require to be standardized if the use of blockchain grows and new standards would need to be developed. This is an extremely tedious and time consuming procedure and several schools may not be interested in sharing information with third parties.

That being said, blockchain is expected to penetrate the education sector in the years to come and many institutions have already started toying with the technology and its applications. However, just like in case of some other industries, it is yet to be seen if blockchain manages to revolutionize the entire industry or offer few niche applications in some areas and limited geographic scope. It will have a lot to do with the cost and ease of adaptation of the technology in already exiting school systems.

by EOS Intelligence EOS Intelligence No Comments

Global Economy Bound to Suffer from Coronavirus Fever

Global economy has slowed down in response to coronavirus. Factories in China and many parts of Europe have been forced to halt production temporarily as some of the largest manufacturing hubs in the world battle with the virus. While the heaviest impact of the virus has been (so far) observed in China, global economy too is impacted as most industries’ global supply chains are highly dependent on China for small components and cheaper production rates.

China is considered to be the manufacturing and exporting hub of the world. Lower labor costs and advanced production capabilities make manufacturing in China attractive to international businesses. World Bank estimated China’s GDP in 2018 to be US$13.6 trillion, making it the second largest economy after the USA (US$20.58 trillion). Since 1952, China’s economy has grown 450 fold as compared with the growth rate of the USA economy. International trade and investment have been the primary reason for the economic growth of the country. This shows China’s strong position in the world and indicates that any disturbances in the country’s businesses could have a global effect.

On New Years’ Eve 2019, an outbreak of a virus known as coronavirus (COVID-19) was reported in Wuhan, China to the WHO. Coronavirus is known to cause respiratory illness that ranges from cough and cold to critical infections. As the virus spreads fast and has a relatively high mortality rate, the Chinese government responded by quarantining Wuhan city and its nearby areas on January 23, 2020. However, this did not contain the situation. In January 2020, WHO designated coronavirus a “public health emergency of international concern” (PHEIC), indicating that measures need to be taken to contain the outbreak. On March 11, 2020, WHO called coronavirus a pandemic with the outbreak spreading across about 164 countries, infecting more than 190,000 people and claiming 7,800+ lives (as of March 18, 2020).

Coronavirus threatening businesses in China and beyond

Businesses globally (and especially in China) are feeling the impact of coronavirus. Workers are stuck in their homes due to the outbreak. Factories and work places remain dormant or are running slower than usual. Also, the effects of coronavirus are spreading across the globe. Initially, all factory shutdowns happened in China, however, the ripple effects of the outbreak can now be seen in other parts of the world as well, especially Italy.

Automotive industry

Global automobile manufacturers, such as General Motors, Volkswagen, Toyota, Daimler, Renault, Honda, Hyundai, and Ford Motors, who have invested heavily in China (for instance, Ford Motor joined ventured with China’s state-owned Chongqing Changan Automobile Company, Ltd., one of China’s biggest auto manufacturers) have shut down their factories and production units in the country. According to a London-based global information provider IHS Markit, Chinese auto industry is likely to lose approximately 1.7 million units of production till March 2020, since Wuhan and the rest of Hubei province, where the outbreak originated, account for 9% of total Chinese auto production. While the factories are reopening slowly (at least outside the Wuhan city) and production is expected to ramp up again, it all depends on how well the outbreak is contained. If the situation drags on for few months, the auto manufacturers might face significant losses which in turn may result in limited supply and price hikes.

American, European, and Japanese automobile manufacturers, among others, are heavily dependent on components supplied from China. Low production of car parts and components in China are resulting in supply shortages for the automakers globally. UN estimates that China shipped close to US$35 billion worth of auto parts in 2018. Also, according to the US Commerce Department’s International Trade Administration, about US$20 billion of Chinese parts were exported to the USA alone in 2018. A large percentage of parts are used in assembly lines that are used to build cars while remaining are supplied to retail stores. Supply chain is crucial in a connected global economy.

Coronavirus outbreak poses a risk to the global automotive supply chain.

South Korea’s Hyundai held off operations at its Ulsan complex in Korea due to lack of parts that were supposed to be imported from China. The plant manufactures 1.4 million vehicles annually and the shutdown has cost approximately US$500 million within just five days of shutting down. However, Hyundai is not the only such case. Nissan’s plant in Kyushu, Japan adjusted its production due to shortage of Chinese parts. French automaker Renault also suspended its production at a plant in Busan, South Korea due to similar reasons. Fiat Chrysler predicts the company’s European plant could be at risk of shutting down due to lack of supply of Chinese parts.

However, very recently, automobile factories in China have started reopening as the virus is slowly getting contained in the region. While Volkswagen has slowly started producing in all its locations in China, Nissan has managed to restart three of its five plants in the country.

That being said, auto factories are facing shutdowns across the world as coronavirus becomes a pandemic. Ford Chrysler has temporarily shut down four of its plants in Italy as the country becomes the second largest affected nation after China.

Automobile supply chains are highly integrated and complex, and require significant investments as well as a long term commitment from automobile manufacturers. A sudden shift in suppliers is not easy. The virus is spreading uncontrollably across Europe now and if France and Germany are forced to follow Italy’s footsteps of shutting down factories to contain its spread, this will spell doom for the auto sector as the two countries are home to some of the biggest automobile manufacturers in the world.

Technology industry

China is the largest manufacturer of phones, television sets, and computers. Much of the consumer technologies from smartphones to LED televisions are manufactured in China. One of the important sectors in the technology industry is smartphones.

The outbreak of coronavirus is bad news for the technology sector, especially at the verge of the 5G technology roll-out. Consumers were eagerly waiting for smartphone launches supporting 5G but with the outbreak, the demand for smartphones has seen a decline. According to the China Academy of Information and Communications Technology, overall smartphone shipments in China fell 37% year over year in January 2020.

Foxconn, which is a China-based manufacturing partner of Apple, has iPhone assembling plants in Zhengzhou and Shenzhen. These plants, which make up a large part for the Apple’s global iPhone assembly line, are currently facing a shortage of workers that will ultimately affect the production levels of iPhone in these factories. According to Reuters, only 10% of workers resumed work after the Lunar New Year holiday in China. As per TrendForce, a Taiwanese technology forecasting firm, Apple’s iPhone production is expected to drop by 10% in the first quarter of 2020.

Moreover, Apple closed down all its retail stores and corporate offices in the first week of February 2020 in China in response to the outbreak. On March 13, 2020, it reopened all of its stores in China as the outbreak seems to be under control. However, while Apple seems to recover from the outbreak in China, it is equally affected by store shutdowns in other parts of the world (especially Europe). On March 11, Apple announced that all stores in Italy will be closed until further notice. Italy has been hit by the virus hard after China. The Italian government imposed a nationwide lockdown on the first week of March 2020.

On the other hand other multinational smartphone giants such as LG, Sony Mobile, Oppo, Motorola, Nokia, and many others have delayed their smartphone launches in the first quarter of 2020 due to the outbreak.

The coronavirus outbreak is more likely to be a disaster for smartphone manufacturers relying on China.

Other sectors such as LCD panels for TVs, laptops, and computer monitors are mostly manufactured in China. According to IHS Markit, there are five LCD factories located in the city of Wuhan and the capacity at these factories is likely to be affected due to the quarantine placed by the Chinese government. This is likely to force Chinese manufacturers to raise prices to deal with the shortage.

According to Upload VR, an American virtual reality-focused technology and media company, Facebook has stopped taking new orders for the standalone VR headset and also said the coronavirus will impact production of its Oculus Quest headset.

Shipping industry

In addition to these sectors, the new coronavirus has also hit shipping industry hard. All shipping segments from container lines to oil tanks have been affected by trade restrictions and factory shutdowns in China and other countries. Shipyards have been deserted and vessels are idle awaiting services since the outbreak.

According to a February 2020 survey conducted by Shanghai International Shipping Institute, a Beijing based think-tank, capacity utilization at major Chinese ports has been 20%-50% lower than normal and one-third of the storage facilities were more than 90% full since goods are not moving out. Terminal operations have also been slow since the outbreak in China. The outbreak is costing container shipping lines US$350 million per week, as per Sea-Intelligence, a Danish maritime data specialist.

According to Sea-Intelligence, by February 2020, 21 sailings between China and America and 10 sailings in the Asia-Europe trade loop had been cancelled since the outbreak. In terms of containers, these cancellations encompass 198,500 containers for the China-America route and 151,500 boxes for the Asia-Europe route.

Moreover, shutting down of factories in China has resulted in a manufacturing slowdown, which in turn is expected to impact the Asian shipping markets. European and American trade is also getting affected as the virus spreads to those continents. US retailers depend heavily on imports from China but the outbreak has caused the shipping volumes to diminish over the first quarter.

The USA is already in the middle of a trade war with China that has put a dent in the imports from China. National Retail Federation (world’s largest retail trade association) and Hackett Associates (US based consultancy and research firm) projects imported container volumes at US seaports is likely to be down by 9.5% in March 2020 from 2019. The outbreak is heavily impacting the supply chains globally and if factory shutdowns continue the impact is more likely to be grave.


Read our other Perspectives on US-China tensions: Sino-US Trade War to Cause Ripple Effect of Implications in Auto Industry and Decoding the USA-China 5G War


Other businesses

In addition to the auto, technology, and shipping industries, other sectors are also feeling the heat from the outbreak. Under Armour, an American sports clothing and accessories manufacturer, estimated that its revenues are likely to decline by US$50-60 million in 2020 owing to the outbreak.

Disney’s theme parks in California, Shanghai, Tokyo, and Hong Kong have been shut down due to the outbreak and this is expected to reduce its operating income by more than US$175 million by second quarter 2020.

Further, IMAX, a Canadian film company, has postponed the release of five films in January 2020, due to the outbreak.

Several fast food chains have been temporarily shut down across China and Italy, however, most of them have opened or are in the process of reopening in China as the outbreak is slowly coming under control there. While the global fast food and retail players have limited exposure in China, they are suffering huge losses in Europe, especially Italy. The restaurant sector is severely impacted there, where all restaurants, fast food chains, and bars have been shut down temporarily till April 3 in an attempt to contain the outbreak.

Another significantly affected industry is the American semiconductor industry as it is heavily connected to the Chinese market. Intel’s (a US-based semiconductor company) Chinese customers account for approximately US$20 billion in revenue in 2019. Another American multinational semiconductor and telecommunications equipment company, Qualcomm draws approximately 47% of its revenue from China sales annually. The outbreak is making its way through various industries and global manufacturers could now see how much they have become dependent on China. Although the virus seems to be getting under control as days pass, the businesses are not yet fully operational. Losses could ramp up if the virus is not contained soon.

Global Economy Bound to Suffer from Coronavirus Fever by EOS Intelligence

 

Housebound consumers dealing with coronavirus

Since the virus outbreak, people across many countries are increasingly housebound. Road traffic in China, Italy, Iran, and other severely affected countries has been minimized and public places have been isolated. People are scared to go out and mostly remain at home. This has led local businesses such as shopping malls, restaurants, cinemas, and department stores to witness a considerable slowdown, while in some countries being forced to shut down.

TV viewing and mobile internet consumption on various apps have increased after the outbreak. According to QuestMobile, a research and consultancy firm, daily time spent with mobile internet rose from 6.1 hours in early January 2020 to 6.8 hours during Lunar New Year (February 2020).

While retail outlets and other businesses are slower, people have turned to ordering products online. JD.com, a Chinese online retailer, reported that its online grocery sales grew 215% (year on year) to 15,000 tons between late January and early February 2020. Further, DingTalk, a communication platform developed by Alibaba in 2014, was recorded as the most downloaded app in China in early February 2020.

EOS Perspective

International businesses depend heavily on Chinese factories to make their products, from auto parts to computer and smartphone accessories. The country has emerged as an important part in the global supply chain, manufacturing components required by companies globally. The coronavirus outbreak has shaken the Chinese economy and global supply chains, which in turn has hurt the global economy, the extent of which is to be seen in the months to come. Oxford Economics, a global forecasting and analysis firm, projected China’s economic growth to slip down to 5.6% in 2020 from 6.1% in 2019, which might in turn reduce the global economic growth by 0.2% to an annual rate of 2.3%.

A similar kind of outbreak was seen in China in late 2002 and 2003, with SARS (Severe Acute Respiratory Syndrome) virus. China was just coming out of recession in 2003 and joined the World Trade Organization, attaining entrance to global markets with its low cost labor and production of cheaper goods. The Chinese market was at its infancy at that time. As per 2004 estimates by economists Jong-Wha Lee and Warwick J. McKibbin, SARS had cost the global economy a total of about US$40 billion. After SARS, China suffered several months of economic retrenchment.

The impact of coronavirus on Chinese as well as global economy seems to be much higher than the impact of SARS, since COVID-19 has spread globally, while China has also grown to be the hub for manufacturing parts for almost every industry since the SARS outbreak. In 2003, China accounted for only 4% of the global GDP, whereas in 2020, its share in the global GDP is close to 17%.

Currently, the key challenge for businesses would be to deal with and recover from the outbreak. On the one hand, they need to protect their workers safety and abide by their respective governments’ regulations, and on other hand they need to safeguard their operations under a strained supply chain and shrunken demand.

In the current landscape, many businesses in China have reopened operations but the outbreak is rapidly spreading to other parts of the world (especially Europe and the USA), where it is impacting several business as well as everyday lives. The best thing for manufacturing companies in this scenario is to re-evaluate their inventory levels vs revised demand levels (which may differ from industry to industry), and consider a short-term re-strategizing of their global supply chains to ensure that raw materials/components or their alternates are available and accessible – bearing in mind their existing production capability with less workers and customer needs during this pandemic period.

With the rapid spread of the virus, it seems that the outbreak is likely to cause considerable damage to the global economy (both in terms of production levels as well as psychological reaction on stock markets), at least in the short term, i.e. next 6 months. However, many experts believe that the situation should soon start coming under control at a global level. For instance, some experts at Goldman Sachs, one of the world’s largest financial services companies, believe that while this pandemic will bring the lowest growth rate of the global GDP in the last 30 years (expected at 2% in 2020), it does not pose any systematic risks to the world’s financial system (as was the case during the 2008 economic crisis).

Having said that, it is difficult to estimate what real impact the coronavirus will have on the global economy yet, and if opinions such as Goldman Sachs’ are just a way to downplay the situation to keep the investors calm. It is more likely to depend on how long the virus continues to spread and linger and how effectively do governments around the world are able to contain it.

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