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44THE EFFECTS OF GLOBAL PANDEMIC ON THE INTERNATIONAL
BUSINESS
Ibragimova Farangiz Aybek kizi GLOBAL TEXTILE SOLUTIONS LTD Import manager, Tashkent, Republic of Uzbekistan.
Abstract: There were concern about the pandemic's long-term influence on globalization as the coronavirus swept the worldwide, closing borders and disrupting international trade and capital flows. And also during the pandemic, most countries, especially, countries whose economy are relied on tourism industry have experienced severe economic downturn. Meanwhile, a critical analysis of recent data reveals a considerably more positive picture. While international travel is still in decline and is not predicted to recover until 2023, cross-border trade, financial, and information movements are expected to increase.
Keywords: International trade, Covid-19 pandemic, Globalization, Capital Flow, tourism industry
Аннотация: Высказывались опасения по поводу долгосрочного влияния пандемии на глобализацию, поскольку коронавирус охватил весь мир, закрывая границы и нарушая международную торговлю и потоки капитала. А также во время пандемии большинство стран, особенно стран, экономика которых зависит от индустрии туризма, испытали серьезный экономический спад. Между тем критический анализ последних данных показывает значительно более позитивную картину. В то время как количество международных поездок все еще сокращается и, по прогнозам, не восстановится до 2023 года, ожидается рост трансграничной торговли, финансовых и информационных потоков.
Ключевые слова: международная торговля, пандемия Covid-19, глобализация, поток капитала, туристическая индустрия.
INTRODUCTION
As the Covid-19 pandemic spread the globe in 20201, cross-border flows dropped, worries about globalization's prospects. As we move into 2021, the latest data state a clearer and more hopeful picture. Global business is not going away, but the landscape is altering, with significant consequences for strategy and management. According to the 2020 edition of the DHL Global Connectedness Index2, which was
1 https://hbr.org/2020/05/will-covid-19-have-a-lasting-impact-on-globalization
2 https://www.dhl.com/global-en/spotlight/globalization/global-connectedness-index.html
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released in December, the Covid-19 pandemic is unlikely to reduce globalization to levels seen during the global financial crisis of 2008-09 (the greatest setback for international trade and capital flows in decades). The paper implements data on trade, capital flows and tourism to evaluate international business.
The only part of the index showing an unprecedented collapse due to Covid-19 is international tourism. Trade has rebounded strongly; capital flows are recovering. Consider the business implications of developments in each of these three areas: Trade flows, Capital flows and Tourism.
Even the most optimistic early projects of a world trade recovery have been surpassed. In March and April of 2020, goods trade fell faster than it did during the Great Depression and the global financial crisis. In June, however, it started to increase again, and by November, it had returned to pre-pandemic levels. Despite initial setbacks, trade has proven to be a lifeline for economies and health-care systems. As social distancing shifted expenditure from local services (e.g. restaurants) to imported goods, trade in medical supplies and electronics (for working from home) boomed.3 The trade reversal should highlight the fact that Covid-19 is the tipping point for global supply chains. Many corporations have already put their pandemic-era reshoring strategies on hold, noting that concentrating manufacturing at home generally raises costs without improving resilience. Diversification across efficient domestic and/or international production locations, as well as expenditures in technology and inventory, usually makes more sense, and surveys reveal that more businesses are adopting these methods.
Covid-19 affected cross-border investment flows even worse than trade. At the start of the epidemic, investors withdrew massive amounts of portfolio capital from emerging markets, although these flows immediately stabilized and subsequently rallied in late 2020. So far, bold fiscal and monetary policy solutions have kept the Covid-19 crisis from becoming a global financial disaster.
Portfolio Equity Flows to Emerging Markets.
Trade and Capital Flows
DISCUSSION AND RESULTS
3 CPB World Trade Monitor
Nonresident portfolio equity flows
$40 billion
30 WM
20
10
0 ____IH „ flB №
-10 -20 -30 -40 -50 -60
iiiiiiiiiiii JFMAMJ JASOND
2020
Source: IIF Capital Flows Tracker
International corporate investment, but at the other hand, is expected to remain flat in 2021. FDI flows, which entail corporations buying, building, or reinvesting in operations abroad, plummeted 42% in 2020, to a level last seen in the 1990s. In the midst of a fragile and uneven economic recovery, businesses are understandably wary of investing in new "greenfield" expansion. However, in late 2020, international mergers and acquisitions (M&A) began to pick up, and the worldwide share of M&A activity remained stable last year. Corporate dealmakers do not appear to have gotten more wary about overseas purchases in particular.
As pandemic-induced macroeconomic uncertainty, lockdowns, and travel restrictions begin to ease, the outlook for foreign business investment should strengthen. However, stricter national security monitoring of foreign takeovers will remain in place, and supply-chain diversification and partial reshoring will increase the prospects for some projects while making others less appealing. Traditional factors such as entrance to markets and resources will continue to drive the economic case for investing in international operations, but risk assessments in the current environment should place a greater emphasis on geopolitical issues. Tourism
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During the pandemic, most countries, especially, countries whose economy are relied on tourism industry have experienced severe economic downturn. With high potential, and having enough opportunities, countries are trying to revive international tourism from scratch, by opening airlines again, making more comfortable and astonishing trips for tourists. They are trying to widen their tourism share in the export operations and its share in the budget by applying new marketing strategies in the global market competition. As the global market situation changed, requirements of consumers also became more complicated and non-life-threatening. Strategies to win the market competition, and improve comparative advantages led new marketing vision and complex strategy. There are different approaches to the definition of "tourism" in modern foreign scientific literature. In 1991, the World Tourism Organization (WTO) Conference on Travel and Tourism Statistics in Ottawa, Canada, selected the direction of requirements as a concept and defined tourism as follows: "Tourism activities of the person who carried out the field visit"; As all countries are involved in international tourism industry, they define it as their own, so as the republic of Uzbekistan. According to the law of Uzbekistan, tourism is defined as follows: "Tourism is the departure (travel) of an individual from the place of permanent residence for a period of at least one year without engaging in paid activities in the place (country) for health, educational, professional or other purposes." Analyzing the concept of 'tourism' using a systematic approach, the American professor studied the University of Mainzen, Auckland. We distinguish the Leiper concept. He calls tourism a system of three main elements:
1. Geographical component; 2. Tourists; 3. Tourism industry.
According to American professor Leiper, the geographic component covers the following elements in their place takes
The field of tourism is a multifaceted phenomenon, which manifests itself in many forms, and in the scientific literature there are many definitions of it. Tourism is "the activity of individuals when they are out of their usual environment, traveling and arriving at a place (address), not more than one year away from leisure or work" (BTT). Among them, five different definitions of tourism need to be conceptually defined:
- Tourism is the result of people moving to the intended tourist destinations and staying there to meet their tourist needs;
- tourist-generating region;
- transit area;
- region of tourist destinations
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- Different forms of tourism include two basic elements: travel to the intended tourist destination (relocation) and accommodation at this destination, skating, accommodation and meals, and other needs;
- Travel means departure of the tourist from the place of permanent residence the country (territory, place of residence);
- The movement of tourists to different tourist destinations is temporary. That is, tourists return to their place of permanent residence after a few days, weeks, or months;
- People visit tourist sites for various purposes, which does not include permanent residence and income (business activity).
Statistical Analysis:
As we get information about tourism and its role in the economy, now explaining position of international tourism during global lockdown would be great. Before appearance and spread of COVID -19, travel and tourism industry had become one of the most important sectors in the world economy, which 25 accounted for 10 percent of global GDP and more than 330 million jobs worldwide. In 2019, 1.5 billion people took foreign trips, and the tourism sector almost reached its peak many economies. The pandemic, the first of its scale in a new era of interconnectedness, has put 100 million jobs at risk, many in micro, small, and medium-sized enterprises that employ a high share of women, representing 54 percent of the tourism workforce, according to the United Nations World Tourism Organization (UNWTO). In 2019, World Economic Outlook forecasted that the global economy would contract by 4.4 percent in 2020. The shock in tourism-dependent countries will be far worse. Real GDP among African countries dependent on tourism will shrink by 12 percent. Among tourism-dependent Caribbean nations, the decline will also reach 12 percent. Pacific island nations such as Fiji could see the real GDP shrink by a staggering 21 percent in 2020. Not only tourism-based economies, but also American states suffered during global lockdown. Taking Florida as an example, it was one of the most visited places on America. The state attracted a record 131.42 million tourists in 2019, the culmination of year-to-year growth since 2009, when Florida had 80.879 million visitors. The hospitality and leisure industries handled 82.315 million visitors in 2010 and 87.307 million in 2011. Since 2015, the state had drawn more than 100 million visitors a year. If we compare before and after position in the state, we can see that in 2019, Florida reached its peak in the number of visitors, however, this tremendously declined at the beginning of the 2020. The coronavirus ended record-setting tourism numbers in Florida, with the industry seeing a 34% drop in visitors in
2020 compared to the prior year. The state tourism-marketing agency Visit Florida posted preliminary figures from the fourth quarter and for the full year late Monday, showing 86.714 million visitors to the state during 2020. That was the lowest annual total since 2010. In Florida, where tourism accounts for up to 15 percent of the state's revenue, officials are predicting that will least 3 years for the industry to recover. Not only developing countries, and tourism-dependent economies suffered from COVID-19, but also developed countries that are the representative of G20 also lost its place in the tourism. According to a recent IMF data, among G20 countries, the hospitality and travel sectors make up 10 percent of employment and 9.5 percent of GDP on average, with the GDP share reaching 14 percent or more in Italy, Mexico, and Spain. A six-month 26 disruption to activity could directly reduce GDP between 2.5 percent and 3.5 percent across all G20 countries. Tourism-dependent countries will likely feel the negative impacts of the crisis for much longer than other economies. Contact-intensive services key to the tourism and travel sectors are disproportionately affected by the pandemic and will continue to struggle until people feel safe to travel again. As some countries, who are tourism- depended, are experiencing struggles in their economies. While trade and capital flows all played a positive role in the pandemic response, personal mobility was limited to prevent the virus from spreading, resulting in this year's unusual drop in people flows. In 2020, the number of persons going to foreign nations declined by 74%. Before 2023, international travel is not projected to return to pre-pandemic levels.
International Tourist Arrivals, year-over-year change.
o
-20
-40
-60
-80
-100%
J FMAMJ JASOND
2020
Source: UNWTO
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Before the epidemic, business trips amounted for only 13% of all international travel, yet they are critical in promoting trade, investment, and corporate management. Prior to travel for internal company meetings and participation in conferences and trade shows, travel supporting organizations' external sales and business development objectives is predicted to return. This implies that managers in multinational corporations should pay special attention over the medium-term to effects of travel restrictions on internal team functioning and learning and innovation [1-4].
According to Official Esta statistic information, these are the top ten countries with major negative impact as the result of COVID -19:
1. Bangladesh - 9 jobs per tourist (944 per 100)
2. India - 2 jobs per tourist (172 per 100)
3. Pakistan - 2 jobs per tourist (154 per 100)
4. Venezuela - 1 job per tourist (101 per 100)
5. Ethiopia - 1 job per tourist (99 per 100)
6. Madagascar - 1 job per tourist (93 per 100)
7. Philippines - 1 job per tourist (83 per 100)
8. Guinea - 1 job per tourist (77 per 100)
9. Libya - 1 job per tourist (68 per 100)
10. Nigeria - 1 job per tourist (66 per 100)
All over the world, tourism-dependent economies are working to finance a broad range of policy measures to soften the impact of plummeting tourism revenues on households and businesses. Cash transfers, grants, tax relief, payroll support, and loan guarantees have been deployed. Banks have also halted loan repayments in some cases. Some countries have focused support on informal workers, who tend to be concentrated in the tourism sector and are highly vulnerable [5].
Situation analysis:
The main question stays to all countries as: what prevented travels decline and how countries can revive the system? In order to analyze the problems, we should start by looking at the causes of the international tourism decline.
First and foremost, the main cause would be the pandemic itself. As COVID virus spread at the high speed, all airlines, travels, departures stopped immediately. Countries tried to save people by locking down their borders. It caused everybody to stay at home, even for some countries it led to the closing down the schools, public places, and most importantly workplaces. Only alive economic part became hospitals and retail shops [6].
Causes:
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The second cause would be the shortage of money. As economies suffered a lot, and most of the businesses closed down, or even broke. The unemployment rate doubled in most economies, especially in USA and Uzbekistan. Both countries had 6.5 % and 8% unemployment rate in 2019, respectively, while it reached to 13.4 % for both countries. These 2 different countries locating in the different continents, with unequal demographic and economic indicators, served as a great example of a pandemic effect for both developing and developed countries.
The last but not least, third cause would be psychological. Even if conditions became better during mid-2020s, people became afraid of travelling abroad or departure within a country even [7]. The official news about ongoing pandemic will affect this reason still, and gaining their trust will not be easy for any host countries. Effects of the lockdown are obvious, as we can see it in the example of Florida, Caribbean and G20 countries earlier mentioned in the thesis. As a researcher what I want to conclude that, the international tourism will revive gradually, along with the disappearance of the pandemic. There is hope for economies to reach their highest potential again, but it will take approximately 2 or 3 years. But, still the severe difficulties can be seen in economies which are depended on tourism.
So, the pandemic has not stopped most sorts of international flows. Nor has it clearly turned the tide toward deglobalization moving forward. The DHL Global Connectedness Index 2020 report also looks for evidence of the world economy fracturing into rival blocs.
Over the last year, many countries have taken significant moves to expand markets. In November, the Regional Comprehensive Economic Partnership (RCEP) was inked, promising to streamline trade across a swath of the Asia-Pacific area that accounts for nearly one-third of global economy. The US-Mexico-Canada agreement (USMCA) entered into force in July, replacing the North American Free Trade Agreement (NAFTA). And trading under the African Continental Free Trade Agreement (AfCFTA) began on January 1, 2021.
Data on public opinion backs up these moves [8]. Majorities across several nations want increased international collaboration, and polling in the United States shows that support for globalization in general and immigration in particular is at an all-time high.
The bottom line for business is that Covid-19 has not reduced globalization to anywhere close to the level required for strategists to focus on their native countries or regions. Globalization has never been easy for businesses, but if international
CONCLUSION
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possibilities and competitive challenges were important before the epidemic, they will undoubtedly be important in 2021 and beyond. And, because nations that are more connected to global flows grow quicker, we need more globalization rather than less to speed up the recovery from Covid-19.
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