Coronavirus: How Long Can Government-Backed Logistics Sector Last?

As Darko Bicak/Poslovni Dnevnik writes on the 23rd of April, 2020, owing to the coronavirus pandemic, the Croatian logistics and distribution sector is suffering a great deal of damage to its operations as a result of the overall business downturn and the difficulty in working in all segments that make up the total supply chain.

International transport within European Union (EU) countries has been very difficult in all segments since the second half of March 2020, when restrictions on border crossings came into force, with the introduction of mandatory quarantine for drivers, a move which virtually prevented any transport operation.

According to the Croatian Employers’ Association (HUP) – Transport Association, the closure of almost all stores further halted all processes related to contract logistics, as well as warehousing and distribution. Ana Soldo, of the HUP-Transport Association, who is otherwise the director of Quehenberger Logistics Croatia, says that the companies that specialise in parcel delivery felt the least impact of all, as customers merely switched to online shopping.

”The logistics sector is largely oriented towards foreign markets, the reason being that Croatia is predominantly an import country with a small share of its own production. All logistics companies reported a large drop in turnover in excess of 40 percent in April, but it’s still too early to come out with some final forecasts, as it all depends on what’s done related to the relaxation of the anti-coronavirus measures. The entire sector can withstand a maximum of another month with the support of the state like this, and after that period, the damage would be enormous, with many job losses and with the existence of some companies on the market being called into question,” explained Ana Soldo.

The problems are only just beginning…

She added that this situation is mostly affecting small and medium-sized Croatian companies, which will continue to find it very difficult to cope with the ongoing coronavirus crisis. Multinationals, she pointed out, that operate on the globalised market won’t be particularly threatened in the next phase when we go from being in a health crisis to a major economic crisis because of coronavirus.

“The coronavirus crisis is just the prelude to a major economic crisis due to distorted market relationships leading to declining sales in almost every industry. The measures under consideration by the Croatian Government should not be solely related to the beginning and end of the pandemic, as these challenging times are only just beginning.

If the Croatian Government fails to realise that we’re facing a very long and slow recovery, we’re in danger of collapsing again, as we witnessed back in 2009. The current situation is an opportunity for the government to review the working conditions of the private sector primarily from the aspect of fiscal and para-fiscal levies that greatly hinder the development of companies and hamper new investments to the greatest extent possible.

The abolition of heavy para-fiscal levies would greatly facilitate further business and make the private sector less vulnerable to government support in times of crisis. Transparency in the procurement process would lead to more healthy market competition and open the door to the development of the highest quality companies on the market.

One-off assistance from the Government and the EU certainly contributes to stability but doesn’t solve the accumulated problems that are now very visible in these times of crisis. Support to the private sector should last until the first visible signs of market recovery beign, otherwise, the whole process could turn into painful and slow death,” explained the head of the HUP Transport Association. She noted that, on the other hand, every crisis brings with it a whole series of structural changes both in the labour market and in people’s general habits.

“The coronavirus crisis has shown us that even our otherwise sluggish state can adapt procedures and make them easier by using technologies under the pressure of this situation. Certainly, digitalisation, online commerce and making working from home more commonplace can increase efficiency and raise the quality of life. Distanced learning (for kids) has also shown some benefits, but in the basic education process, the impact of children’s interactions with their teachers and among themselves is immeasurable,” Soldo estimated.

This industry isn’t planning layoffs, yet…

Employers in this sector are currently not planning layoffs and redundancies because, despite temporary work from home and vacation time, they believe they will be able to survive this difficult period with state incentives.

Make sure to follow our business section for more on Croatian companies. Follow our dedicated section for all you need to know about coronavirus in relation to Croatia.

 

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