Is ASEAN the Next Global Manufacturing Hub?

These days many market analysts are bullish on the burgeoning economies of the Association of Southeast Asian Nations.

These days many market analysts are bullish on the burgeoning economies of the Association of Southeast Asian Nations. These ten countries — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam — were experiencing impressive growth prior to the global COVID-19 shutdown. They are expected to resume that growth as conditions return to normal and worldwide demand for their products returns. If you are looking to outsource manufacturing, an ASEAN supplier could make sense. Here’s a bit of background on the leading ASEAN states that your company might consider:

  • Vietnam — The last ten years could be called the Decade of Emergence for this nation of 97 million. After the government made the necessary reforms, this formerly sluggish economy moved from its long-held caboose position to compete as the engine of ASEAN. Vietnam’s GDP growth of 5.8 percent from 2010 to 2017 ranks up there with China’s 7 percent. Vietnam must improve its transportation infrastructure to accommodate growing demand, but the government has shown a firm commitment to supporting industry with investments and pro-business policies. Manufacturing infrastructure is impressive and continues to grow. Today 260 industrial parks operate in Vietnam, with an additional 75 in the planning stages. When that plan is complete, manufacturing space in Vietnam will cover more than 10.5 billion square feet. The workforce is ample, inexpensive, widely literate, and capable of skilled labor. Vietnam’s leading exports include electrical machinery and equipment, footwear, apparel, furniture and home furnishings, optical and medical devices, leather items and plastics.
  • Thailand — Trailing Vietnam by not much, Thailand showed impressive GDP growth of 5.3 percent between 2010 and 2017. Thailand has the most developed infrastructure in the region, but the labor market has been tightening and wages have been rising. The top exports of Thailand include office machine parts, automobiles and auto parts, integrated circuits, and delivery trucks.
  • Malaysia — A leading ASEAN state in terms of worker productivity, Malaysia boasts a GDP-per-worker of US$ 49,000 (2017), more than twice the rate of China’s US$ 21,000 per-worker. However, Malaysia experienced an economic slow-down in 2019 prior to COVID. This may have been due to its traditional reliance on unskilled labor which has delayed investment in factory automation. Still, some analysts foresee a return to the powerhouse growth of the 1990s. Malaysia is mostly known for electrical machinery and equipment, oil, computers and computer parts, optical and medical apparatus, plastic articles, rubber articles, iron and steel articles, and chemical goods.
  • Indonesia — Foreign direct investment in Indonesia has also dwindled in the last few years. Yet, with the fourth largest population in the world, Indonesia has the workforce to propel growth, if the government can resolve issues of uncertainty. Top exports for Indonesia include electrical machinery and equipment, footwear, apparel, iron and steel articles, motor vehicles, gems and precious metals, computers, and rubber articles.
  • Philippines — This mid-level regional performer has shown steady expansion and good worker productivity, despite being one of the member nations with the least developed infrastructure. Government programs to support growth have shown spotty results. Nevertheless, at least one prominent analyst is predicting top performance in the region over the next two decades. Chief exports of the Philippines include electrical machinery and equipment, computers. optical and medical apparatus, gems and precious metals, motor vehicles, and plastic articles.
  • Singapore — This city-state is at a much more advanced stage of development than its neighbors, so analysts are not predicting enormous growth. However, Singapore’s highly productive workforce will continue to attract companies looking for a good return on their investment. Singapore’s top exports include electrical machinery and equipment, computers, optical and medical apparatus, gems and precious metals, plastic articles, perfumes and cosmetics, pharmaceuticals, and aircraft.

Many of these countries are highly dependent on the Chinese economy. As China struggles, ASEAN nations will be looking for partners to fill the void. This dynamic will create opportunities for companies the world over to contract with reliable suppliers at a cost-effective rate.

Greater opportunity on the horizon

A revolution is coming to industrial manufacturing. Dubbed Industry 4.0, this new wave of manufacture incorporates advanced technology, such as analytics, virtual imaging, artificial intelligence, and augmented industrial automation. Analysts point to Thailand as the ASEAN state most ready to adapt Industry 4.0 practices to attract more business in the automotive and aviation maintenance sectors, while Vietnam has also shown great enthusiasm for the enhanced capabilities these practices offer. If these states lead the way to Industry 4.0, some economists predict an increase in ASEAN’s regional productivity of US$600 billion by 2025.

With more than 50 years of experience in Asian contract manufacture and a growing presence in the ASEAN region, Genimex is ready to help you get every advantage of outsourcing to Southeast Asia.