Asean region gets more attractive for global factories

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Port Batu Ampar, a seaport in Batam, is slated for expansion in infrastructure plans for the island, which is a free trade zone. Indonesia has been ranked one of the top five manufacturing locations worldwide for cost-competitiveness.
APRIL 25, 2019 - 5:46 PM

SOUTH-EAST Asia is home to some of the world’s cheapest production for global manufacturers, according to a new industry ranking index.

China was rated the most cost-competitive manufacturing site - but Malaysia, Vietnam and Indonesia were not far behind in the ranks, in a report from real estate services firm Cushman & Wakefield that assessed 48 markets around the world. India rounded out the top five.

Two other South-east Asian countries made the top 15 cost-competitive factory locations: Thailand, in sixth place, and the Philippines, ranked 15th.

Christine Li, the firm’s Singapore and South-east Asia research head, said in a statement: “While China remains a global manufacturing powerhouse, the US-China trade tension was a wake-up call for many global companies to seriously consider supply chain diversification into other low-cost alternatives in countries such as Vietnam and Indonesia.”

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“Global manufacturing has entered a new era, marked by the growing influence of technology in addressing productivity, labour shortages and safety in production and logistics,” said Lisa Graham, Cushman & Wakefield’s regional head of industrial research, who wrote the report.

“We are seeing formerly low-cost locations such as China and India moving up through the value production chain through country-sponsored support of technological adoption. That is why Asian countries featured so prominently in our rankings.”

But Ms Graham warned: “There are still concerns over intellectual property issues in the region which mean, that despite higher costs, countries in North America and Europe will continue to thrive as manufacturing bases.” 

Ms Li added: “Singapore will also be a key beneficiary in the transition to Industry 4.0 as the city-state continues to invest heavily in technology and innovation to keep pace with the rapid transformation in manufacturing. Singapore’s robust regulatory framework offer manufacturers a reasonable level of protection from geopolitical and intellectual property risks.”

On a weighted basis that also looked at operating conditions and geopolitical risk, China came in top again, followed by the United States, India, Canada and the Czech Republic.

Under these criteria, the highest-ranked Asean market for factories was Malaysia in seventh place, followed by Thailand, which came in 10th.

Indonesia, Singapore and Vietnam took the 13th to 15th spots, in that order.

“Countries which invest in platforms that facilitate flows in and out of production lines will succeed,” Cushman & Wakefield said in a summary of its findings.

“China’s seamless supply chain connections have resulted in substantial investment in infrastructure and multi-modal transport, including the New Silk Road rail and maritime projects, in addition to incentives. These factors are offsetting concerns regarding intellectual property.”