Southeast Asia (SEA), which is situated at the intersection of important trade routes and sees US$3.4 trillion worth of global commerce flow through each year, has served as a focal point for collaboration between regional and international forces. Over the past few years, Southeast Asia has captured the attention of foreign countries for its prospective Supply Chain Landscape and Sourcing.
What is the potential that Southeast Asia holds? This article will provide a thorough look into the attributes of SEA and how Source of Asia Company can assist your business; with logistics acceleration.
1. Factors driving foreign companies to move to the Southeast Asia market
A. Overview of the Southeast Asian Supply Chain Market
Arsjad Rasjid, the chairperson of the ASEAN Business Advisory Council (ASEAN-BAC), stated with confidence that ASEAN should be the “supply chain of the world.”
Transnational occurrences like the pandemic and geopolitical tensions have put the world’s supply chains to the test and highlighted logistical disruptions. Manufacturers are moving their supply chains to strengthen their resilience, overcoming their reliance on a single location. Asia and the ASEAN area have become more popular as enticing choices for the following reasons.
Its expansion and increased intra-ASEAN cooperation have been made possible by the Association of Southeast Asian States (ASEAN) Economic Community, or AEC. Cross-border trade is encouraged by a number of free trade agreements between SEA countries and a reduction in tariffs in the area. Companies can navigate and expand with confidence in the varied area thanks to programs like the Southeast Asia Manufacturing Alliance and the Regional Comprehensive Economic Partnership, which connect them with a network of reliable partners.
Southeast Asian nations have more readily accessible skilled labor that is in plentiful supply chain and sourcing; and reasonably priced compared to other regions. Companies will be able to meet the rising demand throughout SEA with the aid of this varied talent pool. With a population of over 661 million and an estimated economic contribution of over USD 3.1 trillion in 2020, the ASEAN area enjoys a substantial demographic dividend.
The availability of a working-age population is the second reason. Governments of the respective countries are also implementing skill development programs specific to sub-segments within manufacturing and are also utilizing universities to produce skilled graduates in order to continuously upskill and upgrade the workforce to equip them with the necessary technological skills to meet the industry’s growing needs.
Lastly, the rapid development of infrastructure is what makes businesses want to migrate to nations in Asia and the ASEAN area. For businesses looking to establish operations in the area, the availability of industrial parks and designated manufacturing zones tailored to various sub-sectors of the manufacturing industry provide a complete manufacturing environment. Besides seaports and airports, nations’ governments are boosting investments to enhance their infrastructure and transportation systems further.
B. Vietnam – Rising star in Asia’s shifting supply chains
Vietnam’s supply chains have evolved significantly over the past few decades, driven by the country’s rapid economic growth and integration into global trade networks. The country has become a hub for regional supply chains, with many companies using the country as a base to manufacture goods for export to other Southeast Asian countries.
One of the critical strengths of Vietnam’s supply chains is the country’s low-cost labor. Additionally, the country’s favorable location, with access to major shipping lanes and proximity to key markets such as China, Japan, and South Korea, has made it an essential hub for regional supply chains.