Organisation:
EY
Resource Link:
Published in 2022, Link
My Key Takeaways
Trade shockwaves.
The pandemic has bared open the vulnerabilities of traditional manufacturing and supply chain models.
Some takeaways from a report by EY on companies looking towards Southeast Asia (“SEA”) to deal with global manufacturing and trade disruptions:
How’s SEA trade doing?
SEA is currently the 5th largest economy in the world (GDP US$3.2T in 2019) and surpassed the US as China’s second largest trade partner.
The region is also the fastest growing economy in Asia after China, with GDP growth at 3-5% from 2021-2025 [International Monetary Fund].
Conducive Business Environment for Manufacturing
On the Global Ease of Doing Business Index 2019, seven SEA countries featured in the top half, while three ranked in the top 25, with Singapore leading at rank number two.
The average statutory corporate tax rate is 28.44% globally, 26.96% for G2010 and 27.40% for BRICS. The tax rate for the SEA region averages approximately 22.35%, with Singapore being the most competitive at 17.0%.
“Proactive and strategic approach to obtaining incentives can generate significant cost savings (~5-30% ROI), dependent on the project size, capital investment, geographic jurisdiction, perceived competitiveness and timing” (Pg 7)
Which sectors of manufacturing are compatible with SEA?
Figure 2 maps out SEA’s sectors of strength (i.e. highest export volumes & growth rates) in finished goods, raw materials, and heavy metals & machinery.
For example, 7.3% of the world’s consumer electronics and 80% of the world’s hard drives come from SEA.
Notably, 6 of the world’s top 10 electronic manufacturing services companies are present in Singapore.
The promising healthcare equipment market in SEA would grow at a CAGR of 10.2% from 2020-25 vs 9.0% for APAC (Fig 4).
Highlighting initiatives supporting your manufacturing and supply chain strategy in SEA
1) Regional Comprehensive Economic Partnership (RCEP)
SEA is an integral part of the Free Trade Agreement (FTA) covering 30% of the world economy and over a third of the global population. Pg 42 for an analysis of how RCEP can impact supply chain design.
2) TradeTrust
A digital utility comprising a set of globally-accepted standards and frameworks that connects governments and businesses to a public blockchain, reducing trade document fraud risk and costs through automation.
3) Southeast Asia Manufacturing Alliance (SMA)
SMA helps companies to access trusted partners to establish the “Singapore + 1” twinning model – dual locations in SEA with Singapore as an advanced manufacturing innovation hub, and cost-competitive production locations nearby.
Need more data and case studies?
Save your team some research time by referring to this table on Pg 45 summarising factors like GDP, labour force size, top export sectors, monthly wage of manufacturing worker, and FTAs across SEA.
Dive into four case studies of manufacturers in Consumer goods, Healthcare equipment, Automotive OEM and Foodtech using the above SG+1 twinning model (Pg 37-39).
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Recent developments have uncovered cracks in the “just-in-time” model.
Have you also observed companies shifting towards the “just-in-case” alternative and reconfiguring their critical manufacturing and supply chain activities for greater resiliency?
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About Zhilin SIM
Having worked and lived in Singapore, the Nordics, China, Spain, UK, I’m now based in Paris.
I’m fluent in English, French and Mandarin, and I’m learning Arabic because it’s a beautiful and fascinating language.
My team creates and supports one-many initiatives connecting corporate and startup ecosystems in Europe to business and innovation opportunities in Singapore and Southeast Asia.
I’m passionate about horticulture, watercolour, startups/tech as well as French cuisine, Peranakan kueh techniques and other global cuisines.
Feel free to connect with me if you think my network in Europe and Asia could be of benefit to your business and innovation activities.
