Manufacturing Powerhouse Shift: Southeast Asia & India Rise as China Recalibrates In Next Decade

• 1 June 2024
• Construction Focus
• 2105 Views

Southeast Asia and India: The New Manufacturing Powerhouses

A significant shift is underway in global manufacturing, with Southeast Asia and India emerging as key destinations alongside China, according to JLL, a leading commercial real estate services firm, updated by Retalkasia on 29 May 2024. This trend is driven by rising costs in China and the growing importance of supply chain diversification.

Southeast Asia and India: Strategic Location and Strong Fundamentals

Companies are increasingly looking beyond China to establish or expand their manufacturing operations.  This “China+1” strategy aims to mitigate risk by diversifying production across multiple locations. Southeast Asia and India, with their large and skilled workforces, favourable costs, and improving infrastructure, are attracting significant foreign direct investment (FDI) in manufacturing. Southeast Asia and India boast several competitive advantages that position them for continued growth in manufacturing. Their large and growing populations provide access to a vast pool of skilled labour.

Government Incentives Fuel Growth

Recognising this opportunity, governments in Southeast Asia and India are actively implementing policies to attract manufacturing businesses.  These policies often focus on land availability, access to capital, and other incentives to create a supportive environment for industrial development.

Beyond Cost: A Holistic Approach

While cost remains a critical factor in location selection, JLL emphasises the importance of a comprehensive evaluation process.  Michael Ignatiadis, Head of Manufacturing Strategy, Asia Pacific, JLL, stresses that “companies need to adopt a flexible mindset towards land selection and funding options” to adapt to evolving supply chain dynamics”.

Indonesia & Vietnam See FDI Surge

JLL’s analysis reveals a significant increase in FDI for manufacturing in Southeast Asian countries.  Indonesia, for example, saw a US$4 billion year-on-year jump in manufacturing FDI, reaching US$28.7 billion last year.  Vietnam also experienced robust growth, with FDI in manufacturing climbing over 30% to US$23.5 billion.  These figures highlight the growing appeal of Southeast Asia as a manufacturing hub.

The Future of Manufacturing: Diversification & Growth

The rise of Southeast Asia and India as manufacturing powerhouses reflects the evolving global economic landscape.  Companies are increasingly seeking to diversify their supply chains and capitalise on the strong fundamentals offered by these emerging markets. 

“Beyond cost factors, skilled labour, infrastructure quality, environmental regulations, and proximity to key markets are all crucial considerations for long-term success,” said Peter Guevarra, Director, Research Consultancy, Asia Pacific, JLL.

Additionally, with their strategic locations offer proximity to major markets and critical supply chains, skilled workforces, and supportive government policies, Southeast Asia and India stand poised for a prominent role in the future of global manufacturing.

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