EY+重塑制造和供应链：投资东南亚-英

Reimagining

manufacturing

andsupplychains

InvestinginSoutheastAsia

CompaniesinvestinginSoutheastAsia

canaccelerategrowthiftheyhaveadeep

understandingoftheoperatinglandscapeand

maintainagilesupplychainstrategies.

Executivesummary2

Contents

1

2

3

4

Overviewofthe

businesslandscape

SoutheastAsia(SEA)marketenvironmentandlandscape

5

WhySEA:enablersfor

businessesandinvestments

7

Economicoutlookpost

COVID-19pandemic

9

OpportunitiesinSEA

amiddisruptionand

challenges

TopsectorsinSEA

11

Keyopportunitiesandmid-termoutlookinSEAacrosssectors

12

Buildingthestrategy

Supplychainreimagined

Howareindustriesbeingdisrupted?

Whatistheimplicationontraditionalsupplychains?

Howcanthesedisruptionsbeaddressed?Theimperatives

foraresilientsupplychaininthefuture.

15

Howcancompaniesdeveloptheirstrategy?

22

Whatarethepotentialpitfalls

24

tobeovercomeandwaysof

buildingfuturestrategies,

newinvestments,capabilities,

evolvingsupplychainmodelsin

thefocusedsectors?

5

6

7

Industryperspectives

Casestudies

37

TheSingapore+Model

39

Keytrendsand

developments

RegionalComprehensive

EconomicPartnership(RCEP)

41

Investmentsininfrastructureforimprovedsupplychain

andmanufacturing

42

Emergenceofnewtechnologies

42

Developmentofsharing

economy

42

Greenandsustainable

infrastructureinvestment

43

Annex

SnapshotofkeySEAcountries

45

InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychain

1

1

Executivesummary

2|InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychains

ExecutiveSummary

AstheworldisbattlingtheCOVID-19pandemic,thevulnerabilitiesof

traditionalsupplychainshavebeenbaredopen,withcertaincritical

industriesbeingcaughtoff-guardandnowdealingwithmajorand

minorshockwaves.

SoutheastAsia(SEA)ishometoover656millionpeople

andisaconfluenceofmanyemergingmarkets.Througha

uniquecombinationofdemographics,naturalresourcesandexcitingmarkettrends,theregionprovidesbothpurpose

andmyriadopportunitiestobusinessestodevelopand

expandtheirmanufacturingandsupplychaincapabilities.

Thereareseveralenablersthatmaketheregiononeof

thefastest-growingregionsinAsia-Pacific(APAC),and

worthyofopportunityhuntingeveninthegloballandscape.Someoftheenablersincludegrowthoftheconsuming

classandeasyavailabilityofaskilledworkforce.ThoughtheCOVID-19pandemicdealtablowin2020,theregionispoisedtomakeasharprecoveryin2021.Theregion’sevolvingtradepolicieshavehelpedtocreateaboostin

severalsectorsofthemanufacturingandserviceindustry.

Basedonananalysisofpre-pandemicexportdata,

consumergoodsandhealthcareequipmentsectorsare

areasoffocusforthisreport.Otheremergingsectorssuchaselectronicmanufacturingservices(EMS)andagritech

havealsobeenexplored.

AstheworldbattlestheCOVID-19pandemic,the

vulnerabilitiesoftraditionalsupplychainshavebeen

baredopen,withcertaincriticalindustriesbeingcaughtoff-guardandnowdealingwithmajorandminorshockwaves.TradetensionsbetweentheUSandChinahavedrivenentitiestofurtherrethinktheirsupplychain

strategies,providinganaddedimpetusfor

SEAopportunities.

Thisreportexamineshowentitiesinspecifiedindustriesareimpactedandcanoptimizetheirsupplychainstrategies.

Theconsumergoodssectoriscurrentlyunderpressure

toensuremaximumvaluederivationfromthesupply

chain,whileensuringgreatertransparencyinvaluechainactivities.Thehealthcareindustry,whichwasmajorly

impactedbythepandemic,isexploringalternaterevenuechannelsthroughtelemedicineandtheuseoftechnologyforbothproductionofmedicinesandequipment.

Throughthisreport,industryperspectivesweregatheredfromplayersinthefocusedsectors.Theseprovidea

contextforthepainpointstheseentitiessuffered,their

rationaleforselectingSEAastheirregionofpreferenceorexpansion,enablersthatprovedadvantageousforentitiesoperatinginthisregion,andtheirfutureaspirationsfromtheregion.

NumerousinitiativessuchastheSoutheastAsia

ManufacturingAlliance(SMA)andRegional

ComprehensiveEconomicPartnership(RCEP)connect

companieswithanetworkoftrustedpartnerstonavigateandgrowinthediverseSEAregionwithconfidence.

Inparticular,theRCEPallowseconomicintegration

withabout30%oftheworld’spopulation.

Thereareseveraltrendsanddevelopmentsthat

promulgateSEAasakeyregionoffocusinthefuture.

Technologicaladvancementsandtheirrapidadoption,

continuousimprovementtoprovidestate-of-the-art

infrastructurefacilitiesanddevelopmentofa

sharing-basedeconomicmodelaresomefactors

amongmany,whichmakeSEAthedesiredregionfor

expansionofmanufacturingandsupplychaincapabilities.

InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychain

3

2Overviewofthe

businesslandscape

4|InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychains

6-5-4-3-2-1-0-1--1-

-3-

SoutheastAsia(SEA)market

environmentandlandscape

SEAissituatedattheconfluenceofmajortraderoutes

withUS$3.4t1ofglobaltradepassingthrougheachyear.

TheregionbordersChinaandIndia,twooftheworld’s

mostpopulouseconomicpowers,makingSEAafocalpointforcooperationandtensions,amongbothregionaland

globalpowers.

Amidrisingtradeandtechnologytensionsbetween

theUS,Chinaandotherrelatedtradingpartners,

SEAnationshavenowsurpassedtheUSasChina’s

second-largesttradepartner.RisingimportsfromChinahavealsoputdownwardpressureonpricesintheregion.

Despitetheseroadblocks,SEAispoisedforgrowthintheupcomingyears.WithacombinedGDPofover

US$3.2t2in2019,itiscurrentlythefifth-largesteconomy

intheworld.Hometo656million2people,ayoung

demographicandagrowingmiddleclass,SEAholds

immensepotential,seenintheregion’srealgrossdomesticproduct(GDP)growthovertheyearsinfigure1.

TheregionisthefastestgrowingeconomyinAsiaafter

China,andtheInternationalMonetaryFund(IMF)expectsgrowthtoremainat3-5%in2021-25.

TheASEANEconomicCommunity(AEC),establishedin2016,hasbeencrucialtostrengtheningintra-ASEAN

collaboration.Ithascreatedasinglemarketandproductionbaseforthefreeflowofgoods,services,investment,capital,andskilledlaborwithinSEA.

Multiplefreetradeagreements(FTAs)ofcountriesinSEA,alongwithitslooseningtariffs,alsoattractincreasing

cross-bordertrade.Forcompaniesandinvestorsinsearchoftheirnextphaseofgrowth,theAECisanopportunitytointegrateproductionprocessesandtakeadvantageofeachcountry’suniquenaturalresources,structuralcapabilitiesandlaborskills.

Forinstance,Singaporehasemergedasafinancial

andlegalpowerhouse,offeringeasyaccesstoinvestor

capital.Furthermore,itisalsoconsideredanadvanced

manufacturinghubowingtocutting-edgetechnology

capabilitiesandahighlyskilledworkforce.Indonesia,

MalaysiaandMyanmarareabundantinnaturalresourcesthatfuelsectorssuchasoilandgas.

Figure1:SEArealGDPgrowth%YoY3

4.8%

3.4%

FY20A

FY17AFY18AFY19AFY21FFY22FFY23FFY24FFY25F

5.0%5.0%5.0%4.9%

5.1%

5.4%

-2.5%

InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychain

5

TheoverallSEAregionisalsoexperiencingameteoric

riseine-commercepenetrationwithonlineretail

forecastedtoreachUS$53b4by2023.Theregion’s

|digitaleconomyisprojectedtoexceedUS$240b5by2025.ThedigitaleconomyinIndonesiaaloneisestimatedto

reachUS$124b6by2025.

SEAisageographicallyexpansiveandpopulousregion,

whereeachcountryhasitsownuniquedemographic,

economicpoliciesandmarketenvironment.Although

increasinglyviewedasanintegratedregionalbloc,SEAisbynomeansahomogenousentity.AsseveralSEAstateshavetheirownproductioncapabilitiesanduniquebusinesslandscape,theregion,asawhole,providesviableand

sustainableopportunitiesforinvestors.

WhileSEAisemergingasamanufacturingandlogisticshub

duetoitslowercostbase,digitizationofmanufacturing

processesisalsoatthecoreofitsfuturestrategywith

theadoptionofIndustry4.0beingthenorm.Tosuittheircustomizedrequirements,itisimperativeforinvestorstorethinkandtweaktheirstrategiestoaccommodate

region-specificnuancesintheoperatinglandscape.

Indonesia’sdigitaleconomyaloneisestimatedtoreach

US$124b

by2025.

SEAonlineretailisforecastedtoreach

US$53b

by2023.

Theregion’sdigitaleconomy

isprojectedtoexceed

US$240b

by2025.

6|InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychains

WhySEA:enablersfor

businessesandinvestments

1

Growthofconsumingclass

TherehasbeenstrongdemandfromtheSEAregionacrosssectors,suchastheenergysectorthathasgrownby80%7

since2000.SEA’sconsumptionisexpectedtomorethan

doubletonearlyUS$4t8by2030,withIndonesiaaccountingforone-thirdofthetotalconsumption.

SEAisalsoadding140millionnewconsumers,representing16%oftheworld’snewconsumerclasswithnewfound

spendingpower,by2030.Thesenewconsumersareyoung.AccordingtoASEANKeyFigures2020,morethanhalf

(59.6%)ofSEA’spopulationwaswithinproductiveworkingagein2019,while33.3%wasclassifiedastheyouth

population.Byabsolutenumbers,VietnamandIndonesia

havethehighestnumberofpeopleinthesedemographic

categories.Thisspellsopportunitiesforcompaniestoreachouttoconsumersintheregionandcultivateloyalty.

2

Lowcostandskilledworkforce

SEA’skeysectorssuchasadvancedandprecision

manufacturing,medtechandconsumerelectronics

requirehighlyskilledlaborwithaspecializedskillset.

AsIndustry4.0technologiesshapethefutureofthese

sectors,talentwithskillsindatamining,machinelearning,anddatatransformationisbeingdevelopedandgenerated.

TheNetEnrolmentRate(NER)insecondaryeducationfortheregionisover75%,withSingaporeleadingat99.3%.

FourcountriesintheSEAregionarerankedamongthetop50countriesfortheskillsetoftheirgraduateworkforce.

Regardingtheeaseoffindingskilledlabor,Singapore,

MalaysiaandthePhilippinesranked9th,11thand13th

respectivelyacrosstheglobe.

SEAalsohasanabundanceoflower-skilledworkers,

largelymadeupofintra-regionalmigrants.Withalarge

laborforceandaplethoraofcapabilities,ranging

fromassemblyworkerstohighlyskilleddigital-ready

professionals,thereappearstobeamplediversetalent

tokeepupwiththeincreasingdemandacrossSEA.

3

Easeofdoingbusinesscoupledwithan

attractivetaxenvironment

SEAgovernmentshavecontinuedtotakestepstoimprovetheeaseofdoingbusinessthroughreforminglegaland

tradeframeworksinadditiontoinvestingininfrastructure,sophisticatedmanufacturingcapabilitiesandtalent.

Incentivessuchastaxholidays,allowances,exemptionsandsuperexemptions;customsanddutiesexemptions;and

cashgrantsareavailableforcompanieslookingtorelocatetheirmanufacturingorsupplychainhubstoSEA.Onthe

GlobalEaseofDoingBusinessIndex20199,sevenSEA

countriesfeaturedinthetophalf,whilethreerankedin

thetop25,withSingaporeleadingatrank2.Theaveragestatutorycorporatetaxrateis28.44%globally,26.96%for

G2010and27.40%forBRICS.ThetaxratefortheSEAregionaveragesapproximately22.35%11,withSingaporebeing

thelowestat17.0%.

InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychains

7

Theincentivesavailabletypicallycenteraround

manufacturing,principalandtradingactivities;R&D

andinnovation;specificindustriesorlocation-boundedoperations(e.g.,specialeconomiczones).Aproactiveandstrategicapproachtoobtainingincentivescan

generatesignificantcostsavings,generallya5-30%returnoninvestment,dependentontheprojectsize,capitalinvestment,geographicjurisdiction,perceivedcompetitivenessandtiming.

Tofurtherimprovethedigitalinfrastructureandfacilitatecross-borderdigitaltrade,theASEANCoordinating

CommitteeonElectronicCommerce(ACCEC)adopted

theASEANDigitalIntegrationFramework(DIF)in2018.

TheadoptionoftheASEANSmartCitiesNetwork(ASCN)

presentsopportunitiesforinvestmentsacross

multiplesectors.

4

Abundantfreetradeagreements

CountriesinSEAhavecontinuedtopromoteandenhancetradecooperationinter-andintra-region.Anumber

ofFTAshavebeenestablishedoverthepastcoupleof

years.TheseincludetheComprehensiveandProgressiveTrans-PacificPartnership(CPTPP)andRegional

ComprehensiveEconomicPartnership(RCEP).FTAscanreduceoverallcoststomanufacture,improve

operatingmarginsandimproveproductleadtimes.

TheattractivenessofSEApredatestheUS-Chinatrade

disputes.In2010,NikeexpandeditsentiremanufacturingoperationsinVietnam.Theregioncontinuestofurther

alignitselfasamajorblocforeconomicdevelopmentand

sustainableinnovation.SEAenjoysthekeyadvantage

ofsignificantlylowerlaborcosts—anadvantagethatis

outweighedbypoorproductivity.This,however,maybe

anoutdatedconcernforsomeofSEA’sbuddinghigh-tech

sectorsastheyaredependentonahighlyskilledworkforce,andlesssoonalow-skilledone.

Apartfromlabor,theregion’sincentivesforfirmstoset

uphigh-techmanufacturingfactoriesandnumerousFTAsmakeSEAaviablemanufacturingregion.Collectively,

ASEANhassixFTAswithitsdialoguepartnersandits

memberstateshaveafurther12212signedandin-effectagreements.KeySEAnationsareanintegralpartof

theRegionalComprehensiveEconomicPartnership(RCEP)

enablingpreferentialinteractionbetween30%oftheworld

economyandconnectingoverathirdoftheglobalpopulation.TheRCEPisdesignedtopositivelyimpactmulti-stage

supplychainnetworks,makingregionaldistributionmore

efficientthroughtheeasieroperationofregionaldistributioncenters(RDC)andadditionallyincreasingcompetitionfor

businesshubs.Whenrelocatingmanufacturingorsupplyhubs,utilizationofFTAscanlowerthetotallandedcost,

improvemargins,shortenleadtimesofimportandexport,andthusprovidetherequisiteagilityandresilience.A

criticalcomponentwhenassessingtheabilitytoqualifyfor

preferentialrateswithintheFTAistocarefullyalignthelocalsupplierbaseevaluationtoensureregionalvaluecontent

thresholdscanbemetforFTApurposes.

AccordingtotheWorldBank’sLogisticsPerformanceIndex,

nineSEAnationsrankamongthetop100.Notably,Vietnam,atthe39thspot13,offersahugeshippingadvantagecomparedwithotherSEAcountriesandisastrongcontenderforexportsectorssuchasapparel,textiles,footwearandbags,owing

tothehighworkmanshipoflabor.Thailand,SEA’sautomobilemanufacturingcenter,showsgreatpotentialdespitepolitical

instability.Singaporeisanattractivechoiceforentitieslookingforadvancedmanufacturingcapabilitiesandthatareatthe

higherendofthemanufacturingvaluechain.SEAcanalso

expecttoseearecordincreaseininvestmentandtradesoon.

8|InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychains

Economicoutlook

postCOVID-19

Despiteacontractionintheregion’srealGDPamid

lockdownrestrictionsduringthepandemic,SEAstateswereexpectedtocollectivelywitnessasharprecoveryin2021by6%14,withtheregion’ssixlargesteconomiesgrowingby6.3%.Malaysiawasforecastedtobethe

fastest-growingeconomyin2021withrealGDPgrowthof7.8%14andthePhilippineswasexpectedtogrow

|at7.4%.14Theregion’sgrowingtradeandstrongfiscalpolicieshavehelpedthecountrieswitnessaboostin

growthofthemanufacturingandservicesectors.Post-pandemic,realestate,fast-movingconsumergoods

(FMCG)andfoodlogistics,andmanufacturingindustrieswilllikelyemergetransformedasaresultofmajorshiftsinsupply-demanddynamics.

Theintegrationofinformationandcommunicationinto

healthcarewillalsodrivesectoralreforms.Usageof

healthcareappsshalltransformthewayhospitalsand

doctorsstoretheirrecordsaswellascollectand

sharepatientdata.Indonesiaispredictedtohavean

interneteconomyclosetoUS$130bby2025from

US$40bin2021.

Thereshallbemajorstridesinnewindustries,such

asagritech,medtechandedtech,andradicalshiftsin

certainindustriessuchasautomotiveandelectronics

manufacturingservices.Inthisnewera,SEAshallplayapivotalroleinshapingtheglobalsupplychainlandscape.

7.8%

Malaysia

GDPgrowth

2021

7.4%

ThePhilippines

GDPgrowth

2021

US$40b

IndonesiaispredictedtohaveanInternet

economyclosetoUS$130bby2025

fromUS$40bin2021.

InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychain

9

Opportunitiesin

SEAamiddisruption

andchallenges

3

10|InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychains

2019exports(US$b)

GAGR2015—19%

Electrical

machineryand

equipment

Consumer

goods

Minerals

Nuclear

equipment

andparts

Food(fresh

andpackaged)

Mobility

equipment

andparts

Metals

Precious

metals

Chemicals

Plasticand

relatedarticles

Healthcare

equipment

16

14

12

10

8

6

4

2

0

TopsectorsinSEA

Figure2:SEAsector-wiseexports(2019)15andCAGR(2015-2019)

%

400

350

300

250

200

150

100

50

0

FinishedgoodsRawmeterialsHeavymetalsandmachinery

Theanalysisofpre-pandemicmetrics—notablythe

finishedgoodsexportin2019andthecompoundannualgrowthrate(CAGR)for2015-2019—hashelpedinthe

identificationofkeysectorsasfocusareasforthiswhitepaper.Thetopsectorsidentifiedareconsumergoodsandhealthcareequipment.Asseeninfigure2,theconsumergoodssectorhasseenthesecond-largestvolumeof

exportsintheyear2019andthelargestCAGRintheperiod2015-2019.HealthcareequipmenthasseenaconsiderableCAGRin2015-2019andhasacomplexanduniqueglobalsupplychain.

Inadditiontothesesectorsandthosehighlightedin

thegraphabove,certainemergingsectorshavebeen

identified,withapotentialtobecomesignificantgrowthdriversfortheregion:

Electronicmanufacturingservices(EMS)—7.3%of

theworld’sconsumerelectronicscomefromSEAand

80%oftheworld’sharddrivesaremadeinthisregion.

ThetopEMSmanufacturinglocationsinSEAareThailand,MalaysiaandthePhilippines.Someoftheworld’slargest

chipmakerssuchasTexasInstrumentsandtheworld’s

largestproducersofharddrivessuchasHitachihaveseveralbasesinthePhilippines.Malaysiahasgrowntobecomea

majorglobalmanufacturinghubforseveralEMScompanies,withatotalinvestmentofapproximatelyUS$35b.

Agritech—Thealternativeproteinindustry,whichconsistsofplant-based,cultivated,whole-foodmeat,seafoodand

dairyalternatives,ispredictedtogrowannuallyat9.3%16globallyuntil2026.17TheagritechindustryinSEAis

fueledbyincreasinginterestandinvestments,notjust

bygovernmentsandstate-ownedinstitutionssuchas

Temasek,EnterpriseSingaporeandSingapore’sEconomicDevelopmentBoard(EDB),butalsobylargecorporate

andinstitutionalinvestorssuchasSequoiaCapital.18

Risingconsumerdemandandarenewedfocuson

sustainabilityhaveledtopromisinggrowthofplant-basedstart-upssuchasKaranaandShiokMeatsamongother

plant-basedventuresintheregion.

InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychain

11

Keyopportunitiesandmid-termoutlookinSEAacrosssectors

1

Consumergoods

Consumersarenowtrendingtowardconvenient,

personalizedandsustainably-sourcedproductsthat

cansimplifyeverydaylife.Arisingsectionofconsumers

isreadytopayapremiumforproductsduetorisingpurchasingpowerintheregion.Superappshave

emergedinSEA20andhavealteredhowpeople

engagewithinapps.

Fortheconsumergoodssectorthatcompriseshomecare,personalcareandapparel,forthesixbiggesteconomiesinSEA6,themarketsizeforFY2015-20grewhistoricallyataCAGRof1.9%19,andisforecastedtogrowat9.06%

duringFY2020-2519,whileAPACisforecastedtogrowat7.6%19asseeninfigure3.ThemarketsizeinSEAfor2025isestimatedatoverUS$107b.

Theshiftinconsumerpurchasepatterns,support

fromgovernmentinstitutionsandeconomicintegrationtowardadigitalinfrastructureareimprovingtheoverallfeasibilityofSEA.Supplychainresilienceandreliance

onmultiplesourcesofsupplyaregivingriseto

significantopportunities.

2

Healthcareequipment

Singaporeisamongthefastest-growinginnovative

productionhubsofthissector.Afavorablebusiness

environment,strongintellectualproperty(IP)laws,an

expansiveresearchnetworkandgrantsprovideconducive

supportfornewopportunities.Theregionisenjoyingstrong

growthintelehealth,digitaltherapeutics,diagnostics,

remotepatientmonitoringandanalytics.

ThehealthcareequipmentmarketinSEA,whichsawa

CAGRof7.8%in2015-20,isforecasttoseeanincreasedCAGRof10.2%in2020-25.Incontrast,APACsawa

CAGRof5.5%in2015-20,andisforecasttogrowat

9.0%in2020-25(figure4).

Figure3:MarketgrowthSEAvs.APAC19

MarketGrowthRate(%)

11

9

7

5

3

1

FY15-20AFY20-25F

SEAAPAC

Figure4:MarketgrowthSEAvs.APAC20

MarketGrowthRate(%)

11

9

7

5

3

1

FY20-25F

FY15-20A

SEAAPAC

12|InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychains

3

Electronicmanufacturingservices(EMS)

Globally,theEMSsectorisforecastedtogrowataCAGR

of5%in2020-26.OpportunitiesareopeningupinSEA,asentitiesreadjustfromtheircurrentfacilitiesinChinaand

developmoreresilientsupplychainnetworksintheregion.Notably,6oftheworld’stop10EMScompaniesarepresentinSingapore.UnderitsResearch,InnovationandEnterprise(RIE)2020plan,theSingaporeGovernmentplanstoinvestS$3.3b21inadvancedmanufacturingandengineeringR&D.

4

Agritech

Withanincreasingfocusonhealthyfoodoptionsand

sustainability,therighttargetdemographicandR&D

capabilities,theagritechsectorisgrowingatarapidpace

inSEA,withSingaporeleadingtheway.Arguably,

thebiggestdriverforinnovationinagritechinSEAis

thatSingaporecurrentlyimports90%ofitsfood.

TheSingaporeGovernmenthasallottedS$30m22in

supportofits“30by30”target,whichaimstohave

30%ofSingapore’sfoodproducedlocallyby2030.

SEAreceivedapproximatelyUS$700m23ofinvestmentsin2020inthissector,withasignificantproportion

goingtoSingapore.

InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychains

13

4

Building

thestrategy

14|InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychains

Supplychainreimagined

Generalobservations

andimperatives

SEAandtherestoftheworldcontinuetobeimpactedbyCOVID-19anditsvariants,whichalsoexposedthefragilityandinherentinefficienciesoftraditionalsupplychains.

Thepandemichascaughtallindustriesoffguardwith

rippleeffectstearingthroughsupplychainsandimpactingroutineoperations.

Dependenceonasinglesourceofsupplyenhances

reliability,buthampersflexibility.Thepandemichas

forcedcompaniestoidentifyalternative,lower-risk

localsuppliersfordiversification,aswellastobecloser

tothemarket.Proximitytoconsumerswillresultinfastertime-to-marketandlowerlogisticscostsaswellasprovidecompanieshigherflexibilitytoadapttolocaldemand.

TradetensionsbetweentheUSandChinaandthe

impositionoftariffsonChinesegoodsareboosting

opportunitiesforinvestmentsinSEAtocircumventanyimpendingdisruptions.Thetradetensionhasnotonlycausedglobalshockswithimmediateandsubstantial

consequences,butalsoindicatesthatthepolitical

landscapemayfaceheighteneduncertaintyandformidablechallengesinthedecadeahead.SEAnationsarenow

beingincreasinglyseenaslow-costmanufacturinghubs,notonlyforhigh-techorhigh-valuegoods,butalsoformainstreamproducts.

Manyentitiesarealreadymovingtowardorplanningto

adopta“ChinaPlusOne”strategy,akeyopportunity

forinvestmentsinSEA.Thereisastrongemphasison

reducingsupplychainoverheadsinthelongrun,while

developingaresilientsupplychain,immunetobothminorandmajordisruptions.

Industry4.0istransforminghowentitiesoptimize

theirmanufacturingprocesses.ManufacturersinSEA

areleveragingdigitaltechnologiessuchasadvanced

manufacturingmethods,human-machineinteraction,

advancedanalyticsandintelligencetoovercomerelativelylowproductivitylevelsandfurtherstrengthentheirpositionas“factoriesoftheworld”.Theincreaseininvestments

bySEAgovernmentsintechnologyanddigitizationisapromisingdevelopment.

Sector-specificobservations

andimperatives

Sector:Consumergoods(CG)

Consumerbehaviorhadbeenevolvingrapidlyevenbeforethepandemicstruck.Thecurrentcrisishasledtogreater

uncertaintyandcomplexitiesfortheconsumergoods

industryonmanyfronts,includingacceleratedshiftsin

consumerpreferences,personalization,speedtodelivery

andconvenience.Consumerswhohadbeenslowtoadopt

onlineshoppingpriortothepandemicarenowregular

users.Othertrendsarealsoemerging.Short-andmedium-termdemandacrossproductcategoriesisexpectedtoshifttowardmostconsumerstaples,includingfoodandbeverageproductswithanextendedshelflife.Demandforhomecareandconsumerhealthandhygieneproductsisalsoexpectedtocontinuetoincrease.However,discretionaryspendingwilllikelydip,withconsumersbecomingmorevalue-conscious

andfocusingmoreonessential,competitivelypricedgoods.

InvestinginSoutheastAsiaReimaginingmanufacturingandsupplychain

15

Consumerproductsupplychainsfacetwinpressures—

i.e.,retailersaremovingupthevaluechainanddemandinggreatertraceabilityintheproductstheysell.There