The global pandemic impacted the supply chain worldwide, impacting logistics, sourcing, distribution, and even aftermarket services. It forced multinational companies to reassess their manufacturing and sourcing approach. These companies are now looking for ways to build agility and resilience into their supply chain networks, even if it means additional costs. Companies are now adopting a diversified strategy to mitigate supply chain risks resulting from being dependent on only one geographic region. That's why you will find a lot of MNCs looking for alternate locations, especially in the high-performing emerging economies of Asia.
Countries such as India, Singapore, Malaysia, Thailand, Vietnam, and Taiwan are fast emerging as popular choices among companies. A robust economy, strong leadership, and favourable demographics have positioned these countries as key stakeholders in the region. The governments of these countries are also working hard to attract fresh investments by introducing a slew of investor-friendly reforms.
As discussed earlier, more and more businesses are relocating their international supply chains. South and Middle East Asia have been emerging as a preferred alternative for companies. Asia offers low operational costs, the availability of a qualified workforce, and the accessibility of an established manufacturing base.
Some of the countries in Asia are doing better than the others, such as:
The global pandemic accelerated the development of the logistics industry in China, which was already moving at incredible speed. China has, for many decades, been an important node in the supply chain for companies around the world. With more people staying at home during the pandemic and online shopping reaching new highs, shipping volumes soared, including container, road freight, and air freight. According to Mckinsey, freight volumes have risen between 1 and 14% since 2019. Air freight rates between Hong Kong and Europe increased by 47% between November 2020 and 2021. This meant better profit margins for freight forwarders and better returns for shareholders.
India has witnessed robust growth in the logistics sector in recent years. 2021 witnessed great investments in the development of infrastructure and operational efficiency of the industry. Modern technology-driven service providers and technology platforms are spearheading the transportation and supply chain industry. There has also been an unprecedented push toward building more warehouses, roads, ports, and transport hubs in the country. Thanks to tech-driven logistics companies, transporters and shippers are now able to do most of their business online and optimize operations through automation.
The logistics sector plays an important role in the Malaysian economy, contributing about 3.8% to the GDP in 2019. Trade and transportation activities have increased significantly over the years. The Malaysian Government's initiatives such as National Transport Policy and National Logistics Trade Facilitation aim to increase the GDP contribution of the sector as well as internationalize the logistics industry in Malaysia. The National E-Commerce Strategic Roadmap is accelerating the development of e-commerce activities in a bid to position Malaysia as a major e-fulfilment hub soon.
Singapore has the world's highest trade to GDP ratio. The country is a major trading port and an oil and gas hub. The country's role in regional supply chains has also been the reason for the increase in intermediate goods trade. It is a major hub for logistics players and helps companies drive speed through excellent connectivity and infrastructure. Singapore has amazing transport connectivity with dense road and sea networks for multimodal transshipments.
Taiwan is a global supply chain base for businesses within the electronics, textiles, automotive parts, and machinery sectors. It is often hailed as a trading super innovator due to the ease of doing business and providing one of the most favourable environments for investments in Asia. Being a global supply chain base, Taiwan offers seven trade-free zones- Suao, Anping, Taoyuan, Taipei, Kaohsiung, Taichung, and Keelung.
The logistics market in Thailand is forecasted to grow at a CAGR of 4.95% to reach $18 billion between 2022 and 2026. Increasing cross-border trade and growing e-commerce are considered to be the main drivers of the logistics industry in the country.
Transport and logistics activities are on the rise in Vietnam due to increasing import and export activities. With over 3,200 km of coastline and major international ports, such as Ho Chi Minh City, Haiphong, and Da Nang, Vietnam is the perfect hub for shipping. Cheap labour costs, central location, and a favourable regulatory environment are other reasons why businesses are moving their supply chain to Vietnam.
Together, the territories mentioned above contributed 13% to the global supply chain in 2020. There are also 301 seaports in the region, which is yet another reason why companies are choosing this region to relocate their supply chain. The Port of Singapore is one of the busiest in the world and the Port of Hong Kong, Port Klang, Port of Tanjung, and many more are important ports in this region.
The logistics industry in the Middle East was growing at a normal pace even before the pandemic hit. The coming years are considered to be promising for the GCC region. The key drivers would be the rising demand for e-commerce, the development of infrastructure, and an increase in cross-border sales. The Middle Eastern logistics industry is expected to grow by 4.3% from 2020 to 2025.
The ASEAN region has a strong demographic and a population of over 660 million. The availability of a working-age population and growing economies are primary reasons for driving the logistics landscape in the region. Low logistics costs and advanced infrastructure of the Middle Eastern countries have led to massive foreign investments, making these countries the preferred destination for international companies to move their global supply chain.