Leading the charge
While there are many Southeast Asian countries emerging as serious logistics markets, Vietnam is at the tip of the spear. Forty years after American troops left the war-torn country to its Communist government, Vietnam has been reborn as one of the fastest-rising economic powers in the region, ironically attracting another foreign “invasion” in the form of manufacturers and logistics firms. Companies such as Converse, Gap, H&M, Lacoste, Reebok, and Zara all have factories there, producing $20.8 billion in garments and $10.2 billion in footwear, boosting the country’s annual export growth by 15.8 percent in 2014.
And that’s just the apparel industry. Vietnam is not only one of Apple’s fastest-growing consumer markets in the world, it is also becoming one of the leading manufacturing centers. Other high-tech companies like LG, Microsoft and Samsung Electronics have invested billions of dollars in Vietnamese factories to build smartphones, tablets and various appliances.
U.S.-based forwarder and trucking firm C.H. Robinson recently opened an office in Ho Chi Minh City – the city through which more than 70 percent of the country’s cargo volume is shipped – to be near the center of the action in the region. “Several companies are beginning to explore manufacturing options throughout Southeast Asian countries as a result of the region’s increasingly affordable and high-quality labor options,” said Matt Castle, director of global airfreight services at C.H. Robinson. “Vietnam, in particular, has experienced steady economic growth due to its strategic location and growing population. Vietnam’s total volumes, along the U.S. trans-Pacific eastbound trade lane, are second only to China.”
Agility’s Damgaard says interest in Vietnam is only going to increase for the next few years, at least. “Vietnam has also seen strong growth in its airfreight market as high-tech manufacturers and retailers have expanded into the country to take advantage of its relatively low-cost production base.”
Next in line
While Vietnam is getting attention for its manufacturing potential, many other countries in the area are showing just as much promise, not just as sources of inexpensive labor, but as a consumer block. “We are seeing growth across the region, with specifically the Philippines and Indonesia looking stronger,” Damgaard said. “Based on its demographics, Indonesia has a lot of potential for airfreight growth due to its fast-growing middle class consumers and large domestic market.”
Agility has a well-established presence in Southeast Asia that has been built up over the years, starting with a Singapore operation in 1975. In recent years, the forwarder has opened its doors to much more restrictive regimes, such as Myanmar, in response in demand from customers. “In the last few years, we have expanded contract logistics and domestic distribution capabilities in Indonesia and Malaysia and are constantly assessing the need for additional facilities,” he said.
Indonesia, he added, “stands out as a ‘next-tier’ emerging country,” in terms of its technology, pharma/life sciences, retail, and perishables sectors, as well as its “huge consumer base” of 250 million people. “While some [Indonesian] companies have moved parts of their supply chain to ocean freight, there will still be demand from these sectors.”
There is also growing domestic demand in Malaysia, a strong manufacturing base in Thailand, and robusteconomic growth in Philippines, Damgaard added, all of which “position the region well for continued growth.”
Samsung may help make the case that Indonesia could be the next most promising market. The world’s largest cell-phone maker opened a plant there earlier this year capable of producing 1.5 million phones per month, using labor that is less than half as expensive as it is currently in China, and a large consumer base that is more interested in Samsung’s lower-cost phone – a shrinking demographic in China, with its growing middle class.
If Samsung builds more factories in Indonesia, there will be a greater demand to ship the most sought-after new releases via air. “As the world clamors for new technology, electronic products, such as televisions, laptops, tablets and smartphones, continue to drive demand in the global air freight market,” said Castle, of C.H. Robinson. “Although more expensive than other methods of shipment, airfreight is by far the fastest, and potentially the most reliable, method of transportation.”Like This Post