The infrastructure barrier
But regardless of how much demand there is within any particular emerging market, the lack of infrastructure tends to get in the way. The draw of manufacturing in this region is strong, but many logistics firms also must face the reality that much of Southeast Asia, with inadequate roads, rail lines, ports and airstrips, is still woefully unprepared for the interest it is now receiving from the global forwarding and shipping community.
In some ways, Indonesia, with its vast population and relatively high wealth, is leading the infrastructure race. However, there are still hardships to overcome because the country is spread out among so many outlying islands, making it hard to maintain flexibility during demand spikes.
“From world-class facilities in Singapore to the challenges faced in Cambodia or Indonesia, there is a great difference,” Damgaard said. “The infrastructure is in good shape with Singapore and Malaysia offering best-in-class capabilities, followed, in no particular order, by Thailand, Indonesia, Philippines, and Vietnam, while countries such as Cambodia and Myanmar present challenges.”
Another challenge, he said, is the complex regulatory environment in Southeast Asia. Countries have vastly different customs regulations, making it especially challenging for cross-border transportation. “Countries in the region have made progress in developing the infrastructure required, such as ports, airports and roads, but progress still needs to be made in the ‘softer’ side of logistics, with bureaucracy still causing delays and problems.”
Castle calls the infrastructure problem “one of the biggest challenges for freight forwarding in the region today. With the exception of Singapore, most of the countries within this region are only considered secondary ports and feed into a larger hub port, such as Hong Kong and Taipei. As a result, countries such as Vietnam and Indonesia are competing for carrier capacity in both their local markets and large regional markets.”