MULTINATIONALS WILL REMAIN IN ASEAN+3 REGION, SAYS AMRO
MOST multinational firms are expected to stay put in the Asean+3 region, which accounts for the lion’s share of the world’s consumer market, despite the reconfiguration in global value chains.
Asean+3 Macroeconomic Research Office (Amro) Chief Economist Hoe Ee Khor said in an online event on Wednesday that the Asean+3 blow has remained a competitive location for global supply chain.
“No evidence so far of wholesale reshoring, nearshoring or transfers of manufacturing out of the Asean+3 region,” he said.
is bloc is composed of Association of Southeast Asian Nation (Asean) members, China, Japan and Republic of Korea.
In relocating a facility, Khor said that a firm is considering whether it is producing for domestic market or for export and where it will move if ever.
But the multinational enterprises (MNES) have been finding it “very easy” to just stay put in Asean+3 region, particularly China, he said. Moving out of China might actually even be difficult because the company will risk losing links to existing suppliers, he said.
e regional bloc has been very attractive as a global value chain destination, Amro said, citing the quality of infrastructure, availability of labor skills, labor costs and market size.
“So on the demand side, a lot of MNES are attracted to the region [because] of the large consumer market,” he said. Asean+3 accounts for 42 percent of the global consumer market.
Asian Trade Centre Founder and Executive Director Deborah Elms agreed with the statement of Khor, saying: “Firms are not moving as quickly as people had originally expected.
ey don’t move for a number of reasons.”
Given the current situation, Elms said that relocating is difficult and expensive. Replicating the current operations in another country is challenging and there are “not a lot of options that are attractive” for now, she added.
She suggested that firms have a “clear sense” of their own supply chain and not wait for a disruption to strengthen it.
However, Elms explained this does not mean that the firms should create double supply chains to ensure consistent supply of materials as this could be very inefficient.
What the firms can do, she said, is identify which part of their supply chain is the most vulnerable. As a response, the firms may then need to stock more inventory of identified materials to cushion anticipated bottlenecks or have another supplier ready if ever.
TECHNOLOGY is seen as a key driver in transforming the global supply chain, the Amro economist said, noting that digital adoption has been accelerated throughout the world in the past year.
Khor said 3D printing, automation, artificial intelligence and Internet of things, among others, are seen to help in “reshaping the production process.”
For his part, Denis Hew, Policy Support Unit director at Asia-pacific Economic Cooperation, said:
“Although the trend toward digitalization predates the pandemic, digital solutions have now become a necessity rather than an option for many firms. e digitization of GVCS [global value chain] can improve risk management and reduce logistical bottlenecks.”
“However, enhancing the resilience of these value chains requires a rethinking of policies such as those on data security and human capital management,” Hew added.
Earlier, Amro said the region is expected to grow by 6.7 percent while the Philippines could register 6.9-percent growth this year.