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WHICH ASEAN COUNTRY WILL BECOME THE WORLD'S NEXT MANUFACTURING HUB?
By Alicia Garcia Herrero , Natixis | Monday, October 19, 2015 - 16:32
Since the Industrial Revolution, the center of manufacturing production has shifted from the United Kingdom to the United States and to Japan. From the 1990s, the center then moved to South Korea and Taiwan, and subsequently to China.
The world’s manufacturers have two options. The first is to relocate their production sites to ASEAN. The second is to move to China’s interior regions. The best candidates seem to be Vietnam, Thailand and the Philippines. But additional considerations are warranted
This dynamic is known as the “Flying Geese Paradigm,” which suggests that production of commoditized goods will continuously move from the more advanced economies to the less advanced ones.
China’s successful manufacturing story is now under question given the very rapid rise in wages there during the last few years. Where may the geese (manufacturing sites) be heading next, especially in the low-added-value segment, given wage trends in China?
China Versus ASEAN
The world’s manufacturers have two options. The first is to relocate their production sites to ASEAN. The second is to move to the west of China.
Because the coastal areas (east China) have well established manufacturing sites, they have been regarded as the production base of “China.” However, in the past decade, the government has been developing the western and central regions, providing potential homes for manufacturing sites.
But between the two, manufacturing sites could relocate to ASEAN rather than to China’s interior.
Labor costs are one of the largest cost components, so corporate profitability is highly sensitive to changes in wages. But wage growth in China has outpaced productivity, compared with ASEAN.
Productivity and Labor Costs
Sources: McKinsey Global Institute, Natixis
Furthermore, wages for engineers and employer’s mandatory social contribution in China’s east and west are generally higher than in ASEAN.
Monthly Salaries, Engineers (2014, USD)
Sources: JETRO, Natixis
Mandatory Social Contribution
Sources: JETRO, Natixis
In addition to low wages, the attractiveness of ASEAN lies in the free trade agreements that it has developed. Firstly, it has a treaty with China and has already eliminated tariffs on nearly 90% of imported goods.
Secondly, the Trans-Pacific Partnership (TPP) is extremely important for ASEAN countries. In addition to the elimination of import tariffs, TPP encourages mobility of capital and labor, protects intellectual property and data transmission.
[Editor’s Note: Signatories to the TPP agreement reached on October 5 include the US, Japan and ASEAN members Brunei, Malaysia, Singapore and Vietnam. China is not part of the TPP. The ten signatories must ratify the pact within the next two years].
Which ASEAN Country Will Become the World's Next Manufacturing Hub? | CFO innovation ASIA
By Alicia Garcia Herrero , Natixis | Monday, October 19, 2015 - 16:32
Since the Industrial Revolution, the center of manufacturing production has shifted from the United Kingdom to the United States and to Japan. From the 1990s, the center then moved to South Korea and Taiwan, and subsequently to China.
The world’s manufacturers have two options. The first is to relocate their production sites to ASEAN. The second is to move to China’s interior regions. The best candidates seem to be Vietnam, Thailand and the Philippines. But additional considerations are warranted
This dynamic is known as the “Flying Geese Paradigm,” which suggests that production of commoditized goods will continuously move from the more advanced economies to the less advanced ones.
China’s successful manufacturing story is now under question given the very rapid rise in wages there during the last few years. Where may the geese (manufacturing sites) be heading next, especially in the low-added-value segment, given wage trends in China?
China Versus ASEAN
The world’s manufacturers have two options. The first is to relocate their production sites to ASEAN. The second is to move to the west of China.
Because the coastal areas (east China) have well established manufacturing sites, they have been regarded as the production base of “China.” However, in the past decade, the government has been developing the western and central regions, providing potential homes for manufacturing sites.
But between the two, manufacturing sites could relocate to ASEAN rather than to China’s interior.
Labor costs are one of the largest cost components, so corporate profitability is highly sensitive to changes in wages. But wage growth in China has outpaced productivity, compared with ASEAN.
Productivity and Labor Costs
Sources: McKinsey Global Institute, Natixis
Furthermore, wages for engineers and employer’s mandatory social contribution in China’s east and west are generally higher than in ASEAN.
Monthly Salaries, Engineers (2014, USD)
Sources: JETRO, Natixis
Mandatory Social Contribution
Sources: JETRO, Natixis
In addition to low wages, the attractiveness of ASEAN lies in the free trade agreements that it has developed. Firstly, it has a treaty with China and has already eliminated tariffs on nearly 90% of imported goods.
Secondly, the Trans-Pacific Partnership (TPP) is extremely important for ASEAN countries. In addition to the elimination of import tariffs, TPP encourages mobility of capital and labor, protects intellectual property and data transmission.
[Editor’s Note: Signatories to the TPP agreement reached on October 5 include the US, Japan and ASEAN members Brunei, Malaysia, Singapore and Vietnam. China is not part of the TPP. The ten signatories must ratify the pact within the next two years].
Which ASEAN Country Will Become the World's Next Manufacturing Hub? | CFO innovation ASIA
STOP wasting your time debating on something that is so OBVIOUS. 
I won't waste my time debating in circle with the khmer krom nationalistic trolls from Vietnam and others.
