Are the Asian ‘tiger cubs’ missing a member?

Asia Pacific has long been of interest to logistics providers thanks to the region’s appetite for export-driven economic growth. Apart from China, smaller economies known as the four Asian ‘tigers’ followed this model (Hong Kong, Singapore, South Korea and Taiwan) between the 1960s and 1990s and are now developed economies. The next generation, termed the ‘tiger cub’ economies, include Thailand, Malaysia, Philippines and Indonesia.

Although political instability clouds Thailand’s future, its trade profile should interest logistics providers. According to UN COMTRADE statistics from International Trade Centre, Thailand exported $229bn of goods in 2013, placing it as the world’s 22nd largest exporter. This was almost as large as Brazil, which exported $242bn. However, Thailand’s three leading export sectors of machinery ($37bn), electronics ($30bn) and automotive ($26bn) are far more ‘logistics intensive’ compared to the three leading sectors in Brazil which are ores ($35bn), soya beans ($23bn) and mineral fuels ($22bn). Generally, Asia Pacific emerging markets are much more exposed to logistics intensive sectors compared to those in the Middle East or Africa, which tend to be dominated by oil, gas and minerals.

The value of Malaysia’s goods exports was virtually identical to Thailand’s in 2013, also at $229bn. However, the electronics sector is much more important to Malaysia, with the country’s exports approximately double that of Thailand’s at $61bn, while machinery is less important to Malaysia with exports at $24bn in 2013. Oil and gas is Malaysia’s second largest export sector valued at $51bn. The Philippines is similarly exposed to electronics and machinery exports which rank as its first and second most important sectors, although they are at a lesser scale compared to Thailand and Malaysia, valued at $20bn and $7bn respectively.

Indonesia seems to be the odd one out with oil and gas and agricultural exports dominating its trade profile. Investors are more likely to be enticed by the potential of its domestic market, with a population of over 250m people ranking as the fourth highest in the world. Contract logistics providers should be particularly intrigued by a rapidly formalising retail sector and a fast-developing automotive sector. Modern retail penetration is around 40% while vehicle production in Indonesia has more than doubled from about 600,000 units in 2008 to over 1.2m units in 2013.

A possible candidate for entry to the tiger cub club is Vietnam. From 2004 to 2013, its exports have grown more than five times over from $26bn to $138bn, an average growth rate of over 20% per year. The electronics, machinery and fashion industries are the country’s largest export sectors. In particular, electronics exports have exploded from $13bn in 2011 to $38bn in 2013. The attraction of lower wages compared to increasingly unfavourable labour market conditions in China has seen numerous multinationals invest further in peripheral Asian countries, though apparently none more so than Vietnam. Samsung, Intel and LG are investing billions in new factories in Vietnam, with Samsung alone importing and exporting $11.3bn and $12.5bn of goods in and out of Vietnam in 2012 respectively. Other analysts have pointed to Vietnam’s closer proximity to China and its lower frequency of natural disasters compared to regional emerging market competitors. The former simplifies integration into existing supply chains while the latter reduces supply chain risk.

In the 2014 Agility Emerging Markets Index, 58% of industry professionals believed emerging markets in Asia Pacific to have the brightest outlook compared to any other region. Although many eyes may be fixated on the potential market size of China and India, perhaps this figure is increasingly being swayed by the attraction of peripheral Asian markets such as the tiger cubs and their ‘would be’ member, Vietnam.

The 2015 Agility Emerging Markets survey collects the opinions of logistics industry professionals from across the globe on the most important issues for emerging markets. Now in its sixth year, the survey offers those with knowledge of the World’s most dynamic logistics markets the chance to share their insights and inform thought leading debate.

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