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The Cement Industry in Asia: Major Producers & Trends

Cement factory in Thailand


The cement industry plays a vital role in infrastructure development and urbanization drives the demand for cement greatly. Concrete is currently the second-most used substance on the planet after water, which explains its importance.

In this article, we review the cement industry in Asia and what countries account for much of the exports and the consumption. We will also explain current issues that governments work actively trying to resolve, and how these affect the markets.

The Cement Industry in Asia

Production and consumption of cement are largely concentrated in Asia, accounting for 73% of the output globally and a consumption of 81%. Yet, the cement production industry is also facing a capacity surplus due to lower demand from the construction industries.

The largest producers of cement include China, Vietnam, India, and Indonesia where China produces and consumes the most by a big margin. In Southeast Asia, there is a large gap between Vietnam and the second-largest cement-producing country, Indonesia, which has 15 integrated plants and 66 million metric tons of production per year.

Thailand, the Philippines, and Malaysia all also possess large cement markets, despite not being as big as the above-mentioned countries.

The EU imports the most cement from China, Thailand, and the Philippines, while Vietnam is in the top 5 exporters of cement and clinker to the US. Having said that, both the EU and the US aren’t dependent on cement from Asia as most of their cement producers operate on a global scale and can provide enough for the domestic markets.

Worth highlighting is also the close ties between the US, Mexico, and Brazil, where the latter have large-scale cement manufacturing.

In recent years, China has tried to cut down on cement production due to environmental issues. It’s said that if the cement industry was a country, it would be the third-biggest polluter in the world, after the US and China. The governments of Vietnam and Indonesia have also implemented measures to counter the surplus of cement capacity with new regulations that limit new cement investment projects. The new regulations and limits will also help to reduce the cement output, preventing oversupply and increased competition among suppliers.

What countries are the biggest cement producers in Asia?

Four of the ten biggest producers of cement globally can be found in Asia, as well as the world’s biggest exporter of cement. Keep in mind that we must make a distinction between “producers” and “exporters” as countries like China consume much of their locally produced cement.


Vietnam is the biggest exporter of cement globally with an export value of 1.4 billion USD in 2020, equaling 12.5% of the global cement exports. Clinker is a nodular material used as a binder in cement products, and Vietnam also exports this product in large quantities.

Vietnam exports around 10% to 15% of its cement, having China, the Philippines, and Bangladesh as its biggest trading partners. China doesn’t have a shortage of cement, yet the cost for Chinese producers to transport products to the coastal region is higher than importing from Vietnam. This explains why China remains the biggest importer of Vietnam’s cement and clinker for many years, accounting for 57% of the total export volume.

At the moment, Vietnam faces an oversupply of cement. While the current domestic demand is around 65 million tons, the industry’s capacity has reached nearly 107 million tons. The situation is particularly serious in the North of Vietnam, which will increase its dependence on the export market.


China is the biggest cement producer, consumer, and importer in the world. It produces almost 60% of the world’s cement and accounts for most of the colossal carbon footprint of the industry. In 2020, the production volume reached almost 2.4 billion metric tons. To match China’s urbanization need, the domestic production of cement grew rapidly between 2002 and 2014.

However, the demand for cement is expected to decline due to the shift from mass urbanization to more sustainable infrastructure, along with the slowdown in the Chinese real estate market. Therefore, the country is reportedly trying to limit cement imports.

In addition to restricting imports, China has a plan to cut down on cement production as the manufacturing process requires much coal, which emits CO2 and dust. This causes a negative and long-lasting impact on the environment. This is part of its five-year plan to reach the CO2 emission reduction goal.


Being the second-largest cement producer with 7% of the global installed capacity, India has a positive outlook on its cement industry. Until February 2021, India’s overall cement production reached 262 million metric tons in 2021, which is around 10% of China’s.

The demand for housing in rural areas and the Indian government’s strong focus on infrastructure development will drive the cement production to double-digit growth. Examples of infrastructure development projects include the goal of creating 100 smart cities, expanding the capacity of railways, and adding 125,000 km of roads in the coming five years. We will also see an increase in storage and handling facilities to reduce transportation costs. The demand for cement will remain high for at least until 2030.

South India is the main hub for cement production that has several big producers, accounting for 33% of India’s total output. On the international trade aspect, India exports mostly to Bangladesh, Sri Lanka, and Nepal, while it imports much clinker from Vietnam.


Indonesia is an emerging exporter of cement, having a production volume of around 66 million metric tons of cement in 2021. It’s rapidly increasing exports of cement and clinker where Bangladesh and the Philippines are major importers of clinker, and Mauritius and the Maldives are the biggest importers of its cement.

The cement industry is dominated by four major producers, including the state-owned Semen Indonesia, which has a 44% market share. The other major producers include Indocement Tunggal Prakarsa, Holcim Indonesia, and Semen Baturaja.

Like Vietnam, Indonesia also struggles with an oversupply as domestic consumption only accounts for 60% of its production capability. Despite the massive infrastructure projects across the country, the low utilization rate results in inefficiencies that have hurt many cement producers.


Asia has four of the ten biggest cement producers globally, including China, Vietnam, India, and Indonesia. While Vietnam exports much of its cement, China consumes much of its locally produced cement and where most of the supply is allocated to the construction industry. Worth highlighting is also the overcapacity that countries struggle with, including Vietnam, which will result in the need for more exports.

At the same time, Europe is facing a crisis due to a shortage of building materials, which is partly related to the increased energy costs. Turkey and China have traditionally been interesting supply markets for such products, but we might well see Southeast Asian countries becoming new options for foreign companies.

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    Sourcing of Agricultural Products in Southeast Asia: An Introduction

    Rice farmers in Thailand


    Southeast Asia is a major producer of agriculture products and plays an increasingly important role for the US and the EU. Increased exports also result in the need for new technologies, opening for investment, and sales opportunities for foreign companies.

    In this article, we review the agriculture industry in Southeast Asia with a focus on the most important markets. We explain what products are exported by country, what challenges the countries face, and how foreign companies can profit from this growing market.

    The Agriculture Industry in Southeast Asia

    The agriculture sector in Southeast Asia includes three main categories: farming and planting, fishing, and forestry. Most countries are developing the three simultaneously due to the geographical advantages that can be found, including long coastal lines, large and diverse ocean ecosystems, and tropical weather.

    Even if the proportion of total GDP is decreasing due to industrialization, agriculture remains a significantly important economic pillar. In frontier markets like Cambodia and Myanmar, the agriculture sector is even more important to the local economies.

    Southeast Asia is a top exporter of certain commodities globally, where the following five stand out: Malaysia, Indonesia, Vietnam, the Philippines, and Thailand.

    Apart from the food industry, agricultural products from Southeast Asian countries also serve many other industries, especially wooden furniture production. Indonesia, Malaysia, and Vietnam are some of the major exporters of wooden products globally, accounting for more than 15% of the global export volume.

    What agriculture products can be imported from Southeast Asia?

    We have already covered the three main categories, including farming and planting, fishing, and forestry. Let’s review the categories in greater detail and what specific products the countries export.

    Planting and farming

    Vegetable oils, coffee, and rice are exported in large volumes from Southeast Asia. For instance, Malaysia and Indonesia account for more than 90% of the world’s palm oil exports during the period 2019-2021, at the same time as Vietnam is the second-biggest exporter of coffee, after Brazil.

    Palm oil has various applications, apart from being an ingredient for direct cooking. It could also be used for the production of lipsticks or detergents. The conflict between Russia and Ukraine pushed the prices for vegetable oils to record levels, as the Black Sea countries are key suppliers of vegetable oils.

    Global importers have turned their focus to other major producers, especially in Southeast Asia. Indonesia even banned all palm oil export for three weeks, due to soaring prices domestically. Still, Indonesian producers are required to ensure a sufficient domestic supply before selling such products overseas.

    Rice and coffee beans are also major exporting commodities in Southeast Asia, particularly from Vietnam and Indonesia.

    Among ten countries that have the largest exports of rice, four are from Southeast Asia. More than 40% of the rice imported to the EU comes from Southeast Asia, such as Vietnam, Thailand, Myanmar, or Cambodia.

    The import of rice from Pakistan and India to the EU has been increasing over time thanks to the duty-free policy of such products to the EU. We can also expect the same movement for rice imported from Vietnam when the free trade agreement between it and the EU came into effect in 2020.

    Forestry and wood manufacturing

    Southeast Asia has large forestry and wood manufacturing industries with exports of products like wood pellets, veneer sheets, wood-based panels, and wooden furniture.

    Vietnam is the leading exporter of furniture globally and has even surpassed China, which is a major achievement. Southeast Asia exports around 20% of all wooden furniture products globally and where Vietnam accounts for more than 50%. The biggest export markets are the UK, the US, and Japan.

    Wood pellets are also vastly produced in Southeast Asia and which has suffered from a supply shortage globally. Key drivers of the shortage are the growing demand for renewable energy in Europe and nonrenewable energy production in Asia.

    Europe is the main consumer of wood pellets, mostly for home heating and power generation. The ongoing tensions in Ukraine, which affected the supply of wood pellets, have made Malaysia and Vietnam alternative sourcing destinations.


    Southeast Asia is rich in marine resources with Indonesia, Vietnam, Thailand, and the Philippines being top seafood exporters globally.

    Over the last decade, the US has significantly increased its seafood imports from Southeast Asia. Typical products are tuna and shrimp, which are exported primarily from Vietnam and Thailand.

    The trade tensions between the US and China have made Southeast Asia increasingly important as an alternative supply market. Import tariffs are now as high as 25% and the rising wages make China less attractive to US-based importers.

    The implementation of the European Union–Vietnam Free Trade Agreement (EVFTA) has resulted in tax exemptions for the majority of over 200 tariff lines for seafood imported from Vietnam. Key exports from Vietnam include fish, shrimps, oysters, and scallops.

    To summarize, the five countries covered primarily export the following agriculture products:

    • Malaysia – Palm oil, rubber, cocoa and wood products
    • Indonesia – Palm oil, coffee, vegetables, and fruits
    • Vietnam – Rice, seafood, coffee, cashew nuts, tea, and fruits
    • The Philippines – Coconut oil, fruits, seafood, and tuna
    • Thailand – Rice, sugar, fruits, processed tuna, and seafood

    Investment Opportunities in the Agriculture Sector

    Key challenges for most Southeast Asian countries are to cope with increasing export volumes, outdated techniques used, and weak quality control systems. However, with the adaption of new technology and collaboration with foreign companies, the industry is catching up to meet global standards.

    Below you can find some of the primary reasons why there will be increased investment opportunities in Southeast Asia’s agriculture sector.

    Demand for agriculture machinery

    Modernization of the agriculture industry allows local producers to increase effectiveness and product quality. Most Southeast Asian countries rely on imported agriculture machinery from China, South Korea, Japan, and the EU with only a small percentage supplied within the region, with most coming from Malaysia.

    Let us take Vietnam as an example, which is a large exporter of different types of crops such as rice, coffee beans, and pepper. However, 70% of the agricultural machinery used is imported. This has created opportunities for reputable machinery brands to enter the market.

    Worth mentioning is also that there’s a strong demand for machinery brands from developed countries thanks to the high quality offered.

    The growing market for Agri-tech startups

    Apart from innovating dated techniques, modernization also boosts the performance and productivity of well-established companies or individuals. Two major drivers for this are the push for the digital transformation from governments, as well as the growth in internet usage.

    Thailand, for example, has been rewarding farmers and enterprises who introduced technology in agriculture production. As a result, drones are getting more popular to plant seeds, spray pesticides, or map crop fields. Poladrone, a Malaysian startup, also provides pest control services by drones to local palm oil farmers.

    Local startups that embed the Internet of Things (IoT) into agriculture production have also started to receive attention from foreign investors, both within the region, from the EU, or the US. Agribuddy, a Cambodia-based startup, has successfully raised funds from The Index Project (Denmark) or KSK Angle Fund (the US). MimosaTek (Vietnam-based) also receives investments from Seedstars (Switzerland) and Captii Ventures (Malaysia).

    The increase in the middle-class population is one of the main factors driving the growth of Agri-tech startups. Consumers are now demanding products of higher quality (organic, transparent, healthy, etc). Meanwhile, new technologies and advanced farming methods are getting more accessible to the producers, allowing them to improve the output quality and meet consumers’ rising demand.


    Southeast Asia is a large exporter of agricultural products, particularly crops, fish, and seafood. Crops include rice, coffee, fruits, and vegetables, for example. While the agriculture industry contributes less to GDP as countries develop, agriculture exports are crucial for countries like Vietnam, Thailand, and the Philippines.

    The ongoing trade war between the US and China has resulted in increased demand for the Southeast Asia region, further enticing companies to invest in local production. Recently introduced trade agreements, like the EVFTA between the EU and Vietnam, further increase demand for products from the region.

    The Agri-tech industry also sees great growth as governments push for digitalization and the introduction of new technology, to make production more effective and for higher product quality. This attracts more investors and companies with goals to profit from growing companies or through B2B sales.

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      Manufacturing & Sourcing in Southeast Asia: Industries, Trends, and Benefits

      Factory workers, Thailand


      Southeast Asia gains increasingly more attention as foreign companies try to diversify manufacturing activities from China. Increasing wages, disruptions, increased shipping lead times, and costs are just some of the reasons. In this article, we review the underlying causes behind the rise of Southeast Asia, but also the challenges of entering the region.

      Why are companies moving to Southeast Asia?

      China has long been referred to as the World’s Factory, thanks to its strong manufacturing capabilities and low labor costs. In recent years, a multitude of issues has started to emerge in China, making companies more aware of the importance to diversify their supply chains.

      Southeast Asia has therefore sprung up as the most interesting alternative sourcing market outside of China, due to the benefits we will review in this section.

      The US-China trade war

      The US-China trade war has urged companies to find new supply markets and where Southeast Asia gains much attention. Import tariffs have almost tripled for products from China, putting other supply markets in a favorable position. Being one of the fastest-growing regions in the world with low labor costs, openness for trade, and strategic proximity to China, Southeast Asian countries also have favorable trade agreements with many developed countries.

      Increasing wages in China

      China’s large labor pool and its low labor costs were the main reason why companies started to relocate manufacturing to the country. Yet, this has changed drastically in recent years. From 2009 to 2014, minimum wages nearly doubled, significantly decreasing profits for foreign investors.

      Supply chain disruptions

      The pandemic resulted in stalled production in China and has significantly increased shipping lead times and costs, leading to global supply chain disruptions. Near sourcing activities and manufacturing relocations to neighboring countries in Southeast Asia have accelerated greatly since.

      Enhanced manufacturing capabilities

      While countries like Vietnam have primarily been active in less advanced industries like textiles and furniture production, it is now a major producer of different electronics products, machinery, and telecom equipment. This trend is not only evident in Vietnam, but also in countries like the Philippines and Indonesia.

      The countries are still highly active in the midstream segment and assembly operations, relying on imports from overseas. Yet, this is also changing as their manufacturing capabilities become more advanced, including the designing and manufacturing of previously imported sub-components (upstream activities). Distribution and sales of final products grow (downstream activities) at the same time, as manufacturing companies and private consumers demand more products.

      Lucrative trade agreements

      Singapore, Thailand, Vietnam, and Malaysia are open to international trade, having multiple free trade agreements signed. Free trade partners include the EU, Australia, Japan, and South Korea, for example. These countries are also part of ASEAN, which in turn has various trade agreements, making the region even more attractive to investors and businesses.

      Since 1992, when ASEAN’s six founding members agreed to form a regional trade bloc, governments have made significant progress in lowering barriers to regional trade and capital flows. Initiatives like the Southeast Asia Manufacturing Alliance connect businesses with a network of trusted partners, allowing them to confidently navigate and grow in this diverse region.

      The Regional Comprehensive Economic Partnership (RCEP), which was signed by all ASEAN members and Australia, China, Japan, New Zealand, and South Korea in 2020, will boost the region’s competitiveness as a manufacturing base and in global trade.

      Major Manufacturing Sectors in Southeast Asia

      While you can find manufacturers of any kind of product in China, Southeast Asian countries are specialized in certain industries. Major industries include:

      • Electronics (Vietnam, Malaysia, Singapore)
      • Textiles/apparel (Vietnam, Philippines)
      • Automotive (Thailand, Indonesia)
      • Petrochemical products (Thailand, Indonesia, Malaysia)
      • Agricultural products (Vietnam, the Philippines, Indonesia, Thailand)

      Let’s review the largest industries one by one, explaining where they are most prevalent and the history.


      The electronics industry accounts for around 20% to 50% of the total export value of most South Asian countries. Southeast Asia now produces much of the world’s consumer electronics, including televisions, computers, and smartphones. For example, more than 80% of the world’s hard drives are produced here. As mentioned above, Vietnam, the Philippines, Malaysia and Singapore are the biggest producers of electronics products in Southeast Asia.

      Much of Vietnam’s export growth has been driven by investments from companies such as Samsung, LG, Canon, and Nokia. These foreign enterprises have become the essence of Vietnam’s exports, captivated by tax breaks and some of the largest export processing zones in Southeast Asia.

      As of 2014, Samsung accounted for roughly 20% of the total Vietnamese exports of electronics. As multinationals relocate production here, many smaller electronics companies follow. Some Northern provinces of Vietnam have expanded into manufacturing hubs for electronics products, where you can find plenty of suppliers for electronics components and phone accessories.

      At the same time, Malaysia has grown to become a major global manufacturing hub for electrical and electronics (E&E) products. Malaysia’s electronics industry has invested much in R&D and explored domestic outsourcing of non-core activities over the years. Penang represents 80% of the nation’s contribution to the global semiconductor output.

      Singapore has a more developed E&E manufacturing industry than the rest of ASEAN. This includes R&D and manufacturing, supply chain management services, logistics, and regional and global headquarters functions.

      Textiles and apparel

      Vietnam has a long history of producing textiles and garments, dating back several decades. It’s currently one of the biggest exporters globally and continues to attract many investments from foreign companies. Many of the world’s most well-known companies source products from Vietnam or set up their own manufacturing facilities locally. Examples include the high-end brand Prada, The North Face, Fjällräven, Adidas, Nike, Sketchers, and Decathlon.

      The Philippines is another big name in Southeast Asia for textile and garment production, yet smaller than in Vietnam. When companies don’t meet the minimum order quantity requirements (MOQs) of factories in China, Bangladesh, Vietnam, and India, they sometimes turn to the Philippines instead.

      Around 80% of the country’s textiles and garments are exported to the United States, with the rest going to the EU, Australia, Canada, and other ASEAN countries.


      Established over 50 years ago, Thailand’s automotive manufacturing sector has developed into one of the biggest in the world. Almost all leading automakers and component manufacturers have established a presence locally. Toyota, Isuzu, Honda, Mitsubishi, Nissan, and BMW account for most of the two million vehicles being produced in Thailand every year.

      As electric vehicles (EV) are on the rise, Thailand also faces competition from Indonesia in this sector. Indonesia holds the world’s largest nickel reserve and can offer competitive labor costs and prices for EV batteries. EV batteries are even 8% lower than in China.


      Malaysia is the leading manufacturer of specialized process machinery for the E&E industry and automation equipment. Yet, the industry has not evolved into making complete products but only work on components, or as OEM manufacturers.

      Some sub-sectors are on the rise, particularly metalworking machinery and power generating machinery. Companies with established manufacturing in Malaysia include Advantest, Pentamaster, Vitrox, Muehlbauer, SRM, and UMS.

      Challenges when Relocating Manufacturing to Southeast Asia

      Even if Southeast Asia becomes more promising for manufacturing, there are a handful of challenges you should be aware of. Below you can find the most notable ones.

      Reliance on imports from China

      Manufacturers still rely heavily on imports of raw materials and sub-components from China. In the textiles industry, companies often must import Velcro and buttons, for example. As much as 80% of all textile raw materials are imported from China to Vietnam. The Chinese market is also a major export market for countries in the region.

      When the pandemic hit, Southeast Asian manufacturers were strongly affected due to increased costs of raw materials and increased shipping lead times, due to port congestions and lack of workers in China during lockdowns.

      Specialized manufacturing

      As mentioned above, most Southeast Asian countries are specialized in specific manufacturing industries. In Malaysia and Vietnam, you can find many electronic suppliers, but the products are slightly different. 60% of Malaysia’s exported electrical and electronics products include semiconductor­ devices, ICs,­ transistors, and valves. In Vietnam, we mainly see the exports of transmission apparatus, mobile phones, TVs, cameras, electrical apparatus, and integrated circuits.

      Vietnam does have suppliers of fitness and sports products, but it’s mainly limited to footwear, gym clothes, and weights, for example. Treadmills and skipping ropes are harder to find on the other hand. They must compete with Chinese suppliers on price, which is so difficult as Chinese factories are built for economies of scale. Unless the market receives foreign investments to manufacture on-demand, they cannot begin to produce these products for exports.

      Comparatively underdeveloped supply chains

      China Plus One strategies are clearly here to stay, but Southeast Asian manufacturers can still not meet the developed levels of Chinese supply chains.

      Products must pass many layers of suppliers to reach end customers, while information flows are not transparent and consistent. Together, it’s difficult to build a solid supply chain network. Moreover, the infrastructure to support the logistics and supply chain is still underdeveloped to handle the growing complexity of products and consumer demands.

      Although some of the industries are within the specialty of Southeast Asian nations, these nations are still relatively young in terms of supply chain knowledge and lack experienced professionals in manufacturing, distribution, planning, and supply chain management.


      Southeast Asia gains much attention as foreign companies look for alternative supply markets to China. Lower labor costs, enhanced manufacturing capabilities, diversification, and the many trade agreements speak for Southeast Asia as a primary sourcing market.

      Countries of interest for manufacturing most often include Vietnam, Indonesia, Thailand, the Philippines, Malaysia, and Singapore. We have also highlighted how countries specialize in certain industries where Vietnam, Malaysia, the Philippines, and Singapore export many electronics products, for example. Thailand and Indonesia, on the other hand, are major producers of automobiles and related parts.

      While Southeast Asia gains more attention, there are some disadvantages that foreign companies should beware of. Countries still rely heavily on imports from China, which is also a major importer of the final products. The supply chains are comparatively underdeveloped and with infrastructure that doesn’t meet the level of China.

      Southeast Asia will remain attractive for foreign investors but will also have to become less reliant on imports, at the same time as the countries provide more value-added activities for companies.


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        Rubber Manufacturing in Southeast Asia, an Introduction Part 1: Thailand and Indonesia

        Rubber plantation in Thailand


        Southeast Asia is widely known as the world’s largest region for rubber plantations, with Thailand, Indonesia, Vietnam, and Malaysia accounting for nearly 80% of the global natural rubber output. Thanks to their potential, the region has received a lot of attention from foreign investors for sourcing activities.

        This article is part one of a two-part series and will cover some important information for companies to consider when thinking about sourcing rubber products in the two largest markets in the world, Thailand and Indonesia.

        Overview of the rubber industry in Thailand and Indonesia

        With suitable climate and cultivating conditions, rubber plantations in Indonesia and Thailand have prospered quickly since the end of the 20th century, paving the way for the two countries to become leading suppliers of natural rubber.

        In terms of export volume, Thailand is the largest exporter of rubber with an average volume of 4 million tons per year, accounting for around 35% of the global output. Indonesia comes in second place, with an annual average export volume of 2.5 million tons. In both Thailand and Indonesia, rubber and rubber products are among the top 6 export commodities and have contributed significantly to their economies. The export values of rubber products are 19.7 billion USD in Thailand and 5.6 billion USD in Indonesia, respectively accounting for 7.5% and 3.5% of the whole national export value.

        Products that can be sourced in Thailand and Indonesia

        In general, rubber products can be divided into three main types: upstream products, midstream products, and downstream products. Upstream products refer to raw or semi-processed rubber (latex, dry rubber, cup lump). Midstream products are processed rubber such as ribbed smoked sheet (RSS), technically specified rubber (TSR), concentrated latex, and compound rubber. Downstream products are final outputs such as automobile tires, latex gloves, condoms, and rubber bands.

        Upstream and midstream products are key export products of both Thailand and Indonesia, with the main export markets being China and the US. Manufacturing of downstream products, on the other hand, is not as developed yet due to a lack of investment in technology and production facilities. However, more and more manufacturing companies of tires and medical gloves are considering investing more in Thailand and Indonesia. Thus, making use of the abundant supply of natural rubber while also meeting the pandemic-fueled growing global demand for these products.

        Governmental supports

        In recent years, the global rubber market witnessed a severe drop in both demand and prices due to oversupply. To stabilize the rubber industry against these unfavourable changes, Thailand’s government introduced several initiatives such as cutting down on rubber supply (by reducing the number of plantations and cutting down rubber trees), increasing added values to rubber exports (by encouraging manufacturing activities of final outputs), and promoting domestic consumption of rubber. The ultimate goal of these initiatives is to solve the current oversupply issue, and thus, gradually increase the value of the rubber industry.

        Facing the same issues as Thailand, Indonesia decided to implement similar approaches, for example reducing rubber exports and encouraging companies to increase the production capabilities of high-value downstream products.

        In the coming years, more policies to support operations, as well as investment activities of manufacturing companies, are expected to be announced to help both Thailand and Indonesia solve the current issues and reach their full growth potential.

        Import duties for rubber products from Thailand and Indonesia

        Thailand and Indonesia, as members of ASEAN, have implemented several free trade agreements with the region’s key trading partners, including Australia, China, Hong Kong, India, Japan, South Korea, and New Zealand. Thanks to these agreements, 90% to 100% of rubber products exported from Thailand and Indonesia to partner countries are exempted from import duties.

        In addition, each country is also active in discussing and promoting bilateral free trade agreements with other strategic markets such as the US and the EU. Thailand and Indonesia’s great enthusiasm for promoting trade agreements as well as the swift trade relations expansion of ASEAN promise great benefits for traders doing business with these countries.

        Moreover, in 2021, Indonesia officially set up an agreement with the European Free Trade Association (EFTA). With this agreement, all rubber products exported from Indonesia to EFTA countries (Switzerland, Iceland, Liechtenstein, and Norway) will be completely exempted from import duty by 2029.

        Import duties to the US

        Thailand and Indonesia haven’t established any free trade agreement with the US, so products exported from these countries are subject to the general duty rates as other normal trade partners of the US. Depending on the HS code of the rubber product, the tariff rate can go as low as 0% or reach up to 14%.

        Table of US tariffs for rubber products

        Import duties to the EU

        Currently, EU–Thailand Free Trade Agreement and EU–Indonesia Free Trade Agreement are being discussed among parties, but no agreement has yet been established. Therefore, rubber exports from Thailand and Indonesia are still subject to the EU’s general import duties. With different HS codes, the import duty of rubber products can vary from 0% (lowest) to 6.5% (highest).

        Table of EU tariffs for rubber products

        On a side note, the EU-Indonesia Free Trade Agreement has gone through 11 rounds of discussion, while Thailand and the EU have slowly picked up the discussion on a free trade agreement recently. There are still some issues all parties need to solve, such as disagreements on taxation regimes and trading policies, before these bilateral agreements can be finalized. However, future prospects look bright as all relevant parties are committed to finalising the discussion as soon as possible. It seems that after Singapore and Vietnam, the EU wants to establish trade agreements with other ASEAN members to pave the way for a future region-to-region agreement.


        Thailand and Indonesia are the two largest suppliers of natural rubber in the world and have great potential for sourcing downstream rubber products. Although processed rubber products are Thailand and Indonesia’s key exports as of now, manufacturing of rubber tires and medical gloves is also getting more and more established and can later thrive to become major exports.

        The governments of Thailand and Indonesia are also aware of the advantages of the natural rubber supply. Thus, they aim to take advantage of the source and increase the total value of the rubber industry by launching new policies to support operation and investment activities.

        Moreover, as part of the ASEAN, Thailand and Indonesia enjoy great benefits from many free trade agreements. Each country is also active in promoting bilateral free trade agreements with big markets. As a result, importers and distributors of rubber products from Thailand and Indonesia will continue to receive great tariff benefits.


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          Market Entry & Expansion in Southeast Asia: An introduction

          Southeast Asia business meeting


          Southeast Asia is one of the fastest-growing regions in the world, having a population of around 600 million people. Increasingly more companies, both in the B2C and B2B sphere, target the market to capitalize on its expanding manufacturing activities and booming middle class.

          Yet, the region is also comparatively complex, comprising eleven countries with different languages and levels of development. Each market also has different demands in terms of product categories and price levels.

          In this article, we review the most interesting countries for market entries in Southeast Asia and what sets them apart.

          The Most Interesting Countries for Market Entries in Southeast Asia

          Southeast Asia comprises eleven countries with different levels of development, languages, ease of doing business, and import regulations. This makes the region comparatively difficult to enter as pre-assessments are required to find the most suitable markets.

          Compare this to China which is a single market and where the same language is spoken nationwide. Once you’ve managed to register your products locally, you have no obstacles to selling your products to local businesses or consumers.

          Besides, not only do we have to consider country-specific characteristics when choosing a Southeast Asian market, but also your products. Selling machines and equipment for the wood industry is undoubtedly more suitable for Vietnam, considering its large exports of furniture and wooden raw materials.

          At the same time, Singapore might be more suitable for exclusive skincare brands, as the market is more developed, and citizens have a stronger purchasing power.

          Luckily, not all eleven countries are interesting for market entries in Southeast Asia, which makes the assessment easier. The countries we will review in this article include Singapore, Vietnam, Thailand, Malaysia, and Indonesia.


          Despite its small size and population of just 5.8 million, Singapore has built a robust and diverse manufacturing base in industries like electronics, aerospace, precision engineering, and biomedical sciences.

          It’s also renowned for its manufacturing capabilities in chemical manufacturing, having more than 100 global petroleum, petrochemical, and specialty chemical companies present.

          Manufacturing contributes to a whopping 20% of the country’s GDP, totaling SGD 372.4 billion (USD 270 billion) in 2020. That’s considerably high and on par with many of its developing neighbors.

          In Hong Kong, for instance, the manufacturing output is less than USD 4 billion and 1.5% of Singapore’s.

          What attracts businesses is the skilled and educated labor pool, English-speaking population, transparent juridical system, and ease of doing business. Singapore has continuously been ranked on top of the World Bank’s yearly reports on ease of doing business.

          Moreover, it’s a tax haven with a flat corporate income tax rate of just 17% (with part of the first 300 000 SGD exempted) and no capital gain tax.

          With that said, what makes Singapore a less attractive country for B2B sales is the small population, developed economy, and its focus on advanced manufacturing. Even if its neighboring countries are less developed and harder to navigate, the large populations, booming manufacturing industries, and developing economies make them more interesting for market entries.


          Malaysia shares many advantages with Singapore such as the close distance to global shipping lines, its ease of doing business, and the English-speaking population. Disposable incomes are also higher on average here compared to other Southeast Asian countries.

          Electrical products, electronics, machinery, and related equipment contribute to much of the country’s manufacturing industry. Chemicals and petrochemical production also accounts for around 10% of the output.

          Just keep in mind that its population of just 33 million and lower economic growth is a disadvantage. Upcoming markets, like Vietnam, have a highly active manufacturing sector, including electronics, furniture, machinery, agriculture, and more.

          This allows for market entry opportunities as local companies seek to buy foreign products.

          Another challenge for Malaysia-based businesses is its taxation system. The corporate income tax is currently 24% and makes Malaysia one of the countries that have the highest tax rates in the region. By comparison, Vietnam has a corporate income tax of 15% to 20%, Singapore 17%, and Thailand 20%.


          Indonesia is the second-largest beneficiary of foreign direct investments in Southeast Asia, accounting for around 14%. The manufacturing industry is a large contributor to the economy with a focus on the production of textiles, electronics, automotive, palm oil, petroleum, minerals, and coal.

          Contrary to Malaysia, Indonesia also has a major benefit thanks to its big population and future growth prospects. This allows companies to access the wide and well-diversified pool of consumers.

          As a result, market entries with a focus on selling products related to the above industries should be a priority. Besides, worth highlighting is the growth of Indonesia’s digital economy, which offers opportunities for FinTech companies, digital banking, and SaaS solutions.

          Looking at consumer goods and B2C sales, companies now also seek to target Indonesia’s growing upper and middle-class, especially high-end goods and services.

          Indonesia also has the highest number of Unicorns in Southeast Asia, including GoJek, J&T Express, and Traveloka. The ease of doing business has been improved in recent years, the corporate income tax reduced, and we’ve also seen an introduction of a single submission system for business registrations.

          As explained in our separate article about manufacturing in Indonesia, one of the most challenging issues when doing business is bureaucratic inefficiency and red tape. Regardless of the attempts to simplify business procedures, companies still struggle with different regulations and required clearances.


          Vietnam is the third-largest FDI recipient in Southeast Asia and benefits much from the recent trade tensions globally.

          Various multinationals in the electronics and technology industries have relocated manufacturing facilities here, including TCL, Foxconn, and Sharp. Its growing trade relationship with the EU, especially after the execution of the EVFTA in 2019.

          As a result, companies that sell machinery for production tend to have many benefits from these factory relocations. Apart from industrial production, the agriculture sector relies heavily on imported machinery, particularly from the EU, Japan, and South Korea. It’s estimated that 70% of the agriculture machinery used in Vietnam is imported.

          Some companies also face challenges when entering the Vietnamese market. Foreign ownership is strictly limited in some industries, like logistics and banking. This impacts inbound merger and acquisition (M&A) activities.

          The government’s attempt to introduce simpler and clearer regulations has also failed at some stages. Current regulations still overlap and are often opaque, as these are regulated by different governmental agencies.


          Sharing the same geographic advantages as other Southeast Asian countries, Thailand has been attracting foreign companies thanks to the continuous improvement of its business environment.

          Thailand is now among the top three countries in Southeast Asia in terms of ease of doing business. Different advantages allow foreign businesses to reach their expansion targets by selling consumer goods or investing in local businesses.

          Products with the highest growth rate are medical goods and F&B products. This is boosted by the increased middle class and as citizens become more health-conscious and more willing to pay for high-quality international brands.

          However, companies expanding to Thailand should be aware of the political uncertainties within the country. Its politics has been volatile over the last two decades, with the involvement of many military coups.

          In addition, imported products typically face strong competition from domestic Thai products. Thai consumers are relatively price-sensitive and mainly served by local suppliers. Hence, companies might face issues to remain competitive and profit-making at the same time.

          The Philippines

          The Philippines is known for its strong reliance on the service sector, which accounts for more than 50% of the GDP. Business process outsourcing (BPO) is one of the key drivers of the service sector.

          Hence, foreign companies are strongly recommended to take the advantage of this foundation in the Philippines. This, firstly, provides foreign players access to a well-established BPO market. Also, international experience is a competitive advantage over the local businesses when it comes to providing services to multi-national companies (MNC).

          Tourism is also another strength of the Philippines. This has opened the door for businesses in the hospitality industry, such as F&B, traveling, and more. With a long history as an agricultural country, the Philippines allows global F&B manufacturers to have cheap and locally sourced ingredients to lower the cost while taking advantage of its original international brand name.

          However, companies expanding to the Philippines also need to consider some common foreseeable challenges there. Infrastructure inefficiency is at the top. Regardless of the Government’s growing spending on infrastructure, it’s common with overcapacities in the international airports, port congestion in many major seaports, and slow and costly internet services.

          The Philippines is usually ranked below its neighbors in terms of basic infrastructures, such as roads, railroads, ports, and more.

          Market Entry Strategy in Southeast Asia

          You have several options if you intend to enter Southeast Asian markets. Here, we must consider whether you sell B2C and/or B2B, offline and/or online, whether you have limited knowledge and presence in markets, and financing capabilities. Let’s review the different sales channels and market entry strategies available.

          Distributor channel development

          One of the most common and time-saving options is to find a local distributor with extensive knowledge and experience in local sales and marketing. Here it’s important to have clear assessment criteria to choose the right partner. Examples include:

          • The scope of business (general or industry-specific)
          • Geographical coverage (certain cities/provinces, national or international)
          • Focused channels (general trade, modern trade, or eCommerce)
          • The scope of work (custom clearance, tax and duty payment, warehousing, required local certificates, and more)

          A good distributor does not only have access to existing sales channels, but also a network with relevant authorities. This is important in emerging markets, where regulations are not as effective and transparent.

          A partner who is familiar with normal business practices and relevant legal requirements can save massive time in bringing the products to the market.

          However, this method of expansion also has its cons. Firstly, the company will lose control over the sales activities and mostly rely on the sales and marketing capabilities of the local partner. Besides, the sales commissions will also affect your profitability, making it harder for the manufacturer to build a competitive price advantage while maintaining a solid and profitable pricing strategy.

          Mergers & Acquisitions (M&A)

          M&A is another common way to enter new Southeast Asian markets. Businesses doing inbound M&A transactions have different motivations rather than just expanding sales. A typical one is the acquisition of an experienced company with established operations.

          Singapore is undoubtedly the leader in terms of both the number of deals and deal value made. Setting up a new business from scratch often requires significant investments, both in capital and time. Acquiring a local business can therefore be a preferable choice if you have the finances required and want to enter a market quickly.

          However, managing M&As in developing countries is indeed complicated, especially for companies that have limited experience in the field. The challenges can come from local legal requirements, assessing the value of target companies, differences in management style post-acquisitions, and more.

          Deal structure is also crucial, making sure that a suitable buying strategy is applied. Buyers need to decide whether they want to proceed with a complete buy-out or acquire a minority or majority share. This will determine whether you spend enough while meeting your expectations (veto right, financial consolidation, control over the business).

          Joint Venture (JV) with a local partner

          M&A activities allow foreign businesses to get control over existing businesses. JVs, on the other hand, allows for collaboration with local business to create synergies.

          While companies in emerging markets have established sales channels and networks, foreign companies can bring expertise, technological knowledge, and brand reputation. If well-facilitated, the joint venture can utilize the strengths of both sides.

          Let’s take agriculture as an example. A local partner will then have experience in farming and fishing, with great knowledge of the local geography and ecosystem. Meanwhile, the foreign partner can help to modernize the production exporting to international markets.

          Like any other type of partnership, founding members of a JV, especially those from different cultures, should be aware of the conflict of interest. This is likely to happen when the JV grows and the founding members have their own visions and strategies for future development, either for their own company or for the JV.

          Domestic eCommerce sales

          Given the recent eCommerce boom in Southeast Asia, many foreign companies see online sales as the most promising sales channel. You have two options, either to import and have the products available locally or ship the products from a warehouse overseas.

          Importing products and selling on local eCommerce websites is referred to as domestic eCommerce sales. For companies that sell lighter products such as in the fashion categories, cross-border eCommerce might be a more suitable option.

          The entry and registration requirements will then be significantly lower, but you must deal with higher and longer shipping costs. This is not optimal for some businesses as consumers require shorter delivery lead times and lower shipping costs.

          A local warehouse assures effective fulfillment of the orders as international shipping normally takes 3 – 5 times longer than domestic dittos. The lead times can be even longer if the country is under lockdown or faces restrictions of movement.

          It’s therefore recommended to have locally ready products to meet growing demands and to save logistics costs in the long run. Yet, domestic eCommerce also requires that you have a local legal entity that can import products and manage orders.

          Foreign companies must either set up their own legal entity or work with local distributors. Although this might require more effort and capital, it could be used as a foundation for the company to penetrate offline sales channels.

          Cross-border eCommerce sales

          If you don’t have a physical presence or work with a distributor in Southeast Asia, you can also sell your products cross-border. Major platforms like Lazada and Shopee have developed cross-border eCommerce capabilities and where you ship the products from overseas.

          This is considered an effective way to examine the market’s reaction to a certain group of products while keeping the budget low. Shopee and Lazada are among the pioneers to enable cross-border sales functions. Tiki, a Vietnamese-based eCommerce startup has also recently allowed international sales, to catch up with this globalization trend.

          However, not all platforms are available for cross-border sales. Tokopedia, the third most visited marketplace in Southeast Asia is only available for trading activities in Indonesia. Besides, Tokopedia is only available for a limited number of product groups.

          Each platform has its own restrictions on eligibility for cross-border sales. Typical products are household and fashion goods, which bear less risk of being defective and are relatively easy to deliver. Worth mentioning is also that foods and supplements are not allowed to sell cross-border on platforms like Lazada.

          Another disadvantage to consider in the long run is that cross-border eCommerce limits you to online sales. This also shares a mutual disadvantage with domestic eCommerce, which is generally not suitable for B2B products such as machinery.


          Southeast Asia boasts a population of around 600 million people and is one of the fastest-growing regions globally. Foreign investments and diversifications from the Chinese supply market will allow for growth, increased disposable incomes, and expanding manufacturing activities in the coming years.

          As a result, increasingly more foreign companies seek to enter and expand in the markets, either for B2C or B2B sales. You must also consider whether your products are suitable to sell offline or online. For instance, bulkier products for B2B are often more suitable for B2B sales offline and with the help of distributors.

          Smaller products such as fashion items can be more suitable to sell online, sometimes cross-border from overseas. The most popular eCommerce platforms, Lazada and Shopee, allow cross-border sales and is something they prioritize.

          The most interesting countries that foreign companies should target for market entries in Southeast Asia include Vietnam, Indonesia, Malaysia, Thailand, and the Philippines.


          Read more about our market entry services or other consulting capabilities.


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            Southeast Asia’s Plant-Based Food Market: New Consumer Behaviours Post-Pandemic

            The COVID-19 pandemic has increased consumers’ health consciousness globally, which has also greatly benefited the alternative protein market. Southeast Asia is no exception as the region recorded a great number of new companies entering the market to grasp market shares in this growing industry.


            Thai farmer working in his fields


            Almost two years of the pandemic has created a lot of changes in food consumption behaviours globally, including in Southeast Asia. A great number of consumers are now replacing red meat and sugar with vegetables, fruits, and healthy snacks in their diets, while also purposedly spending more money on foods that they perceive are good for their bodies and health. Southeast Asia’s consumer food spending, in general, is expected to skyrocket in the next decade. According to a study by PwC, Rabobank, and Temasek, consumer-driven growth in food spending in Southeast Asia will reach 1.1 trillion USD in 2030, an 83% increase compared to 2019, a growth rate that would outpace even China’s.

            These shifts have fueled the growth momentum of alternative proteins across the region. It has been extremely noticeable that despite the higher price for alternative protein products, consumers are willing to spend the extra money because of the health benefits. Moreover, a recent report by Boston Consulting Group and Blue Horizon Corporation indicates that although alternative proteins account for only 2% of the world protein market in 2020, it is predicted to reach 12% by 2035.

            Graph showing Southeast Asia meat consumption

            Graph showing Southeast Asia's willingness to spend more on healthy foods

            Furthermore, due to an increased fear of a connection between the consumption of animal products and communicable diseases, people are now actively trying to find alternative protein sources such as plant-based meat, cultivated meat, and fermented food. This has also been enhanced by the increased availability of plant-based meats and improvements in the taste and texture of alternative protein alternatives in the region.

            Plant-based alternatives such as soy-based mock meat, tofu, and tempeh have already been around for a long time in the local cuisine. It is believed that the familiarity with plant-based meat substitutes will accelerate the industry’s adoption and development in Southeast Asia much quicker than in many other regions around the world. Southeast Asian market size of plant-based meat is expected to increase by 25% to 1.7 billion USD by 2025, driven by consumers’ increased awareness of the importance of healthier options and sustainability.

            The increase in demand for plant-based meats among consumers is the primary contributor to the growing number of start-ups and legacy brands developing their range of plant-based meats across the region. In Thailand, for instance, the plant-based meat company, Let’s Plant Meat, developed its soy-based patty in just 12 months, which they now sell on the market for half the price of Beyond Meat, a leading western plant-based meat brand. Another example is the Malaysian-based Phuture Daging, which sells minced meat made of soy, rice, peas, and chickpea protein in Singapore and Malaysia.

            Of all Southeast Asian countries, Singapore emerges as the leading nation in facilitating the development and expansion of alternative proteins. The Singapore government has a 100-billion-USD plan to prepare for the effects of the climate crisis, which also includes the goal of producing 30% of Singapore’s own nutritional needs by 2030 to reduce the country’s overreliance on imported foods (currently 90%). This has resulted in a great number of homegrown Singapore start-ups venturing into this lucrative field; from NextGen Food’s Tindle brand of plant-based chicken to Karana’s jackfruit replacement meats. The country has also attracted numerous international brands and organizations looking to establish their presence in Asia, with Singapore as their home base.

            Moving forward, there will be significant opportunities for all players in the plant-based protein field in Southeast Asia. Companies will need to carefully consider consumers’ rapidly changing preferences to optimize their product portfolio, with new product development focusing on serving consumer needs over product attributes. Many experts also believe that capability-driven M&As or partnerships may increase in the coming years as it will allow businesses to satisfy changing preferences by repositioning themselves through acquiring new skills and venturing into untapped markets.

            Read more about our consumer products experience or our other consulting services.


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              Sourcing & Manufacturing in Thаilаnd: An Introduction

              Busy street in Bangkok


              In this article, we review Thailand as a manufacturing destination and why it’s considered one of Asia’s most important export markets.

              First, we cover the benefits and disadvantages of choosing Thailand for manufacturing. This will give you an understanding of why companies keep or relocate production to neighboring countries.

              The article also gives you an overview of Thailand’s major manufacturing industries, the most active economic regions, and its free trade agreements.

              Thailand Overview:

              • Population: Around 70 million
              • Capital: Bangkok
              • Bordering countries: Myanmar, Laos, and Cambodia
              • Major cities: Bangkok, Nonthaburi, Nakhon Ratchasima, Chiang Mai

              Benefits of Manufacturing in Thailand

              Setting up manufacturing in an emerging market can be rewarding but is oftentimes challenging. It’s crucial to find a balance between the potential cost savings and future growth prospects, along with the existing infrastructure and business environment.

              Let’s review some of the major benefits of choosing Thailand as a manufacturing destination.

              Established manufacturing sector

              Thailand has an established manufacturing sector, particularly in the electronics, automotive, and petrochemical industries. The sector has been active since the 1980s and with foreign multinationals present, giving the country a head-start over many Asian countries.

              Over the years, Thailand has managed to build up a robust manufacturing infrastructure by Southeast Asian standards. The high reliance on local suppliers, networks, and its business ecosystem makes relocations to nearby countries a non-priority to some companies.

              This is something we touched on in our article about manufacturing in China, and the importance of its business ecosystem. It’s comparatively easy to move a factory, but it’s difficult to relocate a business ecosystem in a short time.

              Low labor costs

              Thailand is not the most competitive country in Southeast Asia in terms of labor costs. Vietnam, the Philippines, and particularly Indonesia have lower labor costs, being 30% to 50% lower than Thailand on average.

              With that said, Thailand is still considered a low-cost country for manufacturing and with labor costs that are almost a third of China’s.

              Ease of doing business

              Thailand is a business-friendly nation that scored high in the World Bank’s Ease of Doing Business (EODB) ranking. In 2020, it was listed in the 21st spot among 190 countries globally, only behind Malaysia in 12th place, and Singapore in 2nd place.

              By comparison, Vietnam was ranked 70th, Indonesia 73rd, and the Philippines 95th.

              Contributing factors include Thailand’s active approach to simplifying the process of starting businesses and paying taxes. It has also introduced electronic submission of customs declarations, to give another example.

              What are the disadvantages?

              Thailand might have advantages thanks to its developed infrastructure and business-friendly environment. At the same time, it struggles with issues that make other Southeast Asian countries more preferable for investors. Let’s review the most prevalent ones.

              Political instability

              In the last century, Thailand has experienced the most military coups worldwide, including 13 successful ones and 9 failed. The latest coup took place in 2014 when the Thai military abruptly suspended the constitution and started to control the government.

              Even if the economy has remained relatively stable due to the coup, the events affect companies’ decisions to invest in the country. According to the IMF, the military coups and following instability have a clear impact on the slow economic development.

              The 2014 coup has also put negotiations and introductions of free trade agreements on halt.

              Slow economic growth

              Thailand saw great growth in the 80s and 90s and was the fastest-growing economy in the world from 1985 to 1994. That abruptly ended in 1997 with the Asian financial crisis, which was triggered in Bangkok when the Thai baht was unpegged from the US dollar.

              In recent years, Thailand’s economy has grown at a timid pace, recording a growth of 2.27% in 2019, right before the pandemic. Vietnam and the Philippines, on the other hand, grew by 6% to 7%, remarkably higher figures.

              It’s fair to say that Thailand had its booming days in the 80s and 90s, but will face difficulties in competing with neighboring countries in terms of economic growth in the coming years.

              Aging population

              Thailand’s population growths by a slow pace and will stagnate around 2028. The population growth rate has declined since the 1970s, which is partly related to its economic development.

              Birth rates and median ages both tend to decline as countries become more developed.

              Looking at median ages, Thailand has a median age of 40.1 years as of 2022. This is well above that of Vietnam (32.5 years), Indonesia (29.7 years), and the Philippines (25.7 years).

              What products are manufactured in Thailand?

              When choosing a manufacturing destination, it’s crucial to understand what products the country specializes in. The underlying infrastructure and development of supply chains have a close correlation to the primary industries.

              While Thailand has a broad manufacturing sector, there are a few industries that account for a majority of the exports.


              Thailand is a major exporter of electrical and electronic equipment (E&E) that accounts for 24% of exports. The sector contributes 10.4% of GDP and employs 800,000 employees nationally, with 2,500 companies present.

              Products manufactured include washing machines, air conditioners, computers, semiconductors, and display panels.

              In recent years, we’ve also seen local brands popping up, including Casper, which targets international markets. It plans to become a leading provider of electronics, refrigeration products, and appliances.

              Automotive parts

              Thailand is a manufacturing hub for automotive parts and vehicles, being the largest exporter in ASEAN. It’s the 12th biggest exporter of vehicles globally and the industry accounts for around 10% of the total GDP.

              In the 1960s, Japanese vehicle manufacturers entered the market with brands like Mitsubishi and Toyota. American and German companies soon followed. With decades of development in the automotive industry, Thailand is sometimes even referred to as “The Detroit of Asia”.

              During the pandemic, the automotive industry saw strong growth at the same time as other industries suffered. Vehicle production is expected to exceed 2 million per year by 2024, while 50% of locally produced vehicles will be electric (EV) by 2030.

              Agricultural products

              The agriculture industry accounts for around 6% of Thailand’s exports but employs around one-third of the population. Thailand is currently the world’s biggest exporter of rubber, tapioca products, frozen shrimp, canned pineapple, and canned tuna, to give some examples.

              Rice is the most important crop and around 60% of the country’s 13 million farmers grow the product. Agricultural production accounts for almost 10% of the GDP, on par with the automotive industry.

              Industrial Regions & Cities

              Most of Thailand’s manufacturing can be found in Bangkok and its surrounding areas, as well as in the North. Let’s review the cities and provinces that account for most of the economic output nationally.


              Foreign companies first targeted Bangkok when they started to set up manufacturing in Thailand.

              The city is the most densely populated with developed infrastructure by local standards. It also has a strategic location along the Southern maritime border with superior shipping capabilities.

              Much of Thailand’s electronics manufacturing can be found in the surrounding areas of Bangkok. Other major industries include textiles and garment production, food processing, and petrochemical products.

              Automotive manufacturers are also active in the surrounding areas of Bangkok, including Nissan, Ford, and General Motors.

              Eastern Seaboard

              The eastern seaboard is a major region comprising Chonburi Province, Rayong Province, and Chachoengsao Province. It’s the home of many car and automotive parts manufacturers, including companies like Ford and Denso.

              Rayong is particularly dense with manufacturers of rubber and petrochemical products, but also electronics and automotive parts. Emerson, Daikin, and Bosch are just examples of companies with factories in Rayong.

              Chonburi is famous for its vast electronics and automotive parts manufacturing. Sony, Toyota, Mazda, and Triumph are located here while the province is also home to the country’s biggest sea port, Laem Chabang.

              What speaks for the region as a more promising manufacturing hub is the lower labor costs and the development of its infrastructure. Much investment will be allocated to the region in the coming years.

              Samut Prakan

              Samut Prakan is a province located to the South of Bangkok, covering almost the whole Southern sea border. Being part of the Bangkok Metropolitan Region, it has received many investments in the past decades, thanks to its proximity to Bangkok and developed supply chains.

              The province is considered the most important transportation hub and where Suvarnabhumi Airport, the biggest international airport, is located. Various electronics and automotive parts manufacturers can be found here, including Denso, Toyota, Isuzu, Nissan, and Panasonic.

              It also has a strategic location as it’s considered a gateway to the Eastern Economic Corridor (EEC).

              Thailand’s Free Trade Agreements

              Thailand has country-specific trade agreements with Australia, Chile, China, Laos, New Zealand, Japan, Peru, and India.

              It’s also a member of the Association of Southeast Asian Nations (ASEAN), including Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, and Vietnam as additional member countries.

              ASEAN currently has free trade agreements with the following countries:

              • ASEAN-Australia and New Zealand
              • ASEAN-China
              • ASEAN-India
              • ASEAN-Japan
              • ASEAN-Korea

              The Regional Comprehensive Economic Partnership (RCEP) is another trade agreement signed between 10 ASEAN countries and:

              • Australia
              • China
              • India
              • Korea
              • Japan
              • New Zealand

              Thailand also negotiates potential future trade agreements with the US, Turkey and Pakistan, for example.


              Thailand has a developed manufacturing industry by Southeast Asian standards and foreign companies have been present for decades. Major industries include vehicle and automotive parts manufacturing, agricultural production and food processing, electronics manufacturing, and petrochemical production.

              Even if Thailand has problems with an aging and stagnating population, slower economic growth, and political instability, it remains a major manufacturing destination in Southeast Asia. It’s still considered a low-cost market with developed infrastructure and supply chains.

              Many manufacturers rely on local sub-suppliers and the overall business ecosystem, which makes it difficult to relocate production, at least in the short term. With that said, upcoming markets like Indonesia and Vietnam will increasingly impact companies’ manufacturing strategies.

              Read more about our market entry services or other consulting capabilities.


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                by Asia Perspective Asia Perspective No Comments

                Southeast Asian Governments’ Shift in COVID Polices Gives Way to Economic Revival

                The impact of the COVID pandemic has started to subside in Southeast Asia. Regional governments continue to ease restrictions and further open their borders in 2022, giving rise to the recovery of key tourism industries and cross-border businesses. Despite the recent uncertainties caused by the Russia-Ukraine conflict, the region’s overall economy is still set for robust growth.


                Commuters in Bangkok


                This insight is part of Southeast Asia’s COVID update series by Asia Perspective. Read the previous insight here.

                Graph showing COVID vaccination progress in Southeast Asia

                One quarter into 2022, Southeast Asia experienced another surge in daily COVID-19 cases. Vietnam’s daily cases escalated more than any part of the region, with more than 80% of its total recorded cases happening within this period. The country’s government stressed that extra efforts are needed to reduce the number of new cases, severe cases, and fatalities. At the end of February 2022, Thailand raised its COVID-19 alert level to level 4, the highest alert level which indicates very high health risk, as the number of severe cases and deaths continued to rise. However, the government stated that it would not impose new lockdowns. Its neighbor Malaysia has also not been able to lower their cases to less than 10,000 registered infections per day. Some of the key reasons behind the high infection rate in Southeast Asia are the spread of contagious Omicron variant as well as the less precautions amongst the population after the reopening of the societies.

                Philippines, on the other hand, significantly improved infection control, successfully keeping the daily cases to less than 1000 cases per day since the start of March 2022. Philippines recorded a 24% decline in daily infections in the last week of March 2022, compared to a week earlier, while the total number of cases of Indonesia in March 2022 is 2.7 times lower than its February figure.

                Graph showing COVID cases in Southeast Asia


                Despite the high daily cases, many countries are well on track with the vaccination timeline, such as Vietnam, Malaysia, Thailand, and have managed to stabilize the situation in some of the big cities and provinces.

                Graph showing COVID vaccination timeline in Southeast Asia

                More than 70% of the population in Vietnam, Malaysia, and Thailand have been fully vaccinated. Initially, all governments targeted to achieve herd immunity by fully vaccinating around 70-90% of the population. High vaccination coverage allows these countries to reach a ‘new normal’ state, where businesses can return to their pre-COVID level of operation and the people can resume normal movement, both domestically and internationally.

                Vietnam, home of 98 million people, is currently among the world’s most highly vaccinated countries. As Vietnam recently finished vaccinations of people aged 12 and older, the country now aims to wrap up booster shots for adults within the first quarter of 2022, and start rolling out vaccination for children aged 5-11 starting April 2022. With new Omicron-fueled cases on the rise, Thailand’s government has recently stepped up a campaign to vaccinate the elderly and other vulnerable groups. Malaysia, the first country in Southeast Asia to reach its herd immunity target, is ramping up the booster shot rollout. As of March 23rd, over 15 million Malaysians, equivalent to more than 40% of the population, have received a booster shots for COVID-19. Overall, it is evident that these countries’ efforts to secure COVID-19 vaccine doses through robust multilateral relationships has already paid off.

                In contrast, Indonesia and the Philippines are lagging behind their targets. As of March 2022, the share of fully vaccinated people in the two nations have not even reached 60% of their population, and there was little vaccination progress during the first quarter of 2022. Amidst the exponential increase in the region, Indonesia shortened the recommended interval between the second and third dose for individuals aged 60 and older from six months to three. The Philippines also announced its plan to accelerate the administration of booster shots and the vaccination of senior citizens, including improving the accessibility of vaccination sites, simplifying the process, and increasing engagement with localities.

                Current Travel Regulations and Social Restrictions

                As Southeast Asia moves past the worst of the omicron wave, the region will begin a transitioning toward an endemic phase starting in the second quarter of the year. Vietnam, Malaysia and the Philippines announced waived quarantines for vaccinated international travelers with negative tests upon arrival, while Indonesia and Thailand eased testing requirements to boost tourism.


                Vietnam resumed flight routes with 20 international destinations in the Asia Pacific, Europe, and the United States. However, the flight frequency is still limited compared to pre-covid levels. Yet, it is expected to quickly increase. Effective from March 15th 2022, Vietnam’s government resumed its visa exemption policy for 13 countries for up to 15 days, which had been in place prior to the pandemic. The policy applies to citizens of Belarus, Denmark, Finland, France, Germany, Italy, Japan, Norway, Russia, South Korea, Spain, Sweden, and the UK.


                Following its fellow SEA neighbors, Indonesia started easing travel restriction since daily infections have dropped by 90% compared to the mid-February peak. After initially trying the program in Bali, Batam, and Bintan islands for two weeks, the government is now applying its quarantine-free travel policies for fully vaccinated individuals to the rest of the country, which would soon end the two-year border closure. The five-day quarantine will still be required for unvaccinated or partially vaccinated travelers.


                On April 1st 2022, Malaysia began its transition toward the endemic phase, an exit strategy that would allow Malaysians to return to near-normal life after nearly two years of battling the COVID-19 pandemic. All restrictions on business operating hours have been removed and prayer activities are now allowed without physical distancing.

                The Philippines

                Following an initial lift of a nearly two-year ban on foreign travelers from a selected few countries, fully vaccinated travelers from everywhere are allowed to enter the Philippines and are no longer subject to facility-based quarantine upon arrival from April 1st. Travelers must present proof of vaccination and negative RT-PCR results from a test taken within 48 hours from their country of origin.


                As the tourism-reliant Southeast Asian nation seeks to boost economic recovery, foreign visitors are now only required to undergo an RT-PCR test on arrival and a self-administered antigen test on day five, instead prior pre-departure RT-PCR COVID Test, starting on April 1st. At the same time, the government announced the extension of a nationwide state of emergency which will remain until the end of May to keep the spread under control.

                Economic Landscape: Tourism, Trade, Mergers and Acquisitions (M&A)

                Asian Development Bank (ADB) forecasted Southeast Asia’s GDP growth to be 5.1% for the year 2022, with the worst-case scenario for GDP growth to be -0.8 percentage points from the baseline forecast, factoring in the impact of the Omicron wave. In comparison, the GDP growth in 2021 landed at 3%. The road to recovery, however, has been complicated by the recent Russia-Ukraine conflict. Given Southeast Asia’s dependence on exports, the economic expansion would likely suffer from supply chain uncertainties and soaring energy prices. In March 2022, S&P Global changed its growth forecast for emerging Southeast Asia to a still relatively robust 5 percent, lowered from the initial forecast of 5.6 percent.

                4.7 million Southeast Asians fell into extreme poverty in 2021, according to a new ADB report. As many as 9.3 million jobs disappeared in comparison with a baseline no-COVID scenario. Economic output in 2022 is forecasted to remain more than 10% below the COVID-free scenario. Unskilled workers, retail, and non-regulated workers, as well as small businesses without a digital presence, are among the most affected.

                However, a recovery was noted in Southeast Asia towards the end of 2021. The region witnessed a rise of 161% in visits to retail and recreational areas in February 2022, compared to the levels throughout 2020. Economies with high technology adoption (Singapore, Malaysia, Thailand), merchandise resilience (Malaysia, Singapore, Thailand, Vietnam), and rich natural resources (Brunei, Laos PDR, Indonesia) are likely set for a stronger return.

                The continuing trend of this year for Southeast Asian countries would be to reopen their borders for international quarantine-free travel to recover the region’s key tourism industries, which nearly halved their GDP contribution from 2019 to 2020. Border reopening also gives ways for stronger cross-border business activities. Multiple sectors could expect the return of international investors and business operators wanting to expand their portfolios in the region.

                “Revenge travel” from overseas tourists is highly anticipated. A surge of 268% in flight booking from South Korea to Southeast Asia between March 11th-22nd, 2022 has already been recorded. The region’s largest sporting event SEA Games, which will be hosted by Vietnam in 2022, is also expected to boost interregional travel.

                M&A activities in the region remained positive up until February 2022, mainly driven by Singapore. Southeast Asian startups raised at least 1.96 billion USD in private equity and venture capital transactions in the month. Deal count dropped 23% compared to January, yet big-ticket transactions increase deal value by 15% month-on-month. Singapore leads Southeast Asia’s funding scene by both volume and value. Indonesia came second with 34 startups raising 198 million USD. Startups in the software and SaaS sector received most of the funding. Followed are fintech, e-commerce, data analytics, and AI. Powered by interregional megadeals, Southeast Asia’s M&A activities remain bullish as the world weathers recent changes and increasing uncertainties. Dealogic recorded a reduction of 29% in the number of global mergers in the first quarter of 2022 compared to the same period of the previous year. Asia-Pacific suffered a 33% drop in transaction value, the heaviest drag among the recorded regions (North America fell 28%, Europe fell 25%).

                Graph showing deal value in 2022 in Southeast Asia

                While the number of COVID cases has continued to rise, the pandemic’s impact on the economy has been subdued in 2022. The GDP growth in most SEA counties will likely surpass the previous year’s level. Border reopening in the region helps boost the recovery of the tourism industries and the return of overseas businesses, which will significantly facilitate Foreign Direct Investment (FDI) growth and M&A in the investment-fueled region. At the same time, governments must watch out for the progress of the Russia-Ukraine conflict and prepare immediate action plans to deal with its potential consequences, such as supply chain disruption and soaring commodity prices. All in all, the overall economic growth will only be guaranteed with recovery strategies across multi-sectors.


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                  The Regional Comprehensive Economic Partnership (RCEP) promotes connectivity among economies in the Asia-Pacific region

                  The Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade deal, officially took effect on January 1, 2022, targeting a market of 2.2 billion consumers.


                  RCEP 2022


                  RCEP Overview

                  Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement (FTA) among 10 ASEAN member countries and an additional 5 countries: Australia, China, Japan, South Korea, and New Zealand. RCEP was signed in Hanoi, Vietnam on November 15, 2020, aiming to form the East Asia Free Trade Agreement (EAFTA) and the Comprehensive Economic Partnership in East Asia (CEPEA).

                  Map showing RCEP members

                  The 15 members of RCEP accounts for 30% of the world’s population (2.2 billion people) and 30% of the global GDP (26.2 trillion USD), forming the largest trade bloc in history. RCEP is the first free trade agreement between China, Japan, and South Korea, three of Asia’s four largest economies.

                  Table comparing RCEP with major FTAs

                  As of November 2, 2021, 6 ASEAN countries and 4 of the partner countries, including China, Japan, Australia, and New Zealand, sent their ratification of the RCEP Agreement to the General Secretary of ASEAN. On this basis, the RCEP Agreement officially took effect starting January 1, 2022. RCEP has two major changes compared to previous FTAs: consolidated Rules of Origin (ROO) and tariff reductions. Both will have positive impacts on trade within the region and will likely attract multinational corporations into the bloc.

                  Enhance Trade with Accumulative Rules of Origin

                  The agreement’s accumulative ROO is the RCEP agreement’s biggest accomplishment. A good will be considered to meet the ROO requirement if it meets just one of the following three conditions: the good is wholly obtained in a member country; the good is produced solely from materials originating in one or more member countries; the good is produced from non-originating materials that meet the requirements of the Item Specific Rules. For example, cotton from China processed in Vietnam, under the new cumulative ROO, will be deemed to have originated in Vietnam when Vietnam exports the final product to another RCEP country. In general, the RCEP brings together all the original rules of origin outlined in the ASEAN-Plus-one and other bilateral preferential trade arrangements (PTAs). Thus, businesses will only need one ROO when trading within the bloc.

                  Accordingly, the RCEP creates huge benefits to some key export industries of its members, for example, Vietnam’s textile and garment industry. The previous FTAs which Vietnam had signed with Japan: VJFTA and AJCEP, both required two-step rules of origin: the fabric had to be produced in the ASEAN country or in Japan to be eligible to receive tariff preferences. With the new RCEP Agreement, Vietnam manufacturers can import fabrics from anywhere; as long as the fabric is then cut and sewn in Vietnam, tax incentives will be implemented when exporting to Japan. Vietnamese exports to any of the member countries of the agreements will now be more time- and cost-efficient. Other industries such as footwear, automobiles, agriculture, fisheries, and telecommunications will also enjoy similar advantages with the new RCEP.

                  Overall, the relaxed, consolidated ROO will reduce costs and enhance global value chain activities for any company that has supply chains spanning in Asia. Multinational companies that would like to move parts of their production to Asia will also find it easier to establish supply chains in the region.

                  Benefits for China with Tariff Abolition and Reduction

                  The RCEP will eliminate tariffs and quotas on more than 65% of traded goods, improving market access. The member countries agree to reduce or eliminate customs duties imposed on goods by approximately 92% over 20 years. Some tariffs will be eliminated immediately, while others will be phased out gradually over 20 years. However, this does not necessarily imply extensive tariff abolition for all member countries, as more favourable trade agreements already exist between some of the member countries.

                  Among the countries, China is the one that will benefit greatly from this agreement. RCEP members are all important partners of China. In the first nine months of 2020, trade turnover between China and its member countries amounted to 1.055 billion USD, accounting for about one-third of the country’s total foreign trade turnover. With RCEP, 85% of Chinese goods will enjoy zero tariffs when exported to RCEP countries. Further on, a total of 98.2% of Chinese products will be granted zero Australian tariffs in the long run. Overall, the share of trade with free trade partners is expected to increase from 27% to 35%, and China will have a total of 19 free trade agreements with 26 partners.

                  Thanks to RCEP, China can also establish its first free trade agreement with Japan. During the first three decades after China’s reform and opening, Japanese investment in China was mainly in the form of “re-exports”, meaning that Japan invested in manufacturing in China, to then export those products to other countries. With RCEP, preferential tariffs will be immediately applied to 57% of Chinese goods exported to the Japanese market. Therefore, Japanese investors who are eager to switch from re-export investment to investment focused on the China market can promote this strategy further with RCEP.

                  In general, global partners and investors can benefit from a bigger market, more flexible supply chains, lower transaction costs in RCEP countries with this new partnership.

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                    Southeast Asia’s Improved COVID Situation Offers a Positive Outlook For Economy Rebound

                    With intensive vaccine rollout and heavy restrictions, Southeast Asia has significantly improved its COVID situation towards the end of 2021. Regional governments are gradually lifting restrictions and pushing to reopen, aiming to strike a balance between virus containment and movement of people and money.


                    Tourists in Bangkok, Thailand

                    Southeast Asia’s COVID Cases

                    Southeast Asia’s top economies – Vietnam, Indonesia, the Philippines, Malaysia, and Thailand, all faced a surge in COVID cases during the summer of 2021. The number of COVID-infected citizens soared in Indonesia during June-July, making it the country with the highest rate of infections in the region. Vietnam, originally successful in preventing the disease, also suffered a severe outbreak from June of 2021.

                    Table showing number of confirmed COVID cases in Southeast Asia

                    With heavy restrictions in place, the rate of daily new COVID cases has decreased for most countries. Indonesia, once the pandemic centre of Southeast Asia, reported the lowest number of daily new cases among the top economies. Except for Thailand, other countries have reduced their daily record of infections to less than 5,000 cases.

                    Graph showing daily ne confirmed cases in Southeast Asia

                    Southeast Asia’s COVID Vaccination Progress

                    Making up for a slow beginning, Vietnam and Indonesia are speeding up their vaccination program with over 1 million doses administered daily in October. Thailand and the Philippines are lagging in the race, with around 5 to 6 thousand doses administered daily. Only Malaysia has fully vaccinated over 70% of its population.

                    Table showing vaccinations in Southeast Asia

                    All countries target to achieve herd immunity with at least 70% of the population fully vaccinated against COVID-19. There are several complications in reaching these deadlines. For example, shortage of doses, government and localities coordination and local anti-vaccine movement (particularly in the Philippines and Indonesia), just to name a few.

                    Vietnam and Indonesia both aim to achieve herd immunity by March 2022. The Philippines is set to immunize 60% of its population by the end of 2021. Malaysia has surpassed the 70% benchmark and plans to vaccinate 80% of its target population (adults aged 18 and over) by December 2021. Thailand aims to vaccinate 70% of its population within 2021, focusing on covering tourist-concentrated areas.

                    Countries are also introducing vaccination programs to children ahead of the new school year. In October 2021, the Philippines began a pilot program in hospitals to vaccinate minors aged 12 to 17 with underlying medical conditions. Thailand recently kicked off a vaccination program with the Pfizer vaccine, aiming for more than 5.04 million students, aged 12 to 18. Vietnam will also start vaccinating children aged 12 to 17 with the Pfizer-BioNTech vaccine, starting November 2021.

                    Future Outlook: GDP, FDI, Supply Chains, and Tourism

                    The surge in infected cases led several governments to apply COVID-zero strategies, including limited international and local movements, and halted business activities. Unsurprisingly, strict regulations carried a negative impact on the economy. After months of heavy restrictions that put the economy on the brink, countries in Southeast Asia have lifted several social curbs and, most importantly, planned to reopen.

                    According to Oxford Economics, Foreign Direct Investment (FDI) flowing into Southeast Asia remains strong. As the global value chains continue to adjust to higher labour costs and trade protectionism in China, Southeast Asia is likely to be the key beneficiary. London-based think tank Capital Economics projected the region’s economy to rebound strongly in the fourth quarter of 2021 as COVID cases have dramatically reduced.


                    Vietnam’s GDP declined sharply by 6.17% in Quarter 3 of 2021 – the first recorded negative growth since 2000. In the first nine months of the year, the country’s GDP has now only grown by 1.42%. The Ministry of Planning and Investment estimates the annual GDP growth of 2021 to be at 3-3.5% compared to 2.91% in the previous year.

                    Foreign investors remain optimistic about Vietnam’s long-term growth. Its role in the global supply chain is only expected to grow, as noted by American Chamber of Commerce in Vietnam. Information services company IHS Market also stated that Vietnam’s involvement in the global supply chains would not be diminished by the pandemic, since the costs to relocate would outweigh the costs of momentary disruptions.

                    The government is developing a roadmap to be fully open to international tourists by June 2022. A pilot program for fully vaccinated international visitors to Phu Quoc Island will be carried out in November 2021, before reopening Nha Trang, Ha Long, Hoi An, and Dalat in December.


                    Indonesia, Southeast Asia’s largest economy, is expected to grow by 4.5% in the third quarter of 2021, much lower than the 7.07% growth of the second quarter. Indonesia’s finance minister stated that domestic demand had improved since the second week of August as restrictions relaxed. Exports from Indonesia, the world’s largest exporter of thermal coal and palm oil, also spiked as prices reached a record high. The new official forecast for the annual GDP in 2021 is at 4%.

                    The Indonesian Investment Ministry disclosed that the rate of foreign investment in Indonesia in the third quarter of 2021 decreased by 2.8% quarter-to-quarter, but increased by 3.7% year-on-year (YoY). With 13% of total foreign investment, the housing sector, industrial estates, and offices received the most attention. The transportation, warehouse, and telecommunications sectors received around 12.3%. The government is targeting 900 trillion rupiahs in total investment in 2021. By September, Indonesia has reached 73.3% of the target.

                    Indonesia is bracing itself for the year-end holidays, as nearly 20 million people are forecasted to travel to Java and Bali. The government has implemented several protocols for reopening tourist sites and hospitality services.


                    Capital Economics projected an uptick in the Philippines’ GDP in the third quarter of 2021 from the second one. The second-quarter GDP was equivalent to an 11.8% growth YoY. Capital Economics also expects the fourth-quarter GDP to grow by over 4% compared to the third-quarter result and the annual GDP to grow 4.5% in 2021. The government set a target of 4-5% growth this year.

                    In the first half of 2021, FDIs to the Philippines amounted to US$4.3 billion, a 40.7% increase from the previous year’s level. The approved foreign investment reached a 45.5% increase YoY in the second quarter. The major investors to the Philippines in the quarter include the United Kingdom, which accounted for 55.6% of the total approved foreign investments, followed by South Korea (10%) and the United States (9.5%). 55.7% of the total foreign investment pledges are in the Information and Communication Industry (ICT). Construction came in second with a 16.1% share of total foreign investment commitments, while manufacturing came third with a 10.1% share.

                    The Philippines currently permits fully vaccinated international travellers from low-risk areas to arrive without quarantine. Most businesses in Metro Manila are allowed to operate at full capacity, while casinos, bars, and indoor tourist attractions can reopen at 30% capacity.


                    According to the Malaysian Institute of Economic Research (MIER), Malaysia’s economy is on the path of a V-shaped recovery. The GDP growth for 2021 is projected to be at 4.0%, slightly less than the average 4.9% growth of the pre-COVID period. Considering the improved COVID situation in Malaysia, Fitch Solutions has also revised the GDP growth forecast for Malaysia from 0.0% to 1.5% in 2021. Fitch Solutions’ forecast for 2022 remains at 5.5% growth in GDP.

                    In the first half of 2021, FDIs in Malaysia surged 223.1% YoY amid the pandemic, as stated by Malaysian International Trade and Industry Minister. FDI and domestic direct investment (DDI) have played a significant part in growing the company. FDI inflows in Malaysia targeted the manufacturing sector, which accounts for 79.9% of the total investment flow in the second quarter of 2021.

                    Archipelago Langkawi has reopened in October 2021 as part of the government’s Tourism Recovery Plan; however, the destination is only available for vaccinated domestic visitors.  The government plans to welcome domestic visitors to Tioman Island, Johor, Melaka, and the state of Sabah on the island of Borneo. International travelers will be welcomed after inter-state travel and tourism are running run smoothly.


                    Thailand’s economy is set to grow at a slower pace than previously expected. The Finance Ministry lowered its forecast to 1% growth in annual GDP, from 1.3% predicted in July. The ministry expects the economy to have declined by 3.5% YoY in the third quarter. As a reopening plan is rolling, the ministry forecasts a 3% growth YoY in the fourth-quarter GDP. Thailand’s trade performance was higher than expected, with a 17.1% growth in exports YoY for the first three quarters of 2021.

                    In the January-September period, Thailand’s investment pledges climbed to a 140% growth from the year before. Japan, the United States, and China were the top three sources of FDI applications. Industries that saw significant inflows of foreign investments include electrical and electronics, medical and chemical sectors.

                    With tourism representing 18% of its GDP, Thailand has been the most eager country to reopen its doors to international travelers. Since the last week of October 2021, Thailand has welcomed vaccinated travelers from more than 40 countries. Beginning November 1, travelers from 6 more countries and territories that Thailand considers “low risk” will be able to enter without quarantine. The government anticipates 1 million tourists to enter Thailand by March 2022.

                    After a long battle with the pandemic surge, Southeast Asia has been able to relax its stringent social restrictions. The intensive vaccination programs have played an important role in curbing the daily infection rates. While the road to rebound to pre-pandemic levels might have prolonged, the region’s top economies have made multiple measures to balance its pandemic control and economic recovery. The short-term disruption in supply chains did not diminish Southeast Asia’s growing importance in the global supply chains, as foreign investors are still keen to enter the region.

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