WEF and Kearney: APAC to see seismic shifts in manufacturing supply chains

13 January 2025 Consultancy.asia

The manufacturing sector in the Asia-Pacific region is evolving rapidly, with many countries emerging as highly competitive, according to a report from the World Economic Forum and Kearney. That comes as global organizations take a close look at their supply chains and manufacturers navigate growing pressure to change.

Significant shifts in global trends, including a growing focus on resilience and sustainability, have led Asia-Pacific countries to enact changes in order to maintain foreign investment. But there are big differences between these countries: The report categorizes countries according to GPD per capita on the one hand, and on the other hand, the contribution of manufacturing to GDP.

China, for example, has one of the highest levels of manufacturing contribution to GDP, but has a low GDP per capita. These are what the report calls ‘Connectors’, and other Asia-Pacific countries like Malaysia, Bangladesh, Thailand, and Indonesia are also in this category.

These countries – thanks their high productivity and low costs – are attractive to global organizations looking for manufacturing capabilities. In fact, the ‘Connector’ countries have seen the appeal of their inward investment improve by 14%, the report notes.

WEF and Kearney: APAC to see seismic shifts in manufacturing supply chains

Other countries in Asia are breaking through with unique strengths and opportunities. For example, Malaysia’s government has put forward a national strategy for semiconductor manufacturing. This initiative is working to place Malaysia on the map in the fierce market for semiconductors, and more broadly as a leader in high-tech manufacturing.

Or take Vietnam, which has for decades leveraged trade agreements to boost its competitive edge. The EU-Vietnam Free Trade Agreement, for example, has boosted trade with European countries by eliminating tariffs. Industrial parks and improving logistics have helped to make Vietnam a good option for manufacturing operations for global organizations.

Readiness factors

The report by the World Economic Forum (a global think-tank) and Kearney (a leading strategic consulting firm) lists a series of factors that put manufacturing-focused nations at a distinct advantage. These areas of focus are all interconnected and adopting these policies across the board is key for countries to positions themselves as future-proof leaders in manufacturing.

These include quality infrastructure, access to resources, technology, labor and skills, favorable policies, international relations and trade policies, and a focus on ESG.

WEF and Kearney: APAC to see seismic shifts in manufacturing supply chains

While crucial for a favorable environment, these readiness factors are not the only elements at play. Cost, market access, and political priorities are a few other factors that also significantly influence a country’s attractiveness as a manufacturing destination.

Attracting global companies and more foreign direct investment (FDI) is not easy, and changes are coming in the way large organizations approach their supply chain strategies, especially considering the growing importance of sustainability and ongoing geopolitical instability. In order to stay ahead, countries will need to boost collaboration between the public and private sectors.

“The Asia-Pacific region is at the forefront of a seismic shift in global manufacturing and supply chains,” said Keat Yap, partner at Kearney.

“From Singapore’s leadership in high-tech, sustainable manufacturing to Vietnam and Malaysia’s emergence as neutral and innovative manufacturing hubs, APAC nations are demonstrating their ability to adapt, innovate, and compete in a rapidly evolving landscape. As businesses prioritize regionalization and ESG considerations, we believe APAC is well positioned as a critical driver of resilient and future-ready supply chains.”

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