Disruption, Digitisation, Resilience

17 DISRUPTION, DIGITISATION, RESILIENCE : The future of Asia-Pacific supply chains In late 2020, the Philippines government launched “Make it Happen in the Philippines”, a campaign to attract manufacturing investment in sectors such as electronics, automotive, aerospace, health and IT and to get companies to establish a local base in the country. 14 More than a third (35%) of supply-chain managers in the automotive sector picked India as one of three Asian locations their firm has either invested in or plan to invest in over the next 12 months, the highest score for any country across any sector. “India has got both high-skilled workers as well as low-cost, low- skilled labour,” says Mr Menon. India is among the largest automotive manufacturing economies globally, and more importantly, a rapidly growing automotive market, so the choice seems logical. India became the fifth-largest auto market in 2020, selling a combined total (passenger and commercial vehicles) of about 3.49 million units, with the sector expected to reach US$282.8bn in sales by 2026. 15 No wonder then that 28% of respondents in the automotive sector picked “access to key markets” as the top reason that made their preferred market attractive for their companies. Almost one in three (32%) North American supply-chain managers and 20% of those based in Europe picked Singapore as one of three markets they’ve either invested in the past 12 months or looking to invest in as part of their supply-chain strategy. This is not surprising, given Singapore is uniquely positioned as a trade and financial hub that also acts as a gateway to much of the ASEAN — and indeed Asian — market. the Philippines, India, China, Singapore, Vietnam and Japan emerge as favourites among managers in North America and Europe, the picture is more mixed in Asia. India has got both high- skilled workers as well as low-cost, low-skilled labour Jayant Menon, visiting senior fellow, ISEAS–Yusof Ishak Institute There is far greater diversity in terms of locations Asia-Pacific supply-chain managers are interested in investing — while the usual suspects are no doubt popular, many other markets such as Indonesia, Bangladesh, Australia, Hong Kong, South Korea, Myanmar, Malaysia and Sri Lanka are also on their radar. This illustrates there is already far greater diversification among supply chain managers in Asia-Pacific when it comes to Asian supply chains. This is because they understand the region better, including its economies, trends and risks. They have a more nuanced understanding of Asian markets than their peers based in North America and Europe. One in five managers globally have invested or are looking to invest in the Philippines and India in the next 12 months as part of their supply- chain strategy. Cheap labour costs and young populations in both these countries are important factors in this choice. Separately, the Philippines has witnessed strong economic growth of more than 6% per annum on average from 2010 to 2019, 13 providing a consumption boost in a large domestic market. 13 The World Bank 14 “PH remains key market for manufacturing investment.” Philippine News Agency . 27 May 2021. Available online at https://www.pna.gov.ph/articles/1141736 15 India Brand Equity Foundation. Automobile Industry in India . Last updated on 14 June 2021. Available online at https://www.ibef.org/industry/india- automobiles.aspx