Ongoing supply chain disruptions, due to factors like the volatility from China’s COVID-19 strategy and geopolitical tensions taking place globally, are setting the ASEAN region’s economies back by a staggering total of US$17.01 billion annually, according to new analysis by business transformation consultancy, TMX Global.
TMX Global’s Managing Director Asia, Dean Jones, notes that the ASEAN region, which comprises of the 10 nations of Southeast Asia, had a combined GDP of US$3.62 trillion1 in 2022, amounting to 3.62%2 of global GDP. With supply chain disruptions impacting an average of 0.47% of business revenue around the world3, he adds that ASEAN businesses are forfeiting an estimate of US$17 billion a year in sales.
Diving deeper, research by the Economic Research Institute for ASEAN and East Asia (ERIA) found that larger economies like Singapore, Malaysia, and Thailand faced greater negative supply and demand shocks to their supply chains during the pandemic than smaller economies like Brunei and Myanmar. Industries that were most impacted by decreased sales are the retail and wholesale sectors4.
ASEAN in a bright spot post-pandemic
Despite being hit hard by the pandemic and subsequent disruptions, Mr Jones opines that the region is in a bright spot amidst the gloomy global outlook. ASEAN’s positive trajectory is improving thanks to domestic demand, which supported the region’s rebound during the first half of 2022 and sustained its reputation as the world economy’s fastest growing region. Driven by both exports and domestic demand, ASEAN’s GDP is forecasted to more than quadruple over the next two decades, increasing to US$13.3 trillion by 20405.
Mr Jones adds, “China’s reopening in December has been a welcomed move for global brands that are still manufacturing out of Asia, as it signals further easing from global supply chain pressures. However, the disruptions experienced in the last few years, and most notably the greater part of 2022, have set in motion a greater consideration of ASEAN’s role when anticipating future volatilities in the global supply chain landscape. Businesses are thus continuing their transition into a ‘China Plus One’ strategy, diversifying certain aspects of their operations such as production centers and warehouses outside of China.
“As part of this, we are seeing countries like Malaysia, India, Thailand, and Vietnam being the top choices by businesses to set up shop as part of their renewed supply chain strategies. As a result, countries in the region are now seeing new opportunities to become global centers of manufacturing and shipping.
“While all these put the region at an advantage, it also means that businesses in the region should all the more not let their guard down when it comes to ensuring supply chain resilience.”
Refining people, process, and technology for resilient supply chains
Amidst this strong backdrop, Mr Jones notes that ASEAN’s strengths only go as far unless the region addresses key gaps that would ensure its supply chains are future-proof, while navigating the region’s diversity.
“ASEAN cannot afford to rest on its laurels of its geographic, regulatory, economic, and demographic advantages if it wants to continue the fast track to lead on global trade. Supply chains thrive on predictability, and so the ability to take away as much of the uncertainty as possible through a resilient supply chain is crucial,” he says.
In terms of what are some key considerations for businesses for their supply chain strategy, Mr Jones notes these three areas: Process, where operations are optimised and geared towards fast-changing customer preferences; Technology, leveraging digitalisation and emerging innovations to enable these necessary business transformations; and People, where logistics workforce now needs to upskill and transform to serve a reinvented supply chain.
“Now is the best time for businesses to already start putting some of the key lessons learnt during the last few years from supply chain disruptions into practice. Using the valuable insights gathered from these key events, the team at TMX is looking forward to work with businesses in the region to optimise their supply chains and business operations,” says Mr Jones.
1 International Monetary Fund (2022). World Economic Outlook Database.
2 Visual Capitalist (December 2022). Top Heavy: Countries by Share of the Global Economy.
3 Interos (May 2022). Resilience 2022: The Interos Annual Global Supply Chains Report, p. 12.
4 Economic Research Institute for ASEAN and East Asia (2022). The COVID-19 Pandemic: Impact on ASEAN Connectivity and Recovery Strategies Policy Insights.
5 S&P Global Market Intelligence (Aug 2022). The ascent of APAC in the global economy.