Export capacity building up throughout South-East Asia
Op-Ed Commentary: Chris Devonshire-Ellis
As global manufacturing starts to spread its tentacles across Asia, Export Processing Zones – once the sole preserve of China – are springing up all over. Conceived as ideal for emerging markets as they help develop worker skill sets and begin the development of supply chain infrastructure, they are also popular with foreign investors as they negate the need to import directly into the host country (avoiding import duties) and assist with being able to deliver a cost-effective product by offering VAT rebates on any locally sourced components.
Here we list ten of Asia’s most dynamic Export Processing Zones – and almost certainly most you will not yet have heard of. That maybe about to change…as even Myanmar gets in on the act with its Thilawa EPZ to be completed in 2015 with significant investment from Japan.
The reason I highlight these – which just scratch the surface of the numbers of Export Processing Zones across Asia – is to provide some sort of idea of the growth potential for global manufacturing that Asia is now collectively putting into place.
China tends to dominate media attention about export manufacturing, and often other countries get left in the shade. Take Bangladesh for example. Generally considered a poor and backward country, it is in fact upgrading big time. Honda are investing more into their auto manufacturing capabilities there, while it is generally not well known that the country is the world’s second largest producer of textiles. Consequently, the Chittagong EPZ is well up to speed with numerous well known global brands well established there.
The Madras EPZ, near Chennai on India’s east cast is also thriving – a serious player in electronics and IT. Indonesia has been making impressive strides with its EPZ’s, both on its own, and in partnerships with Singapore at Batam – now one of the world’s largest EPZ in its own right. As an Australian manufacturer confessed to me recently, “When I say I’m on a business trip to Surabaya, no-one has ever heard of it.” Surabaya is Indonesia’s second largest city, a deep water port and with a population of over 3 million, one of the many gateways to Southeast Asia. It is just 1,200km from Darwin, Australia.
Vietnam’s Tan Thaun EPZ is also thriving. Sited near Ho Chi Minh City, it, and others like it, are set to explode with business investments – many expected to be adding manufacturing capacity for the China market – as Vietnam comes into economic integration with ASEAN at the end of next year and the Vietnamese government follow that up with a reduction of profits taxes to 20 percent.
The sheer size of the still to be completed Thilawa EPZ in Myanmar is also impressive. Some 2,400 hectares – 24 sq kilometers, major investors are pouring in from Japan and South Korea to get it up to speed. Which countries border Myanmar? China and Bangladesh, with India a stone’s throw away. The Japanese, already in Bangladesh in a big way, will leverage their facilities there to help develop Thilawa. Within a decade, motorbikes driven on the roads in China will have been manufactured and assembled in Myanmar. China’s minimum wage in Guangdong is US$290 a month. In Myanmar it is US$37.
While the chart we provide is far from inclusive, the message is clear. South-East Asia is gearing up to be the manufacturing export hub for the global consumer market – and that includes manufacturing to service the Chinese.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
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