CFA Society Singapore
SINGAPORE (Nov 1): Supply chain shifts in Asia resulting from the growing US-China trade conflict could stand to benefit a number of countries in the region, suggests a new report from The Economist Intelligence Unit (The EIU).
According to the report, countries which are home to a number of major multinational electronics manufacturing companies, such as Malaysia and Vietnam, would be able to leverage their improving infrastructure and relatively-robust business environments to attract information and communications technology (ICT) related investment inflows.
This is especially the case in industries linked to the low-end manufacturing of consumer goods like mobile phones and laptops. Positive business environment considerations – such as Malaysia’s stable corporate law system and Vietnam’s new special economic zones – further add to the investment attractiveness of these countries, says EIU.
Other potential winners in South Asia include Bangladesh, which EIU believes will be well-positioned to take market share from China considering its existing strengths in garment manufacturing.
On the flip side, the report highlights Japan, Singapore, South Korea and Taiwan as countries which stand to be more negatively affected by the global supply chain disruption, given their heavy reliance on trade links with the Chinese market.
These markets are also likely to see limited reshoring of ICT manufacturing operations from China due to the countries’ high taxes, limited land and expensive labour.
However, likely winners of the US-China trade war are warned not to celebrate just yet.
“It will take time for multinationals to draft new global and regional strategies, find new business partners, navigate different regulatory systems and secure the required licenses and permits to expand production in new markets. As a result, the negative, disruptive effects of the trade war will dominate in the short term,” cautions EIU analyst Nick Marro.
“Multinational companies have already been shifting their export-manufacturing operations away from China and into South-east Asia for much of the past decade. The trade war will accelerate that trend,” he adds.