Trend Report Asia: Localisation and regionalisation

The world has experienced unprecedented economic disruptions in the last two years, owing in part to COVID-19 pandemic-related containment measures. To mitigate the economic impact of the pandemic, manufacturers worldwide have either localised or regionalised their production to reduce or even eliminate their dependence on sources that are perceived as risky.

China, the world"s second-largest economy, is at the centre of the global value chain. Recently, China has been hampered by the COVID-19 outbreak, debts, and a property downturn.

From this year, the country"s imports and exports have managed to recover with trading partners such as ASEAN (19.7%), the European union (19.1%), and the US (20.2%), while commerce with East Asian peers, Japan and South Korea, increased 9.4% and 18.4%, respectively.

For manufacturing companies operating in the global market, the “China Plus One” initiative, provides an opportunity to tap into Southeast Asia’s advancing industrial infrastructure to improve supply chain resiliency. 

With the pandemic tapering off and more countries reopening, manufacturers are facing new challenges such as high raw material and energy prices, logistical bottlenecks, and inflations. As well, digitalisation will continue to play a vital part in keeping production and distribution efficiency as well as closing the workforce gap.

Digitalisation: 4IR and digital economy in ASEAN

The ASEAN region has rallied behind the stringent containment measures and economic response during the pandemic. Trade has also been impacted by the pandemic, with imports and exports down 8% in 2020 compared to the previous year.

In order to usher in the post-pandemic economic recovery in 2022, the ASEAN must consider taking more bold steps toward manufacturing hubs, green infrastructure, digital investments, talent reskilling, and high-value food industries. Given how digitalisation has helped businesses continue operations, despite contactless transactions, adoption of digital technology has become a must.

Most recently, COVID-19 has hastened the region’s digital shift, as digital technology has proven to be a critical driver of economic activity during the pandemic. To this end, the ASEAN Comprehensive Recovery Framework (ACRF), ASEAN’s whole-of-community exit strategy to COVID-19, which was launched at the 37th ASEAN Summit in November 2020, has sped up the region"s digital transition.

Enabling the Fourth Industrial Revolution (4IR) can boost ASEAN"s competitiveness by increasing innovation, moving up value chains, creating jobs with better workforce capabilities and skills, lowering capital requirements, and increasing product customisation.

ASEAN"s digital consumers have increased by 60 million from 350 million since the pandemic. Furthermore, the emphasis on advanced manufacturing and the service sectors of the new economy bodes well for the growth of its digital economy.

The digital economy in ASEAN’s six largest markets – Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam – is estimated to reach US$309 billion by 2025, up from US$32 billion in 2015, and collectively, is expected to reach US$1 trillion by 2030.

ASEAN must accelerate its digital shift and green transformation to boost its competitiveness.

Circular economy: cradle-to-cradle sustainability

Enforcing a circular economy, which is restorative, regenerative by design, and makes effective use of materials and energy to retain their value by reducing waste and using natural resources sustainably, could lead to economic benefits worth up to US$4.5 trillion by 2030.

ASEAN, which is still in its early stages of adopting the circular economy, is coming to grips with resource depletion, unsustainable raw material consumption, flaws in product value chains, and climate change, all of which are affecting the region"s economic growth.

Furthermore, the region is plagued by the consequences of poor waste management. According to the United Nations" ASEAN waste management report, the country generates a per capita of 1.14 kg/day of municipal solid waste (MSW). Indonesia produces the most municipal waste, generating 64 million tonnes/year, and Thailand produces an estimated 26.8 million tonnes/year.

Recycling: boosting value recovery of plastics

According to a World Bank report on Southeast Asia"s plastic circularity, less than 25% of plastics available for recycling are recycled into valuable materials in Malaysia, the Philippines, and Thailand; while over 75% of the material value of the plastics is lost, equating to US$6 billion/year across the three countries. It is due to improper waste management and poor recycling of single-use plastics. This is a challenge the region must address.

Malaysia, which is home to about 1,300 plastic manufacturers, has a low recycling rate, owing to its recycling industry"s focus on materials like transparent PET bottles, which are easy to collect and have a high value. A vast bulk of waste, such as food packaging, polystyrene products, and straws, go unrecycled due to lack of technology and an unappealing profitability.

In response, Malaysia developed the Roadmap Towards Zero Single-Use Plastics 2018-2030. It will also enforce a Federal pollution levy on plastic manufacturers, which is set to begin in 2022.

Philippines, which is responsible for an estimated 0.75 million tonnes/year of mismanaged plastics entering the ocean, is working to increase its plastic recycling rates, which are currently at 22%.

In 2019, only 28%, or 292,000 tonnes of the 1.1 million tonnes of key resins consumed, including PET, PP, HDPE, and LLDPE/LDPE, were recycled. PET (excluding polyester applications) has the highest recycling rate in packaging, at 45%. 

To close this recycling gap, several obstacles must be overcome, including high logistics costs, which prevent recyclers from sourcing feedstock locally; energy costs, which are up to 67% higher than regional peers like Thailand and Vietnam.

Meanwhile, Thailand, which has the largest petrochemical sector in ASEAN and the 16th largest in the world; and a plastics industry that accounted for 6.1% of its GDP in 2019, is focusing on plastic waste management as part of its efforts to strengthen trade.

In 2018, it consumed 3.49 million tonnes of plastics/year - 42% of which is used for packaging; and recycled only 17.6% to 616,000 tonnes/year of key plastic resins such as PET, HDPE/LDPE and PP, resulting in an 87% material value loss amounting to around US$4 billion/year. PET has the highest recycling rate (46%) of the resin types.

Thailand’s National Plastic Waste Management Roadmap 2018-2030 aims to recycle all plastics to boost material value recovery. This can be accomplished by increasing the efficiency of post-consumer plastic waste collection and sorting, as well as mechanical and chemical recycling capacities; setting recycled content targets across all major end-use applications; mandating "design for recycling" standards; and implementing waste management policies.

Due to easy collection and high value, PET has the highest recycling rate in many Southeast Asian countries. (Photo: Yunaidi Joepoet/WWF)

Renewable energy: plugging into a low carbon economy

Rising urbanisation and industrialisation, as well as economies ready to rebound from pandemic losses, necessitate a stable energy supply. The post-pandemic period is also expected to be an emissions-intensive period, following a significant reduction in carbon emissions during the lockdowns.

Asia has a carbon footprint of 19 billion tonnes/year, accounting for 53% of global emissions. Excluding China and India, the region"s fossil-fuel emissions totalled 7.21 billion tonnes in 2020, while China alone accounted for 10.67 billion tonnes and India, 2.44 billion tonnes during the same period.

Certain countries in Asia are still reliant on coal and fossil fuels for energy generation. According to a report from Carbon Tracker Initiative, China, India, Indonesia, Japan, and Vietnam are building more than 600 new coal units with an aggregate capacity of more than 300 GW, accounting for 80% of the world"s new coal-fired power plants.

Coal occupies a pivotal role in the power generation mix of Indonesia, Vietnam, and the Philippines. Nevertheless, all three countries have pledged to decarbonise their energy and enhance their renewable energy infrastructure.

Other Asian countries, meanwhile, are eliminating coal from their energy mix. Singapore is the first Asian country to join the Powering Past Coal Alliance (PPCA), pledging to support clean energy.

Sub-governments in South Korea, Japan and Philippines have also joined the coalition, which was launched in 2017 at COP23 and that has committed to phase out coal in the OECD and EU by 2030, and in the entire world by no later than 2050.

Electric Vehicles: driving up a net-zero future

Automotive makers around the world are joining forces to decarbonise the transportation sector, which could result in 2.6 gigatonnes CO2 reduction/year by 2030.

Southeast Asia, which is home to five major automotive makers – Thailand, Indonesia, Malaysia, Vietnam, and the Philippines – needs to accelerate its electric vehicle (EV) goals. Thailand, Malaysia, and Indonesia have already established new EV policies and are preparing for a full-fledged EV ecosystem, which includes increasing utilisation and providing incentives private investment across the value chain.

Thailand is eyeing to produce 250,000 EVs, 3,000 electric public buses, and 53,000 electric motorcycles by 2025. Indonesia, ASEAN"s largest automotive market, accounting for 32% of the regional market, has prioritised the EV sector. Its US$17 billion EV roadmap seeks to achieve utilisation of 2.1 million electric motorcycles and 400,000 electric cars – 20% of which to be made locally, by 2025.

The country has an edge due to its local nickel reserves, which are used in the production of lithium ion batteries for EVs. It is the world"s largest, with 72 million tonnes, accounting for 52% of global nickel reserves.

Indonesia seeks to achieve utilisation of 2.1 million electric motorcycles by 2025. 

Vietnam"s road map is being developed in stages, with the second phase spanning 2030-2040 to develop and produce 3.5 million EVs, and the third phase spanning 2040-2050 to increase production to 4-4.5 million EVs.

As with China, the world"s largest vehicle producer and the country with the largest shares of EV sales, it has taken a milestone step of halting new gas-powered car sales by 2035 to focus on producing energy-efficient vehicles such as EVs, plug-in hybrids, and fuel cell models in line with its commitment to achieve zero emissions by 2060.

Source : https://www.adsalecprj.com/en/news_show-77977.html

Edit : HANDLER