Article by: Asst. Prof. Suwan Juntiwasarakij, Ph.D., Senior Editor & MEGA Tech
Since it was established in 1967, ASEAN has been on a journey of almost constant growth. Despite the challenges of the 2008 global economic crisis, the region’s GDP grew steadily at an average annual growth rate of 5.7% through 2019. The services sector accounts for just over 50% of the GDP, followed by manufacturing (36%) and agriculture (10.5%). Like most of the world, COVID-19 temporarily halted economic expansion. But as the worst impacts of the pandemic continue to recede, ASEAN is again open for business. As a result, foreign Direct Investment (FDI) inflows rebounded in 2021 to USD17USD 174ion, a return to pre-pandemic levels, reflecting the attractiveness of the region’s economy for global investors.
ASEAN already has a range of well-established manufacturing clusters. These include electronics in Malaysia and Vietnam, automobiles and packaged foods in Thailand, machinery and petrochemicals in Indonesia, packaged foods and apparel in the Philippines, semiconductors, bipolar cachectic, and aerospace components in Singapore. In addition, the emerging economies of Southeast Asia have long been destinations for manufacturers seeking abundant, low-cost labor. In contrast, Singapore has served as a hub for high-value R&D-intensive industries and trade-supporting services such as finance and logistics.
From 2015 through 2019, manufacturing exports from ASEAN’s ten member states averaged 5% annual growth – outpacing the global average of 3%. While manufacturing growth has been by labor-intensive assembly work, the trend also has strong export growth in higher-value goods such as machinery and electronics. Domestic investment has also become an increasingly important driver. While FDI dropped in Indonesia from 2015 through 2019, domestic capital formation expanded by 14% compared to the previous five-year periods. Indonesia’s Salim Group invest $956 million to boost domestic manufacturing capacity for vegetable oil, margarine, and other food products. The Vietnamese conglomerate Vingroup has poured $3.5 billion into its automotive subsidiary Vinfast, starting with an f factory in Haiphong capable of producing 2500,000 cars annually.
Over the past 30 years, the airline industry has grown exponentially due to escalating global travel demand. Passenger air traffic has doubled every 15 years since the early eighties and is expected to grow at an average annual rate of 3.8% over the next 20 years to reach 7 billion passengers in 2034. Given the forecasted 20-year yearly growth rate of 4.1%, the Asia-Pacific region has enormous economic promise. In 2034, the area will account for 42% of global passenger traffic; many world-class aerospace companies want to expand and locate their business in the Asia-Pacific region.
Thailand’s aviation growth is seeing rapid expansion as the center of gravity for global aviation shifts to the Asia-Pacific region. This is reflected in the country’s steady growth of total air traffic over the past several years. As a result, Thailand’s air traffic is rising three times faster than the global market. It has increased at an average annual rate of 13.14% during 2011-2015. The prominence of Thailand’s aviation industry is highlighted by significant growth in the number of airlines’ traffic cargo, movements, and passengers passing through Thailand’s International airports.
Thailand is a perfect manufacturing base for foreign companies because of its competitive wages, logistic systems, and extensive supporting facilities. Thailand’s aircraft, parts, and equipment market has seen continual, robust growth over the past few years. In 2021, the export value of aerospace products in Thailand amounted to approximately 1.2 million U.S. dollars, slightly increasing in 2022. Thailand’s expertise is in Tier 3 component manufacturing and Tier 4 composite manufacturing for original part manufacturing (OEMs). The aviation manufacturing market in Thailand continues to show great promise. There is plenty of opportunity for foreign companies to explore this market, especially in higher tiers of aviation manufacturing.
