Rising labour costs, among other reasons, have driven Chinese manufacturers to set up operations in Southeast Asian countries. A study by ANZ Bank economists suggest that Southeast Asia would take over from China to become the ´world´s factory´ in the next 10-15 years, citing its youthful workforce and strategic location as catalysts for this shift.
The Asean Economic Community, which is likely to come to fruition by end of the year, would see the emergence of a single market with free movement of goods, services, investments and skilled labour. The economic zone, the report said, would connect the low-cost labour in Myanmar, Cambodia and Laos, cost-effective businesses in Thailand, Vietnam, Indonesia and the Philippines, and sophisticated manufacturers in Singapore and Malaysia. According to the Secretary General of the China Chamber of Commerce for Import and Export of Textile and Apparel lower production costs, reduction of tariffs and competitive cotton prices contributed to the success of Chinese companies in shifting their production to overseas bases. Manufacturers in both China and Asean countries are complementing each other in the production chain, rather than competing with each other.
Philippines´ inclusion in the European Union´s GSP+ allows the country to export over 6,000 items to European Union member countries at zero tariffs, including apparels and footwear, which previously came with a 5-9 per cent and 11.9 per cent tariff.
As the level of development varies from one country to another in Southeast Asia, some boast lower production costs as their competitive advantage while Malaysia prides itself on high-value manufacturing. Malaysian Investment Development Authority says Chinese manufacturers should not write off Malaysia simply because labour costs are high.
According to the China-Asean Business Association textile manufacturers in Southeast Asia also look forward to working hand-in-hand with Chinese partners through joint ventures to raise the standard of the industry, in terms of technology, design and equipment. Such partnerships pave the way for establishments of regional brands, and the Chinese industry players plan to visit Southeast Asian countries in currently to explore opportunities to cooperate with local manufacturers.