Philippine to benefit from reshaping supply chains

MANILA, Philippines — The Philippines, along with other ASEAN-member countries, stands to benefit in the near term from the ongoing reconfiguration of supply chains by companies from developed economies, according to market intelligence firm IHS Markit.

In a report, IHS market said the continued move by companies from advanced economies well into the second half of the year to diversify their supply chains would benefit ASEAN countries such as Vietnam, Thailand, Indonesia, Myanmar and the Philippines.

This process of diversification from China has been underway over the past decade, but has been accelerated after the   pandemic exposed issues with concentrating operations in China, the report said.

Even as lockdowns have been lifted in many countries and supply chain disruptions have been easing, companies have nonetheless become wary of vulnerabilities in a China-centric operation and risks associated with various geopolitical tensions such as the US-China trade tensions that continue to escalate particularly in the technology sector, it said.

“A key beneficiary of the shift in global manufacturing supply chains will be the ASEAN region, with Southeast Asian manufacturing hubs such as Vietnam, Thailand, Indonesia, Myanmar and Philippines likely to benefit from the greater diversification of supply chains,” IHS Markit said.

“South Asian countries, notably India and Bangladesh, are also expected to be winners from this process of supply chain diversification,” it said.

Among the countries that have been helping firms lessen their dependence on China are Japan, Australia, Taiwan, South Korea and US.

In May, the Japanese government created a $220 million fund to help their companies to either reshore their operations or shift production to the ASEAN region. The first round of allocations to companies was announced in July 2020.

In early September, the trade ministers of Australia, India and Japan agreed on a new trilateral initiative to establish more resilient supply chains, and government officials have been tasked to work on the details of the initiative which will be launched later in 2020.

IHS Markit also noted that the US government has also signaled that it is considering incentives to attract US firms to reshore their supply chains back to the US, with various measures under consideration.

“US multinationals have already been diversifying their supply chains away from China over the past decade, in response to rising Chinese wage costs as well as the impact of the US punitive tariffs imposed on Chinese products during the US-China trade war,” IHS Markit said.

“Southeast Asia has been a significant beneficiary from this supply chain diversification process, with significant diversion of US export orders away from China to Vietnam in 2019, “ it said.