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Southeast Asia the ‘new China’ for supply chains: business group


Kuala Lumpur, Malaysia – Southeast Asia is the “new China” and should be the center of the global supply chain, said the head of an influential regional trade organization.

In an interview, Arsjad Rasjid, president of the ASEAN Business Advisory Council (ASEAN-BAC), said the 10-member Association of Southeast Asian Nations (ASEAN) should be the “supply chain of the world”.

“ASEAN should be the world’s supply chain, the new China is ASEAN,” Arsjad said in an interview with Al Jazeera last week.

Arsjad, who also heads Indonesia’s Chamber of Commerce and Industry, said the bloc is on track to take China’s spot “good as tomorrow” due to the region’s rich resources of nickel and other important minerals.

“ASEAN countries also have food and agriculture,” said Arsjad, who was in Kuala Lumpur to meet with government officials and business leaders.

The comments come as China and Chinese companies, especially critical sectors such as advanced chips, are facing increasing restrictions imposed by the West amid the heated geopolitical rivalry between Washington and Beijing. The tensions have prompted industry giants such as Apple, Google and Samsung to seek new production bases outside of China, particularly in Vietnam.

ASEAN-BAC, the private sector branch of ASEAN, is tasked with facilitating economic cooperation and integration in the region. Indonesia is the president of ASEAN this year.

Indonesia has the world’s largest nickel reserves at 21 million tons, making up nearly a quarter of the global total, according to data from the US Geological Survey. The Philippines has the fourth largest reserves, with 4.8 million tons. Nickel is a critical element in the manufacture of stainless steel, electronic devices and electrically powered vehicles.

“Indonesia contributes 40 percent of the nickel (output) to the world. If you add the Philippines, it becomes 50-60 percent,” Arsjad said.

Indonesia, along with Thailand and Vietnam, aims to become a major player in the electric vehicle supply chain by leveraging its large nickel reserves to attract investment.

Arsjad said that while Southeast Asia rivals China’s position at the heart of global supply chains, companies in the region are eager to complement and partner with China.

“We are always open to China. We tell China to invest here (in ASEAN)… not just buy the raw materials. Create the added value (production) here,” he said

“It’s time for us to create our own downstream… our own ecosystem, to add more small and medium businesses… and create jobs.”

Yose Rizal Damuri, executive director of the Jakarta-based Center for Strategic and International Studies, said ASEAN has the resources to be at the center of the global supply chain.

“But each of them has to realize that there is not much they can do individually. There has to be a regional supply chain that they have to build first,” says Damuri.

“They should cooperate and allow certain stages of production to be developed in (fellow) ASEAN countries,” Damuri added.

Fithra Faisal, an economist at the University of Indonesia, said China’s transition to high-value manufacturing has created an opportunity for Southeast Asian countries with lower labor costs.

“China is now leaving the mid and low production phase behind. Most ASEAN countries will fill the gap. We see the Chinese production stage as more complementary to its ASEAN counterparts,” Fithra told Al Jazeera.

China leads the world in 37 of 44 critical technologies, with Western democracies falling behind in the race for scientific and research breakthroughs, according to a report released earlier this month by the Australian Strategic Policy Institute think tank.

Fithra said the spillover from China’s advanced manufacturing could help ASEAN countries establish their own manufacturing networks.

“It will be a much more important production line and network in the world for the next 20 or 30 years,” Fithra said.

ASEAN-BAC’s Arshad said the region also needs policies that encourage financial institutions to treat farmers as entrepreneurs, who remain a backbone of the ASEAN economy and have helped ensure food security during the war between Russia and Ukraine.

“This helps reduce what bankers see as risk and helps farmers access capital,” said Arsjad.

Merry C. Vega is a highly respected and accomplished news author. She began her career as a journalist, covering local news for a small-town newspaper. She quickly gained a reputation for her thorough reporting and ability to uncover the truth.

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