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Opportunity to develop ASEAN logistics industry after COVID-19

There are high risks for COVID-19 pandemic outbreak to rebound globally, especially during winter. Many European countries are struggling with the next wave of the pandemic, which may be far more severe than the first one, causing concern of a further shutdown of economic activities. Though the crisis gives rise to disadvantages in economic potential, COVID-19 has also shown some focal points in the process of reviving and reshaping global supply chains in Southeast Asia.

COVID-19 has also shown some focal points in the process of reviving and reshaping global supply chains in Southeast Asia

Diversification of international supply chains

The unprecedented disruption incurring from the COVID-19 epidemic further highlights the risk of over-reliance on supply chain management and operations by a solitary nation, China. One issue in the ASEAN region’s favour is that multinational corporations (MNCs) have sought to diversify their supply chains out of China over the past few years due to growing trade tensions between America and China as well as labour costs in China are soaring. By diversifying parts of the supply chain to countries in the region while maintaining higher-value manufacturing in China with the adoption of digital transformation and automation, ASEAN countries are having focal points to immediately benefit from this supply chain redesign.

Even before the COVID-19 epidemic, the e-commerce sector of Southeast Asia had a solid surge accumulating nearly 600% in value, from US 5.5 billion in 2015 to US 38 billion in 2019, expected to reach US 150 billion by 2025, facilitating the strong development of logistics for e-commerce in the next 5 years.

It’s also an advantage whereas worldwide stores shut down amid the complicated COVID-19 epidemic, consumers have turned to online retailers to purchase entertainment items and even groceries, thus creating a huge motivation for e-commerce.

Logistics recovery from the pandemic

Singapore is one of the fastest-growing e-commerce markets in Southeast Asia. The island is expected to reach nearly US 10 billion in online sales in 2020 alone.

Singapore is one of the fastest-growing e-commerce markets in Southeast Asia

The logistics industry in Malaysia has grown in recent years and will have many incentives to develop along with the shifting trend of regional supply chains. With the ascent of e-commerce in the country from the beginning of 2020 until now, Malaysian logistics companies are taking advantage of this emerging trend to develop new segments. Companies are interested in emerging sectors, such as cold chain logistics and last-mile conveyance services. Malaysia’s economy is expected to grow from 5% - 6%, promoting the development of the logistics industry. The government has invested RM 34.3 million in Sepanggar Bay Container Port to improve its infrastructure. Various incentives announced in the RM35 billion short-term economic recovery plan will help further encourage the inflow of foreign direct investment (FDI). With these timely incentives and competitive real estate and labour prices, Malaysia will be positioned as one of the main beneficiaries among ASEAN partners in capturing production activities and supply chains in the context of an ongoing global supply chain restructuring.

Thailand’s logistics operations are confronting deterrents in the movement of goods across borders to Myanmar after Myanmar announced to tighten its cross-border control as part of preventive and control measures of COVID-19, starting from September 17, 2020. However, Thailand is a manufacturing hub in the region, and the country’s main infrastructure investment continues to attract investment in the region to the logistics industry.

Indochina bright spot

Cambodia is striving for becoming the region’s shipping gateway. This is part of the country’s ambition to transform into ASEAN regional logistics hub. According to the Minister of Transport of Cambodia and Public Works - Mr Sun Chanthol, the country is executing numerous exercises to modernize transport infrastructure and services, zeroing in on opening new global doors to mitigate and adjust border traffic congestion. The government is actively working to overhaul the road infrastructure system across the country and gradually opening new border gates. Road infrastructure and freight access will be the tools to drive national economic growth when they reach a more convenient level.

The mission of Cambodia to transform the international image and raise national income has created a steady stream of new infrastructure projects despite COVID-19’s extensive disruption to the global economy. In spite of the fact that COVID-19 is spreading, the government did not suspend or cancel any new infrastructure projects, according to the Minister of Transport and Public Works. The Ministry also said it signed a technical cooperation agreement with the Japan International Cooperation Agency (Jica) for phase II of the “Cambodia Logistics System Improvement Project”.

Efforts of the Cambodian government to boost logistics are still in the early stage. The long-term plan is to make Cambodia one of the attractive logistics hubs in ASEAN region and lure more investors to set up factories and businesses here. Cambodia’s freight forwarding activities by 2025 will double those of 2016 (quoting predictions published by JICA in April 2018). Cambodia and Singapore have launched the Phnom Penh Logistics Project, which will further develop Cambodia’s logistics and supply chain infrastructure as part of the Smart Growth Connectivity initiative, which implements not only modern supply chain solutions but also supports growth in ASEAN logistics sector.

Despite the influence of COVID-19, Vietnam is expected to become one of the fastest-growing economies in Southeast Asia. Vietnam is also one of the countries that control the spread of COVID-19 epidemic. Notwithstanding the logistics opportunities for e-commerce, the new free trade agreements (FTAs) signed by Vietnam with major trading partners such as the European Union (EVFTA) bring many advantages to the logistics industry, are an important growth lever after the COVID-19 pandemic. Agreements like EVFTA will be a boost to Vietnam’s production and import and export activities. As the production and import-export activities develop, the development of the logistics industry will follow.

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Digital transformation in agriculture is a phrase that has been mentioned a lot recently when agriculture is one of eight fields of priority that the program of national digital transformation issued by the prime minister is implemented. Giving more support and helping aricultural production households to participate in e-commerce platforms to consume agricultural products, especially in the context of the pandemic of COVID-19 is one of the directions that gives back positive signals in the process of national digital transformation.

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Waterway transport and the trend of green transport in the North

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Recovering supply chains in the time of post COVID-19

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The pandemic of COVID-19 has caused comprehensive and deeps impacts to all countries worldwide. According to RFI’s forecast, it has caused a damage of USD 22,000bn to the world, USD 4,500bn to the world’s tourism sector, pushing the global economy to a severe recession. Vietnam’s economy, with its large openness and deep international integration, has also suffered a lot from its impacts as well.