ASEAN Market Watch: Indonesian Manufacturing, Thai E-Commerce, and the Future of ASEAN’s Digital Economy
Indonesia Increases Rankings to become among World’s Largest Manufacturers
Indonesia topped Russia and the UK, placing in the top 10 manufacturing nations globally, according to the United Nations Industrial Development Organization (UNIDO). Indonesia moved up to 10th place from its previous position on 12 in 2015. This has been attributed to its ability to continue keeping factories running due to strong domestic demand, despite a global downturn. Indonesia’s industry ministry has stated that manufacturing contributes over 18 percent of national GDP. UN data pointed also out that while textiles and tobacco make up a small share of output, chemicals, machinery and vehicles are growing fast. The government has been promoting the manufacturing industry through improvements in productivity and fiscal policy.
While the country still ranks low in the ease of doing business rankings, the government remains committed to deregulation. The manufacturing sector grew at 5.04 percent in 2015, higher than the economic growth rate of 4.79 percent. The industry also contributed to a higher employment level though the rate of job creation was minimal. Foreign investors should look at manufacturing options in Indonesia as its government looks to compete with other ASEAN countries.
ASEAN: Digital Economy Projected to Show Strong Growth
ASEAN is projected to be in the top five digital economies by 2025 according to a joint study report by a consulting and telecommunications firm. The growth of the digital economy is projected to add US $1 trillion to the GDP of ASEAN over the next decade. The growth will be driven by an increase in broadband services in the region, higher worker productivity and the growth of new digital industries. Industries such as e-commerce, m-finance, and cloud computing services will be key drivers of this growth. ASEAN has a strong base to build and develop its digital economy. For instance, ASEAN has a healthy economy with an overall GDP of US $2.5 trillion, which is growing at six percent per year. In addition, ASEAN member states have a population of over 600 million, and 40 percent of them are under the age of 30. Moreover, the smartphone penetration is around 35 percent and growing rapidly.
While a bright future is in the pipeline for ASEAN, several roadblocks exist to achieving a full digital economy. Some include a weak business case for building out broadband services, regulations inhibiting mobile finances services, and the absence of a single digital market. The report highlights several policy initiatives that can be undertaken to accelerate growth including improving broadband connectivity, innovation in mobile financial services and e-commerce and strengthening local digital economies among others. The existence of the aforementioned features coupled with the projected growth estimates highlights the future business opportunities in ASEAN’s digital economy.
Thai Post Teams Up with E-commerce Firm Shoppe
Capitalizing on the mobile shopping market, Thailand Post signed a partnership agreement with Shopee, a Singapore based mobile shopping app, to provide free delivery of goods to customers shopping on the Shopee site. The agreement will allow Shopee to deliver products under 250 grams free of charge. Sellers will be required to pay the cost of delivery in advance and Shopee will later reimburse sellers at a later date. Thailand’s e-commerce market has grown by 20 percent a year mostly due to due smartphones. Around 40 million people access the internet through their phones making it a huge market to access, according to officials at Thailand Post.
Meanwhile, Shopee – which has a presence in several ASEAN countries – aims to boost its online sales via a partnership with Thailand Post which has a reliable and countrywide delivery service. Thailand Post is also in talks with other e-commerce firms such as Japan’s Line Corporation and South Korea’s SK Planet for a similar partnership. The development highlights the growing e-commerce market in Thailand which foreign investors can tap into.
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