Southeast Asia, the “new China” of supply chains: business group | Business and economy

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

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

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

Arsjad, who also heads the Indonesian Chamber of Commerce and Industry, said the bloc was on track to take China’s place “like tomorrow” due to the region’s rich resources of nickel and other key 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, face growing 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 manufacturing bases outside of China, including in Vietnam.

ASEAN-BAC, the private sector arm of ASEAN, has a mandate to facilitate economic cooperation and integration in the region. Indonesia is the chairmanship of ASEAN this year.

Indonesia has the world’s largest nickel reserves at 21 million tons, which is almost a quarter of the world’s total, according to data from the US Geological Survey. The Philippines has the fourth largest reserves, with 4.8 million metric tons. Nickel is a crucial element in the manufacture of stainless steel, electronic devices and electric vehicles.

“Indonesia contributes 40% of the nickel [output] in the world. If you add the Philippines, it becomes 50-60%,” Arsjad said.

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

Arsjad said that although Southeast Asia competes with China’s position at the heart of global supply chains, businesses in the region want to complement each other and work with China.

“We are always open to China. We tell China to invest here [in ASEAN] …not just buying the raw materials. Create added value [production] here, he said

“It’s time for us to create our own downline…our own ecosystem, add more small and medium-sized 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 heart of the global supply chain.

“But each of them has to realize that individually they can’t do much. There has to be a regional supply chain that they have to build first,” Damuri said.

“They have to 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-end production has created an opportunity for Southeast Asian countries with lower labor costs. .

“China is now abandoning the middle and low stages of production. Most ASEAN countries will fill the void. We consider the Chinese production stage to be more complementary with 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 by think tank Australian Strategic Policy Institute earlier this month.

Fithra said spillovers from China’s advanced production could help ASEAN countries establish their own production networks.

“It will be a much bigger production chain and network in the world over the next 20 or 30 years,” Fithra said.

Arsjad of ASEAN-BAC said the region also needs policies that encourage financial institutions to treat farmers as entrepreneurs, who remain a mainstay of ASEAN’s economy and have helped ensure the food security in the midst of the Russian-Ukrainian war.

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

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