3 major reasons to enter Southeast Asia's project cargo market
Published on 24/05/2017
Considered one of the most stable regional supranational groupings in the world since its establishment 50 years ago, the Association of Southeast Asian Nations (ASEAN) is a fast growing trade bloc with the expanding economic clout to match.
The ASEAN’s combined GDP grew by 4.7% in 2016 to $2.55 trillion—collectively higher than some major economic powerhouses such as Brazil, France, and Indi. In 2017, the group’s GDP is expected to grow at a rate of 4.8% in 2017.
Regional trade volumes are expected to increase 130% by 2023. This growth in economy translates to rapid growth in several industry sectors including manufacturing, energy, and mining—all of which are industry sectors that require specialist shipping.
While some ASEAN member states are amongst the fastest growing economies in the world, these developing nations are not as well-known as India or China, presenting major opportunities your project cargo companies can tap into well before others do.
Below, we have highlighted three reasons why you should get involved in the project cargo market in Southeast Asia.
ASEAN member states are investing heavily in infrastructure, transport & logistics
Connectivity is essential to economic growth, and Southeast Asian nations are investing vast sums of money on mega projects aimed to improve infrastructure.
Indonesia, for example, is currently on a huge spending spree. It has allocated $450 billion towards essential infrastructure upgrades. These include building 55 seaports, 19 deep sea ports, 13 airports, 1,000 km of toll roads, and 3,000 km of fresh roads in a programme that will last until at least 2020.
The Thai cabinet has also approved a $25 billion plan for 2017, covering 36 infrastructure projects covering rail, roads, air and sea transport. Malaysia’s infrastructure development is similarly on the rise, setting aside $447 billion for mega projects currently in the works including the High Speed Rail, East Coast Rail Link, Pan Borneo Highway, Bandar Malaysia, and the Vision Valley industrial park.
Indonesia and The Philippines are archipelagos spanning thousands of individual islands. Similarly, Malaysia and Singapore are surrounded by seas. Efforts are being made to connect these separate areas—for example, the railway to connect Malaysia and Singapore, as well as “sea tolls” planned for Sunda Strait in Indonesia.
Building infrastructure on this scale requires transport of oversized and heavy equipment, thus increasing demand for project cargo services.
The main industries in ASEAN rely heavily on specialist shipping services
Manufacturing, oil & gas, and mining are key industrial sectors in ASEAN member states, with a significant portion of their GDP coming from these sectors.
Take Malaysia for example; manufacturing is the highest GDP contributing industry sector in Malaysia, accounting for 22.7% of domestic product. Malaysia is the world’s sixth largest manufacturer and exporter of semiconductors and one of world’s biggest palm oil producers. Its oil & gas production is equally active, contributing 20% to the economy.
Though Malaysia’s mining sector is underdeveloped in comparison to their neighbours, Malaysia extracts $6 billion worth of mined resources per year, making it a high value sector.
Growth is not only constricted to infrastructure and transport projects—the number of energy projects are also increasing. In Malaysia’s case, it is partly driven by the desire to encourage the use of renewable energies across the nation. Malaysia is aiming to generate 11% of its power needs from renewable sources by 2020, explaining the large number of energy projects in the country.
The high levels of activity in these sectors mean that there is a demand for carriers that deal with specialist shipping to transport and install bulky machinery.
Southeast Asian companies often go international for their transport needs
While some of the countries in ASEAN are world-leading when it comes to logistics performance, others do not do so well. Costs of logistics in Indonesia and Vietnam, for example, takes up 27% and 25% of the GDP, suggesting inefficiencies and poor environment for cargo handling that can be due to lack of technical know-how and small resources invested in research & development.
As the countries race to boost economic growth by investing massively in building infrastructures, they often look outside of the region to for cargo operators and shipping specialists, providing more opportunities for international breakbulk companies to enter the market.
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“The Project Cargo Industry in Malaysia & the ASEAN Economic Community: Transporting the Region to New Heights”- a free market guide that details the industry environment across Southeast Asian nations as well as case studies —and find out how your business can make the most out of the opportunities in the Southeast Asian breakbulk sector.
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