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

Kuala Lumpur, Malaysia – Southeast Asia is the “new China” and should become the center of the global supply chain, said the head of a powerful regional business structure.

In an interview, Arshad Rasjid, Chairman of the ASEAN Business Advisory Council (ASEAN-BAC), said that the 10-member Association of Southeast Asian Nations (ASEAN) should become “the global supply chain.”

“ASEAN should be the global supply chain, the new China is ASEAN,” Arshad told Al Jazeera last week.

Arshad, who also chairs the Indonesian Chamber of Commerce and Industry, said the bloc is on track to take China’s place “as well as tomorrow” thanks to the region’s rich nickel and other key mineral resources.

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

The comments come at a time when China and Chinese companies, especially in critical sectors such as advanced chips, are facing increasing restrictions imposed by the West amid intense geopolitical competition between Washington and Beijing. Tensions have forced industry giants such as Apple, Google and Samsung to look for new manufacturing bases outside of China, especially in Vietnam.

ASEAN-BAC, the private sector arm of ASEAN, is mandated to promote economic cooperation and integration in the region. Indonesia is chairing ASEAN this year.

Indonesia has the world’s largest nickel reserves, at 21 million tonnes, nearly a quarter of the world’s reserves, according to the US Geological Survey. The Philippines has the fourth largest reserves with 4.8 million metric tons. Nickel is a critical element in the production of stainless steel, electronic devices and electric vehicles.

“Indonesia produces 40% of nickel. [output] to the world. If you add the Philippines, you get 50-60 percent,” Arshad said.

Indonesia, along with Thailand and Vietnam, is aiming to become a key player in the electric vehicle supply chain, using its large nickel reserves to attract investment.

Arshad said that while Southeast Asia rivals China at the center of global supply chains, companies in the region are keen to complement and work alongside China.

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

“It’s time for us to build our own downstream network… our own ecosystem, add more SMEs… and create jobs.”

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

“But each of them needs to realize that individually they can do little. There should be a regional supply chain that they need to build first,” Damuri said.

“They should cooperate and allow certain stages of production to develop in [fellow] ASEAN countries,” Damuri added.

Fitra Faisal, an economist at the University of Indonesia, said China’s shift to high-end manufacturing has created opportunities for Southeast Asian countries with lower labor costs.

“China is now leaving behind the middle and low stages of production. Most ASEAN countries will fill this gap. We believe the Chinese manufacturing phase better complements its ASEAN counterparts,” Fitra told Al Jazeera.

China leads the world in 37 of 44 critical technologies, with Western democracies lagging 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.

Fitra said the spread of advanced Chinese manufacturing could help ASEAN countries build their own manufacturing networks.

“In the next 20 or 30 years, this will be a much more significant production line and network in the world,” Fitra said.

ASEAN-BAC’s Arshad said the region also needs policies that encourage financial institutions to treat farmers as entrepreneurs, who remain the backbone of the ASEAN economy and helped ensure food security amid the Russo-Ukrainian war.

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