India, Indonesia need new infrastructure to unlock potential
HONG KONG -- India and Indonesia are prime candidates for companies seeking to diversify their supply chains beyond China, market experts told a Hong Kong symposium on Tuesday. The biggest obstacle, they said, is insufficient infrastructure.
"A lot of moves [in supply chains] are not really driven by costs," said Kenith Poon, president of the Institute for Supply Management Hong Kong. Over the "next decade, I think there will be two determining factors that impact supply chains. One is technology evolution. The second is the growing size of the middle class."
He pointed to the decision by Taiwan's Hon Hai Precision Industry, better known as Foxconn Technology Group, to make a massive investment in India. He said the move will prompt more companies to manufacture a wide variety of products in small quantities.
On the subject of China's One Belt, One Road initiative to build infrastructure across the region, Ben Simpfendorfer said the impact is likely to be "limited over the next five or so years." The founder and managing director of Hong Kong-based consultancy Silk Road Associates added, "If it is going to have a big impact [on supply chain shifts], it will take significant construction of ports and roads in two countries, in particular -- Indonesia and India."
He also stressed that "China will remain the world's largest manufacturer."
Frank Chen, professor of management sciences at the College of Business, City University of Hong Kong, cited Vietnam as another likely investment destination. "The TPP (Trans-Pacific Partnership) will accelerate supply chain shifts in the region," he said.
"As trade agreements expand, SME (small and midsize enterprise) supply chains [will] become the new key driver of Asian trade," according to Chris Williamson, chief economist at British financial information services provider Markit, which hosted the event with the Nikkei Asian Review.
The symposium -- titled "Shifting Supply Chains in Asia?" -- was held as part of the Asian Financial Forum, co-organized by the Hong Kong Special Administrative Region Government and the Hong Kong Trade Development Council.