Isolated country highlights for Indonesia, ranked third and Malaysia ranked fifth from the report show some clear wins for recovery post COVID-19.
Indonesia
The Indonesian economy, the largest in Southeast Asia, rises one ranking position to displace the UAE in 3rd overall for the 2021 Agility Emerging Markets Logistics Index 2021. There were challenges for Indonesia in 2020. The country fell into its first recession since the Asian financial crisis in 1998 as the Covid-19 pandemic took hold. GDP declines of 5.3% and 3.5% in the second and third quarters of 2020 respectively were partially a result of the highest infection rate in the region. The pandemic has strained key sectors of Indonesia’s economy including household spending and investment as some 3 million jobs have been put at risk. However, while 2020 has certainly been a challenging year for Indonesia, prospects for recovery in 2021 are much stronger. The IMF forecasts the Indonesian economy will expand 6.1% in 2021, following a 1.5% contraction in 2020, as consumer spending recovers and positive signs begin to emerge from Indonesia’s manufacturing sector.
A recovery in manufacturing will be vital to Indonesia’s prospects. The sector accounts for around 25% of the country’s GDP and employs nearly 20% of its 120 million working population. The development of the sector is led by the Making Indonesia 4.0 initiative which aims to integrate advanced technologies including artificial intelligence and the Internet of Things into supply chain and logistics operations to increase efficiency. The initiative is also part of a wider plan to make Indonesia a hub for electric vehicle manufacturing. In December 2020, Chinese battery cell manufacturer CATL announced its plans to invest $5 billion in a production facility that would become operational in a production facility that would become operational by 2024.
The announcements followed Hyundai’s deal with the Indonesian government to invest $1.5 billion to build a plant in Kota Deltamas, east of Jakarta, and Toyota’s $2 billion investment which will see it produce 10 vehicle models in the country. Outside of manufacturing, Indonesia’s e-commerce sector is also attracting foreign investment. Indonesia is the largest e-commerce market in Southeast Asia and its population spends around $30 billion online each year. It is expected to account for 50% of Southeast Asia’s online transaction by 2025. The development of logistics infrastructure must sit alongside online retail’s growth, however, with costs remaining high, especially on more
remote islands outside of Java. With the market opened to foreign investment in 2016, competition is healthy with Alibaba, Lazada, JD.com, and Shopee all active in the country, while recent investment from Google and Temasek will help e-commerce platform Tokopedia fund
its expansion. The Covid-19 pandemic has further spurred e-commerce growth, with average daily transaction volumes doubling in 2020.
“Asia Pacific experienced great turmoil in the beginning of 2020 due to the COVID-19 crisis, but it has rebounded strongly, led by the powerful performance of China and Vietnam. The region is on track for a full recovery this year,” says Andy Vargoczky, SVP of Sales & Marketing Asia-Pacific, Agility GIL. “India, Indonesia, Malaysia, Thailand and Vietnam continue to improve their supply chain infrastructure and capabilities, showing why they are leaders in domestic and international logistics.”
Malaysia
Malaysia’s diversified economy means the country has dealt well with the impact of the Covid-19 pandemic. Despite the IMF asserting that GDP fell 6%, Malaysia’s high-tech, manufacturing and services sectors all played a role in limiting the depth of the impact made by the Covid-19 pandemic. The country was also able to respond to the pandemic by deploying spending and stimulus packages equivalent to 21% of GDP. These factors combined to see Southeast Asia’s best performing market for business Fundamentals retain its 5th overall rank for a
third year. Malaysia imposed strict social restrictions early in the pandemic. Easing for certain economic activities followed from May onwards and saw manufacturing, production and sales growth turn positive in June. The recovery was uneven, however, and new restrictions were imposed as Covid-19 cases spiked again towards the end of 2020. The result is captured in Malaysia’s manufacturing PMI data, which entered contractionary territory in July 2020 and steadily declined over the five months to a November reading of 48.4. The trajectory
played into a third quarter GDP decline of 2.7%, when the services sector also contracted by 4%. As the Covid-19 pandemic retreats, rising global demand for the output of Malaysia’s manufacturing sector underpins optimism for Since June 2020, Malaysian manufacturers have recorded improving sentiment about the 12 months ahead, according to IHS Markit. Online retail has performed well in Malaysia during the Covid-19 pandemic. According to data from E-Commerce Analytics, the Malaysian e-commerce market will grow 24.7% in 2020, recording total sales of around $7.5 billion. The market is expected to reach $12.6 billion by 2024. The development of online sales in Malaysia is supported by one of Southeast Asia’s most digitally engaged populations – data from 2019 shows 84.2% have internet access, a higher proportion that all other ASEAN-5 states. The country also has a healthy online services ecosystem which has fostered the development of online banking and payment services in recent years. This has helped to increase the value-added by e-commerce to the Malaysian economy to around $42.5 billion in 2020, according to the Malaysia Digital Economy Corporation. Leading e-commerce players Lazada and Shopee saw strong sales in 2020 as a result – Lazada’s 12.12 shopping event saw total 2019 sales exceeded in less than 12 hours in 2020,
with 80% more brands and SMEs participating. Shopee recorded some 875,000 orders in the first hour of 12.12 sales.
Transport Intelligence (Ti), a leading analysis and research firm for the logistics industry, compiled the Index. John Manners-Bell, Chief Executive of Ti, says: “The strength of the Agility Emerging Markets Logistics Index has always been to differentiate between those emerging markets which demonstrate resilience in the face of adversity and those which are more fragile. This year is no exception. Although some – especially China and Vietnam – have been able to rebalance around domestic industrial and consumer demand, the majority are still highly dependent on international markets and investment. A lack of global demand, combined with the breakdown of air and sea logistics networks, has had severe consequences for these economies and societies. As the COVID crisis finally unwinds over the next two years, those most resilient will bounce back the fastest. Inevitably, those which have failed to embrace market, trade, governmental and social reforms will be hardest hit by the fallout from the pandemic.”
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Download the 2021 Agility Emerging Markets Logistics Index: www.agility.com/2021index
Source: PRNewsGIG/AFTNN