ASEAN: Emerging market leaders in Southeast Asia | KPMG | GLOBAL

ASEAN: Emerging market leaders in Southeast Asia

ASEAN: Emerging market leaders in Southeast Asia

China has long dominated Asia’s economic growth, with India close behind. Likewise, even two or three years ago, in the boardrooms of chemical companies around the world, an Asian growth strategy would focus on China, India, and nothing else.


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But in 2014, the playing field of Southeast Asia is beginning to shift. China’s double-digit growth is settling into the single digits while the country’s labor, transportation, and other production costs are all on the rise. India is still struggling to overcome a massive bureaucracy, infrastructure limitations, feedstock constraints and other factors that impede growth.

In contrast, the Association of Southeast Asian Nations (ASEAN) countries are emerging as strategic manufacturing centers with competitive export positions as well as many of the underlying fundamentals that have driven the development of the chemical industry in China and India over the last two decades.

If current trends continue, “Other Asia” is likely to assume an increasingly important role in the global chemical industry.

The next wave of chemical industry growth

ASEAN countries are boldly leading the next wave of emerging-market, chemical industry growth. For example, Indonesia’s population gives it a massive potential consumer base for new products, while Vietnam is becoming a favored destination for low-cost manufacturing, especially as wages in China continue to rise.

As the regional economies continue to develop and mature, further market opportunities are likely to include construction chemicals, consumer chemicals, and personal care.

Increased government support for chemicals

In Singapore, the government has announced further development of Jurong Island, a world-class, integrated manufacturing complex. The Malaysian Investment Development Authority (MIDA) has urged more diversity and investments by new players in the oleo-chemical industry. The Indonesian government plans to build at least three oil refineries with a capacity of 300,000 barrels per day.

The government in Thailand has approved a soft-loan package for the bio-plastics industry, which is expected to spur about THB100 billion worth of investments in the industry within the next 5 to 10 years. In Vietnam, the government has approved a plan to use advanced technology to produce quality chemical products at competitive prices in a sustainable, environmentally responsible manner.


The chemical industry in Southeast Asia has to learn to walk before it can run, so investment is likely to be focused on the commodity end of the sector and establishing the basic building blocks of the industry. However, with increased urbanization and continued middle-class growth, there are also likely to be opportunities in segments such as construction chemicals, consumer chemicals, and personal care.

The challenge for ASEAN countries is to have all of the fundamentals in place — including support for chemical industry supply chains, legal structures and business practices — so that higher-value chemicals can be manufactured in-country rather than imported from abroad. For global chemical companies, the region represents a huge opportunity for growth, and should be increasingly high in the ranking of strategic growth considerations.

If you have any questions, please contact:

Paul Harnick

+44 20 7694 8532

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