Region Set to Be Largest Manufacturing Hub

Over the next decade, Cambodia’s “cheap youthful labor” will help to propel Southeast Asia past China to become the world’s largest manufacturing hub, according to a report released by ANZ Bank on Friday.

The region stands to attract manufacturing business due to both advantageous demographics and lower wages compared to other Asian centers, says the report, “ASEAN: The Next Horizon.”

“[W]e…believe Southeast Asia will take up China’s mantle of the ‘world’s factory’ over the next 10-15 years, as companies move to take advantage of cheap and abundant labor in areas such as the Mekong,” the report says, adding that by 2030, half of the region’s 650 million-strong population will be less than 30 years old.

It predicts that Cambodia, along with Laos and Burma, “will provide cheap youthful labour to the new production platforms” in manufacturing centers such as Thailand and Vietnam, while Malaysia and Singapore will serve as the region’s hubs for finance and technology.

Additionally, the report forecasts that Asean will become the world’s fifth-largest economy by 2020, noting that the region’s economic integration with the Asean Economic Community (AEC) at year’s end would likely play a role.

While acknowledging that a true “borderless economic community will not emerge for at least another 15 years,” the report says steps have already been taken that would enable Asean member states to experience significant economic gains.

“[G]ood progress has already been made in some areas such as trade integration and the reduction of tariffs, and ultimately we expect the AEC to unlock synergies within the region which will usher in a new era of higher potential growth.”

Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia, said the report reflected Southeast Asia’s burgeoning population.

“It’s not surprising that…they predict Southeast Asia to move forward to be a manufacturing hub simply because of the population,” Mr. Loo said, adding that flows of Cambodian laborers to other countries would not necessarily hinder development of a domestic manufacturing capacity.

“I think…you will always find Cambodian workers in Thailand, in Vietnam, in Malaysia, but it’s not mutually exclusive,” he said.

“The local manufacturing can also grow simply for the fact Cambodia has an extremely young population and you’re talking about 200,000 to 300,000 new entrants to the job market annually.”

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