APAC GROWTH

The Asia Pacific (APAC) region is at the forefront of a global shift in supply chain management and international trade.

As traditional models are reshaped by macroeconomic drivers, geopolitics and innovation, APAC economies are uniquely positioned to capitalise on these changes, driving growth and reshaping the global economic landscape.

Simultaneously, trade patterns are evolving, influenced by economic headwinds, shifting consumer demands and a growing emphasis on sustainability.

APAC countries are adapting swiftly, forging new partnerships and diversifying their trade relationships to mitigate risks and seize emerging opportunities.

APAC economies are uniquely positioned to capitalise on global shifts, driving growth and reshaping the economic landscape."

This dynamic environment is driving economic expansion across the region, with APAC emerging as a powerhouse of innovation, production and consumption.

This chapter will dive into these interconnected trends, exploring their implications for businesses and their partners throughout the value chain.

The electrical vehicle (EV) market is one area where these dynamics are clearly being played out. China’s EV makers, building on their domestic success, are increasingly looking further afield. Their strategies, however, are being shaped by tariffs and geopolitics.

We will also explore the impact of the region’s growing importance as a trade nexus on its emerging markets. Market-friendly policies, a strategic location and a skilled workforce are helping a growing band of Southeast Asian nations become competitive trading partners.

APAC GROWTH

SOUTHEAST ASIA IS GROWING AS A GLOBAL TRADE NEXUS – AND ITS EMERGING MARKETS HAVE AN IMPORTANT ROLE

From a small base, Southeast Asia has grown to become one of the world’s most dynamic trading areas over the past three decades.

Malaysia, Indonesia and Singapore have become increasingly significant hubs. In addition to trading with their dominant Asian neighbour, China, they now trade internationally with the European Union (EU) and the United States.

And alongside Southeast Asia’s more advanced markets, a rising band of emerging countries are becoming more active, thanks to a convergence of factors making them more competitive as trading partners.

Fuelled by market-friendly policies, a strategic geographic location and a surging skilled workforce, the region is set to cement its position as a trade and logistics hub.

DID YOU KNOW?

EU imports from ASEAN countries grew from €79 billion in 2011 to an all-time high of €136 billion in 2021

Source: Statistics Explained

DID YOU KNOW?

EU imports from ASEAN countries grew from €79 billion in 2011 to an all-time high of €136 billion in 2021

Source: Statistics Explained

Indonesia, for example, has seen its automotive industry develop significantly in recent years, emerging as a major production base for global automakers like Toyota, Honda and Suzuki. While much of this trade is with local partners, the country’s reach is expanding.

Electronics, meanwhile, represent Malaysia’s top export, valued at around RM600 billion ($135 billion) in 2022, up more than a fifth from 2021.

DP World’s partnership with Sabah Ports in Sapangar will help support the country’s position, with plans to increase container handling capacity from 500,000 TEUs to 1.25 million TEUs by 2025.

ASEAN’s other key trading hub, Singapore, has a diversified export market and strong links with multiple countries thanks to a raft of trade agreements. It has one of the highest trade-to-GDP ratios in the world, showing the importance of trade to the country.

UNPARALLELED MARKET ACCESS

One of the key drivers behind Southeast Asia's ascendancy is the unparalleled market access granted by multilateral trade agreements like the ASEAN Trade in Goods Agreement (ATIGA). This comprehensive pact, which covers all 10 member states of the Association of Southeast Asian Nations (ASEAN), has significantly reduced tariffs and other barriers, facilitating the seamless flow of goods across the region.

The trade agreement has seen intra-ASEAN trade soar, as well as trade outside the region. EU imports from ASEAN countries grew from €79 billion in 2011 to an all-time high of €136 billion in 2021 – an increase of nearly three-quarters.

Southeast Asia’s merchandise exports grew over 10% annually on average between 2017 and 2021."

And Southeast Asia’s merchandise exports grew over 10% annually on average between 2017 and 2021 – faster than the increase seen by the Asia Pacific region more broadly.

This is reflected in the growth we’re seeing as part of our significant presence in major ports like Laem Chabang, Ho Chi Minh City, Manila and Batangas, where we aim to provide integrated logistics solutions to customers across the region.

Growth has been particularly pronounced in sectors such as electronics, automotive and machinery, where Southeast Asian nations have emerged as major exporters.

Looking ahead, how important do you think Southeast Asia will be to your supply chain in the next 3-5 years?

Slightly more important
Much more important
About the same
Less important
Much less important

EMERGING MARKETS AT THE FORE

ATIGA has also benefited historically less dominant players, such as the Philippines. Well placed at the heart of Southeast Asia, the trading pact and greater investment in infrastructure have enabled greater market access and allowed the country to emerge as an important regional hub.

The new Tanza Barge terminal we’ve launched, offers an innovative solution to ease supply chain gridlock and enable faster, easier movement of goods given the road and port congestion around Manila. The terminal can handle 200,000 containers every year and providing weekly trips to and from the Manila South Harbour can save 150,000 truck journeys annually.

Another key infrastructure upgrade we’ve made has been the modernisation of the Batangas Passenger Terminal, the country’s largest inter-island hub. Batangas Port also hosts a container terminal primarily serving the Calabarzon region which is home to major economic zones and accounts for about 15% of the Philippines’ GDP.

DID YOU KNOW?

The new Tanza Barge terminal in Manilla can handle 200,000 containers every year

By strategically investing in ports, terminals, economic zones and logistics capabilities across the region, we are catalysing greater regional integration, attracting investment, creating jobs and supporting growth.

Emerging markets like Laos and Brunei are also contributing to the region's growing prominence in global trade.

Laos, for instance, is leveraging its strategic location as a landlocked country to facilitate trade flows between Southeast Asia and China.

In 2020, Laos’ share of intra-ASEAN trade in goods was around 60% – the highest in the region. It has also been actively promoting foreign trade and investment opportunities, particularly in sectors like mining, hydropower and agriculture.

In fact, we have recently taken over the operation of the Savannakhet dry port in the Savannakhet Special Economic Zone in Laos. As a crucial link between Laos, Cambodia, Myanmar, Thailand and Vietnam, the port is used by regional cargo owners and logistics companies to connect supply chains along the East-West Economic Corridor.

DID YOU KNOW?

In 2020, Laos’ share of intra-ASEAN trade in goods was around 60%

Brunei is another key intra-ASEAN trading partner and is capitalising on its abundant natural resources and strategic location along major shipping routes to establish itself as a regional trading hub. The country is pursuing economic diversification beyond its traditional reliance on oil and gas, for example, leveraging its strong Islamic culture to become established as a global halal food hub.

DID YOU KNOW?

In total, emerging markets in East Asia account for around 17% of global trade in goods and services.

It has also been investing in its ports and transportation infrastructure to improve logistics. The country is pursuing economic diversification beyond its traditional reliance on oil and gas, for example, leveraging its strong Islamic culture to become established as a global halal food hub. It has also been investing in its ports and transportation infrastructure to improve logistics.

APAC GROWTH

THE RISE OF CHINA – HOW EXPANDING EV PRESENCE BEYOND BORDERS IS RESHAPING APAC TRADE

Building on their domestic success, China’s electric vehicle makers are increasingly looking further afield. But as they react to trade tariffs, supply chains are on the move too.

If you live outside of China, or Asia more broadly, the electric vehicle (EV) company BYD may not be one you’ve heard of.

More familiar brand names such as Tesla tend to capture much of the attention and cachet, while electric models produced by established automakers have higher brand recognition.

But at the end of 2023, BYD knocked Elon Musk’s company off the top spot as the world’s biggest EV maker.

The home-grown Chinese brand has rapidly come to dominate its domestic market, making up over a quarter of the market share. China is now home to more than half of the EVs on the road today.

DID YOU KNOW?

60% of global electric car sales originate in China

As an early adopter of EVs, supported by favourable pricing and government policies, sales in China continue to boom – over one in three new car registrations in the country in 2023 were for electric cars.

However, Chinese automakers are increasingly looking outwards, seeking expansion and maximising the opportunities given by the country’s dominance of battery manufacturing.

Europe is a key market for Chinese EV exports, but increasingly countries in Latin America are also emerging as destinations. And, of course, many locations closer to home in South Asia are being targeted.

But, with several countries imposing punitive tariffs on Chinese EVs, the supply chain is in flux. While some companies are exploring nearshoring as a solution, emerging new players are rethinking their logistics play.

Chinese automakers are leveraging innovative solutions to maintain their global competitive edge in EV supply chains, despite tariffs and logistical hurdles."

THE PARTICULAR CHALLENGES OF EVS

DP World has been focused on the automotive industry for some years and continues to adapt its business in line with these shifting trends. Compared to other types of goods being moved, vehicles are particularly high-value and represent a large amount of capital invested by the manufacturers. This makes an end-to-end service with a wide geographic reach particularly valuable – especially given the local connections and expertise DP World has in each of its hubs.

Another notable challenge with EVs is that restrictions around their batteries often mean they need to be transported as ‘dangerous goods’ (DG).

This means there may be different requirements placed on shipments compared to traditional internal combustion engine (ICE) vehicles, and the logistics can be more complex. Special licences are required for storage and transport, for example, and the processing time and documentation can be rather different across different markets.

In addition, in current shipping markets, space for ocean vehicle freight has been quite tight as RoRo capacity struggles to keep pace with demand. And there is even more competition for the limited space available for DG.

Q: Has your business made efforts to diversify its supply chain in the past 24 months?

Yes – significantly
Yes – to some degree
No – but we are looking into this
No – this is not a current business priority

THE IMPACT OF TARIFFS

For many Chinese automakers, the imposition of tariffs by countries such as the US and EU has caused them to rethink strategies. Some are exploring assembly and manufacturing set-ups in Eastern Europe or Latin America. New markets such as North Africa are also emerging as supply chains react to policy implications.

Meanwhile, many manufacturers are increasing their exports to beat the tariff deadline, adding further strain to logistics along some routes.

Supply chains will remain dynamic as the impact of tariffs starts to take effect.

NEW SOLUTIONS

DP World has been working with customers to overcome these challenges. For one major Chinese carmaker, we found a new route into Europe using our P&O ferry network in Zeebrugge, for example. This bypassed the congestion and shortage of space at other terminals and yards and created a faster route to end customers.

When it comes to sea crossings, RoRo currently dominates automotive logistics, but DP World is focused on building cars in containers (CIC) as an alternative option. The advantages are clear. Firstly, using container ships increases capacity and availability.

And secondly, because a container ship can carry more cars stacked in containers than a RoRo vessel, it is a more environmentally friendly option.

Only around 20% of our cars are currently transported as CIC, but it is increasingly being explored by some of Asia Pacific’s new generation of EV manufacturers.

More broadly, the ability to lean on other intermodal solutions like rail freight and road transport across the DP World network has proved advantageous for several customers.

One new EV manufacturer, for example, was looking for support shipping cars from China to Laos. This presented particular challenges given Laos’ underdeveloped logistics infrastructure compared with other routes into Europe, and the manufacturer had previously experienced a high level of damage in transit.

DP World offered a range of solutions including cross-border road and rail options and CIC, which significantly improved the manufacturer’s access to the land-locked country.

THE TRADITIONAL VS THE NEW

While many established automakers have expanded into the EV market in recent years, a number of new players have also entered the space.

This next generation of EV makers comes without the historic supply chain structure built over years of moving internal combustion engine (ICE) vehicles.

And this is heralding new approaches to logistics as fresh thinking brings novel solutions. One example is how new EV makers have embraced DP World’s racking system for wrecks, where up to four vehicles are transported on racks in containers.

In this way, cars can be recycled more efficiently and cost-effectively, which contrasts with the traditional ICE vehicle approach, where old and broken models go to waste.

Only around 20% of DP World’s cars are currently transported as CIC, but it is increasingly being explored by some of Asia Pacific’s new generation of EV manufacturers."

TECHNOLOGY PROVIDES GREATER VISIBILITY

As Chinese automotive manufacturers increasingly look further afield for opportunities, the need to track vehicles and bring predictability to logistics becomes more pressing. And this is where technology can help.

DP World’s inventory management system helps bring greater transparency and control to supply chains.

With warehousing and transportation management systems connected through a suite of technologies, cargo owners and manufacturers can make better decisions about the production and delivery of their vehicles. Supply chains can be more efficient and less wasteful, too.