China's west and SE Asia seen as key manufacturing hubs
By Lee Chyen Yee
DAVOS, Switzerland | Wed Jan 26, 2011 1:25am IST
DAVOS, Switzerland (Reuters) - Western China, India and southeast Asia will likely be the major low-cost global production bases in the next 15 to 20 years, though their infrastructure needs improving, a survey showed on Tuesday.
Manufacturers have already begun to move to rural western China from the increasing expensive eastern coastal areas, though poor infrastructure, especially roads, has impeded its potential, according to the survey by logistics company Agility (AGLT.KW) and Transport Intelligence.
"Developments of new roads and airports are underway, attempting to link this region with the eastern part of China, but it is too early to determine how effective these are," they said in a report released at the World Economic Forum here.
Besides China, global manufacturers are already tapping southeast Asian countries, such as Thailand and Vietnam, and India to make everything from T-shirts to electronic goods. Their appeal is seen growing as their domestic markets develop.
"Vietnam and India already compete with China as major global manufacturing hubs, both having lower labor costs. They also represent important consumer bases in the future," the companies said.
Some investments in the manufacturing sector have already started flowing into sub-Saharan Africa, but the continent is still lagging behind Asia and Latin America, the survey showed.
China, the workshop of the world, is also the most attractive country for logistics investments, with India, Brazil, Indonesia and Russia ranking behind, according to an Emerging Markets Logistics Index in the report.
Saudi Arabia is up four notches from last year, while Mexico, Turkey, the United Arab Emirates and Chile also made it to the top 10 in the index.
"Economic growth is, by far, the predominant factor with all of the countries listed in the top ten experiencing higher than average growth rates," the surveyors said.
"India, for example, is seen as a preferable manufacturing base for European and Middle Eastern markets, having far less distance to cover than Chinese exporters."
The index, which ranks 39 emerging countries on the attractiveness of logistics investments and was launched in Davos, put Bolivia, Kenya and Paraguay at the bottom of the list due to sluggish economies, weak infrastructure and security threats.
For full coverage, blogs and TV from Davos go to www.reuters.com/davos
(Reporting by Lee Chyen Yee; editing by Michael Stott)