04 Jan Logistics could unlock next level of growth in ASEAN
There is a flipside to everything. Thailand and Vietnam have emerged as manufacturing hubs with customers across the world. But when the pandemic hit, a supply chain crisis put the world’s needs on pause. In fact, Nike said it could run out of shoes if the crisis didn’t resolve soon enough. The OECD stated that lockdowns led to a 12% drop in freight/logistics sector revenues to US$316.54 billion in 2020. But things have started to gradually recover.
An OECD report said that freight transport within ASEAN cities, such as couriers and parcel-delivery services, is expected to have grown by about 20% in 2020 because of changing consumer behaviours during the lockdown.
In the region, Indonesia was the largest market for freight and logistics, with US$81.3 billion in revenue in 2020. According to estimates by Mordor Intelligence, the Indonesian freight and logistics market is projected to exceed US$128 billion in revenue by 2025. Thailand and Singapore come next.
Source: Improving Logistics Connectivity of E-commerce in the ASEAN Region by A Kawa (2020)
Removal of barriers
Currently, there are multiple permits required for cross-border freight transport in ASEAN. Having a single simplified license system could help reduce the complexities for new applicants and nurture competition. Detailed entry criteria, including the number of vehicles and financial strength, could also build a strong framework for the development of the logistics industry. On the maritime front, OECD has recommended that international cargo operators be permitted to operate in select routes in the region, besides lifting the ban on ASEAN vessels carrying domestic cargo.
For ASEAN to reach its full potential in logistics, regulatory tweaks to boost international investments and accelerate digitisation are essential. An electronic world is staring at us and the logistics industry cannot shy away from this evolution. The worst is already over and service providers should ready themselves for the upcoming growth phase.