Asean is more than just the next ‘world factory’ after China

The drive from Phnom Penh Special Economic Zone (PPSEZ) to the Cambodian capital’s international airport is not far, but the traffic can be congested, crowded and cacophonous.
Like many bustling Southeast Asian cities, heavily loaded trucks trundle along slowly, while countless motorcycles buzz noisily by. Stores selling construction machinery, like cranes from China or Japan, line both sides of the dusty road.
The scene is reminiscent of industrial Southwest China back in the 1980s and 1990s, when the country’s industrialisation had just picked up speed.
On the surface, the ongoing industrialisation in the 10-member Asean resembles the path that China took more than 30 years ago. Its production and manufacturing industries, for example, have grown rapidly.
As China today accelerates its transition toward an innovation hub, many even see Asean as the next “world factory”. But this view may be too simplistic as Asean, to some extent, has taken a different strategy compared to the one adopted by China decades ago.
The bloc gives far more attention to the quality of growth than China did in its early stages of industrialisation.
The miraculous growth experienced by China is the result of high accumulation of both capital and labour with a smaller role played by technological progress. It was mostly quantitative.
However, Asean members realise that they can achieve growth in a more qualitative, technology-based and sustainable way.
Hiroshi Uematsu, CEO of the PPSEZ, noted that its management standards “must be international”.
“We want to be a leading industrial zone in the [Greater Mekong] region,” he said.
Despite Uematsu’s claim, expectations would have been fairly low before a visit to the PPSEZ in June, at least for anyone still influenced by the conventional wisdom that Asean’s industrialisation resembles China’s experience.
But Liwayway (Cambodia) Food Industries, a local branch of the Philippines’ famous snack producer Oishi, impressed with its automated machinery, bright and clean work areas, and a brisk production process.
The PPSEZ is emblematic of Cambodia’s efforts to shift its industry into more sophisticated light manufacturing and away from apparel production.
Established in 2006, the zone has attracted 77 manufacturers, including major global brands – such as Toyota, Yamaha, Tiffany and Coca-Cola – from 15 countries and regions.
Uematsu said the zone will soon produce auto parts, marking a big step up from assembly, given that the country is still in the “beginning stages of industrialisation”.
Four Chinese companies have also settled in the 350-hectare industrial zone, and some of them have much bigger ambitions than just being producers or manufacturers.
Xue Dong, marketing director of Sichuan New Hope Agribusiness (Cambodia), said the local subsidiary of China’s largest privately held agricultural company aims to be more than just an animal-feed producer in Cambodia.
It aims to be a multi-sector conglomerate and even provide banking and financial services, he said.
Across Cambodia’s east border, Vietnam has stated that it will “continue to renew its growth model and enhance growth quality”.
A party resolution, issued in November and signed by Vietnam’s communist party chief Nguyen Phu Trong, states that the country hopes to achieve fast, sustained and comprehensive development of the national economy, society and environment, Viet Nam News reported.
Vietnam will not chase growth at any cost, but hopes to exploit its resources effectively, while trying to take advantage of scientific and technological advancements.
Instead of relying solely on investment and exports, Vietnam will also focus on growing its domestic market. The country will look to education, training, and science and technology development to create international-level human resources.
It also aims to produce environmentally friendly agriculture with high-tech applications, build brand names for local farm produce, and modernise rural infrastructure to cope with climate change.
China’s investment in Asean has surged rapidly in recent years following the launch of the “go abroad” policy and the Belt and Road Initiative, an ambitious plan to revive ancient trade routes.
Large amounts of Chinese investment go to sectors including manufacturing and production, infrastructure, connectivity and transport.
These areas are ripe with opportunities, especially for Chinese companies, which have accumulated rich experience over the past few decades. But they should understand that they cannot just repeat the same success story at home.
Quality to some extent is more important than quantity in the Asean markets, and the key words they need to bear in mind include technology, knowledge, sustainability and management standards.
Soon, the China-Cambodia Business Forum and Financial Development Forum will convene in Phnom Penh. It will bring together some of China’s top investors to explore opportunities in Cambodia with local politicians and business leaders.
It is to be hoped attendees will also discuss how both sides may complement each other to help Cambodia, and even the entire Asean community, achieve quality growth during industrialisation.