Friday, August 7, 2020

"As Supply Chains Shift, Indonesia Should Get a Serious Look"

If the Philippines' President Duterte was smart he'd have already made the contacts with the U.S. and E.U. manufacturers but I don't think he has and now he has his hands full of the worst covid-19 outbreak in the region.
Vietnam on the other hand was making the pitch immediately, although truth be told a lot of the "Vietnamese" companies seem to have Chinese ownership.
So Indonesia it is.
From Real Clear Markets:
As many hospitals and healthcare workers faced shortages of personal protective equipment and even ventilators at the start of the COVID-19 pandemic in the United States, the Trump Administration has sought to shift healthcare and other supply chains from an excessive reliance on one country -- or even worse, one factory in one country.  As supply chains shift, investors should take a close look at Indonesia as a destination for foreign investment – notably in the medical equipment sector-- but also in others as well.

Why Indonesia?  Several factors play to its advantage:

A large domestic market:  With 270 million people, Indonesia is the world’s fourth most populous country – and thus an important market in its own right.  Thailand has been able to grow a very successful medical device industry with an approximate export/domestic consumption ratio of 70/30.  This formula could work for investments in Indonesia as well, particularly.Indonesia has a strong need to procure supplies for its own domestic market – the country was hit by shortages of testing kits in the early stages of the pandemic. Export-led Foreign Direct Investment (FDI) which serves the domestic market is a win/win for all sides.

A  sweet spot in the new reality:  Shortages of medical supplies in the West based on supply chain problems demonstrated that picking suppliers just on price is often a short-sighted strategy.  Now, in this new reality, medical equipment purchasers will be looking at both reliability of supply and quality as well as price.  Indonesia can occupy this sweet spot by a willingness to guarantee supplies to FDI purchasers and by a focus on quality, as it has in other areas such as textiles and electronics.  Malaysia has followed a similar path, and its own strong share of the medical glove market has caused some supply disruptions.  Indonesia is a natural location to diversify this supply chain....

When people are talking covid-19 in the U.S. they almost never mention the country has the third largest population in the world, although that position will be lost this century as Nigeria, Indonesia,  Pakistan and D.R. Congo all have a shot at surpassing 'Murica.