Mfg Costs: Leave PRC for Cambodia, Laos & Myanmar

Cheap, cheaper, cheapest: in search of low wages in Southeast Asia's CLMV.

The previous post on how China aspires to be Asia's Germany in producing high value-added manufactures jogged my memory about the this earlier article. Vietnam becoming the Republic of Samsung has already been discussed in an earlier post. However, there are also other low-cost destinations in Southeast Asia. Collectively, the latecomers to joining the Association of Southeast nations (ASEAN )are known as the CLMV countries with Cambodia joining in 1999, Laos and Myanmar in 1997, and Vietnam in 1995. Ever on the lookout for relatively skilled workers and dirt-cheap labor costs, CLMV are becoming attractive together with other Southeast Asian countries:

The cheap, young labor and strategic location of Myanmar, Cambodia and Laos are set to draw increasing numbers of manufacturers to Southeast Asia, which will eventually displace China for the title of "world's factory.'' The transformation will be part of the rise of the Association of Southeast Asian Nations to become the "third pillar'' of regional growth after China and India, ANZ Bank economists led by Glenn Maguire reckon. By 2030, more than half of 650 million people in Southeast Asia will be under the age of 30, part of an emerging middle class with high rates of consumption.

So ANZ actually believes that, collectively, Southeast Asia will surpass China as the "workshop to the world" given the advantages its various nations have aside from simply low cost:

"We also believe Southeast Asia will take up China’s mantle of the ‘world’s factory’ over the next 10-15 years as companies move to take advantage of cheap and abundant labor in areas such as the Mekong,'' ANZ said. What will likely assist this shift is the connection between low-cost labor in places like Myanmar, Cambodia and Laos, cost-effective manufacturers in Thailand, Vietnam, Indonesia and the Philippines, and sophisticated producers in Singapore and Malaysia.

Southeast Asian nations have resolved to establish the Asean Economic Community by the end of 2015 to enable the free movement of goods, services, capital and labor between the 10 member states. Together, the Southeast Asian nations could lift intra-regional trade to $1 trillion by 2025, ANZ estimates. Foreign direct investment into Asean from the major economies could climb to $106 billion in 2025, having already eclipsed investment into China for the first time in 2013.

"Most of Asean's member countries lie at the junction of the Pacific and Indian Oceans," ANZ noted. "The land-based members of Asean sit between the two most populous countries in the world – China and India. Access to these land and maritime routes allows Asean to participate in Asia’s expanding production network.''

Even for an ASEAN booster like yours truly, I think it's not going to be as easy as ANZ makes it sound. Still, the coming into effect of the ASEAN Economic Community at year-end 2015 is an awaited event that promises to bring Southeast Asia's advantages to wider global attention.

Is it no longer just a Vietnam story? We'll soon find out.