US companies shift production to Southeast Asia from China

[GoFlyKiteNow]

US companies shift production to Southeast Asia from China

February 17, 2010
Daniel Ten Kate & Haslinda Amin

Indonesia will welcome US President Barack Obama’s efforts to increase trade when he visits next month as more US companies shift production to Southeast Asia from China, Trade Minister Mari Elka Pangestu said on Wednesday.

“What we are seeing is a diversification of sourcing from US companies away from China toward Indonesia in a number of areas, such as footwear, textiles and clothing and furniture,” she said. “We do see a lot of prospects there with increased interest from US buyers coming to Indonesia.”

Indonesia is the largest economy in the 10-member Association of Southeast Asian Nations, which collectively would have amounted to the third-biggest market for US goods in 2008 behind Canada and Mexico.

The US is aiming to boost trade with Asia to keep pace with China in a region with the world’s fastest-growing major economies. Exclusion from a proposed East Asian free-trade area could cost the US as much as $25 billion in annual exports, Demetrios Marantis, deputy US trade representative, said in January.

Indonesia is reviewing the requirements for joining the Trans-Pacific Partnership, which the Obama administration aims to turn into a platform for economic integration in the Asia-Pacific region. The US plans to start negotiations to join the partnership this year with New Zealand, Chile, Brunei, Singapore, Peru, Vietnam and Australia.

“For many developing countries such as Indonesia, this is still what we call a very high standard agreement,” Mari said. “We will of course review it, but at the moment we are still looking at it.”

The US has run an annual trade deficit with Indonesia since 1985, the latest year for which statistics are available.

US exports to Indonesia have grown more than five times to $5.1 billion in that time, while Indonesia’s shipments to the US almost tripled to $15.8 billion.

 

[zuoom]

make sense. cost of production in China has been climbing fast in this 5-6 years.

 

[Glaringly]

make sense. cost of production in China has been climbing fast in this 5-6 years.

The shift won't be coming from China but from Malaysia.

 

[Zombie]

Indonesia is the largest economy in the 10-member Association of Southeast Asian Nations, which collectively would have amounted to the third-biggest market for US goods in 2008 behind Canada and Mexico.

In the 1980s, people already called Indonesia the sleeping XXXXX (tiger, lion, elephant or whatever?) and speculated that Indonesia will be next star after the 亞洲四小龍 due to the size of their economy (just like the same reason in the report).

But, they always go back to their sleep.

 

[csjcsjcsj]

US is becoming a loser in economy and least significant player in terms of production. Their movement will not be of significance to the world. They are on path of self-destruction and on way to their own ending. There will be many better alternatives to take over from Americans as production companies and employers, thing will improve very much with this change is completed and the cycle will not take too long.

 

[longbow]

China is not more expensive than Indonesia. A lot of this has to do with tariffs.

Chinese made furniture going to the US is subjected to a tariff. So a lot of the Chinese made furniture detours to taiwan (no such tariff) before going to the US. It is tough to compete with the Chinese. The interior provinces are still very cheap in term of labor. To understand what is happening look at tariffs

 

[Zombie]

A lot of this has to do with quotas and tariffs.

someone I spoke to, who imported plastic products from china, said that he had to go through taiwan for the same reason...

 

[zuoom]

i was thinking more on the exchange rate n minimum wage n transports issue.

in recent years, the exhange rate vs. the USD has upped about 20%.
wages has creeped up. and transport almost double.

it's still cheaper than Indonesia?

will have to do more reading n asking.

yup, hear of those quota. something along anti-dumping? and they are allowed to circumvent the restriction? likethat, wouldn't the Indonesian MFG just sit back, shake leg and do some paperwork can liao?

 

[longbow]

For an indication, latest poverty report says that 30% of Chinese live on less than $2 a day. That is easily 350 million. Indonesia itself only has about 280 million people and no way all 280 M of them fall below $2/day poverty indicator.

So there is still large pool of cheap labor in the inner provinces. But Beijing has been opening up highways and trains into these inner provinces to allow mfg goods and raw materials to reach these provinces. So the cheap shoes and furniture move inland while the coastal cities concentrate on upmarket Ipod, Ipad, Iphone, LCD TV, electronics, chips that kind of stuff.

Indonesia's infra is still very bad. Remember it is not just cheap labor but you need to be able to bring out the goods. That is why india has not really stepped on the mfg bandwagon (despite their cheap labor 75% of pop live on less than $2 a day!) and is still basically an agrian country. Without the infra, goods take days to move between cities, power supply is not stable, supply chain not there (you need the factories to make and print the shoe boxes, supply the fabrics, buttons, zippers. etc.)

Walmart/Macys need their goods in time for Xmas season and if you tell them how about after Xmas they tell you to go fly a kite.