The Recent Development of electronics manufacturing in Southeast Asia

The electronics manufacturing industry has a thriving development in Asia and is the global production hub of electronic products, with a leading status especially in semiconductors, computers and communication equipment. In recent years, the global industrial supply chain has begun to undergo transformation, and the supply chain has accelerated its restructuring under geopolitical changes. Overseas enterprises have moved into Southeast Asia for diversifying the risk of excessive concentration of production capacity. Since there is a large demand for energy, logistics and manpower in the electronics manufacturing industry, Southeast Asia has benefited from its superior geographical location and natural resources, abundant and young labor force, market potential and local government’s investment preferential policies, etc., which attracted many international investors and multinational companies to set up production bases and office locations, and the structure of electronics manufacturing industry has been continuously upgraded, becoming one of the world’s important processing bases.

Vietnam’s electronics industry is mainly on assembly and product processing, which relies on foreign investment. In the past decade, Vietnam’s electronics manufacturing industry has received a large inflow of foreign direct investment, and has developed rapidly into one of the world’s leading exporters of communication equipment, with a growth rate of 41% from 2006 to 2016, world ranking rising from 47th in 2001 to 12th in 2022 and ranked 3rd in ASEAN in 2022. The growth of the electronics manufacturing industry is largely related to the inflow of foreign direct investment, Vietnam’s electronics industry relies on foreign-owned enterprises (95%), which mainly assemble simple parts and process products before being sold to Europe and the United States, and design is usually carried out by foreign countries. In 2020, more than 13,000 digital technology companies were established, bringing a total of 58,000 companies contribute to the country’s technology and electronics R&D.

Malaysia actively promotes industrial upgrading. Malaysia is rich in natural resources such as tin, rubber, palm oil and timber, which can be used as raw materials to produce mechanical and electrical products, and is mainly responsible for the manufacturing and assembly of consumer goods in the supply chain. At present, Malaysia is one of the most important semiconductor export markets in Asia, and is also one of the main centers of global packaging and testing, Southeast Asia has a global market share of about 27%, of which Malaysia accounts for half of it, accounting for about 40% of the country’s annual exports. In 2022, its exports of electronic and electrical products reached RM593.5 billion, which has a growth of 30.2% comparing from the previous year and accounting for 38.3% of total exports. The Government has also actively invested in promoting innovation and technology applications, and has promulgated the New Industrial Master Plan (NIMP) and “MyDIGITAL” to promote the development of its high value-added activities. There are currently more than 50 semiconductor companies in Malaysia, most of which are multinationals.

Thailand is an important base for global electronics manufacturing. Thailand has been an important supply chain country for the electronics industry for over 40 years, and electronic equipment is the country’s second largest export industry, and it is also the world’s second largest producer of computer hard drives, with the export value of computer parts reaching US$22 billion in 2021, but after a two-year surge in strong demand for home-based workers during the epidemic, the demand for personal computers (PCs) has fallen sharply, and global PC sales in the first 9 months of 2022 fell by 13% year-on-year. In addition, Thailand is also an important member of the regional supply chain in terms of IC foundry. Thailand’s electronic information industry has more than 2,100 enterprises, and the number of industry workers has exceeded 700,000. Thailand has the advantages of skilled labors, stable power supply, etc., and is expected to continue to maintain the key area of Southeast Asia’s electronic foundry industry, and new development trends such as new energy vehicles, 5G, IoT equipment and other new development trends have led to an increase in chip demand, which will make the industry maintain a high degree of prosperity.

In summary, as one of the important bases of the global electronics manufacturing industry, Southeast Asia is competitive and advantageous in all aspects, and the electronics manufacturing industry is full of potential, and it is foreseeable that the region will attract more investment and innovation, bringing growth to the economy. However, many countries in Southeast Asia still have room for optimization in terms of infrastructure, labor skills, regulatory environment, etc., and enterprises need to track the industry development trends, market changes and risks to better seize opportunities.

Tsz Yin Elaine LAU, Analyst of Hong Kong Financial Research Institute of Bank of China.

Singapore to Mandate Climate Disclosures from FY2025

On February 28, 2024, the Singapore government announced new climate-related disclosure requirements, signaling a commitment to environmental sustainability and corporate responsibility. Starting from FY 2025 , all locally listed companies will be mandated to disclose climate-related information in accordance with the International Sustainability Standards Board (ISSB) guidelines, including Scope 1 and Scope 2 greenhouse gas (GHG) emissions. Unlisted companies with annual revenue of S$1 billion or more and total assets of at least S$500 million or more will also be required to disclose from FY2027 onwards.

Listed companies will need to disclose Scope 3 GHG emissions starting in FY2026, with external assurance on Scope 1 and 2 emissions disclosures required from FY2027. Large non-listed companies will have a grace period for disclosing Scope 3 emissions information until FY2029.

This endeavor is in line with all major markets globally as a response to the launch of ISSB climate related disclosure requirements, suggesting listed companies must undertake a heightened degree of responsibility in tackling the challenges related to climate change. The implementation of this legislation will have a substantial impact on the risk management and business expansion of commercial banks.

To begin with, companies will be compelled to assess the impacts of climate change on their operations across multiple perspectives, including supply chains, asset valuations, compliance expenses, and brand reputation. Commercial banks, in turn, will be required to adopt a more comprehensive approach in evaluating loan applications from corporate clients. This will necessitate ensuring that clients are actively engaged in green initiatives that promote sustainable development and long-term competitiveness.

Furthermore, as to conduct more in-depth risk assessments, financial institutions operating in Singapore will be compelled to improve their data collection and reporting practices regarding climate change. By incorporating climate-related factors into their risk management frameworks, commercial banks can safeguard their own interests and contribute to a more sustainable financial landscape while mitigating risks associated with services that are linked to climate change.

In addition, the enforcement of this stipulation will encourage commercial banks to participate more actively in efforts to reduce carbon emissions and facilitate the transition to a low-carbon society. Banks have the ability to initiate climate change-related Through cooperation with enterprises, banks can jointly launch climate change related projects and initiatives that advance green finance and sustainable development through collaborative efforts with businesses. Concurrently, banks may seize this opportunity to assist their customers in embracing more environmentally friendly and sustainable development endeavours, thereby contributing to collective effort to address the challenges of climate change.

In all, collaboration among regulatory agencies, businesses, and financial institutions will be crucial in driving sustainable practices and mitigating climate risks for a resilient and responsible future.

Yu Dong, ESG Strategist at the Hong Kong Financial Research Institute of the Bank of China

Jan-Feb 2024, Inbound Tourists in ASEAN significantly Increased, Driven by Tourists from China

Tourism is one of the pillars of the macroeconomic of Southeast Asian countries. In 2019, before the epidemic, the total tourism revenue of the seven ASEAN countries (Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, and Cambodia) accounted for approximately 5.3% of the total nominal GDP. In terms of the proportion of tourism revenue to GDP, Cambodia, Thailand, and Vietnam had the highest proportions at 18.2%, 11.3%, and 9.8% respectively, followed by Malaysia and Singapore at 5.7% and 5.4%, and the Philippines and Indonesia at the lowest at 2.5% and 1.6% respectively.

After the COVID-19 pandemic, global tourism activities have been sluggish, and the recovery of the Southeast Asian tourism-related economy has significantly lagged behind other industries. With the reopening of borders in the second and third quarters of 2022, the tourism industry in Southeast Asia began to recover. By December 2022, the number of inbound tourists in the seven Southeast Asian countries had recovered to 61% of the same period in 2019. The recovery of inbound tourists in 2022 mainly relied on the movement of people within the ASEAN region, Europe, the Americas, and other countries. In 2023, with the opening of mainland China's borders, the Southeast Asian tourism industry further recovered, reaching 85% of the same period in 2019 by December 2023. Among them, tourists from countries other than China recovered to 94% of the same period in 2019, while Chinese tourists recovered to 48% of the same period in 2019.

In January 2024, Singapore and Thailand respectively signed a mutual visa exemption agreement for ordinary passport holders with China, boosting tourism between the two countries. Driven by the rapid recovery of tourists from China, the Southeast Asian tourism industry further recovered. As of February, the overall inbound tourists in six ASEAN countries (Indonesia, the Philippines, Singapore, Thailand, Vietnam, and Cambodia) had recovered to 90% of the same period in 2019 (approximately 79% in December 2023), with tourists from China recovering to 63% (45% in December 2023) and tourists from countries other than China recovering to 102% (87% in December 2023). Since the visa exemption with China on February 9, the number of tourists from mainland China entering Singapore has significantly increased, recovering to 96% of the same period in 2019 (66% in January). The mutual visa exemption not only promotes tourism activities and related industries between Southeast Asian countries and China, but also serves as the foundation for China-ASEAN connectivity. The further connectivity measures will further promote and catalyze the integration of countries in culture and commerce. Looking ahead to 2024, with the convenience of visa exemption, the resumption of flights, and government promotion, the number of inbound tourists in ASEAN countries will continue to recover in 2024. The tourism economy is an underestimated driving factor supporting the economic recovery of Southeast Asia.

1. Cambodia

In 2023, approximately 5.45 million tourists entered Cambodia throughout the year, about 82% of the number in 2019 (6.61 million). The number of tourists from the ASEAN region has far exceeded the level of the same period in 2019, reaching 200% in the second and third quarters, mainly due to Cambodia hosting the 32nd Southeast Asian Games in 2023, attracting a large number of tourists from the ASEAN region. By February 2024, the number of inbound tourists to Cambodia had dropped to 75% of the level in the same period in 2019.

Tourists from China accounted for a relatively high proportion of inbound tourists in Cambodia. Before the epidemic in 2019, approximately 2.36 million tourists from China visited Cambodia, accounting for about 36% (6.61 million tourists throughout the year in 2019). In 2023, about 550,000 tourists from China visited Cambodia throughout the year, accounting for about 10% of all tourists, which is about 23% of the same period in 2019. By February 2024, the recovery of Chinese tourists had somewhat stalled, reaching about 27% of the level in the same period in 2019 (Chinese tourist recovery level was 27% of the same period in 2019 in December 2023).

2. Thailand

In 2023, approximately 28.1 million tourists entered Thailand throughout the year, about 70% of the total in 2019 (39.92 million throughout the year). The number of inbound tourists to Thailand began to rapidly recover from the second quarter of 2022, driven by ASEAN tourists, and then the recovery of European tourists, bringing the number of inbound tourists in the first quarter of 2023 to about 70% of the same period in 2019. By December 2023, tourists from Europe, Asia (excluding ASEAN and China), the ASEAN region had recovered to almost full capacity; tourists from the Americas had recovered to nearly nine-tenths. By February 2024, the number of inbound tourists to Thailand had recovered to 93% of the same period in 2019, mainly due to the recovery of tourists from the ASEAN region and mainland China.

Before the epidemic in 2019, the number of tourists from China entering Thailand reached 11 million, accounting for about 28%. At the beginning of 2023, with the optimization of China's epidemic prevention measures, the Tourism Authority of Thailand had predicted that the number of tourists from China for the whole year would reach 6 to 7 million. In 2023, about 3.52 million tourists from China visited Thailand throughout the year, accounting for only about 13% of all tourists, which was only 32% of the 2019 level and only half of the Tourism Authority of Thailand's initial expectations. Chinese tourists rapidly recovered to nearly 40% of the level in the same period in 2019 from January to April 2023, entered a bottleneck period after that, and further recovered to 50% of the level in the same period in 2019 in December, reaching 63% of the level in the same period in 2019 by February 2024.

3. Vietnam

In 2023, approximately 12.6 million tourists entered Vietnam throughout the year, about 70% of the total in 2019 (18.01 million). The number of inbound tourists to Vietnam began to rapidly recover from the second quarter of 2022, driven by tourists from ASEAN and Asia (excluding ASEAN and China). By December 2023, tourists from the Americas, Europe, Asia (excluding ASEAN and China), and the ASEAN region had recovered to almost full capacity. By February 2024, the number of inbound tourists to Vietnam had reached approximately 96% of the level in the same period in 2019.

Before the epidemic in 2019, the number of tourists from China entering Vietnam reached 5.81 million, accounting for about 32%. In 2023, about 1.74 million tourists from China visited Vietnam throughout the year, accounting for only about 14% of all tourists, which was only 30% of the 2019 level. Chinese tourists rapidly recovered to over 45% of the level in the same period in 2019 from January to June 2023, then recovery progress slowed down in the third and fourth quarters, but picked up to 42% in December. By February 2024, Chinese tourists had further recovered to 57% of the level in the same period in 2019.

4. Malaysia

In 2023, approximately 20.14 million tourists entered Malaysia throughout the year, about 77% of the total in the same period in 2019 (26.1 million). The number of inbound tourists to Malaysia began to rapidly recover from the second quarter of 2022, driven by tourists from ASEAN, and by December 2022, had reached over 90% of the level in the same period in 2019. Although there was a slight decline in 2023, data from December showed that the number of inbound tourists was about 117% of the same period in 2019, with tourists from the Americas, Europe, and the ASEAN region recovering to over 120%. (Malaysia has not yet released data for 2024)

The proportion of tourists from China (including mainland China, Hong Kong, and Macau) among inbound tourists to Malaysia is not high. Before the epidemic in 2019, Malaysia received approximately 26.1 million inbound tourists throughout the year, with about 3.11 million tourists coming from China, accounting for about 12%. In 2023, about 1.47 million tourists from China visited Malaysia throughout the year, accounting for only about 7% of all tourists, which was only 47% of the 2019 level. Since 2023, tourists from China have steadily recovered, reaching 67% of the level in the same period in 2019 in the third quarter, and significantly increasing to 91% in December (Note: this data includes mainland China, Hong Kong, and Macau data, and if excluding Hong Kong and Macau data, the recovery level of tourists from mainland China would be lower).

5. Singapore

In 2023, approximately 13.61 million tourists entered Singapore throughout the year, about 71% of the total in the same period in 2019 (19.12 million). The number of inbound tourists to Singapore began to gradually recover from the second quarter of 2022, driven by tourists from ASEAN, Asia (excluding ASEAN and China), and Europe. By mid-2023, the number of inbound tourists had recovered to 80% of the level in the same period in 2019, then slightly declined. By December 2023, tourists from the Americas had recovered to almost full capacity; tourists from Europe, ASEAN, and Asia (excluding ASEAN and China) had recovered to about 80%. By February 2024, the number of inbound tourists to Singapore had reached approximately 96% of the level in the same period in 2019, mainly due to the recovery of tourists from mainland China and Europe.

The proportion of tourists from China among inbound tourists to Singapore is relatively low. Before the epidemic in 2019, approximately 3.63 million tourists from China visited Singapore, accounting for about 19%. In 2023, about 1.36 million tourists from China visited Singapore throughout the year, accounting for only about 10% of all tourists, which was only 38% of the 2019 level. Tourists from China began to recover from the second quarter of 2023, significantly increasing to nearly 60% in the third quarter, dropping to around 50% in the fourth quarter. By February 2024, Chinese tourists had further recovered to 96% of the level in the same period in 2019. Singapore is the country in ASEAN where the recovery of tourists from China has been the fastest.

6. Philippines

In 2023, approximately 5 million tourists entered the Philippines throughout the year, about 61% of the total in 2019 (8.19 million). The number of inbound tourists to the Philippines began to gradually recover from the second quarter of 2022, driven by tourists from Asia (excluding ASEAN and China), the Americas, and Europe. By the end of 2022, the number of inbound tourists had recovered to 60% of the level in the same period in 2019, then further recovered to 67% in December 2023. By December 2023, tourists from the Americas and the ASEAN region had recovered to over eight-tenths; tourists from Europe and Asia (excluding ASEAN and China) had recovered to about seven-tenths. By February 2024, the number of inbound tourists to the Philippines had further recovered to 72% of the level in the same period in 2019.

The proportion of tourists from China among inbound tourists to the Philippines is relatively low. Before the epidemic in 2019, approximately 1.74 million tourists from China visited the Philippines, accounting for about 21%. In 2023, about 260,000 tourists from China visited the Philippines throughout the year, accounting for only about 5% of all tourists, which was only 15% of the 2019 level. Tourists from China only began to recover in the second and third quarters of 2023 but still did not reach 20% of the level in the same period in 2019, and were much lower than in other countries in the region. By February 2024, Chinese tourists had further recovered to 28% of the level in the same period in 2019 (Chinese tourist recovery level was 16% of the level in the same period in 2019 in December 2023).

7. Indonesia

In 2023, approximately 11.57 million tourists entered Indonesia throughout the year, about 72% of the total in 2019 (16.11 million). The number of inbound tourists to Indonesia began to gradually recover from the second quarter of 2022, driven by tourists from ASEAN, Asia (excluding ASEAN and China), and Europe. By December, tourists from the Americas had recovered to over eight-tenths; tourists from Europe, ASEAN, and other regions of Asia (excluding mainland China and ASEAN) had recovered to nearly nine-tenths; tourists from mainland China had recovered to nearly half of pre-epidemic levels. By February 2024, the number of inbound tourists to Indonesia had reached approximately 83% of the level in the same period in 2019.

The proportion of tourists from China among inbound tourists to Indonesia is relatively low. Before the epidemic in 2019, approximately 2.07 million tourists from China visited Indonesia, accounting for about 13% (approximately 16.11 million inbound tourists in 2019). In 2023, about 790,000 tourists from China visited Indonesia throughout the year, accounting for about 7% of all tourists, which was only 38% of the 2019 level. Tourists from China began to recover since the second quarter of 2023, reaching 49% of the level in the same period in 2019 by December. By February 2024, Chinese tourists had further recovered to 53% of the level in the same period in 2019.

Jinming XIE, Economist at Hong Kong Financial Research Institute of Bank of China.

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