Despite Strong Manufacturing Foundation, Most ASEAN Countries Still Fall Behind In Digital Transformation, Survey Finds | Vietcetera
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Despite Strong Manufacturing Foundation, Most ASEAN Countries Still Fall Behind In Digital Transformation, Survey Finds

Southeast Asian countries have had a strong manufacturing foundation for decades. But somehow, some parts of the region still lag in digital transformation. 

Despite Strong Manufacturing Foundation, Most ASEAN Countries Still Fall Behind In Digital Transformation, Survey Finds

Export manufacturing has played a critical role in powering remarkable socioeconomic development across Southeast Asia. | Source: Shutterstock

Southeast Asian countries have had a strong manufacturing foundation for decades. The region already has a range of well-established manufacturing clusters that include electronics in Vietnam and Malaysia, automobiles and packaged foods in Thailand, machinery and petrochemicals in Indonesia, packaged foods and apparel in the Philippines, and semiconductors, biopharmaceuticals, and aerospace components in Singapore. 

In fact, the emerging economies in ASEAN have long been destinations for manufacturers seeking abundant low-cost labor, while Singapore has served as a hub for high-value R&D-intensive industries and trade-supporting services such as finance and logistics.

Evidently, export manufacturing has played a critical role in powering remarkable socioeconomic development across Southeast Asia. But somehow, some parts of the region still lag in digital transformation. 

Behind implementing digital solutions

Nearly half or 46.6% of manufacturing and supply chain professionals in Southeast Asia believe that their companies are still lagging behind in terms of digital transformation, according to a survey conducted by Singapore-based growth consulting firm AIBP and Oracle.

The head of Oracle Enterprise Resource Planning and Digital Supply Chain Michael Lin said that since 2020 and the recent Suez Canal blockade, there is an urgent need to reorganize the supply chain. “Manufacturers in the region are also aware that they are creating strong and flexible logistics processes. To keep the business running efficiently, the internal resources they have are not enough.”

Meanwhile, the remaining 16.6% of the 193 professionals asked in the survey who are mainly in the IT, innovation & business backgrounds in manufacturing and supply chain companies across the largest economies in Singapore, Indonesia, Malaysia, Thailand, the Philippines, and Vietnam feel that digital solutions should be used to increase or create revenue opportunities.

While some companies struggled to come to terms with unusual fluctuations in supply and demand, other companies were better prepared. Still, the COVID-19 pandemic has seen supply chain disruptions across industries.

It is also worth mentioning that the manufacturing industry contributes more than 20% of the gross domestic product (GDP) in markets such as Singapore, Indonesia, Malaysia, and Thailand. 

In addition, the recent trade tensions between the United States and China have also increased expectations of how manufacturing will contribute to markets such as Indonesia and Vietnam. In the same way, local governments are focusing on improving local manufacturing capabilities by implementing policies to encourage and support Industry 4.0 initiatives.

46.6% of manufacturing and supply chain professionals in Southeast Asia believe that their companies are still lagging behind in terms of digital transformation. | Source: AIBP

Vietnam’s digital transformation program

Vietnam is one of the pioneering countries in building a national digital transformation program, focusing on digital government, digital economy, and digital society.

In September 2019, the Party Central Committee issued Resolution No 52-NQ/TW on a number of policies and guidelines regarding the country’s engagement in the Fourth Industrial Revolution, with an emphasis on speeding up digital transformation.

By 2025, Vietnam strives to maintain its position amongst the top three ASEAN countries in the Global Innovation Index (GII) rankings; aiming for the digital economy to account for ~20% of GDP, and labor productivity to increase 7.5% every year. 

The National Digital Transformation Project of Vietnam sets out the vision, goals, and key areas of focus of digital transformation such as digital transformation in enterprises, state agencies, and healthcare and education organizations.

In addition, then Prime Minister Nguyen Xuan Phuc also issued Decision No 749/QD-TTg approving the national digital transformation program by 2025 and vision towards 2030.

To attain rapid and sustainable economic development, Ho Chi Minh City is focusing on areas such as E-Government, Intelligent Transport Systems, Flood Control, and Environment Monitoring. The city government is looking to implement an Integrated Operations Center which will be the ‘brain’ of the city by integrating daily information and resources across all sectors in the City.

In 2020, the Ministry of Science and Technology (MST) proposed an initiative to build a road map and adopt solutions to foster smart production in Southeast Asian countries.

An official from MST’s Directorate for Standards, Metrology, and Quality, Vu Thi Tu Quyen, said the results of the agency’s survey of smart manufacturing methods in 93 enterprises from 10 ASEAN countries pointed out the importance of smart manufacturing solutions in the region amid ongoing global trends.

“Industry 4.0 has shown that promoting the development of digital production by boosting the digitalization of and connectivity between products, value chains, and business models will contribute to GDP growth,” the official added.

Quyen cited many reports suggesting that to increase workplace productivity, it is important to foster production by linking machinery, data, and value chains towards digital transformation and smart manufacturing.

Smart production is expected to grow strongly in the ASEAN region from 2025 onwards, she added.

Quyen emphasized that ASEAN countries have been taking different steps in accessing and promoting smart production, proving Vietnam’s initiative to build a road map and adopt solutions to foster smart production in the region is necessary and more practical.