Why this is important to Wisconsin businesses: Imports of industrial machinery are rising along with this trend.
The Association of Southeast Asian Nations (ASEAN, which includes the six key economies of Singapore, Malaysia, Indonesia, Thailand, Vietnam and the Philippines, and the four smaller markets of Brunei, Cambodia, Myanmar and Laos) has positioned itself well as a region for low-cost manufacturing, consequently solidifying the region as one of the major destinations for global foreign direct investment (FDI) in manufacturing.
Along with this inflow of FDI, ASEAN is also seeing a steady increase in imports of industrial machinery, with the U.S. being one of the top supplying countries in the region. Records from the Trade Map of the International Trade Centre (ITC), a joint agency of the World Trade Organization and the United Nations, show that ASEAN's global imports amounted to $176 billion in 2018 for HS Code 84 (machinery, mechanical appliances, nuclear reactors, boilers and parts thereof), of which about $21 billion, or 12%, were supplied by the U.S.
Singapore is the top importer in the region and one of the U.S.’s top global export destination for goods in HS Code 84. Singapore imported $53 billion (30% of ASEAN's imports) in 2018 from around the world, $15 billion of which came from the U.S. Notably, the U.S. has historically been Singapore's top supplier for this product category.
Vietnam, one of the world’s current high-growth markets, is another country in the region to watch. Global imports in Vietnam for HS Code 84 more than doubled in the last 10 years, from $11 billion in 2008 to $24 billion in 2018. Top supplying countries are China and nearby Asian countries, as well as Germany and Italy. While the U.S. is 11th in the ranking, Vietnam presents huge potential for U.S. exporters, as U.S. exports for HS Code 84 increased by 30% in the last 10 years, reaching almost half a billion dollars in 2018, thereby increasing the U.S.’s market share in Vietnam from just 0.3% to 2%.
Cambodia is another high-growth market to consider. Although its value of imports is not as high as Singapore or Vietnam, the country is recording remarkable levels of growth, with the current market six times larger than in 2008. Cambodia's global imports for HS Code 84 rose sharply to $1.5 billion in 2018, from just $260 million a decade prior. Like Vietnam, Cambodia counts nearby Asian countries (particularly China and Thailand) as its top source markets. While Cambodia's imports from the U.S. have increased sixfold over the last decade, from $4 million in 2008 to $24 million 2018, the U.S. market share has remained relatively stable at 2%.
Thailand, Indonesia and Malaysia have also grown their imports in the last decade. The U.S. is one of the top 10 suppliers to these countries; however, U.S. exports have been declining, arguably due to stiff competition from nearby Asian countries—particularly China and Japan. The situation is similar for the Philippines and Brunei.
In terms of subsectors, key product categories that most ASEAN countries import from the U.S. include:
- Turbojets, turbo propellers and other gas turbines
- Automatic data-processing machines and units thereof; magnetic or optical readers; machines for transcribing data onto data media in coded form; and machines for processing such data
- Taps, cocks, valves and similar appliances for pipes, boiler shells, tanks, vats and the like, including pressure-reducing valves and thermostatically controlled valves and parts thereof
- Parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with machines of HS Code 8469 through 8472 (typewriters and word-processing machines; calculating devices, cash registers and automatic goods-vending machines; office machines)
- Centrifuges, including centrifugal dryers (excluding those for isotope separation); filtering or purifying machinery and apparatus for liquids or gases; and parts thereof (excluding artificial kidneys)
One notable high-growth subsector in Singapore, Malaysia, Vietnam and Thailand is industrial robotics, with each country importing between $50 million and $80 million in 2018. Vietnam’s imports of industrial robotics have doubled in the last five years. Japan is generally the top supplier, followed by China, the U.S., Europe and other countries in Asia.
With the above opportunities, Wisconsin companies that are looking to enter the ASEAN market or expand their exports there are recommended to attend regional trade shows where they can have the chance to meet regional and/or local partners. One such show is MTA, a leading trade show for industrial products held annually in Singapore, Thailand or Vietnam.