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MITI-V: Reshaping "World's Next Factory"

Updated: Jun 15, 2022

The 2016 GMCI : Global Manufacturing Competitiveness Index report is the third study prepared by Deloitte, with prior studies published in 2010 and 2013. This multi-year research platform designed by Deloitte is to identify which nations would expect to offer the most competitive manufacturing environments.


Manufacturing remains critically important to both the developing and the advanced nations. The sector is a vital source of exports, innovation & productivity growth, and stimulating economic prosperity. With the flux of time, the industry is changing rapidly while bringing new opportunities & challenges. Countries and organizations are striving to advance technology and raise their financial well-being.


Fall of China: As a low-cost manufacturing Nation


Manufacturing goods in China is now only 4% cheaper than in the US, mainly because yearly average manufacturing wages in China have increased by 80 percent since 2010.


China can produce very complex products in this era. The country can maintain a good quality of the products while skilling up handsomely. Smartphones, robots, and advanced manufacturing equipment have even surpassed the US by developing the world's fastest supercomputer, Tianhe-2 or Milky Way 2, as it prioritizes "High-Performance Computing" as one of the most promising advanced manufacturing technologies.




China is focusing on upgrading the industry into medium to high tech as the years' pass. As Chinese manufacturing becomes high-value and wages rise, low-cost manufacturing moves out of the country. Especially shoe-making, apparel is already moving out to Vietnam, Indonesia, and even Bangladesh.


Rise of MITI-V


China is dramatically changing by actively pivoting towards a more technologically advanced manufacturing paradigm to align with other nations and innovative-oriented markets. This shift creates opportunities for other countries to build their position as low-cost global manufacturing destinations.


Countries looking to capitalize on China's evolution include MITI-V: Malaysia, India, Thailand, Indonesia, and Vietnam, the "Mighty Five."


While these countries continue to maintain the interest of global manufacturers looking for alternatives to China, each country must overcome various challenges while accentuating its unique strengths to take absolute supremacy of international manufacturing investment opportunities.


ANALYSIS OF THE "MIGHTY-FIVE"


Malaysia has a low-cost base of workers earning one-fourth of their counterparts in the neighboring country, Singapore. The government strongly focuses on assembling, testing, designing, and developing components and systems production, making it well equipped to support high-tech industries. On the contrary, a talent shortage, political unrest, and comparatively low productivity pose a challenge.


Thailand offers a skilled workforce and high labor productivity, backed by a 90% national literacy rate, with approximately 100,000 engineers, technology, and science graduates annually. In contrast, this highly skilled workforce creates relatively high labor costs. Still, Thailand remains attractive to manufacturing companies, as they offer a lower corporate tax rate than other countries in MITI-V. Already a well-established nation with political uncertainty.


As China's labor costs climb over time, Indonesia's costs have remained uniform; the manufacturing labor costs are less than one-fifth of those in China, drawing the attention of those manufacturers looking for a stable, low-cost substitute. The island pales with the sheer size of its population, and Indonesia remains high on the list of alternatives.


Boasting comparatively low labor costs, Vietnam is another alternative to China. It has raised its overall productivity outpacing other nations like Thailand and Malaysia. Such productivity has caused manufacturers to construct billion-dollar manufacturing complexes in the country. However, Vietnam's manufacturing capacity is not close to China's.


As for India, 62% of worldwide manufacturing executives rank India as highly competitive on cost, closely aligning with China's performance. India's government supports initiatives like "Make in India" and funding that focuses on attracting manufacturing investments. The country also provides a highly skilled workforce and a vibrant pool of English-speaking scientists, researchers, engineers, and labor-class residents, making it well-suited to support high-tech industries.


Nevertheless, India's huge market, graduation rates, low costs, and positive noises from the government (through different incentives) make it unavoidable for any manufacturer to produce bulk commodity products that may secure India as the next low-cost manufacturing hub.


When viewed as a whole, the Mighty Five nations are an attractive alternative for market and economic growth. The advantages that the MITI-V nations represent for global manufacturers are as follows:

(1) Numerous tax incentives,

(2) Tax exemptions or reduced import duties, and

(3) Reduced duties on capital goods and raw materials used in export-oriented production.


This emerging cluster may be a captivating substitute for China's manufacturing sector. The timing and extent to which China's labor costs go up in the coming years will determine how MITI-V nations can fully harness the talent of their workforce, fund requisite infrastructure, and create regulatory policies in sync with the manufacturing sector.



Drivers of Global Manufacturing Competitiveness


In an era where cost competitiveness was of essence today, it scores position, talent being the most important. What is talent, according to the study? The quality and availability of highly skilled workers may facilitate innovation in manufacturing strategies.


To better understand most competitive nations' comparative strengths and weaknesses, global manufacturing executives rated six focus countries: the US, Germany, China, South Korea, and India, based on 12 drivers of competitiveness.


The survey results revealed that China and India have the most competitive advantage in labor and materials. However, these two countries are least competitive in their legal and regulatory environments, with India facing challenges due to its poor infrastructure.


In this ongoing battle for global manufacturing, supremacy belongs to the countries prioritizing a comprehensive agenda to remain attractive to multinational companies while finding the right balance across several vital drivers.


Where do we come into play?


Here at Ximpex, we strive to provide you with the best services to export goods/ products. As with the shift in the market, the manufacturing sector will grow immensely in the coming years, resulting in a jump in our nation's exports.


Ximpex provides you with experts in the foreign trade department for you to grow your business internationally quickly. Our team helps you succeed in foreign markets while keeping in mind the amounts of money every customer is willing to spend. We save you money while keeping you safe at every stage. Ximpex provides you with everything you need from A to Z for exporting.


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