On November 3rd, local time, Thaksin Srivika, President and CEO of the Thai industrial giant Siam Cement Group (SCG), said at the Fortune Southeast Asia 500 Summit held in Ho Chi Minh City that cheap exports from China is a “fact of life” that must be faced. Southeast Asian manufacturers need to build factories of sufficient size to sell products to the entire region; otherwise, they will be eliminated from the market.
He said at the meeting: "A large number of high-quality and competitive Chinese products are flooding into the entire region... For SCG, this is the reality of life, and we must make adjustments."
According to data from the industry research firm ICIS, China's polypropylene exports will increase from 1.3 million tons in 2022 to 3.1 million tons by 2025. An analyst at ICIS estimates that if this growth trend continues from January to May, exports could reach approximately 5.1 million tons in 2026.
Tamassak believes that the markets in Southeast Asia are too small to be able to handle production alone. "The scale of production for Vietnam alone may not be enough," he said, "You need to establish a production capacity that can support the entire ASEAN region."
Last year, we were phasing out the old small factory and building a new large factory,” he continued. “Then he mentioned SCG's new ceramic factory in Vietnam: much larger than the previous one.”
Guests who discussed the same group as Tamasak also expressed optimism about Southeast Asia's ability to move towards the upper end of the value chain. Salil Charri, President of FedEx Asia-Pacific, said, "I visited a client in Vietnam yesterday. They used to produce industrial connectors, some traditional industrial products. Now, with the growth in the artificial intelligence data center sector, they have moved up the value chain, producing fiber optic cables for data centers."
SAP Southeast Asia President and Managing Director Helle Ulbisu also pointed out that R&D investment is a way to help Southeast Asia 'escape the middle-income trap and climb up the value chain'. He mentioned that South Korea invests about 5% of its GDP in R&D each year, Singapore at around 2%, while the other ASEAN countries only invest 1% or less.
SAP is the largest software and enterprise service technology company in Europe. Over the past two decades, its largest research and development center has always been situated in India and China; until recently, it has begun to layout its R&D capabilities in Southeast Asia. Ulbisoo mentioned SAP's Ho Chi Minh City laboratory at the conference, currently with 500 developers writing code for global customers there.
Urbis said that ASEAN SMEs are adopting AI faster than their counterparts in Europe and the United States. "People are increasingly believing that artificial intelligence can bring commercial benefits."
Tamarak said that SCG's research and development budget cannot be compared with that of China. Therefore, it is necessary to be more frugal with the use of funds. “We need to be more sensible.”
