- Reinforced supply chain actions keep Asia Pacific’s outlook upbeat amid challenges, geopolitical tensions
- New research from Economist Impact and DP World says 2024 will see more businesses in APAC investing in technology and turning to “friendshoring” and parallel sourcing to enable growth and supply chain resilience
- 39% of APAC executives surveyed are using AI to lessen disruptions in their supply chains
- Over a quarter expect technological upgrades to be the primary growth drivers for their firm’s imports in 2024
- APAC is projected to be the fastest-growing region in the world in terms of both imports and exports
- Intra-Asia trade is also on the rise, with one-third of APAC execs saying that Southeast Asia is one of their primary export markets
Reinforced supply chain actions have kept the Asia Pacific’s (APAC) outlook upbeat amid challenges and geopolitical tensions, according to new research from Economist Impact and DP World.
The latest Trade in Transition research, commissioned by DP World and led by Economist Impact, featured the perspectives of trade experts and senior executives worldwide.
The research said that 2024 will see more businesses in APAC investing in technology and turning to “friendshoring” and parallel sourcing to enable growth and supply chain resilience.
Friendshoring is the activity of manufacturing and sourcing from countries that are geopolitical allies which makes it a trade bloc.
The Trade in Transition research was unveiled at the World Economic Forum (WEF) in Davos which opened on January 15.
The report found the “primary driver” of optimism in APAC is a growing belief that technology will transform the efficiency and resilience of supply chains.
In the face of political instability, high inflation and interest rates as well as economic downturn in key markets, businesses are also implementing friendshoring and dual supply chain strategies to manage risk across their operations.
When asked to assess the future of global trade, 32% of APAC business leaders cited the ability of technology to improve supply chain efficacy and resilience as their main reason for optimism.
27% also expect technological upgrades to serve as primary growth drivers for their companies’ imports.
At the core of these positive sentiments is the increasing adoption of artificial intelligence (AI). Around 99% of APAC businesses are using AI to revolutionize at least one aspect of their supply chain management, including:
- Streamlining operating costs (cited by 34% of respondents);
- Improving resource planning to reduce supply chain disruptions (31%); and
- Identifying new sources of demand (29%).
Businesses are set to proactively ramp up their technological adoption in 2024, underscoring a commitment to innovate given an ever-changing operating environment.
At least 39% are prioritizing increasing research and development efforts to enhance products, services, and supply chain operations. Of those surveyed in APAC:
- 32% are poised to incorporate advanced automation and robotics to amplify logistical efficiencies;
- 27% intend to embrace augmented or virtual reality for troubleshooting and repairs; and
- 25% will integrate blockchain technology to enhance traceability, security, and data protection.
Among APAC executives, the enduring threat of inflation was cited by 28% as their main concern over the next two years.
Additionally, 26% express fears of economic downturn in key markets where they operate. In response to economic headwinds, an increasing number of APAC firms are restructuring their supply chains, with 24% opting for fewer suppliers – a 13%-point increase from the previous year.
Many are looking within Asia for trade opportunities, with 30% of APAC executives stating Southeast Asia is one of their primary export markets.
Economist Impact also conducted a quantitative trade analysis through the Global Trade Analysis Project (GTAP) platform to estimate the potential global output loss from hypothetical scenarios of further “geo-economic fragmentation.”
In a scenario focused on significantly increased trade barriers on high-tech goods – a focal point in the current geopolitical climate – the GTAP modeling projected a 0.9% decline in worldwide GDP.
In APAC, nearly a quarter of businesses express concerns about political instability in sourcing markets.
“Asia Pacific’s imports and exports are projected to grow over 5% in 2024 – the fastest, globally. The report makes clear that intra-Asian trade is critical to ensuring that businesses continue to develop and prosper in the region and technology will play a critical role,” Glen Hilton, CEO & Managing Director for DP World in Asia Pacific said.