Thailand, the Philippines, and Argentina have emerged as some of the highly potential countries that have yet to be fully leveraged, with opportunities to play increasingly significant roles in the global supply chain, according to a new global trade trend analysis.
A report by Verisk Maplecroft, a UK-based risk analysis firm published last Thursday (25 June), states that these countries, along with several others in Southeast Asia and Latin America, are likely to benefit from the trend of supply chain diversification. This is because businesses worldwide are no longer focused solely on cost and efficiency but are increasingly prioritizing supply chain resilience and risk management capabilities.
The report also warns that one-third of the world's most congested ports and airports face risks from geopolitical conflicts, environmental hazards, and internal security issues. At the same time, trade resilience in over 150 countries, representing 90% of global trade, has weakened, creating opportunities for countries viewed as Rising Stars to take on greater roles.
Moreover, although the closure of the Strait of Hormuz during conflicts involving the U.S., Israel, and Iran has created short-term pressures for both Thailand and the Philippines, Verisk Maplecroft noted that long-term investors still find these two countries very attractive markets.
The assessment of each country's potential is based on three main factors: market openness, regulatory strength, , and labor rights standards.
According to the report, Verisk Maplecroft states that Thailand's risk level has decreased compared to neighboring countries over the past five years.
The report notes that Thailand's electronics industry is being boosted by investments in artificial intelligence (AI), positioning the country well to support supply chains with higher added value.
However, despite challenges from an aging society and higher labor costs than many regional countries, Thailand's overall fundamentals remain strong.
Laura Schwartz, senior Asia analyst at Verisk Maplecroft, said, “Thailand has very ready components for many industries seeking new alternatives for supply chain diversification.”
Next door, the report states that the Philippines continues to have potential as a supply chain hub despite ongoing political unrest throughout the past year, including a major corruption case involving a flood prevention project, which led to arrest warrants for several politicians.
This corruption case affected foreign investor confidence last year and was one factor prompting the government to revise down this year's economic growth forecast.
Additionally, the Philippine Senate has experienced internal conflicts stemming from divisions between President Ferdinand Marcos Jr. and Vice President Sara Duterte, with an impeachment inquiry scheduled for July.
Laura Schwartz noted that despite the political instability, the government continues to implement various policies behind the scenes, including efforts to attract investment and reduce regulatory burdens on businesses, although the results are not yet clear.
She added, “Sometimes political turmoil can halt policymaking entirely, but in some cases, policy development can continue alongside political conflicts.”
The Philippines benefits from a young workforce proficient in English, giving it strong potential to develop service industries and outsourcing businesses.
If companies have supply chain management systems that effectively monitor and control corruption risks, corruption is not a major obstacle to investment.
Regarding Argentina, the report sees that trade agreements between the European Union (EU) and Mercosur—a key economic and trade bloc in South America—as well as trade and investment deals with the U.S., may help boost exports of key minerals, energy, and industrial goods.
Chile and Uruguay are also considered countries with potential, with Uruguay evaluated as having the best balance between business opportunities and risk levels in the region.
The report states that although Latin America still lags behind Southeast Asia as a major manufacturing hub, Western efforts to reduce reliance on China are opening opportunities for many countries in the region to emerge as new players in the global supply chain.
Meanwhile, the report points out that Vietnam, Malaysia, Mexico, and Brazil have already benefited from reduced trade between the U.S. and China, with all four having advantages as global manufacturing bases.
However, Verisk Maplecroft warns that although these countries benefit from these trends, company data show that risks potentially impacting the supply chains of multinational corporations in these four countries are also increasing.
Source:Bloomberg
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