Export-oriented manufacturing (EOM) has played a pivotal role in global industrialization and
economic transformation. Emerging after World War II, it helped rebuild war-torn economies and
stimulated growth in developing nations.
In East Asia, the “East Asia Miracle” (1960s–1990s) saw countries and territories like Japan, South
Korea, Taiwan, Hong Kong and Singapore rapidly industrialize, reduce poverty and sustain
economic growth through export-driven strategies. Southeast Asian nations like Malaysia,
Thailand, and later Vietnam, adopted similar strategies to integrate into the global economy.
Today, EOM remains a cornerstone of development in the region, contributing significantly to the
expansion of the middle class and to the journey toward high-income nations.
“According to the latest data from the ASEAN Secretariat, manufacturing accounts for over 20%
of ASEAN’s combined GDP, employs millions, and drives 75% of goods exports,” says Mr.
Giuseppe Di Lieto, founder of the Singapore-based boutique consulting firm Exponasia Growth
Partners. “While sectors like services and tourism are gaining momentum, manufacturing will
remain a critical economic driver in the years ahead”.
As the Southeast Asia countries embraced EOM, they experienced profound benefits:

• Economic Diversification: EOM shifted economies from dependence on agriculture and
  natural resource to reliance on a broad variety of manufacturing sectors, reducing vulnerability
  to commodity’s market cycles and price fluctuations.
• Job Creation: EOM generated millions of jobs, particularly for unskilled and semi-skilled
  workers, promoting upward mobility and social stability.
• Attracting FDI: EOM attracted capital, expertise and technology.
• Global Value Chains: EOM integrated economies into global production networks, offering
  access to international markets and advanced technologies.
• Economic Resilience: EOM diversified export portfolios improved resilience against global
  market disruptions.

  Leveraging these advantages, EOM continues to drive Southeast Asia’s economic growth and
  global competitiveness. This impact is evident in early adopters like Singapore, countries that
  have gained global prominence in recent decades such as Malaysia, Thailand and Vietnam, and
  those poised to emerge as the next players on the global stage.

Singapore: A High-Value Manufacturing Powerhouse

As a key player in the “East Asia Miracle,” Singapore used EOM to transition from an
underdeveloped economy to a high-income nation. In the 1960s, it embraced labor-intensive industries like textiles and electronics, creating jobs and attracting foreign investment. By the
1980s, Singapore shifted to higher-value sectors such as semiconductors, precision engineering,
petrochemical and offshore engineering. This strategy fostered innovation and upskilled the
workforce, allowing the nation to climb the manufacturing value chain. Today, manufacturing
contributes around 22% to GDP and employs around 10% of the workforce, with significant
contribution to advanced industries like pharmaceutical, medical technology, chip manufacturing
and aerospace.

Malaysia: From Agriculture to the “Silicon Valley of the East”

Malaysia’s shift from an agriculture-based economy to a global manufacturing hub began in the
1960s with the First Malaysia Plan. A landmark moment occurred in 1972 when Intel established
its first international plant in Penang, attracting major US companies like Broadcom, Dell, and
Motorola. The 1990s saw further acceleration with strategic initiatives that drew multinational
corporations, building a strong foundation for industrial growth. Today, manufacturing accounts
for 23% of Malaysia’s GDP, employing 2.7 million people. Key industries include petrochemicals,
automotive, electronics, and food production. Recently, Malaysia has planned on advancing into
high-tech sectors, such as front-end semiconductor manufacturing and data centers, to enhance
its position as an innovation leader.

Thailand: The “Detroit of Asia”

Thailand’s export-oriented manufacturing (EOM) strategy has established it as a global leader,
particularly in automotive production. The industry began in the 1960s, driven by government
efforts to industrialize. Early assembly plants from Japanese carmakers like Toyota and Nissan
laid the foundation. Localization policies in the 1970s and 1980s attracted foreign investment,
strengthening the supply chain. By the 1990s, trade liberalization and incentives attracted global
automakers such as Honda and GM. Today, Thailand produces around 2 million vehicles annually,
with a growing focus on electric vehicles. In addition to automotive, the country excels in
petrochemicals, plastics, electronics, food processing, and textiles. This manufacturing diversity
contributes 27% to GDP and employs 16% of the nation’s workforce.

Vietnam: The Rising Star in Southeast Asia Manufacturing
Vietnam’s rise as a manufacturing hub has been fueled by its strategic location, competitive labor
costs, and favorable trade agreements. A key milestone came in 2007 with its WTO accession,
attracting foreign investment. Over the past two decades, global companies like Samsung, Intel,
and LG have set up operations, particularly in electronics. Textile and apparel production also
thrives, benefiting from strong export markets in Europe and North America. Manufacturing now
accounts for 25% of Vietnam’s GDP and employs 23% of the workforce. In recent years, there
has been a shift toward higher-value industries, with the government promoting technological
adoption to sustain growth and enhance competitiveness.

The Next Frontier of EOM in Southeast Asia

While Singapore, Malaysia, Thailand, and Vietnam are established manufacturing hubs of global
relevance, a new wave of Southeast Asian nations is emerging:
Indonesia: With abundant natural resources and a young workforce, Indonesia is set to become
the next Southeast Asia manufacturing powerhouse. Challenges remain in regulatory reforms,
workforce upskilling and infrastructure improvements.
Philippines: Traditionally strong in food, beverage and electronics, the Philippines are expanding
into higher value segments. Their English-speaking, skilled workforce and central geographical
location make it attractive for investment, though infrastructure gaps persist.
Cambodia: An established center for the garment industry, Cambodia is branching into
electronics manufacturing. However, significant investments in infrastructure and workforce
development are crucial for long-term competitiveness.

Lessons from the Southeast Asia’s Development Journey

The experience of EOM in Southeast Asia offers valuable lessons for developing economies:

• Focus on Export Markets: Integration into global trade networks drives economic growth by
  providing access to international markets, technology and expertise, which are essential for
  industrial development.
• Invest in Human Capital: Building a skilled, adaptable workforce is crucial for sustaining
  industrial growth and competitiveness. Technical education and proficiency in languages used
  in global business such as English, are key to meeting the demands of rapidly evolving global
  industries.
• Maintain Macroeconomic Stability: A stable fiscal and monetary environment attracts
  foreign investment, supports industrial growth and fosters investor confidence through
  consistent policies and transparent governance.
• Develop Infrastructure: Robust infrastructure—efficient transport, reliable energy systems,
  and advanced digital connectivity—lowers costs, attracts foreign investment, and supports
  local businesses.
• Develop Local Supply Chains: Strengthening local supply chains reduces dependency on
  global disruptions and supports sustainable growth. By fostering relationships between local
  suppliers and multinational companies, Southeast Asian nations create resilient, efficient
  ecosystems that drive innovation and enhance industrial competitiveness.

Charting a Dynamic Future in Export Manufacturing

As Southeast Asia continues to evolve, the lessons from its EOM success offer a roadmap for
other developing economies. By focusing on export markets, investing in human capital,
maintaining macroeconomic stability and developing essential infrastructure, ASEAN nations have
built a foundation for long-term growth and competitiveness.
Mr. Giuseppe Di Lieto is optimistic about the future of manufacturing in Southeast Asia: “Current
economic and geopolitical trends are set to provide strong momentum for ASEAN’s economies to
remain relevant, competitive, and thrive. Moving forward, focus will remain on driving innovation,
enhancing productivity and transitioning to higher-value manufacturing sectors.”
By embracing these strategies, ASEAN is positioning itself to navigate future challenges and
continue its journey toward high-income economies, offering valuable lessons for other
developing economies along the way.

Article by Exponasia Growth Partners