Much of the discussion around changes in sourcing patterns has focused on South and Southeast Asia. In making location decisions, companies need to balance multiple factors including labour cost and skill considerations, infrastructure, ease of doing business and freight connectivity. This also have implications from a government policy perspective – without connectivity there cannot be any meaningful growth in trade. This article provides an assessment of current international air cargo and liner shipping connectivity in South and Southeast Asia in the context of expected growth and growth aspirations.
Trade Forecast
Expected import and export growth across the region through to 2028 is generally above the world average forecast growth of 3.9% per year. The star performers on both the import and export side are expected to be Indonesia, Vietnam, Cambodia, and Bangladesh. Note that the chart below does not include Sri Lanka, for which IMF did not provide a trade forecast due to the economic that affected the country from 2022 until the second half of last year.
While India and Singapore are expected to outperform on the import side, this is not the case on the export side. Malaysia and Thailand are forecast to have below average performance.
Air and Maritime Connectivity
This growth picture is somewhat at odd with the connectivity picture. The two charts below provide an overview of the level of air cargo and liner shipping connectivity for the top 10 airports and seaports in the region.
On both the air cargo and shipping side, Singapore sets the regional benchmark in terms of connectivity. On the air cargo side, Bangkok (BKK), Kuala Lumpur (KUL) and the two major Indian gateways Delhi (DEL) and Mumbai (BOM) comprise the remainder of the top 5. The importance of freighters in terms of providing connectivity varies by city among the top 10 but both Ho Chi Min City and Hanoi have a high freighter share, as do Singapore and Kuala Lumpur. Availability of both belly and maindeck capacity is a key factor in location decisions. Vietnam has grown, but Southeast Asia’s main hubs are still Singapore, Bangkok and Kuala Lumpur.
On the container shipping side, Singapore, Malaysia, Sri Lanka all benefit from their geographic proximity to major shipping lanes.
Ports on the Western side of the Indian subcontinent (including Sri Lanka) have seen an increase in connectivity over time, but also in recent months as a consequence of changed routings due to the Red Sea crisis. Particularly Colombo has benefited. However, short term gains in connectivity do not necessarily signal a long term shift. The level of connectivity in Malayia, Singapore, Thailand, and Indonesia has generally fluctuated but has not necessarily showed an upward trend. With the exception of Indonesia connectivity was already high to begin with. The main Vietnam ports have seen a gradual increase in connectivity as trade has grown.
From a development perspective we find that Indonesia is generally lagging behind its regional peers in terms of both air cargo and liner shipping connectivity. This is something that needs to be resolved – together with appropriate infrastructure – to support the country’s region leading growth trajectory.