1. A Manufacturing Risk Index assesses the, economic, technological and environmental risks in site selection for new manufacturing facilities.
2. A report by Cushman & Wakefield (C&W), ontains an Established Index, which ranks the 30 largest countries by manufacturing output, and a Pioneering Index, which measures the attractiveness of growing but less mature markets.
3. The highest rankings are described as “the scenario of a highly automated manufacturer” and the factors and weightage are as follow:
(i) Conditions - including labor force, logistics, and business environment are weighted at 40 percent.
(ii) Risks - including natural disasters, economics and energy, are weighted at 20 percent.
(iii) Costs - including labor, construction and electricity, are also weighted at 20 percent.
4. The rankings also factor in alternative scenarios, such as manufacturers driven by low operating costs, which weighs conditions and risks at 20 percent and costs at 60 percent.
KEY RESULTS
1.For consecutive years Malaysia tops the Established Index ranking as an attractive market for locating manufacturing facilities. On another survey conducted by BAV Consulting, Malaysia has emerged as the front-runner in the 2017 ranking for best countries to invest in, scoring at least 30 points more than any other country on a 100-point scale.
2. FTY 2016, in the top 10 spot of the Established Index are Malaysia, Taiwan, China, the US, South Korea, Canada, Hungary, Sweden, the Czech Republic and the Netherlands. The top six have all retained their ranking from the previous year. Asia Pacific countries occupy seven places within the top half of the Established Index.
3. On the Pioneering Index for less matured markets, Costa Rica is ranked first (up from fourth in 2015), followed by Vietnam, Sri Lanka, Lithuania and Tunisia in the top five.
ASIA PACIFIC
1. In China, policies either encouraging or directly funding investments in science and technology, technology transfer, sustainability, and infrastructure development appear to be helping Chinese-based companies to create a significant competitive advantage through critical mass, although the region does face some competition from neighboring markets.
2. India rises five places on last year - Given the present Government’s focus on ‘Make in India’ India is witnessing increasing investments by global manufacturers. It is anticipated that this increase in investment will further support infrastructure improvement projects, especially as further policies and regulations actually take shape.
3. Malaysia’s infrastructure services are conducive to productivity with the quality of infrastructure relatively high, despite some concerns surrounding water availability and power outages of late. While other middle-income countries may be catching up with Malaysia in terms of infrastructure standards.
UNITED STATES & UNITED KINGDOM
1. Strong and supportive policies and investment surrounding research & development and innovation reinforce the attraction of the US - offsetting the higher costs resulting in Both The United States of America and Canada secure placement within the top 10.
2. Technological advancements do carry other implications for US employment prospects, a market already having lost nearly 5 million manufacturing jobs in the last two decades. Of more than three million manufacturing jobs that will open up over the next decade, about two million are expected to go unfilled because not enough workers are trained for these highly skilled, technical roles.
3. Canada retains a low-risk profile despite heightened risk exposure surrounding President Elect Trump’s decisions surrounding the North American Free Trade Agreement (NAFTA)
4. UK remains a leader in research & development and innovative design and as such a number of manufacturers have opted to on / re-shore facilities, attracted by the higher-end manufacturing capabilities, science and design skills available. Design and automation is critical to future production and the UK is in strong position with many of Europe’s largest design centers located on home shores
5. The location of the top global education practices and Universities is critical in a number of sectors requiring production / manufacturing – both as a collaborative partner and a source of future talent. The UK continues to offer a number of world leading education facilities
6. Near-term currency fluctuations as a result of the UKs decision to leave the EU has seen a devaluation of the pound and, subsequently, led to an increased demand for exports.
7. Location decisions in the manufacturing sector are significant investments, largely due to the capital investment in the plant. Therefore there is no prospect of modern production facilities being relocated or closed purely because of Brexit at this stage, but negotiations surrounding trade tariffs and free movement of goods and people will be monitored carefully.
MEXICO
1. President Elect Trump has led to significant uncertainty for Mexican manufacturing with the market exposed to greater risk espeacially with the announcement in early 2017 that Ford is to cancel a $1.6 billion new plant in Mexico and instead invest $700 million in Michigan to create 700 new U.S. jobs is indicative of the scale of uncertainty currently at play.
EUROPE
1. Location decisions in this sector are significant investments, largely due to the capital investment in the plant. The implications on tariffs and trade are of course important for the sector, both for those exporting into the UK as well those exporting into Europe.
2. With a number of central and eastern European countries producing many manufacturing components and providing cheaper alternative assembly operations. There is no prospect of modern production facilities being relocated or closed purely because of Brexit
PIONEER COUNTRIES REPORT
1. For Costa Rica, the market continues to play center stage for the Life Sciences sector and the development and creation of medical devices as Costa Rica continues to benefit from a low-risk political environment and should continue to attract manufacturers with the market already supportive in a large proportion of US production.
2. Vietnam has become a magnet for manufacturers due to its comparatively low labor costs and has long been seen as an alternative to China when it comes to low-cost manufacturing with a youthful labor force also providing Vietnam with a competitive advantage.
3. Sri Lanka continues to be regarded as an attractive manufacturing market due to its lower cost profile and location that enjoys ease of access to key trade routes. The design, manufacture and export of textiles and apparel products is one of its biggest industries and it plays a key role in the country’s growth profile. Sri Lanka can enjoy duty free treatment under the Free Trade Agreement (FTA) in place with India, however Labor shortages remain an inherent challenge for both local and foreign manufacturers, given the country’s limited pool of workers.
THOUGHTS
1. In the short run, manufacturing remains partly constrained by a lack of capital investment in plants, reducing near-term radical shifts in location decisions. In the medium run, emerging technologies of Industry 4.0 are expected to create results in different criteria becoming more important in future decision making.
2. Disruptive technologies such as additive manufacturing and robotic process automation will continue to transform the manufacturing world by reshaping the production cycle in the long run.
3. The things that make a country unique – its people, environment, relationships, framework and teachings – create four distinct factors identified by the World Bank Group that motivate an individual or corporation to invest in that country: natural resources, markets, efficiency and strategic assets like technologies or brands.
(Source: cushmanwakefield, BAV Consulting)
