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Frontier markets peak manufacturers’ interests

By Tim Hanley - November 02, 2012

Ha Long Bay VietnamDuring a recent trip to Tokyo, I met with 40 leaders from Deloitte member firms across the Asia Pacific region to discuss what is happening in this dynamic market. As you might imagine, China and India dominated the conversation, but several other countries in the region, often referred to as the next frontier growth markets, were very much part of the discussion.

With the expected government leadership changes this month and signals that manufacturing activity is declining, executives are closely watching what is happening in China. Last month, a 7.4 percent year-on-year rise in China's gross domestic product (GDP) in the third quarter was announced. Some believe however that those government statistics may be more optimistic than the reality experienced by many manufacturers in China. This is the weakest announced growth rate since the start of 2009 and the seventh straight quarter of decline. Many executives are cautiously waiting to see what the new Chinese leadership will do to spur accelerated economic growth and improve manufacturing industry activity.

In terms of India, manufacturing is expected to more than double in market size to an estimated US$850 billion from an estimated US$393 billion today. Highlighted in the discussion were the investments being made in the “Delhi Mumbai Industrial Corridor” which has attracted Japanese interest. This industrial corridor, which will extend up to 1,483 km in length, will include nine industrial zones of about 200-250 square kilometers, high speed freight line, three ports, six airports, and a six-lane intersection-free expressway. India is looking to attract more foreign direct investment in projects like this to improve manufacturing industry competitiveness. The Indian government’s National Manufacturing Policy announced late last year aims to achieve 25 percent GDP contribution from manufacturing by 2025, up from 16 percent today. Initiatives to develop more industrial zones, improve infrastructure, enhance technology, and develop skills are at the heart of the policy which also calls for stronger public and private collaboration.

While China and India are still prominent in discussions, manufacturers are now also turning their attention to new growth markets. The “frontier markets” such as Vietnam, Indonesia, and Myanmar are capturing the interest of executives who are quickly trying to figure out their market strategy and business models. In Indonesia, for example, manufacturers are investing to gain a share of wallet from the growing population which today the World Bank estimates at around 242 million people. Japanese manufacturers are at the forefront of these investments. Indonesia has the largest consumer market in Southeast Asia with household consumption valued at an estimated US$462 billion in 2011, which is more than double the next largest market of Thailand at US$188 billion, according to the Economist Intelligence Unit. A young and growing talent market and also attractive projected real GDP growth anticipated to average 6.5 percent a year from 2014 to 2017, is driving industry investment in sectors including automotive, transport equipment, machinery and equipment, fertilizers, chemicals, and rubber products.

Achieving global competitiveness continues to be on manufacturers’ agenda. This month, Deloitte Touche Tohmatsu Limited’s (DTTL) Global Manufacturing Industry group will launch a 2013 CEO Survey on Global Manufacturing Competitiveness with the survey results looking at what key drivers senior executives viewed as being the most competitive for manufacturing. The report will be available on 16 November at www.deloitte.com/globalcompetitiveness.



Tim HanleyTim Hanley is the Global Leader of the Manufacturing Industry group of Deloitte Touche Tohmatsu Limited (DTTL). In his global industry leadership role, he directs strategic initiatives and investments to grow Deloitte member firm market share within the manufacturing industry. During his distinguished 32-year career, Hanley has led teams serving all business aspects, including consulting with top management regarding organizational financial strategy development and execution, acquisitions, and market development.


Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.


  • Bloomberg. China GDP Shows Pickup Signs After Seven-Quarter Slowdown. 18 October 2012
  • DTTL Global Manufacturing Industry group analysis of total market size of five key industrial sectors of manufacturing in India based on 2011 and projected size in 2016: metals and mining, capital goods, chemicals, automotive, and aerospace and defense.
  • Delhi Mumbai Industrial Corridor. www.delhimumbaiindustrialcorridor.com.
  • The Wall Street Journal. India Cabinet Approves National Manufacturing Policy. 25 October 2011.
  • The World Bank. Indonesia: Country at a glance. www.worldbank.org/en/country/Indonesia.
  • The Economist Intelligence Unit. Indonesia country report. Market opportunities and economic forecasts. 1 June 2012.


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