Southeast Asian firms are diversifying supply chains and markets, but such efforts may not be enough to build resilience against trade shocks, geopolitical uncertainty, and sustainability pressures.
A regional economic research institute said ASEAN companies are increasingly spreading procurement, production, and market exposure, yet they continue to face policy, regulatory, and investment constraints.
A senior research fellow at the institute said diversification alone will not suffice for the region to function as a global supply chain hub.
He argued that stronger trade facilitation, greater regulatory cooperation, and enhanced institutional harmonization within and beyond the region are essential.
The cost and quality advantages of Chinese components make reducing dependence difficult for many firms.
Entering new markets also forces companies to comply with differing standards and certification requirements across jurisdictions.
Decarbonization and digitalization are emerging as priorities for ASEAN firms.
A survey found that 63% of ASEAN firms are undertaking decarbonization measures, while digital adoption remains modest.
A Philippine industry representative said larger companies in the country are adapting well to digitization and circular-economy initiatives.
Small and medium-sized firms, especially in garments and apparel, are challenged by the cost and limited resources for adopting such systems.
The research institute noted a wider gap for advanced technologies such as the Internet of Things and artificial intelligence.
Enterprise resource planning adoption has progressed in countries like the Philippines and Thailand, but skilled labor shortages and high investment costs hinder broader technology uptake.
To close the gap, the institute recommended workforce development, incentives for digital adoption, and infrastructure including digital platforms.
The ASEAN Digital Economy Framework Agreement could lower barriers for micro, small, and medium enterprises entering the digital economy.
Greater support for smaller firms is needed to keep pace with regional decarbonization efforts.
Uneven progress on decarbonization could widen disparities in supply chain participation, prompting a call for MSME capacity-building in sustainability reporting and compliance.
