Home COVID-19 Trucking to support post-pandemic trade growth in Southeast Asia

Trucking to support post-pandemic trade growth in Southeast Asia

Thomas Tieber
The market share of road freight transportation is expected to grow substantially, aided by the global scarcity of shipping capacity and prohibitive air freight costs
Chief Executive Officer for DHL Global Forwarding, Southeast Asia
Vehicles driving past on a highway

New trade initiatives, surging e-commerce demand, an expected post-COVID economic rebound and the volatility of other freight modes are creating ideal conditions for cross-border trucking and intermodal forwarding solutions across the Association of Southeast Asian Nations (ASEAN) region.

Member states in the ASEAN Economic Community (AEC) have long urged customs officials to increase integration and connectivity to facilitate companies looking to expand operations across the region. These efforts are now opening up new trade routes and opportunities for international road freight solutions, according to a new DHL whitepaper, Southeast Asia Freight: The Road to Growth.

Most of Asia is connected by land. Trucking services make sense as a cost-effective and efficient option for customers who are evolving supply chains to meet the needs of the post-COVID logistics landscape.

As our whitepaper highlights, the global scarcity of shipping capacity and equipment, and the prohibitive cost of air freight, have further enhanced the attractiveness of secure, truck-based solutions offering end-to-end cargo visibility to shippers.

Governments have also been taking steps to improve border infrastructure, aligning customs rules and documentation. With these bottlenecks removed, road and multimodal solutions relying on the free movement of trucks across borders may become the preferred freight mode when compared to air or ocean freight.

Leveraging technology is also playing a key role in enabling efficiencies in road freight. One of our digital portals, for example, offers rapid access to instant and competitive quotes, bookings and tracking of shipments. It also enables customers to monitor emissions and shipment visibility, and analyse logistics spend, volumes, customs activity and service quality.

For road freight providers, combining their trucking expertise with the use of technology, and the knowledge of the latest trade regulations and market trends, is imperative for success in the region.

Powering seamless cross-border trade

One of the most significant developments for the road freight sector over the past year has been the implementation of the ASEAN Customs Transit System (ACTS) – a computerised customs transit management system that allows licensed operators to move goods across borders using a single document and making use of a single vehicle for the whole journey from departure, through transit countries, to destination, without having to pay duties and taxes on goods entering or leaving the country.

Launched in Cambodia, Laos, Malaysia, Singapore, Thailand and Vietnam in 2020, the ACTS was designed in line with ASEAN’s goals of reducing trade transaction costs by 10% in three years from 2017, and doubling intra-ASEAN trade between 2017 and 2025.

ACTS will also lower costs over time, while enhancing efficiency and reliability for road freight movements in the ASEAN region by harmonising cross-border regulatory processes and standards imposed across different member economies.

Business users can lodge e-transit declarations directly with ASEAN customs authorities via ACTS and track the movement of cargo from loading at departure to its final destination. As operators no longer need to make a customs declaration at every border, the ACTS will generate administrative and cost savings, while opening up new and more competitive intra-regional trade lanes.

For companies seeking to reconfigure post-COVID supply chains, the launch of ACTS comes at an opportune time. Manufacturers looking to diversify production out of China to reduce risk and increase supply chain resilience now have an improved road-based logistics network to tap into when setting up regional supply chains in Southeast Asia.

Other initiatives have also been moving the needle on intra-regional trade.

For instance, the Greater Mekong Sub-region (GMS) Cross-border Transport Facilitation Agreement allows each of the six member countries—Cambodia, China, Laos, Myanmar, Thailand and Vietnam—to issue up to 500 GMS Road Transport Permits and Temporary Admission Documents for goods and passenger vehicles registered, owned and/or operated in that country.

Under the agreement ratified in 2015, the documents will allow each vehicle to remain in the country for a 30-day time limit.

Meanwhile, the ASEAN-China Free Trade Area has increased trade between Southeast Asia and China since coming into force in 2010, and the 15-member Regional Comprehensive Economic Partnership is expected to improve market access and facilitate investments across the bloc, which represents about a third of the global GDP.

These agreements and initiatives are set to support economic growth and trade just as ASEAN countries look to bounce back from COVID-19 lockdowns.

Economic recovery a boon for logistics

According to research agency Transport Intelligence (Ti), the spike in trade volumes and rebounding economic activity will translate into corresponding growth and demand for logistics and road transport.

It expects real Asia-Pacific contract logistics demand growth to increase by 7.6% from 2020 to 2025, with demand across the entire region forecast to expand by 8.2% this year.

Renewed economic growth in ASEAN countries will give rise to demand for cross-border road transportation as trade recovers.

Manufacturers looking to diversify production out of China to reduce risk and increase supply chain resilience now have an improved road-based logistics network to tap into when setting up regional supply chains in Southeast Asia.

Driven by factors such as the US-China trade war and strong government support, fast-growing emerging markets in the region, such as Indonesia and Vietnam, have increasingly significant manufacturing sectors that would likely propel demand in the longer term.

Separately, Southeast Asia will see e-commerce grow by 5.5% in 2021, with Singapore, Malaysia, Indonesia, the Philippines and Vietnam leading the charge in terms of market growth in the region over the coming year.

Specifically for business-to-business sales, online transactions are expected to surge 70% to reach $20.9 trillion by 2027, which will sustain strong demand for road freight solutions in the years to come.

With rising e-commerce consumer spending and lower trade restrictions amid a robust post-COVID economic recovery, the future of cross-border trucking in Southeast Asia is promising.

* The Southeast Asia Freight: The Road to Growth whitepaper can be accessed here.

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Chief Executive Officer for DHL Global Forwarding, Southeast Asia

Thomas Tieber is the chief executive officer for DHL Global Forwarding Southeast Asia. He is responsible for the leading freight forwarder’s strategy and expansion across Thailand, and oversees the operations in Cambodia, Indonesia, Philippines, Singapore, Vietnam, and other agent operations in Southeast Asia.

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