Factors that will impact plastic packaging demand in Southeast Asia

Mr. Joey Roi Bondoc, Research Director, Colliers Philippines

The plastics and packaging industries in Asia remain robust and are likely to expand further in the years to come. This optimistic forecast is supported by economic expansion driven by a young workforce, rising disposable incomes, rise in the number of employed people, growth of manufacturing sector, and continued take up of industrial space and warehouses in key cities across the region.  The regional bloc is projected to achieve sustained economic growth in the near term and this should further propel demand for plastic and packaging products. Sustainability is now the name of the game and we see more manufacturers taking advantage of this shift in the market -  a shift that present gargantuan opportunities for plastics and packaging stakeholders.

Asia continues to expand and many of its economies are expected to grow in the years to come. This growth has been resulting in rising disposable incomes, allowing Asian consumers to spend more. More Asians are also going for  greater convenience and this ultimately results in a heightened demand for plastics, packaging, and related products.

Credit rating agencies and  multilateral aid firms are forecasting sustained economic growth for the region this year. The Asian Development bank (ADB), for instance, is projecting the region’s economy to grow by 5% this year from the previous growth forecast of  4.9%. The region is projected to grow by 4.9% in 2025. Much of the expansion is driven by personal consumption and manufacturing activities. These segments should propel  the region’s growth in the near to medium term.

Southeast Asian countries such as Thailand, Indonesia, Malaysia, Vietnam, and Philippines are projected to grow between 2.3% and 6% this year and 2.6% and 6.2% next year. What’s interesting is that these economies are also fueled by personal consumption expenditures. Household consumption as a percentage of GDP in these economies range between 31% to almost 80%.

Overall, the number of white collar employees in the region is expanding and this only presents greater opportunities for plastic and packaging manufacturers. More white collar employees means greater need for convenience and this should result in a peripheral rise in demand for plastics and packaging.  

Revenge spending remains prevalent in the region, and this is now  an opportunity for retailers to aggressively differentiate by introducing innovative products and services.  The plastics and packaging industry is one segment of the economy where we are seeing retailers aggressively highlighting sustainability as they try to capture a growing part of the market that continues to give much emphasis on sustainability practices, including recycling and upcycling. According to a study released by Kantar, more than 50% of Asian consumers feel that they are personally affected by environmental problems. Kantar stressed that  Asians are concerned about issues concerning  Water Pollution, Air Pollution, and Extreme Weather Events. The report added that” 53% of Asians have stopped buying products and services that have a negative impact on the environment and society.” Plastics, for instance, remains a key issue as it is tied into other key issues such as water pollution. Hence, we expect more firms to be more environmentally conscious in the near to medium term.

Product differentiation plays a crucial role in ensuring that plastics and packaging products are appropriate  to the needs of consumers especially among Asians that are becoming more discerning given the increasing options in the market.  We expect manufacturers to be more innovative in the future given the Asian consumers’ more discerning preferences.  

Plastics and packaging manufacturers across the region continue to expand. To further take advantage of opportunities, industrial locators including those in the plastics and packaging segments should thoroughly assess the industrial situation in each country and take advantage of emerging  trends.

Leasing demand in industrial parks in Singapore  is expected to pick up as the manufacturing sector in Singapore improves and business sentiments pickup. However, rental growth is expected to temper as a result of higher capital cost, tenant resistance to higher rents, and the higher upcoming supply. There has also been more renewals and consolidations than relocations or expansions, highlighting the financial constraints occupiers are facing. Given the continued rise of new industrial occupiers in Singapore as well as the existing locators’ interest to expand operations, we see rents in industrial parks rising in the near term and this poses a challenge for plastics and packaging locators planning to occupy industrial space and warehouses over the next 12 months.

The inflow of more foreign investment in Thailand has resulted in robust take-up rates in the industrial sector. The influx of foreign investors relocating their investment and manufacturing bases, coupled with government policies aimed at attracting foreign capital into the country, has made Thailand an attractive investment destination. The electronic appliances industry is one of the major industrial demand drivers in the country, followed by automotive, petrochemical, and chemical sectors. These segments complement the already dynamic plastics and packaging industries in Thailand.

Other major investment destinations in the region include Indonesia and Vietnam. These countries continue to attract major manufacturers including food and cosmetics and this has been resulting in a greater demand for industrial space and warehouses for the two sectors. Manufacturers in these two countries continue to enjoy fiscal perks such as tax incentives and these have been compelling industrial park locators such as plastic and packaging firms to open factories in Indonesia and Vietnam. Opportunities in these countries remain bright and with continued government support we only see further expansion of these countries’ plastics and packaging sectors as well as other relevant manufacturing segments.