What are the Global Challenges?
Supply Chain Crisis Leads Companies to Search for New Production Sites
Companies looking for a new production site other than China. Where are they exporting? We’re going to find out.
Welcome to my first News Channel. I am Robert Arthurs, your host for today.
The Rising Labor Cost in China
China is the largest manufacturer in the world. But over the last two years to this pandemic, many things have changed in the import-export business. Diversification is the key to stability what are the new brands? Hello Valeria Bossio of Valas Insurance Brokerage Mexico
Rob: Hello Larry, and thank you for joining me today. The last survey shows that 33% of companies that are working in China right now are looking for other markets. Can you tell us from an insurance perspective? How does that affect you? And what do you see as trends and things that are happening?
Valeria: We can see is that a lot of manufacturing companies are moving out due to the labor costs in China and are looking to invest in other countries.
Rob: Is there any particular countries that people are looking to go? Is there any trends right now that you’re seeing from your end?
Valeria: And yes definitely. The first one that comes to mind is India. India will be a direct competitor I would say of China right now. Not just any manufacturing, but other sectors as well, such as technology, life sciences, healthcare, and other industries as well. In Asia, there are countries we could name Vietnam for example and outside of Asia of course, Mexico comes to mind. Especially because I’ve heard the word “near shoring” a lot lately, which means basically companies won their products to be nearby but it’s still too expensive to keep them within the United States. So, Mexico is another great option.
Driving Factors Causing the Price Increase in Global Premiums
Rob: So Valeria, one of the things you are also seeing is that global premiums have risen substantially over the last year. What’s driving that increase of cost of a substantial amount of 6.1% increase in premiums? What do you see is happening? Is there any or do you see any relief for the people that are doing shipping globally in the marine industry?
Valenia: Oh that’s a question that I always get asked by my clients like premium increases. Specifically, this type of insurance, cargo insurance is affected by several things including trade rates, as well as inflation rates and so on. Trade rate, as it was before or even more premiums increase with that. Another reason is natural disasters have affected a lot of this industry. So there’s more claims and losses when it comes to the natural disasters.
Rob: Wow, that’s pretty substantial for a person that’s looking to export and import for that matter. And trying to look after your insurance premiums, making sure you’re well covered. And on top of what‘s happening globally, you mentioned the insurance risks. That’s you know, some of the natural disasters. That’s something that scares me and I see the shows on TV about containers, falling off the shops and stuff like that. Is that something that really does happen? Is that really affecting the industry gets worse? Or it’s just a Hollywood myth.
Valeria: That actually affects the industry because of course that the claim that the insurance can make. So that’s a loss for the insurance company buy and it’s somehow they have to make up for it. That’s why the premium increases you to that. The more natural disasters, well the more claims were going to,
Rob: Wow, that’s awesome! Thank you so much. They’re so hilarious. Both shield from Varsity insurance brokerage companies in the United States. Thank you so much. That was very informative.
Malaysia Opens Foreign Direct Investments
Rob: One of the countries attracting companies to its economy is Malaysia. The twenty investment offices that Malaysia has around the world called the Malaysia Investment Development Authority, otherwise known as MAIDA, shares a very robust, impressive performance in the first half of 2021 with investment soaring to 223% compared to the first half of 2020. Hello, Nelson Samuel, Director of MAIDA from New York. Thank you for joining us today.
Nelson: Hello Robert.
Rob: With the production of 3- 4% growth rate this year in Malaysia, what do you do to offer your clients and who wants to start manufacturing in Malaysia?
Nelson: Thank you Robert for the question. You know Malaysia is basically, been in the.. you know, in the forefront of promoting investments in the manufacturing sector for many years. We have an excellent track record of attracting investments for the last more than 50 years, especially in the manufacturing sector, you know, BF actually produces great results, especially in the first half of this year in 2021. We had an impressive run, especially in attracting foreign direct investments in the manufacturing sector. So, my message to foreign investors is basically today Malaysia is open and welcome all foreign investors into the country. There is no limit. Hundred percent shareholdings are allowed for any countries that come in, foreigners, foreign investors from many countries. And they are free to actually do business in Malaysia and repatriate their dividends and profits to their home countries at no restrictions also.
Rob: So how do you help? How do you help these companies? What they need to do to is a very onerous responsibility to get to start manufacturing in Malaysia. Considering like let’s say a company from Canada is manufacturing in China, how easy is it for them to switch over to go to Malaysia for manufacturing?
Nelson: Okay that’s a great question. You know, MAIDA is in short, which is actually meant for Malaysian Investment Development Authority is the main national investment agency and trusted to approve and coordinate the industrial development in Malaysia. Now with that comes along the manufacturing sector is a major sector in the Malaysian economy today as it contributes to the growth of job opportunities as well as to the exports. Now Malaysia has been a long while we’ve got it as a major export hub. And today we are focusing on high value-added and high-technology industries.
Rob: It sounds like MAIDA is a one-stop shop. Is that correct? To help companies that, like I look at Canadian companies and think that we’ve got a free trade agreement now with Malaysia. And companies are now saying when we don’t have a free trade agreement with China. we have one with Malaysia, we have one with Vietnam. What kind of, if I came to MAIDA, would they help me with my settlement to find coal manufacturers, for myself or my company?
Nelson: Let me, let me, let me point out what MAIDA does. We essentially take care of approving the manufacturing license. We look at the tax incentives. We look at the corporate tax exemption, of course, that comes with the tax incentive, custom duty exemption. And finally, we also look at visa facilitation for the relocation of projects and expatriates coming into Malaysia. Now with that, we can also offer linking them up to contract manufacturers or even outsourcing arrangements because Malaysian companies are also gone along way into building a strong ecosystem and can be a potential supply chain.
Rob: Any examples of companies that might have done shift to Malaysia?
Nelson: Well, yeah. I have lots of them. I cannot say for sure that they are all shifted out but it definitely did have expanded from wherever they are basically. And these companies come from many regions around the world. To start with, let me focus U.S. first because I’m based here. So, you know, last year, we had Lam research, L.A.M. LAM Research, they are into wafer fabrication equipment for the conductor industry. We’re very happy to say they made Malaysia their home. Besides U.S., we also have approved projects from Europe. Maybe for example, Smith & Nephew. Also in the medical devices industry sector. And then, we have also approved investments from Japan and Korea as well in a variety of industries, from metal, fabricated metal, transport automotive, electronics, and glass industries,
Rob: Nelson Samuel, I want to thank you that was extremely informative.
Nelson: Thank you for this opportunity.
Rob: Thank you Nelson. Thank You
Nearshoring -A Solution to Global Chain Crisis?
As companies are looking to be closer to the American Market, one of those countries to look at is Mexico.
Rob: So, hello to Maria Elena, president and founder CEO of Collectron. Thank you for joining us today on our show. How are you today?
Rob: I am doing great Maria. Thank you for coming today. And thank you for joining our show.
Nowadays with all the companies that are looking for alternatives other than China, have you seen the increase in Mexico and the manufacturing, and as many people approaching your company now to help them resort or nearshore into Mexico?
Maria: Well, what was happening today with us after the pandemia more than new companies who are looking into Mexico. There’s been a lot of organic growth that other companies were manufacturing in other parts of the world. Those companies are already established in Mexico have a large growth.
Rob: That’s great! So, is there any particular sectors Maria, that are more popular than others.
Maria: Maybe what we are seeing is the electronic business, PC board, medical devices.
What Makes Mexico a Solution to Global Supply Crisis?
More than the aerospace business because the aerospace business again because of the pandemia, it is, it’s a kind of had to hold on the growth of coming into Mexico. We’re neighbors to the most powerful country in the world. And the cost of manufacturing is much lower. As soon as you come into Mexico, you have a 20 % increase in your efficiency and productivity because we work at 48-hour aweek, instead of like in the state’s 40-hour week. There are many advantages, you know, like the labor cost.
Rob: Have you seen any Chinese companies move into the marketplace that don’t take advantage of Mexico?
Maria: Any Chinese? Oh, yes, absolutely. We had that too that showing our company two years ago, and in 2019 because of the sanctions that they are having in the United States of their duties and the ACH of 20 to 30%. So just around 101 companies, are moving into Mexico 15 different states throughout Mexico for supply change.
Rob: What would you see is a solution?
Rob: Good answer. Good answer.Thank you. Thank you so much for me. I much appreciate it.
Maria: You’re welcome. Robert. Thank you so much for giving me the space.
Rob: Thank you for watching our first episode of my news channel show. On our next show, we will be talking about the agriculture sector around the world. I am Rob Arthur, your host. Thank you for joining us.