Southeast Asia might not spring to mind as a focal point for the global aerospace industry, but that could be about to change. Singapore is already a leading centre and the sector is developing rapidly in other parts of the region, as Adrian Ashurst, CEO of Worldbox Business Intelligence, reports.
The rapidly growing Asia-Pacific aviation market is driving demand for local aerospace services. By 2034, the region could account for 42% of global air passenger traffic, with an extra 1.8 billion passengers. Many world-class aerospace companies are looking to expand their business in the Asia-Pacific region – and, in particular, in Southeast Asia, which is one of the fastest-growing markets in the world and is home to some of Asia’s most advanced economies. Indian airlines, for example, tend to use Singapore, rather than India, for aircraft maintenance, repair and overhaul (MRO).
The market for commercial aircraft services in the Asia-Pacific region will more than double in value from US$52 billion today to US$129 billion by 2043, according to Airbus, so there is a huge prize for those Southeast Asian countries that can capture a chunk of this growth. 1 The market is being driven by demand for around 19,500 new aircraft, supported by a compound annual growth rate (CAGR) of 4.81% in passenger air traffic, according to the same source.
Singapore’s pathfinder role
As the most advanced economy in Southeast Asia, Singapore has, unsurprisingly, taken the regional lead in the technologically sophisticated aerospace sector. Singapore is home to over 130 aerospace companies, which together cover a range of sectors, including the production of critical components such as engine parts and avionics.
The country is Asia’s leading one-stop solutions provider for MRO, accounting for 10% of global MRO output. MRO encompasses all of the maintenance activities that ensure the safety and airworthiness of an air transport vehicle. The global MRO market is expected to grow by more than 33% between 2023 and 2033, and Singapore appears well positioned to capture a large chunk of this new business. The country’s excellent infrastructure, engineering prowess and the availability of skilled personnel are attracting major investment from the world’s leading aerospace players.
Companies including Pratt & Whitney, Rolls-Royce, Thales, Airbus and GE Aerospace have committed to investing over US$750 million across more than 10 projects over the next three to five years. The industry is set to add more than 2500 employees over the same time period to support its expansion plans, including these investments.
Malaysia’s huge ambitions
Currently home to the second-largest aerospace industry in Southeast Asia, Malaysia has an ambitious plan to become the leading aerospace nation in the region and an integral part of the global market. The Malaysian government’s blueprint targets a total revenue of RM55.2 billion and the creation of more than 32,000 high-income jobs. The country is currently home to more than 200 aerospace companies, including both international and local players.
A robust and competitive supply chain, including precision engineering, advanced manufacturing and cutting-edge technology, underpins the sector. Airbus, for example, lists Malaysian companies such as CTRM and SME Aerospace as top suppliers. The government is seeking to attract foreign direct investment (FDI) by implementing a range of incentives for investors, including tax breaks, grants, and streamlined regulatory processes.
Thai aerospace industry takes flight
Thailand also has ambitions in aerospace, hoping to leverage its well-developed automotive manufacturing industry to support a successful market for aerospace components and services. The Board of Investment is placing special emphasis on developing the country as a supplier of aviation parts.
The growth in air passenger traffic in Thailand, and the potential for further growth in the future, makes Thailand an attractive destination for commercial aircraft maintenance and manufacturing industries, according to the business-strategy consulting and operations management firm Tractus. 2 Airports Council International forecasts that Thailand will rise to ninth place in global air passenger traffic by 2040, providing significant potential for local MRO service providers. Thailand’s demand for MRO services is forecast to increase to US$2.95 billion by 2037 (a CAGR of around 5.4%), with the demand for aircraft in Thailand growing from 314 to 811, according to Tractus.
Thailand should be able to leverage the expertise it has built up in the automotive sector, which has facilitated the development of an advanced logistics infrastructure and a diverse range of experienced suppliers of industrial products, parts, equipment and services. The country’s universities have also proved adept at supplying engineering graduates and other skilled staff.
Aviation industry development is also part of Thailand’s Eastern Economic Corridor development project. Thailand’s main airport on the eastern seaboard, U-Tapao Airport, is projected to expand and become an MRO hub for aviation-related industries, with a targeted US$7 billion of investment.
Indonesia and Vietnam’s huge potential
Under President Suharto, Indonesia had plans to become a major aerospace player. Now it is seeking to revive its ambitions with the Golden Indonesia 2045 vision, launched in 2022. These include manufacturing turboprop aircraft with a capacity of fewer than 100 seats and equipped with the latest technology, manufacturing large cargo drones with a capacity of two tons, and becoming the main producer of flight simulators. Indonesia is also aiming for its aerospace industry to have an MRO turnover of around US$2 billion by 2045.
The country’s advantages in terms of attracting aerospace FDI include its vast domestic market and rising defence budget. Disadvantages, compared with the likes of Malaysia, Singapore and Thailand, include weaker infrastructure and logistics development. In June, however, Boeing expressed interest in partnering with the Indonesian government and stakeholders to support the development of the industry. Boeing is reportedly working with the National Development Planning Agency (Bappenas) and a number of ministries and government officials, as well as regulators and corporations.
Vietnam, too, has significant potential. It is the fastest-growing market in Southeast Asia and the fifth fastest-growing globally in terms of passenger and cargo traffic. Increasing demand for aircraft components, as leading global aircraft manufacturers consistently face order backlogs, is opening up opportunities for Vietnamese businesses to participate more fully in the supply chain, according to a recent article in the Vietnam Investment Review. 3
There are hopes that the likes of Boeing, Airbus, Dassault Aviation and Lockheed Martin could transfer some production to the country. The biggest challenge facing Vietnamese businesses is that their products must meet global aviation standards as well as Boeing’s specific requirements, according to a consultant quoted by the Vietnam Investment Review. However, given Vietnam’s success in expanding into other areas of manufacturing, Worldbox Business Intelligence is convinced that the country can overcome these challenges.
Overall, the aerospace sector in Southeast Asia appears on the cusp of a period of rapid growth that should bring huge benefits in terms of extra FDI, technology transfer, the generation of tens of thousands of highly skilled jobs, and the advance of regional economies up the added-value chain.
2 – https://tractus-asia.com/blog/building-altitude-thailands-aerospace-industry-soars-post-pandemic/
Source: Worldbox Press Release
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