23008_Nearshoring Report

As a result, businesses in developed countries were able to reorganise their value chains on a global basis to enjoy the cost-saving that relocating manufacturing to lower-cost countries could bring. The commercial tension between increased working capital commitment from long lead times was more than offset by the lower unit costs from cheaper manufacturing.

GLOBAL TRADE IN GOODS AND SHARE OF TRADE FROM ASIA

25

100%

20

80%

USD TRILLION

15

60%

WORLD IMPORTS

WORLD EXPORTS

10

40%

SHARE OF GLOBAL EXPORTS FOR GOODS EXPORTED FROM EASTERN ASIAN COUNTRIES (RHS)

5

20%

0

0%

1950

1960

1970

1980

1990

2000

2010

2020

SOURCE: International Trade Centre

Key destinations for business investment and relationship development were in the Far East, particularly China, India, Malaysia, Taiwan and Vietnam. The primary advantage of these countries is the far lower unit cost of production – largely driven by far lower wages – than in ‘home’ countries such as in Europe and North America. Coupled with a plentiful and flexible supply of people and encouraging investment environment (including subsidies, tax incentives and less onerous regulatory environments), manufacturing businesses were encouraged to move production to lower cost geographies – above all else, cost reduction was everything.

7

8

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