When people think of global manufacturing hotspots, countries like China, the United States, and Germany often come to mind due to their large production capacities and established supply chains. However, what many businesses don’t consider is the realm of developing countries that are now emerging as key manufacturing destinations.
In years past, these countries may not have been at the top of anyone’s list of manufacturing partners. But thanks to greater access to advancing technology, the landscape of global manufacturing is undergoing a transformative shift and dozens of lesser-known nations are being recognized for their skilled workforce and favorable business environments. Let’s explore five less common countries that deserve your consideration for outsourcing manufacturing operations.
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Vietnam
Located in Southeast Asia, Vietnam has quietly but surely been building a robust manufacturing ecosystem. Its growing workforce, low labor costs, and increasingly supportive government policies make it a great choice for businesses looking to outsource manufacturing.
While Vietnam’s minimum wage spans between $140 and $200 per month, varying by region, it remains notably lower than that of China, which is nearly double. The country is particularly well-suited for the production of labor-intensive goods, such as furniture, shoes, and apparel. Over the last decade, many global companies, including numerous Chinese organizations, have steadily transitioned their production operations in this direction.
Known for its “golden population ” structure, Vietnam boasts a young and ever-expanding labor force. This structure has caused many manufacturing opportunities to open up, and population experts say it’s expected to continue in the coming years.
As the country becomes an incredibly popular manufacturing hub, local government policies are evolving to be more favorable for business investors. The Vietnamese government has signed free trade and tax agreements with various countries and established a productive environment for foreign direct investment (FDI), making it a solid destination for international manufacturing operations.
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Mexico
While many might not consider Mexico a lesser-known manufacturing destination, it often gets overshadowed by many of its larger competitors. Due to its proximity to the United States, reliable workforce, and modernizing production facilities, Mexico has emerged as a popular choice for businesses looking to tap into North American markets while maintaining low labor costs.
If your company is searching for ways to reduce labor expenses while maintaining the same level of quality, direct labor costs in Mexico are about 70% less than that of the United States and many other developed countries for equivalent services.
Additionally, their highly educated workforce stands out favorably when compared to that of nearly every other developed country in the world. Mexico currently produces a higher number of engineering graduates annually than the United States. Combining this growing talent with generations of manufacturing experience, Mexico’s rich pool of skilled operational workers and professional managers can significantly propel the growth of advancing global companies.
Thanks to its proximity to the U.S., corporate executives and operational managers can make more frequent visits to their Mexican operations and manufacturing facilities, significantly reducing transportation costs and related risks.
Government involvement is also a big motivator for companies looking to relocate manufacturing operations. Currently, Mexico has more than 40 trade agreements in place, including the highly recognized USMCA — formerly NAFTA. Not only does this framework support shelter manufacturing, but also allows the duty- and tax-free import of essential raw materials and components.
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Ethiopia
In recent years, Ethiopia’s manufacturing industry has experienced rapid growth, with a series of emerging government policies aimed at attracting foreign investment and promoting domestic production.
With a diverse range of industries such as textiles, leather goods, food processing, and pharmaceuticals, one of the key factors behind Ethiopia’s recent manufacturing growth has been the development of industry parks.
The country has been working to attract foreign investment and nurture domestic industries through the establishment of industry parks, which serve as designated areas that provide essential infrastructure and services tailored to support industrial activities. These zones typically comprise of warehouses, factories, offices, and an array of auxiliary facilities.
Furthermore, the Ethiopian government has recognized the potential of the manufacturing industries and has worked to implement more favorable policies to hasten their growth. In addition to tax breaks and other incentives, the government is investing in infrastructure and technology development, such as roads and electricity, to support the further expansion of the industry.
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Poland
In the face of challenges posed by the COVID-19 pandemic and the war in Ukraine, Polish manufacturing continues to expand and strengthen. With a nearly 15% increase in industrial production between 2020 and 2021, Poland’s government is now focused on promoting the advancement and introduction of new manufacturing technologies.
As Poland continues to grow as a manufacturing powerhouse in Europe, the need for new and innovative manufacturing procedures has become paramount to the Polish Government.
In 2019, the government introduced its Industry 4.0 Platform, which refers to the adoption of automation and data exchange within manufacturing processes — an evolution often dubbed the fourth industrial revolution. This initiative seeks to enhance the innovative capacity of Polish organizations by sharing information about 4.0 processes and cultivating expertise in areas such as robotics and automation.
As the fifth largest manufacturing country within the EU, Poland’s government extends various tax incentives to bolster advanced manufacturing and industrial transformation. Moreover, the government offers grants to facilitate industry research and experimentation with production methods anticipated for future manufacturing implementation.
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Malaysia
An often overlooked destination for outsourced manufacturing, Malaysia can no longer afford to be ignored. With its booming infrastructure and business-friendly economic zones, business and supply chain consultants are turning their attention to Malaysia as a possible manufacturing alternative to China.
Not only does the region’s strategic geographical positioning make it a strong competitor for importing and exporting activities, but the modernized port infrastructure and high-quality supplier networks facilitate streamlined and cost-effective contract manufacturing and transportation of goods.
The Malaysian government has also been an active participant in assisting the growth of the country’s manufacturing. Several government initiatives have been created, namely the Industry4WRD initiative. Unveiled in late 2018, this initiative seeks to position Malaysia as a key player for smart manufacturing, an optimal destination for high-tech industries, and a comprehensive solutions provider for the wider manufacturing sector in the region.
Additionally, Malaysia’s nine special economic zones each offer exclusive advantages tailored to manufacturing activities within their defined perimeters. These zones, many of which are free trade zones, not only entice companies seeking to outsource manufacturing but also allow those businesses to avoid wasting resources on factors like customs regulations and taxation.
When considering your new manufacturing partner, it’s wise to look for a fresh perspective. While traditional manufacturing giants continue to hold dominance, a new wave of contenders are emerging.
Each with their own unique strengths, business-friendly atmospheres, and strategic geographical locations, the five nations listed above present businesses with a compelling proposition for diversifying their manufacturing operations.