Six countries successfully growing their manufacturing – and what they are doing right

Against this backdrop, what are manufacturers and supply chain companies doing to ensure their operations are fit for future success? A new white paper from the World Economic Forum finds that the most successful firms are moving away from making location decisions based on cost alone to a more complex process that considers factors including performance, resilience and sustainability.

Countries that want to remain competitive and position themselves as manufacturing hubs must embrace this shift, according to Beyond Cost: Country Readiness for the Future of Manufacturing and Supply Chains, a Forum white paper in collaboration with global management consulting firm Kearney. By adopting innovative policies across key country-level readiness drivers, nations can boost their appeal for foreign investment, potentially increasing GDP and their share of global value chains, the report suggests.

The paper is supported by qualitative and quantitative research on macro-dynamic shifts from the early 2000s financial crisis to the present day, together with national strategies aimed at expanding the manufacturing sector from sources including the World Bank, International Monetary Fund, and the Organisation for Economic Co-operation and Development. It reveals four distinct country archetypes defined by two dimensions: the contribution of manufacturing to gross domestic product (GDP) and the level of GDP per capita.

Here are some examples of those archetypes and how they are growing their manufacturing.

Adapter

While Brazil’s GDP per capita and manufacturing’s share of GDP are below average, the country is making efforts to boost manufacturing’s economic role. The service sector now has a larger share of the GDP than the manufacturing sector.

Brazil is the world’s leading source of coffee and a major producer of sugar, soy, and beef. It also exports significant amounts of steel, automobiles, and electronics. For decades, Brazil has been actively promoting manufacturing to diversify its production and reduce its reliance on agricultural exports.

In early 2024, the country launched a new policy plan to drive this effort – called Nova Indústria Brasil. This policy defined strategic areas for investment to stimulate technological development and increase the competitiveness of the Brazilian industry.

Key initiatives under this plan include measures to digitally transform industrial companies and invigorate the country’s semiconductor industry.

Adapter

Like Brazil, India is in the adapter quadrant of the country archetypes. It also boasts a sizeable service sector, which is the main contributor to its overall GDP.

Alongside, it is making significant strides in manufacturing, with some states positioning themselves as key hubs for industries such as automotive. The country is expected to become a global player in light vehicle production, textiles, and electronics.

It is working to create a more stable and investment-friendly trade manufacturing environment through efforts such as the Production Linked Incentive Scheme. This public-private partnership initiative, launched in 2020, provides industry incentives for sales of domestically made products. This has increased the country’s reliance on domestic sourcing components, reducing imports and benefitting the country’s manufacturing capabilities. It has led companies, including Apple and its suppliers, to work closely with the Indian government to increase operations in the country.

Connector

Manufacturing has become a critical part of Bangladesh’s economy, thanks to rapid industrialization.

Once dependent on jute and subsistence farming, the country has halved poverty and significantly boosted GDP by becoming a powerhouse in global supply chains for textiles and garments.

Government initiatives to attract foreign investment have been at the heart of this effort. Through policies such as allowing duty-free importation of machinery in export zones and signing trade agreements with the US and Europe, Bangladesh has created a garment sector that employs 4 million people in more than 3,500 factories and exports goods worth $43 billion to 167 countries.

The country has also undertaken major infrastructure initiatives to develop its network of waterways and ports, strengthening its role as an essential link in international supply chains.

Connector

Mexico has developed a strong manufacturing base in sectors such as electronics and automotive. This is partly due to trade agreements such as the North American Free Trade Agreement, now known as the US-Mexico-Canada Agreement.

The country’s proximity to the US makes it an attractive destination for manufacturing, especially as more supply chain leaders look to mitigate risk with a nearshoring strategy, in which they look to move production closer to the customer. In 2023, Mexico passed China as the top exporter to the US. However, the new Donald Trump administration’s potential tariffs on goods made outside the US could influence supply chain strategies and impact Mexico’s manufacturing competitiveness.

Streamlined regulatory frameworks and tax incentives are also boosting manufacturing – for example, in securing carmaker Audi’s investment to build a ‘smart factory’ – equipped with the latest technology – in San José Chiapa. This partnership has created thousands of jobs and last year produced nearly 200,000 vehicles.

Converger

A global leader in high-technology and innovation-driven manufacturing industries, the US is an example of a converger.

The number of manufacturing firms and plants in the US has fallen by about 25% since 1997. But in recent years, the country has prioritized reinvestment in advanced manufacturing. The Inflation Reduction Act, which signed into law investments in clean technologies, also addressed the offshoring of US industry and promised to reinvest in US manufacturing at scale.

The law sparked an uptick in manufacturing, with manufacturers of battery components, wind and solar equipment, and EVs announcing tens of billions of dollars in new investments. However, to realize the full benefits of these investments and cement its competitive edge, the US must also scale up its industrial workforce to meet rising demand.

The US is also reinforcing its leadership in advanced technologies through initiatives such as the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act and is boosting supply chain resilience through the Promoting Resilient Supply Chains Act.

Such government support is a critical component in enabling countries to become attractive destinations for manufacturing, the Forum report notes.

Scaler

Singapore exemplifies a scaler. It boasts a strategic location, a pro-business government and advanced infrastructure. It has developed a highly sophisticated manufacturing sector, particularly in chemicals and electronics – where it is the world’s fifth largest exporter of high-tech goods.

Under its Manufacturing 2030 plan, Singapore aims to become a leading industrial hub and increase its manufacturing output by 50% by the end of the decade. The focus is on both physical and digital transformation, accelerating innovation in advanced electronics and adopting Industry 4.0 technologies such as AI and robotics. Singapore also invests in smarter, more sustainable manufacturing through research, development, and talent partnerships.

For example, Singapore’s SkillsFuture Initiative, designed alongside the private sector, provides financial incentives and subsidies for training programmes to enhance workforce capabilities.

The country is also engaging in public-private collaborations, including one with Siemens to advance sustainable manufacturing through the integration of renewable energy.

As manufacturers rethink their geographical footprint and network strategies, investing in and adopting policies across a holistic array of readiness factors, as outlined in Beyond Cost: Country Readiness for the Future of Manufacturing and Supply Chains, will help countries enhance their attractiveness for next-generation manufacturing and gain a competitive edge amidst the rewiring of global value chains.

While these systematic changes take time, their long-term success depends on collaboration between the public and private sectors to ensure that industrial strategies reinforce investment in core areas critical to the future of manufacturing and supply chains.

This article is part of the World Economic Forum Annual Meeting. It was originally published at the WEF’s website and has been republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License. You can view the original article here.

Picture: credit KUKA