Asia Manufacturing Index 2026

Bangladesh - Ranked 11^th

Overview - Bangladesh ranks last in the AMI 2026 due to structural infrastructure gaps, lower innovation capacity, and limited industrial diversification. However, it remains a globally significant player in textiles and apparel manufacturing, supported by low labor costs and a large workforce. The country has built considerable expertise in garment production, and the sector continues to attract international buyers due to competitive pricing and improving compliance standards.

Infrastructure challenges persist, affecting logistics efficiency. Port capacity constraints, road congestion, and electricity reliability issues increase lead times and operational costs. Projects such as the Padma Bridge and ongoing port modernization efforts are gradually improving connectivity, but scale and speed remain limiting factors.

Bangladesh’s financial system faces vulnerabilities, including high non-performing loan ratios and limited access to affordable credit for industrial firms. Regulatory efficiency remains uneven, and administrative processes can be slow, creating uncertainty for investors. Innovation indicators remain low, with limited R&D spending and skill gaps in higher-value manufacturing segments.

The country’s labor costs are among the lowest in Asia, but productivity levels also remain comparatively low. Workforce skill development programs are expanding, yet significant gaps persist in engineering, technical manufacturing, and managerial capabilities. These constraints limit movement into more advanced industries.

Bangladesh’s long-term outlook depends on improvements in energy infrastructure, logistics modernization, and governance reforms. While it will remain a major garment exporter, the country faces increasing competition from other low-cost markets and needs deeper reforms to diversify its industrial base and enhance resilience.

China - Ranked 1^st

Overview - China retains the top position in the AMI 2026 due to its unparalleled combination of scale, industrial depth, and technological capability. Its manufacturing ecosystem continues to be the most comprehensive globally, with near-complete value chains in electronics, machinery, automotive, chemicals, and consumer products. This completeness enables China to internalize most inputs, achieve faster lead times, and maintain resilience despite rising wages and shifting geopolitical pressures. The country has also made notable progress in moving up the value chain, supported by intensified investment in semiconductors, batteries, robotics, and green technologies.

Infrastructure remains a decisive advantage. China’s integrated network of highways, high-speed rail, inland ports, coastal mega-ports, and advanced logistics management systems supports efficient domestic distribution and export operations. The country has also leveraged digitalization to modernize freight handling, customs clearance, and supply chain monitoring, easing bottlenecks and ensuring predictable timelines for manufacturers.

In terms of innovation, China outperforms all other markets in the region except South Korea. R&D spending continues to rise, supported by both state-driven programs and private-sector dynamism. Its universities produce a growing pool of engineers and researchers, while major industrial clusters in Shenzhen, Suzhou, Shanghai, Guangzhou, and Chengdu continue to attract global and domestic investment. Although international firms are diversifying, China remains essential for advanced components and high-precision manufacturing.

Key challenges include rising labor costs, geopolitical friction, pressure from trade restrictions, and relocation trends among multinational firms seeking a China-plus-one strategy. However, the country’s strong productivity, automation adoption, and ongoing structural reforms mitigate these exposures. China is expected to remain the region’s manufacturing anchor for the foreseeable future, especially in high-technology and capital-intensive sectors.

India - Ranked 6^th

Overview - India faces a unique duality: a massive market and strong policy momentum combined with structural bottlenecks in infrastructure, logistics, and administrative complexity. Its sixth-place ranking reflects strong economic fundamentals but also long-standing challenges that continue to affect manufacturing competitiveness. India’s strengths include large-scale labor availability, fast-growing domestic consumption, and active industrial policies such as the Production Linked Incentive (PLI) scheme, which targets electronics, pharmaceuticals, solar energy, and automotive components.

Infrastructure constraints remain a central concern. While progress has been made under programs such as Bharatmala, Sagarmala, and the Dedicated Freight Corridors, logistics efficiency still trails leading ASEAN peers. Port congestion, multimodal connectivity gaps, and uneven utilities quality continue to affect operating conditions. Reforms are underway, but time will be required before India’s infrastructure reaches regional best-practice levels.

Governance and regulatory reforms have improved ease of doing business, particularly in areas such as taxation and insolvency. However, administrative processes can remain slow or inconsistent across states. India offers competitive labor costs, but skill levels vary widely, and firms often need to invest heavily in in-house training.

Despite these challenges, India’s medium-term outlook is strong. Favorable demographics, market scale, digital reform momentum, and significant FDI inflows into manufacturing position India as a growing alternative manufacturing hub for global companies seeking diversification.

Indonesia - Ranked 7^th

Overview - Indonesia’s seventh-place ranking reflects strong economic scale, expanding infrastructure, and significant labor availability. The country is becoming an increasingly important player in the regional manufacturing landscape, particularly in automotive production, processed foods, chemicals, basic metals, textiles, footwear, and consumer goods. Indonesia’s large domestic market provides an internal demand base that supports industrial growth even during external headwinds.

Infrastructure improvements remain central to Indonesia’s industrial development. Major investments in ports, toll roads, industrial zones, and power generation have reduced logistics bottlenecks. Initiatives such as the Patimban Port, Batang Industrial Estate, and new transport corridors enhance connectivity and production capacity. However, infrastructure quality still varies significantly between Java and outer islands, affecting national competitiveness.

The country’s governance environment continues to evolve. Regulatory reforms under the Omnibus Law aim to improve business licensing, attract investment, and simplify labor regulations. Progress has been uneven but notable. Indonesia’s trade policy is moderately protective, though the government is actively negotiating new agreements and pursuing integration into global value chains.

Indonesia’s labor force is young and large, but skill levels vary, and vocational training systems require further modernization. Productivity remains below that of Malaysia, Thailand, and Vietnam, although cost competitiveness is strong. The country’s strategy to move up the value chain focuses on electrification, downstream processing of nickel and other minerals, and integration into global EV supply chains.

Risks include regulatory unpredictability, regional disparities, and infrastructure gaps beyond Java. Nonetheless, Indonesia’s long-term manufacturing prospects are supported by domestic demand, resource advantages, and continued industrial policy initiatives.

Japan - Ranked 9^th

Overview - Japan ranks ninth due primarily to high costs and slow growth rather than industrial capability. The country remains one of the world’s most advanced manufacturing economies, with exceptional strengths in automotive manufacturing, robotics, precision engineering, semiconductors, chemicals, advanced materials, and biotechnology. Its firms are global technology leaders, and its production standards are unmatched in many fields. Infrastructure is also among the best globally. Japan’s ports, railways, highways, and utilities are highly reliable.

Labor costs, on the other hand are high, and the population is aging rapidly. Workforce shortages affect both manufacturing and logistics, with firms increasingly turning to robots, AI, and automation technologies to offset demographic constraints. Japan’s highly skilled workforce remains a strength with the country’s research universities and industrial R&D institutions contributing to a world-class innovation ecosystem, but attracting younger talent and foreign workers remains a challenge.

Japan’s business environment is highly stable, with strong regulatory quality, excellent intellectual property protection, and predictable policymaking. However, conservative corporate structures and slow regulatory processes can hinder rapid adaptation to global manufacturing shifts.

Despite high operating costs, Japan’s advanced manufacturing capabilities remain critical to global supply chains. Its medium-term outlook includes continued specialization in high-value industries and increased investment in next-generation technologies such as hydrogen energy, advanced robotics, and semiconductor materials.

Malaysia - Ranked 2^nd

Overview - Malaysia secures second place due to its balanced performance across governance, infrastructure, trade orientation, and industrial capability. The country’s manufacturing base is diversified, with strong clusters in electronics, medical devices, petrochemicals, aerospace components, automotive parts, and precision engineering. Its position as a leading semiconductor assembly and testing hub remains central to its growth outlook, supported by active investment from both Western and East Asian firms seeking alternatives to China.

Governance and regulatory quality distinguish Malaysia from many emerging peers. Transparent investment procedures, stable policymaking, and effective public administration create predictable operating conditions for manufacturers. This stability, combined with relatively efficient tax administration and supportive industrial policies, enhances investor confidence in long-term project development.

Malaysia’s infrastructure network, including ports such as Port Klang and Tanjung Pelepas, is world-class. Logistics performance, utilities reliability, and telecommunications infrastructure all contribute to a strong operational environment. Moreover, Malaysia is rapidly developing its green energy capabilities and sustainability regulation, which is increasingly relevant for export-oriented manufacturing. Labor productivity is comparatively high for the region. Malaysia benefits from an educated workforce, strong technical training institutions, and a multilingual talent pool. Labor costs are lower than those of high-income economies but higher than lower-income ASEAN peers, placing Malaysia in a balanced mid-cost, high-productivity position. The country’s ongoing reforms under the New Industrial Master Plan 2030 aim to expand advanced manufacturing, automation, and digital transformation.

Risks include political fragmentation, persistent skills shortages in certain technical fields, and the fluctuations of the semiconductor market.

Philippines - Ranked 10^th

Overview - The Philippines ranks tenth, second to last in our index, due to a combination of infrastructure constraints, limited supply chain depth and governance challenges. The country’s strength is labor availability. Its young, rapidly growing population provides a significant labor pool, and wage levels are competitively low relative to ASEAN peers. The country has competitive advantages in electronics assembly and light manufacturing.

Infrastructure gaps remain a major impediment. Congestion in Metro Manila, uneven transport connectivity, limited deep-sea port capacity, and power supply challenges raise operating costs. The country faces energy cost volatility and occasional supply interruptions that affect operational predictability. Ongoing infrastructure projects under the Build Better More program aim to improve connectivity, but implementation timelines affect immediate competitiveness.

Governance issues, administrative complexity, and inconsistent enforcement create challenges for manufacturers. Reforms are underway to streamline procurement, taxation, and investment procedures, but progress remains gradual. Trade policy is moderately protective, and integration into advanced supply chains is limited by logistical bottlenecks and limited local supplier networks.

The workforce is a competitive asset, ranking third best in the region for labor cost and second best for English-language availability. It is particularly competitive in the electronics sector, but skill development in engineering and industrial technology requires strengthening.

Despite these challenges, the Philippines has potential for long-term growth, particularly in electronics, food processing, and industrial services aligned with its strong BPO sector. Improving competitiveness will depend on sustained infrastructure investment and policy consistency.

Singapore - Ranked 4^th

Overview - Singapore ranks fourth due to the high quality of its institutions, world-leading infrastructure, efficient logistics, and strong innovation capabilities. The city-state positions itself not as a low-cost manufacturing base but as a high-value hub focused on advanced manufacturing, precision engineering, pharmaceuticals, chemicals, and technology-driven production. Its ability to attract high-tech investments remains robust, with multinational firms leveraging Singapore for regional R&D, automation, and high-precision production.

Infrastructure is one of Singapore’s strongest assets. Changi Airport, the Tuas Mega Port, and advanced digital infrastructure ensure unmatched connectivity and supply chain reliability. Digitalized logistics systems reduce dwell times and streamline cross-border operations. The country’s emphasis on energy efficiency, green manufacturing, and circular economy practices further elevates its competitiveness among high-tech investors.

Singapore’s regulatory framework is widely regarded as the most predictable and transparent in Asia. Contract enforcement, intellectual property protection, financial services, and corporate governance standards are exemplary. These attributes support industries with strict compliance and technological requirements. The country also provides extensive government incentives for R&D, innovation, automation, and workforce training, which further differentiates its industrial offering.

Labor costs are the highest in the ASEAN region, but productivity, skill levels, and automation adoption compensate for this. The country maintains a deep talent pool in engineering, biotechnology, and digital technologies, supported by continuous upgrading through SkillsFuture and university-industry partnerships.

Singapore’s challenges relate primarily to land constraints, high operating costs, and reliance on global trade cycles. However, as a hub for advanced manufacturing and regional headquarters functions, Singapore remains essential to global supply chains in Asia and plays a critical role in anchoring multinational production strategies.

South Korea - Ranked 5^th

Overview - South Korea ranks fifth, supported by a highly advanced industrial base, strong innovation ecosystem, and world-class infrastructure. The country’s manufacturing sector is anchored by globally competitive firms in semiconductors, automotive, shipbuilding, steel, chemicals, robotics, and consumer electronics. Its technological sophistication is among the highest in Asia, and it is a global leader in R&D intensity relative to GDP.

Infrastructure reliability is a hallmark of South Korea’s competitiveness. High-quality highways, airports, and ports facilitate efficient logistics, while widespread high-speed broadband supports digital manufacturing and automation. The country’s emphasis on Industry 4.0 technologies, including smart factories and robotics, continues to boost productivity and offset labor-related challenges.

Innovation capacity is one of South Korea’s greatest strengths. Government programs support collaboration between universities, research institutes, and industry. Major conglomerates such as Samsung, SK, Hyundai, and LG invest heavily in frontier technologies, including artificial intelligence, advanced materials, electric vehicles, and hydrogen. South Korea’s education system produces highly skilled engineers and researchers who reinforce this ecosystem.

Challenges include high labor costs, a rapidly aging population, and structural reliance on large conglomerates, which can limit SME flexibility. Regulatory complexity in some areas also affects ease of doing business. Nevertheless, South Korea’s advanced manufacturing capability, strong intellectual property regime, and strong industrial policies maintain its competitiveness.

The medium-term outlook is driven by continued expansion in semiconductors, electric mobility, battery technologies, and green energy. South Korea will remain a key high-tech manufacturing powerhouse in Asia.

Thailand - Ranked 8^th

Overview - Thailand’s industrial fundamentals remain solid, but many of its advantages are now shared by regional peers, reducing its relative competitiveness. While the country offers a mature ecosystem and reliable infrastructure, slower investment growth, rising labor constraints, and limited cost advantages weigh down its overall positioning. As a result, Thailand ranks eighth, behind faster-growing destinations such as Vietnam and Malaysia.

Its industrial strengths include an extensive automotive supply chain, encompassing Tier 1 and Tier 2 suppliers; the electronics sector, particularly in HDD components; as well as food processing and petrochemicals.

Infrastructure quality is strong across major regions. The Eastern Economic Corridor (EEC) continues to attract high-technology investments, supported by upgraded ports, airports, and industrial parks. Electricity reliability and telecom connectivity are high, contributing to efficient industrial operations.

Thailand’s governance and regulatory environment is stable in core economic institutions but affected by recurring political uncertainty. While investment procedures are relatively clear, shifts in political leadership can result in policy reorientation, leading some manufacturers to diversify regionally. Thailand's positioning as a hub for electric vehicles, automation, and high-value manufacturing, however, remains unaffected by political shifts.

Labor costs are moderate by regional standards, but demographic pressures are emerging, with an aging population affecting long-term workforce availability. Skill shortages in engineering, robotics, and digital technologies remain a challenge. However, Thailand is actively implementing programs to upskill workers and attract foreign talent in targeted industries.

Overall, Thailand’s industrial base remains competitive, but its regional standing is increasingly challenged by faster-growing investment destinations. The medium-term outlook is stable, but it depends on policy continuity, deeper integration into high-value sectors, and sustained infrastructure development.

Vietnam - Ranked 3^rd

Overview - Vietnam’s ascent to third place reflects its status as one of the fastest growing and most dynamic manufacturing destinations in Asia. Over the past decade, the country has transitioned from a low-cost assembly hub into a more sophisticated industrial base, supported by consistent FDI inflows from the United States, South Korea, Japan, China, Taiwan, and Europe. Key sectors include electronics, smartphones, textiles and garments, footwear, furniture, automotive components, and renewable energy equipment.

The country’s strong trade integration remains a defining advantage. In addition to the ASEAN Free Trade Area (AFTA), Vietnam participates in a wide portfolio of high-quality free trade agreements, including CPTPP, EVFTA, RCEP, and UKVFTA. These agreements provide unparalleled preferential access to major markets and significantly enhance Vietnam’s attractiveness for export-oriented manufacturers. Customs modernization and improvements to trade facilitation continue to reduce lead times and compliance costs.

Vietnam’s workforce offers a combination of competitive wages and rising skill levels. The population is young, and vocational education programs are improving, although gaps remain in advanced engineering, automation, and managerial talent. Despite rising labor costs in major industrial hubs such as Hanoi and Ho Chi Minh City, Vietnam remains cost-competitive relative to regional peers and continues to attract large-scale relocations from China under the China-plus-one strategy.

Infrastructure development has accelerated, with major expressways, deep-sea ports, and airports coming online. Industrial parks and special economic zones are expanding, though demand often exceeds supply in high-priority provinces. Constraints include limited energy supply capacity in certain regions, slow administrative processes, and congestion in major cities. Improvements in governance and regulatory consistency remain priorities, but the overall business environment continues to evolve in a positive direction.

Vietnam’s medium-term outlook is strong. The country is transitioning into higher-value manufacturing, supported by growing supply chain depth in electronics and renewable energy. Continued upgrades in policy, infrastructure, and workforce skills will determine how successfully Vietnam consolidates its upward trajectory.