The archipelago constraint
Logistics across 25,000 islands
Most circular economy theories are written in Europe or North America where trucks can drive uninterrupted across a continent. Southeast Asia presents a radically different geography. Indonesia and the Philippines alone comprise over 25,000 islands.
Moving a surplus compressor from a gas plant in Sumatra to a buyer in Vietnam involves a complex multimodal journey. It requires a truck, a barge, a feeder ship, a main vessel, and another truck. This logistical fragmentation increases the time and cost of recovery. In this region, a centralized Hub and Spoke model is essential. Assets must be aggregated in major ports like Singapore or Port Klang or Johor before they can be effectively marketed to the global world. Without these aggregation hubs, the cost of moving single assets kills the economics of the trade.
The arbitrage opportunity
Southeast Asia sits at a unique economic intersection. It has a high demand for affordable industrial equipment to power its rapid development. It is also home to massive legacy infrastructure from the oil and gas boom of the 1980s and 90s.
This creates a perfect Internal Circular Market. A vintage turbine being decommissioned by a major national oil company may be too old for a modern tier one plant. However, it is perfectly suited for a smaller industrial facility in a developing province. The circular economy here is not just about sustainability. It is about Economic Access. It allows smaller enterprises to access high quality tools that would be unaffordable if purchased new.
The informal vs formal sector
The karung guni economy
In many ASEAN nations, the recycling sector is dominated by the informal economy. These are the scrap collectors and small aggregators who operate outside the tax system. They are incredibly efficient at recovering basic materials like copper and steel but lack the technical capability to manage complex assets.
The challenge for platforms like Lesto is to bridge this gap. We must integrate the efficiency of the local collectors with the compliance standards of a global corporation. This means creating “formalized” pathways where informal actors can safely feed material into certified recovery facilities. This ensures that environmental standards are met without destroying local livelihoods. It transforms the informal sector from a liability into a highly efficient “last mile” collection network.
The “China Plus One” impact
As global manufacturing shifts away from China due to geopolitical tensions, Southeast Asia is becoming the primary beneficiary. Factories are springing up across Vietnam, Thailand, and Malaysia.
This industrialization drive creates a massive hunger for equipment. Buying used, high-quality assets allows these new factories to come online faster and cheaper than waiting for new machinery. Consequently, the region is shifting from being a net exporter of scrap to a net importer of reusable capital equipment. This shifts the circular flow of goods and positions ASEAN as a critical node in the global reuse network.