PRIORITY GOODS SECTORS IN ASEAN-8: DEVELOPMENT PATTERNS AND TRADE PERFORMANCE*

Transcription

1 PRIORITY GOODS SECTORS IN ASEAN-8: DEVELOPMENT PATTERNS AND TRADE PERFORMANCE* Thitapha Wattanapruttipaisan* Studies Unit Bureau for Economic Integration and Finance ASEAN Secretariat Jakarta (May 2006) * This brief was prepared as a background paper for circulation at the Second Consultative Meeting for the Priority Integration Sectors (COPS II), Asean Secretariat, Jakarta, June The views expressed in this note do not necessarily reflect those of the ASEAN Secretariat. Mention of any firm or licensed process does not imply endorsement for it by the ASEAN Secretariat. For further enquiries, please contact Thitapha Wattanapruttipaisan, Studies Unit, Bureau for Economic Integration and Finance, ASEAN Secretariat, Jakarta; address: <thitapha@aseansec.org>.

2 Background Brief on PRIORITY GOODS SECTORS IN ASEAN-8: DEVELOPMENT PATTERNS AND TRADE PERFORMANCE Executive Summary An empirical picture of the nine priority goods sectors (PGSs) is provided in the following brief. The related implications and options for supply-side improvements, sourcing and integration are discussed in the next brief. PGSs are the bedrock of production, mass employment, trade-driven foreign direct investment (FDI), and export earnings in ASEAN-8. They have also generated substantial trade surpluses in the region. Comparatively, extra-regional economies are of great importance to PGS trade. Electronics, agro-based, rubber-based, and automotive products enjoy strong world demand and comparative advantage. Facing stiff external competition and/or high import growth, meanwhile, are the ICT, textiles and clothing (T&C), health care, fisheries and wood-based sectors. Thus, PGSs have different structural features and growth potential. This implies diverse challenges and prospects in PGS development and integration among ASEAN-8. The related implications and options are examined in the next brief

3 Background Brief on PRIORITY GOODS SECTORS IN ASEAN-8: DEVELOPMENT PATTERNS AND TRADE PERFORMANCE Contents A. Introduction 2 B. Overall structure of nine PGSs 3 C. Trade flows of the major PGSs 4 D. Trade flows of the minor PGSs 4 E. Conclusion 5 Annex Figures 1 to 9 6 to 10 A. INTRODUCTION The following brief fills a gap in the empirical analysis of priority integration sectors in ASEAN. Its focus is on nine priority goods sectors (PGSs). The next brief will look into major implications and options for further development, sourcing and integration concerning these PGSs. 1 Five-year ( ) averages are used to smooth out year-to-year fluctuations. They also provide a longer-term perspective to the discussion. Currently, 2004 is the latest year for which PGS trade statistics are available. This brief includes negative list products in the nine PGSs because the discussion focuses on the initial PGS conditions before integration. As such, the computed data for , plus other weighted and composite indicators to be developed at the ASEAN Secretariat, can serve as baseline benchmarks for the monitoring and evaluation of the integration process. There are incomplete PGS data for the Lao People s Democratic Republic (PDR) and Viet Nam. This, however, would not alter the major features and overall performance of PGSs in ASEAN-8. In addition, the 1 Namely (1) agro-processed items (HS and 04-24); (2) automotive products (HS 87); (3) e-asean, including information and communications technology (ICT) equipment (HS 84-85, 90 and 3818 but excluding those within the electronics sector); (4) electronics goods (HS , 8418, and 8516); (5) fisheries (HS 03); (6) health care products (HS , 3401, 9018, , and ); (7) rubber-based items (HS 40); (8) textiles and apparel (HS 50-63); and (9) woodbased products (HS 44-48). The above classifications of priority integration sectors follow those adopted by Myrna S. Austria, 2004, The Patterns of Intra-ASEAN Trade in the Priority Goods Sectors, report prepared for the ASEAN Secretariat under the AADCP-Regional Economic Policy Support Facility, 2 volumes, Jakarta, August. Several sectors (such as air travel, e-asean, healthcare and tourism) have a services dimension. However, there are tariff lines for nine priority integration sectors in the Framework Agreement for the Integration of Priority Sectors (Framework Agreement), hence the focus of discussion on these nine PGSs

4 related implications and options to be managed by PGS stakeholders in ASEAN-8 are also applicable to those in the Lao PDR and Viet Nam. B. OVERALL STRUCTURE OF NINE PGSs Firstly, PGSs exports from ASEAN-8 averaged around US$ 310 billion a year, or 73 per cent of merchandise exports, during (Annex Figure 1). ASEAN-8 spent less on PGS imports which averaged about US$ 238 billion annually (Annex Figure 2). On average, PGS exports were growing more slowly (5.1 per cent a year) than PGS imports (6.4 per cent), merchandise exports (7 per cent) or merchandise imports (8.2 per cent) between 2000 and 2004 (Annex Figure 3). Supply-side strengthening measures are discussed in the next brief. Secondly, the nine PGSs have produced healthy, but slow-growing, trade surpluses in ASEAN-8: approximately US$ 72 billion in 2000 and US$ 74.5 billion in The surplus was equal to 21 per cent of merchandise imports by ASEAN-8 in 2000 but to just over 16 per cent in Thirdly, non-asean economies accounted for per cent of PGS trade in (Annex Figure 4). In particular, 90 per cent of exported T&C, electronics and fisheries products went extra-regionally. Cambodia, the Philippines and Thailand had higher ratios of extra-regional PGS exports (80 to 96 per cent) than the average for ASEAN-8. Fourthly, Singapore and Malaysia had a stable share, averaging 58.5 per cent (or US$ billion), of PGS exports in Indonesia and the Philippines accounted for another 21.2 per cent during the same period (Annex Figure 5). Thailand s relative share went up from 16.8 to 19.5 per cent between 2000 and The average share was about 18 per cent (or around US$ 56 billion) for the whole period. Other ASEAN-8 economies are comparatively minor traders of priority goods. Fifthly, PGSs have generated substantial trade surpluses for Singapore plus Thailand: about US$ 25 billion (or 35 per cent of the total PGS surplus) in 2000 and around US$ 36 billion (or 48 per cent) in The trade surplus of Indonesia and Malaysia was stable at US$ billion each while that of the Philippines was falling between 2000 and 2004 (Annex Figure 6). For the sake of completeness, T&C, wood products and coffee accounted for one-half of merchandise exports (US$ 0.36 billion in 2004) from the Lao PDR. This country has also earned substantially on electricity exports (US$ 97 million in 2004). However, there were still large trade deficits in the recent years (for example, US$ 145 million in 2004). Exports of T&C, fisheries, wood products, rice and coffee were worth US$ 9.5 billion, or 36 per cent of merchandise exports (US$ 26.5 billion) from - 3 -

5 Viet Nam in Merchandise exports were growing rapidly, averaging 16.6 per cent a year between 2000 and Nevertheless, the trade balance was in deficit in the recent years (for example, US$ 5.4 billion in 2004). 2 C. TRADE FLOWS OF THE MAJOR PGSs Firstly, PGS trade in ASEAN-8 is concentrated in ICT goods, averaging around 59% (73) per cent of total PGS exports (imports) during (Annex Figures 7 and 8). Debit items: ICT exports were growing more slowly at 4.1 per cent a year, compared to 6.6 per cent for ICT imports (due to the spread of digital-based usage in the region). Consequently, the ICT trade surplus fell steadily US$ 15.9 billion (or 22.2 per cent of the PGS export surplus) in 2000 to US$ 9.5 billion (or 20 per cent) in 2002 and further to US$ 1.9 billion (or just 2.4 per cent) in This sector would benefit from value-adding technological and skills upgrade for high-premium design, services, and product and process innovations. Secondly, the electronics and agro-processing sectors are much smaller in size. The former accounted for 12.9 (5) per cent of annual PGS exports (imports) by ASEAN-8 and agro-processing, for 8.3 (7.3) per cent respectively during (Annex Figures 7 and 8). Both sectors show a strong export performance, however. Electronics produced the largest, but modestly growing, PGS trade surpluses, which averaged around US$ 28 billion per year during The agro-trade surplus is lower but agro-based exports expanded faster, 13.3 per cent annually. As a result, the agro-surplus reached US$ 12 billion in 2004 which was double the surplus level in 2000 (Annex Figure 9). Thirdly, T&C also yielded substantial trade surpluses averaging about US$ 11 billion a year during However, T&C exports and trade surpluses were stagnant in this period, causing thus falling relative (trade and surplus) shares. The stronger competition in quota-free global trade means possibly smaller T&C exports and surpluses from That is a matter for concern. Several regional countries (including Indonesia, the Philippines and Thailand) are among the top ten exporters of T&C products in the US and the EU. In addition, T&C are a major source of domestic employment and export earnings in Cambodia, the Lao PDR, Myanmar and Viet Nam. D. TRADE FLOWS OF THE MINOR PGSs The relative trade shares of five other PGSs are around 4 per cent each in ASEAN-8 (Annex Figures 7 and 8). However, several of them are more dynamic in export performance and show greater competitiveness and growth prospects than some of the major PGSs discussed above. 2 Data are from Asian Development Bank, 2005, Key Indicators 2005, Manila, ADB

6 Firstly, rubber-based exports went up by 22 per cent a year between 2000 and 2004 (reaching US$ 12.5 billion in the later year), admittedly from a low initial base. Similar to the case of agro-processed goods, the rubberbased trade surplus also doubled in the same period to become quite significant at US$ 9.4 billion in Secondly, most dynamic is the automotive sector with export growth averaging 29 per cent a year between 2000 and 2004 (reaching US$ 10.8 billion in the later year). Health care exports were also expanding rapidly, by 13 per cent annually in the same period. However, the export value remained modest at US$ 5.1 billion in Debit items: both sectors are small in size and have long been in a deficit position. The health care trade deficit was stable at about 10 per cent of health care imports during However, the large automotive deficit fell from 48 per cent of automotive import value in 2000 to 22 per cent in It would likely to decline further in the medium term. Thirdly, fisheries and wood-based products have not performed strongly in the recent years, with stagnant export earnings of US$ 4-5 billion for fisheries and about US$ 13 billion in the case of wood-based products. In addition, their trade surpluses remained largely the same or were falling during E. CONCLUSION The structural characteristics and trade performance of the nine PGSs, and hence their development prospects, are diverse in ASEAN-8. So is the availability of economic resources, technical expertise and implementation capacity within the region. Meanwhile, global competition for markets and inputs has become intensified and technological progress, fast paced. New modalities have also emerged in industrial organization and value creation. There is, moreover, the proliferation of preferential and free trading arrangements and areas in the recent years. All these have impacted noticeably on the nature, urgency and sequencing of policy measures for supply-side strengthening, sourcing and integration of the nine PGSs, among other production and trading activities, in ASEAN. The related implications and options are the subject of discussion in the next brief

7 Annex Figure 1. Values of Nine PGS Exports and Total Merchandise Exports of ASEAN-8 in 2000, 2002, and US$ billion Years Nine PGSs Total merchandise exports Annex Figure 2. Values of Nine PGS Imports and Total Merchandise Imports by ASEAN-8 in 2000, 2002 and US$ billion Nine PGSs Total Merchandise Imports - 6 -

8 Figure 3: Values of Exports and Imports of PGSs and Total Merchandise Exports of ASEAN-8 in 2000, 2002 and US$ billion Merchandise Exports PGS Exports PGS Imports Annex Figure 4. Extra-Regional Trade of Nine PGSs of ASEAN-8 in 2004 (Percentage) Textile & Clothing Electronics Fisheries Rubber-based Wood-based Agro-based ICT Healthcare Automotive Extra-Regional Export Extra-Regional Import - 7 -

9 Annex Figure 5. Relative Shares of Individual ASEAN-8 in Total PGS Exports, Percentage Share Singapore Malaysia Thailand Indonesia Philippines Cambodia 5 0 Countries Myanmar Brunei Darussalam Annex Figure 6. PGS Trade Surplus or Deficit of ASEAN in US$ billion Brunei Darussalam Cambodia Indonesia Malaysia Myanmar Philippines Singapore Thailand PGS-9 Total Merchandise - 8 -

10 Annex Figure 7. Relative Shares of Individual PGSs in Total Exports of Nine PGSs in ASEAN-8, Percentage share ICT Electronics Agro-based Textiles&Clothing Wood-based Rubber-based Automotive Health care Fisheries 15 0 PGSs Annex Figure 8. Relative Share of Individual PGSs in Total Imports of Nine PGSs in ASEAN-8, Percentage share PGSs ICT Agro-based Automotive Electronics Textiles & clothing Wood-based Health care Rubber-based Fisheries - 9 -

11 Annex Figure 9. Surplus or Deficit of PGS and Total Merchandise Trade of ASEAN-8 in 2000, 2002, and 2004 in US$ billion