Current Situation of Sub-region s Attractiveness East Asia-wide Economic Integration driven by 1 Has developed as a single market and well connected supply chain network Yangon Cars Mawlamyine Dawei Cars Electrical-parts Shoe-parts <EWEC> Khon Kaen Bangkok Vientiane Car-parts Textile Shoes <SEC> Hanoi Car-parts Electrical-Parts Specialize in respective strengths and complement weaknesses Abundant water resource and fertile soil Existing automotive and electronic industry cluster *CMK: cutting making trimming Phnom Penh Da Nang Savannakhet Electrical-Parts Fabric Textile Shoes Ho Chi Minh Good access to US, EU, and south Has attracted an increasing foreign direct investment FDI from Japan to and ASEAN ASEAN ASEAN 717 810 2006 RCEP AEC 887 Source: Statistics of Bank of Japan 2013 2,333 East Asia ASEAN [Unit: bil yen] Malaysia Singapore Philippines sub-region as the junction between emerging Asian mega-markets
Future industrial structure to be achieved through the strength of each countries In the long run, each countries aim to achieve the following industry structure Individual Lead industrialization of subregion Upgrade its domestic industries and technologies, by leveraging its domestic large/ deep layered industrial cluster Invite FDI by consistent industrial policies to strongly foster industrial clusters Leverage its large population, domestic demand, and good access to EU/ USA with its deep sea port In the early stages of industrialization, invite production-block including labor intensive process by leveraging abundant labor/ natural resources and existing industrial clusters Reinforce the level of labor force through technology spill over from global production network In the long run, nurture industries that are complementary with those of neighboring countries and leverage inherent strength of each country () Foster a precision machinery industry, mineral processing industry, by leveraging its abundant water resource, and fertile soil. (, ) Could attract higher value-added process ( e.g. spinning yarn, weaving, or product planning ), by leveraging the existing garment facilities. general Upgrade the food processing of distinctive fruits & vegetables to a strategic export industry, as well as nurture the related industries (e.g. agro-machine, food processing machine, cold-chains, food wholesale, and restaurant ), which will improve the agricultural productivity, and enhance the market access of local farmers and SMEs. 2
Pillars of Policy Directions <Concept of Vision> Developing the region together with surrounding countries, advancing industries and enhancing the value-chains, by reflecting the unique advantage and competitiveness of each country and mutual complementarity under the spirit of "Specialization & Collaboration, Integrating the region as the core of the production network in Asia and the world as a whole. Expected Outcome GDP increase of USD 20 billion in (i.e. 2% of s GDP) by 2020 (Intra-regional trade: 10 bil, Inter-regional trade: 8 bil, FDI: 2 bil) Growth in neighboring economies Abundant water resource and fertile soil Unique Advantages Good access to US, EU, and south Existing automotive and electronic industry cluster Industrial Development Vision (2016-2020) Pillar I: Partnering with neighboring countries Trade Structure Local Business Collaboration Foreign Direct Investment Pillar II: Building a footing for more advanced industrial structure Competitive SME R&D Pillar III: Strengthening infrastructure and resources that support regional value chain Regional Connectivity Energy supply & Environment HRD Work Programme (2016-2020) 3 Work Programme to be formulated in 2016. Its progress to be monitored annually
Pillar I: Partnering with neighboring countries Challenges and Opportunities Policy Direction CAGR of inter-regional trading ( 00-10) Trade Structure -Need to foster industries and develop value chains with in a mutually beneficial and complementary manner. CAGR 39% CAGR 25% AEC and RCEP Regionally unified efforts for the cross border trade enhancement(e.g. the customs proceedings improvement. etc). Need to foster new industries Source: Uncomtrade, ADB, World Bank World Development Indicators Foreign Direct Investment -FDI has been focused in natural resources and labor-intensive industry. -Need to invite / foster higher value added industries and new industries Remarkable FDIs to in 2013-14 : Labor-intensive and natural resource Garment Hydropower Garment Infrastructure Thermal power Footwear Mining Infrastructure Auto Auto Cement Real-estate Manufacturing Electronics Electronic Auto Agriculture Electronics Oil/Gas Auto Source: ASEAN Investment report 2013-14 Need to create/foster higher value added industrial clusters, including SMEs, through the information provision / the support desk establishment for foreign investors by JETRO etc. Need to foster a harmonized / win-win relationship between neighboring countries on the border SEZ development. Need to create/foster new industries Promote technology transfer to SME Local Business Collaboration -The business presence of enterprises is still limited compared with that of Chinese and n enterprises. # of enterprises in Forbes 2000, 2015 170 56 17 Need to build a common platform to enhance the business collaboration (e.g. necessary legal infrastructure, and business environment improvement). Provide business matching opportunities (e.g. trade fairs, business missionaries ) Source: Forbes 2000, 2015 4
Pillar II: Building a footing for more advanced industrial structure Challenges and Opportunities Policy Direction Num. of Researchers per MM people R&D -Need to increase the capital investment and human resource in R&D activities. 18 16 17 4,381 626 281 293 202 137 113 Need to invite R&D facilities/functions by taking advantage of the adjacent to the production site. Need to create more human resource in R&D activities through collaboration among the universities(e.g. curriculum / internship program development). Source: Thomson, WEF Global Competitiveness Ranking 2013-14, UNESCO Malaysia Singapore SME policy index 2014 (ERIA) Competitive SME 5 -Need to increase necessary human and capital resources. -Especially need to enhance the SME's access to finance. Source: ERIA ASEAN SME Policy Index 2014 ASEAN Ave. = 3.6 2.5 2.9 2.4 4.1 3.7 Steady implementation of the "ASEAN strategic action plan for SME development (2016-2025)"
Pillar III: Strengthening infrastructure and resources that support regional value chain Regional Connectivity -Improvement of road infrastructure is needed, especially in -Need to enhance cross-border connectivity (such as by CBTA) Challenges and Opportunities Overall Logistics Performance Index (WB 2014) 3.4 3.5 2.7 35 3.2 27 3.1 83 2.4 (35) 2.2 Score (Rank as of 2010) Source: World Bank The Logistics Performance Index and Its Indicators2012, 2014 (129) 131 (118) Cam bodia Lao PDR 145 (133) Myan mar Thai land 48 (53) Viet nam (20) 54 (47) Policy Direction Connectivity improvement such as in EWEC, SEC, Viet Nam, and especially in. New deep sea port development facing the n sub-continent. Quality infrastructure development. Input from investors to enhance the implementation of CBTA. Modernization of custom proceedings. Energy supply & Environment -Instability in Electrical Supply -Low energy efficiency in generation and consumption -Environment issues (pollution, waste) Source: World Bank Duration of outage (hrs) 4 3 2 1 0 Philippines 0 5 10 15 # of outage (/month) Need to consider the best possible mix for the regional energy portfolio. Regional power development, and cross border electricity supply. Accelerate the effort toward the energy saving / renewable energy technology. Fostering venous industries. HRD 6 -Wage hike without productivity improvement -Low skilled labor Wage growth (2010-2014) (%) 40 25 10 0-5 CAGR 0 Phillipines Singapore Malaysia 100 200 300 400 1,400 Average wage 2014* (USD/month) *Source: Average wage is calculated from JETRO s survey for Japanese companies Need to create and utilize a "HRD hub" for the regional HRD in sub-region. The improvement of the basic education, vocational training / on-the-job-training in leading countries, and the work ethics improvement are necessary.