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Developing Asia and the World
Economic trends and prospects in developing Asia
Growth amid change

Conclusion

The main findings of this chapter, based upon the empirical analysis of recent trade data, are broadly encouraging for the future prospects of the economies of East and Southeast Asia. Fundamentally, the processes of regional integration and regional cooperation are binding these economies closer together as trade and cross-border investments are mutually reinforcing. The key message from earlier sections is that globalization is the driving force behind increasing regional integration in Asia. Final demand emanating from outside the region is still crucial in the expansion of exports of manufactures from East and Southeast Asia. This is shown to be the case in traditional labor-intensive goods and in more sophisticated products, such as electrical machinery and motor cars. Thus, the economies of East and Southeast Asia are definitely not uncoupling from global markets, indeed they have become ever more closely linked with the large markets of the industrial economies.

East and Southeast Asia have concentrated their export manufactures in the fastest-growing industries in world trade and this has allowed them to enhance their manufacturing capabilities in more sophisticated products while expanding their market shares. The rising trade shares of developing Asia in world trade underscores the fact that trade growth is indeed influenced by the composition of what countries export.

The pattern of trade and structural change in developing Asia has consistently followed the "flying geese" pattern and this remains the case for the PRC and emerging economies such as Indonesia and Viet Nam. The process of industrialization is being fostered by the rise in intra-industry trade. Although such trade has been stagnant or declining in traditional labor-intensive manufacturing (textiles, clothing, and footwear), it has been on the rise in more dynamic industrial branches, including in technology-intensive and human capital-intensive manufacturing sectors, as well as in natural resource-intensive products.

Most of the economies in the region initially stimulated openness by setting up special economic zones, export processing zones, and industrial bonded zones that encourage FDI and provide export-oriented firms with imported inputs free of tax and duty. Eventually they went further in cutting tariffs and opening the entire economy to trade and investment.

Within East and Southeast Asia, there has been explosive growth in trade in intermediate products-especially in parts and components of electrical machinery and transportation equipment centered on the PRC as the assembly point for final goods. The fact that intra-Asian trade has flourished indicates that multinational enterprises in the region tend to have high propensities to engage in vertical production sharing and have much higher export-sales ratios than in other parts of the world. The PRC has a nuanced impact on the process of industrialization elsewhere in the region. Southeast Asia competes in world markets with the PRC in labor-intensive manufacturing but the PRC is largely complementary to the rest of East and Southeast Asia in natural resource-based products and human capital- and technology-intensive manufactures.

Policy implications are as follows:

  • Market access to third country markets, especially in North America and Europe, is vital to further export expansion in East and Southeast Asia and this means a successful and ambitious Doha Round is in the interest of the region.


  • Globalization, technological change and competition requires the East and Southeast Asian economies to employ resources flexibly with ease of entry and exit.


  • Countries may initiate the process of structural change by adopting or simulating open-economy policies that impart market discipline to firms and investors.


  • Liberalization of trade and investment on a unilateral basis is still the most important route for reaping the gains from trade in the region and bilateral initiatives have not had much impact.


  • Productivity improvements at the firm level have helped to ensure competitiveness and will continue to be essential to further develop global and regional integration through trade.


  • Second generation reforms aimed at developing markets and institutions that are missing, incomplete, or inefficient are necessary to generalize open economy policies in the PRC and Southeast Asian economies.

    • Endnotes

    1 Although India is becoming a significant global supplier of services, particularly those associated with information technology outsourcing (Winters and Yusuf 2007), services are not covered in this chapter.

    2 Data from World Trade Analyzer of Statistics Canada in Standard International Trade Classification format were mapped into HS chapter categories using a concordance from Jon Haveman: www.haveman.org.

    3 World imports are equal to world exports in the World Trade Analyzer database.

    4 The Agreement on Textiles and Clothing (ATC) ended the system of global quotas on December 31, 2004. See ADB (2006), pp. 36-57 for an in-depth analysis of textiles and apparel trade in the region.

    5 The United States and European Communities have both placed renewed quota restrictions on certain textile and clothing products from the PRC beginning in late 2005 (ADB 2006). These restrictions will be in place through 2008 and, although they are to be progressively loosened, they will limit the ability of the PRC to increase its shares of these items.

    6 Data from the United States Office of Textiles and Apparel: http://www.OTEXA.ita.doc.gov/.

    References

    Anson, Robin and Guillaume Brocklehurst. 2006. World Markets for Textile Machinery, 2006: Part 2-Fabric Manufacture. Textiles Intelligence. December.

    Asian Development Bank. 2006. "Routes for Asia's Trade. "Asian Development Outlook 2006. Hong Kong, China.

    Eichengreen, Barry and Hui Tong. 2005. "How China is Reorganizing the World Economy. "Paper prepared for the inaugural meeting of the Asian Economic Policy Panel. Tokyo. 22 October 2005.

    General Agreement on Tariffs and Trade (GATT). 1994. Agreement on Textiles and Clothing. Geneva.

    Grubel, Herbert G. and Peter Lloyd. 1975. Intra-Industry Trade: The Theory and Measurement of International Trade in Differentiated Products. London: Basingstoke.

    McKibbin, Warwick J. and Wing Thye Woo. 2003. "The Consequences of China's WTO Accession on its Neighbors. "Working Papers in Trade and Development No. 2003/17. Canberra: The Australian National University, Division of Economics, Research School of Pacific and Asian Studies. August.

    National Council of Textile Organizations (NCTO). 2004. The China Threat to World Textile and Apparel Trade. Washington, DC. July 15.

    Organisation for Economic Co-operation and Development (OECD). 2002. "Intra-Industry and Intra-Firm Trade and the Internationalisation of Production. "In Economic Outlook No. 71, Chapter 6, pp. 159-70. Paris.

    Srinivasan, T. N. 2006. "China, India and the World Economy. "Stanford Center for International Development Working Paper No. 286. 3 July.

    The Economist. 2007. "The Problem with Made in China. "January 13, pp. 68-70.

    Winters, L. Alan and Shahid Yusuf, editors. 2007. Dancing with Giants: China, India and the Global Economy. Washington, DC and Singapore: The World Bank and Institute of Policy Studies.

    A.1.6.1 Structure of trade in East and Southeast Asia (% share of world total), 1995 and 2004
    HS category Japan China, People's Rep. of NIEs ASEAN-5 East and Southeast Asia
    1995 imports
    28–38 4.52 4.57 9.13 4.28 22.50
    39–40 4.10 2.53 6.63 3.20 16.47
    41–43 3.01 12.89 19.31 4.41 39.62
    44–46 19.03 2.87 7.38 1.88 31.16
    47–49 3.85 2.78 6.79 2.97 16.39
    50–60 3.50 11.53 15.16 5.17 35.35
    61–63 10.73 0.87 7.24 0.51 19.34
    64–67 6.06 0.14 3.95 0.35 10.51
    68–70 3.65 2.17 8.94 4.56 19.32
    71 8.11 0.47 11.79 3.34 23.72
    72–83 4.97 3.59 9.73 5.61 23.90
    84 3.57 4.24 10.04 5.58 23.43
    85 4.78 3.68 17.42 7.86 33.73
    86–89 2.82 1.22 4.80 3.31 12.15
    90–91 6.20 3.04 13.72 3.40 26.36
    92 6.25 1.54 11.58 3.77 23.13
    93 4.96 0.05 7.73 5.12 17.87
    94–97 5.44 1.54 7.20 1.71 15.89
    1995 exports
    28–38 5.93 1.99 7.13 1.32 16.37
    39–40 11.47 1.45 8.18 13.39 34.49
    41–43 0.99 3.12 17.65 2.09 23.86
    44–46 0.16 1.99 3.13 14.58 19.87
    47–49 1.86 0.71 3.72 1.75 8.05
    50–60 4.48 6.87 22.68 3.48 37.51
    61–63 0.53 14.79 19.48 7.02 41.82
    64–67 0.18 14.77 22.60 11.54 49.09
    68–70 10.68 4.18 6.52 2.95 24.33
    71 0.59 1.18 3.71 3.02 8.51
    72–83 7.60 3.12 8.23 1.41 20.36
    84 14.76 1.17 12.24 2.50 30.67
    85 15.97 2.84 21.41 7.92 48.14
    86–89 15.45 0.65 4.21 0.72 21.03
    90–91 17.24 2.64 11.49 1.61 32.99
    92 11.94 2.48 12.13 2.09 28.65
    93 0.54 0.14 0.65 0.14 1.48
    94–97 3.11 6.54 16.03 4.19 29.88
    2004 imports
    28–38 3.33 6.91 6.44 3.07 19.75
    39–40 3.00 5.23 4.37 2.80 15.39
    41–43 1.98 20.92 16.67 3.54 43.11
    44–46 10.53 4.36 3.56 1.14 19.60
    47–49 2.47 5.45 4.18 2.72 14.82
    50–60 2.21 13.31 10.29 4.79 30.61
    61–63 7.99 1.21 6.80 0.54 16.53
    64–67 4.60 0.32 4.01 0.51 9.44
    68–70 3.37 3.77 8.17 2.76 18.07
    71 2.21 2.26 12.00 2.06 18.53
    72–83 3.53 6.72 8.55 4.02 22.82
    84 3.67 7.76 9.30 3.67 24.39
    85 4.53 10.61 16.91 6.46 38.52
    86–89 1.91 2.03 2.54 1.62 8.10
    90–91 5.79 10.66 14.42 2.76 33.62
    92 6.50 5.13 8.64 2.76 23.02
    93 6.61 0.12 9.84 0.69 17.25
    94–97 4.19 1.80 5.61 1.33 12.92
    2004 exports
    28–38 4.96 2.90 7.52 1.94 17.33
    39–40 9.40 4.59 6.94 11.55 32.47
    41–43 0.59 7.70 17.07 1.63 27.00
    44–46 0.12 5.62 1.37 8.72 15.83
    47–49 1.95 1.89 3.49 3.01 10.33
    50–60 3.97 13.94 17.81 3.68 39.40
    61–63 0.40 24.59 12.00 5.89 42.87
    64–67 0.05 27.57 10.52 11.87 50.01
    68–70 8.19 9.06 4.77 3.82 25.83
    71 0.53 1.88 5.91 1.52 9.84
    72–83 6.10 7.34 7.95 1.96 23.35
    84 9.75 9.42 12.00 4.27 35.44
    85 9.81 11.20 25.01 8.11 54.13
    86–89 13.21 2.11 5.86 0.90 22.08
    90–91 13.75 6.56 13.13 2.11 35.56
    92 10.50 5.51 19.38 2.99 38.38
    93 0.81 0.06 1.90 0.09 2.85
    94–97 2.23 14.10 9.98 3.88 30.19
    Source: Statistics Canada, World Trade Analyzer.

    		 
    A.1.6.2 Composition of trade: East and Southeast Asia (% share to total imports/exports), 1995 and 2004
    HS category Japan PRC Korea, Rep. of Taipei,China Hong Kong, China Singapore Indonesia Malaysia Philippines Thailand Viet Nam
    1995 imports
    01–05 8.57 0.86 1.41 1.71 2.35 1.17 1.01 1.14 2.45 1.25 0.97
    06–10 4.05 2.38 2.24 2.29 1.55 1.25 5.02 2.10 3.23 0.80 2.42
    11–24 3.48 3.49 2.33 2.71 2.34 1.82 3.73 1.75 4.99 1.45 7.98
    25–26 2.84 1.85 2.44 1.18 0.78 0.54 1.61 0.84 2.11 0.47 1.38
    27 15.60 3.66 14.08 3.77 2.17 8.37 5.43 2.18 10.02 6.39 9.47
    28–38 7.18 13.68 9.91 12.54 8.57 5.86 14.64 6.48 10.32 9.75 15.91
    39–40 0.71 0.82 0.82 0.74 0.56 0.77 0.97 0.74 0.87 0.65 1.18
    41–43 0.30 2.44 1.61 0.86 1.91 0.11 1.38 0.22 0.48 0.72 1.01
    44–46 4.32 1.23 1.79 1.48 0.69 0.38 0.22 0.15 0.66 1.36 0.17
    47–49 1.64 2.22 2.08 2.24 1.89 0.99 2.53 1.55 1.93 1.65 1.70
    50–60 1.99 12.34 4.13 2.58 10.69 1.65 6.65 2.86 5.21 3.37 9.39
    61–63 6.91 1.05 1.18 1.45 6.14 1.49 0.50 0.49 0.62 0.28 1.10
    64–67 0.83 0.04 0.15 0.23 0.60 0.26 0.02 0.10 0.13 0.03 0.05
    68–70 0.53 0.59 0.96 0.85 0.75 0.67 0.65 1.17 0.80 0.89 0.74
    71 1.14 0.13 0.10 0.16 2.72 0.43 0.04 0.21 0.01 1.81 0.25
    72–83 6.00 8.16 9.27 9.98 5.54 5.48 10.08 7.87 8.58 12.01 7.42
    84 8.88 19.89 18.56 15.31 10.65 18.99 24.15 18.72 14.85 20.97 14.62
    85 9.71 14.08 13.48 22.47 21.26 31.38 7.90 36.27 19.30 17.63 8.91
    86–89 5.24 4.26 4.19 7.79 5.42 5.37 8.65 7.63 8.10 10.24 9.44
    90–91 3.27 3.03 4.77 4.07 5.18 3.63 1.77 2.94 2.07 2.72 2.11
    92 0.62 0.29 0.46 0.38 0.59 1.39 0.16 0.43 0.23 0.96 0.42
    93 0.12 0.00 0.20 0.27 0.00 0.05 0.34 0.07 0.33 0.16 0.00
    94–97 4.27 2.28 1.69 2.41 5.27 3.93 1.62 1.75 2.34 2.02 2.36
    1995 exports
    01–05 0.17 3.68 1.36 2.91 0.75 0.64 3.85 0.92 2.94 9.01 10.61
    06–10 0.12 3.27 0.71 0.56 0.71 1.16 3.02 0.70 4.07 6.98 20.93
    11–24 0.24 2.17 0.43 0.29 1.73 2.18 3.99 7.58 6.03 3.45 2.67
    25–26 0.26 0.80 0.31 0.31 0.52 0.31 4.13 0.37 1.70 0.55 0.31
    27 0.62 3.58 1.99 0.21 0.97 6.91 25.52 7.01 1.51 0.73 19.55
    28–38 6.65 6.62 7.15 7.58 6.28 5.27 3.59 3.06 1.98 4.01 0.74
    39–40 1.39 0.52 1.35 0.90 0.33 0.88 4.85 2.67 0.27 5.14 1.47
    41–43 0.07 0.66 1.47 1.10 1.28 0.09 0.23 0.07 0.03 0.84 0.28
    44–46 0.03 0.95 0.13 0.54 0.57 0.35 11.13 6.32 1.00 0.72 1.40
    47–49 0.56 0.64 0.95 0.87 1.18 0.53 3.20 0.51 0.50 0.74 0.07
    50–60 1.80 8.17 10.20 9.70 7.99 1.30 5.89 1.66 1.15 3.56 1.33
    61–63 0.24 19.94 5.03 3.67 15.44 1.38 8.25 3.20 7.20 10.09 18.61
    64–67 0.02 4.22 1.00 0.73 4.26 0.11 4.43 0.15 0.89 3.70 9.71
    68–70 1.09 1.26 0.27 0.78 0.70 0.37 0.64 0.60 0.52 0.82 0.82
    71 0.06 0.35 0.02 0.03 0.83 0.13 0.03 0.14 0.04 2.10 0.31
    72–83 6.48 7.88 8.11 7.82 4.21 3.33 3.06 2.71 3.26 2.33 0.66
    84 25.92 6.10 9.68 24.08 9.72 31.34 1.95 13.50 2.92 14.28 0.59
    85 22.89 12.07 29.85 19.65 20.87 32.92 5.39 38.80 56.22 16.67 0.52
    86–89 20.28 2.54 12.83 3.37 1.21 1.84 1.05 2.83 1.38 2.40 0.33
    90–91 6.42 2.92 1.47 2.31 6.23 3.00 0.49 1.62 0.36 2.06 0.17
    92 0.84 0.52 1.11 0.52 0.53 0.70 0.23 0.41 0.07 0.40 0.01
    93 0.01 0.01 0.03 0.01 0.00 0.00 0.00 0.00 0.00 0.01 0.01
    94–97 1.72 10.76 2.60 8.39 13.05 2.62 4.30 3.52 4.73 8.42 2.82
    2004 imports
    01–05 5.06 0.66 1.63 0.97 1.57 0.98 1.94 1.24 1.66 1.17 1.42
    06–10 3.02 0.70 1.53 1.34 0.79 0.79 3.55 1.72 2.18 1.00 1.79
    11–24 2.57 2.23 1.42 1.66 0.93 1.12 4.06 1.98 3.20 1.99 3.95
    25–26 2.69 3.30 3.33 1.44 0.23 0.22 1.38 0.88 1.27 0.84 0.45
    27 20.37 8.03 20.63 3.85 2.43 14.85 18.37 5.70 10.25 6.01 11.12
    28–38 7.68 12.20 9.08 12.78 6.18 6.43 15.74 7.53 7.59 11.52 13.67
    39–40 0.62 0.83 0.61 0.49 0.40 0.55 1.02 0.82 0.85 0.76 0.86
    41–43 0.18 1.46 0.53 0.38 1.82 0.08 0.40 0.13 0.12 0.60 2.27
    44–46 2.36 0.75 0.70 0.64 0.31 0.14 0.32 0.24 0.37 0.40 0.95
    47–49 0.93 1.56 0.98 1.19 0.81 0.53 2.57 1.16 1.42 1.27 1.68
    50–60 1.02 4.71 1.88 0.96 5.41 0.65 5.40 1.25 3.33 2.70 9.33
    61–63 6.17 0.71 1.67 1.12 5.88 1.35 0.61 0.52 0.56 0.51 1.29
    64–67 0.61 0.03 0.20 0.17 0.52 0.17 0.04 0.15 0.12 0.07 0.02
    68–70 0.52 0.44 0.91 0.93 0.58 0.40 0.57 0.62 0.59 0.68 0.50
    71 0.38 0.30 0.04 0.12 3.11 0.42 0.01 0.08 0.03 1.84 0.19
    72–83 5.17 7.54 9.24 10.53 4.69 4.32 9.16 6.95 4.60 11.67 11.93
    84 11.32 18.33 12.29 17.76 15.83 19.66 14.38 17.02 11.31 19.99 15.58
    85 13.01 23.31 19.03 25.83 32.14 30.63 6.25 37.17 42.53 21.13 8.23
    86–89 4.59 3.74 2.90 4.37 2.24 5.12 7.70 4.97 3.66 5.93 7.90
    90–91 4.11 5.79 5.27 8.58 5.20 4.39 1.30 3.55 2.09 3.39 2.08
    92 0.69 0.42 0.50 0.39 0.37 0.86 0.18 0.36 0.32 0.79 0.18
    93 0.08 0.00 0.14 0.14 0.00 0.03 0.02 0.01 0.01 0.02 0.00
    94–97 4.01 1.32 1.71 1.77 5.21 2.15 1.50 1.86 1.55 2.08 2.16
    2004 exports
    01–05 0.19 1.63 0.47 0.70 0.34 0.32 2.84 0.65 1.24 4.39 7.93
    06–10 0.10 1.47 0.33 0.20 0.22 0.48 1.86 0.57 2.43 4.30 7.11
    11–24 0.20 0.64 0.48 0.16 0.50 0.95 8.13 6.40 2.31 1.90 0.62
    25–26 0.56 0.64 0.23 0.28 0.19 0.21 4.72 0.27 0.75 0.54 0.63
    27 0.48 2.42 4.16 1.39 0.27 9.83 17.94 11.52 1.04 2.65 21.23
    28–38 8.30 4.55 9.03 7.70 4.83 11.59 6.30 5.61 1.81 6.01 1.13
    39–40 1.41 0.64 1.19 0.77 0.22 0.41 4.52 1.56 0.37 4.23 1.59
    41–43 0.04 0.48 0.54 0.41 1.62 0.07 0.25 0.03 0.02 0.32 0.27
    44–46 0.02 0.85 0.04 0.15 0.27 0.09 5.09 2.78 0.38 0.79 0.73
    47–49 0.53 0.48 0.86 0.46 0.67 0.31 4.40 0.56 0.33 0.83 0.23
    50–60 1.33 4.38 4.37 4.24 5.25 0.39 4.93 0.96 0.63 1.94 1.14
    61–63 0.22 12.90 1.68 1.44 11.48 1.12 7.47 1.94 3.56 4.88 18.81
    64–67 0.01 2.48 0.06 0.16 2.02 0.09 1.95 0.19 0.07 0.84 15.48
    68–70 0.91 0.95 0.40 0.42 0.30 0.21 0.89 0.42 0.26 0.92 0.96
    71 0.07 0.22 0.01 0.02 1.52 0.20 0.01 0.01 0.03 1.00 0.11
    72–83 6.48 7.30 7.56 8.00 3.26 2.12 4.70 3.51 2.16 2.98 1.28
    84 21.84 19.75 15.25 18.89 14.86 21.10 6.30 19.18 17.49 17.48 2.59
    85 20.43 21.85 28.76 34.78 33.12 38.04 9.56 34.34 58.51 20.29 4.34
    86–89 23.05 3.44 18.82 2.48 0.76 1.71 1.63 1.08 3.75 4.56 1.16
    90–91 7.08 3.16 2.37 5.65 5.74 3.46 0.37 2.47 0.65 2.33 0.47
    92 0.81 0.40 0.53 1.68 0.41 1.46 0.54 0.59 0.11 0.14 0.03
    93 0.01 0.00 0.03 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00
    94–97 1.55 9.17 1.68 3.49 9.62 2.01 4.31 3.52 1.94 5.14 7.31
    Source: Statistics Canada, World Trade Analyzer.
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