Supply-Side Factors Are Helping Drive Asian Exports - ADB Study

News Release | 17 September 2007

MANILA, PHILIPPINES - Developing Asia's export performance is critically influenced by the availability and quality of the services and infrastructure that form the backbone of efficient production chains and by factors that attract and provide comfort to foreign direct investors, a new major study by the Asian Development Bank (ADB) says.

The study presented in the Asian Development Outlook 2007 Update (ADO 2007) says that deepening trade integration within East Asia is complementary to integration in the wider global economy. The region is still very much exposed to the vicissitudes of the global economy through its participation in international supply chains.

The study finds that manufacturers in the People's Republic of China are more sensitive to external demand than their peers in other economies of the region. But other countries feel the winds of global demand through the parts and components they supply for assembly in the PRC, for onward export to the United States, Europe, and Japan.

The study looks at exports in nine economies over the past 25 years: People's Republic of China; Hong Kong, China; Indonesia; Republic of Korea; Malaysia; Philippines; Singapore; Taipei,China, and Thailand.

The study highlights the prominent role of intra-firm and intra-industry trade in driving intra-regional trade integration. As organizational and technological innovations have spurred the separation and refinement of tasks, their geographical dispersal, stimulated by the search for cost advantage, has created trade. The study shows that this bourgeoning "trade in tasks" is less sensitive to real exchange rate movements than trade in primary commodities or in finished manufactured goods.

The economies of East Asia have been particularly adept at latching onto this most dynamic area of global trade and complementarities among them have helped networks evolve and strengthen. Indonesia, however, has been slower to latch on partly because of its reliance on primary commodity production.