ASEAN4-JAPAN TRADE RELATIONS IN AUTOMOTIVE AND ELECTRONICS SECTORS: TRADE PATTERNS AND TRENDS IN VALUE ADDED Riza Noer Arfani Universitas Gadjah Mada/Ritsumeikan University ARTNeT UNESCAP Seminar Bangkok: January 21 st 2016
Presentation Outline A brief Backgrounder: ASEAN and GPN (Global Production Network) ASEAN4-Japan: Cases on Automotive and Electronics Trade Patterns Inter-regional Intra-regional Trends in Value Added Extended Context Network Trade: East and Southeast Asia Nexus On-going Research Research Design Developed Past and Contemporary Studies Proposed Framework Some Tentative Arguments on Regional Value Chains (RVCs)
Background: ASEAN and GPN ASEAN+3 contribution to the region s trade and production network in the two sectors. Being part of the global production network in the two sectors, the +3 partner countries have positioned ASEAN as a major hub for their multinational companies venturing for: sales and marketing production and manufacturing research and development upgrading and innovation in manufacturing processes, product design and brands
ASEAN4 and Japan: Cases on Automotive and Electronics ASEAN4 (Indonesia, Malaysia, Singapore and Thailand) and Japan trade and investment relations in the two sectors Trade Patterns (based on the UN Comtrade Database for general trends of commodities traded under HS Code 87 (automotiverelated) and HS Code 85 (electronics-related) Patterns of Trade in Value-Added (TiVA) (based on the OECD- WTO TiVA Database for trends in foreign value added (FVA), domestic value added (DVA) and services value added (SVA) in commodities traded in SITC transport equipment (automotive) and electrical and optical equipment (electronics). **Value Chain Governance: preliminary findings on key policy issues (firms and industry-levels micro analysis)
Trade Pattern: Automotive/Japan-ASEAN4 Billions 18 16 Japan Trading Partners (Automotive-related, HS Code 87) 14 Import from THA US $ 12 10 8 6 4 2 0 2009 2010 2011 2012 2013 Export to THA Import from SGP Export to SGP Import from MYS Export to MYS Import from IDN Export to IDN
Automotive/Japan-ASEAN4: Commodities Traded Main commodities traded: parts and accessories (HS Code 8708), particularly transmissions for motor vehicles (HS Code 870840) Types of main commodities traded: 8703 Motor vehicles for the Transport of Persons (Passenger Cars except Bus) 8704 Motor vehicles for the Transports of Goods (Trucks, etc.) 8706 Motor vehicle Chassis fitted with Engine 8708 Parts and Accessories for Motor Vehicles 8714 Parts and Accessories of Motorcycles, etc. Thailand Indonesia Malaysia Singapore Japan Export to 8708 (4 b US $) 8706 (0.8 b US $) 8708 (2 b US $) 8704 (1.2 b US $) 8703 (1.2 b US $) 8708 (0.9 b US $) 8703 (0.3 b US $) 8708 (0.1 b US $) Japan Import from 8703 (0.7 b US $) 8708 (0.6 b US $) 8708 (0.3 b US $) 8704 (0.2 b US $) 8708 (0.05 b US $) 8714 (0.01 b US $) 8708 (0.01 b US $) 8714 (0.01 b US $)
Trade Pattern: Electronics/Japan-ASEAN4 Billions 35 30 Japan Trading Partners (Electronics-related, HS Code 85) 25 20 15 10 Import from THA Export to THA Import from SGP Export to SGP Import from MYS Export to MYS Import from IDN Export to IDN 5 0 2009 2010 2011 2012 2013
Electronics/Japan-ASEAN-4: Commodities Traded Main export commodities: electronic integrated circuits and microassemblies (HS Code 8542) (top destinations are Singapore and Malaysia) Main import commodities: electric apparatus for line telephony, telegraph (HS Code 8517) and television receivers, video monitors, projectors (HS Code 8528) (from Malaysia) Types of main commodities traded: 8516 electric equipment with heating element, domestic, etc. 8517 electric apparatus for line telephony, telegraph 8525 radio & TV transmitters, television cameras 8528 television receivers, video monitors, projectors 8536 electrical switches, connectors, etc. for <1 kv 8541 diodes, transistors, semi-conductors, etc. 8542 electronic integrated circuits and micro-assemblies 8544 insulated wire & cable, optical fiber cable
Trade Pattern: Automotive/Intra ASEAN4 Thailand as Major Hub Billions 7 6 5 Import from IDN Export to IDN 4 Import from MYS 3 Export to MYS 2 Import from SGP 1 Export to SGP 0 2009 2010 2011 2012 2013
Automotive/Intra ASEAN4: Commodities Traded Billions 1.6 1.4 Indonesia Top Five Trades with Thailand: Passenger Cars (HS 8703)/I&E; Motor Vehicle Parts & Accessories (HS 8708)/ I&E;Trucks (HS 8704)/I; Motorcycles (HS 8711)/I; Motorcycle Parts and Accessories (HS 8714)/I&E 1.2 1 0.8 0.6 0.4 0.2 0 8702 8703 8704 8705 8706 8707 8708 8709 8711 8713 8714 8702 8703 8704 8705 8706 8707 8708 8709 8711 8713 8714 Export Import
Trade Pattern: Electronics/Intra ASEAN4 2.5E+10 Malaysia as a Major Hub 2E+10 1.5E+10 1E+10 Import from SGP Export to SGP Import from THA Export to THA Import from IDN Export to IDN 5E+09 0 2009 2010 2011 2012 2013
Electronics/Intra ASEAN4: Commodities Traded Billions 0.2 0.18 0.16 Indonesia Top Five Trades with Malaysia: TV, Video Monitors, Projectors (HS 8528)/I&E; Electronic Integrated Circuits, Micro Assemblies (HS 8542)/I; Line Telephony App (HS 8517)/I; Resistors, Rheostats (HS 8533)/E; and Transformers, Static Converters (HS 0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 8501 8503 8505 8507 8509 8511 8513 8515 8517 8519 8521 8523 8525 8527 8529 8531 8533 8535 8537 8539 8541 8543 8545 8547 8501 8503 8505 8507 8509 8511 8513 8515 8517 8519 8521 8523 8525 8527 8529 8531 8533 8535 8537 8539 8541 8543 8545 8547 Export Import
ASEAN4-Japan Trade Patterns: Recap Automotive [commodities under HS Code 87: vehicles, other than railway, tramway] ~Intra-regionally: passenger cars are the main commodity traded confirming production network shift to Thailand and Indonesia as the two countries participating firms production sharing are in a steady increase (InEIM 2012, Athukolara & Kohpaiboon 2013) ~Inter-regionally: parts and accessories are the main commodity traded ~Japan is a leading home country of firms investing in manufacturing facilities (as FDIs), particularly in Indonesia and (still) in Thailand (Nakanishi et al, 2015) Electronics [commodities under HS Code 85: electrical and electronic equipment] ~Intra-regionally: TV, video monitors and projectors are the major commodity traded confirming existing hub triangle of Malaysia, Singapore and Thailand ~Inter-regionally: electronic integrated circuits and micro assemblies are the major commodity traded ~China and Japan factors in the industry have come to an era where China has no longer attractive as FDI destination in terms of cheap labor or other low-end factors of production and Japan has reversed its position for in-shoring and re-shoring their firms production sites, especially for the latest high-end products (Kwan, Ikebe et al 2015).
Pattern of TiVA: Automotive/Japan-ASEAN4 FVA/DVA Substantially more FVAs/DVAs of Japan-ASEAN-4 than of Intra-ASEAN-4 Trades 2000 1800 1600 1400 1800-2000 1600-1800 1400-1600 1200-1400 1200 1000-1200 1000 800 600 400 200 0 Japan Indonesia Malaysia Singapore Thailand Japan Thailand Singapore Malaysia Indonesia 800-1000 600-800 400-600 200-400 0-200
Pattern of TiVA: Electronics/Japan-ASEAN4 FVA/DVA Intra-ASEAN-4 FVAs/DVAs are catching up those of Japan- ASEAN-4 Trades 2500 2000 US $ (x1,000,000) 1500 1000 500 Thailand Singapore 0 Japan Indonesia Malaysia Singapore Thailand Malaysia Indonesia Japan
ASEAN4-Japan Trends in Value Added: Recap Automotive (commodities under SITC: transport equipment) ~Japan-ASEAN4 trade has produced considerably more FVAs, DVAs and SVAs than the ones resulted among ASEAN4 countries trade ~Japan-ASEAN4 trade have generated much more FVAs than FVAs created among ASEAN4 countries for the commodities, with Japan-Thailand and Japan-Indonesia FVAs dominating at 1,681.8 million US $ (2009) and 937.4 million US $ (2009) respectively Electronics (commodities under SITC: electrical and optical equipment) ~ASEAN4 FVAs, DVAs and SVAs gained momentum and have been tagging closely behind the Japanese ones as the values reach to almost half of the Japan s where Japan- Malaysia and Japan-Thailand FVAs are the highest gainers. ~In terms of DVAs, Thailand and Malaysia gain the most for its embodied final foreign demand in Japan with the values of US $ 1,525.9 million (2009) and US $ 974.6 million (2009) respectively.
Extended Context (1): Reverse Positions of China and Japan in Network Products of Manufacture Trade (Athukorala & Kohpaiboon 2013) East Asia Export Viet Nam Import 100 East Asia Import Viet Nam Export Japan Export Thailand Import 10 Japan Import Thailand Export Singapore Import Singapore Export 1 0.1 China Export China Import Korea Export The Philippines Import Korea Import The Philippines Export South East Asia Export Malaysia Import Malaysia Export Indonesia Export Indonesia Import South East Asia Import Total Manufacturing 1992-93 Total Manufacturing 2009-10 Network Products Parts and Components 1992-93 Network Products Parts and Components 2009-10 Network Products Final Assembly 1992-93 Network Products Final Assembly 2009-10 Total Trade 1992-93 Total Trade 2009-10
Extended Context (2): Shifting Roles and the Centrality of Southeast Asia/ASEAN4 as Hub of Parts and Components Trade (ibid) East Asia Export Viet Nam Import 100 East Asia Import Viet Nam Export Thailand Import 80 60 Japan Export Japan Import Thailand Export 40 China Export Singapore Import Singapore Export 20 0 China Import Korea Export The Philippines The Philippines Korea Import South East Asia Malaysia Import South East Asia Malaysia Export Indonesia Export Indonesia Import Parts and Components 1992-93 Parts and Components 2009-10 Final Assembly 1992-93 Final Assembly 2009-10 Total Network Products 1992-93 Total Network Products 2009-10 Share of Parts and Components in Network Trade 1992-93 Share of Parts and Components in Network Trade 2009-10
Extended Context (3) Other Features (ibid) Inter-regional strong growth in network products of manufacture trade ~Both regions of East Asia (EA) and Southeast Asia (SEA) have persistently maintained substantial share of total network products in manufacturing trade between 1992-3 and 2009-10 ~Export share EA: 51.8% à 61.7% SEA: 56.8% à 69.2% ~Import share EA: 44.4% à 61.8% SEA: 54.4% à 64% East Asia s shifting roles in final assembly trade and in parts and components trade ~East Asia s share of final assembly trade export has declined quite significantly as China and Japan reverse the roles: 31.6% à 25.3% ~Japan assembly export significantly dropped and its final assembly import rose drastically ~Both China and Japan has experienced substantial increase in parts and components trade export Southeast Asia s roles in parts and components trade & Industrial development gaps ~Southeast Asia s share of parts and components trade export has substantially increased: 22.7% (1992-3) to 59.2% (2009-10). ~Among Southeast Asian countries, Indonesia has gained the greatest changes in share of final assembly trade import: its share has almost quadrupled (9.2% à 34.8%) indicating a stagnated industrialization
ON-going (1) Research Design Developed Trade Pattern? JAPANESE FIRMS Trends in Value Added? G lo Automotive G lo b a l b a l P ro d u c ti Strategic Response? Thailand Electronic s Indonesia P ro d u c ti o n N et Bangkok Greater Area Jakarta Greater Area o n N et w or Penang Singapore w or k Malaysia Singapore k Regional Value Chains? ASEAN4 GROWTH ZONES Policy Lessons?
ON-going (2) Past & Contemporary Studies Regional economic integration as seen from GVC and GPN: comprehending changes in production network as part of dynamic (regional) economic integration of ASEAN4 growth zones and Japanese automotive and electronics industries GVC framework as an alternative perspective to comprehend East & Southeast Asia regional economic integration stemming from functioning production networks (IDE JETRO & WTO, 2011 and UNCTAD, 2013) Automotive and electronics sectors as prime cases (Kuroiwa & Heng, 2008 and Kawakami, 2008) Strategic responses of firms and other relevant stakeholders Regional value chains: types of value addition and methods of industrial collaborations Policy dimension: firms level setting and governmental context
ON-going (3) Proposed Framework Strategic Responses [Ref.: Mariel & Minner, 2015; Watanabe, 2014; Francesco et al, 2014; Thome et al, 2014; Aoki et al, 2014; Mai, 2013; Wells & Nieuwenhuis, 2012; Thoma & O Sullivan, 2011] Firms Strategy: Production Sites, Product Development, Chains Organization, Technological Development Suppliers Relations: Firms linkages to SMEs in wider industrial development Technical Capacity Building & Human Resource Development Regional Value Chains [Ref.: F-Stark, Bamber, Gereffi, 2012; Levy, 2008; Kaplinsky, 2000 & 2005; Gereffi, Humphrey, Sturgeon, 2005; Kaplinsky & Morris, 2000; Humphrey & Schmitz, 2000; Types of Value Addition: Process, Product, Functional, and Inter-Sectoral/ Inter-Chains Upgrading Methods of Industrial Collaboration: Trans. Complexity (Cx-T); Trans. Codification Cd-T); Suppliers competence (SC) Policy Incentives Scheme: Local or National Host Governments, Regional Economic Schemes Policy Dimension [Ref.: Nurcahyo & Wibowo, 2015; Rabellotti, 2014; Hasan et al, 2014; Pietrobelli & Rabellotti, 2011; Saliola & Zanfei, 2009; Giuliani, Pietrobelli & Rabellotti, 2005; Lessons Learnt at Firms Level Setting: Learning Mechanism of how upgrading is acquired Lessons Learnt at Institutional Context: Policy Mechanism of how business and innovation systems are developed
RVC #1: Value Added-ness at Firms level Value Added GVC in 2000s Value Chains in 1970s R&D Toyota Panasonic up & down - Lead Firms more down more on up Suppliers more on up but some down more on down - Local Partners more on down Services Design Marketing Upstream Logistic s: Purchas e Production Logistics Downstream *Graphical illustration is adapted from Rabellotti, 2014 Value Chain Activities
RVC #2: Industrial Collaborations in Value Addition? End Use Market Modular Relational Captive Hierarchical Value Chains Automotive Electronic s Materials Low Degree of Explicit Coordination Degree of Power Asymmetry High *Graphical illustration is adapted from Gereffi & Fernandez-Stark, 2011
RVC #3: Policy Lessons on Learning Mechanism for Upgrading? Local/National Host Governments ASEAN Learning by knowing & doing Learning through pressure Learning from trade activities Regulations on MSTQ* Education & Training NIS (National Innovation System) Policy Incentive Schemes Firms Level Setting Institutional Context Learning Mechanism for Upgrading at Firms Level Business Development & Innovation Systems *MSTQ: Metrology, Standards, Testing, And Quality