The Export Competitiveness of ASEAN Economies, 1986–95

Abstract

This article compares changes in the competitive position of five members of the Association of Southeast Asian Nations (ASEAN), Singapore, Thailand, Malaysia, Philippines and Indonesia, exporting to the markets of the United States and Japan between 1986 and 1995. Dynamic shift-share methods are applied to two-digit data for five categories of manufactured exports. Our findings underline clearly the challenge posed to Singapore by its ASEAN partners over this period in all product categories except office and data machines. Thailand appears to have been more successful in the earlier period but lost ground in later years to the Philippines and especially to Malaysia. Indonesia, on the other hand, has been relatively unsuccessful so far relative to the ASEAN bloc as a whole except in the lower value-added category of apparel and clothing exports to the U.S. market. I Introduction Notwithstanding the recent Asian financial crisis, the last two decades have witnessed substantial growth and structural change in Southeast Asia, with the Association of Southeast Asian Nations (ASEAN),' in particular, emerging as one of the fastest growing regions in the world. ASEAN real gross domestic product (GDP) grew at about 6 per cent between 1985 and 1995 on an annual average basis, compared to the world average of 2 per cent and growth in developed market economies of 3 per cent, and ASEAN's share of global merchandise trade reached 6.7 per cent by the end of 1995, compared to 3.8 per cent in 1985.2 Not only have Malaysia and, to a lesser extent, Thailand clearly emerged to challenge the dominant position in manufactured goods exports of the older and more established four (little) tigers (or four dragons, or gang of four) of Taiwan, South Korea, Hong Kong and fellow ASEAN member Singapore, but there is every expectation that the relatively less advanced economies of Indonesia and the Philippines will, in turn, challenge Thailand and Malaysia as they move up the ladder of value-added. The objective of this article is to examine changes in the competitive position of each of these ASEAN-5 member countries relative to the ASEAN-5 group as a whole, in terms of their exports to the key markets of the USA and Japan between 1985 and 1995. A dynamic version of shift-share analysis is applied to two-digit data for five categories of manufactured exports. The particular version of shift-share analysis used here follows the national growth rate methodology of Richardson (1978) and Esteban-Marquillas (1972) and combines it with the dynamic version of Barff and Knight (1988), but focuses on export growth over a period of time rather than employment change. Our findings underline the challenge posed to Singapore by its ASEAN partners over this period in all product categories except office and data machines. Thailand appears to have been more successful in the earlier period but lost ground in later years to the Philippines and especially to Malaysia. In spite of rapid growth, Indonesia, on the other hand, has been comparatively unsuccessful so far relative to the ASEAN-5 bloc as a whole except in the lower value-added category of apparel and clothing exports to the U.S. market. We begin in section II below with some background on the nature of the ASEAN-5 economies and their remarkable economic transformation in the 1980s and 1990s. This is followed in sections III and IV by a description of the shift-share methodology used to compare changes in their competitive positions over this period, and our empirical findings. The article ends with some brief concluding remarks and qualifications to our results. II The ASEAN-5 Some of the economic characteristics of the ASEAN-5 are summarized in Table 1. Despite differences in economic structure and relative resource endowments between the ASEAN economies (for example, Singapore's small population size and dearth of natural resources compared to Indonesia), all have undergone a period of rapid economic growth and structural change between 1983 and 1995. …