Focus on China comes at expense of intra-Asean business

Business News - Saturday December 15, 2007

ASIA FOCUS : TRADE ECONOMIST-DHL STUDY

Focus on China comes at expense of intra-Asean business

Exports to China rise sharply while those among members drop

POST REPORTERS

Intra-Asean trade, one of the key reasons for the revival of the region in the aftermath of the economic crisis a decade ago, has started to take a back seat as the 10 Asean nations look to increase bilateral trade with China, according to the Economist Intelligence Unit (EIU).

The conclusion is contained in a study conducted by the EIU in association with DHL, the multinational logistics company, titled "Trading Up: A New Export Landscape for Asean and Asia".

The study examines the movement of goods across borders in Asia, with Asean as the starting point, and shows that despite goals of Asean integration, members are at a crossroads between pursuing deeper integration, or falling away one by one to develop individual bilateral trading relationships with China.

The share of exports to China from all Asean countries except Vietnam has risen sharply while intra-Asean trade has shown a declining growth trend.

The study concentrated on the bloc's six largest economies - Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam - and analysed the trade of its closest regional competitors, China, Japan and India. Shifting import and export trends from 2000 to 2007 are analysed, focusing particularly on the role played by high-value exports as compared with lower-value bulk commodity goods.

The report shows that trading volumes have changed over the past seven years, the composition of trade has shifted and, most importantly, trade flows have realigned to respond to changing economic and business conditions.

The total amount of trade among Asean countries fell from 22.4% of the bloc's total trade in 2000 to 20.9% in 2006, "which presents a potentially concerning trend", the report said.

Dan McHugh, CEO of DHL Express Asia Pacific, said his company believed that for Asean to sustain growth, governments and businesses alike had to understand how trade patterns and flows were evolving, particularly as new centres of manufacturing such as China and India rise in the global trading system.

"Our role as a trade facilitator goes beyond the movement of goods to the pursuit of trade patterns and how they are changing across Asia and globally," he said. "This report provides Asean governments with an understanding of the evolving trade patterns within and outside of Asean, as well as equipping businesses with the insights to re-assess their strategies in the new export landscape."

While the study highlighted that intra-Asean trade has declined compared with the stellar rise of China, it is believed that the region will stand firm and continue to grow.

It strongly advocates that governments and businesses play a part in moving Asean nations up the export value chain by investing in infrastructure and focusing more on high-value imports and exports such as consumer electronics, information technology and medical devices.

DHL said the data suggested what many of its customers had been saying anecdotally: that the trade flow direction had changed to focus on China more than intra-regional trade.

"We urge the governments of Asean to redouble their efforts to reduce trade barriers in their own countries. Intra-Asean trade still has great potential to provide economic opportunity and raise living standards," Mr McHugh said.

The full "Trading Up" report can be downloaded free at http://www.eiu.com/sponsor/dhl/aseantrade/

Bangkok Post