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Formation of production networks in ASEAN: Measuring the real value-added and identifying the role of ASEAN countries in the world supply chains

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Esquivias Padila M. A., Sari D. W., Handoyo R. D.

Business and Economic Horizons

2017

vol. Volume 13

issue Issue 2

237-255

This study addresses the two-fold question of whether the integration-liberalization process of ASEAN is headed towards the creation of a single production base region, and how ASEAN links with other trade blocks. It looks into the degree of intra-ASEAN and extra-ASEAN vertical integration vis-à-vis North America, East Asia, and the European Union through the measurement of value-added creation-absorption in global value chains (GVC) and by locating ASEAN within vertical structures. The study employs an international input-output database and breaks up gross exports into different components of value-added using data from 1997, 2004, and 2012. ASEAN has made significant gains in integrating with East Asia. However, ASEAN as a single production region has gained little, and even lost share in value-added trade with NAFTA and Europe. The truth is that ASEAN has a stronger role across the GVC as a supplier of intermediate goods (33%) than as a supplier of final goods (30%). Vertical structures represent more than 43% of ASEAN gross exports, but it still depends on foreign parts and components (35%) to produce its exports. It may be argued that ASEAN 6, which entails a wider scope of integration, might offer larger benefits to the ASEAN project.

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1 Business and Economic Horizons

1 Esquivias Padila M. A.

1 Handoyo R. D.

1 Sari D. W.

1 2017

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Formation of production networks in ASEAN: Measuring the real value-added and identifying the role of ASEAN countries in the world supply chains