AN ASSESSMENT OF INTRA-ASEAN TRADE

Abstract

The Association of Southeast Asian Nations (ASEAN) has lasted for three decades, yet remains an enigma in that very little regional economic integration has occurred. The decade of the 1990s has brought about the emergence of new players in the international economy that have challenged ASEAN' s economic standing and prospects. These recent developments have compelled the ASEAN members to reexamine intra-ASEAN economic cooperation and interaction as alternative means of boosting efficiency and growth. The objective of this thesis is to provide a study of the breakdown of intra-ASEAN trade flows and to assess its performance and growth. Attempt is also made to evaluate the comparative advantage of the ASEAN countries in various categories of exports, along with the degree of economic complementarity between members and the impact of the ASEAN Free Trade Area (AFTA) on intra-ASEAN trade and investment. It has been found that there are striking similarities among the ASEAN countries in their production structures and comparative advantages. Indonesia, Malaysia and Thailand show strong comparative advantage in the export of agricultural resource intensive commodities, indicating some degree of competitiveness between them. Similarly for unskilled labour and technology intensive commodities, Singapore and Thailand both exhibit comparative advantage in exporting these goods. In the classification of human capital intensive goods, comparative advantage is shown by Malaysia and Singapore. The findings of the analysis seem to imply a certain lack of economic complementarity between ASEAN members, as demonstrated by the many instances of rivalry in their exports. Notwithstanding the previous study, this author subsequently evaluated the economic complementarity among ASEAN countries by means of computing the cosine indices of trade complementarity among members. The results in general revealed a vast improvement of trade complementarity since the 1980s. Economic complementarity is strongest particularly between exports of Malaysia to Singapore and Thailand. Overall, there appears to be a trend of rising economic complementarity, aided by the industrialization process of ASEAN. This points to enhanced trade possibilities in the future.