Chapter 3
 CPProgress on the ASEAN
A
Inntra-Reg
gional Traade― Diverse playerrs and furrther exp
pansionM
Misa Okabee
A
Associate Prrofessor, Faaculty of Ecconomics, Wakayama
W
University
U【Key Poinnts】
 ASEANN’s intra-regional tradee has expan
nded due to an increase in the tradee ofintermeediate goodds and the paarts of: geneeral machin
nery, electroonic devicess, andtranspoortation equuipment. Unntil recently,, the majoritty of the inttra-regionall
trade wasw carried out
o betweenn Singaporee and Malay
ysia; howeveer, Thailandd,Indoneesia, and Vieetnam are inncreasing thheir trade shhare as the pproduction
networrk expands anda the marrket grows.
 Intra-reegional tradde share of tthe ASEAN
N Member States has inccreased to 25%.
2This is an adequatte level conssidering AS
SEAN’s economic scalee. However, it
can be expected too grow furthher with thee eliminationn of non-tarriff barriers andsustainnable econom
mic growthh.
 The maarket size withinw
the ASon has expaanded. In paarticular, thee
SEAN regio
demandd for durablle consumerr goods hass sharply inccreased in T
Thailand,Indoneesia, and Vieetnam. The market exp
pansion of thhese ASEAN
N MemberStates withw a relatiively low fiinal consum
mption expen
nditure per capita in
relationn to the sizee of the popuulation is drriving ASEA
AN’s consuumption.

Japan Cennter for Econo
omic Researchh, 2014 “Asia Research” Reeport 31

ASEAN’s Intra-Regional Trade Value, ASEAN’s Percentage of Intra-Regional
Trade, and Percentages of Trade with Japan, China, and the United States
30%(In billion USD)
6,000
Others25%

Percentage of ASEAN intra‐
regional trade
5,000

20%
4,000

General machinery・Electronics
・Transport equipment

Percentage of trade with theUnited States

15%
3,000
Percentage of trade with Japan

10%

Percentage of trade with China

2,000

Chemical goods・Industrial raw
materials
5%1,000
Energy fuel0

Agricultural Products・Food・
Beverages
1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

0%

Note: No data is available for Laos. For Myanmar, data is only available for 2010. For Vietnam, the datafor 2013 is missing.
Source: Created based on the United Nations Commodity Trade Statistics Database (Comtrade). Used SITC. rev.
1.

1. Foreword
The ASEAN Economic Community (AEC) is built on reaching four targets: thefirst of which is the establishment of “a single market and production base.” The ASEAN
Member States have been implementing various measures to achieve the free flow of goods,
services, and investment within the ASEAN region. In particular, the measure that has
resulted in most success is the reduction and elimination of tariffs carried out under the
ASEAN Free Trade Area (AFTA), which was entered into force in 1993. ASEAN has built
an efficient production system based on the international division of labor (with a focus on
the electronics and the automotive industries), which has resulted in a complex production
network that crosses multiple borders. In order to maximize the benefits of the division oflabor within the ASEAN region, it was necessary to liberalize and facilitate intra-regional
trade. The reduction and elimination of tariffs under the AFTA facilitated and deepened thedevelopment of the production network for manufacturing in the region. ASEAN as a
production base was realized through the combination of two factors: increased production

32 Japan Center for Economic Research “Asia Research” Reportactivities between the ASEAN companies and the multinational companies operating in the
ASEAN region, which attempted to establish an efficient production system; and theincreased interaction resulting from the AFTA, the intra-regional cooperation policy.
Additionally, in recent years, ASEAN has been attracting attention not just as a
production base, but also as a consumer market. Indonesia (with its large population) and
Vietnam (with its rapidly developing economy) have seen sharp increases in the sale andimport of durable consumer goods. In order to create a single market, it is important to link
the intra-regional trade to a consumer market that is growing and expanding.
This chapter will study how ASEAN’s intra-regional trade has developed byobserving the current situation of trade in goods within the ASEAN region and by
understanding the trade structure, using data mainly on trade in goods. First, this chapter
will review the current situation of trade in goods between the ASEAN Member States thathas developed under the AFTA and outline the level of progress. Additionally, the structureof ASEAN’s intra-regional trade will be examined. When doing so, the production andsales networks of the ASEAN region, which have supported the development of ASEAN’s
intra-regional trade, will be looked at carefully. The formation of the production and sales
networks of electronics, transportation equipment, and agricultural products will be studied
using detailed trade data on each good. In particular, the current growth level as a consumer
market for major countries will be studied by focusing on the current situation of consumer
goods market of these ASEAN Member States that have experienced recent growth. If
intra-regional trade is growing along with the expansion of domestic consumer market, this
could lead to ASEAN’s goal of a single market. Therefore, intra-regional trade and the risein consumption will be observed by linking the two. Lastly, through these analyses, theoutlook for ASEAN’s economic integration will be examined from the viewpoint of tradein goods.
2. The development of ASEAN’s intra-regional trade and its structure
2.1 The expansion of the production network and intra-regional trade shares
ASEAN’s intra-regional trade has developed due to the intra-regional production
network that produces goods more efficiently by dividing the production process within theregion. ASEAN’s intra-regional trade, particularly in parts and intermediate goods has been
growing under the international division of labor in line with the production network
formed by direct investment by non-ASEAN Member States, including Japan. In 2013, thetotal direct investment inflow to ASEAN exceeded that of China. It is expected that

Chapter 3 | Progress on the ASEAN Intra-Regional Trade 33

ASEAN’s production network will further expand and deepen.1 A factor that has been
supporting ASEAN’s growth as a production base is the liberalization of intra-regional
trade implemented under the ASEAN Free Trade Area (AFTA), which entered into effect in1993. The ASEAN Member States have been implementing measures under the AFTA toreduce and eliminate tariffs, and are currently ahead of schedule. With regard to the
Inclusion List (IL), which refers to products targeted for tariff reduction or elimination, theoriginal six countries of ASEAN (Brunei, Malaysia, Indonesia, the Philippines, Singapore,
and Thailand) eliminated tariffs on almost all items by 2010. The four new members(Cambodia, Laos, Myanmar, and Vietnam) are scheduled to eliminate tariffs by 2015.
Additionally, since 2008, the Rules of Origin of the AFTA has changed to a method that canbe chosen between a Regional Value Content (RVC) method and a Change in Tariff
Classification (CTC) method. Furthermore, measures to facilitate intra-regional trade havebeen implemented, including ASEAN’s introduction of a self-certification system for the
Certificate of Origin.2
In the 20 years since the AFTA was established, ASEAN’s intra-regional trade
increased except on two occasions: the year after the Asian Financial Crisis of 1997, and in2009 after the eruption of the Global Financial Crisis (figure 1). Electronics andtransportation equipment (such as automobiles) have been the driving forces of theintra-regional trade. The total trade of general machinery, electronic devices, andtransportation equipment accounted for 50% of the overall intra-regional trade at thehighest period at the beginning of 2000. This proves that ASEAN has developed as a
production base based on the regional division of labor in these industries.
Meanwhile, the fuel industries such as oil and natural gas have been expanding
their share in intra-regional trade since the late 2000s. In 2013, fuel accounted for 40% of
ASEAN’s intra-regional trade. While fuel demand for transportation and industry has been
growing in this region, oil refining capacity differs among countries. The reason for
expanding of trade in fuels is increase in export from Singapore and Thailand withrelatively high oil refining capacity to Indonesia, Malaysia and Vietnam in which oil
domestic demand exceeds the refining capacity.
Within ASEAN, the ratio of intra-regional trade as compared to ASEAN’s global
trade (the intra-regional trade share) increased from 17% in 1990 to 25% in 2013, which isabout 8 percentage point increase in 24 years. From the 1990s to the beginning of the 2000s,
1

According to the statistics by the United Nations Conference on Trade and Development (UNCTADstat), thetotal inflow of FDI into the ten ASEAN countries was $125.4 billion and the total inflow of FDI into China(excluding Hong Kong and Macau) was $123.9 billion in 2013.
2
See Sukekawa (2013) for a detailed explanation on liberalization and facilitation measures of ASEAN’s
intra-regional trade.

34 Japan Center for Economic Research “Asia Research” Reportthe trend was slowly moving upward; however, since the mid-2000s, growth has beensluggish. This can be due to the rapid increase of ASEAN’s trade with China, which has
replaced some potential intra-regional trade. A rapid expansion of ASEAN’s trade with
China shows the expanding and of production networks in ASEAN involving China.
Figure 1: ASEAN’s Intra-Regional Trade Value, ASEAN’s Percentage ofIntra-Regional Trade, and Percentages of Trade with Japan, China, and the UnitedStates30%(In billion USD)
6,000
Others25%

Percentage of ASEAN intra‐
regional trade
5,000

20%
4,000

General machinery・Electronics
・Transport equipment

Percentage of trade with theUnited States

15%
3,000
Percentage of trade with Japan

10%

Percentage of trade with China

2,000

Chemical goods・Industrial raw
materials
5%1,000
Energy fuel0

Agricultural Products・Food・
Beverages
1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

0%

Note: No data is available for Laos. For Myanmar, data is only available for 2010. For Vietnam, the data for2013 is missing.
Source: Created based on the United Nations Commodity Trade Statistics Database (Comtrade). Used SITC. rev.
1.

2.2 Diversification of bilateral trade structure
Another characteristic of ASEAN’s intra-regional trade is that until now, trade has
been dominated by two pairs of countries: Singapore and Malaysia and Singapore andThailand. In 1990, 70% of ASEAN’s intra-regional trade was between these two pairs; in
2000, it still was 57%. However, in recent years, the pairs’ shares have slowly decreased.
By 2012, it had dropped to 33%. Meanwhile, the combinations of the top two countries
have diversified as intra-regional trade between Malaysia and Thailand and Malaysia andIndonesia are growing. Particularly in recent years, trade between Thailand and Indonesia
Chapter 3 | Progress on the ASEAN Intra-Regional Trade 35

and Thailand and Vietnam are also notably increasing. In the past, the scope of
intra-regional trade was limited; however, it is clear that the scope has gradually expanded.
This indicates that more Member States are participating in intra-regional trade as the
production network within the ASEAN region expands and the regional division of labor
develops further.
2.3 ASEAN’s intra-regional trade share
As stated in the previous section, ASEAN’s intra-regional trade share has
increased to 25%, but could it further expand? Intra-regional shares of major regional
economic integration such as the European Union (EU) and the North American Free Trade
Agreement (NAFTA) were approximately 56% and 40%, respectively, in 2012. Comparedto these two, ASEAN’s intra-regional trade share is small. However, it is not appropriate tosimply compare it with EU and NAFTA when the economic sizes are different. If tradeintensity of major regions are compared using the trade intensity index,3 which compares
the sizes of intra-regional trade taking various economic sizes into account, ASEAN greatly
outpaces APEC, EU, and NAFTA. In other words, ASEAN’s intra-regional trade isextremely large in trade scale compared to the rest of the world. Furthermore, if atheoretical ASEAN intra-regional trade value were to be calculated taking into accountfactors that could influence intra-regional trade value (e.g. GDP sizes and income levels of
the ASEAN Member States, and geographical distance of the Member States), theestimated share would be approximately 26%.4 Considering this estimate, given the size ofthe economy, ASEAN’s current intra-regional trade share of 25% is an appropriate level.
3. Expanding and deepening intra-regional production and sales network
3.1 The electronics industry
The electronics industry, which served as a driving force for the development of
the production network within the ASEAN region, has been able to efficiently produce
goods due to process specialization, which compartmentalizes the production process in theregion. The intra-regional bilateral trade flow indicates that the production network has
expanded and deepened because of international process specialization. Figures 2 and 3
3

The trade intensity index indicates the size of an intra-regional trade share taken into account relative tradesizes of the region. It is calculated by dividing the intra-regional trade share by the region’s share of world
trade. If the trade intensity index is greater than 1, it indicates that the intra-regional trade share is large.
4
The intra-regional trade share was calculated by using the gravity model of trade and estimating thetheoretical trade value from data such as a country’s GDP and geographical distances between the two units.
The estimated intra-regional trade shares for EU and NAFTA were approximately 72% and 73%,
respectively.

36 Japan Center for Economic Research “Asia Research” Reportshow thhe intra-regiional exportt structures for integratted circuits and finishedd personal
computters. In partiicular, a largge and a com
mplex netw
work exists forf the bilateeral trade
betweenn the ASEAAN Memberr States of inntegrated ciircuits. Since the produuction of
integratted circuits has been fraagmented innto multiplee processes an active bii-directionaal
trade beetween majoor producerrs has emergged. Trade betweenbSin
ngapore andd Malaysia, bothwith paarticularly laarge domesttic productioon sizes ammong the Meember Statees, are the laargest
within tthe ASEAN
N region. Following Sinngapore andd Malaysia, the producttion sizes off
Thailannd and the PhilippinesP
havehbeen inncreasing (ffigure 2). WithW this, fouur countriess(combinning Malaysia and Sing
gapore) are the main prroducers in the producttion networrk for
integratted circuits.
ysia, and Thhailand – the key playeers in the inttra-regionall
For Singappore, Malayf integrateed circuits reemains beloow
producttion networkk – the intraa-regional eexport rate for23%. H
However, thee extra-regio
onal export rate is relattively high. The total vvalue ofextra-reegional expoorts of integ
grated circuuits of the ASEAN regio
on in 2012 w
was $95.6 billion,bwhich aaccounted foor 25% of th
he world’s ttotal exportts of integrated circuits . ASEAN as a
global pproduction basebis suppported by thhe expanding and evolv
ving intra-reegional
producttion networkk.
Fiigure 2: AS
SEAN’s Intra-Regionaal Export StructureS
fo
or Integratted Circuitss

Note: Thhe number undder the country
y name refers to the item’s totaltexport vaalue within ASSEAN. The nu
umber
inside the parenntheses refers to the total exxport value to the world.
Source: C
Created basedd on the United
d Nations Com
mmodity Tradde Statistics Database (Commtrade).

Chapter 3 | ProgressP
on the ASEAN Intr
tra-Regional Trade
T
37

Singaporee, Malaysia, and Thailaand are majo
or intra-regiional exportters of perso
onal
puters fromm Singapore to Indonesiia is
computters. In partiicular, the export of perrsonal compthe highhest among the ASEAN
N nations att $600 million. Unlike thet trade off integrated
circuits, the intra-regional exp
port rate of ppersonal com
mputers in thesetthree countries iss
relativeely high andd shipments of personall computerss from thesee three counntries are
increasiing, mostly to the largee domestic mmarkets of Indonesia,
I
Vietnam,V
annd the Philipppines.
These trrends indicaate that the ASEAN coountries are developing not only ass productionnbases buut also as coonsumer maarkets.
Figuree 3: Value-A
Added Outtput Value of Semiconnductors an
nd Personaal Computeers in
the ASEAAN Regionn (2006)

Note: Thhe latest data ono Thailand was from 2006;; therefore, daata from 2006 is used here tto compare. Eachcoountry’s most recentrvalue-aadded output vvalue of semicconductors aree the followinng: $10.2 billio
on forSiingapore in 20010, $5.6 billio
on for Malayssia in 2010, $2
2.0 billion for the Philippinees in 2008, $1
1.3 billion
for Indonesia inn 2009, $460 millionmfor Vieetnam in 2010
0. The most reecent value-addded output vaalue ofpeersonal compuuters are the fo
ollowing: $4.00 billion for Siingapore in 20008, $1.7 billiion for Malayssia in
20010, $750 milllion for the Ph
hilippines in 22008, and $30 million for In
ndonesia in 20009.
Source: C
Created basedd on United Naations Industriial Statistics Database
D(IND
DSTAT) 2013..

3.2 Thee transporttation equip
pment indu
ustry
The devellopment of ASEAN’s
A
trransportatio
on equipmen
nt industry hhas also beeen
contribuuting to the developmeent of the int
ntra-regionall production
n network an
and is servinng as adriving force for thhe expansion
n of intra-reegional trad
de. As shownn in figuress 4 and 5,
Thailannd has the laargest intra-regional prooduction off transportattion equipm
ment (includiing
both paarts and finisshed vehiclees) and is thhe central foorce in the intra-regiona
nal productio
onnetworkk. The expoorts of transp
portation eqquipment paarts from Th
hailand to Inndonesia (thhe
38 Japaan Center for Economic Reesearch “Asia Research” Reeportsecond largest prodducer in ASEAN) is thee largest wiith $920 milllion. At thee same time,
pment partss from Indonnesia to Thaailand are att $400 milliion
exports of transporrtation equip(figure 4). Furtherm
more, the Ph
hilippines aand Malaysiia, which are both transsportationequipmment parts prroducers alsso trade withh each otherr. These fou
ur countries divide theproducttion of transsportation equipment pparts. Meanw
while, Singaapore has a large exporrt
value foor transportaation equipm
ment parts aand accountts for 20% ofo the intra--regional exxportsof transsportation eqquipment paarts; howevver, it has ann extremely small domeestic producction
size. W
While Singappore exportss transportattion equipm
ment parts too Thailand, IIndonesia, anda
Malaysia, there is littlelexportt of transporrtation equip
pment partss from thesee countries totSingapoore. This is because Sin
ngapore servves as a suppply hub forr transportattion equipm
mentparts inn the ASEAN
N region.
Figurre 4: ASEAN
N’s Intra-R
Regional Exxport Struccture of Transport Eqquipment Parts
P

Note: Thhe number benneath each cou
untry’s name rrefers to the iteem’s total exp
port value to A
ASEAN.
Source: C
Created basedd on the United
d Nations Com
mmodity Tradde Statistics Database (Commtrade).

With regard to the inttra-regionall export stru
ucture for fin
nished vehiicles, Thailaandand Inddonesia, com
mbined, accoount for 88%% of the tottal exports ofo finished vvehicles in thet
ASEAN
N region. Inn particular, exports of ffinished veh
hicles from Thailand too Indonesia are

Chapter 3 | ProgressP
on the ASEAN Intr
tra-Regional TradeT39

exceptioonally high at $1.53 billion. This sshows that thet size of Indonesia’s
Idomestic marketmhas been rapidly grrowing in reecent years..5 At the same time, In
ndonesia’s ooutput of finnishedvehicless is also rappidly rising and the num
mber of finished vehicles producedd domesticaallyreachedd 1.21 millioon in 2013. Along withh this, Indonnesia’s expo
ort to other A
ASEAN maarkets
has been expandingg. For instance, in 20122, Indonesiaa exported a total of $4400 million oftransporrtation equiipment partss to Thailannd, $150 million to Mallaysia, and $$100 millio
on to
the Phillippines. Evven in the transportationn equipmen
nt industry, automobilesas are producced
throughh an internattional divisiion of laborr using the intra-regional productioon network,, andthe prodduction sizee is expanding. Furtherm
rmore, the inntra-regionaal trade of fi
finished veh
hicleshas been rapidly inncreasing in
n recent yearrs due to thee growing domesticdmaarkets of thee
N region.
ASEAN
Figurre 5: Value--Added Ou
utput Valuee of Finisheed Vehicles and Parts in the ASE
EAN
Reegion (20066)

Note: Thhe latest data for
fo Thailand iss from 2006; ththerefore, the datad shown heere is also fromm 2006 for coomparison
puurposes. Each country’s most recent valuee-added outpu
ut value of parrts were the foollowing: $2.5
5 billion
for Indonesia inn 2009, $850 millionmfor Maalaysia in 2010, $530 millio
on for the Phillippines in 2008, $420
miillion for Viettnam in 2010, and $110 mil lion for Singaapore in 2010. The most reccent output value of
finnished vehiclees were the following: $2.8 billion for Indonesia in 200
09, $1.1 billioon for Malaysiia in 2010,

5

Accordding to data from the Indoneesian Automootive Industry Association (GAIKINDO) , domestic carr sales in2013 w
was 1.23 millioon vehicles annd has been inncreasing conssecutively sincce 2009(http:///gaikindo.or.idd/index.php?ooption=com_ccontent&task==blogcategory&id=0&Itemiid=110).

40 Japaan Center for Economic Reesearch “Asia Research” Reeport$420 million for the Philippines in 2008, $660 million for Vietnam in 2010, and $210 million forSingapore in 2008.
Source: Created based on United Nations Industrial Statistics Database (INDSTAT) 2013.

3.3 Intra-regional trade network for agricultural products
ASEAN’s intra-regional trade has grown with the development of intra-regional
specialization within manufacturing sectors such as electronics and transportationequipment. The agricultural sector still remains to be an important industry for many of theASEAN Member States. For instance, Indonesia and Malaysia’s palm oil, Vietnam andThailand’s rice, Thailand and the Philippines’ sugar, and Indonesia’s marine products havehigh export values both within and outside the ASEAN region. Reducing the inequality gap
in economic development among the ASEAN Member States is the most pressing issue.
Meanwhile, promoting trade of agricultural and processed products in the region is seen as
the key for the economic development of new member states. Therefore, the ASEAN
Economic Community included the promotion of trade and distribution of agricultural
products within the region as one of the targets.
As to the trade value of the agricultural products in the region, trade in vegetableoil such as palm oil and coconut oil mainly from Indonesia and Malaysia accounts for thebiggest share. Palm oil, which is produced and processed in Indonesia and Malaysia, isexported for food and industry use in large quantities not only to Singapore (which is thetransit point for extra-regional trade), but also to Vietnam, the Philippines, and Myanmar.
This shows that palm oil is supplied not only to non-ASEAN countries, but also todomestic markets within the region. Additionally, Thailand and Vietnam were the second
and third largest rice exporters (following India) in 2012 and their combined total rice
export value accounts for 36% of the world’s rice export value. Vietnam has the greatest
intra-regional export value for rice and it exports a high amount to countries with a large
domestic market, such as the Philippines and Indonesia. When the value-added output
value of the agricultural sectors in each country is compared, Indonesia has the largest
value, then Thailand, the Philippines, Malaysia, and Vietnam. Countries with a large
agricultural production size lead the trade in agricultural products within the region.
3.4 Integrating new member states into the production network
In order to reduce the inequality gap within the region, which is one of the pillars
for establishing the AEC, new member states would grow their economies by integrating
into the intra-regional production network. Among the new member states, Vietnam isstarting to follow the ASEAN 5 in domestic production and intra-regional export value ofelectronics. Furthermore, Vietnam is exporting 40% of its total output of integrated circuits

Chapter 3 | Progress on the ASEAN Intra-Regional Trade 41

to Malaysia, Singapore, Thailand, the Philippines, and Indonesia, which indicates that
Vietnam is now playing a role in intra-regional specialization.
Looking at the trade value and trade item components to other countries and to the
ASEAN Member States, light industry such as primary commodities and textiles accountfor a large share in Cambodia and Myanmar. The manufacturing industries of bothcountries are not at a level where they are taking part in the intra-regional production
network for electronics and transportation equipment in the ASEAN region.6 More thanhalf (55%) of Cambodia’s exports to non-ASEAN countries is apparel and 36% of imports
are raw materials for apparel (textiles and cloths). Cambodia’s main manufacturingindustry is the garment industry, which is labor intensive as Cambodia imports raw
materials, then domestically sews and processes the raw materials and exports apparel.
Most of Myanmar’s exports to non-ASEAN countries and to ASEAN Member
States are primary products such as natural gas, non-iron materials, and vegetables andfruits. Oil is the largest import from both the non-ASEAN countries and the ASEAN
countries. Trade in manufacturing products such as electronics and transportationequipment does not account for a large share in Myanmar, which shows that the foundation
for producing manufacturing goods is insufficient domestically.
At the moment, neither Myanmar nor Cambodia appear as if they are at the stage
where they can participate in the ASEAN’s production network. However, direct
investment into both countries’ manufacturing sector, with the garment industry at thecenter, is steadily increasing. The key in catching up to other countries will be whether they
can further upgrade their industrial structures from the garment industry. It will benecessary to develop not only infrastructure, but also institutions for investment andbusiness operations. In order for the manufacturing industry to grow and develop,
Myanmar and Cambodia need to catch up to the advanced ASEAN Member States byimproving the receiving environment for direct investment and further growing anddeveloping the manufacturing industry.
4. ASEAN as a consumer market
4.1 ASEAN’s market size
Intra-regional trade has been developing with a focus on the intra-regional
production and sales network. Recently, the consumer market has rapidly grown due to anincrease in income level as a result of rapid economic growth. In particular, Indonesia,
6

There are no detailed statistical data available on trade items and by partner for Laos. Therefore, here, thesituation of only Cambodia and Myanmar are discussed.

42 Japan Center for Economic Research “Asia Research” Reportwhich accounts for 40% of the population within the ASEAN region, has notably expanded
the durable consumer goods market such as passenger vehicles. The breakdown of export
and sales of Japanese-affiliated companies in four ASEAN countries (Indonesia, Malaysia,
the Philippines, and Thailand) by industry shows that in the manufacturing industry, about
60% of sales was for the local market. This indicates that the ASEAN region is no longer
just a production base but also a consumption base. In particular, raw materials and capital
goods such as oil, coal, steel, and general-purpose equipment that are used for production
within the ASEAN region have high sales in the local markets. Additionally, non-durable
and durable consumer goods such as food items and transportation equipment are also
increasing in sales in the local market. The local sales of electric machinery have also been
consistently increasing, and over the last five years or so, the local sales have been thehighest, exceeding sales in Japan or a third country. It can be concluded that ASEAN not
only has been expanding the market of intermediate and capital goods along with the
manufacturing industry, but also has developed as a consumer market for durable andnon-durable consumer goods with a rise in income level as a result of economic growth.
This section will examine ASEAN as a consumer market for final goods.
Comparing the population of each country and final consumption expenditure per capita
shows that Indonesia, the Philippines, and Vietnam have large populations, but their final
consumption expenditure per capita is low. The domestic markets of these countries still
have room for growth.
Table 6 shows total imports from the world, total imports from the ASEAN
Member States, and growth rate of three years from 2010 for durable and non-durable
consumer goods of each ASEAN Member State. With regard to durable consumer goods,
both Vietnam’s import size from the world and also from the ASEAN Member States is inparallel with that of Thailand, Malaysia, and Indonesia’s. Additionally, Vietnam’s rate ofincrease for imports from the world is the highest in the list. Even for intra-regional imports,
the rate is increasing and is second, following Thailand. This proves that Vietnam’s
domestic market is rapidly growing. Thailand’s import size and rate of increase is also high,which shows that Thailand’s domestic market still has room to expand.
Compared to durable goods, except for a few exceptions (the Philippines,
Cambodia, and Brunei), the ASEAN Member States have a low intra-regional dependency
on non-durable consumer goods. The rate of increase between 2010 and 2012 ofnon-durable imports from the world to Malaysia, Indonesia, Vietnam and the Philippines
exceeds the rate of increase of non-durable imports from ASEAN Member States during
the same time frame. In particular, Vietnam’s rate of increase for non-durable imports fromthe other ASEAN Member States was extremely low at 4%. Vietnam’s largest import
Chapter 3 | Progress on the ASEAN Intra-Regional Trade 43

partner for non-durable consumer goods (aside from the ASEAN countries) is China andthis share has been rapidly increasing in recent years. This may be causing the low increase
rate of intra-regional non-durable imports. China is also the largest import partner of
non-durable consumer goods for Malaysia, the Philippines, and Thailand, which all had ahigh rate of increase for the import of non-durable goods from outside ASEAN between
2010 and 2012. However, the rates of increase for each of those countries’ imports of
non-durable consumer goods (both from the world and from the other ASEAN Member
States) have significantly exceeded the rate of increase of household final consumption
expenditure per capita of 4%-13% from 2010 to 2012. This indicates that in general, evenfor non-durable consumer goods, the consumer markets in those countries and ASEAN as awhole are continuing to grow.
Figure 6: Import Value of Each Country’s Durable and Non-Durable Consumer
Goods (2012)（in USD）
Durable consumer goods

Non-durable consumer goods

Rate ofRate of

Import countryTotal import value increase Intra-regional import value increasesinceSingapore
11,067,614,270
Thailand
3,586,025,275
Malaysia
2,948,081,538
Vietnam
2,571,536,843
Indonesia
1,808,383,363
The Philippines 756,122,215
Brunei
120,834,609
Cambodia
90,936,540

23.0%
49.6%
25.1%
87.3%
28.7%
28.8%
79.1%

Rate ofsince

4,031,076,179
797,952,896
829,067,224
733,698,476
783,716,651
210,953,928
51,735,038
24,457,886

29.3%
62.5%
14.0%
30.0%
3.6%
3.5%
29.2%

Rate of

Import country Total import value increase Intra-regional import value increasesinceSingapore
Thailand
Malaysia
VietnamIndonesia
The Philippines
Cambodia
Brunei

5,968,002,483
4,001,938,309
3,537,553,858
2,674,629,693
2,333,538,443
1,494,323,636
339,975,571
170,458,923

17.7%
24.1%
34.0%
35.8%
31.0%
23.6%
19.8%
-

since

1,029,811,825
503,825,775
781,669,994
324,406,498
664,313,641
451,544,853
214,731,157
110,318,803

19.5%
28.7%
20.0%
4.4%
26.9%
18.3%
15.5%
-

Source: Created based on the United Nations Commodity Trade Statistics Database (Comtrade). Classification
by Broad Economic Categories (BEC).

5. Conclusion
This chapter examined the progress of ASEAN’s intra-regional trade by studying
the current situation of ASEAN’s intra-regional trade in goods and by outlining its structure.
Along with the development of the production network in the ASEAN region, ASEAN’s
intra-regional trade has expanded due to the increase in trade of intermediate goods andparts of: general machinery, electronic devices, and transportation equipment. Meanwhile,in recent years, intra-regional trade of crude oil and refined petroleum products has been
rapidly growing to keep pace with the rise in fuel demand with the expansion of
intra-regional production. Additionally, until now, ASEAN’s intra-regional trade had adisproportionate emphasis on Singapore and Malaysia. However, due to the expansion of
the production network and the growth of the consumer market, the trade shares between

44 Japan Center for Economic Research “Asia Research” Reportother pairs of countries increased and more ASEAN Member States play a role inintra-regional trade.
Trade within the ASEAN region is gradually expanding and the share of ASEAN’s
intra-regional trade has risen to a level that corresponds to its economic scale. Continuous
economic growth of the Member States, elimination of non-tariff barriers, and theimprovement of the acceptance mechanism of direct investment through the developmentof business environments could intensify intra-regional trade and lead to an increase inshare.
ASEAN’s intra-regional trade has been developing due to ASEAN’s intra-regional
production network and currently, Vietnam (who was a new member), is growing
economically through its integration into the production network. Additionally, ASEAN asa market has experienced remarkable expansion. While ASEAN’s economic integration has
been expanding and deepening as a production base by incorporating more Member States
into the production network, it can also intensify the intra-regional trade by expanding
consumption.
However, there are many challenges that remain for the completion of ASEAN’s
economic integration as the AEC. The majority of the major trade items to ASEAN
Member States and the world for new member states such as Myanmar and Cambodia are
still primary products and there is not yet a foundation for upgrading industrial structures.
In the future, the ASEAN Member States are expected to reduce the inequality gap within
the ASEAN region through intra-regional trade and upgrading industrial structures using
the increasing direct investment.
References
Sukekawa, S. (2013). Buppin boeki no jiyuka, enkatsuka ni muketa ASEAN no torikumi.
ASEAN keizai kyodotai to nihon – kyodai togotai shijo no tanjo (K. Ishikawa, K.
Shimizu & S. Sukekawa, Eds.). Bunshindo Publishing Corporation.
UNCTAD. (2014). Global Value Chains: Investment and Trade for Development. World
Investment Report 2013. United Nations.

Chapter 3 | Progress on the ASEAN Intra-Regional Trade 45