October 2020

RESILIENT GLOBAL VALUECHAINS FOR ASEAN

and its Relationship with Partner Countries:
A WAY TO MITIGATE AND
ADAPT TO THE ECONOMIC
IMPACTS OF COVID-19
By ASEAN-Japan Centre

For inquiries, contact ASEAN-Japan Centre(ASEAN Promotion Centre on Trade, Investment and Tourism)
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Copyright © ASEAN Promotion Centre on Trade, Investment and Tourism.
All Rights Reserved. October 2020.
Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19 – By ASEAN-Japan Centre

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

NOTES
The terms “country” and “economy” as used in this study also refer, as appropriate, to territories orareas. The designations employed and the presentation of the material do not imply the expressionof any opinion whatsoever on the part of the ASEAN-Japan Centre concerning the legal status of any
country, territory, city, or area or of the authorities, or delimitations of frontiers or boundaries.
The following symbols have been used in the tables:• Two dots (..) indicate that data are not available or are not separately reported.
• A dash (–) indicates that the item is equal to zero or its value is negligible.
• Use of a dash (–) between dates representing years, e.g., 2015–2016, signifies the full period
involved, including the beginning and end years.
• Reference to “dollars” ($) means United States dollars, unless otherwise indicated.

Prepared by Masataka Fujita (ASEAN-Japan Centre). The author wishes to thank staff membersof the AJC for their comments. The manuscript was edited by Lise Lingo and typeset by
Laurence Duchemin. Errors and omissions are only those of the author and should not be attributed
to his organization.
ii

TABLE OF CONTENTSTABLE OF CONTENTSINTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
I. RATIONALE AND SUPPORT FOR RESILIENT GVCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
II. RISK INTENSITY OF GLOBAL VALUE CHAINS OF ASEAN. . . . . . . . . . . . . . . . . . . . . . . 5
a. Supplier market concentration of GVCs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
b. Buyer market concentration of GVCs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
III. STRATEGIES TO BUILD RESILIENT GVCs IN ASEAN . . . . . . . . . . . . . . . . . . . . . . . . . . 20
a. Pandemic-related policy measures and actions implemented
by ASEAN member states. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
b. Improvement in risk management by the private sector. . . . . . . . . . . . . . . . . . . . 23
c. Strong push for digital transformation by both public
and private sectors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
d. Promoting new and crisis-resistant industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
e. Reconsidering company strategies for international
production: offshoring or reshoring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
CONCLUSION: PREPARING FOR ANOTHER CRISIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
REFERENCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  31
ANNEXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

iii

INTRODUCTIONINTRODUCTION
Resilience has become a catchword for ASEAN’s sustainable development in the post- or with
COVID-19 era. It is the focus of the ASEAN Economic Ministers (AEM) Statement on Strengthening
ASEAN’s Economic Resilience in Response to the Outbreak of the COVID-19 (10 March 2020) and the
AEM’s and Japan’s METI (Minister of Economy, Trade and Industry)’s Joint Statement on Initiatives
on Economic Resilience in Response to the COVID-19 Outbreak (22 April 2020). In response torequest from the AEM and Japanese METI ministers to achieve the following three objectives: (i)sustaining the close economic ties developed by ASEAN and Japan; (ii) mitigating the adverse impact
of COVID-19 on the economy; and (iii) strengthening economic resilience through an “ASEAN-Japan
Economic Resilience Action Plan”, and as part of the AEM-METI framework (para. 7 of the 22 April
2020 document above), the ASEAN-Japan Centre (AJC) prepared this paper.
The term resilience has been used in conjunction with natural disasters. It appeared nearly 50 years
ago in the context of ecological systems to refer to “the ability of systems to absorb changes … andstill persist” (Holling 1973; p. 17, as quoted in Rose 2009). Since then it has been widely used even in
economics. Economic recovery from natural disasters can be also linked to resilience: the exampleof the Kobe earthquake in 1995 demonstrates this relationship (Horwich, 1997).
When resilience is used with economy, production, or supply chains, it also means the robustnessof the system. In global value chains (GVCs) that are resilient, it means that even if one or morechains are disrupted, other chains replace these cut-off chains or play a substituting role so that
GVCs continue to function. Do GVCs in ASEAN resist such disruptions? What do they look like?
This question has become more pertinent today in ASEAN because of the pandemic, which puts
the structure of production and supply chains into question. If GVCs should be strengthened andrebuilt, it should be “building back better” (Lallemant 2013). What is rebuilt should be more resilient.
Lallemant calls the process to build a more resilient future “reformative recovery”, as distinguishedfrom a “response” or “reconstruction” to return to the initial resilience (Lallemant 2013).
The unprecedented magnitude of the ongoing crisis is raising major concerns about the future of
the world economic outlook, especially as it relates to international trade and investment, as well as
tourism traffic. This applies to the relationships between ASEAN and Japan, both of which have been
affected from the beginning of this crisis. In this context, the AJC has reviewed the relationships
between ASEAN and Japan as well as other ASEAN partners and presents a paper on the courseof possible actions to mitigate the economic impact of this crisis and adapt to risk managementin trade, investment and tourism. The approach that the AJC adopts here is to see the production
systems through GVCs, taking into account the current pandemic that is likely to affect the future
patterns of GVCs (which includes regional value chains).
The pandemic raised a set of questions regarding the efficient and effective network of production
systems for many companies in ASEAN and Japan. Will globalization stop or slow down in ASEAN?
Will international production become smaller? Will norms governing value chains change? Will
companies be flexible enough to avoid the risks of running and managing value chains? There arecountless questions; this paper attempts to provide responses to some of them.
The apparent answers to these questions are not easy, but what is absolutely sure is that the waythat companies operate will not remain the same as before and they have to face restructuring.
Seemingly strong industries such as automobiles, electronics, tourism, retail businesses (throughestablished shops) are all losing competitiveness to other new businesses, or strengthening
information technology (IT) and IT-related parts of their products. The pandemic is a driver andcatalyst for changing and even overhauling the economic order with which ASEAN and Japan havelong been satisfied.
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Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

Many foreign companies operating in ASEAN have realized that GVCs can provide the most efficientand effective manner of production. However, the pandemic requires a reconsideration of how thestructure of production operates in ASEAN. At the same time, this pandemic poses a danger in thatit makes the poor poorer and the rich richer. There has been a debate whether globalization works
for the poor even before the pandemic.
This paper is organized as follows. Section I redefines the resilience of GVCs after or with COVID-19.
The pandemic has caused the most serious impact on all economies, as proven by the declineof many macroeconomic indicators. The structure and nature of GVCs is supposed to guarantee
efficient and effective production networks, but, ironically, because of this very nature and structure,
the system is exposed to the risks from the pandemic and does not work as expected. Then, howshould GVCs in the future look like? They should resist, mitigating the impact of and adapting tovarious possible risks and disruptions of supply and production chains.
Calling for resilient GVCs is a world agenda item. Section II provides an overview of GVCs in ASEAN,
and in particular their relationships with Japan and other partner countries, to expose strengths
and weaknesses. The important thing is to maximize the advantages and strengths and minimize
the disadvantages and weaknesses of the current GVCs to lead to an ideal GVC. In some cases
GVCs in ASEAN are so skewed and so concentrated that companies are exposed to external shocks
such as the pandemic and natural disasters, and are easily threatened by the risks of producing
and supplying their products. By using the database in value added trade data that the AJC has
maintained in its project on GVCs in ASEAN,1 this paper clarifies which industries in ASEAN are likely
to be threatened by such risks, and with which partner country ASEAN has vulnerable or strong
value chain relationships. This unique database exposes the complex web of value chains between
ASEAN and Japan to light and helps countries and companies reset their mind on ideal production
and supply chains, contributing to adaptation to the crisis. At the same time, the data on value added
trade used here are all estimates and do not necessarily reflect the reality accurately. The utmost
caution is required in interpreting the data.
Section III considers what ASEAN and Japan have to do to reinvigorate GVCs. There must be a set ofstrategies for this which should be undertaken by both the public and the private sectors. They include(1) policy measures and actions related to production and supply chains (or GVCs), (2) improvement
in risk management by the private sector, (3) strong push towards digital transformation by both the
public and the private sectors, (4) the promotion of new industries that are resistant to the crisis,
and (5) reconsideration of company strategies for international production. ASEAN governments
as well as the Japanese Government immediately provided many policy measures to fight against
the pandemic. Many companies were rescued, even if temporarily, by these measures. However,what other policy measures are considered to lead both ASEAN and Japanese companies to rebuild
resilient GVCs?
The paper ends with some concluding remarks on the way forward.

1

2

The AJC is providing a series of 16 papers on GVCs in ASEAN, consisting of one regional paper, 10 country papers(one for each member state) and five industry papers (automobiles, electronics, textiles and clothing, agribusinessand tourism) (https://www.asean.or.jp/ja/centre-wide/centrewide/).

I. RATIONALE AND SUPPORT FOR RESILIENT GVCs

I. RATIONALE AND SUPPORT FORRESILIENT GVCs
Trade and investment are the principal means to deliver goods and services. However, the current
crisis reminds us of production networks that have already proved vulnerable to external risks suchas natural disaster (e.g. Great East Japan Earthquake in 2011, Thai floods in 2011), disrupting andeven cutting off key supply and delivery chains between Japanese companies and Asian companies,
in particular Chinese companies. It is too late to awake to the vulnerability of supply chains every
time there is an external shock. There is a need to review current production and supply chains and,if needed, re-establish crisis-resistant value chains.
Companies have always sought the maximum efficiency to produce, as if this were an axiom for allthat engage in international production. They have established GVCs throughout the world to make itpossible to achieve such efficiency. However, efficiency and risk are two sides of the same coin. The
more efficient something is, the more risky it is. Companies pursue efficiency of production at therisk of security. It is legitimate for companies to rationalize and increase efficiency if there are manysmall providers. If there are only a few, companies easily succumb to fragility and vulnerability once
they face an unexpected event (e.g. pandemic, natural disaster, terrorist attack).
Although this is a natural consequence of efficient procurement, when their supply or distribution
chains are concentrated in a few firms and a few countries, companies have always a legitimate
concern as to whether they will continue to receive required materials and inputs from suppliers,
and continue to sell. It is paramount for them to procure and receive materials required for theirproduction when needed. However, the secured and timely purchase and receipt of products may beinterrupted. This is likely to take place when these value chains are weak, and become more severe
when they are concentrated in a few companies and countries. The question is where and at whatstage the value chain is concentrated. This is addressed in section II.
There has been a series of calls at the international and regional levels for strengthening andrebuilding value chains since the outbreak of COVID-19. On 16 March 2020, the G7 made the firstjoint statement on combatting COVID-19, followed by the G20 at its Leaders’ Summit on 15 April
2020 endorsing the G20 Action Plan – Supporting the Global Economy through the COVID-19
Pandemic – by the G20 finance ministers and central bank governors. Furthermore, the trade andinvestment ministers of the G20 endorsed on 14 May 2020 the “G20 Actions to Support World Tradeand Investment in Response to COVID-19” prepared by the Trade and Investment Working Group on
building resilience in global supply chains and strengthening international investment (box 1); andin trade regulation, trade facilitation, transparency and operation of logistics networks. The World
Trade Organization compiles the trade and trade-related measures (goods measures, services
measures and intellectual property measures) related to COVID-19 of all member states. At theASEAN level, even earlier than the G7 (on 10 March 2020), the AEM made an announcement as
noted above and on 19 June issued the Hanoi Plan of Action on Strengthening ASEAN Economic
Cooperation and Supply Chain Connectivity in Response to the Covid-19 Pandemic.

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Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

Box 1. Building resilience in global supply chains, by the G20• Support the development and sharing of best practices, specifically in terms of measures that
could be taken during a global crisis to support expanding production and trade in essential
goods and services, including digital trade or e-commerce.
• Strengthen cooperation between authorities responsible for the regulation of trade, including
customs authorities, with regard to issues relating to electronic document management.
• Ensure the transparency and availability of trade-related information and global market
information useful to micro and small and medium enterprises (MSMEs), noting inputs from the(G20) Business 20.
• Encourage connection and policies to strengthen the cooperation between multinational
corporations and MSMEs, noting inputs from the (G20) Business 20.
• Encourage governments to establish voluntary guidelines that would allow, in the event of a
global health crisis, essential cross-border travel, including essential business travel, on an
exceptional basis, in accordance with national laws and regulations, and without undermining
efforts to safeguard public health.
Source: G20 Actions to Support World Trade and Investment in Response to COVID-19, 14 May 2020.

4

II. RISK INTENSITY OF GLOBAL VALUE CHAINS OF ASEAN

II. RISK INTENSITY OF GLOBAL VALUE CHAINSOF ASEAN
The disruption of supply chains brought about by the pandemic has gone beyond production halts
in many product lines and even caused threats to life because of the lack of required medical andpersonal protective equipment (PPE) and products. In order for companies in Japan and ASEAN tohave reliable, secure and stable production and supply chains under any circumstances, they shouldhave well-coordinated and risk-minimized management and control over value chains. The current
crisis not only reveals structural weaknesses and shortcomings in the regulations that governinternational trade and investment, but also awakens many companies to industrial restructuring
for future growth.
When companies stop receiving materials and inputs required for their production and exports fromsuppliers or related firms for any reason, they face serious consequences. The supply and production
chain is disrupted and characterized as weak and non-resilient. If the companies have a milliard of
suppliers, be they related or independent, although they reduce the risk of supply disruption, they
face significant inefficiency in procurement and increased costs. Then what is the right balance? The
most efficient number of suppliers cannot be determined easily and varies by industry and company.
The vulnerability of value chains and the risk of losing competitiveness should be carefully balanced.
In this section, the degree of vulnerability of chains is examined.
GVCs comprise upstream and downstream parts of chains. The upstream part refers to foreign
providers and suppliers of the materials integrated into exports, while the downstream part refers
to the chains in destination countries where exported products are used as inputs to the products
exported therefrom. Thus, in considering how excessively concentrated GVCs are, there are two
types: supplier market concentration (upstream) and buyer market concentration (downstream).
Ideal GVCs resist any risks, wherever they come from; for example, health issues such as the current
pandemic, as well as natural disasters, economic downturns, and the like. Although it is not possible
to avoid the risks completely at any time, it is possible to minimize such risks. Any interruption of
supply and procurement in production processes is sometimes detrimental not only to the existenceof such products but also to the standard of living, including threatening life (e.g. through a shortageof PPE) as the pandemic has done.
In order for companies to build resilient GVCs and for governments to facilitate the build-up ofsuch networks, it is important to know what current GVCs look like and the extent to which they
are vulnerable to risks. Risks that affect the upstream part of GVCs and those that affect thedownstream part can be considered separately. The question is how much GVCs are concentrated ina few suppliers (for the upstream part) and a few buyers (downstream part). The more concentrated
the chain is, the more risky and vulnerable to external shocks it is. The way that the risk is
calculated is analogous to market concentration. Markets are concentrated when there is one seller(monopoly) or there are a few sellers (oligopoly) and when there is one buyer (monopsony) or there
are a few buyers (oligopsony). In providing materials, parts and components, if there are only a few
recipient firms or countries, this market is concentrated. Market concentration takes place in bothends of chains.
How large are supplier and buyer markets? How many are supplier firms and countries, and buyer
firms and countries? How much do they each supply or buy? Along the GVC line, the production
processes and stages before and after the company position are considered, and for each part thesize and the concentration of the market is calculated (figure 1).

5Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

Figure 1. Schematic diagram of GVC concentration structured by upstream (supplier)and downstream (buyer) partborderborder

GVC upstream

Positioningof export product

GVC downstream

Country B and others

Country A

Country C and others

Supplier 1 for domestic use

Supplier 2for e
Suppliexpor
r 3 fortexportSupplier 4 for domestic use
r 5 forSupplie

exportDomestic
use

1
Buyer

DVA

DVA
FVA

t
por
r ex
6 fo

Buyer 2FVA(=DVX)

Buyer3

Exportsr
plie
Sup
Supplier 7 for domestic use

Supplier market
concentration

Exports

Buyer market
concentration

Source: AJC.
Note: FVA = foreign value added; DVA = domestic value added; DVX = value added incorporated in other country’s exports.
The size of the pies does not represent the size of the value.

a. Supplier market concentration of GVCs
Concentration of GVCs can be measured at two levels: foreign reliance (the degree of foreign reliance,or the extent to which exports rely on materials from foreign countries) and suppliers (the degree ofmarket concentration, or the extent to which sources of foreign materials are concentrated) (figure1). If a product exported from a country has a higher degree of foreign reliance – if it relies verymuch on foreign materials to be produced – then the risk of external shocks is high. The export
product cannot be produced when foreign sources become unavailable. The higher the risk is, thehigher the foreign reliance is. There is a need for domestic suppliers, which are not necessarily
affected by external shocks. The risk associated with the degree of foreign reliance is amplified by
the concentration of suppliers. If there are fewer suppliers, the risk of disruption to supply chainsbecomes higher,
Any product used and integrated into other product or consumed as a final product contains
materials that come from within the home country or abroad, or both. When foreign materials areintegrated into exported products, that constitutes the upstream part of GVCs. This is called foreign

6II. RISK INTENSITY OF GLOBAL VALUE CHAINS OF ASEAN

value added (FVA), or value added in trade that belongs to foreign countries (for GVC terminology,
see box 2). The risk associated with the degree of foreign reliance is based on the FVA share, orthe share of foreign materials integrated in exports. In other words, the size of FVA is considered.
The higher the FVA share is, the more risky it is. A level of FVA share that is not overly high, nor
too low is considered moderate. This moderate level is assumed to be between the average FVA
share of all ASEAN and the average FVA share of the world. This level implies that in producing any
product foreign materials are required at the regional or world average share. Any lower level is noor low concentration, and any higher level is highly concentrated. The medium level is moderately
concentrated. The risk is thus characterized as high, low and medium, respectively.

Box 2. GVC terminology used in the paper
A country’s exports can be divided into domestically produced value added and imported (foreign)value added that is incorporated into the country’s exported goods and services. Furthermore,
exports can go to a foreign market either for final consumption or as intermediate inputs to beexported again to third countries (or back to the original country). The analysis of GVCs takes into
account both foreign value added in exports (the upstream perspective) and exported value addedthat is incorporated in third-country exports (the downstream perspective). The indicators used inthis paper as well as other AJC papers on GVCs are as follows:
1. Foreign value added (FVA): FVA indicates what part of a country’s gross exports consists of
inputs that have been produced in other countries.
2. Domestic value added (DVA): DVA is the part of exports created in-country, i.e. the part of exportsthat contributes to gross domestic product (GDP). The sum of foreign and domestic value added
equates to gross exports.
3. Value added incorporated in other countries’ exports (DVX): This indicates the extent to whicha country’s exports are used as inputs to exports from other countries. At the global level, thesum of this value and the sum of FVA are the same.
4. GVC participation: This indicates the share of a country’s exports that is part of a multistage
trade process, by adding to the FVA used in a country’s own exports the value added that is
supplied to other countries’ exports (FVA + DVX). The participation rate is a useful indicator forthe extent to which a country’s exports are integrated in international production networks.
Source: AJC (2019).

If only a few firms or a few countries provide the materials required for exported products, theupstream chain is vulnerable to disruption of supply caused by any event such as the current
pandemic. If there are a number of supply chains, the risk is diversified. Therefore, the concentrationof supply is calculated by looking at the structure of FVA. The degree of concentration used here is
the Herfindahl-Hirschman Index (HHI).2 The HHI tends to be large when there are only a few firms,
or when a few firms have dominant shares in a market.

2

The HHI is calculated by squaring the market share of each firm competing in a market and then summing theresulting numbers. It can range from close to zero to 10,000. Suppose there are three providers (firms or countries)
of FVA, with market shares of 50 per cent, 30 per cent and 20 per cent. In this case the HHI is 502 + 302 +202 = 3,800.
According to the U.S. Department of Justice this is highly concentrated.

7

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

As an example of the market share, the U.S. Department of Justice considers a market with
an HHI of less than 1,500 to be a competitive marketplace, an HHI of 1,500 to 2,500 to be amoderately concentrated marketplace, and an HHI of 2,500 or greater to be a highly concentrated
marketplace (table 1). As a general rule, mergers that increase the HHI by more than 200 points
in highly concentrated markets raise antitrust concerns, as they are assumed to enhance market
power. An HHI of more than 100 points may raise significant competitive concerns in moderately
concentrated markets.

Table 1. Herfindahl-Hirschman Index (HHI) range for market concentration
HHI range

Market concentration

Less than 1,500

Unconcentrated

1,500–2,500

Moderately concentrated

More than 2,500

Highly concentrated

Source: U.S. Department of Justice (https://www.justice.gov/atr/herfindahl-hirschman-index).

For the degree of concentration of suppliers, the higher the HHI is, the higher the risk to external
vulnerability. If companies have a number of supplier chains, it is less risky as they can shift theweight of supply to suppliers that are not affected by the shocks. However, it should be noted that
this may happen at the risk of losing some efficiency, and thus competitiveness, though it mustentail less loss than where no shift within the supplier network is possible and no supply is available.
Two levels of concentration are calculated (table 2), for nine combinations (high-high, high-medium,high-low, medium-high, medium-medium, medium-low, low-high, low-medium and low-low).
Multiplication of two levels of risk is also calculated on the basis of 1, 0.5 and 0.1 for high, medium
and low, respectively. When the foreign reliance is high enough to be risky, what matters is how many
foreign supplier chains exist. If suppliers are not concentrated, the total risk is not necessarily high.
Even if there is moderate level of foreign reliance, if suppliers are concentrated, the risk is elevated.
When foreign reliance is low (FVA < 20 per cent) but there are only a few suppliers, the risk intensity
becomes 0.1 (= 0.1 x 1). This risk intensity is the same as the situation where foreign reliance is high
(FVA > 38 per cent) but there are many supplier countries (0.1 = 1 x 0.1) (table 2).
Out of 222 industries whose classification of activities is standardized in 10 ASEAN countries (annex
table 1), there is no industry where the risk intensity is high for both the degree of foreign relianceand the degree of concentration of supplier countries (in other words, high-high) (table 3). More thanhalf of these industries in ASEAN (126 out of 222) seem to have not well established GVCs, as shownby low foreign reliance and low numbers of suppliers, thus facing no risk over GVCs, if any. The
remaining 96 industries are in the moderate risk range in their GVCs (upstream part), either highrisk for foreign reliance and low/medium risk for the number of suppliers (53 industries), or medium
risk for foreign reliance and low risk for the number of suppliers (23), or low risk for foreign relianceand high/medium risk for the number of suppliers (20) (table 3).
Because of the spread of GVCs in ASEAN, one-quarter of industries in 10 ASEAN countries (53)show value chains that use high shares of foreign materials in their exports and in which thesematerials are widely sourced (risk combination of high-medium and high-low)(table 3). As there aremany suppliers abroad, these industries can obtain required materials widely. In these categories,
many industries in Singapore, Malaysia, and country representative industries of Viet Nam suchas textiles and clothing, and electronics are included. The concern is that high reliance on foreigncountries may cause vulnerability in the functioning of GVCs as, while it is unthinkable to assume
8

0.1
0.5
0.25
0.05
0.1
0.05
0.01

Low (HHI < 1,500)

High (HHI = >2,500)

Medium (HHI = 1,500-2,500)

Low (HHI < 1,500)

High (HHI = >2,500)

Medium (HHI = 1,500-2,500)

Low (HHI < 1,500)

1

Risk intensity

0.5

Risk colour

Risk to vulnerability(6 stages from 0.01 to 1, with higher
numbers being more risky)Medium (HHI = 1,500-2,500)

High (HHI = >2,500)

Degree of concentration(extent to which sourceof foreign materials isconcentrated)

Value chains which use a low share of foreign materials in their exports andin which these materials are widely sourced from many countries.

Value chains which use a low share of foreign materials in their exports andin which these materials are relatively sourced from many countries.

Value chains which use a low share of foreign materials in their exports andin which these materials are sourced.

Value chains which use a medium share of foreign materials in their exports
and in which these materials are widely sourced.

Value chains which use a medium share of foreign materials in their exports
and in which these materials are relatively sourced from many countries.

Value chains which use a medium share of foreign materials in their exports
and in which these materials are sourced mainly from a few countries.

Value chains which use a high share of foreign materials in their exports andin which these materials are widely sourced.

Value chains which use a high share of foreign materials in their exports andin which these materials are relatively sourced from many countries.

Value chains which use a high share of foreign materials in their exports andin which these materials are mainly from only a few countries.

Upstream value chain description

Source: AJC.
Note: Degradation of colour implies the degree of the risk intensity. The more strong the colour is, the greater the risk. There are six levels of risk, which combine the risk due to reliance of essential
products on foreign countries in exporting and the risk due to a limited number of supply lines (number of supplying countries). The risk is graded into high, medium and low, and the weight is given
1, 0.5 and 0.1 respectively for both types of risks. The risk intensity for each situation of GVC vulnerability is the multiplication of these two types of risks.
FVA = foreign value added. In 2017, the world average was 30% and the ASEAN average was 38%.

Low (FVA < 30%)

Medium (FVA = 30–38%)

High (FVA = >38%)

Degree of foreign reliance(extent to which exports
must use materials fromforeign countries)

Table 2. Methodology of risk calculation: Vulnerability of upstream part of GVCs to external shocks

II. RISK INTENSITY OF GLOBAL VALUE CHAINS OF ASEAN

9

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

that all supply links with foreign countries could be cut off, it is not healthy to rely so much on
foreign sources to produce export products. Domestic production is more required and even more
important, as it constitutes a country’s GDP. In particular, agriculture, hunting, forestry and fishing;textiles, clothing and leather; and wood and wood products in Singapore, and motor vehicles andother transport equipment in Thailand are reliant on foreign sources and their supplier market
concentration is moderately high. Increasing domestic value added (DVA) while lowering FVA and/or
increasing number of foreign suppliers is a policy option.
GVC participation in ASEAN seems to be high and spreads through many industries. Indeed the
FVA share in exports is higher than any regional groups except the European Union (EU) (AJC 2019,p. 12). However, it seems to be in select industries as well as select countries where the degree of
GVC is high. In fact, most ASEAN industries have lower involvement in GVCs in terms of FVA share(lower than the ASEAN average). Countries at the beginning of the value chain (e.g. exporters of raw
materials) by definition have a low FVA content of exports.
As per the suggestion of the U.S. Department of Justice, when the HHI increases by 200,3 they raise
antitrust concerns (U.S. Department of Justice and the Federal Trade Commission 2010). If any country
or any firm occupies a share of 14–15 per cent of the market, the HHI becomes 200. Looking at the
HHI for countries, there are several cases where HHI is more than 200 (table 4). In those cases, faircompetition may not be guaranteed and concerns about concentration are emerging. In this paper, thisis the situation in which a country (or a firm) occupies a supplier market share to an extent that causes
a risk of vulnerability to external shocks. The main countries in which this occurs are the following:• China is by far the most important supplier to many industries in ASEAN. China occupies a market
share of FVA that enhances its market power enough to cause a competitive concern in more thanhalf of 222 industries (129). It is followed by Japan and Thailand (38 each). High concentration by
Chinese suppliers is seen in at least one industry in all ASEAN countries except the Lao People’s
Democratic Republic and Myanmar. Among these 129 industries, the HHI is more than 1,000 (butless than 1,500) in the following 6: agriculture, hunting, forestry and fishing, and textiles, clothing
and leather in Singapore; motor vehicles and other transport equipment in Thailand; electrical andgeneral machinery, and metal and metal products in Cambodia; and agriculture, hunting, forestry
and fishing in Viet Nam (annex table 2), in other words, more than 32 per cent market share isowned by China alone in these industries’ foreign supplier markets. The dominance of Chinese
supply in many products has increased during the pandemic as the country shows resilience andis returning to its powerhouse of exports while other major exporting countries are still struggling
with the pandemic as of today.4• Regarding the concentration of Japanese suppliers in ASEAN exports, 22 out of 38 industries where
the Japanese HHI is more than 200 are in Viet Nam, across all industries except “unspecified”.
Japanese suppliers are also concentrated in the Philippines (four industries), Malaysia (fourindustries), Singapore (three industries), Thailand (three industries), and Indonesia (one industry)(annex table 2). Electrical and general machinery, precision instruments and motor vehicles showhigh concentrations of Japanese suppliers.

3

4

10

Mergers resulting in highly concentrated markets that involve an increase in the HHI of between 100 and
200 points potentially raise significant competitive concerns and often warrant scrutiny. Mergers resulting inhighly concentrated markets that involve an increase in the HHI of more than 200 points will be presumed tobe likely to enhance market power (https://www.justice.gov/atr/horizontal-merger-guidelines-08192010#5c). In
moderately concentrated markets, an increase in the HHI of more than 100 points potentially raises significant
competitive concerns. In this paper, regardless of market (supplier or buyer) concentration, an HHI of 200 is adopted
as the threshold.
“Pandemic helps lift China exports”, The New York Times, 2 September 2020. The Chinese share of world’s exports
during April-June 2020 reached 20 per cent, compared to 13 per cent in 2019.

Low (FVA < 30%)

Medium (FVA = 30–38%)

High (FVA = >38%)

Degree of foreign
reliance (extent towhich exports must use
materials from foreigncountries)

0

15

5

High (HHI = >2,500)

Medium (HHI = 1,500-2,500)

23

Low (HHI < 1,500)…/

Lao PDR: Wood and wood products; Lao PDR: Textiles, clothing and leather; Cambodia: Electrical and general machinery; Lao PDR: Hotels andrestaurants; Lao PDR: Education, health and other services; Cambodia: Metal and metal products; Lao PDR: Electrical and general machinery;
Cambodia: Petroleum, chemical and non-metallic mineral products; Lao PDR: Motor vehicles and other transport equipment; Lao PDR:
Food, beverages and tobacco; Lao PDR: Other manufacturing; Lao PDR: Construction; Lao PDR: Metal and metal products; Lao PDR: Mining,
quarrying and petroleum; Lao PDR: Financial intermediation and business activities

Lao PDR: Trade; Lao PDR: Transport, storage and communications; Lao PDR: Petroleum, chemical and non-metallic mineral products; Lao
PDR: Public administration and defence; Lao PDR: Electricity, gas and water

Malaysia: Petroleum, chemical and non-metallic mineral products; Thailand: Electrical and general machinery; Thailand: Textiles, clothing
and leather; Malaysia: Wood and wood products; Thailand: Community, social and personal service activities; Viet Nam: Food, beverages andtobacco; Philippines: Precision instruments; Malaysia: Community, social and personal service activities; Thailand: Precision instruments;
Philippines: Petroleum, chemical and non-metallic mineral products; Singapore: Education, health and other services; Philippines: Motorvehicles and other transport equipment; Viet Nam: Transport, storage and communications; Thailand: Wood and wood products; Philippines:
Metal and metal products; Singapore: Other services; Viet Nam: Precision instruments; Singapore: Electricity, gas and water; Malaysia:
Electricity, gas and water; Cambodia: Recycling; Lao PDR: Unspecified; Cambodia: Motor vehicles and other transport equipment; Brunei
Darussalam: Motor vehicles and other transport equipment

None

None

0

High (HHI = >2,500)

Low (HHI < 1,500)

Medium (HHI = 1,500-2,500)

Thailand: Motor vehicles and other transport equipment; Singapore: Textiles, clothing and leather; Singapore: Agriculture, hunting, forestry andfishing; Singapore: Wood and wood products

49

4

Medium (HHI = 1,500-2,500)

None

Name

Country: Industry, by value of FVAa

Singapore: Electrical and general machinery; Singapore: Petroleum, chemical and non-metallic mineral products; Malaysia: Electrical andgeneral machinery; Philippines: Electrical and general machinery; Singapore: Financial intermediation and business activities; Singapore:
Transport, storage and communications; Singapore: Metal and metal products; Singapore: Precision instruments; Malaysia: Transport,
storage and communications; Singapore: Motor vehicles and other transport equipment; Malaysia: Food, beverages and tobacco; Malaysia:
Metal and metal products; Singapore: Food, beverages and tobacco; Singapore: Trade; Singapore: Publishing, printing and reproduction ofrecorded media; Viet Nam: Textiles, clothing and leather; Thailand: Other manufacturing; Singapore: Community, social and personal service
activities; Malaysia: Textiles, clothing and leather; Malaysia: Other manufacturing; Singapore: Hotels and restaurants; Malaysia: Motorvehicles and other transport equipment; Viet Nam: Petroleum, chemical and non-metallic mineral products; Singapore: Other manufacturing;
Viet Nam: Electrical and general machinery; Malaysia: Hotels and restaurants; Singapore: Construction; Malaysia: Construction; Viet
Nam: Other manufacturing; Viet Nam: Metal and metal products; Viet Nam: Wood and wood products; Viet Nam: Motor vehicles and othertransport equipment; Malaysia: Precision instruments; Malaysia: Publishing, printing and reproduction of recorded media; Malaysia: Public
administration and defence; Malaysia: Recycling; Viet Nam: Construction; Viet Nam: Publishing, printing and reproduction of recorded media;
Philippines: Public administration and defence; Cambodia: Unspecified; Malaysia: Unspecified; Brunei Darussalam: Unspecified; Viet Nam:
Unspecified; Malaysia: Other services; Indonesia: Unspecified; Thailand: Unspecified; Philippines: Unspecified; Brunei Darussalam: Recycling;
Myanmar: Unspecified

0

Number of industries
corresponding to eachrisk range (n = 222)

High (HHI = >2,500)

Degree of concentration(extent to which sourceof foreign materials isconcentrated)

Table 3. 222 industries in ASEAN by the risk intensity of the upstream part of GVCs to external shocks (Concluded)

II. RISK INTENSITY OF GLOBAL VALUE CHAINS OF ASEAN

11

12

Low (HHI < 1,500)

Low (FVA < 30%)

126

Number of industries
corresponding to eachrisk range (n = 222)

Indonesia: Electrical and general machinery; Thailand: Petroleum, chemical and non-metallic mineral products; Malaysia: Financial
intermediation and business activities; Indonesia: Petroleum, chemical and non-metallic mineral products; Indonesia: Textiles, clothing andleather; Indonesia: Wood and wood products; Thailand: Food, beverages and tobacco; Thailand: Transport, storage and communications;
Indonesia: Transport, storage and communications; Philippines: Textiles, clothing and leather; Viet Nam: Agriculture, hunting, forestry andfishing; Indonesia: Metal and metal products; Philippines: Transport, storage and communications; Malaysia: Mining, quarrying and petroleum;
Malaysia: Agriculture, hunting, forestry and fishing; Thailand: Metal and metal products; Indonesia: Mining, quarrying and petroleum;
Indonesia: Other manufacturing; Indonesia: Food, beverages and tobacco; Viet Nam: Mining, quarrying and petroleum; Philippines: Other
services; Thailand: Financial intermediation and business activities; Thailand: Hotels and restaurants; Indonesia: Other services; Viet Nam:
Trade; Thailand: Agriculture, hunting, forestry and fishing; Malaysia: Trade; Indonesia: Trade; Philippines: Trade; Malaysia: Education, healthand other services; Viet Nam: Hotels and restaurants; Viet Nam: Financial intermediation and business activities; Brunei Darussalam:Mining, quarrying and petroleum; Indonesia: Agriculture, hunting, forestry and fishing; Philippines: Other manufacturing; Philippines:
Wood and wood products; Philippines: Food, beverages and tobacco; Indonesia: Motor vehicles and other transport equipment; Philippines:
Financial intermediation and business activities; Thailand: Publishing, printing and reproduction of recorded media; Thailand: Trade;
Philippines: Agriculture, hunting, forestry and fishing; Philippines: Hotels and restaurants; Thailand: Education, health and other services;Indonesia: Hotels and restaurants; Thailand: Mining, quarrying and petroleum; Cambodia: Textiles, clothing and leather; Indonesia: Financial
intermediation and business activities; Indonesia: Precision instruments; Viet Nam: Community, social and personal service activities;
Philippines: Mining, quarrying and petroleum; Thailand: Construction; Indonesia: Publishing, printing and reproduction of recorded media;
Viet Nam: Education, health and other services; Indonesia: Education, health and other services; Indonesia: Construction; Brunei Darussalam:Transport, storage and communications; Brunei Darussalam: Textiles, clothing and leather; Philippines: Education, health and other services;
Brunei Darussalam: Hotels and restaurants; Philippines: Construction; Cambodia: Transport, storage and communications; Cambodia: Woodand wood products; Brunei Darussalam: Education, health and other services; Brunei Darussalam: Trade; Brunei Darussalam: Community,social and personal service activities; Philippines: Publishing, printing and reproduction of recorded media; Cambodia: Community, social andpersonal service activities; Cambodia: Trade; Viet Nam: Electricity, gas and water; Myanmar: Mining, quarrying and petroleum; Cambodia:
Education, health and other services; Cambodia: Agriculture, hunting, forestry and fishing; Cambodia: Hotels and restaurants; Lao PDR:
Agriculture, hunting, forestry and fishing; Brunei Darussalam: Electrical and general machinery; Brunei Darussalam: Other manufacturing;
Brunei Darussalam: Construction; Singapore: Unspecified; Philippines: Electricity, gas and water; Myanmar: Textiles, clothing and leather;
Viet Nam: Public administration and defence; Indonesia: Public administration and defence; Myanmar: Agriculture, hunting, forestry andfishing; Indonesia: Electricity, gas and water; Cambodia: Food, beverages and tobacco; Cambodia: Other manufacturing; Lao PDR: Community,social and personal service activities; Cambodia: Construction; Myanmar: Wood and wood products; Cambodia: Public administration anddefence; Brunei Darussalam: Petroleum, chemical and non-metallic mineral products; Brunei Darussalam: Metal and metal products;
Thailand: Electricity, gas and water; Brunei Darussalam: Agriculture, hunting, forestry and fishing; Viet Nam: Other services; Myanmar:
Transport, storage and communications; Myanmar: Food, beverages and tobacco; Brunei Darussalam: Food, beverages and tobacco; Myanmar:
Community, social and personal service activities; Lao PDR: Recycling; Brunei Darussalam: Public administration and defence; Brunei
Darussalam: Wood and wood products; Myanmar: Other manufacturing; Myanmar: Recycling; Myanmar: Hotels and restaurants; Cambodia:
Other services; Myanmar: Electrical and general machinery; Myanmar: Metal and metal products; Cambodia: Mining, quarrying and petroleum;
Myanmar: Trade; Cambodia: Electricity, gas and water; Myanmar: Petroleum, chemical and non-metallic mineral products; Lao PDR: Other
services; Myanmar: Education, health and other services; Brunei Darussalam: Electricity, gas and water; Myanmar: Electricity, gas and water;
Brunei Darussalam: Other services; Myanmar: Motor vehicles and other transport equipment; Myanmar: Construction; Cambodia: Financial
intermediation and business activities; Myanmar: Public administration and defence; Myanmar: Other services; Brunei Darussalam: Financial
intermediation and business activities; Thailand: Public administration and defence; Myanmar: Financial intermediation and business activities

Name

Country: Industry, by value of FVAa

Source: AJC.
Note: There are six levels of risk, which combine the risk due to reliance of essential products on foreign countries in exporting and the risk due to a limited number of supply lines (number of supplying
countries). The risk is graded into high, medium and low and the weight is given 1, 0.5 and 0.1 respectively for both types of risks. The risk intensity for each situation of GVC vulnerability is themultiplication of these two types of risks.
FVA = foreign value added. In 2017, the world average was 30% and the ASEAN average was 38%.
aRanked in the order of the value of FVA (from large to small).

Degree of concentration(extent to which sourceof foreign materials isconcentrated)

Degree of foreign reliance(extent to which exports
must use materials fromforeign countries)

Table 3. 222 industries in ASEAN by the risk intensity of the upstream part of GVCs to external shocks (Concluded)

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

II. RISK INTENSITY OF GLOBAL VALUE CHAINS OF ASEAN• Among ASEAN countries, at least five (Indonesia, Malaysia, Singapore, Thailand and Viet Nam)own an important share of supplying products to other ASEAN countries’ exports in 3 (Viet Nam) to38 (Singapore) industries. Thai suppliers are concentrated only in Cambodia and the Lao People’s
Democratic Republic. All 38 industries where Thai HHI is more than 200 are in these two countries.
As a result of the “Thailand plus one” strategy, the Lao People’s Democratic Republic has become
the principal host country for Thailand in producing required products for Thailand and receiving
necessary products from Thailand that are integrated into Lao exports.
• For Singapore, all of the 10 industries are in Brunei Darussalam, indicating a strong economic
relationship between these two countries, with Singapore being the main supplier for productsthat are integrated as inputs to exports from Brunei Darussalam. Indonesia is a main supplier toSingapore’s 12 industries, largely in the primary and resource-based sector. Malaysia is a supplierof petroleum, chemical and non-metallic mineral products in Indonesia and Brunei Darussalam.
Seven out of eight industries where Malaysia is a main supplier are in other industries of thesetwo countries.
• The United States is a large supplier, mainly for exports from Malaysia and the Philippines, but are
only for 10 industries out of 24 in Malaysia and 6 industries out of 22 in the Philippines, with one
each in Indonesia (finance intermediation) and Singapore (unspecified) (annex table 2).
• Unlike China and Japan, the Republic of Korea is not a large supplier for ASEAN exports to theextent that its presence affects the supplier market, except for one industry in the Philippines(metal and metal products industry) (annex table 2).

Table 4. Partner countries that may influence vulnerability of upstream part of GVCs,
by ASEAN industry, 2017
Partner country

Number of ASEAN industries (n = 222)
with HHI of more than 200

China

129

Japan

38

Republic of Korea

1

United States

18

ASEAN

71

Indonesia

12

Malaysia

8

Singapore

10

Thailand38

Viet Nam

3

Source: Annex table 2.
Note: According to U.S. Department of Justice, an increase of HHI by 200 points is the level by which market power is enhanced
in highly concentrated markets.

13

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

b. Buyer market concentration of GVCs
The downstream part of GVCs looks at the destination market. Along value chains, this market
comprises value added incorporated in other country’s exports (DVX). It is also an indication ofinternational competitiveness of products as they are integrated into products exported from othercountries. If there is no competitiveness, the product will not be used and integrated into export
products. However, as products are more used as inputs to other country’s exports or have a higher
DVX share in own exports, companies face the challenge of being reliable suppliers. It implies thatan inability to deliver goods and services required by other countries for their exports for any reason(pandemic, natural disasters etc.) harms the exportability of other countries. The higher the DVX
share is, the higher the procurement risk, as the importers tend to be vulnerable to disruptions ofprocurement chains. As the DVX share in gross exports is 30 per cent for both ASEAN and the world,
as in the case of FVA share range, eight percentage points are taken as intervals for the medium risk
range (26 per cent to 34 per cent) (table 5). Thus, the DVX share higher than this range is consideredhigh risk and that lower than this range is low risk. The degree to which exports are used byother countries for further export generation may appear less relevant for policymakers, as it
does not change the DVA contribution of trade. Nevertheless a company, as a responsible supplier,remains relevant.
The number of industries of ASEAN (222 in this paper) is distributed as follows: 38 industries havea high DVX share, 87 a medium DVX share and 97 a low DVX share (table 6). The majority of ASEAN
industries face medium or low risk as far as the size of the DVX market is concerned, as theseproducts are used moderately or at low levels as inputs to exports from destination markets.
Similar to the risks associated with supplier market concentration, there are risks at two levels
for buyer market concentration. The risk at the second level is regarding the extent to which the
DVX market is concentrated. When DVX is concentrated in fewer countries or firms, a disruptionof procurement chains causes a significant impact no matter where the cause of such disruption
happens. The higher the HHI is, the more risky it is. The criteria are the same as for supplier market
concentration; in other words, a low risk for less than 1,500, a medium risk for 1,500–2,500, and ahigh risk for more than 2,500 (table 1).
Out of 222 industries, only five (two with a high DVX share; one medium; and two low) (table 6)demonstrate high DVX market concentration: mining, quarrying and petroleum in Myanmar;
recycling in Cambodia; agriculture, hunting, forestry and fishing, and wood and wood products in
the Lao People’s Democratic Republic; and textiles, and clothing and leather in Brunei Darussalam.
Other industries show an HHI of less than 2,500 – or medium or high buyer market concentration.
The buyer market concentration is high in basic resources and resource-related industries suchas mining, quarrying and petroleum; petroleum, chemical and non-metallic mineral products; andmetal and metal products in natural resources-oriented economies. For agriculture, hunting, forestry
and fishing, the concentration is high for the Lao People’s Democratic Republic, but generally low inother countries. The primary sector other than agriculture products is destined for a few countries
when it comes to exporting. Because of long-term and stable contracts between sellers and buyersof the primary sector products, the number of companies involved is relatively limited.
The HHI for buyer market concentration is lower than that for supplier market concentration.
Regardless of the degree of forward integration (DVX share), the buyer market is not muchconcentrated. ASEAN products are widely purchased. This implies that ASEAN countries provide
required inputs in other countries’ exports widely. Therefore ASEAN faces less risk in supplying
products if a limited number of buyers were to stop buying all of a sudden, as they can shift theirselling chains to other buyers that did not cut their procurement lines.
14

0.01

Low (HHI < 1,500)

0.1High (HHI = >2,500)

0.05

0.05

Low (HHI < 1,500)

Medium (HHI = 1,500-2,500)

0.25

0.5

High (HHI = >2,500)

Medium (HHI = 1,500-2,500)

0.1

Low (HHI < 1,500)

1

Risk intensity

0.5

Risk colour

Risk to vulnerability(6 stages from 0.01 to 1, with higher
number being more risky)Medium (HHI = 1,500-2,500)

High (HHI = >2,500)

Degree of concentration(extent to which destinationof products exported andintegrated into other countries'
exports is concentrated)

Value chains in which exports are at low levels as inputs to other country's
exports and in which these inputs are widely destined.

Value chains in which exports are used at low levels as inputs to othercountry's exports and in which these inputs are destined to relatively many
countries.

Value chains in which exports are used at low levels as inputs to othercountry's exports and in which these inputs are destined to only a few
countries.

Value chains in which exports are used moderately as inputs to othercountry's exports and in which these inputs are widely destined.

Value chains in which exports are used moderately as inputs to othercountry's exports and in which these inputs are destined to relatively many
countries.

Value chains in which exports are used moderately as inputs to othercountry's exports and in which these inputs are destined to only a few
countries.

Value chains in which exports tend to be used as inputs to other country's
exports and in which these inputs are widely destined.

Value chains in which exports tend to be used as inputs to other country's
exports and in which these inputs are destined to relatively many countries.

Value chains in which exports tend to be used as inputs to other country's
exports and in which these inputs are destined to only a few countries.

Downstream value chain description

Source: AJC.
Note: Degradation of colour implies the degree of the risk intensity. The more strong the colour is, the greater the risk. There are six levels of risk, which combine the risk due to the use of products
in foreign countries as inputs to their exports and the risk due to limited number of procurement lines (number of buying countries). The risk is graded into high, medium and low and the weightis given 1, 0.5 and 0.1 respectively for both types of risks. The risk intensity for each situation of GVC vulnerability is the multiplication of these two types of risks.
DVX = value added incorporated in other countries’ exports. In 2017 the average for both the world and ASEAN was 30%. Like the 8% range for the medium risk for the upstream part of chains (FVA share),the same range is adopted for the downstream part of chains (DVX share).

Low (DVX < 26%)

Medium (DVX = 26–34%)

High (DVX = >34%)

Degree of forward
integration(extent to which products
are integrated into exports
from other countries)

Table 5. Methodology of risk calculation: Vulnerability of downstream part of GVCs to external shocks

II. RISK INTENSITY OF GLOBAL VALUE CHAINS OF ASEAN

15

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

Buyer markets of typical products used as inputs such as electrical parts and components, andautomobile parts and components are not concentrated. Therefore, the products of electricaland general machinery and automobile industries in many ASEAN countries are shipped to many
countries regardless of how much they are purchased. In other words, downstream value chainsare not as strong as upstream value chains as their exports tend to be arms’-length transactions.
By looking at individual buyer countries, it is clear that although China is a strong influencer inproviding inputs (upstream part), this country is not a dominant buyer of ASEAN products in its
value chains. Indeed, other ASEAN member states such as Singapore and Thailand, as well as
Germany and Japan, are more influential in determining the provision of ASEAN products throughtheir purchase behaviour.
• Unlike in the upstream part of GVCs or suppliers, China does not figure as the main buyer in manyindustries. In only 11 industries is China’s HHI more than 200 (table 7). They include agriculture,hunting, forestry and fishing industry in three countries (the Lao People’s Democratic Republic,
Malaysia and Myanmar), mining, quarrying and petroleum in two countries (Viet Nam and Thailand)and electrical and general machinery in two countries (Singapore and Malaysia) (annex table 3).
• Japanese buyers of ASEAN products are particularly concentrated in the primary sector andmanufacturing industries of Brunei Darussalam. Other industries are in the Philippines (mining,
quarrying and petroleum; motor vehicles and other transport equipment), Indonesia and Malaysia(mining, quarrying and petroleum), and Viet Nam (precision instruments).
• The Republic of Korea, unlike the case for the upstream part of GVCs, has a relatively large numberof industries in which the country is involved enough to influence the level of market concentration.
As with Japan, the majority of those industries are in Brunei Darussalam.
• ASEAN as a region has the largest number of industries in the destination market (97) where an
ASEAN country can influence the level of market concentration. As a hub of procurement of many
products from ASEAN, Singapore has the largest number of ASEAN industries whose buyer market
competition may be threatened. Singapore’s buyer behaviour may influence the vulnerability of thedownstream part of GVCs in 52 out of 222 industries.
• Thailand has the largest number of industries after Singapore. As many as 32 out of 34 industries
are in Cambodia, the Lao People’s Democratic Republic or Myanmar (annex table 3), all of whichare “Thailand plus one” countries. Exceptions are motor vehicles and other transport equipmentin the Philippines and mining, quarrying and petroleum in Brunei Darussalam. Thailand is a buyer
country for its value chains where products from “Thailand plus one” countries are integrated into
Thai exports.
• As an important exporting country in the European Union, Germany buys products from ASEAN
that are integrated into its export products from various industries and ASEAN countries, while theNetherlands is a main buyer for the Philippines and Thailand only.

16

Medium (DVX = 26–34%)

High (DVX = >34%)

Degree of forward
integration (extent towhich products areintegrated into exports
from other countries)

15

Medium (HHI = 1,500-2,500)

71

1High (HHI = >2,500)

Low (HHI < 1,500)

31

5Medium (HHI = 1,500-2,500)

Low (HHI < 1,500)

2

Number of industries
corresponding to eachrisk range (out of 222)

High (HHI = >2,500)

Degree of concentration(extent to which
destination of products
exported and integrated
into other country's
exports is concentrated)

17…/

Malaysia: Electrical and general machinery; Singapore: Financial intermediation and business activities; Malaysia: Financial intermediation
and business activities; Malaysia: Trade; Thailand: Trade; Indonesia: Trade; Thailand: Petroleum, chemical and non-metallic mineralproducts; Singapore: Electrical and general machinery; Indonesia: Agriculture, hunting, forestry and fishing; Indonesia: Transport, storage
and communications; Indonesia: Financial intermediation and business activities; Singapore: Trade; Singapore: Transport, storage andcommunications; Thailand: Transport, storage and communications; Indonesia: Other services; Indonesia: Wood and wood products; Thailand:Electrical and general machinery; Singapore: Petroleum, chemical and non-metallic mineral products; Thailand: Financial intermediation
and business activities; Philippines: Financial intermediation and business activities; Viet Nam: Mining, quarrying and petroleum; Thailand:Electricity, gas and water; Malaysia: Electricity, gas and water; Thailand: Community, social and personal service activities; Indonesia: Motorvehicles and other transport equipment; Thailand: Mining, quarrying and petroleum; Viet Nam: Trade; Singapore: Metal and metal products;
Philippines: Food, beverages and tobacco; Malaysia: Construction; Indonesia: Electricity, gas and water; Singapore: Publishing, printing andreproduction of recorded media; Viet Nam: Petroleum, chemical and non-metallic mineral products; Philippines: Metal and metal products;
Singapore: Electricity, gas and water; Philippines: Wood and wood products; Myanmar: Agriculture, hunting, forestry and fishing; Malaysia:
Precision instruments; Viet Nam: Electricity, gas and water; Indonesia: Construction; Viet Nam: Electrical and general machinery; Viet Nam:
Wood and wood products; Viet Nam: Metal and metal products; Philippines: Construction; Cambodia: Agriculture, hunting, forestry andfishing; Viet Nam: Motor vehicles and other transport equipment; Myanmar: Transport, storage and communications; Thailand: Unspecified;
Brunei Darussalam: Electrical and general machinery; Myanmar: Petroleum, chemical and non-metallic mineral products; Myanmar: Woodand wood products; Indonesia: Public administration and defence; Viet Nam: Publishing, printing and reproduction of recorded media; Brunei
Darussalam: Wood and wood products; Lao PDR: Transport, storage and communications; Lao PDR: Community, social and personal service
activities; Myanmar: Education, health and other services; Singapore: Wood and wood products; Myanmar: Hotels and restaurants; Lao PDR:
Mining, quarrying and petroleum; Myanmar: Other manufacturing; Lao PDR: Electrical and general machinery; Lao PDR: Food, beverages andtobacco; Lao PDR: Unspecified; Lao PDR: Public administration and defence; Lao PDR: Other manufacturing; Myanmar: Other services; Lao
PDR: Motor vehicles and other transport equipment; Brunei Darussalam: Recycling; Lao PDR: Recycling; Singapore: Unspecified

Malaysia: Transport, storage and communications; Brunei Darussalam: Financial intermediation and business activities; Indonesia: Publishing,printing and reproduction of recorded media; Brunei Darussalam: Mining, quarrying and petroleum; Philippines: Motor vehicles and othertransport equipment; Indonesia: Precision instruments; Myanmar: Financial intermediation and business activities; Malaysia: Publishing,printing and reproduction of recorded media; Brunei Darussalam: Electricity, gas and water; Brunei Darussalam: Transport, storage andcommunications; Brunei Darussalam: Petroleum, chemical and non-metallic mineral products; Brunei Darussalam: Construction; Brunei
Darussalam: Metal and metal products; Brunei Darussalam: Motor vehicles and other transport equipment; Brunei Darussalam: Other services

Lao PDR: Agriculture, hunting, forestry and fishingIndonesia: Mining, quarrying and petroleum; Philippines: Electrical and general machinery; Malaysia: Mining, quarrying and petroleum;
Malaysia: Petroleum, chemical and non-metallic mineral products; Philippines: Trade; Philippines: Other services; Philippines: Transport,
storage and communications; Malaysia: Metal and metal products; Philippines: Petroleum, chemical and non-metallic mineral products;
Philippines: Electricity, gas and water; Philippines: Education, health and other services; Indonesia: Education, health and other services;Indonesia: Unspecified; Myanmar: Trade; Viet Nam: Construction; Philippines: Publishing, printing and reproduction of recorded media;
Myanmar: Community, social and personal service activities; Thailand: Public administration and defence; Philippines: Unspecified;
Malaysia: Recycling; Myanmar: Electrical and general machinery; Myanmar: Electricity, gas and water; Myanmar: Metal and metal products;
Brunei Darussalam: Public administration and defence; Viet Nam: Other services; Myanmar: Motor vehicles and other transport equipment;
Myanmar: Public administration and defence; Cambodia: Unspecified; Myanmar: Recycling; Malaysia: Unspecified; Myanmar: Unspecified

Indonesia: Petroleum, chemical and non-metallic mineral products; Indonesia: Electrical and general machinery; Indonesia: Metal and metal
products; Philippines: Mining, quarrying and petroleum; Myanmar: Construction

Myanmar: Mining, quarrying and petroleum; Cambodia: Recycling

Name

Country: Industry, by value of DVXa

Table 6. 222 industries in ASEAN by the risk intensity of the downstream part of GVCs to external shocks

II. RISK INTENSITY OF GLOBAL VALUE CHAINS OF ASEAN

18
90

5

Medium (HHI = 1,500-2,500)

Low (HHI < 1,500)

2

Number of industries
corresponding to eachrisk range (out of 222)

High (HHI = >2,500)

Degree of concentration(extent to which
destination of products
exported and integrated
into other country's
exports is concentrated)

Thailand: Agriculture, hunting, forestry and fishing; Indonesia: Textiles, clothing and leather; Indonesia: Food, beverages and tobacco;
Malaysia: Agriculture, hunting, forestry and fishing; Malaysia: Wood and wood products; Thailand: Textiles, clothing and leather; Viet Nam:
Agriculture, hunting, forestry and fishing; Thailand: Food, beverages and tobacco; Thailand: Motor vehicles and other transport equipment;
Philippines: Agriculture, hunting, forestry and fishing; Malaysia: Food, beverages and tobacco; Thailand: Hotels and restaurants; Indonesia:
Hotels and restaurants; Philippines: Precision instruments; Viet Nam: Financial intermediation and business activities; Philippines: Hotels
and restaurants; Viet Nam: Food, beverages and tobacco; Singapore: Community, social and personal service activities; Malaysia: Hotels
and restaurants; Thailand: Wood and wood products; Singapore: Precision instruments; Malaysia: Textiles, clothing and leather; Viet Nam:
Transport, storage and communications; Malaysia: Community, social and personal service activities; Singapore: Hotels and restaurants;
Thailand: Metal and metal products; Viet Nam: Textiles, clothing and leather; Thailand: Precision instruments; Philippines: Textiles, clothing
and leather; Singapore: Motor vehicles and other transport equipment; Malaysia: Other manufacturing; Malaysia: Education, health andother services; Viet Nam: Hotels and restaurants; Indonesia: Other manufacturing; Malaysia: Motor vehicles and other transport equipment;
Thailand: Other manufacturing; Singapore: Education, health and other services; Singapore: Construction; Thailand: Publishing, printing andreproduction of recorded media; Philippines: Other manufacturing; Viet Nam: Other manufacturing; Viet Nam: Community, social and personal
service activities; Brunei Darussalam: Trade; Singapore: Agriculture, hunting, forestry and fishing; Singapore: Food, beverages and tobacco;
Malaysia: Public administration and defence; Brunei Darussalam: Community, social and personal service activities; Cambodia: Financial
intermediation and business activities; Singapore: Textiles, clothing and leather; Thailand: Construction; Lao PDR: Trade; Viet Nam: Education,
health and other services; Lao PDR: Financial intermediation and business activities; Cambodia: Transport, storage and communications;Cambodia: Trade; Brunei Darussalam: Education, health and other services; Singapore: Other manufacturing; Cambodia: Community, socialand personal service activities; Myanmar: Food, beverages and tobacco; Cambodia: Textiles, clothing and leather; Cambodia: Petroleum,chemical and non-metallic mineral products; Myanmar: Textiles, clothing and leather; Viet Nam: Precision instruments; Cambodia: Wood andwood products; Cambodia: Education, health and other services; Brunei Darussalam: Other manufacturing; Cambodia: Hotels and restaurants;
Brunei Darussalam: Agriculture, hunting, forestry and fishing; Lao PDR: Hotels and restaurants; Cambodia: Construction; Lao PDR: Textiles,
clothing and leather; Cambodia: Electrical and general machinery; Brunei Darussalam: Hotels and restaurants; Cambodia: Metal and metal
products; Lao PDR: Construction; Lao PDR: Education, health and other services; Brunei Darussalam: Food, beverages and tobacco; Lao
PDR: Metal and metal products; Cambodia: Food, beverages and tobacco; Viet Nam: Public administration and defence; Cambodia: Electricity,
gas and water; Cambodia: Public administration and defence; Cambodia: Mining, quarrying and petroleum; Cambodia: Other manufacturing;Cambodia: Motor vehicles and other transport equipment; Cambodia: Other services; Lao PDR: Other services; Brunei Darussalam:Unspecified; Malaysia: Other services; Viet Nam: Unspecified

Singapore: Other services; Thailand: Education, health and other services; Lao PDR: Electricity, gas and water; Lao PDR: Petroleum, chemical
and non-metallic mineral products; Philippines: Public administration and defence

Lao PDR: Wood and wood products; Brunei Darussalam: Textiles, clothing and leather

Name

Country: Industry, by value of DVXa

Source: AJC.
Note: There are six levels of risk, which combine the risk due to the use of products in foreign countries as inputs to their exports and the risk due to limited number of procurement lines (number of buying
countries). The risk is graded into high, medium and low and the weight is given 1, 0.5 and 0.1 respectively for both types of risks. The risk intensity for each situation of GVC vulnerability is themultiplication of these two types of risks.
DVX = value added incorporated in other countries’ exports. The average for both the world and ASEAN is 30% (2017). Like the 8% range for the medium risk for the upstream part of chains (FVA share),the same range is adopted for the dwonstream part of chains (DVX share).
a
Ranked in the order of the value of DVX (from large to small).

Low (DVX < 26%)

Degree of forward
integration (extent towhich products areintegrated into exports
from other countries)

Table 6. 222 industries in ASEAN by the risk intensity of the downstream part of GVCs to external shocks (Concluded)

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

II. RISK INTENSITY OF GLOBAL VALUE CHAINS OF ASEAN

Table 7. Partner countries that may influence vulnerability of downstream part of GVCs,
by ASEAN industry, 2017
Partner country

Number of ASEAN industries (n = 222)
with HHI of more than 200

Australia

4

China

11

Japan

24

Republic of Korea

17

Germany

26

Netherlands

7

ASEAN

98

Indonesia

2

Malaysia

9

Singapore

52

Thailand34

Viet Nam

1

Source: Annex table 3.
Note: According to the U.S. Department of Justice, an increase of the HHI by 200 points is the level at which market poweris enhanced in highly concentrated markets.

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Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

III. STRATEGIES TO BUILD RESILIENT GVCs
IN ASEAN
The previous section identifies which industries in each ASEAN member state are vulnerable to andwith which trade partners they are vulnerable to external shocks. It is important for each country
and each company engaged in international production networks to examine its vulnerability in therespective industry with possible reference to the AJC’s risk calculation (annex table 4). This is,
first and foremost, an important and quick guide to all member states to investigate vulnerable
industries. With this general homework in mind, this section provides a set of strategies to build
resilient GVCs for ASEAN.
GVC participation and economic growth are interrelated. Therefore, a policy recommendation madein the past by many organizations including ASEAN itself and the AJC (AJC 2019, p. 26-27) is topromote and create an environment conducive to GVC operations. This environment, however, also
increases the risk of vulnerability to external shocks, including the current pandemic, because of
greater foreign reliance on supply of and demand for ASEAN products and reduced numbers of
foreign suppliers and buyers, even if that reliance is meant to enhance the competitiveness andefficiency of international production networks and thus ASEAN products.
GVCs result from globalization. Companies, in particular transnational corporations (TNCs), haveevery reason to expand their production facilities abroad and integrate them into international
production networks. However, if the speed of globalization is measured by trade and foreign direct
investment (FDI), it has already slowed down. Slow trade characterizes today’s global trade trend
and global FDI flows have not reached the peak achieved in 2015. When it comes to ASEAN, bothtrade and FDI flows have been expanding, but their growth rather reflects the growing economy
of ASEAN. Indeed, if GVC participation is considered to measure globalization, it has remained at
almost the same level or even declined since 2015 (AJC 2019, p. 16). In terms of FDI flows as apercentage of GDP, they have remained at 5 per cent or less since 2015, though this level is 1.5 times
higher than in the early 2000s.
Therefore, even if the pace of globalization slows down, it is already part of the overall trend in
the world. Whether the pandemic may accelerate this or not depends on how responsive and inwhat way governments and the private sector mitigate and adapt to its impact. Several strategies
are being considered to make GVCs more resilient. Whether ASEAN is moving towards moreglobalization or not, the region has already reached the stage at which GVCs play an important rolefor sustainable development. Thus, more resilient GVCs are required, particularly so if the efficiency
and competitiveness of certain industries in many countries have been threatened by high suppliermarket concentration, high buyer market concentration, or both.
This section analyzes and provides some consideration for better strategies in the areas of: (1)policy measures and actions related to production and supply chains (GVCs); (2) improvement inrisk management by the private sector; (3) strong push to digital transformation by both public andprivate sectors; (4) promotion of new industries that are resistant to the crisis; and (5) reconsiderationof company strategies for international production.

20

III. STRATEGIES TO BUILD RESILIENT GVCs IN ASEAN

a. Pandemic-related policy measures and actions implemented by ASEAN
member states
To ease the impact of the pandemic, all ASEAN member states have issued policy measures and fiscal
and non-fiscal incentives to assist industries and companies operating in these countries. Understanding such policy measures and incentives is important and will be useful information or insight for
all firms, including the Japanese business communities, so as to mitigate the risk and adverse impactof the pandemic, and decide on the best way forward to strategically overcome this issue.
Many of these policy measures were provided soon after the outbreak of the pandemic. ASEAN andinternational communities such as the G7 and the G20 made political commitments. Individual ASEAN
countries provided measures and actions to reduce risk in operations, facilitate operations and provide
access to funds. The main objective is to mitigate the impacts and save the companies. Their effects do
not necessarily last long. Special measures and actions were also taken to expand medical facilities
and medical research and development, and to increase health care and medical connectivity.
In the context of resilient GVCs, the question is whether ASEAN and its partner countries laid down
concrete measures and actions to help companies operating in ASEAN to strengthen or rebuild GVCs
that are resistant to external shocks. Indeed, many ASEAN countries have issued policy measuresrelating to, or affecting directly and indirectly, the maintenance of GVCs (box 3), mainly as part ofoverall economic measures. These measures include opening up another venue to maintain theflow of goods and services (Brunei Darussalam, Cambodia), easing border measures (introducing
electronic issuance of certificate of origin and custom clearance in Cambodia and Indonesia), fiscal
incentives for port operators and shipping companies (Malaysia, the Philippines), relaxation of
investment in health-related facilities (Myanmar), and incentives for production of raw materials for
medical and health-related products in Thailand. All of them help support value chains.

Box 3. Select policy measures/actions that affect supply and production chains in ASEAN
in response to the pandemic
Brunei Darussalam: Allowance by the State of Sarawak (in Malaysia) for Bruneian and foreigncompanies in Brunei Darussalam to enter and exit the country through land checkpoints for the
purpose of trade or sending of goods. Brunei Darussalam has approved similar arrangements forcompanies from Sarawak to send their goods over Brunei roads (from 1 April 2020 for a period of
six months).
Cambodia: Acceptance of the certificate of origin and electronic customs clearance of an entire
import declaration on condition that the original is submitted within 45 days.
Poipet, land border with neighbouring Thailand, and Kokkon, Viet Nam’s main border, Bavet, areallowed to import and export cargo.
Indonesia: Deductibility of 30 per cent of production costs for companies that produce specifichygiene and medical equipment or that of all the amounts donated for individuals (Indonesian
Government No. 29).
Relaxation of the procedure of certificate of origin: can be submitted electronically (Indonesia
Customs).
Lao People’s Democratic Republic: Extension of time for payment of road tax from 31 March
to 30 June (Ministry of Finance No. 909).
…/

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Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

Box 3. Select policy measures/actions that affect supply and production chains in ASEAN
in response to the pandemic (Concluded)
Malaysia: No import duty and sales tax exemption available for port operators who do not enjoy
the tax incentive under Approved Service Projects. Port operators will be given import duty andsales tax exemptions on equipment and machinery whether imported or purchased locally, subject
to two conditions:(a) The equipment and machinery are used directly in the port operations; and(b) Parts and consumables including those for maintenance purposes are not included.
This is proposed to be effective for applications submitted to the Ministry of Finance from 1 April
2020 to 31 March 2023.
International shipping companies that established and operate businesses in Malaysia will begiven a double deduction on pre-commencement expenditures for setting up regional offices in
Malaysia. The incentive is for applications received by the Malaysian Investment Development
Authority (MIDA) no later than 31 December 2021.
A double deduction will be given on pre-commencement expenses incurred by international
shipping companies for setting up regional offices in Malaysia. This proposal is for applications
received by MIDA no later than 31 December 2021.
Myanmar: Exemption from lease fees for companies producing at state-run factories (for three to
six months).
The Myanmar Investment Commission announced on 11 April 2020 that it would accelerate
approvals for investments in labour-intensive and infrastructure projects. It will also accelerate
approvals for health care and medical equipment businesses, including those involved in
manufacturing supplies such as face masks, and prioritize pharmaceutical enterprises and healthcare service providers. Already on 9 April 2020, a 50 per cent reduction of investment application
fees was announced.
Philippines: Free-of-charge storage period (“free time”) for international shipping companies will
be extended (announcement on 8 July).
Thailand: Adjustments to the benefits granted for the production of raw materials used in the
manufacture of medical products, to encourage a more complete value chain in Thailand. For
instance, pharmaceutical-grade alcohol production can now be entitled to an eight-year corporate
income tax exemption. Additional benefits will also be granted for the production of non-woven
fabric used as raw material for the production of medical masks or medical devices, by expanding
the corporate income tax exemption to five years from three years.
A measure supports the adjustment of production lines to manufacture medical devices or partsby exempting import duties on machinery on the condition that the equipment is imported within2020 and the application for production line adjustment is filed by September 2020.
Source: ASEAN-Japan Centre, based on various accounts.
Brunei Darussalam: Measures Undertaken by Government in Addressing the Impact of Covid-19 in Brunei Darussalam,
27 April 2020.
Cambodia: Information form JETRO (Phnom Penh Office), July 2020.
Indonesia: Cabinet Secretariat of the Republic of Indonesia, Gov’t Continues Support For MSMEs, Households Amid
COVID-19 Pandemic, 11 May 2020 (https://setkab.go.id/en/govt-continues-support-for-msmes-households-amid-covid19-pandemic/).
Malaysia: Economic Stimulus Package 2020: Bolstering Confidence, Stimulating Growth, Protecting Jobs, Prime Ministerof Malaysia, 27 February 2020
Myanmar: UNCTAD, Investment Policy Monitor, Investment Policy Responses to the Covid-19 Pandemic, Special Issue
No. 4, May 2020,
Philippines: DTI-PEZA, “PEZA prepares post-COVID business continuity plans to assist affected registered enterprises
in PH”, 23 April 2020.
Thailand: The Board of Investment of Thailand (BOI), “Thailand BOI Approves Steps to Ease COVID-19 Impact, Accelerate
Investment in Medical Sector”, 19 April 2020; Joint Foreign Chambers of Commerce, “Measures to Look After andto Alleviate the Effects of the Corona Virus (Covid-19) on the Thai Economy, Both Directly and Indirectly”, 25 March 2020.

22

III. STRATEGIES TO BUILD RESILIENT GVCs IN ASEAN

These measures are for short-term relief for existing supply chains. While reducing excessive
concentration in the upstream and downstream markets of GVCs, they do not necessarily lead todiversification of stable and reliable suppliers and buyers in GVCs.
Both the Japanese and ASEAN governments have introduced countermeasures to deal with andmitigate the impact of the pandemic. Given the large-scale operations of Japanese-affiliatedcompanies in ASEAN, they are affected as much as ASEAN companies. In this respect, policy
measures and incentives specially implemented by the governments should be well informed
and utilized. Because of confusion and lack of information, such measures from ASEAN are notnecessarily shared with Japanese-affiliated companies. Although many organizations, including
JETRO and the AJC, are providing information,5 it would be ideal if the ASEAN Secretariat would
compile important policy measures introduced by all ASEAN member states and categorize them inaccordance with specific policy objectives.

b. Improvement in risk management by the private sector
There is increasing recognition of the importance of and increasing demand for risk management.
The current crisis has put many industries, in particular tourism-related industries (including thetransport and entertainment industries) at risk and threatens the survival of these companies.
Companies have to make the utmost efforts to minimize, monitor and control the risks and impact
associated with internal and external shocks and at the same time maximize the realization ofopportunities, if any. Companies have always experienced some sort of business risk. Therefore,
there is a need to clarify what elements are required and embedded in daily business to minimizerisks. Tourism in particular is vulnerable to natural disaster and health-related risks. It is important
to look at various cases of risks such as pandemics, natural disasters, other types of crisis (terrorist,
crimes) and solutions to minimize the risks.
Many ASEAN countries need capacity-building in this area. For example, a series of workshops
targeting ASEAN national tourism organizations and destination management organizations canbe organized in the ASEAN countries where the tourism industry has been largely affected by the
pandemic. This kind of workshop teaches not only risk management but also the ASEAN Tourism
Crisis Communications Manual (2016) to support the crisis management strategy and staff at theorganizational and national levels in the use of effective communications tools to be alert for, planfor, respond to, recover and rebound from crises and emergencies in states and their neighbouring
countries (ASEAN 2016, p. vii). This manual contains 16 best practices from the Pacific Asia Tourism
Association and the United Nations World Tourism Organization.

c. Strong push for digital transformation by both public and private sectors
What is emerging among ASEAN member states as well as their partner countries as a result of the
impact of the pandemic is a move towards more digitalization. There is already a digital divide between
countries, including those within ASEAN, and the pandemic has proven that the industries using, orbased on, digital technology defy the crisis and even continue to grow. Although all member states

5

The list of policy measures for which Japanese-affiliated companies operating in ASEAN are eligible will becompiled and published online. It will be available for public access and links to the respective agencies in each
ASEAN Member States will also be provided. For those compiled by AJC, see https://www.asean.or.jp/ja/investinfo/20200330/.

23

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

recognize the importance of such technology and have already undertaken a number of initiatives atboth the regional and national levels, there is a need for a strong push towards digitalization. ASEAN
countries and Japan, many of which are moving slowly in digital transformation, can move together
and establish digital networks, or value chains laden with digital technologies. Telemedicine is atypical example.
To take advantage of opportunities to restructure the industries provided by the current crisis,some ASEAN countries are ready to push their economies strongly in such a direction by providing
online platforms, facilitating e-commerce and e-payment, accelerating the capital allowance for IT
equipment, financing, and so on (box 4). This push includes new IT-based industries, as mentioned
in the next subsection.

Box 4. Select policy measures related to support for technology advances anddevelopment in ASEAN in response to the pandemic
Brunei Darussalam: Providing co-matching grants for e-commerce and logistic services.
E-commerce platform ‘e-Kadai’: aims to provide an alternative to businesses for marketing theirproducts online.
Community for Brunei provides a platform to bring Bruneian communities together to assist
MSMEs in selling their products in the virtual market and for the general public to purchase goods
virtually and make digital payments using debit or credit cards.
Malaysia: To incentivize businesses to undertake investments in 2020, qualifying capital expenditures
on machinery and equipment including ICT equipment can claim an accelerated capital allowancewithin a two-year period for expenses incurred from 1 March 2020 to 31 December 2020.
Bank Negara Malaysia is to establish a RM300 million SME Automation and Digitalization Facility
for SMEs to upgrade, modernize and rejuvenate their productive assets. Financing can be used forpurchasing equipment, machinery, ICT (hardware, software, IT solutions and services) and otherintangible assets to enhance productivity and efficiency.
Myanmar: e-Commerce and social commerce (e-commerce which utilizes SNS) are to be used topromote the retail and relevant logistics industries.
Philippines: The Central Bank is assisting banks to digitalize (e.g. online banking, e-money
platform building) to mitigate the risk of COVID-19.
Source: ASEAN-Japan Centre, based on various accounts, including:Brunei Darussalam: Measures Undertaken by Government in Addressing the Impact of Covid-19 in Brunei Darussalam,
27 April 2020.
Malaysia: Economic Stimulus Package 2020: Bolstering Confidence, Stimulating Growth, Protecting Jobs, Prime Ministerof Malaysia, 27 February 2020.
Myanmar: UNCTAD, Investment Policy Monitor, Special Issue No. 4, May 2020, “Investment Policy Responses to
the Covid-19 Pandemic”.
Philippines: DTI-PEZA, “PEZA prepares post-COVID business continuity plans to assist affected registered enterprises
in PH”, 23 April 2020.

24

III. STRATEGIES TO BUILD RESILIENT GVCs IN ASEAN

d. Promoting new and crisis-resistant industries
The gloomy evolution of markets, including a long economic recession worldwide and a continued
appreciation of risk (other public health concerns, natural disasters, climate change), reduce firms’
propensity to trade and invest. Many companies have already announced or may announce plans
to curtail production, lay off workers and cut capital expenditure, all of which have implications for
trade, investment and tourism. Thus, there is a need to shift attention to a different set of industries– so-called new industries. Many of these industries are required for successful establishment of
the Fourth Industrial Revolution. These industries should also be risk-resistant.
New industries, particularly technology-intensive and IT-related ones, are emerging in the world,
including in ASEAN. In many start-ups, both ASEAN and its partner country firms, in particular
Japanese companies, may have common interests. Japanese companies may form joint ventures ortake an equity investment. Among these new industries:• In life sciences, which is related to health services, equipment and services for medical diagnosis(notably in vitro), clinical tests, biotechnologies, biocosmetics, and other bioproduction. This
industry assumes more importance now because of the pandemic as it is directly related to life.
This high-tech oriented industry is not advanced in ASEAN despite a call for telemedicine during
the pandemic.
• In agro-food industries, high value added products (e.g. pastries, pre-cooked food, health food)• In transport equipment, electric cars, hybrid motors, automotive logistics and innovative materials• In business services: customer-service centres, providers of outsourced logistics and businessservices, regional headquarters, R&D centres, technical engineering and fintech services• In personal services: care of senior citizens, health care (e.g. medical care at home and remotediagnosis)• In ICT: micro- and nano-electronics, software for video games, interactive and virtual image
technologies, Internet technologies and embedded technologies for wireless telecommunication
systems• In energy, chemistry, and environmental conservation: nano materials, improvements in existingmaterials, photovoltaic energy, wind power, water processing, recycling of wastes and non-fooduse of agricultural products (e.g. bio-fuels, bio-polymers, bio-solvents, bio-materials)• In other industries: technical textiles (e.g. textiles with particular qualities in terms of robustness,
suppleness or adaptability), as well as robotics
Among these industries, health services is not new but faces a formidable challenge in all ASEAN
member states because of their limited capacity and ability. Despite recent favourable factors
such as poverty reduction, health-related and social services in most of these countries are still
underdeveloped and inadequate. Therefore, the industry is facing challenges to meet current andfuture demand, from both within and outside the region.
The current crisis aggravates this situation. The AJC prepared a report on trade in health services
and organized an international forum on health services in 2019 with the objectives of providing
some practical advice for government policymakers on how to strike a balance between promoting
equitable and affordable access to a set of basic health and social services, and modernizing thehealth and social services sector with recent technologies through trade and investment liberalization(box 5). Therefore, it is important to mitigate and adapt to the crisis by strengthening health services
in ASEAN.

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Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

Box 5. Strengthening health services to mitigate and adapt to the risks from thepandemic
Implementation of policy recommendations agreed and discussed with ASEAN member states
through capacity-building and policy dialogue activities remains to be done. The AJC has
recommended nine policy by mode (Services supply modes 1-4) for ASEAN member states:• Carry out reforms with implications of liberalization and regional cooperation• Promote public-private partnerships (PPPs) and better investment environments for domestic
and foreign investors• Increase domestic capacity in medical technology• Remove the remaining entry and operational restrictions on international branch of healthrelated and social services business after putting in place quality assurance frameworks• Establish a clear and transparent policy and regulatory framework• Promote training programmes and general education to increase necessary skills of domestic
labour in health-related and social services• Implement the full mutual recognition agreements• Conduct quality control and ensure consistent accreditation and certification• Promote equal access to quality health-related and social services through universal healthcoverage

The AJC in consultation with ASEAN member states, in particular economic and healthofficials, the ASEAN Secretariat, the ASEAN Coordinating Committee on Services and its
sub-working group on health-related and social services may embark upon prioritized areasof recommendations (such as promotion of public-private partnerships, mutual recognition
agreements), and report to ASEAN economic and health ministers.
Source: AJC, Promoting Services Trade in ASEAN (Second Phase: Social Services): Trade in Health-Related and Social
Services, February 2020.

These industries could be driving forces for new dynamic growth of ASEAN companies that will
presumably trigger, sooner or later, new uptake and provide important “adaptive” services.
Even in the midst of the present crisis, there are many new and growing industries that some ASEAN
countries have already embarked upon. Many of them play a role in adapting to the new configurationof the world economy. International organizations such as the AJC support these industries, which
are resistant to external crises and have very promising prospects.

e. Reconsidering company strategies for international production: offshoringor reshoring
When companies reconfigure their own GVCs in order to strengthen their production and supply
chains, there is an option to offshore their operations or to divest,6 relocate, reshore and nearshore7
their operations abroad. Although offshoring expands international production networks by

6

7

26

Divestment is the process of reverse investment, involving capital withdrawals and reduction in the stock ofassets that TNCs hold abroad. Divestment can involve either full or partial withdrawals of foreign assets. National
statistics do not report the magnitude of divestment explicitly because they record only net flows or stocks in thebalance of payments.
Nearshoring is the process of positioning all or part of the value added activities in a country that is geographically,
economically and culturally close to the country of origin of the TNC (UNCTAD 2013).

III. STRATEGIES TO BUILD RESILIENT GVCs IN ASEAN

transferring value added activities abroad, by reshoring a TNC curtails and relocates all or part ofits value added activities conducted abroad back to its home country (UNCTAD 2013). These twoprocesses stand as the opposite of each other, but they go hand in hand as TNCs adopt dynamic
strategies towards the global configuration of their activities. Policymakers should understand why
they take place and what they mean for international production.
FDI activity is likely to decline in significant magnitudes in 2020 – by as much as 40 per cent in theworld and 30–45 per cent in Asia (UNCTAD 2020). Japanese FDI outflows declined by 30 per cent in
the first six months of 2020.8 The question is in what specific way the downturn is taking place; thatis, is it mainly through the lack of new investment or the divestment9 of existing ones, or both? For
the latter, whether it is complete or partial closure of foreign affiliates, and in the case of complete
closure, whether divested foreign affiliates were relocated, including to home countries (reshoring),
or not reopened, remains to be answered. All of them affect the configuration of international
production networks.
If international supply or production chains do not meet the needs of companies or do not workin an efficient manner when needed, divestment may occur. This is a result of a strategic decision
concerning the geographic scope of the TNC’s value added activities (i.e. reconfiguration of international
production networks of TNCs); a change of a foreign servicing mode (e.g. from local production toexports or licensing); or a complete withdrawal from a host country. In the first case, divestment takes
the form of relocation of production to other locations or a return to the home country (reshoring). In
particular, reshoring, as opposed to offshoring and nearshoring, seems to be on the agenda now, as
firms increasingly find cases where offshoring is not necessarily cost saving and even threatens the
security of human beings. These GVCs do not function as they are supposed to.
Therefore some countries, including Japan, encourage firms to strengthen and diversify their value
chains abroad by providing financial assistance. Japan’s complementary budget for FY2020 after the
pandemic includes a programme to support the diversification of Japanese supply chains overseas
in ASEAN through assistance in multiplication of supply chains and provision of equipment by ASEAN
economic ministers and the METI Economic and Industrial Cooperation Committee (AMEICC).10
Furthermore, the Japanese complementary budget for FY2020 for METI includes the promotion ofdomestic investment to strengthen production facilities in Japan, to combat risks associated with
supply chains in the areas of products whose production is highly concentrated abroad and thosethat are essential for the healthy life of the Japanese.11 Although this does not specifically target
firms operating in ASEAN, it may encourage reshoring of Japanese affiliates. As of September 2020,
first 57 firms were already selected and another 1,670 firms were applying for the remaining fundsof this initiative to be selected in October 2020.12
In fact, closing of foreign affiliates is already rampant. For example, in the case of Japanese affiliates
operating in ASEAN, the number of affiliates that closed down or withdrew is almost the same as
those that are newly established, and even larger in certain years (table 8). Among those that wereclosed down or withdrawn, if past data are any indication, in 2011, about half of divested affiliates
relocated either back to Japan or to other countries, and one half of these relocated firms are
involved in reshoring (UNCTAD 2013, p. 28).

8
9

10
11
12

Nihon Keizai Shimbun, 14 August 2020.
Divestment is reverse investment involving capital withdrawals and reduction in the stock of assets held abroad.
However, FDI statistics on a balance-of-payments basis, which is commonly used, do not report explicitly themagnitude of divestment as they are reported in net terms.
It has a budget of 23.5 billion, or $0.2 billion.
It is a budget of 220 billion, or $2.1 billion.
Nihon Keizai Shimbun, 9 September 2020.

27

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

Japan is ASEAN’s fourth largest trading partner and ASEAN’s second largest source of FDI. As
the current situation is affecting the Japanese-affiliated companies operating in ASEAN or doing
business with ASEAN, it is imperative for ASEAN to provide an environment conducive to theoperations of Japanese companies in ASEAN through, for example, assisting them to maintain andrebuild more resilient GVCs.
Strategic considerations (i.e. reshoring and reconfiguration of production and management
resources) were behind a large number of divestment moves undertaken recently. One third to one
half of Japanese affiliates were closed or withdrawn for this reason (table 8). As a part of deliberate
corporate strategy, reorganization, restructuring and downsizing in order to increase the efficiency
of a corporate system often necessitate divestment. During and after the pandemic, companies
may want to carve out non-essential businesses, and pursue the selection and concentration ofbusinesses. Thus, a decision to focus on core business and divest from non-core activities often
leads to the closure of operations. When affiliates lose their synergies with the rest of the TNCs, they
are divested. Divestment also takes place when TNCs merge. There would be an uptick in mergers
and acquisitions. Some operations are eliminated to avoid duplications, with the aim of cost savingthat often drove a merger in the first place.
It should be noted that divestment may also be driven by this individual affiliate factor. For example,
a survey of 127 Japanese foreign affiliates in ASEAN that had been divested in 2017 shows that onefifth of such affiliates were closed for performance reasons (Japan, METI, 2019).
Even if divestment takes place after the pandemic, if it was fueled in large part by internal restructuringof TNCs, it was in many cases a response of TNCs to the general economic downturn and the needto cut costs in the face of growing competition and/or slowing demand. Added to these reasons is
the need of securing lifelines in the home economy through reshoring. In this environment, retaining
existing FDI is no less important. What role, if any, can governments take to arrest divestment? For
the purpose of this discussion, there is a need to reiterate the distinction made between complete
closure and relocation (including reshoring), even though for individual countries, the consequencesof divestment and relocation are identical. They do, however, call for different policy responses andthey differ in the ability of policymakers to affect them.
When a closure in one country leads to a shift of investment to another, more locationally advantageouscountry for the investment in question, the major policy issue is maintaining the relative attractionof a country for FDI. This is particularly important for investment that does not have high barriers
to exit (i.e., does not involve high sunk costs). The initial investment is undertaken on the basisof an evaluation of the location advantages of the country concerned, which at that point in time
was considered as more attractive for FDI than other potential locations. To prevent the relocationof investment, governments must continuously improve location conditions, so that they remain
attractive relative to other potential locations. The pandemic poses a serious challenge to ASEAN as
a competitive location to host GVCs.

28

72
3
6
20
6
107
8
11
33
16
44

1
3
22
10
126
19
25
31
15
61

2010

62

2009

57

12
7
25
21

14
15
36
41
108

172

2011

49

8
17
23
6

11
15
77
57
90

233

2012

51

7
14
34
13

8
15
66
34
106

207

2013

Source: Japan Ministry of Economy, Trade and Industry, Wagakuni Kigyo no Kaigai Jigyo Katsudo Kihon Chosa, various issues.

Establishments
Of which:
Philippines
Malaysia
ThailandIndonesia
Closures/withdrawals
Of which:
Philippines
Malaysia
ThailandIndonesia
Closures/withdrawals due to restructuring andreconfiguration of management resources

Establishments/Withdrawals

39

6
16
15
7

14
16
39
37
78

189

2014

Table 8. Number of Japanese foreign affiliates newly created in and closed/withdrawn from ASEAN, 2009–2018

49

13
19
35
14

13
13
34
17
121

140

2015

59

3
20
32
20

9
10
18
17
119

102

2016

50

13
17
43
16

5
10
25
10
141

104

2017

..

9
19
27
24

15
10
23
9
117

110

2018

III. STRATEGIES TO BUILD RESILIENT GVCs IN ASEAN

29

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

CONCLUSION: PREPARING FOR ANOTHER CRISIS
The international production system evolves continuously, as do GVCs, with expansion in one sector
or country sometimes accompanied by contraction in another. The composition and organizationof value added activities by a TNC change continuously to respond to exogenous environmental,
technological and social factors, as well as new endogenous strategic priorities. Therefore,
temporary divestment including reshoring, if any, after the pandemic should not be a big concern
for ASEAN.
However, in some industries in ASEAN, GVCs have reached a level of market concentration that may
cause some concern about the healthy operation of GVCs (see annex table 4 for such industries).
Expanding the DVA share while recognizing the important role that foreign inputs (FVA) play inincreasing export competitiveness is a common policy agenda item for all countries. At the sametime, diversification of export destination, rather than concentration, is required in the case of highconcentration of the downstream market of GVCs.
Structural reforms aimed at ensuring more stability in a crisis-prone economic system, renewed
commitment to an open environment for trade and investment, and the implementation of policies
that favour investment and innovation are key issues. For effectively dealing with the COVID-19 crisis
and its economic aftermath, it is important for policymakers to resist the temptation of quick-fix
solutions or protectionism and to maintain an overall favourable business climate.
The risk intensity identified and calculated in this paper does not necessarily mean that thoseindustries with a high risk intensity are always exposed to external shocks, These industries simply
have a higher tendency to be exposed than industries with a lower risk intensity. This analysis
provides ASEAN governments and companies with reasons why they should worry about vulnerability
to external shocks. At the same time, reducing vulnerability means losing efficiency of production,
which is necessary payment for further resilience and robustness of GVCs.

30

REFERENCESREFERENCESASEAN Secretariat (2016). ASEAN Tourism Crisis Communications Manual (Incorporating Best
Practices of PATA and UNWTO).
AJC (ASEAN-Japan Centre) (2019). Global Value Chains in ASEAN: A Regional Perspective, Paper 1(revised), January.
Holling, C. (1973). Resilience and Stability of Ecological Systems. Annual Review of Ecology and
Systematics 4: 1–23.
Horwich, G. (1997), Economic Lessons of the Kobe Earthquake. Purdue CIBER Working Papers.
Paper 128. http://docs.lib.purdue.edu/ciberwp/128.
Rose, Adam Z. (2009), Economic Resilience to Disasters. Published Articles & Papers. Paper 75.
http://research.create.usc.edu/published_papers/75.
Lallemant, David (2013). Building Post-Disaster Resilience, ResilientUrbanism.org.
U.S. Department of Justice and the Federal Trade Commission (2010). Horizontal Merger Guidelines,
Issued on August 19, 2010.
Japan, Ministry of Economy, Trade and Industry (METI) (2019). Dai 48-kai Wagakuni Kigyo no Kaigai
Jigyo Katsudo (Tokyo: Ministry of Finance Printing Bureau).
UNCTAD (2013). World Investment Report 2013: Global Value Chains: Investment and Trade forDevelopment, Geneva and New York: United Nations.
UNCTAD (2020). World Investment Report 2020: International Production Beyond the Pandemic,
Geneva and New York: United Nations.

31

22

Brunei
Darussalam

Source: AJC-UNCTAD-Eora database on ASEAN GVCs.
Note: Non-shaded areas indicates the absence of data.

Total number of industries covered

Wood and wood products

Unspecified

Transport, storage and communications

Trade

Textiles, clothing and leather

Public administration and defence
Publishing, printing and reproductionof recorded media
Recycling

Other services
Petroleum, chemical and non-metallic
mineral products
Precision instruments

Other manufacturing

Motor vehicles and other transport equipment

Mining, quarrying and petroleum

Metal and metal products

Hotels and restaurants

Food, beverages and tobacco

Finacial intermediation and business activities

Electricity, gas and waterElectrical and general machinery

Education, health and other services

Construction

Community, social and personal service activities

Agriculture, hunting, forestry and fishing

Industry

Annex table 1. List of industries covered in this paper

22

Cambodia

22

Indonesia

22

Lao PDR

24

Malaysia

22

Myanmar22

Philippines

21

Singapore

22

Thailand23

Viet Nam

ANNEXESANNEXES

33

34

Japan

China

Partner country

38

None

>1,500200-1,500

129

None

>1,500200-1,500

Number of industries

HHI

…/

Viet Nam: Food, beverages and tobacco; Viet Nam: Publishing, printing and reproduction of recorded media; Viet Nam: Wood and wood products; Viet Nam: Motorvehicles and other transport equipment; Viet Nam: Textiles, clothing and leather; Viet Nam: Other manufacturing; Viet Nam: Construction; Viet Nam: Electrical andgeneral machinery; Viet Nam: Metal and metal products; Malaysia: Motor vehicles and other transport equipment; Viet Nam: Trade; Viet Nam: Precision instruments;
Viet Nam: Other services; Viet Nam: Petroleum, chemical and non-metallic mineral products; Viet Nam: Hotels and restaurants; Thailand: Textiles, clothing andleather; Viet Nam: Education, health and other services; Philippines: Electrical and general machinery; Viet Nam: Community, social and personal service activities;
Viet Nam: Public administration and defence; Viet Nam: Mining, quarrying and petroleum; Viet Nam: Financial intermediation and business activities; Viet Nam:
Electricity, gas and water; Indonesia: Motor vehicles and other transport equipment; Philippines: Motor vehicles and other transport equipment; Singapore: Electricaland general machinery; Singapore: Precision instruments; Singapore: Motor vehicles and other transport equipment; Philippines: Precision instruments; Thailand:
Construction; Thailand: Electrical and general machinery; Viet Nam: Transport, storage and communications; Malaysia: Metal and metal products; Malaysia:
Construction; Viet Nam: Agriculture, hunting, forestry and fishing; Singapore: Trade; Philippines: Metal and metal products; Malaysia: Other manufacturing

None

Singapore: Agriculture, hunting, forestry and fishing; Singapore: Textiles, clothing and leather; Thailand: Motor vehicles and other transport equipment; Cambodia:
Electrical and general machinery; Cambodia: Metal and metal products; Viet Nam: Agriculture, hunting, forestry and fishing; Cambodia: Motor vehicles and othertransport equipment; Singapore: Other manufacturing; Cambodia: Other manufacturing; Singapore: Food, beverages and tobacco; Cambodia: Construction;
Philippines: Textiles, clothing and leather; Cambodia: Agriculture, hunting, forestry and fishing; Singapore: Metal and metal products; Singapore: Motor vehicles
and other transport equipment; Cambodia: Food, beverages and tobacco; Cambodia: Textiles, clothing and leather; Singapore: Hotels and restaurants; Singapore:
Other services; Cambodia: Financial intermediation and business activities; Malaysia: Textiles, clothing and leather; Cambodia: Education, health and other services;
Singapore: Electricity, gas and water; Singapore: Community, social and personal service activities; Cambodia: Hotels and restaurants; Cambodia: Petroleum,chemical and non-metallic mineral products; Singapore: Wood and wood products; Cambodia: Wood and wood products; Indonesia: Textiles, clothing and leather;
Singapore: Construction; Thailand: Community, social and personal service activities; Brunei Darussalam: Textiles, clothing and leather; Viet Nam: Transport, storage
and communications; Viet Nam: Other services; Cambodia: Public administration and defence; Thailand: Publishing, printing and reproduction of recorded media;
Cambodia: Mining, quarrying and petroleum; Viet Nam: Motor vehicles and other transport equipment; Singapore: Publishing, printing and reproduction of recorded
media; Viet Nam: Metal and metal products; Viet Nam: Petroleum, chemical and non-metallic mineral products; Viet Nam: Trade; Cambodia: Transport, storage
and communications; Cambodia: Electricity, gas and water; Thailand: Electrical and general machinery; Viet Nam: Electricity, gas and water; Malaysia: Precision
instruments; Viet Nam: Mining, quarrying and petroleum; Viet Nam: Community, social and personal service activities; Singapore: Education, health and otherservices; Thailand: Textiles, clothing and leather; Viet Nam: Construction; Viet Nam: Education, health and other services; Singapore: Financial intermediation andbusiness activities; Singapore: Electrical and general machinery; Singapore: Precision instruments; Viet Nam: Hotels and restaurants; Viet Nam: Food, beverages
and tobacco; Viet Nam: Textiles, clothing and leather; Cambodia: Trade; Thailand: Education, health and other services; Malaysia: Electrical and general machinery;
Cambodia: Recycling; Viet Nam: Other manufacturing; Viet Nam: Public administration and defence; Thailand: Hotels and restaurants; Thailand: Electricity, gas andwater; Cambodia: Community, social and personal service activities; Viet Nam: Electrical and general machinery; Thailand: Financial intermediation and businessactivities; Indonesia: Electrical and general machinery; Indonesia: Electricity, gas and water; Indonesia: Motor vehicles and other transport equipment; Indonesia:
Agriculture, hunting, forestry and fishing; Indonesia: Other manufacturing; Viet Nam: Financial intermediation and business activities; Brunei Darussalam: Metal
and metal products; Thailand: Agriculture, hunting, forestry and fishing; Indonesia: Precision instruments; Thailand: Other manufacturing; Philippines: Other
manufacturing; Thailand: Food, beverages and tobacco; Malaysia: Motor vehicles and other transport equipment; Malaysia: Construction; Singapore: Unspecified;
Viet Nam: Precision instruments; Indonesia: Construction; Cambodia: Other services; Thailand: Precision instruments; Philippines: Agriculture, hunting, forestry
and fishing; Lao PDR: Electrical and general machinery; Singapore: Trade; Brunei Darussalam: Other manufacturing; Viet Nam: Wood and wood products; Malaysia:
Metal and metal products; Thailand: Trade; Malaysia: Other manufacturing; Thailand: Metal and metal products; Indonesia: Food, beverages and tobacco; Lao PDR:
Motor vehicles and other transport equipment; Brunei Darussalam: Petroleum, chemical and non-metallic mineral products; Indonesia: Metal and metal products;
Indonesia: Other services; Thailand: Construction; Indonesia: Education, health and other services; Brunei Darussalam: Electrical and general machinery; Brunei
Darussalam: Food, beverages and tobacco; Viet Nam: Publishing, printing and reproduction of recorded media; Philippines: Motor vehicles and other transport
equipment; Brunei Darussalam: Motor vehicles and other transport equipment; Malaysia: Recycling; Malaysia: Hotels and restaurants; Brunei Darussalam:Electricity, gas and water; Malaysia: Petroleum, chemical and non-metallic mineral products; Brunei Darussalam: Construction; Brunei Darussalam: Wood andwood products; Malaysia: Food, beverages and tobacco; Brunei Darussalam: Mining, quarrying and petroleum; Philippines: Precision instruments; Indonesia: Hotels
and restaurants; Malaysia: Agriculture, hunting, forestry and fishing; Philippines: Construction; Brunei Darussalam: Hotels and restaurants; Singapore: Transport,
storage and communications; Indonesia: Transport, storage and communications; Thailand: Wood and wood products; Philippines: Electricity, gas and water;Indonesia: Petroleum, chemical and non-metallic mineral products; Singapore: Petroleum, chemical and non-metallic mineral products

None

ASEAN country/industrya

Annex table 2. Partner countries that may influence vulnerability of upstream part of GVCs by ASEAN industry, 2017

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

81,500-2,500

>200

3

27

3

>2,500200-1,500

10

None

200-1,500>1,5008None>1,500200-1,500

12

>200

18

None

1,500-2,500

200-1,500

None>2,5001None>1,500200-1,500

Number of industries

HHI

Lao PDR: Food, beverages and tobacco; Lao PDR: Hotels and restaurants; Lao PDR: Unspecified

Lao PDR: Electrical and general machinery; Lao PDR: Mining, quarrying and petroleum; Lao PDR: Motor vehicles and other transport equipment;
Lao PDR: Other manufacturing; Lao PDR: Agriculture, hunting, forestry and fishing; Lao PDR: Hotels and restaurants; Lao PDR: Food, beverages and tobacco;
Cambodia: Petroleum, chemical and non-metallic mineral products; Cambodia: Trade; Cambodia: Electricity, gas and water; Cambodia: Transport, storage andcommunications; Cambodia: Food, beverages and tobacco; Lao PDR: Community, social and personal service activities; Cambodia: Agriculture, hunting, forestry
and fishing; Cambodia: Mining, quarrying and petroleum; Cambodia: Textiles, clothing and leather; Lao PDR: Other services; Cambodia: Public administrationand defence; Cambodia: Hotels and restaurants; Cambodia: Wood and wood products; Cambodia: Metal and metal products; Lao PDR: Recycling; Cambodia:
Construction; Cambodia: Education, health and other services; Cambodia: Financial intermediation and business activities; Cambodia: Other manufacturing;Cambodia: Recycling

Lao PDR: Public administration and defence; Lao PDR: Electricity, gas and water; Lao PDR: Wood and wood products; Lao PDR: Education, health and otherservices; Lao PDR: Financial intermediation and business activities; Lao PDR: Construction; Lao PDR: Textiles, clothing and leather; Lao PDR: Metal and metal
products

Lao PDR: Petroleum, chemical and non-metallic mineral products; Lao PDR: Trade; Lao PDR: Transport, storage and communications

Brunei Darussalam: Wood and wood products; Brunei Darussalam: Financial intermediation and business activities; Brunei Darussalam: Electrical and generalmachinery; Brunei Darussalam: Trade; Brunei Darussalam: Petroleum, chemical and non-metallic mineral products; Brunei Darussalam: Construction;
Brunei Darussalam: Transport, storage and communications; Brunei Darussalam: Public administration and defence; Brunei Darussalam: Motor vehicles andother transport equipment; Brunei Darussalam: Metal and metal products

None

Indonesia: Petroleum, chemical and non-metallic mineral products; Brunei Darussalam: Electricity, gas and water; Indonesia: Mining, quarrying and petroleum;
Brunei Darussalam: Petroleum, chemical and non-metallic mineral products; Singapore: Wood and wood products; Brunei Darussalam: Hotels and restaurants;
Brunei Darussalam: Financial intermediation and business activities; Brunei Darussalam: Transport, storage and communications

None

Singapore: Wood and wood products; Singapore: Food, beverages and tobacco; Singapore: Textiles, clothing and leather; Singapore: Electricity, gas and water;
Singapore: Hotels and restaurants; Singapore: Construction; Singapore: Publishing, printing and reproduction of recorded media; Singapore: Community, socialand personal service activities; Singapore: Other services; Singapore: Other manufacturing; Singapore: Agriculture, hunting, forestry and fishing; Singapore:
Petroleum, chemical and non-metallic mineral products.

Philippines: Financial intermediation and business activities; Philippines: Trade; Malaysia: Unspecified; Malaysia: Public administration and defence; Singapore:
Unspecified; Malaysia: Community, social and personal service activities; Malaysia: Financial intermediation and business activities; Malaysia: Other services;
Philippines: Other services; Malaysia: Trade; Indonesia: Financial intermediation and business activities; Malaysia: Transport, storage and communications;
Malaysia: Mining, quarrying and petroleum; Malaysia: Education, health and other services; Malaysia: Electricity, gas and water; Philippines: Education, healthand other services; Philippines: Hotels and restaurants; Philippines: Food, beverages and tobacco

None

None

Philippines: Metal and metal products

None

ASEAN country/industrya

Source: Compiled by AJC based on AJC-UNCTAD-Eora database on ASEAN GVCs.
Note: According to U.S. Department of Justice, an increase of HHI by 200 points is the level by which market power is enhanced in highly concentrated markets. HHI of more than 100 points potentially raisesignificant competitive concerns in moderately concentrated markets.
aRanked in the order of HHI (from large to small).

Viet Nam

ThailandSingapore

Malaysia

Indonesia

United States

Republic of Korea

Partner country

Annex table 2. Partner countries that may influence vulnerability of upstream part of GVCs by ASEAN industry, 2017 (Concluded)

ANNEXES35

36

Indonesia

Netherlands

Germany

Republic of Korea

Japan

China

Australia

Partner country3200-1,500

200-1,500>1,500200-1,500>1,500200-1,500>1,500200-1,500>1,500

2

None

7

None

26

None

17

None

22

2

>1,500200-1,500

11200-1,500

None1>1,500>1,500

Number of industries

HHI

Singapore: Motor vehicles and other transport equipment; Malaysia: Mining, quarrying and petroleum…/

Philippines: Hotels and restaurants; Philippines: Food, beverages and tobacco; Philippines: Education, health and other services; Thailand: Food, beverages andtobacco; Philippines: Agriculture, hunting, forestry and fishing; Thailand: Agriculture, hunting, forestry and fishing; Thailand: Hotels and restaurants

Philippines: Public administration and defence; Cambodia: Hotels and restaurants; Cambodia: Education, health and other services; Cambodia: Transport,
storage and communications; Cambodia: Textiles, clothing and leather; Philippines: Wood and wood products; Cambodia: Construction; Viet Nam: Public
administration and defence; Myanmar: Textiles, clothing and leather; Thailand: Construction; Cambodia: Community, social and personal service activities;
Cambodia: Financial intermediation and business activities; Thailand: Precision instruments; Singapore: Hotels and restaurants; Thailand: Public administrationand defence; Cambodia: Electricity, gas and water; Singapore: Construction; Thailand: Other manufacturing; Cambodia: Other services; Philippines: Construction;
Cambodia: Petroleum, chemical and non-metallic mineral products; Philippines: Hotels and restaurants; Lao PDR: Textiles, clothing and leather; Cambodia:
Public administration and defence; Cambodia: Trade; Philippines: Precision instruments

None

Brunei Darussalam: Hotels and restaurants; Brunei Darussalam: Mining, quarrying and petroleum; Brunei Darussalam: Electricity, gas and water; Brunei
Darussalam: Construction; Indonesia: Mining, quarrying and petroleum; Brunei Darussalam: Other services; Brunei Darussalam: Metal and metal products; Brunei
Darussalam: Motor vehicles and other transport equipment; Brunei Darussalam: Petroleum, chemical and non-metallic mineral products; Brunei Darussalam:Financial intermediation and business activities; Brunei Darussalam: Food, beverages and tobacco; Brunei Darussalam: Other manufacturing; Brunei Darussalam:
Wood and wood products; Brunei Darussalam: Electrical and general machinery; Malaysia: Mining, quarrying and petroleum; Brunei Darussalam: Agriculture,hunting, forestry and fishing; Brunei Darussalam: Recycling

None

Brunei Darussalam: Financial intermediation and business activities; Brunei Darussalam: Mining, quarrying and petroleum; Brunei Darussalam: Electricity, gas
and water; Brunei Darussalam: Motor vehicles and other transport equipment; Brunei Darussalam: Construction; Brunei Darussalam: Other services; Brunei
Darussalam: Trade; Brunei Darussalam: Petroleum, chemical and non-metallic mineral products; Brunei Darussalam: Metal and metal products; Brunei
Darussalam: Wood and wood products; Brunei Darussalam: Other manufacturing; Brunei Darussalam: Electrical and general machinery; Brunei Darussalam:Community, social and personal service activities; Philippines: Motor vehicles and other transport equipment; Brunei Darussalam: Education, health and otherservices; Brunei Darussalam: Agriculture, hunting, forestry and fishing; Brunei Darussalam: Recycling; Brunei Darussalam: Food, beverages and tobacco; Indonesia:
Mining, quarrying and petroleum; Brunei Darussalam: Hotels and restaurants; Viet Nam: Precision instruments; Malaysia: Mining, quarrying and petroleum

Philippines: Mining, quarrying and petroleum; Brunei Darussalam: Transport, storage and communications

Cambodia: Wood and wood products; Viet Nam: Mining, quarrying and petroleum; Lao PDR: Agriculture, hunting, forestry and fishing; Thailand: Community, socialand personal service activities; Thailand: Publishing, printing and reproduction of recorded media; Singapore: Electrical and general machinery; Thailand: Mining,
quarrying and petroleum; Malaysia: Agriculture, hunting, forestry and fishing; Myanmar: Agriculture, hunting, forestry and fishing; Singapore: Precision instruments;
Malaysia: Electrical and general machinery

None

Singapore: Other services; Singapore: Education, health and other services; Viet Nam: Education, health and other services

Thailand: Education, health and other services

ASEAN country/industrya

Annex table 3. Partner countries that may influence vulnerability of downstream part of GVCs by ASEAN industry, 2017

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

200-1,500

1

29

2

1,500-2,500

200-1,500

3>2,50041,500-2,500

47

1>2,500200-1,500

9None>1,500200-1,500

Number of industries

HHI

Lao PDR: Trade

Myanmar: Financial intermediation and business activities; Myanmar: Construction; Lao PDR: Petroleum, chemical and non-metallic mineral products;
Cambodia: Mining, quarrying and petroleum; Lao PDR: Electrical and general machinery; Lao PDR: Mining, quarrying and petroleum; Myanmar: Electrical andgeneral machinery; Lao PDR: Recycling; Philippines: Motor vehicles and other transport equipment; Myanmar: Metal and metal products; Myanmar: Petroleum,chemical and non-metallic mineral products; Lao PDR: Financial intermediation and business activities; Lao PDR: Metal and metal products; Myanmar:
Motor vehicles and other transport equipment; Cambodia: Food, beverages and tobacco; Myanmar: Transport, storage and communications; Lao PDR: Other
services; Lao PDR: Food, beverages and tobacco; Myanmar: Electricity, gas and water; Cambodia: Metal and metal products; Myanmar: Trade; Lao PDR: Other
manufacturing; Malaysia: Recycling; Myanmar: Other manufacturing; Myanmar: Other services; Lao PDR: Construction; Myanmar: Community, social andpersonal service activities; Lao PDR: Trade; Brunei Darussalam: Mining, quarrying and petroleum

Lao PDR: Agriculture, hunting, forestry and fishing; Lao PDR: Electricity, gas and water

Lao PDR: Wood and wood products; Myanmar: Mining, quarrying and petroleum; Cambodia: Recycling

Indonesia: Metal and metal products; Indonesia: Publishing, printing and reproduction of recorded media; Malaysia: Financial intermediation and businessactivities; Malaysia: Transport, storage and communications; Malaysia: Precision instruments; Indonesia: Education, health and other services; Malaysia:
Petroleum, chemical and non-metallic mineral products; Malaysia: Metal and metal products; Indonesia: Electricity, gas and water; Indonesia: Other services;
Malaysia: Textiles, clothing and leather; Malaysia: Education, health and other services; Malaysia: Community, social and personal service activities; Malaysia:
Electricity, gas and water; Indonesia: Motor vehicles and other transport equipment; Malaysia: Electrical and general machinery; Indonesia: Transport, storage
and communications; Malaysia: Construction; Indonesia: Financial intermediation and business activities; Indonesia: Public administration and defence;
Malaysia: Trade; Malaysia: Food, beverages and tobacco; Indonesia: Trade; Malaysia: Other manufacturing; Malaysia: Mining, quarrying and petroleum;
Indonesia: Construction; Indonesia: Other manufacturing; Philippines: Electrical and general machinery; Malaysia: Wood and wood products; Malaysia: Hotels
and restaurants; Indonesia: Mining, quarrying and petroleum; Malaysia: Motor vehicles and other transport equipment; Philippines: Transport, storage andcommunications; Philippines: Education, health and other services; Malaysia: Public administration and defence; Malaysia: Recycling; Philippines: Other services;Indonesia: Wood and wood products; Malaysia: Agriculture, hunting, forestry and fishing; Brunei Darussalam: Community, social and personal service activities;
Indonesia: Food, beverages and tobacco; Philippines: Electricity, gas and water; Cambodia: Community, social and personal service activities; Philippines:
Publishing, printing and reproduction of recorded media; Indonesia: Agriculture, hunting, forestry and fishing; Indonesia: Textiles, clothing and leather; Cambodia:
Textiles, clothing and leather

Indonesia: Electrical and general machinery; Malaysia: Publishing, printing and reproduction of recorded media; Indonesia: Petroleum, chemical and nonmetallic mineral products; Indonesia: Precision instruments

Brunei Darussalam: Textiles, clothing and leather;

Singapore: Metal and metal products; Singapore: Construction; Singapore: Publishing, printing and reproduction of recorded media; Singapore: Transport,
storage and communications; Cambodia: Agriculture, hunting, forestry and fishing; Singapore: Textiles, clothing and leather; Singapore: Electrical and generalmachinery; Singapore: Petroleum, chemical and non-metallic mineral products; Singapore: Electricity, gas and water

None

ASEAN country/industrya

Source: Compiled by AJC, based on AJC-UNCTAD-Eora database on ASEAN GVCs.
Note: According to US Department of Justice, an increase of HHI by 200 points is the level by which market power is enhanced in highly concentrated markets. HHI of more than 100 points potentially raisesignificant competitive concerns in moderately concentrated markets.
aRanked in the order of HHI (from large to small).

Viet Nam

ThailandSingapore

Malaysia

Partner country

Annex table 3. Partner countries that may influence vulnerability of downstream part of GVCs by ASEAN industry, 2017 (Concluded)

ANNEXES37

Resilient Global Value Chains for ASEAN and its Relationship with Partner Countries:
A Way to Mitigate and Adapt to the Economic Impacts of COVID-19

Annex table 4. Risk intensity of supplier market concentration and buyer market concentration by six levels

Industry

Brunei Darussalam

Cambodia

Indonesia

Lao PDR

Supplier
Buyermarketmarketconcentration concentration

Supplier
Buyermarketmarketconcentration concentration

Supplier
Buyermarketmarketconcentration concentration

Supplier
Buyermarketmarketconcentration concentration

Agriculture, hunting, forestry and fishing

0.01

0.01

0.01

0.05

0.01

0.5

Community, social and personal service
activities

0.01

0.01

0.01

0.01

0.01

0.05

Construction

0.01

0.25

0.01

0.01

0.01

0.05

0.05

0.01

Education, health and other services

0.01

0.01

0.01

0.01

0.01

0.1

0.05

0.01

Electrical and general machinery

0.01

0.05

0.05

0.01

0.01

0.5

0.05

0.05

Electricity, gas and water

0.01

0.25

0.01

0.01

0.01

0.05

0.1

0.05

Financial intermediation and businessactivities

0.01

0.25

0.01

0.01

0.01

0.05

0.05

0.01

Food, beverages and tobacco

0.01

0.01

0.01

0.01

0.01

0.01

0.05

0.05

Hotels and restaurants

0.01

0.01

0.01

0.01

0.01

0.01

0.05

0.01

Metal and metal products

0.01

0.25

0.05

0.01

0.01

0.5

0.05

0.01

Mining, quarrying and petroleum

0.01

0.25

0.01

0.01

0.01

0.1

0.05

0.05

Motor vehicles and other transport
equipment

0.05

0.25

0.05

0.01

0.01

0.05

0.05

0.05

Other manufacturing

0.01

0.01

0.01

0.01

0.01

0.01

0.05

0.05

Other services

0.01

0.25

0.01

0.01

0.01

0.05

0.01

0.01

Petroleum, chemical and non-metallic
mineral products

0.01

0.25

0.05

0.01

0.01

0.5

0.1

0.05

0.01

0.25

0.01

0.05

0.1

0.05

0.01

0.25
0.01

0.05

Precision instruments
Public administration and defence

0.01

0.1

0.01

0.01

Publishing, printing and reproduction ofrecorded media

0.01

0.05

Recycling

0.1

0.05

0.05

1.0

Textiles, clothing and leather

0.01

0.1

0.01

0.01

0.01

0.01

0.05

0.01

Trade

0.01

0.01

0.01

0.01

0.01

0.05

0.1

0.01

Transport, storage and communications

0.01

0.25

0.01

0.01

0.01

0.05

0.1

0.05

Unspecified

0.1

0.01

0.1

0.1

0.1

0.1

0.05

0.05

Wood and wood products

0.01

0.05

0.01

0.01

0.01

0.05

0.05

0.1

Source: Compiled by the AJC, based on AJC-UNCTAD-Eora database on ASEAN GVCs.
Note: Non-shaded area indicates the absence of data. Degradation of the colour implies the degree of the risk intensity. See tables 2 and 5 for explanation.

38

ANNEXES

Malaysia

MyanmarPhilippines

Singapore

Thailand

Viet Nam

Supplier
Buyer
Supplier
Buyer
Supplier
Buyer
Supplier
Buyer
Supplier
Buyer
Supplier
Buyermarketmarketmarketmarketmarketmarketmarketmarketmarketmarketmarketmarketconcentration concentration concentration concentration concentration concentration concentration concentration concentration concentration concentration concentration
0.01

0.01

0.01

0.05

0.5

0.01

0.01

0.01

0.01

0.01

0.05

0.01

0.01

0.1

0.1

0.01

0.05

0.05

0.01

0.01

0.1

0.05

0.01

0.5

0.01

0.05

0.1

0.01

0.01

0.01

0.1

0.1

0.01

0.01

0.01

0.05

0.01

0.1

0.05

0.01

0.01

0.05

0.01

0.01

0.1

0.05

0.01

0.1

0.1

0.1

0.1

0.05

0.05

0.05

0.1

0.05

0.05

0.05

0.01

0.1

0.01

0.1

0.05

0.05

0.01

0.05

0.01

0.05

0.01

0.05

0.01

0.25

0.01

0.05

0.1

0.05

0.01

0.05

0.01

0.01

0.1

0.01

0.01

0.01

0.01

0.05

0.1

0.01

0.01

0.01

0.05

0.01

0.1

0.01

0.01

0.05

0.01

0.01

0.1

0.01

0.01

0.01

0.01

0.01

0.1

0.1

0.01

0.1

0.05

0.05

0.1

0.05

0.01

0.01

0.1

0.05

0.01

0.1

0.01

1.0

0.01

0.5

0.01

0.05

0.01

0.05

0.1

0.01

0.01

0.1

0.05

0.25

0.1

0.01

0.5

0.01

0.1

0.05

0.1

0.01

0.01

0.05

0.01

0.01

0.1

0.01

0.1

0.01

0.1

0.01

0.1

0.01

0.01

0.05

0.01

0.1

0.05

0.05

0.01

0.1

0.05

0.1

0.01

0.05

0.05

0.1

0.1

0.05

0.01

0.05

0.1

0.05

0.1

0.05

0.05

0.01

0.1

0.01

0.05

0.01

0.05

0.01

0.1

0.01

0.1

0.05

0.01

0.1

0.01

0.01

0.1

0.25

0.01

0.1

0.1

0.05

0.01

0.01

0.1

0.05

0.1

0.1

0.01

0.1

0.1

0.01

0.01

0.01

0.01

0.01

0.5

0.01

0.05

0.01

0.1

0.01

0.01

0.05

0.01

0.1

0.01

0.1

0.1

0.05

0.01

0.05

0.01

0.05

0.1

0.25

0.01

0.05

0.01

0.1

0.1

0.05

0.01

0.05

0.05

0.01

0.1

0.1

0.1

0.1

0.1

0.1

0.01

0.05

0.1

0.05

0.1

0.01

0.05

0.01

0.01

0.05

0.01

0.05

0.5

0.05

0.05

0.01

0.1

0.05

0.01

0.1

0.01

0.01

39

ISBN 978-4-910293-17-2

ASEAN Promotion Centre on Trade,
Investment and Tourism
www.asean.or.jp/en