Page 49 - ASEAN-EU Dialogue 2018: Regional and Inter-Regional Economic Cooperation: Identifying Priorities for ASEAN and the EU

Table 8.5: ASEAN and Selected East Asian Economies: R&D Expenditure as % of GDP,
2010-2016

Country/Year 2010 2012 2014 2015
Brunei n.a. n.a. n.a. n.a.
Cambodia 0.1
Indonesia 0.1 (2009) 0.1 (2013)
Malaysia 1.0 1.1 1.3 1.3
Philippines 0.1 (2009) 0.1 (2011) 0.1 (2013) n.a.
Singapore 2.0 2.0 2.2 n.a.
Thailand 0.2 (2009) 0.4 (2011) 0.5 0.6
Vietnam n.a. 0.2 (2011) 0.4 (2013) n.a.

China 1.7 1.9 2.0 2.1
South Korea 3.5 4.0 4.3 4.2
Taiwan 2.8 3.0 3.0 3.0
Source: World Development Indicators; OECD

Leaving aside Singapore and the resource exporting countries, only Malaysia spends 1% or
more of its GDP for R&D. Thailand spends about half that share in 2015 while Vietnam has
also increased its share but from a very low base. The Philippines spends minimally (0.1%) on
R&D. These proportions are far less than the minimum of 2% which advanced countries spend
on R&D to stay at the frontier of technology. China, although not yet an advanced country,
has achieved that percentage by 2014, while Korea’s and Taiwan’s R&D spending exceed that
threshold by quite a margin.

Explaining the Discrepancy
The explanation of this discrepancy comes from the fact that the share of high tech exports has
to do with global supply chains in electronics locating in these countries (Gangnes and Van
Assche, 2010). These chains are controlled by MNCs, which locate production of parts of the
chain in a country which possesses comparative advantage in that segment of production. Host
countries have limited leverage over their segments of the supply chain and likewise the
technology embodied in that segment. For ASEAN countries except Singapore, their
comparative advantage is still defined by their relatively low labour costs rather than
technological sophistication (HKTDC, 2017)

The intensive participation of ASEAN countries in these chains can be shown by high
estimated values of the Grubel Lloyd Index, the most commonly used indicator of intra-
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industry trade (IIT) (Table 8.6). The closer the index is to the value 1 the larger the proportion
of intra-industry trade. Since the index is calculated as the magnitude of IIT divided by total
trade in a sector, it can be interpreted as the share of IIT in total trade in a sector.

9 The Grubel Lloyd Index, developed in 1975, remains the most commonly used for measuring the intensity of
intra-industry trade. A value of one for the index signifies complete intra-industry trade, i.e., all trade is within
the same industry while a value zero signifies the absence of intra-industry trade. To the extent that the level of
data aggregation affects what is included or excluded in calculating IIT, the accuracy of the calculated index
depends on the extent of data aggregation.
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