Page 51 - ASEAN-EU Dialogue 2018: Regional and Inter-Regional Economic Cooperation: Identifying Priorities for ASEAN and the EU

Conclusion
There is a clear disconnect between trade indicators of export performance and domestic
indicators of technological capability in ASEAN countries. The source of this disconnect has
been shown to be countries’ hosting global supply chains. Participation in these chains has
contributed to export earnings, provided employment, and stability in exports except in times
of global recession. But it is also hostage to decisions made by MNCs over which the host
country has no say. And, as shown here, it has done little to upgrade domestic technological
capability. Technology transfer has not occurred for ASEAN countries because they are
engaged in low value-added, such as assembly operations.

For sectors with global chains, gross exports overstate the actual value of exports contributed
by the country, since import content is also counted as exports. Alternative measures, such as
export value-added, give a much better picture of a country’s export performance. These supply
chains are an integral part of the globalization process – the growth of intra-Asian trade owes
much to the expansion of these networks in this part of the world (HKTDC, 2017). But
globalization is under threat, and protectionist sentiment is on the rise in the US, and in response
to the US posture, in Europe. This will have negative consequences on the operations of these
global supply chains.

On the positive side, the gradual shift not only of supply chains but also of markets to Asia
affords ASEAN countries’ MNCs to establish their own supply chains and for these chains to
engage in higher value-added activities (Oizumi, 2013). While the possibilities for technology
transfer are higher, the primary source of technological capability is still domestic and countries
need to develop this capability domestically. For the supply chains themselves, issues are
emerging that include timeliness to market, flexibility to vary output in response to changing
market conditions, and responsiveness to customer needs, all of which occasioned by the rise
of e-commerce, especially in China (Tsang et al., 2015). Reconfiguration of supply chains will
result as some ASEAN countries begin to lose their labour cost advantage. For these countries
especially, but even for ASEAN member countries as a whole, the need to upgrade
technological capability is imperative.

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