Role of Production Networks in Sustaining and Rebalancing Asia's Growth
AbstractIn last few decades, Asian production networks have contributed significantly toward the rapid trade expansion and economic growth in East Asia. Developed Asia produces technology-intensive intermediate goods and capital goods and ships them to the People Republic of China (PRC) and ASEAN for assembly by lower-skilled workers. The finished products are then exported to the US, Japan, Europe, and other countries. In view of ongoing global financial crisis and European debt crisis, the ability of the rest of the world to absorb Asia’s exports has decreased. Export production in some Asian countries has also been subsidized by artificially low prices for labor, land, and energy, and by lax enforcement of environmental regulations. Asian economies should thus rebalance away from relying too much on exporting subsidized goods to developed economies. On the supply side, the best way to rebalance growth is to increase productivity in order to raise wage rates and living standards. This can be done by leveraging production networks to graduate to higher value-added, knowledge-intensive activities. On the demand side, producers in the region should turn to Asian consumers as an engine of growth. This can be facilitated by improving connectivity through increased investment in connecting infrastructure such as transport and telecommunications; and by implementing a region-wide FTA. This paper addresses these issues by providing an analytic description of production networks in Asia. It then discusses how developing Asian countries could leverage production networks to facilitate technology transfer to domestic firms and how a regional FTA could bring Asian producers and consumers together. Finally, it considers how infrastructure investment in large and connecting projects could help to rebalance and sustain growth in the region through increased connectivity and reducing trade costs.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3896.
Date of creation: 2012
Date of revision:
East Asian production networks; ASEAN; infrastructure; connectivity; rebalancing growth; sustainable growth;
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hank Lim & Fukunari Kimura, 2009. "The Internationalisation of SMEs in Regional and Global Value Chains," IDB Publications 47858, Inter-American Development Bank.
- Jan Wengel & Edgard Rodriguez, 2006. "SME Export Performance in Indonesia After the Crisis," Small Business Economics, Springer, vol. 26(1), pages 25-37, 02.
- Masahiro Kawai & Ganeshan Wignaraja, 2009. "The Asian â€œNoodle Bowlâ€:Is It Serious for Business?," Working Papers id:1936, eSocialSciences.
- Ang, James B., 2008. "Determinants of foreign direct investment in Malaysia," Journal of Policy Modeling, Elsevier, vol. 30(1), pages 185-189.
- Tourk, Khairy, 2004. "The political economy of east Asian economic integration," Journal of Asian Economics, Elsevier, vol. 15(5), pages 843-888, October.
- Shujiro Urata & Toshiyuki Matsuura & Yuhong Wei, 2006. "International Intrafirm Transfer of Management Technology by Japanese Multinational Corporations," Discussion papers 06006, Research Institute of Economy, Trade and Industry (RIETI).
- Wignaraja, Ganeshan, 2008. "FDI and Innovation as Drivers of Export Behaviour: Firm-level Evidence from East Asia," MERIT Working Papers 061, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Hertel, Thomas & Keeney, Roman & Ivanic, Maros & Winters, Alan, 2007.
"Why Isn’t the Doha Development Agenda More Poverty Friendly?,"
GTAP Working Papers
2292, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Thomas W. Hertel & Roman Keeney & Maros Ivanic & L. Alan Winters, 2009. "Why Isn't the Doha Development Agenda more Poverty Friendly?," Review of Development Economics, Wiley Blackwell, vol. 13(4), pages 543-559, November.
- Arianto A. Patunru & Erna Zetha, 2010. "Indonesia's Savior: Fiscal, Monetary, Trade, or Luck?," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(4), pages 721-740, April.
- Nagesh Kumar & Prabir De, 2008. "East Asian Infrastructure Development in a Comparative Global Perspective : An Analysis of RIS Infrastructure Index," Development Economics Working Papers 22114, East Asian Bureau of Economic Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If references are entirely missing, you can add them using this form.