ROUTLEDGE LIBRARY EDITIONS: DEVELOPMENT EXPORT-ORIENTED INDUSTRIALISATION EXPORT-ORIENTED INDUSTRIALISATION The ASEAN Experience MOHAMMED ARIFF and HAL HILL Volume 49 Firstpublishedin1985 Thiseditionfirstpublishedin2011 byRoutledge 2ParkSquare,MiltonPark,Abingdon,Oxon,OX144RN SimultaneouslypublishedintheUSAandCanada byRoutledge 270MadisonAvenue,NewYork,NY10016 RoutledgeisanimprintoftheTaylor&FrancisGroup,aninformabusiness ©1985MohammedAriffandHalHill PrintedandboundinGreatBritain Allrightsreserved.Nopartofthisbookmaybereprintedorreproducedor utilisedinanyformorbyanyelectronic,mechanical,orothermeans,now knownorhereafterinvented,includingphotocopyingandrecording,orinany informationstorageorretrievalsystem,withoutpermissioninwritingfromthe publishers. BritishLibraryCataloguinginPublicationData AcataloguerecordforthisbookisavailablefromtheBritishLibrary ISBN13:978-0-415-58414-2(Set) eISBN13:978-0-203-84035-1(Set) ISBN13:978-0-415-59370-0(Volume49) eISBN13:978-0-203-83840-2(Volume49) Publisher’sNote Thepublisherhasgonetogreatlengthstoensurethequalityofthisreprintbut pointsoutthatsomeimperfectionsintheoriginalcopiesmaybeapparent. Disclaimer Thepublisherhasmadeeveryefforttotracecopyrightholdersandwelcomes correspondencefromthosetheyhavebeenunabletocontact. EXPORT-ORIENTED INDUSTRIALISATION: THE ASEAN EXPERIENCE MOHAMED ARIFF AND HAL Hill ALLEN AND UNWIN Sydney London Boston © Mohamed Ariff and Hal Hill 1985 This book is copyright under the Berne Convention. No reproduction without permission. All rights reserved. First published in 1985 Allen & Unwin Australia Pty Ltd 8 Napier Street, North Sydney NSW 2060 George Allen & Unwin (Publishers) Ltd 18 Park Lane, Hemel Hempstead, Herts HP2 4TE England Allen & Unwin Inc. 8 Winchester Place, Winchester, Mass. 01890 USA National Library of Australia Cataloguing -in -Publication entry: K.A. Mohamed Ariff, 1940- Export-oriented industrialisation. Includes index. ISBN 0 86861 783 0 (pbk.). 1. ASEAN. 2. Asia, Southeastern-Commercial policy. 2. Asia, Southeastern-Economic policy. 3. Asia, Southeastern-Industries. I. Hill, Hal. II. Title. 337.59 Library of Congress Catalog Card Number: 85-61869 Set in lO/llpt Times by Graphicraft Typesetters Ltd., Hong Kong Printed in Hong Kong by Color craft Ltd. Contents Tables vii Figures xi Abbreviations Xll Preface xiv 1 Introduction 1 Layout and organisation 5 2 The export drive: an overview 7 From import substitution to export orientation 13 Profile of the manufacturing sector 25 Issues in export-oriented industrialisation with special reference to ASEAN 34 Future prospects 56 Some policy considerations 65 3 Protection and market penetration 71 Protection for manufactures in ASEAN 72 ASEAN manufactured exports to developed countries: protection and market access 99 Conclusion and policy implications 113 4 Government regulation and industrialisation 117 The role of governments in ASEAN: an overview 119 Theories of economic regulation 121 The objectives and tools of industrial regulation in ASEAN 123 The system in practice and economic implications 129 The role of state enterprises 146 Conclusions and policy implications 151 5 Industrialisation and structural change 156 The dimensions of industrialisation in ASEAN 157 Changing comparative advantage and factor endowments 170 Changing comparative advantage: empirical evidence 179 Conclusions 194 v VI EXPORT-ORIENTED INDUSTRIALISA nON 6 Manufactured exports: performance and shifts in comparative advantage 196 The pattern and composition of exports 197 Export performance 209 Revealed comparative advantage 219 Conclusion 229 7 Conclusion and future prospects 230 The future outlook 232 Appendix 237 Notes 245 References 254 Index of Subjects 265 of Names 268 Tables 2.1 Basic economic data: ASEAN and middle income developing countries 8 2.2 Production structure of ASEAN economies 8 2.3 Commodity composition of ASEAN trade 1960s to 1980s 9 2.4 ASEAN: data relating to international finance 11 2.5 External debt, selected developing countries 12 2.6 Structure of ASEAN manufacturing value added, 1970-1980 27 2.7 Total net resource flows to Western Pacific developing countries, 1969-1982 30 2.8 Foreign investment in ASEAN by major investor country/region 32 2.9 Direct foreign investment in ASEAN manufacturing by major industry group, 1972-1982 33 2.10 Basic data on export processing zones in ASEAN countries 35 2.11 Employment-output elasticities in ASEAN manufacturing 42 2.12 ASEAN manufactured exports to OECD markets and employment, 1975-1980 43 2.13 ASEAN: direct and total employment coefficients, 1975 45 2.14 ASEAN manufacturing sector: share of wages in gross value added, 1975 47 2.15 ASEAN manufacturing sector: input structure, 1975 49 2.16 ASEAN manufacturing sector: weighted average measures of spread effects, 1975 51 3.1 Comparison of simple averages of tariff rates in ASEAN, 1978 80 3.2 Nominal and effective protection in ASEAN and Northeast Asia, mid 1970s 82 3.3 Indonesia: effective rates of protection by major product group, 1971-1980 85 Vll Vlll EXPORT-ORIENTED INDUSTRIALISATION 3.4 Malaysia: nominal and effective rates of protection by product category, 1965-1978 86 3.5 Philippines: nominal and effective rates of protection by product category, 1961-1980s 88 3.6 Singapore: nominal and effective rates of protection, 1966, 1967 and 1979 89 3.7 Thailand: selected nominal and effective tariffrates, 1974, 1978 and 1982 90 3.8 Protection rates and import penetration ratios: ASEAN 97 3.9 Major developed countries: m.f.n. tariffs 102 3.10 Market penetration of manufactures in industrially advanced countries, 1970-1980 108 3.11 Growth and market penetration of ASEAN manufactures by major importing country, 1970-1980 108 3.12 Growth and market penetration of ASEAN manufactures by product group in industrially advanced countries, 1970-1980 109 3.13 ASEAN manufactured exports: import penetration ratios in industrially advanced countries, 1970-1980 111 3.14 ASEAN manufactured exports: import penetration ratios in industrially advanced countries by product and country, 1980 112 4.1 Government expenditure and employment, ASEAN, India and Korea 120 4.2 State enterprises in selected Indonesian manufacturing industries, 1974 148 5.1 Comparative industrialisation indicators, ASEAN, India, Korea 158 5.2 Indices of structural change in manufacturing, ASEAN and other countries, 1970s 162 5.3 Size distribution of Singapore manufacturing 1965-1982 166 5.4 Size distribution of Malaysian manufacturing 1968-1981 167 5.5 Size distribution of Indonesian manufacturing 1964-1974 167 5.6 Size distribution of Philippine manufacturing, 1961-1975 168 5.7 The growth of ASEAN manufactured exports, 1962-1982 169 5.8 Export-output ratios of ASEAN manufacturing, 1970-1980 169