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Competitiveness
Report
ASEAN Competitiveness Report 2010
Foreword by
Michael E. Porter
Professor
Harvard Business School
20
10
Marn-Heong Wong
Rakhi Shankar
Ruby Toh
Christian Ketels
Special Advisor
ASEAN
Competitiveness
Report
20
10
Foreword by
Michael E. Porter
Professor
Harvard Business School
Marn-Heong Wong
Rakhi Shankar
Ruby Toh
Christian Ketels
Special Advisor
ACKNOWLEDGEMENTS
This Report was prepared by a research team led by Dr Marn-Heong Wong, Assistant Professor at the Lee Kuan Yew School
of Public Policy (LKYSPP), National University of Singapore. Dr Christian Ketels, Special Advisor to the ACI and a member
of the Harvard Business School faculty at Professor Michael E. Porters Institute for Strategy and Competitiveness, provided
invaluable input on the analytical structure of the Report. The research input and support provided by Ng Kwan Kee and
Kiran Safwan Malik of the ACI and LKYSPP at various stages of the project is gratefully acknowledged. We would also like
to thank Anthon Kiong for providing the photo on the cover of the Report.
All views and opinions in this Report remain the sole responsibility of the authors.
ii
ASEAN
Competitiveness
Report
20
10
FOREWORD
The Asia Competitiveness Institute (ACI) was created to provide policy-relevant analysis and recommendations on competitiveness in
Singapore and the ASEAN region, drawn on rich data and a comprehensive competitiveness framework. The ASEAN Competitiveness
Report, following studies on Singapore (2009) and Vietnam (2010), is another important milestone in realizing this vision. On behalf of
ACIs International Advisory Panel, I would like to congratulate the ACI team for this important piece of work.
Covering a region of ten countries ranging from poor, landlocked Laos to rich, island city Singapore, the ASEAN Competitiveness Report
highlights the importance of regions, or groups of neighboring countries, to competitiveness and economic prosperity at the national
level. Regions are important because neighbors are a nations most natural trading and investment partners. The region provides accessible
markets for local firms, especially important for those with limited international experience. Economic development and prosperity
can be greatly enhanced by a healthy neighborhood. National productivity can be greatly enhanced through regional coordination of
economic policies. Neighbors almost inevitably affect a countrys reputation and image. Regional economic integration makes all nations
more attractive as locations for FDI, and helps countries to gain greater weight in international relations.
The ASEAN Competitiveness Report highlights the challenging position that ASEAN finds itself in in 2011. Following the traumatic
experience of the Asian financial crisis, the region is now faced with a large and increasingly powerful Chinese economy in the North
and a huge Indian economy in the West also making rapid progress. ASEAN has stabilized its position and proven to be quite resilient
in the face of the recent global crisis, despite its high dependency on exports. But the region will ultimately need to define its role and
competitive strengths at the crossroads of these two emerging economic giants.
The Report explores how regional collaboration across the heterogeneous set of ASEAN members can help individual countries to address
these challenges. ASEAN can share policy knowledge and spur improvement in areas like capital market infrastructure, human resource
development, rule of law, cluster development, and indigenous enterprise development. These are areas where many ASEAN members are
suffering from weaknesses but can benefit from some countries that are leaders. ASEAN can enable the strengthening of linkages among
related clusters across the region. In clusters such as information technology, there are elements of an ASEAN production system, i.e., a
set of related clusters in the region that cover different parts of the value chain. In macroeconomic policy, ASEAN has already made some
steps towards better policy cooperation through the Chiang Mai initiative covering multilateral currency swaps.
In the ASEAN Charter and the plans for an ASEAN Community, the region has outlined ambitious goals. The recommendations
contained in this Report are fully consistent with this vision, while offering specific steps for moving forward. However, the Report also
highlights the need for ASEAN to be strengthened as an institution in order to have sufficient weight and influence to move from vision
to action. Collective action, especially among a group of disparate countries, only occurs if there is strong political will and sufficient
institutional capacity to make change happen.
Our ambition at ACI is to provide government and private sector leaders with objective data and powerful analysis to enable more
informed policy decisions. Whether or not leaders agree with every conclusion or recommendation, my hope is that this first ASEAN
Competitiveness Report will achieve this purpose. This Report will become a central part of ACIs portfolio of activities. We would
welcome the guidance, support, and collaboration of the private sector, universities, and government from throughout the region in
advancing this agenda.
Michael E. Porter
Bishop William Lawrence University Professor, Harvard Business School
Chair of the International Advisory Panel, Asia Competitiveness Institute
ASEAN COMPETITIVENESS REPORT
iii
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ASEAN
Competitiveness
Report
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10
KEY MESSAGES
ASEAN is facing profound changes in the global economic climate with the rise of China and India and weakened
economic prospects in major advanced countries. It is also entering a new phase in its cooperation as members move
towards building an ASEAN Community by 2015.
ASEAN economies have weathered the global crisis well, but a longer-term competitiveness review highlights the need
and scope to substantially raise competitiveness across ASEAN economies and for ASEAN as a whole.
ASEANs current prosperity or GDP per capita, which is the outcome of past competitiveness, is behind that of China
and much lower than that of world leaders. Its shares of world exports and inward foreign direct investment flows have
either fallen or stagnated over the last decade.
ASEANs ranking on competitiveness fundamentals, as measured by a wide range of macroeconomic and microeconomic
factors, is 57 of 132 countries in 2010. This position has remained relatively unchanged over the last five years.
While the priority issues that each country has to address to raise national competitiveness may differ, this Report has
shown that there is much ground for policy learning and action at the regional level.
Collectively, it is imperative for ASEAN to achieve deeper integration in a timely manner to generate new sources of
growth and reduce its reliance on traditional export markets in major advanced economies. At the same time, ASEAN
should expand its cooperation with external partners, in particular China and India, to tap opportunities offered by their
rapid growth.
ASEAN can extract greater gains from its integration efforts by adopting an integrated, multi-pronged ASEAN
Competitiveness Agenda that focuses on areas where collaboration creates direct benefits for participants.
To create an attractive environment for local and foreign businesses, it is recommended that ASEAN builds on its
relative strengths to intensify cluster development, strengthen capital market infrastructure, nurture local enterprises
and step up macroeconomic policy dialogue. ASEAN also needs to urgently address its main weaknesses by promoting
administrative regulatory reforms, enhancing human resource development and strengthening the rule of law.
For ASEAN to successfully move from vision to action, its institutional mechanisms and capacity have to be strengthened
to enable both the ASEAN Secretariat and member economies to effectively fulfill the tasks required. The political will
to adhere to the blueprints for action is also paramount.
CEP
ABBREVIATIONS
CEPEA
CEPT
CLMV
AANZFTA
ACI
ACIA
CMIM
CPF
DB
Doing Business
East Asian Free Trade Area
EAFTA
EAS
EIU
Economist Intelligence
Unit
EU
European Union
FDI
FTA
AFTA
GCI
AIA
ADB
ADBI
AEC
AEM
AFAS
AIF
AMRO
ASEAN
ASEAN-6
ASEAN+3
ASEAN+6
ASEAN-BAC
ASEAN-ISIS
vi
ASEAN-Australia-New
Zealand Free Trade Area
Asia Competitiveness
Institute
ASEAN Comprehensive
Investment Agreement
Comprehensive Economic
Partnership
Comprehensive Economic
Partnership for East Asia
Common Effective
Preferential Tariff
Cambodia, Laos, Myanmar
and Vietnam
Chiang Mai Initiative
Multilateralization
ASEAN Infrastructure
Fund
ASEAN+3
Macroeconomic Research
Office
Association of Southeast
Asian Nations
Indonesia, Malaysia,
Philippines, Singapore,
Thailand and Brunei
ASEAN, China, Japan,
South Korea
ASEAN, China, Japan,
South Korea, India,
Australia, New Zealand
ASEAN Business Advisory
Council
ASEAN Institute of
Strategic and International
Studies
GDP
GEM
Gender Empowerment
Measure
GNI
HDI
ICT
IMF
IT
LPI
NAFTA
Human Development
Index
Information and
Communications
Technology
International Monetary
Fund
Information Technology
Logistics Performance
Index
North American Free
Trade Agreement
NSW
PPP
R&D
Balance of Payments
ROO
Compound Annual
Growth Rate
Rules of Origin
SIPI
ASW
ATIGA
BOP
CAGR
GDI
Global Competitiveness
Index
Gender-related
Development Index
SME
UN
United Nations
UNCTAD
UNDP
UNESCO
UNU-WIDER
US
USPTO
United Nations
Conference on Trade and
Development
United Nations
Development Program
United Nations
Educational, Scientific and
Cultural Organization
World Institute for
Development Economics
Research of the United
Nations University
United States
US Patent and Trademark
Office
WB
World Bank
WDI
World Development
Indicators
WEF
WGI
WHO
WTO
Worldwide Governance
Indicators
World Health
Organization
World Trade Organization
vii
Contents
Foreword ........................................................................................................................................................................................... iii
Key Messages ................................................................................................................................................................................... v
Abbreviations .................................................................................................................................................................................. vi
Executive Summary ....................................................................................................................................................................... xiv
Chapter 1: Introduction
ASEANs Competitiveness Challenges ........................................................................................................................................ 2
Conceptual Approach of the Report ............................................................................................................................................ 3
Report Outline ................................................................................................................................................................................. 4
Chapter 2: Context for Regional Cooperation
Macroeconomic Environment ....................................................................................................................................................... 8
ASEAN .......................................................................................................................................................................................... 8
Recent Macroeconomic Performance ........................................................................................................................................ 8
Macroeconomic Policies and Growth Prospects ....................................................................................................................... 12
The Global Context ...................................................................................................................................................................... 14
Global Economic Outlook .......................................................................................................................................................... 14
Global Rebalancing .................................................................................................................................................................... 15
ASEANs Trade and Investment Linkages ............................................................................................................................. 15
ASEAN Cooperation Model .......................................................................................................................................................... 16
Towards an ASEAN Economic Community .......................................................................................................................... 17
Trade and Investment Liberalization and Facilitation ................................................................................................. 18
Enhancing ASEAN Connectivity ................................................................................................................................. 19
ASEANs Engagement with Stakeholders .................................................................................................................... 20
ASEAN-plus Initiatives .................................................................................................................................................. 20
Trade and Investment Agreements ................................................................................................................................ 20
Financial Cooperation .................................................................................................................................................. 21
Institutional Framework for Collaboration ................................................................................................................... 22
Summary ............................................................................................................................................................................. 23
Chapter 3: Competitiveness Performance of ASEAN
Profile of the ASEAN Region ......................................................................................................................................................... 28
Competitiveness Performance ........................................................................................................................................................ 30
Standard of Living ............................................................................................................................,,,,,,,,,,,,,,............................. 30
Prosperity .................................................................................................................................................................................... 30
Distribution of Prosperity .......................................................................................................................................................... 31
Quality of Life ............................................................................................................................................................................ 32
The Elements of Prosperity ......................................................................................................................................................... 33
Labor Productivity ..................................................................................................................................................................
34
34
viii
Contents (continued)
Intermediate Economic Outcomes ............................................................................................................................................... 36
Exports ........................................................................................................................................................................................... 36
Exports by Clusters .................................................................................................................................................................... 37
Investments ................................................................................................................................................................................... 38
Domestic Gross Fixed Capital Investment .............................................................................................................................. 39
Inward Foreign Direct Investment .......................................................................................................................................... 40
Outward Foreign Direct Investment ....................................................................................................................................... 42
Innovation ..................................................................................................................................................................................... 43
Entrepreneurship .......................................................................................................................................................................... 44
Summary ........................................................................................................................................................................................... 45
Chapter 4: ASEAN Competitiveness Fundamentals
Regional Competitiveness ........................................................................ 50
Macroeconomic Competitiveness ............................................................................................................................................. 50
Microeconomic Competitiveness .............................................................................................................................................. 51
National Competitiveness across ASEAN Countries ............................................................................................................... 58
Brunei ............................................................................................................................................................................................. 58
Cambodia ...................................................................................................................................................................................... 59
Indonesia ........................................................................................................................................................................................ 60
Malaysia ......................................................................................................................................................................................... 61
Philippines ..................................................................................................................................................................................... 63
Singapore ....................................................................................................................................................................................... 64
Thailand ......................................................................................................................................................................................... 65
Vietnam ......................................................................................................................................................................................... 66
Analysis with Additional Competitiveness Indicators .............................................................................................................. 69
Summary ........................................................................................................................................................................................... 73
Chapter 5: Assessment and Policy Recommendations
Key Challenges in a Changing Global Context .......................................................................................................................... 78
ASEANs Competitiveness Performance ..................................................................................................................................... 78
ASEANs Competitiveness Fundamentals .................................................................................................................................. 80
Main Areas of Strengths and Weaknesses ................................................................................................................................ 80
Strengths ..................................................................................................................................................................................... 80
Weaknesses .................................................................................................................................................................................. 81
Prosperity and Competitiveness Fundamentals ...................................................................................................................... 82
ASEAN, China and India .......................................................................................................................................................... 82
Towards an ASEAN Competitiveness Agenda .......................................................................................................................... 83
Building on Strengths .................................................................................................................................................................. 84
Addressing Weaknesses ............................................................................................................................................................... 85
Strengthening Implementation ..................................................................................................................................................... 86
Conclusion ........................................................................................................................................................................................ 86
ASEAN COMPETITIVENESS REPORT
ix
Boxes
Box 4.1
Box 4.2
Box 4.3
Box 4.4
Box 4.5
ASEAN-China-India ...................................................................................................................................
Laos and Myanmar .......................................................................................................................................
Economic Freedom in ASEAN ..................................................................................................................
Ease of Doing Business in ASEAN ............................................................................................................
Logistical Performance in ASEAN ............................................................................................................
55
68
69
71
72
xvii
3
9
9
10
10
11
11
12
13
13
14
14
15
16
16
17
28
29
30
30
31
32
32
33
33
34
34
35
35
36
37
37
38
38
39
39
40
40
41
Figures
Figure A
Figure 1.1
Figure 2.1
Figure 2.2
Figure 2.3
Figure 2.4
Figure 2.5
Figure 2.6
Figure 2.7
Figure 2.8
Figure 2.9
Figure 2.10
Figure 2.11
Figure 2.12
Figure 2.13
Figure 2.14
Figure 2.15
Figure 3.1
Figure 3.2
Figure 3.3
Figure 3.4
Figure 3.5
Figure 3.6
Figure 3.7
Figure 3.8
Figure 3.9
Figure 3.10
Figure 3.11
Figure 3.12
Figure 3.13
Figure 3.14
Figure 3.15
Figure 3.16
Figure 3.17
Figure 3.18
Figure 3.19
Figure 3.20
Figure 3.21
Figure 3.22
Figure 3.23
Figures (continued)
Figure 3.24
Figure 3.25
Figure 3.26
Figure 3.27
Figure 3.28
Figure 3.29
Figure 3.30
Figure 3.31
Figure 3.32
Figure 4.1
Figure 4.2
Figure 4.3
Figure 4.4
Figure 4.5
Figure 4.6
Figure 4.7
Figure 4.8
Figure 4.9
Figure 4.10
Figure 4.11
Figure 4.12
Figure 4.13
Figure 4.14
Figure 5.1
Figure 5.2
Figure 5.3
41
42
42
43
43
44
45
45
46
51
53
55
58
60
61
62
63
64
65
67
70
71
73
80
83
84
xviii
xviii
22
31
52
52
53
54
54
56
57
68
70
71
73
81
81
Tables
Table A
Table B
Table 2.1
Table 3.1
Table 4.1
Table 4.2
Table 4.3
Table 4.4
Table 4.5
Table 4.6
Table 4.7
Table 4.8
Table 4.9
Table 4.10
Table 4.11
Table 5.1
Table 5.2
xi
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ASEAN
Competitiveness
Report
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Executive
Summary
xiii
EXECUTIVE
SUMMARY
The Association of Southeast Asian Nations (ASEAN) is
facing profound changes in the global economic climate as
well as undergoing a new phase in its development towards
deeper integration. The global economic environment post2008 crisis is characterized by weakened economic prospects
in major advanced countries and the growing economic
might of China and India.
From five countries coming together to form an association
in 1967 primarily to promote peace and stability in the
Southeast Asian region, ASEAN has morphed 43 years later
into a ten-member organization with a legal personality with
the signing of the ASEAN Charter in 2007. Despite the
diversity that remains among members in levels of economic
development, culture, ethnicity and language, ASEAN has
ambitious plans to form an ASEAN Community that is
politically cohesive, economically integrated and socially
responsible by 2015.
What do these economic and institutional changes imply
for ASEANs medium-term competitiveness? What can
ASEAN members do collectively and individually to
address key challenges?
The ASEAN Competitiveness Report 2010 is the inaugural
assessment of the regions competitiveness by the Asia
Competitiveness Institute (ACI) at the Lee Kuan Yew
School of Public Policy, National University of Singapore.
The Report casts into perspective the dynamics of economic
conditions and institutional developments as well as
the longer-term economic performance of ASEAN and
examines the fundamental competitiveness of the region.
The competitiveness analysis is organized based on the
conceptual framework developed by Professor Michael
Porter of the Harvard Business School and Chairman of
ACIs International Advisory Panel. In recognition of both
the varying circumstances across ASEAN economies and
ASEANs resolve to seek unity in diversity, the analysis is
conducted at two levels overall ASEAN and by individual
ASEAN country. The Report seeks to explore ASEANs
global competitiveness position if it were a single economic
entity. It also reviews the competitiveness of each member
country to identify areas of strengths and weaknesses that
prevail across more of the ASEAN countries that are well
suited for policy sharing and common policy action at
the regional level. The Report aims to offer suggestions
on the direction of policies that can be given emphasis in
the ASEAN process. It is also hoped that analysis at the
individual country level will assist policy makers in the
identification of areas for priority national action.
xiv
Conceptual Approach
The competitiveness analysis in this Report adopts the
competitiveness framework developed by Michael Porter.
The attractiveness of the Porter framework lies in its
malleability to the analysis of any situation by capturing the
role of various factors on competitiveness without the need
for a priori assumptions. Porters approach is particularly
useful when faced with a diversity of impact factors with
varying importance in determining competitiveness, as in
the case of ASEAN.
Competitiveness determines the productivity with which
a country or region uses its land, labor, capital and other
resources. Productivity sets the standard of living through
returns on factors of production (wages, rent, etc.) that
Summary of Findings
Context for Regional Cooperation
The ASEAN region has rebounded from the 2008 global
economic crisis that had affected economies unevenly.
Prompt macroeconomic policy responses, low public debt,
resilient domestic demand and a rebound in exports have
contributed to the turnaround. Resource-rich ASEAN
countries have also benefited from high commodity prices.
The global economic recovery process has been characterized
by a duality in the post-crisis growth paths of ASEAN and
the rest of developing Asia and major advanced economies.
The Asian economies, particularly, China and India, are
outperforming major advanced economies in economic
growth, and this is precipitating changes in the structure of
the global economy that would require ASEAN to adjust
its own economic structure to enable it to maximize its
competitiveness and find complementarities with other
high-growth economies in the region. There is a need to
reduce export dependence, especially to the developed
economies, and develop intra-regional and domestic
demand, as a global rebalancing of current accounts is set
in motion.
The outlook for ASEAN economies is positive, although
growth is expected to moderate in 2011 from the sharp
xv
xvi
FIGURE A:
Competitiveness
Profile of ASEAN
Region 2010
GDP pc (79)
Micro (49)
National Business
Environment (49)
Related and Supporting
Industries (37)
Demand Conditions
(56)
Macro (64)
Company Operations
and Strategy (45)
Strategy (44)
Org. Practices
(48)
Internationalization (45)
Social Infrastructure
and Pol. Institutions
(66)
Macroeconomic Policy
(55)
Political Institutions
(57)
Rule of Law (72)
Quintile Rankings
1 (Top 20%)
Human
Development (72)
2
3
4
5
Logistic (64)
Capital (42)
Comm. (68)
xvii
table A:
Top-Three Areas
of Relative
Strength within
Each ASEAN
Country
Source: Authors analysis
based on unpublished
data in Delgado et al.
(2010); raw data from
World Economic Forum,
Executive Opinion Survey
2009, 2010.
Singapore
Brunei
Malaysia
Administrative
Infrastructure
Macroeconomic
Policy
Supporting
& Related
Industries &
Clusters
Context for
Strategy &
Rivalry
Rule of Law
Logistical
Infrastructure
Human
Development
Indonesia
Philippines
Macroeconomic
Policy
Supporting
& Related
Industries &
Clusters
Organization
-al Practices
Supporting
& Related
Industries &
Clusters
Context for
Strategy &
Rivalry
Capital
Market
Infrastructure
Strategy &
Operational
Effectiveness
Macroeconomic
Policy
Capital
Market
Infrastructure
Political
Institutions
Organization
-al Practices
Supporting
& Related
Industries &
Clusters
Capital
Market
Infrastructure
Supporting
& Related
Industries &
Clusters
Political
Institutions
Logistical
Infrastructure
table b:
Top-Three
Areas of
Relative
Weakness
within Each
ASEAN Country
Source: Authors
analysis based on
unpublished data in
Delgado et al. (2010);
raw data from World
Economic Forum,
Executive Opinion
Survey 2009, 2010.
xviii
Singapore
! Supporting
Brunei
!Administrative
& Related
Industries &
Clusters
Infrastructure
! Internationali-
!Internationali -
zation of Firms
! Strategy &
Operational
Effectiveness
Malaysia
!Human
Development
!Rule of Law
Thailand
& Related
Industries &
Clusters
Communications
!
Infrastructure
Cambodia
Thailand
! Political
Institutions
! Rule of Law
zation of Firms
!Supporting
Vietnam
! Human
Development
Indonesia
Philippines
Vietnam
Cambodia
!Administrative
!Administrative
!Macroeconomic
!Communications
Infrastructure
Infrastructure
Policy
Infrastructure
!Administrative
!Human
Infrastructure
Development
!Logistical
!Rule of Law
!
Communications
Infrastructure
!Logistical
!Human
!Political
Development
Infrastructure
Institutions
Infrastructure
xix
Addressing Weaknesses
Strengthening Implementation
Administrative Infrastructure
ASEANs least competitive area is its administrative
infrastructure. Many of the ASEAN countries are
particularly weak in their administrative infrastructure due
to the time and procedures required to start businesses as
well as burdensome customs procedures. Urgent action is
required for ASEAN countries to work towards clearlydefined targets in reducing administrative red tape. Such
regulatory reforms will also enhance ASEANs attractiveness
as a business investment destination.
xx
Conclusion
The assessment of the competitiveness of ASEAN as a whole
and its member countries has been conducted against the
backdrop of profound changes in the global economic
landscape following the 2008 global crisis.
Over the last decade, ASEANs economic performance has
been stable. However, it has not taken big strides unlike in
the period before the 1997 Asian financial crisis. ASEANs
position on competitiveness fundamentals as measured by a
wide range of macroeconomic and microeconomic factors
is above the world average, but its ranking has remained
relatively unchanged over the last five years.
xxi
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Competitiveness
Report
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Chapter 1
Introduction
INTRODUCTION
Figure 1.1
Competitiveness
Framework:
Foundations of
Prosperity
Macroeconomic Competitiveness
Macroeconomic
Policy
Rule of
Law
Organizational
Practices
Microeconomic Competitiveness
Monetary
Policy
Company Operations
and Strategy
Cluster
Development
Supporting
Factor
Context for and
Demand
Related
(input) Strategy and Industries Conditions
Conditions
Rivalry
and Clusters
Fiscal
Policy
Internationalization
of Firms
National Business
Environment
Logistical
Infrastructure
Communications
Infrastructure
Administrative
Infrastructure
Capital Market
Infrastructure
Innovation
Infrastructure
Endowments
Natural
Resources
Geographical
Location
Size
Prosperity
Report Outline
The rest of the Report is organized in four chapters.
Chapter 2 presents the macroeconomic and institutional
contexts for regional cooperation. The first part discusses
the recent macroeconomic performance of individual
ASEAN countries as well as the changing global economic
context post-global crisis. The second part reviews the state
of regional cooperation among member countries and
between ASEAN and its external partners, with a focus
on economic initiatives. It also assesses the institutional
framework for cooperation.
Chapter 3 provides a profile of the region and analyzes
trends in the competitiveness performance of ASEAN and
individual member countries over the last two decades. The
ultimate goal of competitiveness, namely, an increase in
prosperity or the standard of living of people in the region is
assessed using the income measure of GDP per capita as well
as measures of the distribution of prosperity and quality of
life that relate to poverty reduction, income inequality and
human capacity development. A second section examines
the main elements of prosperity growth: labor productivity,
labor mobilization and purchasing power. The last section
assesses the regions intermediate economic outcomes
through indicators such as exports, domestic and foreign
investment, innovation and entrepreneurship. ASEANs
competitiveness performance will be benchmarked against
that of the major developed economies of the US, EU and
Japan, as well as compared with the performance of China
and India.
Competitiveness fundamentals that drive the longer-term
competitiveness performance of ASEAN and its member
countries are evaluated in Chapter 4. Factors in the two
building blocks that lay the foundations for competitiveness
as identified in Porters framework, namely, macroeconomic
competitiveness and microeconomic competitiveness, are
analyzed. The first part of the chapter assesses the ASEAN
Chapter References
ASEAN (2010). ASEANstats, http://www.aseansec.org/22122.htm
Ketels, Christian H.M. (2009). State of the Region Report 2009: Boosting the Top of Europe.
Porter, Michael E., Mercedes Delgado, Christian Ketels and Scott Stern (2008). Moving to a New Global Competitiveness
Index, in The Global Competitiveness Report 2008-2009, World Economic Forum.
ASEAN
Competitiveness
Report
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Chapter 2
Context for
Regional
Cooperation
Macroeconomic Environment
ASEAN
Recent Macroeconomic Performance
ASEAN has registered fairly strong growth along with the
rest of Asia in 2010, buoyed by robustness in the economies of
China and India. Although the ASEAN region experienced
its largest slowdown in annual growth in 2009 of just 1.2
percent since the Asian financial crisis of 1997-98, quarterly
growth figures have shown that affected economies started
to register positive growth from the fourth quarter of 2009.
Various factors have underpinned the economic turnaround
in ASEAN, among which are prompt macroeconomic
policy responses, low public debt and resilient domestic
demand. Strengthened capital adequacy ratios of banks in
ASEAN following the Asian financial crisis also helped to
minimize the regions direct exposure to subprime assets
(only about 0.09 percent) resulting in comparatively less
pressure on its balance sheets compared with the rest of the
world at the onset of the 2008 crisis.
GDP Growth
Available data show that ASEAN economies have recorded
strong growth in 2010, particularly in the first half of the
year (Figures 2.1 & 2.2). Although the higher growth rates
were partly due to the lower base in 2009 and the stimulus
measures implemented by governments, they were also
driven by a rebound in global trade and a broad-based
FIGURE 2.1:
Quarterly
Real GDP
Growth,
ASEAN
Countries
25
20
Indonesia
Malaysia
Philippines
Singapore
Thailand
08Q1
6.2
7.6
3.9
7.8
6.4
08Q2
6.3
6.5
3.7
2.6
5.2
08Q3
6.2
4.9
4.6
-0.2
2.9
08Q4
5.3
0.1
2.8
-2.4
-4.2
09Q1
4.5
-6.2
0.5
-9.0
-7.1
09Q2
4.1
-3.9
1.2
-1.8
-4.9
15
10
5
0
07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4
-5
Source: EIU; 10Q4
figures are updated
from national sources. -10
-15
figure 2.2:
Annual Real
GDP Growth,
ASEAN
Countries
20
% change, year-on-year
15
10
5
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-5
Brunei
Cambodia
Indonesia
Laos
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam
2007
0.2
10.2
6.3
7.8
6.5
3.4
7.1
8.8
4.9
8.5
2008
-1.9
5.0
6.0
7.2
4.7
1.1
3.7
1.5
2.5
6.2
2009
-1.8
-1.5
4.5
7.6
-1.7
1.8
1.1
-0.8
-2.2
5.3
2010
1.0
4.1
6.1
8.0
7.2
3.1
7.3
14.5
7.8
6.8
-10
FIGURE 2.3:
Quarterly
Merchandise
Exports Growth,
ASEAN Countries
140
120
100
80
60
40
20
0
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
-20
-40
Source: EIU.
-60
Cambodia
Indonesia
Laos
Malaysia
Export Growth
The export growth of ASEAN countries affected by the
global crisis rebounded strongly from the last quarter of
2009. From double-digit contractions in exports over the
first three quarters of 2009, most of the countries registered
double-digit export increases in the first half of 2010 of
between 34 and 55 percent before moderating in the third
quarter (Figure 2.3). The dip in export growth in Vietnam in
first quarter 2010 was due to more than $1 billion earned in
the first quarter of the previous year from re-exporting gold
and also due to reduction in exports of crude oil and coal,
Vietnams key export products. Vietnams exports increased
by 35.3 percent in the third quarter.
The robust export performance of ASEAN countries was
in line with the broader global trade recovery in 2010,
which has been described by the World Trade Organization
(WTO) as the fastest-ever annual expansion recorded in
global commerce in a data series going back to 1950. In
September 2010, the WTO revised its forecast for world
trade growth in 2010 from 10 to 13.5 percent. While the
exports for developed economies are expected to grow by
11.5 percent, the rest of the world is expected to register an
export growth of 16.5 percent.
FIGURE 2.4:
Unemployment
Rates, ASEAN
Countries
12
Myanmar
Philippines
Singapore
Thailand
Vietnam
Unemployment
With healthier economic conditions from late 2009, worries
over escalating unemployment have diminished. Singapores
average unemployment rate in 2009 was 3.0 percent, up
from 2.25 percent in 2008. Unemployment reached a fiveyear high of 3.3 percent in the third quarter of 2009, but fell
to 2.3 percent in fourth quarter 2009, and has been around
2.2 percent in 2010 (Figure 2.4).
Malaysia and the Philippines saw slight increases in
unemployment in 2009, with the highest quarterly rates
of 4.0 and 7.7 percent respectively in first quarter 2009.
Malaysias unemployment rate declined to 3.2 percent by
the third quarter of 2010. The Philippines unemployment
rate moderated towards the end of 2009 but climbed to
8.0 percent in the second quarter of 2010, before falling to
6.9 percent in the third quarter. Compared with the other
ASEAN countries, Thailands unemployment rate has been
relatively low, at 1.5 percent in 2009 and 1.4 percent in
2008. Vietnams unemployment rate has remained relatively
stable at 4.6 percent in 2009 from 4.7 percent in 2008.
Indonesia, which has the highest unemployment rate
between 2006 and 2009 among the ASEAN countries
Average, %
10
8
6
4
2
10
0
2006
2007
2008
Indonesia
Malaysia
Myanmar
Singapore
Thailand
Vietnam
2009
Philippines
2010
figure 2.5:
Consumer
Prices,
ASEAN
Countries
45
% change, year-on-year
40
35
30
25
20
15
10
5
0
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
-5
Source: EIU.
-10
Brunei
Cambodia
Indonesia
Laos
Malaysia
Source: EIU.
Thailand
Vietnam
% of GDP
70
60
48
50
40
39
46
37
27
30
Notes: 1. Figures
for Brunei (2008),
Cambodia (2008,
2009), Laos (2009)
and Myanmar (2007,
2008, 2009) are EIU
estimates. e refers to
EIU estimates for all
countries in 2010.
Singapore
80
Philippines
Inflation
Inflationary pressures that had become a major concern for
ASEAN economies in the first half of 2008, started to ease
in the third quarter of 2008 with the onset of the economic
downturn. Although inflation rates in 2010 have remained
below the pre-crisis peaks, they are again fanning concerns
as rates have been climbing, stoked by economic recovery,
higher food and fuel prices and a surge in capital inflows to
the region (Figure 2.5).
Figure 2.6:
Current
Account
Balances,
ASEAN
Countries
Myanmar
16 18 16
20
10
2 1
3 2
19 18 19
12
3 3
5 5
-0.4
-6
-10 -8 -8.5
-10
-20
Brunei
Cambodia
-10
Indonesia
Laos
2007
Malaysia
2008
2009
Myanmar
Philippines
Singapore
Thailand
-7 -5
-12
Vietnam
2010 e
11
Figure 2.7:
Exchange Rates,
ASEAN Countries
120
115
110
105
100
95
90
85
80
75
70
Source: EIU.
08Q1
08Q2
08Q3
08Q4
09Q1
Indonesia
Laos
Malaysia
Philippines
Singapore
Thailand
Vietnam
Exchange Rates
Nominal exchange rates in most ASEAN countries
depreciated in late 2008 and early 2009, in concert
with the deterioration of current account balances. In
general, ASEAN currencies were cushioned against major
disruptions in the foreign exchange market due to the
regions low exposure to subprime assets and high foreign
exchange reserves.
The currencies of most ASEAN countries have been
appreciating since the second half of 2009 and into 2010. By
the third quarter of 2010, the Indonesian rupiah, Malaysian
ringgit, Singapore dollar and Thai baht have exceeded their
pre-crisis levels in the first half of 2008, while the Philippine
peso has yet to recover its value (Figure 2.7).
An exception is the Vietnamese dong, which has been
depreciating since early 2008 and has continued on a
downtrend. The Vietnamese authorities devalued the dong
thrice between November 2009 and August 2010 by about
11 percent against the US dollar. The devaluations were
necessitated by the widening spread between the black
market exchange rate and the reference rate of Vietnams
central bank, which was due to the high trade deficits and
inflation and the shifting preference for US dollars and gold
over local-currency assets.
A continuing trend of appreciation of major ASEAN
currencies against the US dollar would contribute to
correcting the global current account imbalances that
exist between the developed and developing countries,
although the effect may be moderated by reduced export
competitiveness if other currencies in the region do not also
appreciate.
ASIA COMPETITIVENESS INSTITUTE
09Q3
Cambodia
12
09Q2
09Q4
10Q1
10Q2
10Q3
Myanmar
FIGURE 2.8:
Policy Rates,
ASEAN Countries
16
Vietnam
14
12
10
Indonesia
8
Philippines
Thailand
Malaysia
2
0
J
F M A M J
J A S O N D
F M A M J
2008
40
J A S O N D
F M A M J
2009
FIGURE 2.9:
Fiscal Balances,
ASEAN Countries
J A S O N
2010
% of GDP
31.6
30
27.9
22.5
20
10
3.1
-0.7 -0.6
-1.6
-2.9 -2.9
Brunei
Cambodia Indonesia
Laos
-3.0
-3.2
-4.8
-6.3
-10
-20
-0.2
-2.8 -2.8 -3.3
-7.0
Malaysia
2007
2008
-3.5 -4.5
-0.9
1.4
-1.0
-3.9
-2.3
-1.1
-4.4
Thailand
-5.4
-7.3
-9.0
Vietnam
2009
Source: EIU.
13
FIGURE 2.10:
GDP Growth
Forecasts, ASEAN
Countries
16
% change, year-on-year
14
12
Brunei
Cambodia
Indonesia
Laos
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam
10
8
6
4
2
2011f
E
I
W
1.4 1.0 -
2012f
E
I
W
1.2 1.2 -
4.4 5.0
-2
2007
2008
2009
2011f
2010
2012f
-4
Figure 2.11:
GDP Growth
Rates, Selected
Countries/
Regions
20
% change, year-on-year
15
10
6.6
6.3
5.6
5.2
3.6
1.2
2007
2009
2011f
2010
2012f
-5
-10
14
2008
ASEAN
China
India
EU
Japan
US
World
Figure 2.12:
World Current
Account
Balances
2.50
% of world GDP
2.00
1.50
1.00
0.50
0.00
2006
2007
2008
2010e
2009
2011e
2012e
2013e
2014e
-0.50
-1.00
-1.50
-2.00
ASEAN
China
India
EU
Japan
United States
Middle East
to developed markets in the West towards greater intraregional trade and greater domestic consumption and
investment. In this regard, it is necessary for governments
to provide better social safety nets so that there would be
less need for precautionary savings. Improvements in overall
living standards as the economies develop would also spur
greater consumer demand and help to shift resources toward
production for local as well as regional consumers.
ASEANs Trade and Investment Linkages
The regions trade and investment linkages have been
predominantly with countries outside ASEAN, although
there have been changes in the relative importance of
external partners over time. This underscores the scope for
expanding intra-ASEAN trade and investments while at the
same time also emphasizes the need for ASEAN to remain
open.
ASEANs trade is mainly in goods (83 percent in 2009)
rather than in services. The shares of ASEANs merchandise
exports to and imports from the US, EU and Japan have been
decreasing. From 2002 to 2009, the share of exports to these
three destinations has fallen from a combined 42 percent to
31 percent and the share of imports from 42 percent to 32
percent (Figures 2.13 & 2.14). On the other hand, ASEANs
shares of exports to and imports from China and India
have been increasing. In the case of China, the shares have
doubled between 2002 and 2009. The changing pattern of
ASEANs trade can be attributed partly to developments in
production networks for manufactured goods in East Asia,
where ASEAN countries supplied components for final
assembly in China and then export to developed market
destinations. In 2009, 34 percent of ASEANs exports to
China were in parts and components1. Thus, while trade
between ASEAN and China has expanded significantly, a
considerable share is still tied to final demand from the West.
15
FIGURE 2.13:
Share of
ASEAN Exports
TO Selected
COUNTRIES/REGIONS
%
16.0
2002
14.6
11.6
5.1 2.2
22.6
27.9
2004
2006
2008
2009
10.1
US
11.5
9.6
EU
10.1
Japan
24.6
China
FIGURE 2.14:
Share of ASEAN
Imports FROM
Selected
COUNTRIES/REGIONS
3.3
India
30.8
ASEAN
%
2002
13.2
12.4
16.1
7.0 1.1
22.2
28.0
2004
2006
2008
2009
9.3
US
16
10.8
EU
11.4
Japan
13.3
China
1.7
24.3
India
29.1
ASEAN
FIGURE 2.15:
Share of ASEAN
FDI Inflows
from Selected
COUNTRIES/REGIONS
%
2002
-1.2
21.0
17.0
0.5
21.4
41.6
2004
2006
2008
20.6
5.6
US
EU
12.7
Japan
2.5 0.7
China
18.3
India
39.6
ASEAN
In 2009, ASEAN further adopted the ASEAN PoliticalSecurity Community and ASEAN Socio-Cultural
Community Blueprints towards a shared responsibility for
regional security and global integration and to enhance
cooperation in human development and narrow the
development gap between members. The theme in 2009 was
ASEAN Charter for ASEAN Peoples and the target was to
achieve an ASEAN Community by 2015.
Towards an ASEAN Economic Community
The AEC as envisaged would comprise four key interrelated
and mutually reinforcing characteristics: (i) a single market
and production base, (ii) a competitive economic region, (iii)
equitable economic development and (iv) integration into
the global economy. The AEC Blueprint sets clear targets,
actions and timelines for the implementation of various
measures from 2008 to 2015. To track progress towards
the AEC 2015, a scorecard mechanism was developed to
monitor and assess implementation.
The plan for an AEC builds on earlier ASEAN initiatives
to establish closer cooperation in trade and investment.
These building blocks include the ASEAN Free Trade
Area (AFTA) (1992), ASEAN Investment Area (AIA)
(1998), and the ASEAN Framework Agreement on
Services (AFAS) (1995). Through further liberalization and
facilitation measures, ASEAN aims to realize a single market
and production base in 2015. Accelerated liberalization and
integration is identified for 12 goods and services sectors.
These are: agro-based products, automotives, electronics,
fisheries, rubber-based products, textiles and apparels,
wood-based products, healthcare, e-ASEAN, tourism and
logistics services.
The case for an AEC is evident from several viewpoints.
An integrated economic community enjoys economies of
scale, lower production and transaction costs, enhanced
intra- and extra-regional trade and overall welfare gains.
With freer movement for goods, labor and capital among
member countries, there would be more efficient allocation
ASEAN COMPETITIVENESS REPORT
17
18
19
20
21
table 2.1:
CMIM
Contribution
Ratio
Countries
China
38.40
Japan
38.40
South Korea
19.20
Brunei
0.03
Cambodia
0.12
Indonesia
4.552
Laos
0.03
Malaysia
4.552
Myanmar
0.06
Philippines
4.552
Singapore
4.552
Thailand
4.552
Vietnam
1.00
22
Summary
The ASEAN countries weathered the recent global crisis
fairly well due to the safeguards adopted during the
Asian financial crisis, which insulated them from a shock
to the financial sector although the real sector suffered
some setbacks particularly in the more export-oriented
economies. Expansionary monetary and fiscal policies as
well as a rebound in exports contributed to the recovery.
The resource rich ASEAN countries also benefited from the
high commodity prices.
23
Endnotes
Authors calculations using data from UN Comtrade database.
Chapter References
ADB (2010a). Asian Development Outlook 2010: Macroeconomic Management Beyond the Crisis, Mandaluyong City,
Philippines: Asian Development Bank.
_____________ (2010b). Asian Development Outlook 2010 Update: The Future of Growth in Asia, Mandaluyong City,
Philippines: Asian Development Bank.
_____________ (2010c). Key Indicators for Asia and the Pacific 2010: The Rise of Asias Middle Class, Mandaluyong City,
Philippines: Asian Development Bank.
_____________ and Asian Development Bank Institute (2009). Infrastructure for a Seamless Asia, Tokyo: Asian Development
Bank Institute.
AFP (Agence France Presse) (2011). Indonesia posts 6.1% GDP growth in 2010: official, February 6, 2011.
ASEAN (2009a). ASEAN Charter for ASEAN Peoples, Statement by the ASEAN Chairman of the 14th ASEAN Summit,
http://www.asean.org/22389.htm.
____________ (2009b). Joint Media Statement of the 41st ASEAN Economic Ministers (AEM) Meeting, Bangkok, 13-14
August, 2009.
____________ (2010a). The Joint Ministerial Statement of the 13th ASEAN+3 Finance Ministers Meeting, Press Release,
May 2, 2010.
____________ (2010b). Master Plan on ASEAN Connectivity, October 2010.
ASEAN (2010c). ASEANstats, http://www.aseansec.org/22122.htm
ASEAN Secretariat (2008a). ASEAN Economic Community Blueprint, Jakarta: ASEAN Secretariat.
_____________ (2008b). The ASEAN Charter, Jakarta: ASEAN Secretariat.
_____________ (2009). Roadmap for an ASEAN Community 2009-2015, Jakarta: ASEAN Secretariat.
_____________ (2010). FTA Agreements, Jakarta: ASEAN Secretariat, http://www.aseansec.org/Fact%20Sheet/AEC/
AEC-12.pdf
_____________ (2010). Charting Progress Towards Regional Economic Integration: ASEAN Economic Community Scorecard,
Jakarta: ASEAN Secretariat.
Bernama The Malaysian National News Agency (2010). Mustapa: Changing Trends in Trade Liberalization Negotiations,
October 7, 2010.
Borneo Bulletin (2010). Pilot Project for ASEAN Self-Certification Begins, November 2, 2010.
Cockerham, Geoffrey B. (2010). Regional Integration in ASEAN: Institutional Design and the ASEAN Way, East Asia,
27:165185.
Desker, Barry (2008). Where the Asean Charter Comes Up Short, The Straits Times, July 18, 2008.
Economic and Social Commission for Asia and the Pacific (ESCAP) (2009). Economic and Social Survey of Asia and the
Pacific 2009: Addressing Triple Threats to Development, United Nations.
Economist Intelligence Unit (EIU) (2007-2010). Online country statistics, www.eiu.com
_____________ (2010). Vietnam: The Trade Account Continues to Post Enormous Deficits, September 5, 2010, http://
country.eiu.com/article.aspx?articleid=857437070
24
Hew, Denis (2007). Introduction: Brick by Brick - The Building of an Asean Economic Community, in Hew, D. (ed.),
Brick by Brick: The Building of an ASEAN Economic Community, Singapore: ISEAS.
International Monetary Fund (IMF) (2010a). World Economic Outlook April 2010: Rebalancing Growth, Washington, DC:
International Monetary Fund.
___________ (2010b). World Economic Outlook October 2010: Recovery, Risk and Rebalancing, Washington, DC:
International Monetary Fund.
Malaysia Department of Statistics, National Product and Expenditure Accounts Fourth Quarter 2010, Statistical Release,
February 18, 2011.
Philippine National Statistical Coordination Board, Annual GDP Sizzled to its Highest Growth Rate in the Post Marcos
Era at 7.3. Percent; Q4 2010 GDP Growth Grew by 7.1 Percent, Press Release, January 31, 2011.
Plummer, Michael G. and Chia Siow Yue (2009). Introduction, in Plummer, M. G. and Chia, S.Y. (eds), Realizing the
ASEAN Economic Community: A Comprehensive Assessment, Singapore: ISEAS.
Pushpanathan, Sundram (2010). ASEANs Readiness in Achieving the ASEAN Economic Community 2015: Prospects
and Challenges, Keynote Address at the ISEAS ASEAN Roundtable 2010, April 29, 2010, http://www.iseas.edu.sg/
aseanstudiescentre/N-ART10-Keynote-29-04-10.pdf.
Schwartz, A. and Roland Villinger (2004). Integrating South-east Asias Economies, McKinsey Quarterly, 1: 36-47.
Singapore Ministry of Trade and Industry (2011). MTI Forecasts GDP Growth of 4.0 to 6.0 Per Cent for 2011 Following
Strong Rebound in 2010, Press Release, February 17, 2011.
Thailand Government Media Center (2010). MOU on Implementation of ASEAN Single Window Pilot Project to be
Signed, October 4, 2010.
The Business Times Singapore (2010). ASEAN Exchange Link to Kick Off in H2 Next Year, December 1, 2010.
Vietnam News and Information Portal (2010). Vietnams GDP Surpasses Target with 6.78% Growth in 2010, December
30, 2010.
World Bank (2011). Global Economic Prospects: Navigating Strong Currents, Volume 2, January 2011, Washington DC: The
World Bank.
World Trade Organization (WTO) (2010). Trade Likely to Grow by 13.5% in 2010, WTO Says, Press Release, September
20, 2010.
Xinhua General News Service (2010). ASEAN Should Put Mechanism in Place to Boost Trade, November 22, 2010.
Yuvejwattana, Suttinee and Shamim Adam (2010). Slowing Growth May Create Headache for Thailand, Malaysia Central
Banks, Bloomberg News, November 19, 2010.
25
26
ASEAN
Competitiveness
Report
20
10
Chapter 3
Competitiveness
Performance of
ASEAN
27
COMPETITIVENESS
PERFORMANCE OF
ASEAN
figure 3.1:
ASEAN Endowments:
Natural Resources
Petroleum,
Timber, Tin
Anmony,
Zinc, Copper,
Tungsten, Lead,
Coal, Marble,
Limestone,
Precious stones,
Natural gas,
Hydropower
MYANMAR
Tin, Rubber,
Natural gas,
Tungsten, Tantalum,
Timber, Lead, Fish,
Gypsum, Lignite,
Fluorite,
Hydropower
Tin, Petroleum
Timber, Copper,
Iron ore,
Natural gas, Bauxite
Source: Central
Intelligence Agency
(2009). The World
Factbook 2009.
28
Fish,
Deepwater ports
Timber,
Hydropower,
Gypsum,
Tin, Gold,
Gemstones
LAOS
Phosphates,
Coal,
Manganese,
Bauxite,
Chromate,
Oil and gas,
Forests,
Hydropower
PHILIPPINES
THAILAND
VIETNAM
CAMBODIA
BRUNEI
MALAYSIA
SINGAPORE
INDONESIA
Petroleum,
Natural gas,
Timber
Petroleum, Tin,
Natural gas, Nickel,
Timber, Bauxite,
Copper, Ferle soils,
Coal, Gold, Silver
figure 3.2:
ASEAN
Heterogeneity:
Ethnicity
Khmer 90%
Viet
2%
Chinese 1%
Other 4%
Burman 68%
Shan
9%
Karen 7%
Rakhine 4%
Chinese 3%
Indian 2%
Mon
2%
Other 5%
MYANMAR
LAOS
VIETNAM
CAMBODIA
Malay
50%
Chinese
23%
Indigenous 11%
Indian
7%
Other
8%
Source: Central
Intelligence Agency
(2009). The World
Factbook 2009.
Kinh (Viet)
Tay
Thai
Muong
Other
86%
2%
2%
2%
8%
PHILIPPINES
THAILAND
Thai
75%
Chinese 14%
Other
11%
Chinese
Malay
Indian
Other
Lao
55%
Khmou 11%
Hmong 8%
Other 26%
(Over 100
minor groups)
BRUNEI
MALAYSIA
SINGAPORE
77%
14%
8%
1%
Tagalog
28%
Cebuano
13%
Hocano
9%
Bisaya/Bibisaya
8%
Hiligaynon Honggo 8%
Boikol
6%
Waray
3%
Other
25%
Malay
66%
Chinese 11%
Indigenous 3%
Other
4%
Javanese
41%
Sundanese 15%
Madurese
3%
Minangkabau 3%
Betawi
2%
Bugis
2%
Banjar
2%
Other
30%
INDONESIA
29
Figure 3.3:
Trends in
Prosperity
Growth, ASEAN
and Selected
Countries
15
10
0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
-5
-10
ASEAN
China
India
EU
Japan
US
World
-15
Competitiveness Performance
higher than that of the world average (1.5 percent and 1.2
percent respectively). Over the same two periods, ASEANs
GDP growth rates were 7.1 percent and 3.7 percent CAGR
respectively (which compared with 2.7 percent and 3.4
percent CAGR for the world). Consequently, ASEANs
prosperity, which was rising faster than the world average
between 1990 and 1997 at a yearly rate of 5.3 percent, has
decelerated over the last decade to an annual 2.3 percent,
which was only slightly above the world average of 2.1
percent (Figure 3.3). In contrast, Chinas prosperity growth
remained vigorous at an annual 10.2 percent and 9.1
percent pre- and post-1997, while Indias prosperity growth
improved from 3.4 percent to 5.4 percent over the two
periods.
Standard of Living
Prosperity
The competitiveness of a country or region determines the
economic outcomes it achieves. One successful economic
outcome is an increase in prosperity of the country or
region. The central measure of prosperity used in this Report
is Gross Domestic Product (GDP) per capita adjusted for
purchasing power parity. This measure is a key determinant
of the actual standard of living of a country or region.
GDP per capita is determined by both population and
output. ASEANs population increased at a compound
annual growth rate (CAGR) of 1.7 percent in the pre-Asian
financial crisis period from 1990-1997 and 1.4 percent
CAGR post-Asian crisis from 1997-2009. These rates were
figure 3.4:
Prosperity Level
and Growth, ASEAN
and Selected
Countries
50,000
US
45,000
40,000
35,000
Japan
30,000
EU
25,000
30
20,000
15,000
World
10,000
ASEAN5
5,000
China
ASEAN
India
4
CLMV
6
10
figure 3.5:
GNI Per Capita
in 2009, ASEAN
Countries,
China and India
High
Income
40,000
37220
Upper
Middle
Income
Low
Income
Lower
Middle
Income
35,000
30,000
27050
25,000
20,000
15,000
Notes: Income
classification based on
World Bank. Brunei data 10,000
refers to 2006. Myanmar
5,000
data is estimated.
7230
3760
2940
2230
1790
1040
1010
880
650
India
Vietnam
Laos
Cambodia
600
0
Singapore
Brunei
Malaysia
Thailand
China
Indonesia Philippines
Myanmar
(Figure 3.4). Since 2006, Chinas GDP per capita has been
higher than ASEANs, by 31 percent in 2009. Among the
comparator countries, ASEANs GDP per capita was only
higher than that of India, by 60 percent in 2009. ASEANs
current prosperity relative to comparator countries points to
the need for the region as a whole to exert greater effort to
substantially raise the standard of living of its people.
Distribution of Prosperity
The distribution of prosperity generated may be uneven
with large differences in the standard of living within the
same country or region. To find out how ASEAN is doing
on this front, indicators of income inequality and poverty
levels are examined below.
table 3.1:
Changes
in Income
Classification
of ASEAN
Countries,
1990-2009
Inequality
Income inequality in ASEAN appears to be relatively high,
with five of eight ASEAN countries having a Gini coefficient
above 0.4. Singapore has the highest level of income
inequality, followed by the Philippines and Thailand (Figure
1990
1992
1993
1998
2003
2009
<= 610
<= 675
<= 695
<= 760
<= 765
<= 995
611-2,465
676-2,695
696-2,785
761-3,030
766-3,035
996-3,945
2,466-7,620
2,696-8,355
2,786-8,625
3,031-9,360
3,036-9,385
3,946-12,195
> 7,620
> 8,355
> 8,625
> 9,360
> 9,385
> 12,195
Malaysia
LM
UM
UM
UM
UM
UM
Indonesia
LM
LM
LM
LM
Philippines
LM
LM
LM
LM
LM
LM
Thailand
LM
LM
LM
LM
LM
LM
Cambodia
LM
Laos
Myanmar
Vietnam
LM
31
0.50
figure 3.6:
Income Inequality,
ASEAN Countries,
China and India
0.40
Gini coefficient
0.344
0.346
Vietnam
Laos
0.368
0.394
0.403
0.409
Indonesia
Malaysia
ASEAN
0.417
Cambodia
0.420
0.464
0.445
0.469
0.30
0.20
0.10
0.00
India
China
3.6). The key reasons often cited for rising income inequality
are technological change providing higher returns to
talented individuals and more open markets creating greater
opportunities for entrepreneurs to leverage their capabilities
across larger markets. Inequality is lower in ASEAN than
China but higher compared with India.
Poverty
Poverty shows the extent to which growth generated
has failed to reach all echelons of a countrys or regions
population. A common indicator of poverty is the
percentage of population below the income poverty line
of US$1.25 per day. Four ASEAN countries have about a
fifth or more of their population living below the income
poverty line, which is higher than Chinas 15.9 percent
share. Cambodia (40.2 percent) and Laos (44 percent)
have a much higher proportion of abject poor than the
other ASEAN countries for which data are available; this
proportion is comparable to Indias. Thailand (0.4 percent)
and Malaysia (0.5 percent) have among the lowest level of
poverty in ASEAN (Singapore does not have an official
figure 3.7:
Poverty Rates,
ASEAN Countries,
China and India
50
20
Quality of Life
Beyond an income measure, it is as important that a
countrys or regions competitiveness is determined by the
broader concept of quality of life. The UNDP Human
Development Index (HDI) provides the most established
attempt to measure such a quality. Based on sub-indices on
life expectancy, education and GDP, the latest HDI shows
that ASEAN as a whole ranks above India but below China
on human development and quality of life. Four ASEAN
countries have better levels of human development than
China, while eight ASEAN countries rank above India.
Among the ASEAN countries, there is a large gap in HDI
with Singapore being the most developed and Myanmar the
least (Figure 3.8).
Gender
An average measure of prosperity across an economy can
conceal huge differences of access and participation within
the society. The Gender-related Development Index (GDI)
40
41.6
44.0
30
21.5
22.6
15.9
10
32
0.4
Thailand
0.5
Malaysia
China
Vietnam
Philippines
Cambodia
India
Laos
figure 3.8:
Human
Development
Index, ASEAN
Countries, China
and India
1.0
0.944
0.920
0.9
0.829
0.783
0.8
0.772
0.751
0.748
0.734
0.725
0.7
0.619
0.612
Laos
India
0.6
0.593
0.586
0.5
0.4
0.3
0.2
0.1
0.0
Singapore Brunei
Malaysia Thailand
China
figure 3.9:
Gender-Related Indices,
ASEAN Countries, China
and India
Notes: No data on GDI and GEM
for Myanmar. No data on GDI
for Singapore. No data on GEM
for Brunei, Laos and India. GDI
includes life expectancy at birth,
adult literacy rate, combined gross
enrollment ratio in education,
and estimated earned income.
GEM includes seats in parliament
held by women, share of female
professional and technical workers,
share of female legislators, senior
officials and managers, and ratio of
estimated female to male earned
income.
1.0
0.9
Philippines ASEAN
Indonesia Vietnam
Cambodia Myanmar
0.91
0.79
0.8
0.82
0.78
0.77
0.75
0.73
0.72
0.7
0.6
0.54
0.51
0.61
0.56
0.53
0.5
0.55
0.59
0.43
0.41
0.4
0.59
0.3
0.2
0.1
0.0
Brunei
Singapore Malaysia
Thailand
China
Laos
India
Cambodia
33
figure 3.10:
Trends in Labor
Productivity,
ASEAN and
Selected
Countries
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
90
91
92
93
94
ASEAN
95
96
EU
97
98
99
China
Labor Productivity
Labor productivity in ASEAN is relatively low, as is the
case with most developing countries. ASEANs labor
productivity, as measured by GDP per person employed
(in 1990 international dollars) was US$11,114 in 2009.
This was 17 percent of the level of the world productivity
leader, the US, and between 25 and 30 percent of the labor
productivity in Japan and EU (Figure 3.10).
00
01
02
India
03
04
05
Japan
06
07
08
09
US
Labor Mobilization
Labor mobilization in ASEAN, as indicated by the labor
force participation rate by the working age population
(15 64 years old) in 2009, was below that in China, the
figure 3.11:
Labor
Productivity
Level and
Growth, ASEAN
and Selected
Countries
80,000
75,000
70,000
65,000
US
60,000
55,000
50,000
45,000
Japan
40,000
Singapore
EU
35,000
30,000
Malaysia
34
25,000
20,000
Thailand
-16
-14
-12
-10
-8
-6
ASEAN
-4
15,000
Myanmar
10,000
Indonesia
Philippines
5,000
Cambodia
0
-2
0
2
Producvity Growth, 2008-2009 (%)
India
China
Vietnam
4
10
figure 3.12:
Labor Force
Participation
Rates, ASEAN
and Selected
Countries
%, 2009
China
79.8
US
74.1
Japan
73.1
72.1
ASEAN
60.8
India
Source: International
Labor Organization
(2010).
10
20
30
40
figure 3.13:
Labor Force
Participation
Rates, ASEAN
countries
90
80
70
83.6
82.2 81.3
70.1 70.5
60
70
80
90
81.0
69.6 70.3
50
79.0
74.9
66.5 65.6
65.2 64.7
77.6 77.4
78.6 77.4
Thailand
Vietnam
71.1 70.9
60
50
40
30
20
10
0
Brunei
Cambodia
Indonesia
Laos
Malaysia
2000
Myanmar
Philippines
Singapore
2009
35
figure 3.14:
Price
Comparisons,
ASEAN and
Selected
Countries
Worsening
purchasing
1.6
power
1.4
Japan
EU
1.2
US
1.0
0.8
Singapore
China
Brunei
Philippines
Malaysia
Myanmar
Improving
purchasing
power
-30
-28
-26
-24
-22
-20
-18
-16
-14
-12
-10
ASEAN
Indonesia
Thailand
Laos
Cambodia
India
Vietnam
0.6
0.4
0.2
0.0
-8
-6
-4
-2
10
12
36
figure 3.15:
World Export
Market Shares,
ASEAN
7
6
5
4
3
2
1
0
90
91
92
93
94
95
96
97
98
Goods
48
00
01
Services
figure 3.16:
World Export
Market Shares,
ASEAN and
Selected
Countries
99
02
03
04
Total
05
06
07
08
09
GDP
46
44
42
40
16
14
12
10
8
6
4
2
0
90
91
92
93 94
ASEAN
95
96 97
China
98
99
India
00
01
EU
02
03 04
Japan
05
06 07
08
09
US
37
figure 3.17:
World Export
Market Shares,
ASEAN Countries
2.5
2.0
1.5
1.0
0.5
0.0
90
91
92
93
94
95
96
99
00
01
02
03
04
05
06
07
08
Cambodia
Indonesia
Laos
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam
200,000
98
Brunei
figure 3.18:
Exports by
Clusters, ASEAN
Countries
97
180,000
160,000
140,000
120,000
100,000
80,000
38
40,000
20,000
dt
s
Tr
in
an
in
g,
sp
or
Pr
ta
od
nd
Lo
gis
c
Bu
s
sin
es
sS
Ap
er
pa
vic
re
es
la
nd
Te
x
le
s
Co
m
Pl
m
as
un
c
ica
s
o
ns
Eq
ui
pt
Au
to
m
o
ve
Fo
ot
we
Fo
ar
r
es
Po
tP
we
r
od
r/P
uc
ow
ts
er
Ge
n
Eq
ui
pt
rP
Ag
Ga
sP
dt
IT
et
al
la
nd
60,000
Oi
Brunei
Myanmar
09
Cambodia
Philippines
Indonesia
Singapore
Laos
Thailand
Malaysia
Vietnam
figure 3.19:
Domestic
Investment, ASEAN
and Selected
Countries
50
45
40
35
30
25
20
15
10
90
91
92
93
ASEAN
94
95
96
97
China
50
99
India
figure 3.20:
Domestic
Investment,
ASEAN
Countries
98
00
EU
01
02
03
Japan
04
05
06
US
07
08
09
World
45
40
35
30
25
20
15
10
5
0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
Brunei
Cambodia
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
05
06
07
08
09
Myanmar
39
figure 3.21:
FDI Inward
Stock, ASEAN
and Selected
Countries
60
50
40
30
20
10
0
90
91
92
93
94
ASEAN
95
96
China
figure 3.22:
World Share
in FDI Inflows,
ASEAN and
Selected
Countries
60
97
98
India
99
00
EU
01
02
03
04
Japan
US
05
06
07
08
09
World
50
40
30
20
10
10
8
6
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
ASEAN
40
China
India
EU
Japan
US
05
06
07
08
09
figure 3.23:
Inward FDI
Performance
Index, ASEAN
and Selected
Countries
6.0
5.0
4.0
3.0
2.0
1.0
0.0
90
91
92
93
94
ASEAN
95
96
China
figure 3.24:
Share of
FDI Inflows
in ASEAN by
Country,
Selected Years
97
98
99
India
00
01
02
03
EU
04
Japan
05
06
07
08
09
US
in 2008 and 2009, which means that its FDI inflows in recent
years have been roughly commensurate with its economic
size. Indias Inward FDI Performance Index, which has been
around 0.5 or below for many years, has risen to 0.8 in 2008
and 1.0 in 2009 (Figure 3.23).
Among the ASEAN countries, Singapore receives the largest
share of the regions FDI inflows. Between 2007 and 2009,
its share was 40.2 percent, which was somewhat lower than
its typical share of nearly 50 or over 50 percent in the 2000s,
due to a plunge in its share to 23.1 in 2008. Thailand is the
second-largest recipient with 16.4 percent, although it has
lost its position twice in recent years to Indonesia. Indonesia
has seen robust inflows since 2005 and is the third-largest
recipient with 13.2 percent share between 2007 and 2009.
This is in contrast to the late 1990s and early 2000s, where
Indonesias net FDI inflows were negative due partly to huge
repayments of intra-company loans by foreign affiliates after
the Asian financial crisis.
7.0
7.3
6.3
21.9
12.2
Vietnam
Thailand
16.4
37.6
Singapore
Philippines
Myanmar
40.2
5.8
Malaysia
53.5
Laos
22.3
4.1
3.6
16.2
1.6
94-96
10.0
10.9
Indonesia
Cambodia
13.2
7.9
-6.3
1.4
01-03
07-09
Brunei
41
figure 3.25:
FDI Outward
Stock, ASEAN
and Selected
Countries
60
50
40
30
20
10
0
90
91
92
93
94
ASEAN
95
96
97
China
60
00
EU
01
02
03
Japan
04
05
06
07
US
08
09
World
70
99
India
figure 3.26:
World
Share in FDI
Outflows,
ASEAN and
Selected
Countries
98
50
40
30
20
3
10
0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
42
ASEAN
China
India
EU
Japan
US
1
0
05
06
07
08
09
figure 3.27:
Outward FDI
Performance
Index, ASEAN
and Selected
Countries
2.5
2.0
1.5
1.0
0.5
0.0
Note: The Outward FDI
Performance Index is the
ratio of a countrys share
in global FDI outflows to its
share in global GDP.
90
91
92
93
94
ASEAN
95
96
97
China
98
99
00
India
01
02
EU
03
04
05
06
Japan
07
08
09
US
figure 3.28:
Share of Outward
FDI flows from
ASEAN by Country,
Selected Years
4.0
10.6
Singapore
29.0
Philippines
53.3
81.5
4.8
Malaysia
Laos
1.6
39.5
Indonesia
23.7
Brunei
0.7
Thailand
14.4
11.6
1.7
15.6
94-96
01-03
07-09
43
figure 3.29:
Patent Filings
with USPTO, ASEAN
and Selected
Countries
China
44
India
EU
Japan
US
figure 3.30:
Number and Growth
of Patent Filings
with USPTO, ASEAN
and Selected
Countries
550
450
US
350
Japan
250
150
Singapore
EU
50
Philippines
-5
Thailand ASEAN
Brunei
0
Indonesia 5
10
15
China
India
Malaysia
20
25
30
35
figure 3.31:
Number and Growth
of Registered
Businesses, ASEAN
and Selected
Countries
Summary
ASEAN has several naturally-endowed advantages in
location, resource abundance and market size, but there
are also some fundamental conditions related to disaster
and health risks as well cultural and ethnic diversities that
potentially can disrupt ASEANs development.
The analysis of ASEANs economic performance over
the last two decades, which would reflect the outcomes
of its past competitiveness, has shown that while there is
considerable variation across countries, ASEAN as a whole
has not performed as well in the decade after the 1997 Asian
financial crisis compared with the heights the region has
attained in the years prior to the crisis. On recent measures
29,923.9
Singapore
3.3%
EU
9.0%
Japan
0.0%
US
0.9%
Thailand
2.2%
ASEAN
3.5%
Indonesia
2.4%
India
2.8%
973.3
Vietnam
30.5%
892.2
28,423.1
23,350.0
22,034.7
5,292.0
2,504.9
1,607.8
5,000
CAGR %, 2001-2005
10,000
15,000
20,000
25,000
30,000
35,000
45
figure 3.32:
Number and Growth
of New Registered
Businesses to
Total Registered
Businesses, ASEAN
and Selected
Countries
Note: CAGR refers to compound
annual growth rate in the number
of new registered businesses
to total registered businesses.
ASEAN data refers to Indonesia,
Singapore and Thailand only.
Source: World Bank (2010a);
authors analysis.
Singapore
11.4
12.0
ASEAN
19.0
17.5
7.8
13.8
Indonesia
10.3
2.2
EU
4.4
5.3
Japan
5.3
9.7
India
20
15
10
13.1
2.6
US
46
12.0
8.3
Thailand
10
15
20
25
Chapter References
Central Intelligence Agency (CIA) (2009). The World Factbook 2009, Washington, DC: Central Intelligence Agency.
Cheong, David and Michael Plummer (2009). FDI Effects of ASEAN Integration, MPRA (Munich Personal RePEc
Archive) Paper No. 26004.
Economist Intelligence Unit (EIU) (2010). Online country statistics, www.eiu.com
____________ (2008). Laos and Vietnam: EIU Country Profiles, 2008.
Forbes.com (2010a). The Global 2000.
____________ (2010b). Asias Best Under a Billion.
International Labor Organization (ILO) (2010). Labor Force Participation Rate, http://kilm.ilo.org/KILMnetBeta/
default2.asp
International Monetary Fund (IMF) (2010). World Economic Outlook Database October 2010.
Porter, Michael E. and Richard Bryden (2010). International Cluster Competitiveness Project, Institute for Strategy and
Competitiveness, Harvard Business School. Underlying data drawn from the UN Commodity Trade Statistics Database and
the IMF BOP statistics.
Singapore Department of Statistics (2011). Key Household Income Trends 2010.
The Conference Board and Groningen Growth and Development Centre (2010). The Conference Board Total Economy
Database.
United Nations Conference on Trade and Development (UNCTAD) (2002). World Investment Report 2002: Transnational
Corporations and Export Competitiveness, New York and Geneva: United Nations.
_____________ (2010). UNCTADstat, http://unctadstat.unctad.org/ReportFolders/reportFolders.aspx?sCS_referer=&s
CS_ChosenLang=en
United Nations Development Programme (UNDP) (2009). Human Development Report 2009, United Nations, New York:
United Nations Development Programme.
United States Patents and Trademark Office (USPTO) (2010). Patent Statistics, http://www.uspto.gov/about/stats/index.
jsp
United Nations University-World Institute for Development Economic Research (UNU-WIDER) (2010). UNU-WIDER
World Income Inequality Database.
World Bank (2010a). World Development Indicators.
____________ (2010b). PovcalNet.
47
48
ASEAN
Competitiveness
Report
20
10
Chapter 4
ASEAN
Competitiveness
Fundamentals
49
ASEAN
COMPETITIVENESS
FUNDAMENTALS
This chapter analyzes myriad factors that drive the longerterm competitiveness performance of ASEAN and its
member countries, which are organized under the two
building blocks of macroeconomic competitiveness and
microeconomic competitiveness in the Porter framework.
The first part of the chapter evaluates the ASEAN region as
a whole on these parameters to identify the strengths and
weaknesses of ASEAN. This is then put into perspective
with respect to China and India. The purpose of this analysis
is to provide an understanding of the competitiveness
fundamentals of the region that can then serve to formulate
an agenda for regional collaboration.
The second part provides an assessment of individual
member countries to identify specific areas that need to be
addressed at the national level.
Additional analysis is conducted using alternative sets of
competitiveness indices in the aspects of economic freedom,
ease of doing business and logistical efficiency as a limited
means to validating the findings in the earlier sections.
Regional Competitiveness
The competitiveness analysis is organized using the Porter
framework and draws on multiple sources of unpublished
and published data to assess ASEANs competitiveness from
various perspectives. In particular, it makes extensive use of
a set of competitiveness indices aggregated at different levels
using a methodology developed by Professor Porter and
his research team (see Porter et al. (2008)), primarily from
raw data collected by the World Economic Forum (WEF)
in its annual Executive Opinion Survey (see Browne and
Geiger (2010))1. The 2010 Survey of business executives
was conducted between January and May 2010 for 139
economies. The competitiveness indices also incorporate
selected statistical data from the World Banks Worldwide
Governance Indicators, the World Banks Doing Business
project, World Health Organization, UNESCO Institute
for Statistics, International Telecommunication Union and
International Monetary Fund; 2009 data were used where
available.
Given the diversity in development within the region, there
are obvious limitations in comparability, reliability and
comprehensiveness of data sources and a caveat is made
here in recognition of this fact. It is also noted that data on
ASEAN from the WEFs Executive Opinion Survey are
available for only eight of the regions ten countries, that
50
figure 4.1:
Competitiveness
Profile of ASEAN
Region 2010
GDP pc (79)
Micro (49)
National Business
Environment (49)
Company Operations
and Strategy (45)
Strategy (44)
Org. Practices
(48)
Internationalization (45)
Demand Conditions
(56)
Macro (64)
Social Infrastructure
and Pol. Institutions
(66)
Macroeconomic Policy
(55)
Political Institutions
(57)
Rule of Law (72)
Quintile Rankings
1 (Top 20%)
Human
Development (72)
2
3
4
5
Admin (75)
Logistic (64)
Capital (42)
Comm. (68)
51
table 4.1:
Company
Sophistication in
ASEAN
Note: Changes in rank are
calculated for a constant
sample of 132 countries. A
negative sign indicates a
worsening in rank. Darker
green indicates significant
advantage gain. Light green
indicates moderate advantage
gain. Light grey indicates
neutral. Darker pink indicates
significant advantage loss.
Light pink indicates moderate
advantage loss.
40
43
48
-4
-2
-4
45
-5
table 4.2:
National Business
Environment in
ASEAN: Supporting
and Related
Industries
Source: Authors analysis
based on unpublished
data in Delgado et al.
(2010); raw data from
World Economic Forum,
Executive Opinion Survey
2009, 2010.
52
The regions context for strategy and rivalry is the next most
competitive area, but its ranking is significantly behind
that of supporting industries and clusters. In 2010, this
aspect has been placed lower as a result of deterioration in
assessments in a wide range of individual indicators. The less
favorable assessments have been particularly in areas such as
FDI rules, antitrust policy and trade barriers (Table 4.3).
Demand conditions, typically critical for innovation, have
also worsened for ASEAN over the past year. Although there
has been significant improvement in buyer sophistication,
important drivers to innovation such as government
procurement of advanced technology products and ICT
promotion have worsened (Table 4.4). There has also been
some worsening in ICT laws, regulatory standards and
environmental standards.
figure 4.2:
Clusters in ASEAN
CAMBODIA
Plascs
Business Services
Table 4.3:
National
Business
Environment in
ASEAN: Context
for Strategy
and Rivalry
VIETNAM
IT
Oil & Gas
MALAYSIA Agricultural Products
IT
Communicaons Equipt
Oil & Gas
Plascs
Business Services
Transport & Logiscs
SINGAPORE
Communicaons Equipt
Oil & Gas
Metal Mining & Mfg
Agricultural Products
Plascs
Coal & Briquees
IT
Metal Mining & Mfg
Communicaons Equipt
Agricultural Products
Automove
PHILIPPINES
Oil & Gas
INDONESIA
Indicator
53
table 4.4:
National Business
Environment in
ASEAN: Demand
Conditions
Indicator
Table 4.5:
National Business
Environment in
ASEAN: Factor Input
Conditions
53
54
box 4.1:
ASEAN-China-India
ASEAN is less competitive overall compared with China, where it is behind by 18 positions
on the New GCI 2010. However, it is more competitive than India, by 13 places. ASEANs
negative gap with China has persisted over the last few years, while its significant positive gap
with India has arisen in 2010 mainly as a result of deterioration in Indias competitiveness
position from 2009 (Figure 4.3).
ASEAN is ranked behind China on both micro and macro competitiveness fundamentals,
particularly the latter. It is less competitive across the two sub-categories of social infrastructure
and political institutions and macroeconomic policy under macro competitiveness and the two
sub-categories of company operations and strategy and national business environment under
micro competitiveness.
ASEAN has a competitive edge over India in both micro and macro competitiveness
fundamentals, although the gap in microeconomic competitiveness is relatively small. ASEAN
does better in both macroeconomic competitiveness sub-categories of social infrastructure
and political institutions and macroeconomic policy. Under microeconomic competitiveness,
ASEAN is somewhat stronger than India on company operations and strategy but ASEAN and
India are overall equally competitiveness in their national business environments.
figure 4.3:
Competitiveness of
ASEAN-China-India
China
45
New GCI
India
Micro
Macro
New GCI
Micro
Macro
Ranking Gap
30
21
13
15
10
-15
-2
-6
-10
-12
-18
-30
-12
-21
2009
2010
2010 Rank
ASEAN
China
India
New GCI
57
39
70
Micro
49
37
53
Macro
64
43
85
55
table 4.6:
Top-five Relative
Strengths of
ASEAN-China-India
Note: The rank columns
show the global rankings of
ASEAN, China and India, that
is, among 132 countries in
the New GCI sample in 2010
in each sub-area.
Source: Authors analysis
based on unpublished data
in Delgado et al. (2010); raw
data from World Economic
Forum, Executive Opinion
Survey 2009, 2010.
ASEAN
Supporting & Related Industries &
Clusters
Capital Market Infrastructure
Rank
China
Rank
India
Rank
37
Macroeconomic Policy
35
42
23
38
48
44
Demand Conditions
34
Internationalization of Firms
45
38
Innovation Infrastructure
48
Organizational Practices
48
Internationalization of Firms
39
Internationalization of Firms
50
ASEAN, China and India share some common strengths in microeconomic competitiveness
fundamentals. These relate to an aspect of national business environment, namely, supporting
and related industries and clusters and two aspects of company operations and strategy, namely
strategy and operational effectiveness and internationalization of firms.
While ASEAN and India are equally competitive in supporting and related industries and
clusters, China is clearly more competitive than both. China is more competitive than ASEAN
in all the indicators for supporting and related industries and clusters except for availability
of latest technologies in which ASEAN is stronger. ASEAN does notably better than India
for indicators related to cluster development, namely, extent of cluster policy, extent of
collaboration in clusters and state of cluster development. India fares better than ASEAN in
local supplier quantity and availability of latest technologies.
For company strategy and operational effectiveness and internationalization of firms, China is
ahead of ASEAN, which is ahead of India. China does better than ASEAN on the majority of
indicators, although there are selected indicators where ASEAN seems to be more competitive.
Under strategy and operational effectiveness, China is rated significantly higher on capacity for
innovation and company spending on R&D while ASEAN has a greater degree of customer
orientation. For internationalization of firms, ASEAN has a significant advantage in greater
prevalence of foreign technology licensing but fares worse than China for the extent of regional
sales and the breadth of international markets. ASEAN has a slight edge over India for strategy
and operational effectiveness in many of the aspects especially extent of marketing and value chain
breadth. India does better than ASEAN in firm-level technology absorption and production
process sophistication. However, ASEAN does better than India for internationalization of
firms particularly with respect to control of international distribution.
ASEANs other areas of relative strength lie in its capital market infrastructure and organizational
practices. Although these are not among the top five areas of relative strength within China,
Chinas global ranking on capital market infrastructure is comparable with ASEANs while
it is ahead on organizational practices. ASEAN is rated better than India on organizational
practices, but India has better capital market infrastructure than ASEAN particularly in the
laws that facilitate lending, regulation of securities exchanges and soundness of banks. ASEAN,
however, is better than China and India in ease of access to loans.
Chinas other relative strengths are in macroeconomic policy and demand conditions, both of
which are more competitive than ASEAN.
Innovation infrastructure is a relative strength for India and it ranks better in this area than
ASEAN (although not as well as China) due to better quality of management schools, quality
of scientific research institutions, availability of scientists and engineers and a higher number of
utility patents per million population. ASEAN, however, has better tertiary enrollment than
both China and India.
56
table 4.7:
Top-five Relative
Weaknesses of
ASEAN-China-India
Note: The rank columns
show the global rankings of
ASEAN, China and India, that
is, among 132 countries in
the New GCI sample in 2010
in each sub-area.
Source: Authors analysis
based on unpublished data
in Delgado et al. (2010); raw
data from World Economic
Forum, Executive Opinion
Survey 2009, 2010.
ASEAN
Rank
China
Rank
India
Rank
Administrative Infrastructure
75
Human Development
60
Macroeconomic Policy
110
Rule of Law
72
Administrative Infrastructure
60
Administrative Infrastructure
108
Human Development
72
Communications Infrastructure
60
Human Development
100
Communications Infrastructure
68
Rule of Law
52
Communications Infrastructure
96
Logistical Infrastructure
64
52
Logistical Infrastructure
72
ASEAN, China and India all are weak in the macroeconomic area of human development
and the microeconomic factor input conditions of administrative and communications
infrastructure. Comparatively, China fares better than ASEAN, which is ahead of India, in
these three areas.
China is stronger in human development on almost all indicators of basic health and education
except that ASEAN has lower infant mortality and the quality of healthcare is about the same
for both. ASEANs human development is better than Indias on all indicators but the gap is
wider for infant mortality, primary enrollment and quality of primary education, accessibility
and quality of healthcare services and life expectancy. ASEAN and India have the same score
for tuberculosis incidence and almost the same for health expenditure.
China has better administrative infrastructure than ASEAN with reduced burden of
government regulation and customs procedures. However, the number of procedures and the
time required to start a business is lower in ASEAN. ASEAN has much better administrative
infrastructure compared with India due to a lower number of procedures required to start a
business and lower burden of government regulation. The burden of customs procedures and
the time required to start a business are about the same in ASEAN and India.
The communications infrastructure in China is better than that in ASEAN on the indicators
of fixed-line telephone penetration rate, quality of telephone infrastructure and internet
access in schools, but ASEAN has higher mobile phone penetration rate. ASEAN has better
communications infrastructure than India on all indicators except for the quality of telephone
infrastructure.
Rule of law is among the five weakest areas of both ASEAN and China but not India, although
in terms of global ranking, China is ranked higher than India, which is ahead of ASEAN.
ASEANs rule of law is weaker than China and India particularly in the impact and business
costs of crime and violence, judicial independence and property rights. ASEAN, China and
India have similar rankings for control of corruption.
Logistical infrastructure is a relatively weak area for both ASEAN and India. Compared with
India, ASEAN has better quality of roads, electricity supply and air transport infrastructure,
while India is rated higher on the quality of railroad infrastructure. China is more competitive
than ASEAN and India on logistical infrastructure.
Context for strategy and rivalry is a sub-area of relative weakness for China, although in terms
of global ranking, China, ASEAN and India are in similar positions. India is weakest in its
macroeconomic policy. ASEAN is ranked higher on macroeconomic policy than India with
regard to inflation and fiscal balance but not for government debt, while China is strong on
macroeconomic policy.
In summary, when analyzed across competitiveness sub-areas, ASEAN is not as competitive
as China in many respects. Even for sub-areas that are ASEANs relative strengths, ASEANs
performance is generally not as good as that of Chinas. Although ASEAN and China share
some common relative weaknesses, China is still more competitive in these sub-areas than
ASEAN. On the other hand, ASEAN in stronger than India in a good number of sub-areas but
there are a few sub-areas where it is behind India.
57
figure 4.4:
Competitiveness
Profile of Brunei
2010
GDP pc (5)
Micro (61)
National Business
Environment (58)
Related and Supporting
Industries (85)
Demand Conditions
(52)
Macro (33)
Company Operations
and Strategy (79)
Strategy (81)
Org. Practices
(47)
Internationalization (104)
Social Infrastructure
and Pol. Institutions
(37)
Macroeconomic Policy
(1)
Political Institutions
(42)
Rule of Law (36)
Quintile Rankings
1 (Top 20%)
Human
Development (37)
2
3
4
5
Logistic (65)
Capital (56)
Comm. (52)
58
59
figure 4.5:
Competitiveness
Profile of Cambodia
2010
GDP pc (110)
Micro (95)
National Business
Environment (93)
Related and Supporting
Industries (89)
Demand Conditions
(86)
Company Operations
and Strategy (103)
Strategy (100)
Org. Practices
(92)
Internationalization (114)
Social Infrastructure
and Pol. Institutions
(105)
Macroeconomic Policy
(104)
Political Institutions
(73)
Rule of Law (103)
Quintile Rankings
1 (Top 20%)
Human
Development (107)
Macro (112)
2
3
4
5
Logistic (84)
Capital (96)
Comm. (110)
60
figure 4.6:
Competitiveness
Profile of Indonesia
2010
GDP pc (96)
Micro (54)
National Business
Environment (54)
Related and Supporting
Industries (37)
Demand Conditions
(60)
Macro (70)
Company Operations
and Strategy (49)
Strategy (41)
Social Infrastructure
and Pol. Institutions
(73)
Macroeconomic Policy
(65)
Political Institutions
(45)
Org. Practices
(60)
Internationalization (53)
Quintile Rankings
1 (Top 20%)
Human
Development (84)
2
3
4
5
Logistic (81)
Capital (51)
Comm. (90)
Malaysia
Malaysias GDP per capita has risen by one rank in 2009 to
54th in the world and remains the third highest in ASEAN.
Malaysias overall competitiveness is 34th position in 2010.
This is a gain of four places from improvements in both
macroeconomic and microeconomic competitiveness
(Figure 4.7).
Malaysias macroeconomic competitiveness has strengthened
from better macroeconomic performance in the control
of inflation, as well as improved social infrastructure and
political institutions. The gains are particularly in rule of law
through lower business costs of crime and corruption and
more efficient legal framework. Under political institutions,
higher ratings on public trust of politicians and effectiveness
of law-making bodies are countered by less favorable
assessments on freedom of the press and decentralization of
economic policymaking.
Indonesia is weak in a few dimensions of factor
input conditions. Its weakest area is administrative
infrastructure, where it needs to urgently address the time
required to start a business, the number of tax payments
by businesses and the burden of customs procedures. Its
communications infrastructure, although improved from
last year, requires substantial strengthening. Indonesia
also has to enhance its logistical infrastructure, in
particular, the quality of its domestic transport network,
port infrastructure and electricity supply.
Indonesias human development and rule of law are also
areas of particular weakness. Attention has to be given
in the area of basic health to improving accessibility
of healthcare services and lowering the incidence of
tuberculosis and malaria. The control of corruption and
high irregular payments by firms and increased impact of
crime are priority issues to tackle under rule of law.
61
figure 4.7:
Competitiveness
Profile of Malaysia
2010
GDP pc (54)
Micro (22)
National Business
Environment (22)
Related and Supporting
Industries (16)
Demand Conditions
(28)
Macro (41)
Company Operations
and Strategy (23)
Strategy (25)
Org. Practices
(16)
Internationalization (20)
Social Infrastructure
and Pol. Institutions
(42)
Macroeconomic Policy
(40)
Political Institutions
(38)
Rule of Law (47)
Quintile Rankings
1 (Top 20%)
Human
Development (47)
2
3
4
5
Logistic (21)
Capital (12)
Comm. (45)
62
figure 4.8:
Competitiveness
Profile of Philippines
2010
GDP pc (98)
Micro (74)
National Business
Environment (80)
Related and Supporting
Industries (55)
Demand Conditions
(97)
Company Operations
and Strategy (55)
Strategy (57)
Org. Practices
(38)
Internationalization (64)
Macro (101)
Social Infrastructure
and Pol. Institutions
(106)
Macroeconomic Policy
(42)
Political Institutions
(114)
Rule of Law (113)
Quintile Rankings
1 (Top 20%)
Human
Development (95)
2
3
4
5
Logistic (118)
Capital (58)
Comm. (88)
Philippines
The Philippines GDP per capita has risen by one rank
in 2009 to 98th in the world. Its overall competitiveness
has improved by eight ranks in 2010 to 89th position,
with gains in both macroeconomic and microeconomic
competitiveness, in particular, the latter (Figure 4.8).
The Philippines slight gain in macroeconomic competitiveness
reflects an improvement in both sub-categories of social
infrastructure and political institutions and macroeconomic
policy. The quality of rule of law is perceived to have
improved, with lower occurrence of irregular payments by
firms, lower impact of organized crime and greater judicial
independence, even while political institutions are rated
less favorably, such as on the indicator of transparency
of government policymaking. The condition of primary
education and healthcare has remained little changed.
The Philippines better performance on macroeconomic
policy has been due to its lowering of government debt as a
percentage of GDP.
63
figure 4.9:
Competitiveness
Profile of Singapore
2010
GDP pc (4)
Micro (3)
National Business
Environment (2)
Related and Supporting
Industries (19)
Demand Conditions
(4)
Macro (10)
Company Operations
and Strategy (12)
Strategy (15)
Org. Practices
(12)
Internationalization (16)
Social Infrastructure
and Pol. Institutions
(7)
Macroeconomic Policy
(67)
Political Institutions
(4)
Rule of Law (3)
Quintile Rankings
1 (Top 20%)
Human
Development (28)
2
3
4
5
64
Logistic (2)
Capital (3)
Comm. (7)
figure 4.10:
Competitiveness
Profile of Thailand
2010
Micro (46)
National Business
Environment (45)
Related and Supporting
Industries (34)
Demand Conditions
(57)
Macro (56)
Company Operations
and Strategy (45)
Strategy (51)
Org. Practices
(56)
Internationalization (31)
Social Infrastructure
and Pol. Institutions
(64)
Macroeconomic Policy
(18)
Political Institutions
(75)
Rule of Law (67)
Quintile Rankings
1 (Top 20%)
Human
Development (66)
2
3
4
5
Logistic (35)
Capital (39)
Comm. (53)
65
66
figure 4.11:
Competitiveness
Profile of Vietnam
2010
GDP pc (100)
Micro (73)
National Business
Environment (73)
Related and Supporting
Industries (51)
Demand Conditions
(71)
Macro (89)
Company Operations
and Strategy (67)
Strategy (71)
Org. Practices
(74)
Internationalization (71)
Social Infrastructure
and Pol. Institutions
(75)
Macroeconomic Policy
(122)
Political Institutions
(63)
Rule of Law (76)
Quintile Rankings
1 (Top 20%)
Human
Development (78)
2
3
4
5
Logistic (103)
Capital (63)
Comm. (68)
67
box 4.2:
Laos and Myanmar
The data for Laos and Myanmar are quite limited. However, some indicators for which data are
available can help to shed light on the competitiveness of Laos and Myanmar in certain areas.
Table 4.8 presents indicators for Laos and Myanmar in the categories of macroeconomic policy,
social infrastructure and political institutions and factor input conditions. It also gives their
relative positions among ASEAN countries as well as their approximate quintile ranking if the
two countries were included in the New GCI country sample.
On macroeconomic policy indicators, Laos and Myanmar experienced relatively low inflation
in 2009 from 2008, which place them in the top and second quintile among New GCI sample
countries respectively. Laos and Myanmars fiscal deficits have widened in 2009, but their
levels are lower than 60 and 40 percent of countries respectively. Laos government debt is
comparatively high and places it in the fourth quintile, while Myanmar is ranked in the third
quintile on this indicator.
Laos and Myanmar are relatively weak in the sub-area of basic health and education and are
placed among the bottom 20 percent of countries on some indicators. Laos performs better
than Myanmar in basic health and fares worse on school enrollment rates. In the political
institutions and rule of law sub-areas, both Laos and Myanmar receive very unfavorable
assessments, in particular the latter, as given by the World Banks Worldwide Governance
Indicators in the dimensions of voice and accountability, control of corruption and rule of law.
The two countries are among the last placed when compared with other ASEAN countries, and
are in the bottom quintile of sample countries.
On communications infrastructure, Laos and Myanmar fare poorly, as measured by the
telephone lines and mobile telephone subscribers per 100 population. The two countries are
among the worst performers within ASEAN and are in the bottom quintile of sample countries.
The competitiveness profiles of Laos and Myanmar that emerge from this analysis of limited key
indicators are that of comparatively uncompetitive economies. Both countries, as with the other
ASEAN countries, appear to be stronger on macroeconomic policy than social infrastructure
and political institutions under macroeconomic competitiveness. Human development and
rule of law have been identified as being among the weakest areas for ASEAN in the New GCI
analysis above and the relative positions of Laos and Myanmar on basic health and education
and governance indicators reinforce this finding. Likewise, data on Laos and Myanmar support
the observation that communications infrastructure is weak across a number of ASEAN
countries.
table 4.8:
Selected
Comparative
Competitiveness
Indicators for Laos
and Myanmar
Notes: 1. Data are for 2007
and 2008. 2. Approximate
quintile ranking if country
were among the countries in
the New GCI sample.
Sources: Economist
Intelligence Unit (EIU),
World Health Organization
(WHO), World Economic
Outlook (WEO), Worldwide
Governance Indicators
(WGI), World Development
Indicators (WDI); authors
analysis.
68
Laos
2008
Myanmar
2009
Posion in
ASEAN
2009
Approx.
Quinle
Ranking
2009 2
2008
2009
Posion in
ASEAN
2009
Approx.
Quinle
Ranking
2009 2
Macroeconomic Policy
Government Surplus/deficit (% of GDP)
-2.8
-3.3
-3.5
-4.8
60.0
62.1
48.7
50.8
7.6
0.0
26.8
1.5
312.5
284.4
675.9
830.2
88.0
89.0
404.0
404.0
79.8
82.4
10
89.8
88.6
44.0
43.9
49.3
52.7
4.8
4.7
0.5
0.5
10
Polical Instuons
Voice and Accountability (percenle rank)
Rule of Law
Control of Corrupon (percenle rank)
7.2
9.5
1.0
0.0
10
23.0
18.4
4.8
3.8
10
24.3
32.6
0.5
0.7
10
1.6
2.1
1.4
1.6
box 4.3:
Economic Freedom
in ASEAN
The Index of Economic Freedom compiled by The Wall Street Journal and The Heritage
Foundation ranks countries on ten components of economic freedom, which are aimed at
measuring the extent to which individuals can engage in economic activities in any way they
please and resources can move freely, with that freedom both protected by the state and
unconstrained by the state. Economic freedom has been shown to be positively related to
positive social and economic values such as per capita income and economic growth rates.
The Index of Economic Freedom covers a broad range of areas similar to the New GCI, but the
data used are mainly from different sources and are organized differently. This section assesses
ASEANs performance across components of economic freedom based on the 2011 Index
and 2010 Index that are available for a constant sample of 179 countries. ASEANs ranking
is constructed as the GDP (PPP)-weighted rankings of nine ASEAN countries (excluding
Brunei). Since the 2011 (2010) indices cover primarily data from the second half of 2009
(2008) through to the first half of 2010 (2009), the analysis below will refer to changes in
ASEANs rankings in 2010 from 2009 to reflect the time period captured in the data.
ASEAN is ranked above 47 percent of countries in the sample on overall economic freedom
in 2010, which is slightly improved from 2009. ASEAN is weakest on investment freedom,
which measures restrictions on both domestic and foreign investments, and business freedom,
which captures the ease of starting, operating and closing a business. The other component
where ASEAN is placed worse than its overall economic freedom index ranking is freedom
from corruption. ASEAN is strongest on government spending, that is, in keeping the level of
government expenditure as a percentage of GDP within a reasonable range. Between 2009 and
2010, ASEANs largest gain has been in monetary freedom, which combines a measure of price
stability with an assessment of price controls (Figure 4.12).
ASEAN is assessed to be weaker on economic freedom compared with its position on global
competitiveness as given by the New GCI, where the region is ranked above 57 percent of
countries. ASEAN is ranked lower on factors under trade freedom, investment freedom and
labor freedom compared with similar indicators in the context for strategy and rivalry sub-area
under the New GCI. In particular, ASEANs ranking on investment freedom is substantially
weaker than on indicators of FDI restrictions under the New GCI.
69
Restrictions measured under investment freedom include whether there is national treatment
and prescreening of foreign investment, transparency of investment laws, restrictions on land
ownership, foreign exchange controls and capital controls. ASEANs investment freedom has
improved slightly by 1 place from 2009 to 2010, which reflects a jump in Malaysias rankings,
as the positions of the other ASEAN countries, particularly Vietnam, have declined (Table
4.9). Indicators of FDI restrictiveness are grouped under the context for strategy and rivalry in
the New GCI. The rankings of ASEAN on business assessments of indicators such as impact
of business rules on FDI, prevalence of foreign ownership and restrictions on capital flows
comparatively are more favorable. Nevertheless, these indicators are ranked lower relative
to other items within the context for strategy and rivalry sub-area, and their ratings have
deteriorated between 2009 and 2010. Thus, investment barriers might be another area for
ASEAN to monitor more closely.
ASEANs ranking on freedom from corruption has shown improvement over the last few
years but it is still perceived to have more corruption than over 55 percent of countries in the
sample. This ranking, which is derived primarily from Transparency Internationals Corruption
Perceptions Index, reinforces the assessment from indicators on control of corruption and
irregular payments by firms from the New GCI, which are among the lowest ranking indicators
within the rule of law sub-area.
figure 4.12:
Economic Freedom
in ASEAN Region
120
107 (+1)
94 (+1)
100
93 (-8)
100 (+4)
85 (+17)
80
109 (+1)
90 (+1)
81 (+3)
86 (+8)
69 (-1)
60
40
27 (+4)
20
0
Index of
Business
Economic Freedom (a)
Freedom
Trade
Freedom
Fiscal
Government Monetary
Freedom
Spending
Freedom
Investment
Freedom
Financial
Freedom
table 4.9:
Index of Economic
Freedom, ASEAN
Countries
Notes: Numbers in brackets
indicate changes in ranks in
the 2011 Index of Economic
Freedom and sub-indices from
2010 ranks. Only rank changes
larger than + 5 (improvement)
or -5 (deterioration) are
reported.
Source: The Heritage
Foundation and The Wall Street
Journal (2010, 2011); authors
analysis.
70
Index of
Economic
Freedom
Business
Freedom
Trade
Freedom
Cambodia
102(5)
161
124
20
4(6)
Indonesia
116
133(6)
103(-19)
58
Laos
141
123(-5)
133
77
53(6)
74
85
39
Myanmar
174
175
112(-7)
Philippines
115(-6)
152
86
Singapore
Malaysia
Fiscal
Government
Freedom
Spending
62
70
22(5)
98
123
15(5)
34(39)
146
59(-5)
27(16)
64(-5)
84
10(6)
18
9(-7)
Freedom
from
Property
Labor
Rights Corrupon Freedom
99
160(9)
106
99
113(16)
123(11)
159
146(18)
160(-6)
134(-30)
103(29)
70
52
55(-8)
35(20)
172(6)
172
172
176
178
176
77(7)
117
70
99
141
128
26
38(31)
143(11)
Thailand
62
72
94
107
13(10)
136
117
17
70
84
44(7)
Vietnam
139(5)
109
132
101(-5)
77(7)
45(127)
164(-12)
133
164
122
63
box 4.4:
Ease of Doing
Business in ASEAN
ASEAN (excluding Myanmar) is rated stronger on ease of doing business than 57 percent of
183 countries in the World Banks Doing Business 2011 Report, which is a slight deterioration
from the 2010 Report.
The World Banks Doing Business indicators measure business regulations and the protection
of property rights and their effect on businesses, especially small and medium-sized domestic
firms. The Ease of Doing Business (DB) Index 2011 is constructed from component indicators
of nine Doing Business topics, with the data mainly applicable at June 2010.
The region is strongest on trading across borders, which measures the documents required, time
and cost to export and import, and protection of investors, such as the extent of disclosure and
shareholders ability to sue officers and directors for misconduct (Figure 4.13).
ASEAN is particularly weak in the ease of starting a business in terms of procedural requirements,
time and cost, where it is ranked in the 34th percentile. This is followed by closing a business
(44th percentile), that is, the time, cost and outcome of insolvency proceedings.
Singapore retains its top position on overall ease of doing business, while Thailand and Malaysia
are among the top 12 percent of countries. The overall DB rankings of the other countries are
fairly low (Table 4.10).
ASEANs rankings on DB indicators point to substantial scope for the region to lower the
burden of administrative regulations, particularly in relation to starting and closing a business.
This is also the message from analysis under the New GCI framework, where administrative
infrastructure, which is measured by two component indicators of DB on starting a business
among others, is identified as an area of substantial weakness.
figure 4.13:
Doing Business
Index for ASEAN
Region
53 (-1)
66 (-3)
Registering Property
68 (-2)
Geng Credit
78 (-3)
Enforcing Contracts
89 (-1)
Paying Taxes
95 (0)
Closing a Business
100 (0)
121 (+2)
Starng a Business
table 4.10:
Doing Business
Index, ASEAN
Countries
Ease of
Doing
Business
Index
Brunei
Cambodia
75 (-2)
OVERALL
40 (+2)
147
Indonesia
Contracts
Borders
159
52
142
Business
Taxes
183
22
183
117
154
47
142
98
163
Laos
171
110
170
183
Malaysia
21
59
37
55
Philippines
148
118
Singapore
13
Thailand
19
25
Vietnam
Property
31
89
1
102
128
15
12
46
72
43
Investors
74
120
170
146
74
155
60
44
115
182
108
152
153
124
57
Permits
Business
23
113
132
4
12
12
173
71
box 4.5:
Logistical
Performance in
ASEAN
72
Customs
figure 4.14:
Logistics
Performance Index
for ASEAN Region
60
ASEAN
LPI 53 (-9)
of 140 countries
55
54 (-13)
Infrastructure
50
Timeliness
54 (-4)
54 (-6)
45
40
48 (-5)
57 (-15)
Internaonal Shipments
59 (-13)
table 4.11:
Logistics
Performance
Index, ASEAN
countries
Note: Numbers in brackets
indicate changes in ranks
in the 2010 LPI and subindices from 2007 ranks.
Only rank changes larger
than + 5 (improvement) or -5
(deterioration) are reported.
Source: World Bank (2007,
2010b); authors analysis.
Logiscs
Performance
Index
Customs
Infrastructure
Internaonal
Shipments
Logiscs
Quality and Tracking and
Competence
Tracing
Timeliness
Cambodia
Indonesia
Laos
110
Malaysia
29
93
28
Myanmar
Philippines
53
Singapore
Thailand
35
Vietnam
52
Summary
ASEANs competitiveness, as a whole, was ranked at 57th
among 132 countries in 2010, based on New GCI data for
eight ASEAN countries (excluding Laos and Myanmar).
Its position has not changed much over the last five years.
ASEANs GDP per capita in 2009, the latest year available,
was 79th position. The significant gap between current
prosperity and overall competitiveness might point to the
potential of current competitiveness fundamentals in raising
future prosperity.
ASEANs advantage has been more in microeconomic
fundamentals than macroeconomic competitiveness
factors. Across competitiveness categories, the regions
relative strengths lie in its related and supporting industries
and clusters, its capital market infrastructure and company
35
29
6
37
54
73
74
Endnotes
The Global Competitiveness Index compiled by the WEF and published in its annual Global Competitiveness Report is
not directly comparable to the New Global Competitiveness Index compiled by Porter et al. Although both approaches use
basically the same underlying data, there are some differences in the detailed indicators used, as well as distinct differences in
the organization and processing of the data and in the methodology used in deriving the Index.
The competitiveness ranking of ASEAN, individual ASEAN countries, China and India will be analyzed with respect
to a constant sample of 132 countries throughout this chapter. This sample will be referred to generally as the global set of
countries or the world.
Chapter References
ASEAN (2010). ASEANstats, http://www.aseansec.org/22122.htm
Browne, Ciara and Thierry Geiger (2010). The Executive Opinion Survey: The Business Executives Insight into Their
Operating Environment, in The Global Competitiveness Report 2010-2011, World Economic Forum.
Delgado, Mercedes, Christian Ketels, Michael E. Porter and Scott Stern (2010). Explaining Prosperity Differences Across
Countries: The Determinants of National Competitiveness, mimeo.
International Monetary Fund (IMF) (2010). World Economic Outlook October 2010: Recovery, Risk and Rebalancing,
Washington, DC: International Monetary Fund.
Kaufmann, Daniel, Aart Kraay and Massimo Mastruzzi (2010). Worldwide Governance Indicators, http://info.worldbank.
org/governance/wgi/index.asp
Porter, Michael E., Mercedes Delgado, Christian Ketels and Scott Stern (2008). Moving to a New Global Competitiveness
Index, in The Global Competitiveness Report 2008-2009, World Economic Forum.
Porter, Michael E. and Richard Bryden (2010). International Cluster Competitiveness Project, Institute for Strategy and
Competitiveness, Harvard Business School. Underlying data drawn from the UN Commodity Trade Statistics Database and
the IMF BOP statistics.
The Heritage Foundation and The Wall Street Journal (2010, 2011). The Index of Economic Freedom, Washington DC: The
Heritage Foundation and The Wall Street Journal.
World Bank (Arvis, Jean-Francois, Monica Alina Mustra, John Panzer , Lauri Ojala and Tapio Naula) (2007). Connecting to
Compete: Trade Logistics in the Global Economy, The Logistics Performance Index and Its Indicators, Washington DC: World
Bank.
World Bank (2009). Doing Business 2010: Reforming through Difficult Times, Washington DC: The World Bank and
International Finance Corporation.
World Bank (2010a). Doing Business 2011: Making a Difference for Entrepreneurs, Washington DC: The World Bank and
International Finance Corporation.
World Bank (Arvis, Jean-Francois, Monica Alina Mustra, John Panzer, Lauri Ojala, Ben Shepherd and Daniel Saslavsky)
(2010b). Connecting to Compete: Trade Logistics in the Global Economy, The Logistics Performance Index and Its Indicators,
Washington DC: The World Bank.
World Bank (2010c). World Development Indicators.
75
76
20
10
ASEAN
Competitiveness
Report
Chapter 5
Assessment
and Policy
Recommendations
77
ASSESSMENT
AND POLICY
RECOMMENDATIONS
78
79
90
80
70
60
50
40
20
Vietnam
Thailand
40
Malaysia
Indonesia
60
80
100
Philippines
120
Cambodia
10
ASEAN
80
20
Singapore
Brunei
30
figure 5.1:
Microeconomic and
Macroeconomic
Competitiveness
across ASEAN
countries
table 5.1:
Top-Three
Areas of
Relative
Strength,
ASEAN and
Member
Countries
Source: Authors
analysis based on
unpublished data in
Delgado et al. (2010);
raw data from World
Economic Forum,
Executive Opinion
Survey 2009, 2010.
ASEAN
Singapore
Brunei
Malaysia
Administrative
Infrastructure
Macroeconomic
Policy
Supporting
& Related
Industries &
Clusters
Context for
Strategy &
Rivalry
Rule of Law
Logistical
Infrastructure
Human
Development
Thailand
Indonesia
Philippines
Macroeconomic
Policy
Supporting
& Related
Industries &
Clusters
Organization
-al Practices
Supporting
& Related
Industries &
Clusters
Context for
Strategy &
Rivalry
Capital
Market
Infrastructure
Strategy &
Operational
Effectiveness
Macroeconomic
Policy
Capital
Market
Infrastructure
Political
Institutions
Organization
-al Practices
Supporting
& Related
Industries &
Clusters
Capital
Market
Infrastructure
Supporting
& Related
Industries &
Clusters
Political
Institutions
Logistical
Infrastructure
table 5.2:
Top-Three Areas
of Relative
Weakness,
ASEAN and
Member
Countries
Vietnam
Cambodia
ASEAN
Rule of Law
Administrative Infrastructure
Human Development
Singapore
Brunei
Malaysia
Thailand
Indonesia
Philippines
Vietnam
Cambodia
Supporting
& Related
Industries &
Clusters
Administrative
Infrastructure
Human
Development
Political
Institutions
Administrative
Infrastructure
Administrative
Infrastructure
Macroeconomic
Policy
Communications
Infrastructure
Internationalization of Firms
Rule of Law
Rule of Law
Communications
Infrastructure
Logistical
Infrastructure
Administrative
Infrastructure
Human
Development
Strategy &
Operational
Effectiveness
Supporting
& Related
Industries &
Clusters
Human
Development
Human
Development
Political
Institutions
Logistical
Infrastructure
Rule of Law
Communications
Infrastructure
81
82
40
30
20
10
Ca
m
bo
di
m
na
et
pi
ilip
Ph
Vi
ne
s
ia
es
on
In
d
nd
la
ai
al
M
-20
Th
ay
sia
N
EA
AS
ei
un
Sin
Source: Authors
analysis based on
unpublished data in
Delgado et al. (2010);
raw data from World
Economic Forum,
Executive Opinion
Survey 2009, 2010.
Br
po
-10
re
ga
Ranking gap
figure 5.2:
Competitiveness
Gap: DIFFERENCE
IN GDP PER CAPITA
AND NEW GCI
RANKINGS
-30
-40
83
figure 5.3:
ASEAN
Competitiveness
Agenda
ASEAN Integraon
Building on Strengths
Encouraging
Local
Enterprises
Foster SMEs
Boosting
Clusters
Align regional
infrastructure
development
Addressing Weaknesses
Integrating
Regional
Capital Market
Infrastructure
Mobilize financial
resources
Improving
Regional
Macroeconomic
Policy
Coordination
Stepping Up
Human
Resource
Development
Enhancing
Administrative
Infrastructure
Expedite the
ASEAN Single
Window
Simplify business
procedures
Improve basic
health and
education
Upgrade skills
Improving
Rule of Law
Inclusive Growth
84
85
Strengthening Implementation
ASEAN does not lack well-defined goals and plans.
Its weakness lies in its inability to deliver on provisions
in its agreements. ASEAN has to ensure the timely
implementation of agreements and decisions within a rulebased framework to maintain its credibility. This requires
the strengthening of both institutional mechanisms and
capacities and political will.
For forty years, ASEAN has established a norm in
interactions that is based on the ASEAN Way, which
emphasizes consultation, consensus and non-interference in
internal affairs. This informal and consensual approach has
succeeded in maintaining peace and stability in the region,
but it might also be a bane to ASEAN achieving greater
success in its regional integration efforts.
The ASEAN Charter has established a legal and institutional
framework for making ASEAN more rules-based, but the
organizations effectiveness in coordinating and executing
policies is not going to improve vastly overnight. Various
mechanisms to enhance compliance are in place but they
have been largely ineffectual. For instance, members have
traditionally preferred to resolve their economic disputes
through political channels rather than in a more rules-based
manner through the 2004 Enhanced Dispute Settlement
Mechanism. The AEC Scorecard in its current form requires
improvements to strengthen its monitoring function, and
the public version of the Scorecard should contain more
detailed information by individual country to increase the
transparency of the compliance review process.
The diversity within ASEAN also requires a flexible
mechanism for moving forward since the member countries
are at different stages of development and have different
priorities thus making it difficult for them to move at the
same pace. The Charter provides for an ASEAN Minus X
formula but this is the only formula that is endorsed, and it
can only be adopted if there is consensus to do so. ASEAN
can consider adopting another formula 2 Plus X that had
previously been utilized, and to develop more pilot projects
involving participation by countries that are ready, so as to
progress initiatives.
The successful implementation of ASEANs Roadmap
for an ASEAN Community by 2015 also hinges on the
ASEAN Secretariat as well as member countries having
adequate capacity and tool kits to effectively fulfill the tasks
required. Although the Secretariats resources and research
capabilities have been boosted and less developed members
are assisted with capacity building programmes, more needs
to be done to upgrade ASEANs ability to act institutionally.
Conclusion
The assessment of the competitiveness of ASEAN as a whole
and its member countries has been conducted against the
backdrop of profound changes in the global economic
landscape following the 2008 global crisis.
86
Chapter References
Coker, Richard J., Benjamin H. Hunter, James W. Rudge, Marco Liverani and Piya Hanvoravongchai (2011). Emerging
Infectious Diseases in Southeast Asia: Regional Challenges to Control, Health in Southeast Asia Series Paper 3, Lancet
Series on Southeast Asia.
87
88
ASEAN
Competitiveness
Report
ASEAN Competitiveness Report 2010
Foreword by
Michael E. Porter
Professor
Harvard Business School
20
10
Marn-Heong Wong
Rakhi Shankar
Ruby Toh
Christian Ketels
Special Advisor