AseanOutlook.com – International trade and foreign direct investment (FDI) have increasingly become key underpinning factors in the region’s economic development.
ASEAN total values of merchandise trade and trade in services have increased significantly. Over the past few years it reach more than US$ 2,815.2 billion and US$ 844.6 billion.
Respectively, in 2019, while total FDI inflows to the region amounted to US$ 160.6 billion in the same year.
Within a period of 20 years, ASEAN total merchandise trade has multiplied almost 4 times reaching over US$2.8 trillion in 2019.
Both exports and imports of goods steadily increased until 2018, except in 2009 and 2015-2016.
But the merchandise trade growth recorded a slight decline from 2018 of -0.3% as contributed by its export values the 2019 year-end.
The decline has continued until semester-1 of 2020, the preliminary data of first semester of 2020 showed that ASEAN total trade was US$ 1.2 trillion. A significant decline of 12.4% (year-on-year).
Majority of ASEAN member states contributed to this drop. The Covid-19 pandemic and the movement restrictions that it entails has significantly affected trade and supply chains around the world, including ASEAN, resulting in the weakening of international trade.
In its latest estimate, the World Trade Organization (WTO) projected a 9.2% fall in trade volume by end 2020.
The largest share of ASEAN total trade because contribution from intra-ASEAN trade. In 2019, intra-ASEAN accounted for 22.5% of total merchandise trade in the region, with intra-ASEAN constituting 23.4% and 21.5% of ASEAN’s total merchandise exports and imports, respectively.
However, the share of intra-ASEAN in 2019 was lower than in 2018, at 22.5% as compared with 23.0% in the previous year.
The shares of ASEAN trading partners also indicated slight decline in 2019 from the previous year, except for China (18.0% in 2019 from 17.1% in 2018) and USA (10.5% in 2019, from 9.3% in 2018).
The largest external markets for ASEAN exports in 2019 were China (14.2%), USA (12.9%), EU-28 (10.8%), and Japan (7.7%).
As for imports, China is the region’s largest external source of imports with a share of 21.9%, followed by EU-28 (9.1%), Japan (8.3%), and USA (8.0%). This is detail of trade sector in ASEAN:
Manufacturing sector in ASEAN’s merchandise trade
Manufacturing products constitute a major share of both total exports and imports in most AMS. The largest share of manufacturing products to total exports in 2019 was recorded in Cambodia (95.1%), followed by the Philippines (87.1%), Viet Nam (86.4%), and Thailand (81.6%).
Meanwhile, the largest manufacturing shares in imports of goods in 2019 were recorded in Viet Nam (84.0%) and Cambodia (81.6%), followed by Thailand (77.5%) and Malaysia (75.8%).
Agricultural sector in ASEAN’s merchandise trade
Agriculture remains an important trade sector in some AMS. Myanmar and Laos PDR have the largest shares of agricultural products in total exports at 24.3% and 23.0%, respectively, in 2019, followed by Indonesia (19.2%) and Thailand (14.4%).
As for imports, the shares of agricultural products in total imports in 2019 were highest in Lao PDR (15.8%), followed by Philippines (12.4%), Myanmar (12.0%), and Indonesia (10.9%).
International trade in services
During the last 14 years, ASEAN total trade in services has more than tripled from US$252.2 billion in 2005 to US$844.6 billion in 2019.
In the same period, total ASEAN exports of services increased nearly fourfold from US$ 112.5 billion to US$ 444.8 billion, while total ASEAN imports of services increased nearly threefold from US$ 139.6 billion to US$ 399.8 billion. Significant progress was also observed in trade balance.
After experiencing continuous services trade deficit for a decade, ASEAN recorded a positive balance of trade in services starting in 2015, with increasing trend reaching US$45.0 billion in 2019.
Foreign Direct Investments
In the last two decades, foreign direct investment (FDI) inflows to ASEAN have been on an increasing trend, from US$21.8 billion in 2000 to reach US$ 160.6 billion in 2019.
However, COVID-19 pandemic is expected to significantly affect investment, which was already on a muted trend in recent years.
The United Nations Conference on Trade and Development (UNCTAD) forecasted that global FDI flows may decline by up to 40% in 2028.
FDI inflows to ASEAN in the first quarter of 2020 was 34.2% lower than the same quarter of 2019, while in the second quarter was 31.5% lower.