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ADB says East Asia economic integration on the rise

The growing trade in manufactured parts and components is helping East Asia weather the strengthening of regional currencies while inducing greater economic integration, an Asian Development Bank (ADB) report said yesterday.

"This burgeoning `trade in tasks' is less sensitive to real exchange movements than exports of primary commodities or finished manufactured goods," the Philippines-based lender said in its updated Asian Development Outlook report.

The subregion's intermediate goods trade burgeoned between 1990 and last year, with China becoming a significant export destination for neighbors, particularly for machinery and transport equipment parts and components, it said.

The shift away from more labor-intensive product exports was driven by rising wage costs and attendant real currency appreciation.

Although outsourcing components is now a global phenomenon, "it is far more important and is growing more rapidly in East Asia than elsewhere in the world," ADB said.

"Though exports are now growing quickly in some countries of South Asia, it has not yet latched onto international production networks to the same degree as East Asia," it said.

Production of parts and components now accounts for 57.8 percent of total manufacturing in the Philippines, 50.4 percent in Malaysia, 47.6 percent in Singapore, 38.7 percent in Taiwan, 33.2 percent in South Korea, 31.4 percent in China, 30.8 percent in Thailand, 29.7 percent in Hong Kong and 16.1 percent in Indonesia.

"It is clear that international product fragmentation taking place in this region has induced more intraregional trade over the past 15 years," it said.
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