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Korea Economic Trends10

Exports to ASEAN from Korea,China and Japan

PARK Bun-Soon

Senior Fellow, Samsung Economic Research Institute

I. ASEAN Economy Aected by GlobalFinancial Crisis

Since the outbreak o the global nancial crisis, ASE-AN exports have plummeted, refecting the huge allin demand rom advanced countries. For instance, ex-ports by major ASEAN countries started to all in thesecond hal o 2008 and, by the rst quarter o 2009,most ASEAN countries suered negative growth o ex-ports o about 30%. While the decline is slowing in thesecond hal o this year, a return to positive growth isnot expected anytime soon.ASEAN countries have seen imports take a similarroute, with some experiencing a greater drop in im-ports than in exports. As a result, they have posted so-called recession-type trade surpluses. For example, thePhilippines, Thailand and Vietnam, all o which postedtrade decits in the rst quarter o 2008, saw their tradedecits narrow or turn to surplus in the rst quartero 2009. Indeed, the Philippines was the only countryamong major ASEAN countries to post a trade decit(US$1.7 billion) in the rst quarter o 2009. In the sec-ond quarter o 2009, Indonesia and Thailand recordedtrade surpluses that represented our-old increases ona year-on-year basis; each o their accumulated tradesurpluses or July and August alone surpassed theirsurpluses or the whole third quarter o 2008.Due to high overseas dependence, industrial produc-tion in ASEAN was hit hard by stagnating import de-mand rom advanced countries. All major ASEAN mem-bers except or Indonesia posted negative growth in theourth quarter o 2008 and saw production deteriorateurther in the rst quarter o 2009. This aected privateconsumption and investment, undermining economicgrowth. Malaysia, Singapore and Thailand in particularposted negative economic growth at the time.Fortunately, however, as the global economy seemsto be in the early stages o recovery and the decline inexports slows down, it seems unlikely that ASEAN willcontinue its economic decline much urther. Industrialproduction gures or major ASEAN countries in thesecond quarter o 2009 showed a marked improvementcompared to those o the rst quarter, while economic

W e e k l y I n s i g h t

Industrial Production and Economic Growth Rates of ASEAN

200820091Q2Q3Q4Q1Q2QIndonesiaIndustrial Production 4.34.24.31.81.51.5GDP6.26.46.45.24.44.0MalaysiaIndustrial Production7.23.11.4-9.1-14.4-10.9GDP7.46.64.80.1-6.2-3.9PhilippinesIndustrial Production-0.45.24.0-7.1-20.2-13.7GDP3.94.24.62.90.61.5SingaporeIndustrial Production12.3-5.6-10.9-10.7-24.2-2.4GDP6.62.5-0.1-4.1-9.5-3.5 ThailandIndustrial Production12.610.17.6-8.1-18.5-9.1GDP6.05.33.9-4.2-7.1-4.9(Unit: %)Note: Year-on-year.Source: Country reports o EIU.

November 16, 2009Samsung Economic Research Institute 11growth has also been on the rise. For instance, second-quarter economic growth rates or Singapore and Ma-laysia increased by 6.0 and 2.3 percentage points, re-spectively, since the rst quarter, indicating clear signso recovery. The ASEAN economy is also increasinglybeing viewed in a more positive light. In October 2009,the International Monetary Fund adjusted upward itsgrowth rates or ve ASEAN countries by 0.7 percent-age point or 2009 and 1.7 percentage points or 2010rom gures previously announced in May.

II. Northeast Asian Exports to ASEAN

1. Sluggish Exports to ASEANExports or the three major Northeast Asian econo-mies o Korea, China and Japan have not been spared bythe global economic turmoil. Korea’s exports plungedto US$21.1 billion in January 2009 rom US$41 billionin August 2008, while imports plummeted to US$22.6billion in February 2009 rom US$43 billion in July 2008.As or China, monthly exports averaged US$136 billionin the third quarter o 2008 but decreased substantiallyto US$64.8 billion in February. Japan posted monthlyaverages o US$68.1 billion in exports and US$68.6 bil-lion in imports in the third quarter o 2008; these guresell to US$39.2 billion and US$ 38.3 billion, respectively,in February 2009.Korea, China and Japan have seen exports slow dueto sluggish demand rom ASEAN. In September 2009,year-to-date accumulated exports to ASEAN by Ko-rea totaled US$28.9 billion, a 26% all year-on-year,while those o China and Japan were US$73.1 billionand US$55.4 billion, respectively, dropping 15.9% and29.9%. Korea’s exports decreased at a lower rate thanJapan’s but higher than China’s; a comparison o thethree rates o decline indicated that only Korea saw itsexports to ASEAN all more than its overall drop in to-tal exports. For the year up to September, Korea’s totalexports on an accumulated basis contracted by 20.7%but exports to ASEAN shrank 26%. This can also be illustrated by the change in ASEAN’sportion o total exports or each country: 11.1% in 2009rom 11.7% in 2008 or Korea, 8.6% rom 8% or Chinaand 13.7% rom 13.2% or Japan.

Total Export of Korea, China and Japan

1003005007009001,1001,3001,500Jan.2008Mar.MayJulySept.Nov.Jan.2009Mar.MayJulySept.KoreaChinaJapan

(Unit: US$100 million)Source: Korea International Trade Association and Japan External Trade Organization.

Korea Economic Trends12Korea’s total imports rom ASEAN also declined butnot as much as the drop in imports as a whole. For theyear up to September, Korea imported rom ASEAN24.3% less than the same period last year, while totalimports nose-dived 33.1%. With exports alling morethan imports, Korea’s trade surplus with ASEAN is ex-pected to narrow compared to last year. In the case o China and Japan, the drops in imports rom ASEAN andtotal imports have been similar.

Exports by Korea, China and Japan to individualASEAN countries showed uniform and fairly even de-clines, including their exports to Singapore, an impor-tant intermediary entrepôt in ASEAN and their biggestmarket. However, the decline in exports from Korea to Thailand and Malaysia was much more marked thanexports to the Philippines and CMVL.

For China, thedecline in exports was less pronounced in the case of Vietnam, the Philippines and CMVL, while Japan expe-

1 Cambodia, Myanmar, Vietnam and Laos.

rienced a relatively low decrease in its exports to thePhilippines.

Thailand and the Philippines seem to show dierentmarket characteristics. Their imports or the year up toAugust were the slowest among the ASEAN countries.Although Korea, China and Japan had total exportsto the Philippines all at a slower pace than their totalexports to ASEAN, their exports to Thailand droppeddramatically. This implies that the Philippines is nowbecoming more connected to the network o industriallabor divisions in Northeast Asia, a relationship thatwas quite weak in the past.2. Sluggish Exports o Korea’s Main ProductsCompetition among the three major Northeast Asianplayers has intensied in their eorts to export to theASEAN market. At the same time, the product tradestructure between Korea, China and Japan and ASEANshow characteristics o “intra-industry trade” and “in-

Change in ASEAN Exports and Imports for Korea, China and Japan

(Unit: %)Note: For the year up to September.Source: Korea International Trade Association and Japan External Trade Organization.

-20.7-21.3-32.8-26.0-15.9-29.9-40-35-30-25-20-15-10-50KoreaChinaJapan TotalASEAN-33.1-20.6-31.6-24.3-21.3-30.0-40-35-30-25-20-15-10-50KoreaChinaJapan TotalASEAN