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Global Production Sharing in Machinery and Transport Equipment Industry in the ASEAN4

Millanida Hilman, Rafiazka and Widodo, Tri (2015): Global Production Sharing in Machinery and Transport Equipment Industry in the ASEAN4.

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The production network of machinery and transport equipment in the ASEAN4 countries is dominated by the automobile industry, and the way it connects to East Asia is particularly well documented. This paper aims to offer a divergent analysis on the posture of the industry, the trade pattern of time period region-based parts and components, and the model of determinants of this trade flow. The Trade Balance Index (TBI) is applied to reveal the pattern of this trade. A Panel Ordinary Least Square estimate is used as the gravity equation to deal with this trade flow in machinery and transport equipment (SITC 7) Rev. 3 which is decomposed into a 5-digit parts and components level. For the purpose of the analysis, only the ASEAN4 and East Asian countries, comprising of Thailand, Indonesia, Malaysia, the Philippines, Japan, South Korea, and China, are studied using data on parts and components for machinery and transport equipment from 1992 to 2012. This paper’s conclusions show that the posture of the ASEAN4 machinery and transport equipment industry is supported by the vital participation of MNCs, especially of East Asian origin. In this trade pattern, the competitiveness of parts and components made in the ASEAN4 induces specialized dynamics as time goes by, notably from 1992 to 2012. It is also found that the determinants of the trade flow, such as the trade volume, real gross domestic products, logistics performance index, distance, and real effective exchange rate, remains varied among the ASEAN4 because of their different policies and orientations for trade.

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