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7 May 2020

International Economy

Opportunities and Challenges of ASEAN Amid Transformation of Supply Chains Post COVID-19 (Current Issue No.3108)

​A majority of ASEAN member states overall may experience fragile supply chains as a result of their dependency on imports of intermediate products from sources that are highly competitive in terms of costs, namely China, plus technologies from countries that own advanced technologies, such as South Korea and Japan. Such dependency also suggests that there are risks that may contribute to a stagnation of supply chains. Despite moderate complexity involved in the manufacturing of intermediate products, ASEAN member states have been able to produce such products by themselves. In so doing, ASEAN, however, have to import intermediate products from owners of advanced technologies, suggesting their limited attempts to diversify risks in supply chains as a result of their dependency on regional manufacturers of intermediate products.

Looking ahead, the coronavirus (COVID-19) pandemic, which is dealing a big blow to large countries, being major markets for industrial products, reinforces the fragility of supply chains as a result of dependency on semi-finished products.  Although ASEAN, as one of the world's important manufacturing sources, has the potential to induce manufacturers to relocate production bases from China, such a relocation of supply chains involves a number of factors, including reshoring in order to reduce risks that may stem from the stagnation of supply chains, as well as production costs and market access. These factors may also affect the decision to relocate supply chains from China. Regarding the manufacturing potential of ASEAN, it has been found that ASEAN can produce many categories of finished products in place of China via intermediate products imported from China and countries that own technologies. ASEAN may only be able to manufacture some categories of intermediate products using upstream products from the region, suggesting that ASEAN's dependency on intermediate products may not change significantly.   

 


International Economy