On 28 August 2020, IDEAS held a webinar entitled, “IDEAS Webinar: China Plus One: Convergence or Divergence in ASEAN Integration?”. The webinar aims to deliberate on the reasons manufacturers and businesses adopting China Plus One strategy and to discuss the perspective of different ASEAN nations. IDEAS Research Manager, Lau Zheng Zhou moderated the webinar and was joined by three panelists.
In his introductory remark and presentation, Lau has highlighted a few issues to kick-off the discussion. First, the options available for recovery with regards to FDI and global value chain (GVC). Second, where and why the multinational companies (MNCs) are leaving China? Third, is the trend now moving towards convergence or divergence? Lau also posed questions on Vietnam’s dependence on extra-ASEAN trade, Indonesia’s difficulty in attracting FDI and ASEAN integration for recovery.
The first panelist, Dr. Jayant Menon of ISEAS-Yusof Ishak Institute gave the overviews for issues highlighted in the discussion. According to him, GVCs can be a powerful tool to increase income and reduce poverty in Asia and developing countries as it accounts for almost 50% of global trade. On China Plus One policy, he said that GVCs are affected by the US-China trade war. COVID-19 may have hastened the restructuring but it started much before the trade war. On the US-China trade war and GVCs, Dr. Jayant added that even a relatively small tariff could have big effects on GVCs. Lastly, on whether ASEAN integration is in convergence or divergence, he commented that with fiscal incentives, ASEAN countries should avoid a race-to-the-bottom, despite they are competing for the relocation.
The second panelist, Dr. Doan Thi Thanh of the Economic Research Institute for ASEAN and East Asia (ERIA) commented that “inequality” between ASEAN countries in receiving FDI has been going for some time. Open-regionalism even though is uneven but still a win-win situation for ASEAN countries. Dr. Doan does not view it as the case of a trade-off when it comes to regional economic integration and extra-ASEAN trade and FDI. She thought that focusing on the domestic market instead of GVC is a bad policy option given increased productivity. Lastly, Dr. Doan mentioned that there has been an increase of non-tariff measures (NTMs) in all countries but that does not mean they will have large effects.
The third panelist, Dr. Upalat Korwatanasakul of Waseda University mentioned that COVID-19 acts as accelerator for relocation of firms as it started even before the pandemic. ASEAN offers an attractive relocation destination due to the value chain ecosystem of ASEAN. ASEAN is in the middle of the value chain. He agreed that the gains from relocation of MNCs are unequally distributed but maintained that the relocation will benefit ASEAN as a whole due to close RVC ties. Lastly, Dr. Upalat also stated that the degree and trend of GVC and RVC participation varies greatly across ASEAN.
For those who missed the webinar session and would like to watch it, the video recording of the webinar is available below.