Regionalsim in the asian automobile industry

1,382 views

Published on

Published in: Business, Technology
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,382
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide

Regionalsim in the asian automobile industry

  1. 1. Regional trade and international production networks: The context of automobile industry in Asia Presented by: NUNNOO Nawseen BURNAH Neeta CAMALL SAIB Amiirah 1/7/2013 Regionalism in Asian automobile industry 1
  2. 2. Regional trade and international production networks: The context of automobile industry in Asia Author: DEBDEEP DE Jaypee Business School, Jaypee Institute of Information Technology, Deemed University Source: International Journal of Technology Management & Sustainable Development Volume 10 Number 1 (2011) Website: www.ebsco.com 1/7/2013 Amiirah CAMALL SAIB 2
  3. 3. Regional trade and international production networks: The context of automobile industry in Asia 1/7/2013 Amiirah CAMALL SAIB 3
  4. 4. List of Abbreviations • IPN: International Production Network • WTO: World Trade Organisation • LDCs: Least Developed Countries • P&C: Parts and Components • EU: European Union • APEC: Asia-Pacific Economic Corporation • RTA: Regional Trade Agreement • MFN: Most Favoured Nation • OEMs: Original Equipment Manufacturers • SKD: Semi Knocked Down • CKD: Completely knocked Down • CBU: Completely Built Units 1/7/2013 Amiirah CAMALL SAIB 5
  5. 5. List of Abbreviations (Contd) • ASEAN: Association of South East Asian Nations • SMEs: Small and Medium Enterprises • SAARC:South Asian Association for Regional Cooperation • IIT: Intra-Industry Trade • EPZ: Export Processing Zones • FDI: Foreign Direct Investment • BBC: Brand of Brand Complementation • AICO: ASEAN Industry Cooperative Organization • CEPT: Common Effective Preferential Tariff • AFTA: ASAEN Free Trade Agreement 1/7/2013 Amiirah CAMALL SAIB 6
  6. 6. Overview of the study IPN in automobile industry Regionalization in the automobile industry Intra-Asian trade in auto components Policy determinant of IPNs in Asia Conclusion: Is RTA a necessary factor for IPN 1/7/2013 Amiirah CAMALL SAIB 7
  7. 7. Introduction “Globalization is a process that encompasses the causes, course, and consequences of transnational and transcultural integration of human and non-human activities.” ( Stoudmann,2006 ) 1/7/2013 Amiirah CAMALL SAIB 8
  8. 8. Introduction (Contd) • The proliferation of production networks • The global value chain • Advantage of IPN: o Cross-border production sharing o Opportunities for cost-efficient specialisation and welfare-enhancing trade. o Facilitate trade pattern in South East Asian economies 1/7/2013 Regionalism in Asian automobile industry 9
  9. 9. Introduction (Contd) 1/7/2013 Regionalism in Asian automobile industry 10 International Exchange Japan China Other Asian countries
  10. 10. Objectives of the study Objectives To identify the linkages in the production networks and the trade agreements in the context of the automobile industry. To assess how the growing formal trade agreements influence the IPNs in the region. To analyse the intraregional trade in the automobile industry in Asia. 1/7/2013 Regionalism in Asian automobile industry 11
  11. 11. IPN in Automobile industry • IPN is defined as the nexus of interconnected functions and operations through which goods and services are produced, distributed and consumed (Henderson et al.,2002: 445-46). • IPN combines various value chain across countries along with an integrated hierarchical layers of networks participants. 1/7/2013 Amiirah CAMALL SAIB 12
  12. 12. Evolution of IPN in Asia 1950s (1)Import- substitution industrialization policies 1990s (1)Limited imports and exports (2) Change to trade liberalisation (3)Developing countries becoming more integral to their plans 2001-2005 (1)Reduction in MFN duties on various automotive components (2)Countries such as China, India, Indonesia and Thailand liberalised trade in P&C 1/7/2013 Regionalism in Asian automobile industry 13
  13. 13. Original Equipment Manufacturers(OEMs) • OEMs form an industrial network. • OEMs bargain over: o Prices o Wages o Subsidies & Legislation 1/7/2013 Regionalism in Asian automobile industry 14
  14. 14. Innovation and networks • Organisation are driven more towards greater product differentiation • Likewise, the industry is shaping towards the cluster and is taking two distinct forms: o The formation of a geographic cluster o Innovation process 1/7/2013 Regionalism in Asian automobile industry 15
  15. 15. Innovation and networks(Contd) • The four factors of the innovation process leading to the formation of the cluster: 1/7/2013 Regionalism in Asian automobile industry 16 (2) Collaboration & interaction (4) Optimal skills & Knowledge (3) Formal & informal institution (1) Learning & knowledge accumulation
  16. 16. Horizontal/Vertical networks • Definition • Horizontal relationships among networks of peer companies can involve vertical network relationships at the same time. 1/7/2013 Regionalism in Asian automobile industry 17
  17. 17. Closed/open networks • Closed networks – Long term relationships exist that are not accessible to outsiders Examples ; Renault & Volkswagen • Open networks – Easily penetrable by outsiders • Combination of both can exist 1/7/2013 Regionalism in Asian automobile industry 18
  18. 18. Closed/open networks (Contd) 1/7/2013 Regionalism in Asian automobile industry 19 • Sourcing strategies: o Single sourcing strategies o Multiple sourcing strategies • Internationalisation strategies o Exports of complete cars o Exports & local assembly of cars that are slightly disassembled(SKD) o Substantial local assembly of cars (CKD) o Integrated local manufacturing (CBU)
  19. 19. Regionalization IN THE AUTOMOBILE INDUSTRY : THE ASIAN EXPERIENCE 1/7/2013 Regionalism in Asian automobile industry 20
  20. 20. Regionalization “Regionalization can be defined as politico- administrative process by which regions emerge as relevant units of analysis for economic and political activity and welfare and service provision” (Magel, 2011). 1/7/2013 Regionalism in Asian automobile industry 21
  21. 21. The Triad region • 80% of world automobile production takes place in the three triad regions 1/7/2013 Regionalism in Asian automobile industry 22
  22. 22. Automobile production in Asia • The automobile production in Asia is dominated by Japan and lesser extent by Korea • Major focus of automobile production in East and South East Asia are China, Malaysia, Taiwan, Thailand and to lesser extent, Indonesia and India 1/7/2013 Regionalism in Asian automobile industry 23
  23. 23. Regionalization IN THE AUTOMOBILE INDUSTRY 1/7/2013 Regionalism in Asian automobile industry 24 • Japanese cars are assembled in Thailand, Malaysia, India, Indonesia, Taiwan and China • Japanese firms are prone to penetrate the Asian market to developed customised cars • The western automobile companies are also taking interest in Asia o GM and Ford
  24. 24. Profile of automobile trade by automotive- producing and Asian countries (2006) (values in US$ billion) 1/7/2013 Regionalism in Asian automobile industry 25
  25. 25. Intraregional integration of production • The size and affluence of the market • The high degree and wide geographical extent of political integration • East Asia is regarded as potentially the fastest growing market for cars over the next few decades • South East Asian countries are inevitably the next automobile hub 1/7/2013 Regionalism in Asian automobile industry 26
  26. 26. INTRA-ASIAN TRADE IN AUTO COMPONENTS • The growth of the components depend on relationship between supplier and assembler 1/7/2013 Regionalism in Asian automobile industry 27 OEM Players focus on Servicing on After-sales market Assembly operations Basic design Deal with smaller group of large suppliers
  27. 27. INTRA-ASIAN TRADE IN AUTO COMPONENTS (Contd) 1/7/2013 Regionalism in Asian automobile industry 28 • Strong competition exist in component sector caused by: o Price cut o Shorter life cycles of production • Importance is being given to price and quality while buying from suppliers • Governments are supporting the sector by providing incentives
  28. 28. INTRA-ASIAN TRADE IN AUTO COMPONENTS (Contd) • SMEs were encouraged to set up plants around OEMs • The concept of assembly process at different stages resulted in multiple-border crossing of product fragments before getting incorporated in the final product 1/7/2013 Regionalism in Asian automobile industry 29
  29. 29. Major export destination of auto components from Asia (2006) 1/7/2013 Regionalism in Asian automobile industry 30
  30. 30. Export destinations of automobiles • India export to: o US o UK o Germany o Middle East o SAARC members • ASEAN is a major destination of Indian auto component product 1/7/2013 Regionalism in Asian automobile industry 31
  31. 31. Import destinations of automobiles • India imports from: 1/7/2013 Regionalism in Asian automobile industry 32 Asia • US$2.4 billion Japan • US$575 million China • US$484 million Thailand US$234 million
  32. 32. 1/7/2013 Regionalism in Asian automobile industry 33
  33. 33. 1/7/2013 Regionalism in Asian automobile industry 34
  34. 34. 1/7/2013 Regionalism in Asian automobile industry 35
  35. 35. POLICY DETERMINANT OF IPNS IN ASIA • Production networks in the Asian region can be explain by policy factor because of two region-specific policy events: 1. The tendency of the so-called hollowing out of the Japanese economy in the 1980s (Baldwin 2007) 2. The Asian economies introduce the dual- track strategic approach to industrialisation (Kimura 2006) 1/7/2013 Regionalism in Asian automobile industry 36
  36. 36. POLICY DETERMINANT OF IPNS IN ASIA (Contd) 1. Japanese reallocating their production plants 2. Industrialization in less developed Asian countries 3. Liberalization in foreign direct investment 4. Liberalisation in trade policy Factors that initiated production networks within Asia 1/7/2013 Regionalism in Asian automobile industry 37
  37. 37. Tariff phase out in Asia for auto components, 2000-07 1/7/2013 Regionalism in Asian automobile industry 38
  38. 38. Problems facing automobile industry in East Asia • The region remains one of the largely separate markets • Schemes devised to counter these problem: • BBC (Brand of Brand Complementation) Schemes in the late 1980s • AICO ( ASEAN Industry Cooperative Organisation) in 1996 • CEPT (Common Effective Preferential Tariff in 2003 1/7/2013 Regionalism in Asian automobile industry 39
  39. 39. Mauritian Context 1/7/2013 Regionalism in Asian automobile industry 40
  40. 40. History of automobile industry in Mauritius • At the beginning of 1860, the transport of passengers and goods was undertaken by animals, carriages and carts. 1/7/2013 Regionalism in Asian automobile industry 41
  41. 41. History of automobile industry in Mauritius (Contd) 1901 • First two seater car • First motorised truck of British origin 1930 • 3,016 vehicles around the island 1950 • 5, 161 vehicles 1970 • 25, 389 motorised vehicles 2011 • 392,276 vehicles registered 1/7/2013 Regionalism in Asian automobile industry 42
  42. 42. The Mauritian Automobile Industry • As at 30 June 2010, the number of vehicles registered at the National Transport Authority (NTA) was 374,547. • Composition of the fleet: 1/7/2013 Regionalism in Asian automobile industry 43 45% 42% 13% Central Statistics Office, August 2010 Cars and dual purpose vehicles Motorized two-wheelers Vans, Lorries and trucks, buses and other vehicles
  43. 43. Vehicles registered in Mauritius Table 1.1 - Vehicles¹ registered as at June 2010 No. of New Imported Re - registered Vehicles off the No. of second-hand Net addition2 3 Type of vehicle vehicles at vehicles vehicles at vehicles vehicles road Jan. - June 2010 31.12.09 Jan. - June 10 30.06.10Jan. - June 10 Jan. - June 10 Jan. - June 10 Car 117,890 2,251 2,493 141 577 122,198 4,308 Dual purpose vehicle 47,146 638 68 57 335 47,574 428 Motor cycle 44,222 2,201 24 122 348 46,221 1,999 Auto cycle 108,713 1,667 1 - 718 109,663 950 -5- Lorry and truck 12,950 132 108 42 107 13,125 175 Van 25,622 140 177 40 238 25,741 119 Bus 2,803 74 - - 33 2,844 41 Other 7,174 66 31 16 106 7,181 7 Total 366,520 7,169 2,902 418 2,462 374,547 8,027 1/7/2013 Regionalism in Asian automobile industry 44
  44. 44. Agreements signed by Mauritius Mauritius has secured preferential access to markets of several hundreds of million consumers with: o The US under the Africa Growth and Opportunity Act (AGOA) o The Eastern and Southern Africa through the Common Market for Eastern and Southern Africa (COMESA) o The Southern African Development Community (SADC) o Membership to African Pacific- Carribean (ACP) 1/7/2013 Regionalism in Asian automobile industry 45
  45. 45. Agreements signed by Mauritius (Contd) o The Investment Promotion and Protection Agreements (‘IPPAs’) o The North American Free Trade Agreement (NAFTA) o European Union (EU) o World Trade Organisation (WTO) 1/7/2013 Regionalism in Asian automobile industry 46
  46. 46. Free Trade Agreement (FTA) between Mauritius and Turkey 1/7/2013 Regionalism in Asian automobile industry 47
  47. 47. Free Trade Agreement (FTA) between Mauritius and Turkey (Contd) 1/7/2013 Regionalism in Asian automobile industry 48 Source: ANNEX II to Protocol 1- Free Trade Agreement between the Republic Of Turkey and The Republic Of Mauritius
  48. 48. EU Trading With Mauritius (2011) 1/7/2013 Regionalism in Asian automobile industry 49 Source: MAURITIUS EU BILATERAL TRADE AND TRADE WITH THE WORLD 21-MAR-12 http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc _122463.pdf
  49. 49. EU Trading With Mauritius (2011) (Contd) 1/7/2013 Regionalism in Asian automobile industry 50 Source: MAURITIUS EU BILATERAL TRADE AND TRADE WITH THE WORLD 21-MAR- 12 http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_122463.pdf
  50. 50. United States-Mauritius Trade and Investment Framework Agreement (TIFA) • Mauritius exports to U.S.: $ 176.4 million in 2008, a 6% decrease from 2007. (textile and apparel, cut diamonds and jewelry, live animals, prepared fish, optical and medical instruments and perfume) • U.S. exports to Mauritius valued at $51.3 million, a 3% increase (wheat, diamonds and jewelry and machinery) 1/7/2013 Regionalism in Asian automobile industry 51
  51. 51. Benefits of regional integration to Mauritius • Regional integration is expected to: o bring efficiency in the production system o develop the regional market o bring homogeneity in transportation sector o liberalize trade and trade facilitation in this sector o reach economies of scale 1/7/2013 Regionalism in Asian automobile industry 52
  52. 52. Limitations • Secondary data was limited based on the Mauritian context of automobile industry 1/7/2013 Regionalism in Asian automobile industry 53
  53. 53. Proposal 1/7/2013 Regionalism in Asian automobile industry 54
  54. 54. Conclusion • Market-led integration, rather than integration that comes from formal trade agreements • More recently, after the 1997/98 Asian economies crisis, countries in East Asia tried to formalize the market-led integration • The establishment of regional trade arrangements helped to deepen production networks and supply chain 1/7/2013 Regionalism in Asian automobile industry 55
  55. 55. Conclusion (Contd) • RTAs could be adopted as a vehicle to further activate IPNs as: o RTAs are flexible policy tools, in terms of speed, scope and sequencing o Trigger IPNs by reducing service-link costs arising from geographical distance o Promoting production cost saving in the fragmented production blocks o Promoting institutional building to reduce firms’ arm-length transactions 1/7/2013 Regionalism in Asian automobile industry 56
  56. 56. 1/7/2013 Regionalism in Asian automobile industry 57

×