This presentation by Yasushi Ueki was made at the session "Integrating ASEAN firms into global value chains through investment" during the 2nd ASEAN-OECD Investment Policy Conference held on 10-11 December 2014. Find out more at: http://www.oecd.org/daf/inv/investment-policy/2014-asean-oecd-investment-policy-conference.htm

1. Integrating ASEAN firms into GVC for Industrial Upgrading
Yasushi Ueki
Economic Research Institute for ASEAN and East Asia (ERIA), Jakarta
11 December 2014
yasushi.ueki@eria.org
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2nd ASEAN-OECD Investment Policy Conference
ASEAN Hall, ASEAN Secretariat, Jakarta

2. Questions
1. What are the main challenges for ASEAN firms to participate
in GVCs?
2. What roles can MNCs play?
3. What can governments do?
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3. East Asian Production Networks and Agglomeration
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Agglomeration Forces Dispersion Forces
• SEZ, Industrial Park
• Compulsory education
• Connectivity
• Trade and FDI Promotion
Relocation of a production
block by a lead firm and
inter-cluster technology
transfer
• Vocational Education
• Capacity Building of Local
Industry
• Urban Planning
• Engineering Education
• Collaboration among
Firms, Public Research
Institutes, and Univ.
Value Added
Cluster
• Increase in local factor prices
(wage, rent)
• Competition in local market
• Fragmentation of production
• Decrease in transportation
costs
• Capital flow liberalization
Geographical Space
• Economies of Scale Attraction of
supporting
industries
Intra and inter-cluster
technology transfer,
Learning by producing
SEZ
Emerging Industrial Districts Large Industrial Districts
in East AsiaPolicies

4. Focus
1. Relationships between Quality Control, Tech Transfer, and
Upgrading
2. Supply Chain and Supplier Support Chain
– Supplier Supports along a Supply Chain
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 Data used for this presentation
• ERIA Survey FY2013
• Indonesia, Philippines, Thailand, and Vietnam.
• Manufacturing
• 100% locally owned firms
• 719 of 998 observation (about 700 available for tabulation).

5. Focus 1
Quality Control, Tech Transfer, and Upgrading
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Upgrading
Technology Transfer Quality Control
Introduction of New Product
Supplier. Support by Buyer Adoption of 5S
Receive training from a main buyer Sort (整理)
Straighten (整頓)
Shine (清掃)
Standardize (清潔)
sustain the discipline (しつけ)

6. Quality Control and Upgrading
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Introduction of New Product
Supplier Support
by Buyer
Adoption of 5S
10%
16%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
not adopted 5S adopted 5S
Introduction of New Product
(n=725)
 Firms who have adopted 5S are more likely to introduce new products based on new
technologies.

7. Tech. Transfer and Upgrading
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Introduction of New Product
Supplier Support
by Buyer
Adoption of 5S
(n=717)
 Firms who received technical assistances from buyer are more likely to introduce new
products based on new technologies.
9%
21%
0%
5%
10%
15%
20%
25%
without Supplier
Support by Buyer
with Supplier
Support by Buyer
Introduction of New Product

8. Quality Control and Tech. Transfer
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Introduction of New Product
Supplier Support
by Buyer
Adoption of 5S
(n=714)
 Firms who adopted 5S are more likely to receive technical assistances from Buyer.
21%
45%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
not adopted 5S adopted 5S
Supplier Support by Buyer

9. Focus 2
Supply Chain and Supplier Support Chain
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Focal Firm Buyer B’s BuyerS’s Supplier Supplier

10. Supplier Support by Buyer and by Focal Firm
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(n=717)
 Firms who received technical assistances from buyer are more likely to provide technical
assistances to supplier.
10%
51%
0%
10%
20%
30%
40%
50%
60%
without Supplier
Support by Buyer
with Supplier
Support by Buyer
Supplier Support by Focal Firm

11. Supplier Support Chain
The buyer-supplier relationship extends along a supply chain
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Upgrading
Tech Transfer through
Production Networks
Management Practice
Introduction of New Product
Tech Support from Buyer
Adoption of 5S
Receive training from a main buyer
Sort
Straighten
Shine
Standardize
sustain the discipline
Capacity
Tech Support to Supplier
Provide training to a main supplier
Tech Transfer through
Production Networks

12. Role of MNCs: Foreign-owned Buyer and Supplier Support
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(n=716)
 Foreign-owned buyers including JVs are more likely to provide technical assistances to
the focal firm (supplier) than locally owned buyers.
 Foreign-owned buyers can initiate a supplier support chain.
47%
31%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Foreign-owned Buyer Locally owned Buyer
Supplier Support by Buyer

13. Tentative Answers to the Questions
1. What are the main challenges for ASEAN firms to participate in GVCs?
 A better implementation of quality control enables firms to plug into collaborative
production networks.
 The opportunity for participating in collaborative production linkages will become open to all
firms by putting 5S into practice.
 A big challenge for firms is to change organizational culture.
 5S is an approach meant to change organizational culture.
 Changing organizational culture requires time and perseverance before it is realized.
2. What roles can MNCs play?
 MNCs foster regional production networks in ASEAN.
 MNCs bring technologies, know-how and human resources.
 MNCs bring a willingness to develop local people and suppliers.
 GVC is a learning school for local firms.
 MNCs stimulate supplier supports along a supply chain.
3. What can governments do?
 Governments can support private efforts for adopting 5S and other quality
management practices
 Governments can develop infrastructure to attract FDIs and stimulate
agglomeration.
 Distance between buyer and supplier is a matter for technology transfer and spillover.
 Governments can improve physical, institutional, and people-to-people
connectivity.
 Connectivity for fostering inter-cluster linkages
 People-to-People Connectivity for facilitating face-to-face interactions among business partners
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14. Thank you very much for your kind attentions!
Your comments, and suggestions are highly appreciated.
Yasushi Ueki
yasushi.ueki@eria.org
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