Exports in ASEAN-10 and External Shocks: Persistence, Convergence, and Challenges for Regional Economic Development

Abstract

The Association of Southeast Asian Nations (ASEAN) is made up of 10 countries: Brunei, Cambodia, Indonesia, Lao PDR (People's Democratic Republic), Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. Regarding the exports data is important to understand that the required policy actions may differ depending on whether the effects of the pandemic on ASEAN’s countries are transitory or permanent, and this question requires further exploration.

Our study tries to answer the following two questions: 1. first, are ASEAN exports persistent across time, in the sense that exogenous shocks have permanent effects on the series or, on the contrary, the effects of the shocks are transitory, disappearing by themselves in the long run? 2. Secondly, do these series converge with respect to the world economy or to the other ASEAN countries? In the analysis fractional integration methods have been used on the ten ASEAN countries’ and World series annual exports from 1950 to 2022. The data used in this research has been obtained from the World Trade Organization (WTO) Database. The results can be summarized as follows: 1.a. If we assume that random changes (or "noise") don’t affect each other over time, then none of the countries show signs of bouncing back to normal. 1.b. But if we allow for changes that are somewhat connected over time (like when one shock leads to another), only Laos shows signs of recovering to its usual export pattern. 2. a. When we look at how these countries compare to the World average, it’s the same: no sign of bouncing back unless we consider those connected changes — and even then, only Laos shows a bit of recovery. 2.b. However, when we just compare the ASEAN countries to each other, Laos, Malaysia, and Singapore seem to recover over time and move toward similar trends. The rest, though, don’t show that kind of “catching up” or moving in sync.

The study found that, for most ASEAN countries, exports don’t really "bounce back" to normal after something shakes them up — like a global crisis or a big change in trade. Instead, those changes tend to stick around. The only country that might return to normal over time is Laos. So basically, for most of these countries, when exports are affected, the effect is more long-lasting and not just a temporary bump.

Looking at the Key socio-economic indicators in 2022, it is difficult to group Lao with countries like Malaysia and Singapore. There are a few key indicators such as socio demography factors where Lao is the last or penultimate country in the list: population living below national poverty line, unemployment rate, access to improved sanitation, infant mortality rate, access to improved drinking water or life expectancy. Economic and trade factors provide additional cases: GDP at current price, inflation rate and exports and imports of goods. With these numbers, Lao is closer to countries like The Philippines, Cambodia, Brunei or Myanmar. Potential explanations for this similar pattern observed for Lao with Malaysia and Singapore may be due to facts such as unproven data, an absolute size so small as to make the results extraordinary, an exponential increase of similar shape or even the fact that firms are doing well even when the country is not.