chapter 2 development and current status of machinery trade between asean and india

7/28/2019 CHAPTER 2 Development and Current Status of Machinery Trade Between ASEAN and India

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Chapter

2

DevelopmentandCurrentStatusofMachineryTradebetweenASEANandIndiaAyakoObashiUniversityofWisconsin-Madisons

December2011

ThischaptershouldbecitedasObashi,A.(2011),DevelopmentandCurrentStatusofMachineryTradebetweenASEANandIndia inKimura,F.andS.Umezaki(eds.),ASEAN-IndiaConnectivity:TheComprehensiveAsiaDevelopmentPlan,PhaseII,ERIAResearchProjectReport2010-7,Jakarta:ERIA,pp.57-94.


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CHAPTER2.DEVELOPMENTANDCURRENTSTATUSOFMACHINERYTRADE

BETWEENASEANANDINDIAAYAKOOBASHI

AbstractTheimportanceoftheASEANasdestinationofIndiasexportsofmachineryhas

nearlydoubledoverthelastfewyears. Meanwhile,theproportionofmachineryintheASEANs total importsfromIndia,orIndiasexports to theASEAN,hasdoubledoverthe lastseveralyears thoughnotto the levelof themachineryssharefortheASEANsexportside. Inrelativeterms,theASEANmemberstatestendtoexportmoremachinerypartstoandimportmorefinishedmachineryproductsfromIndia,comparedto twodecadesago. In theASEANsmachineryexports toIndia,computerpartsandaccessoriesandelectricintegratedcircuitsarethetoptwogoods. IntheASEANsmachineryimportsfromIndia,therewasanoticeablesurgeintheimportsofmobilephonesinthelastseveralyears. SingaporehasbeenaleadingexporterandimporterintheASEANsmachinerytradewithIndia,butfortheASEANsimportside,IndonesiahasrapidlyincreasedtheimportsoffinishedmachineryproductsincludingmobilephonesoverthelastseveralyearstothelevelexceedingSingaporeinvalue.

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1.INTRODUCTIONThischapteraimsatdeepeningourbasicunderstandingonthedevelopmentand

currentstatusoftradeinmachinerybetweentheASEANmemberstatesandIndia.BilateralinternationaltradedatafortheASEANandIndiaareexaminedfromvariousaspects. Section2examinesdatafortheASEANsexportstotheworldbydestinationanditsimportsbyorigin,considering theimportanceofIndiaasits tradingpartner. TheASEANspresenceinIndiasexportstoandimportsfromtheworldisalsoconsidered. Section3looksattheASEANsexportstoandimportsfromIndiabyindustry,withaspecialinterestinmachinery. Section4focusesontheASEANstradeinmachinerywithIndia. TheASEANsmachineryexports toandimportsfromIndiaarebrokendownbycountryandbymachinerysubsector. ThefinalsectionprovidesabriefsummaryoftheobservedfactsonmachinerytradebetweentheASEANandIndiaandconcludeswithdiscussionontheimpactoftheNokiaslaunchofmobiledevicemanufacturingfacilityinIndiain2006onIndiasexportsofmobilephonestotheASEAN.

2. ASEANANDINDIASEXPORTSTOANDIMPORTSFROMTHEWORLD

ThissectionexaminesdataforthetotalmerchandiseexportsbytheASEANtotheworldbydestinationanditsimportsbyorigintoconsidertherelativeimportanceofIndiaasitstradingpartner. ThesameexaminationisdonewiththeimportanceofASEANinIndiastotalmerchandiseexportstoandimportsfromtheworld.

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BilateralexportandimportdatausedthroughoutthischapterareobtainedfromtheUnitedNationsCommodityTradeStatisticsDatabase(UNComtrade). IhavecleaneduprawdataobtainedfromtheUNComtradeasdescribedinAppendixA.1. TheASEANhere includes Indonesia,Malaysia,Philippines,Singapore,Thailand,andVietNam. Duetothescarcityoftradedatafortheperiodofinterest,Brunei,Myanmar,Cambodia,andLaosareexcludedfromsample. Thedatasetcoverstheyears1990,1995,and2000-2009.1

2-1. ByExportDestinationandImportOriginWebeginbyexaminingonhowimportantIndiaisastheASEANstradingpartner,

andviceversa. TheuppertableofTable1showstheproportionsofIndiaasdestinationoftheASEANstotalexportsandasoriginoftheASEANs totalimportsin1990,2000,and2009. Thefiguresarereportedforexportsandimportsofallcommodities,thoseofmanufacturedgoods,andthoseofmachinery. FortheASEANstradeinallcommodities,thepercentageofIndiaasexportdestinationhasdoubledfrom1.6%in2000to3.3%in2009whileitspercentageasimportdestinationalsohasdoubledfrom1.0%in2000to2.1%in2009. AsimilarriseintheIndiassharebothastheASEANsexportdestinationandimportorigincanbeobservedfortradeinmanufacturedgoodsandthatinmachinery. Nevertheless,IndiaisstillofslightimportancebothintheASEANsexportsandimports,withitsshareasdestinationandoriginlimitedto2-3%asof2009.

1 ASEAN-IndiaFTAwhichtookeffectinJanuary2010isbeyondthescopeofmyanalysis.

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Table1: TheProportionsofIndia/ASEANastheASEAN/IndiasExportDestinationandImportOrigin

ForASEAN Indiaasexportdestination Indiaasimportorigin1990 2000 2009 1990 2000 2009

Allcommodities 1.3% 1.6% 3.3% 0.9% 1.0% 2.1%Manufacturedgoods 1.1% 1.3% 2.7% 0.9% 0.8% 1.7%Machinery 0.9% 1.0% 2.4% 0.3% 0.3% 0.9%

ForIndia ASEANasexportdestination ASEANasimportorigin1990

2000

2009

1990

2000

2009

Allcommodities 5.4% 6.5% 10.6% 6.3% 11.0% 9.1%Manufacturedgoods 5.3% 5.9% 9.2% 5.7% 9.9% 7.5%Machinery 12.7% 11.6% 19.2% 6.4% 17.1% 9.9%

Source: UNComtrade(exportandimportstatisticsforallcommodities,manufacturedgoods(HS28-92),andmachinery(HS84-92)reportedbytheASEANmemberstatesandIndia,variousversionsoftheHSclassification).

ThecorrespondingfiguresfortheproportionoftheASEANasIndiasexportdestinationandimportoriginareshowninthelowertableofTable1. ItisobviousataglancethattheASEANbecomesrelativelymoreimportanttradingpartnerforIndia,comparedtotheIndiasimportanceintheASEANstrade. Foreachoftradeinallcommodities, that inmanufacturedgoods,and that inmachinery, thepercentageof theASEANasexportdestinationhasalmostdoubledinthelastdecadethoughitspercentageasimportdestinationhasdecreasedduringthesameperiod. TheriseintheASEANsshareasIndiasexportdestinationisparticularlynoticeableforexportsofmachinery. In2009,aboutonefifth(19.2%)ofIndiasexportsofmachineryweredestinedfortheASEANmemberstates.

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Figure1providesasnapshotofthetrendinIndiasexportsofmachinerybydestinationintheyears1990,1995,and2000-2009. Inthestackedbarchartofexportvalues,eachexportdestinationcountry/regionisshowninadifferentcolor. ThesolidlinechartshowstheproportionsoftheASEANasIndiasexportdestination,andthedashedlinechartshowsthecorrespondingpercentagesoftheEastAsianregionasawhole, i.e.ASEAN+6.2 Thesolid linechartdemonstrates that theASEANsshareasdestinationofIndiasmachineryexportsleapedinjusttwoyears. TheASEANsshareof Indiasmachineryexportshoveredaround10%from2002 to2007andhasdoubledform10.0% in2007 to19.2% in2009. More interestingly, therise in theEastAsiasshareofIndiasmachineryexportsduringtheperiod2007-2009wasattributedtotheincreasingimportanceoftheASEANasexportdestination. IndiahasbecometoexportmoremachinerytotheASEANmemberstatesratherthantoChinaorotherEastAsiancountries. In2009,theASEANsshareasdestinationofIndiasmachineryexportswas19.2%,whichwasalmost three fourthof thepercentageofEastAsiaasawhole(26.5%).

2 ASEAN+6consistsoftheASEANmembercountries,China,Japan,RepublicofKorea,India,Australia,andNewZealand.

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Figure1: IndiasMachineryExportsbyDestination

Source: UNComtrade(exportstatistics formachineryindustry(HS84-92)reportedbyIndia,variousversionsoftheHSclassification.

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AmongtheASEANmemberstates,SingaporehasbeenamajordestinationcountryofIndiasexportsofmachinerythroughouttheperiodofinterestexcepttheyear2001,followedbyMalaysiaandIndonesia. ThetopdestinationsintheASEANin2009areshown in thepiechart in theupper leftpartofFigure1. In2009,40.6%ofIndiasmachineryexportstotheASEANweredestinedforSingapore,28.1%forMalaysia,14.8%forIndonesia,andtherestforThailandandothercountries.

ItshouldbenotedthattherewasanoticeablesurgeinIndiasexportsofmachinerytoMalaysiafrom2008to2009. Beingcuriousaboutthissurge,welookintotheASEANsimportanceinIndiasmachineryexportsbycomparingdataobtainedfromIndiasexportstatisticsandthemirrordatafromtheASEANsimportstatisticsinFigure2. ThebluelinechartsshowthevaluesofIndiasmachineryexportstotheASEANmemberstates reported in Indiasexportstatistics. The red linechartsshowthecorrespondingvaluesof theASEANmemberstatesmachinery importsfromIndiareportedintheASEANmemberstatesimportstatistics.

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Figure2: IndiasMachineryExportstotheASEANMemberStates:ComparisonofExportStatisticswithImportStatistics

Source: UNComtrade(exportandimportstatisticsformachineryindustry(HS84-92)reportedbyIndiaandtheASEANmemberstates,variousversionsoftheHSclassification).

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IntheUNComtradedatabase,importsaregenerallyreportedonthebasisofcost,insuranceandfreight(c.i.f.),whileexportsarereportedonafreeonboard(f.o.b.)basis.Thistendstomakeimportvalueshigherthanthecorrespondingexportvalues;however,forSingapore, theexportvaluehasexceeded the importvaluesince2003,and thegapbetweenthevalueshasbeenwideningespeciallyinthelastfewyears. SuchacounterintuitivetrendisalsoobservedforMalaysia,whichhasexperiencedasuddensurgeintheexportvalue,unlikeintheimportvalue,from2008to2009. Thefactthatthevaluesreportedinexportstatisticsarehigherthanthosereportedinimportstatisticscannot,itseems,beexplainedonlybythedifferencesinthetimeofrecording.SingaporeandMalaysiamayberecordedas(immediate)destinationatIndiascustomsbecausetheultimatedestinationmarketcannotnecessarilybespecifiedatthetimeofexport,whichleadstothehighervaluesreportedinexportstatistics. Inotherwords,itappearsthatSingaporeandMalaysiahavebecomemoreimportantforIndiaasentrepttradebase.3 Inaddition,firmslocatedinspecialeconomiczones(SEZ)inIndiawouldtendtooverstatethevaluesoftheirexportstobeawardedspecialtaxprivileges.

3.ASEANSEXPORTSTOANDIMPORTSFROMINDIAThissectionlooksattheASEANstotalmerchandiseexportstoandimportsfrom

Indiaby industry,withaspecial interestinmachinery. Excluding thepossibleeffects3 FurtherdiscussionontheroleofSingaporeandMalaysiaasenterpttradebaseforIndiaisbeyondthescopeofthischapter,becauseofthescarcityofdataforre-exportsandre-imports.SomeofmachinerygoodsexportedfromIndia toSingaporeorMalaysiamaybeconsumed locallyandothersmaybere-exportedbacktoIndia,tootherASEANmemberstates,ortootherpartsoftheworld.

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ofprimarycommodityprice increases, thesection furtherconsiders theproportionsofmachineryintheASEANstradeinmanufacturedgoodswithIndia.

3-1. ByIndustry:AllCommoditiesAsnapshotof the trend in theASEANs totalmerchandiseexportsto India in the

years1990,1995,and2000-2009isprovidedinFigure3. Thestackedbarchartshowsexportvaluesbyindustry,eachindustryisrepresentedbyadifferentcolor.4 ThesolidlinechartshowstheproportionsofmachineryintheASEANstotalmerchandiseexportstoIndia,andthedashedlinechartshowsthecorrespondingpercentagesofmanufacturedgoodsincludingmachinery. AsubstantialportionoftheASEANstotalmerchandiseexportstoIndiahasbeenaccountedforbymachinerythroughouttheperiodofinterest. Asshownbythesolidlinechart,themachineryssharehashoveredaround35%overthelastdecade. In2009,onethird(32.6%)oftheASEANstotalmerchandiseexportstoIndiawereaccountedforbymachinery. Meanwhile,machinerygoodsconstitutedmore thanhalfof theASEANsexportsofmanufacturedgoodstoIndia,whichaccountedfor56.8%ofthetotalmerchandiseexports.

4 TheindustryclassificationappliedthroughoutthischapterisexplainedinAppendixA.1.

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Figure3: IndustryCompositionoftheASEANsTotalMerchandiseExportstoIndia

Source: UNComtrade(exportstatistics forallcommoditiesreportedbytheASEANmemberstates,variousversionsoftheHSclassification).

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Forareference,thetableintheupperleftpartofFigure3showstheproportionsofmachineryintheASEANstotalmerchandiseexportsto theworldandthoseinIndiastotalmerchandise imports from theworld in1990,2000,and2009. ThemachinerysshareintheASEANsexports toIndia islimitedcomparedtotheASEANsexportstotheworld,butishigherthanintheIndiasimportsfromtheworld. In2009,themachinerysshareintheASEANsexportstoIndia(32.6%)wasatthelevelintermediatebetweentheASEANsexportstotheworld(44.0%)andtheIndiasimportsfromtheworld(24.0%).

Duetocrudeoilpriceincreases,theASEANsexportsofmineralsandmineralproductstoIndiahaveincreasedlargelyintermsofvaluesince2004. Likewise,reflectingtheworldwidefoodpriceincreasessince2007,therewasasignificantincreaseinthevalueoftheASEANsexportsofanimals,plants,andfoodstoIndia. Inspiteoftheincreasedexportvaluesofmineralsandmineralproductsandthatofanimals,plants,and foods, it isnoteworthy that theASEANsmachineryexports to Indiahaveincreasedcontinuouslysince2002,afterinternetbubble,andthemachineryssharehasremainedsteadyataround35%.

Figure4providesasnapshotofthetrendintheASEANstotalmerchandiseimportsfromIndia,followingthesameformatasFigure3. TheproportionofmachineryintheASEANstotalmerchandiseimportsfromIndiareachedapeakat23.7%in2001intimesofinternetbubble. Afterhoveringaround11%forafewyears,themachineryssharehasdoubled from9.8% in2005 to19.3% in2009.In the faceofcrudeoilprice increasesandworldwide foodprice increases, theASEANs importsofmachineryfromIndiahaveincreasedsignificantlyafterinternetbubble,atapaceexceedingtheincreaseintheimportsofotherindustries. In2009,onefifth(19.3%)of

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theASEANstotalmerchandiseimportsfrom IndiawereaccountedforbymachinerythoughthemachinerysshareisstilllimitedcomparedtotheASEANsexportside.MachinerygoodsconstitutedonethirdoftheASEANsimportsofmanufacturedgoodsfromIndia,whichaccountedfor60.0%ofthetotalmerchandiseimports.

Figure4: IndustryCompositionoftheASEANsTotalMerchandiseImportsfromIndia

Source: UNComtrade(importstatisticsforallcommoditiesreportedbytheASEANmemberstates,variousversionsoftheHSclassification).

ComparedtotheASEANsexportside,theproportionofmachineryintheASEANstotalmerchandiseimportsfromIndiaisfarbelowthemachinerysshareintheASEANsimportsfromtheworld,butisslightlyhigherthaninIndiasexportstotheworld. In2009,themachinerysshareintheASEANsimportsfromIndia(19.3%)waslessthanhalfthatintheASEANsimportsfromtheworld(45.5%),butwasslightly

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abovethatinIndiasexportstotheworld(16.9%).In2005, therewasanoticeablesurge in theproportionofmanufacturedgoods in

theASEANstotalmerchandiseimportsfromIndia,whichwasattributedtoasharpincrease inSingapores importsof lightmanufacturedgoods from India. Tobemoreprecise,Singaporesharplyincreasedimportsofnon-industrialdiamonds(jewelry)workedbutnotmountedorset(No.7102.39 in theHS1996classification)fromIndiain2005. Andthenin2006,SingaporesimportsofjewelryfromIndiareturnedtothesamelevelasin2004.5 Interestingly,SingaporesjewelryexportstotheUAEincreasedsharplyonlyin2005whileneitherIndiasjewelryexportstotheworldnorSingaporesjewelryimportsfromtheworldexperiencedsuchasharpincrease. ItappearsthatIndiashippedjewelrytoSingaporeinordertosupplytotheultimatedestinationmarketoftheUAEonlyin2005thoughwecannotexaminesuchapossibilitybecausedataforre-exportsbySingaporearenotavailable.6

3-2. MachineryasaShareofTradeinManufacturedGoodsExcluding thepossibleeffectson the tradevaluesofcrudeoilprice increasesand

worldwidefoodpriceincreases,thissubsectionfurtherexaminesrelativeimportanceofmachineryintradebetweentheASEANandIndia,byfocusingonexportsandimportsofmanufacturedgoods. ThesolidlinechartsinFigures3and4aremodifiedandcombinedintoFigure5. TheblueboldlinechartshowstheproportionsofmachineryintheASEANsexportsofmanufacturedgoodstoIndia,andthebluethinlinechart5 Duetothescarcityofthequantitydata,wecannotevaluatetheeffectsofdiamondpriceincreases.Also,thesurgeinSingaporesjewelry importsfromIndiawasnottheresultof theIndia-SingaporeComprehensiveEconomicCooperationAgreement(CECA)becauseSingaporesMNFtariffongoodsclassifiedunderthecategoryNo.7102.39hadalreadybeenzerobeforeitseffectuation.6 Note,however,thatIndiasjewelryexportstotheUAEratherincreasedin2005.

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showsthepercentagesofmachinerypartsonly.7 Machineryasshownbytheblueboldlineincludesbothmachinerypartsandcomponentsandfinishedmachineryproducts.TheredlinechartsshowthecorrespondingpercentagesfortheASEANsimportsofmanufacturedgoodsfromIndia.

7 Forthedetailsonthedefinitionofmachinerypartsandcomponents,seeAppendixA.1.

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Figure5: MachineryasaShareofTotalExportsandImportsofManufacturedGoods:TheASEANsExportstoandImportsfromIndia

Source: UNComtrade(exportandimportstatisticsformanufacturedgoods(HS28-92)reportedbytheASEANmemberstates,variousversionsoftheHSclassification).

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IntheASEANsexportsofmanufacturedgoodstoIndia,theproportionofmachinerypartshasincreasedgraduallyespeciallyinthelastseveralyearswhilethepercentageofmachineryasawholehashoveredaround57%overthelastdecade. In2009,57.4%of theASEANsexportsofmanufacturedgoods to Indiawereaccountedforbymachinery,andabout two thirdof those,36.1%of theexportsofmanufacturedgoodsweremachineryparts. FortheASEANsimportside,theincreaseanddecreaseinthemachinerysshareintimesofinternetbubblewerelargelyduetothoseinthepercentageofmachineryparts. Morenoteworthyisarapidincreaseinthemachineryssharesince2005asaturningpoint.8 Meanwhile,thepercentageofmachinerypartshasremainedsteadyoverthelastseveralyears. Sincethegapbetweentheboldandthinlinesequalstothepercentageoffinishedmachineryproducts,theASEANhassignificantlyincreasedrelativeimportanceofitsimportsoffinishedmachineryproductsfromIndia. Thepercentageoffinishedmachineryproductshasquadrupledfrom5.4%in2005to20.9%in2009.

Theincreasedrelativeimportanceofmachineryparts in theASEANsexportsofmanufacturedgoods toIndiaandthatoffinishedmachineryproductsfortheASEANsimportsidearecommonfeaturessharedamong theASEANmemberstates. Figure6showstheproportionsofmachineryintheASEANmemberstatesexportsandimportsofmanufacturedgoodstoandfromIndiain1990and2009. ThebluestackedbarsindicatethepercentagesofmachineryintheexportsofmanufacturedgoodstoIndiaforeachASEANmemberstate,and the redbarsshow the importside. Forboth the redandbluebars,thedarkcoloredportionsrepresentthepercentagesaccountedforbymachinerypartsandthelightcoloredportionsforfinishedmachineryproducts.8 NotethatSingaporesjewelryimportsfromIndiasurgedin2005,whichpusheddownthepercentageofmachineryintheASEANsimportsofmanufacturedgoodsfromIndia.

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Figure6: MachineryasaShareofTotalExportsandImportsofManufacturedGoods:TheASEANMemberStatesExportstoandImportsfromIndia

Source: UNComtrade(exportandimportstatisticsformanufacturedgoods(HS28-92)reportedbytheASEANmemberstates,variousversionsoftheHSclassification).

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Bycomparingthestackedbarsbetweentheyears1990and2009,itisapparentthateachof theASEANmember stateshas increased relative importanceof itsexportsofmachinerypartstoanditsimportsoffinishedmachineryproductsfromIndia,withtheexceptionofMalaysiasimports. Inaddition,theproportionsofmachineryasawholehaveincreasedsimultaneouslyfortheASEANmemberstatesexportstoandimportsfromIndiainthelasttwodecades,withtheexceptionofMalaysiaandSingaporesimports.

4.ASEANSMACHINERYEXPORTSTOANDIMPORTSFROMINDIAFocusingontheASEANstradeinmachinerywithIndia,thissectionlooksintothe

ASEANmemberstatestakingpartinthemachineryexportstoandimportsfromIndia.ThesectionalsobreaksdowntheASEANsmachineryexportstoandimportsfromIndiabymachinerysubsector.

4-1. ByCountryandTypeofGoodsFigure7overviewsthetrendinthevalueoftheASEANsexportsofmachineryto

Indiabycountryandbythetypeofgoods,i.e.machinerypartsandcomponentsandfinishedmachineryproducts. Thedarkcoloredportions,regardlessofblueorred,representtheexportvaluesofmachinerypartsandcomponentsandthelightcoloredportionsforfinishedmachineryproducts. Theareachart indicates thatSingaporehasbeenaleadingexporterintheASEANsmachineryexportstoIndiaoverthelasttwodecades,withasignificantincreaseintheexportvalueofmachinerypartsinthelastseveralyears.SingaporeisfollowedbyMalaysiaandThailand. Therewerenoticeable

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increasesintheexportvaluesofbothmachinerypartsandfinishedmachineryproductsforthosetwocountriessince2002. ThemachineryexportsbyotherASEANmemberstatestoIndiaarenegligibleamountofvalue.

Figure8providestheareachartfortheASEANsimportsofmachineryfromIndiabycountryandbythetypeofgoods. Asintheexportside,SingaporehasbeenaleadingimporterintheASEANsmachineryimportsfromIndiaoverthelasttwodecade. Itshouldbenoted,however,thatIndonesiasimportsoffinishedmachineryproductsfromIndiahas increasedrapidlysince2006andexceededSingapore invaluein2009. NotonlyIndonesiabutalsoSingapore,Thailand,Malaysia,andVietNamhaveexperiencedtheincreaseintheimportvalueoffinishedmachineryproductssince2005-2006. Incontrast,theimportvaluesofmachinerypartshaveremainedlargelyunchangedforalltheASEANmemberstates,exceptthatthepartsimportsbySingaporeandMalaysiaincreasedanddecreasedintimesofinternetbubble.

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Figure7: ExporterCountryCompositionoftheASEANsMachineryExportstoIndia

Source: UNComtrade(exportstatisticsformachinery(HS84-92)reportedbytheASEANmemberstates,variousversionsoftheHSclassification

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Figure8: ImporterCountryCompositionoftheASEANsMachineryImportsfromIndia

Source: UNComtrade(importstatisticsformachinery(HS84-92)reportedbytheASEANmemberstates,variousversionsoftheHSclassification).

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4-2. BySectorandTypeofGoodsAswithFigure7,theareachartofFigure9alsoshowsthetrendinthevalueofthe

ASEANsexportsofmachinerytoIndia,butbymachinerysubsectorandbythetypeofgoods.

9 Thedarkcoloredportionsaremachinerypartsandcomponents,andthelightcoloredportionsarefinishedmachineryproducts,asbefore. Machineryisdividedintofoursubsectors,namely,generalmachinery(HS84),electricmachinery(HS85),transportequipment(HS86-89),andprecisionmachinery(HS90-92)sectors. TheexportvaluesofgoodsclassifiedundertheparticularHScommoditycodesareexcludedfromrelevantsubsectorsandarehighlightedas independentareasinordertolookintothetrendintheASEANsmachineryexportstoIndia.

9 Toexaminechangesinthecommoditycompositionofexportsovertime,ideallywewouldliketousetradedatabasedonasingleconstantcommodityclassification,whichenablesusnottoconcernaboutthecensoringissueemergingfromthecomplicatedmergersandbranchingofcodesduetotheupdateofclassification. Forthisareachart,IthereforeusedexportstatisticsreportedaccordingtotheHS1992classification,theoldestversion. ThesameappliestoFigure10.

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Figure9: ProductCompositionoftheASEANsMachineryExportstoIndia

Source: UNComtrade(exportstatistics formachinery(HS84-92)reportedbytheASEANmemberstates,theHS1992classification)

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Generalmachinerysector(HS84),followedbyelectricmachinerysector(HS85),hasbeendominantintheASEANsexportsofmachinerytoIndiaandhasincreasedconstantlysince2002,afterinternetbubble. Behindthisdominanceofgeneralmachinerysector,thecommoditycodeNo.8473.30(partsandaccessoriesofcomputers)hasrankedfirstintheexportvalueattheHS6-digitlevelthroughoutthesampleperiodexcepttheyear1990,inwhichNo.8473.30rankedsecondafterNo.8471.93(computerdatastorageunits,whichareclassifiedasfinishedproducts).10 Fortheelectricmachinerysector,electronicintegratedcircuitshavebeenmajorexportedgoods. Intheareachart,IunitedthreecommoditycodesofNo.8542.11,8542.19,and8542.20intoanorangeportionlabeledaselectronicintegratedcircuits.11 Unlikewithgeneralmachineryandelectricmachinery sectors,transportequipment(HS86-89)andprecisionmachinery(HS90-92)sectorsarestilllimitedtonegligibleamountinvalue,regardlessofpartsorfinishedproducts.

Forfurtherreference,Table2looksatthedetailsofmajormachinerygoodsexportedbytheASEANmemberstatestoIndiain2009. Goodsarelistedindescendingorderofvaluebycountry,andthelistfocusesontheHS6-digitcommoditycodes,eachofwhichaccountsformorethan10%ofthecountrysmachineryexportstoIndia. OnlySingapore,Malaysia,andThailandare included in the listbecause,as isclearfromFigure7,theotherASEANmemberstatesarenegligibleintheASEANs10 No.8473.30 isdefinedaspartsandaccessoriesofthemachinesof theheadingNo.84.71,i.e.automaticdataprocessingmachines(computers). Morespecifically,No.84.71isdefinedasautomaticdataprocessingmachinesandunitsthereof;magneticoropticalreaders,machinesfortranscribingdataontodatamediaincodedformandmachinesforprocessingsuchdata,notelsewherespecifiedorincluded.11 No.8542.11,8542.19,and8542.20isdefinedasmonolithicintegratedcircuits,digital;monolithicdigitalintegratedcircuits,exceptdigital;andhybridintegratedcircuits;respectively.Althoughelectronic integratedcircuitsareclassifiedunder theheadingNo.85.42regardlessof theversionoftheHSclassification,therehavebeencomplicatedmergersandbranchingofcodesatthe6-digit level. Iunited the threecodes soas toavoidpossiblymisclassifieddatadue toconfusionoverthechangesinthecommodityclassification.

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totalmachineryexportstoIndia. Fortheleadingexporter,Singapore,electronicintegratedcircuits(No.8542.11/8542.19/8542.20)andpartsandaccessoriesofcomputers(No.8473.30)rankedfirstandsecond,respectively,andthetoptwogoodsaccountedforonefourthofSingaporesmachineryexportstoIndia. TheleadinggoodswerecomputerpartsandaccessoriesforMalaysiaandelectricintegratedcircuitsforThailand,whichsuggeststhatthereisthecompartmentalizationofmachinerysubsectorsbetweenthetwocountries.

Table2: MajorMachineryExportsfromASEANtoIndia(2009)

Country HScodesintheHS1992classification

Commoditydescription Type

Value(millionUS$,

constant2005)

Shareofthecountrysmachinery

exportstoIndiaSingapore No.8542.11

/8542.19 ElectronicIC Parts 692 14%No.8473.30 Partsandaccessories

ofautomaticdataprocessingmachines(computers)

Malaysia No.8473.30 Partsandaccessoriesofautomaticdataprocessingmachines(computers)

No.8471.20 DigitalcomputerswithCPUandinput-outputunits

No.8540.11 Colorcathode-raytelevisionpicture(includingvideomonitor)tubes

Parts 501 10%Parts 186 19%

Products 115 11%Parts 105 10%

Thailand No.8542.11/8542.19 ElectronicIC Parts 129 11%No.8408.20 Engines,diesel,for Parts 117 10%

motorvehiclesofChapter87

Note: NogoodsclassifiedunderthecategoryNo.8542.20areexportedbySingaporeorThailandtoIndiain2009

Source: UNComtrade(exportstatisticsformachinery(HS84-92)reportedbytheASEANmemberstates,theHS1992classification).

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Figure10correspondstoFigure8andshowsthetrendinthevalueoftheASEANsimportsofmachineryfromIndiabymachinerysubsectorandby thetypeofgoods. TherearetwonoticeablechangesintheASEANsmachineryimportsfromIndiainthelasttwodecades. First,theincreaseanddecreaseoftheASEANsmachineryimportsfromIndiaintimesofinternetbubblewereduesolelytotheincreaseanddecreaseintheimportsofpartsandaccessoriesofcomputers(No.8473.30).CombinedwiththeobservedfactfromFigure8,itappearsthatSingaporeandMalaysiaengagedintheseincreasedanddecreasedimportsofcomputerpartsandaccessories.Second,theincreaseintheASEANsimportsoffinishedmachineryproductsfromIndiasince2005wasduelargelytoadramaticincreaseinasinglecommoditycodeofNo.8525.20(transmit-receiveapparatus),whichincludesmobilephones.12 Besidesthesurgeintheimportsofmobilephones,theASEANsimportsoffinishedproductsoftransportequipment (HS86-89) from Indiahave increased significantly in the last fewyears.

12 No.8525.20isdefinedastransmissionapparatusincorporatingreceptionapparatus,whichincludestelephonesforcellularnetworksorforotherwirelessnetworks(No.8517.12intheHS2007classification,thelatestversion),i.e.mobilephones.

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Figure10: ProductCompositionoftheASEANsMachineryImportsfromIndia

Source: UNComtrade(importstatisticsformachinery(HS84-92)reportedbytheASEANmemberstates,theHS1992classification)

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ThedetailsofmajormachinerygoodsimportedbytheASEANmemberstatesfromIndiain2009areprovidedinTable3. Transmit-receiveapparatusincludingmobilephones(No.8525.20)rankedfirstforallthenon-negligibleimporters,namely,Singapore, Indonesia,Thailand,Malaysia,andVietNam. Inparticular,more thanhalf(56.6%)ofIndonesiasmachineryimportsfromIndiawereaccountedforbymobilephones. Similarly,mobilephonesconstitutedasubstantialportionofthemachineryimportsbyVietNam,Thailand,andSingapore. Besidesmobilephones,large-scalevehicleswerehighlyranked,suchasdieselpoweredtrucks(No.8704.23)forSingapore,dumptrucks(No.8704.10)forIndonesia,andcargovessels(No.8901.90)forVietNam.

Thesurge in theASEANs importsof transmit-receiveapparatus includingmobilephonesfromIndia isfurtherexamined inFigure11. FromtheASEANsperspective,theproportionof Indiaasoriginof its importsofmobilephoneshasincreasedsharplyfrom0.1%in2005to10.2%in2009. Andin2009,almosthalf(48.8%)oftheASEANsmobilephones imports fromIndiaweredestined for Indonesia, followedbySingapore(21.0%)andThailand(16.1%). Piecingtogethertheseobservedfacts,itwouldappearthatNokiaIndiahasgreatlyaffectedthesurgeintheASEANsmobilephonesimportsfromIndia.

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Table3: MajorMachineryGoodsImportedbytheASEANMemberStatesfromIndiain2009

CountryHScodesintheHS1992classification

Commoditydescription TypeValue

(millionUS$,constant

2005)

Shareofthecountrys

machineryimportsfromIndia

Singapore

No.8525.20

Transmit-receive

apparatus,

including

mobile

Products

163

21%

phones

No.8704.23 Dieselpoweredtrucksweighing>20t Products 77 10%Indonesia No.8525.20 Transmit-receiveapparatus,includingmobile Products 379 57%

phonesNo.8704.10 Dumptrucksdesignedforoff-highwayuse Products 72 11%

Thailand No.8525.20 Transmit-receiveapparatus,includingmobile Products 125 32%phones

No.8708.40 Transmissionsformotorvehicles Parts 58 15%Malaysia No.8525.20 Transmit-receiveapparatus,includingmobile

phonesVietNam No.8525.20 Transmit-receiveapparatus,includingmobile

Products 30 11%Products 101 42%

phonesNo.8901.90 Cargovesselsotherthantankerorrefrigerated Products 75 31%

Source: UNComtrade(importstatisticsformachinery(HS84-92)reportedbytheASEANmemberstates,theHS1992classification).

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Figure11: TopImportOriginsoftheASEANsImportsofTransmit-receiveApparatus(No.8525.20)

Source: UNComtrade(importstatisticsreportedbytheASEANmemberstates,theHS1992classification)

Nokiasetup itsmobiledevicemanufacturing facility (NokiaTelecomSEZPark)inChennai,India,inJanuary2006. NokiawasthefirstglobaltelecomcompanytolaunchamanufacturingplantformobilephonehandsetsinIndia. Initiallyaimedtoserve thedemandsof the rapidlygrowing Indiasdomesticmarket,approximatelyhalfof thecurrentproductionof theNokiasChennai facilitiesconsumeddomesticallyandtherestisexportedto100countriescoveringsixcontinents.13 Indonesiahasbeen13 OnMay5,2011,NokiaannouncedthatitsmanufacturingfacilityatChennaihasachievedproductionof500millionmobilephonehandsetsafterfiveyearsofitsoperations.NokiasChennaifacility

isbased

on

the

Nokias

global

standards

and

can

manage

the

production

ofall

types

of

Nokiashandsetsfromlow-endtohigh-endphones. Formoreinformation,seethewebpageof

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rankedasoneofthetop10majormarketsofNokia,intermsofnetsales,inspiteofthefactthatNokiahasnomobiledevicemanufacturingfacilityinIndonesia. Onanotherfront,inIndonesia,Nokiahasthelargestmarketshare,about60%,formobilephonesales.

5.CONCLUSIONThischapterhasoverviewedthedevelopmentandcurrentstatusoftradein

machinerybetweentheASEANandIndia. Theobservedfactsaresummarizedasfollows. First,therelativeimportanceoftheASEANasdestinationofIndiasexportsofmachineryhasnearlydoubledoverthelastfewyears;in2009,almostonefifthofIndiasmachineryexportswereshippedtotheASEAN. Second,theproportionofmachineryintheASEANstotalimportsfrom IndiahasdoubledoverthelastseveralyearsthoughnotuptothelevelofthemachineryssharefortheASEANsexportside.TheincreaseinthemachineryssharewasduesolelytotheincreasedimportsoffinishedmachineryproductsbytheASEANfromIndia. Meanwhile,intheASEANsexportstoIndia,theproportionofmachinerypartshasgraduallyincreasedoverthelastdecade. Third,theASEANmemberstatescenteringonSingaporehavebecometoexportmoremachinerypartsincludingcomputerpartsandaccessoriesandelectricintegratedcircuitstoIndia. Ontheotherhand,theASEANmemberstateshavesignificantlyincreasedimportsoffinishedmachineryproductsincludingmobilephonesfromIndiainthelastseveralyears,whichisespeciallytrueforIndonesiaandNokiaIndia:http://www.nokia.co.in/about-nokia/company/manufacturing-in-india.

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Singapore.WhatisinterestingaboutthelastpointisthattheNokiaslaunchofmobiledevice

manufacturingfacilityinIndiaappearstogreatlyaffectthevolumeoftransactionsbetweenIndiaandtheASEANmemberstates. Theglobalproductionstrategyofasinglecompanycouldshapetradepatternsbetweentwocountrieswithweaktraderelationships. SuchaNokias impacton theASEANsmachinery imports from IndiawouldsuggestthatdevelopingeconomieslikeIndiaultimatelyneedtotakeseriousandeffectivemeasurestoattractforeignfirmsinordertoenhancetraderelationswithothercountries. Indeed,onitswebpage,NokiaIndiaannouncedhighexpectationsregardinginvestmentclimateinChennai. Duetotheavailabilityofskilledlabor,supportfromthestategovernment,andtheexistenceofgoodlogisticsconnections,ChennaiwasselectedasthelocationfortheNokiasmanufacturingfacility. InadditiontohavingagreatimpactonIndiasexportsofmobilephonestotheASEAN,theNokiaslaunchofmobiledevicemanufacturingfacilityappearstoserveasthecatalystforindustrialdevelopment inChennai. OtherelectronicmanufacturingcompanieshaveannouncedtoplantoinvestinChennaisincetheNokiaslaunch. Inthemeantime,theNokiaTelecomSEZParkhousesfiveglobalcomponentsuppliersasofMay2011,creatingemploymentopportunitiesexceeding25,000. Domesticcomponentsuppliersandserviceprovidersarealsoexpected to takepart inandgainbenefit from thisemergingindustrialagglomeration.

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APPENDIX

A1. DatadescriptionIusedinternationaltradedata,obtainedfromtheUNComtradeonlinedatabase,at

the6-digitleveloftheHarmonizedSystem(HS)commodityclassification,whichisthemostdetaileddisaggregatedleveloftradedatathatisbothinternationallycomparableandpubliclyavailable. AttheHS6-digitlevel,sincetheannualdatabelow$500(currentUS$)arenotreportedbefore2000,tradeflowsbelow$500aretreatedasiftherewasnotradeatallforalltheyearsinthesample. Afterthecutoffvalueof$500isapplied,all tradedataaredeflatedby theconsumerprice index (CPI) in theUnitedStatestoobtainaconstantdollarseries. VersionsoftheHSclassificationvarybycountryandbyyear(seeTableA1). Basically,IuseddatabasedonthelatestversionoftheHSclassificationasreportedintheUNComtrade.

AsforthePhilippinesexportsandimportsin1990and1995andVietNamsexportsandimportsin1990,1995,and2009,Iusedmirrordatawithappropriatemodification. Forexample,toestimatethevalueofbilateralimportsbythePhilippines,theobservedvalueofthecorrespondingbilateralexportsbythetradecounterpartismultipliedby1.05. Themultiplier1.05isemployedasaproxytoadjustexportvaluesonanf.o.b.basistoimportvaluesonac.i.f.basis,followingAndo(2006).

Asfortheindustryclassification,theHS2-digittarifflinesareclassifiedintosevenbroadcategories. Theaggregatedseven industries includeanimals,plants,and foods(HS1-24);mineralsandmineralproducts (HS25-27);chemicalsandchemicalproducts(HS28-40);lightmanufacturedgoods(HS41-71);metalsandmetalproducts(HS72-83);machinery(HS84-92);andotherproducts(HS93-97). Thedetailsoftheindustry

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classificationaresummarizedinTableA2.ManufacturedgoodsrangefromHS28toHS92.

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TableA1: VersionsoftheHSClassificationEmployedbytheASEANMemberStatesandIndia1900 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Indonesia HS1992HS1992HS1996 HS1996 HS1996 HS1996 HS1996HS1996 HS1996 HS1996 HS1996 HS1996Malaysia HS1992HS1992HS1996 HS1996 HS2002 HS2002 HS2002HS2002 HS2002 HS2002 HS2002 HS2007Philippines .. .. HS1996 HS1996 HS1996 HS1996 HS1996HS1996 HS1996 HS2002 HS2002 HS2002Singapore

HS1992

HS1992

HS1996

HS1996

HS2002

HS2002

HS2002

HS2002

HS2002

HS2007

HS2007

HS2007

VietNam .. .. HS1996 HS1996 HS1996 HS1996 HS2002HS2002 HS2002 HS2002 HS2007 ..Thailand HS1992HS1992HS1996 HS1996 HS2002 HS2002 HS2002HS2002 HS2002 HS2007 HS2007 HS2007India HS1992HS1992HS1996 HS1996 HS1996 HS2002 HS2002HS2002 HS2002 HS2002 HS2002 HS2007Source: UNComtrade

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TableA2: IndustryClassificationbasedontheHSClassificationCategoryofindustry Subcategories

Animals,plantsandfoods(HS1-24)

Mineralsandmineralproducts(HS25-27)Chemicalsandchemicalproducts(HS28-40)Lightmanufacturedgoods(HS41-71)

Liveanimals;edibleproductsofanimalorigin(HS1-5)Liveplants;ediblevegetablesandfruits;vegetableproducts(HS6-14)Animalorvegetablefatsandoils(HS15)Ediblepreparations;beverages;tobacco(HS16-24)

Chemicalsandchemicalproducts(HS28-38)Plasticsandarticlesthereof;rubberandarticlesthereof(HS39-40)Rawhidesandskins;leatherandarticlesthereof;furskinsandfurproducts(HS41-43)Woodandarticlesthereof;woodcharcoal;corkandarticlesthereof;strawandespartoproducts(HS44-46)Pulp,paper,andpaperboardandarticlesthereof;productsofprintingindustry(HS47-49)Textilefibers;yarn;textileandwovenfabrics;articlesofapparelandclothingaccessories(HS50-63)Footwear;headgear;umbrellasandsticks(HS64-67)Articlesofstone,plaster,cement,asbestosandmica;ceramicproducts;glassandglassware(HS68-70)Naturalorculturedpearls,preciousorsemi-preciousstones(HS71)

Categoryofindustry SubcategoriesMetalsandmetalproducts(HS72-83)Machinery(HS84-92) Machineryandmechanicalappliancesandpartsthereof;electrical

machineryandequipmentandpartsthereof(HS84-85)Vehiclesandpartsthereof;aircraft,spacecraft,andpartsthereof;ships,boatsandfloatingstructures(HS86-89)Optical,photographic,cinematographic,measuring,checking,precision,medicalinstruments;clocksandwatchesandpartsthereof;musicalinstrumentsandpartsandaccessoriesthereof(HS90-92)

Otherproducts(HS93-97) Armsandammunitionandpartsandaccessoriesthereof(HS93)Miscellaneousmanufacturedarticles(HS94-96)Worksofart,collectorspiecesandantiques(HS97)

Source:UNComtrade

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Machineryhereincludesallthegoodsclassifiedaspartofgeneralmachinery(HS84),electricmachinery(HS85),transportequipment(HS86-89),andprecisionmachinery(HS90-92)sectors.Forthisproductgroup,wegroupedtheHScommoditycodesintopartsandcomponentsandfinishedproducts.Asforthedefinitionofmachinerypartsandcomponentsappliedhere,seeKimuraandObashi(2010). KimuraandObashiprovide the listsofmachinerypartsandcomponentsat theHS4-digitand6-digitlevelsforvariousversionsoftheHSclassification,whicharethemodifiedversionsofthelistoriginallyproposedbyAndoandKimura(2005).

REFERENCES

Ando,Mitsuyo(2006). FragmentationandVerticalIntra-industryTradeinEastAsia.TheNorthAmericanJournalofEconomicsandFinance17,No.3:257-81.

Ando,Mitsuyo,andFukunariKimura(2005).TheFormationofInternationalProductionandDistributionNetworksinEastAsia.InInternationalTradeinEastAsia,ed.TakatoshiItoandAndrewRose.Chicago:UniversityofChicagoPress.

Kimura,Fukunari,andAyakoObashi(2010). InternationalProductionNetworksinMachineryIndustries:StructureandItsEvolution.ERIADiscussionPaperSeriesNo.2010-09,Jakarta:ERIA.

chapter 2 development and current status of machinery trade between asean and india

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