ASEAN’s evolving trade links: Exploring a decade of growth

In Part 2 of our series on ASEAN connectivity, we look at how ASEAN’s trade connectivity with its partners has grown over the decades.

Improving connectivity within ASEAN will help to foster a more unified region, subsequently boosting competitiveness, inclusiveness, and a heightened community spirit.

To achieve this, further development in three critical areas – physical connectivity, trade connectivity, and investment and financial connectivity – is required.

Specifically, when it comes to trade connectivity, it is important to look at the trade balance position of selected ASEAN economies. ASEAN recorded a back-to-back trade surplus of US$93 billion and US$79 billion in 2021 and 2022 respectively, supported largely by surpluses of key ASEAN exports commodities such as Electrical Machinery & Equipment, animal or vegetables, and footwear products.

Figure 1: ASEAN trade recorded a steady growth momentum and recovered faster. Source: ASEAN statistics, UOB Global Economics & Markets Research

Figure 2: ASEAN’s trade balance remained robust in surplus. Source: ASEAN statistics, UOB Global Economics & Markets Research

By export destination, the largest surplus was derived from the United States (US) and European Union (EU) with US$158.4 billion and US$56.4 billion respectively. Meanwhile, ASEAN is a net importer from China with a trade deficit of US$137.3 billion in 2022, followed by Taiwan, South Korea, and Japan.

Figure 3: ASEAN-6 exports by country. Source: ASEAN statistics, UOB Global Economics & Markets Research

Figure 4: Top five ASEAN exports by commodity. Source: ASEAN statistics, UOB Global Economics & Markets Research

The trade deficit with China was driven by high imports of electrical machinery and equipment, as well as iron and steel boiler commodities which were mostly in raw form, as well as in the final capital goods.

Similar to China, the trade deficit with Japan was mainly in iron and steel, machinery and mechanical appliances, and vehicles. Most of the imported commodities from Japan are raw materials and consumer goods such as galvanised steel for vehicle bodies, as well as motor vehicle components.

In contrast, ASEAN is a net exporter to the US with a trade surplus of US$158.4 billion, of which more than 46 per cent are electronics-related exports with a surplus amounting to US$73.1 billion.

Figure 5: ASEAN’s trade balance by country. Source: ASEAN statistics, UOB Global Economics & Markets Research

Figure 6: Top five ASEAN trade balance by commodity. Source: ASEAN statistics, UOB Global Economics & Markets Research

Several countries in ASEAN have a long-standing comparative advantage as electrical and electronics (E&E) exporters such as Vietnam, Singapore, and Thailand with a surplus of US$35.3 billion, US$10.4 billion, and US$10.7 billion respectively in 2022. Meanwhile, ASEAN also recorded a large surplus with the EU in 2022 of US$56.4 billion, underpinned by surpluses in the electronics and footwear industries.

Overall, ASEAN trade (exports and imports) recorded a sustained growth from US$2.4 trillion in 2012 to US$3.8 trillion in 2022 – more than a 50 per cent increase in the last decade. Intra-ASEAN trade, however, remained low as evident from just a 22.1 per cent share while China and US accounted for 18.7 per cent and 10.9 per cent respectively, which yielded a combined share of close to 30 per cent.

This is an excerpt from ASEAN: Deepening trade and financial inter-connectivity for sustainable growth that was first published on 8 June 2023 by UOB Global Economics & Markets Research. View Part 1 and Part 3 here.

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