Magazine article Business Asia

Time to Resurrect Export Spirit

Magazine article Business Asia

Time to Resurrect Export Spirit

Article excerpt

Asia's export-led recovery has not kicked in, despite currency devaluations in the region. NAOYUKI HASHIMOTO(*) offers an explanation

A peculiar phenomenon is now in evidence. The exports of Asian countries, whose competitiveness should have been dramatically strengthened by the plunge in their currency values, have hardly been increasing at all.

The situation is indicative of a fundamental problem in Asian economies.

A number of reasons can be advanced for the current lack of export growth. One is the so-called J-curve effect, according to which a devaluation tends to cause exports to dip first and rise later.

Also, some of these countries' traditional export mainstays, such as raw materials, do not have high price elasticity; in other words, even if their price falls considerably, demand for them does not suddenly shoot up. Another problem is the severe shortage of funds.

As I see it, though, a more fundamental problem is the lack of what we might call the "export or die" spirit. For example, South East Asian trade missions to Japan are all but non-existent

Also, many Asian production lines have been designed basically to meet domestic demand. Evidently, it is no easy matter to shift the manufacturing focus of a plant even if the domestic market is ailing.

From 1985 on, when the yen shot up against the US dollar, Japanese companies moved in full force to set up operations in South East Asia. Not only did they introduce capital, technology, and manufacturing facilities, but they also brought along an international network of export destinations to supplement domestic markets. …

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