Journal of ASEAN Studies, Vol. 4, No. 1 (2016), pp. 34-60
©2016 by CBDS Bina Nusantara University and Indonesian Association for International Relations
ISSN 2338-1361 print / ISSN 2338-1353 electronic
The Political Economy of the Automobile Industry in
ASEAN: A Cross-Country Comparison
1
Wan-Ping Tai Cheng Shiu University, Taiwan
Abstract
The automobile industry plays a leading role in a country’s industrialization.
Various countries have used different methods to identify a model of industrial
development. For developing countries, establishing the automobile industry is
crucial for promoting industrialization. After Southeast Asian countries had
achieved independent, their automobile industries underwent establishment and
development stages. The domestic and overseas competitiveness of the automobile
industries in ASEAN have received global attention. How can the industrial
development of Thailand, Indonesia, Malaysia, and the Philippines be understood?
Researchers have proposed various views regarding the industrial development of
these four ASEAN countries. We researched the political economy of these
countries to understand the development of their automobile industries.
Thailand’s automobile industry was successfully developed because of the
government’s crucial role in implementing a coordinated market economy and
national system of innovation. In Indonesia, government–business relations
hampered the government’s efforts to meet society and market needs, thereby
limiting the country’s industrialization. Malaysia must learn how to coordinate
its industries with a market economy through liberalization and coordination. The
Philippines has positioned its automobile industry on manufacturing automotive
parts because of the country’s limited industrialization. Theoretically, following
the 1997 Asian financial crisis, these ASEAN countries have adopted market
economy-oriented policies; however, because of the historical context of political
economy, the development of their automobile industries has varied. Under the
context of globalization, the economic systems of various countries have exhibited
low convergence. In this study, we show that embedded liberalism is the preferred
interpretation in ASEAN automobile industry development. In other words,
researchers should look beyond convergence theory and consider the political
economy characteristics of various countries. Accordingly, further comparative
research must be conducted to clarify the differences in the economic systems and
policies in ASEAN studies.
Keywords: Political Economy, ASEAN, Automobile Industry,
Globalization, Embedded Liberalism
1
Original paper was presented at 2015 Consortium for Southeast ASIAN Studies in Asia,
Tokyo University, 2015/12. The study also belongs to a part of author`s Minister of Science
and Technology Project (MOST 102-2410-H-230 -003 -MY2).
Journal of ASEAN Studies 35
Introduction
Automobile industries play a leading
role in a country’s industrialization.
Countries such as Thailand, Malaysia,
Indonesia, and the Philippines have
adopted various strategies in
attempting to identify a model of
industrial development, establish their
automobile industry, and promote
industrialization.
After Southeast Asian countries
had become independent, their
automobile industries underwent
establishment and development stages.
In the twenty-first century, the domestic
and overseas competitiveness of the
automobile industries in Association of
Southeast Asian Nations (ASEAN) have
received global attention. According to
Table 1, regarding the foreign trade of
ASEAN countries between 2000 to 2010,
vehicle exports and imports have
increased by 47.4% and 12.4%,
respectively. In addition, domestic trade
in ASEAN countries has grown rapidly;
from 2000 to 2010, the vehicle exports
and imports increased by 77% and 94%,
respectively. Trade growth has
stimulated the development of various
industries in these countries. In
particular, in the ASEAN Economic
Community (AEC), tariff reduction has
driven the prospective development of
automobile industries in this region.
Table 1 Value of vehicle imports and export in Thailand, Malaysia, Indonesia, and
the Philippines (2000, 2005 and2010) Unit: US$1 million
2000
2005
2010
GROWTH RATE%
DOMESTIC
TRADE
EXPORTS
1.06
4.88
9.22
77.0
IMPORTS
0.80
3.98
8.33
94.1
FOREIGN
TRADE
EXPORTS
3.33
9.10
19.1
3
47.4
IMPORTS
9.55
14.0
2
21.3
6
12.4
DATA SOURCE: STATISTICAL DATA SETS OF
ORGANISATION INTERNATIONALE DES
CONSTRUCTEURS D’AUTOMOBILES (OICA) AND WORLD
TRADE ORGANIZATION (WTO) ABOUT VEHICLE
IMPORTS AND EXPORTS,
HTTP://STAT.WTO.ORG/STATISTICALPROGRAM/WSDBS
TATPROGRAMTECHNOTES.ASPX?LANGUAGE=E(2015/9/1)
36 The Political Economy of the Automobile Industry
The question is which of these
ASEAN countries has achieved the
strongest automobile industry
performance. Tables 2 and 3 show the
performance of automobile businesses
in four ASEAN countries for the 1990 to
2010 period. The tables show that
Thailand, with Japan as a foreign
investor, has demonstrated the
strongest performance in trade and
production among these four ASEAN
countries. Although Malaysia’s trade
transactions have been less than
Thailand’s and Indonesia’s, Malaysia is
the only country among these four
countries to own a local automobile
brand. Indonesia intends to follow
Thailand’s model of liberalizing
automobile businesses; in addition,
Indonesia has attempted to establish its
national brand. Regardless of
production or trade imports and exports,
Indonesia’s automobile industry is
weaker than that of Thailand and
Malaysia. The Philippines does not have
a clear goal for industrial development,
and its production and trade volumes
are less than those of the other three
countries are.
Table 2 Value of automobile manufacturing and vehicle imports and exports in Thailand,
Malaysia, Indonesia, and the Philippines (1990–2010)
Unit: US$1 million
Trade growth rate (%)
Trade value
1990
1995
2000
2010
1990-2000
2000-10
1990-95
1995-2010
Thailand
Exports
0.11
0.49
2.42
18.7
210
67.3
69.1
247.8
Imports
2.65
5.18
2.08
8.54
-2.2
31.1
19.1
4.3
Malaysia
Exports
0.12
0.28
0.31
1.33
15.8
32.9
26.7
25
Imports
1.31
2.79
1.83
5.76
4
21.5
22.6
7.1
Indonesia
Exports
0.02
0.13
0.37
2.55
175
58.9
110
124.1
Imports
1.52
3.14
1.87
5.56
2.3
45.6
21.3
5.1
The
Philippines
Exports
0.02
0.22
0.58
1.82
280
21.3
200
48.5
Imports
0.54
1.54
0.97
2.57
8
16.5
37
4.5
Source: Statistical data sets of OICA and WTO about vehicle imports and exports,
http://stat.wto.org/StatisticalProgram/WSDBStatProgramTechNotes.aspx?Language=E(2015/9/1)
Journal of ASEAN Studies 37
Table 3 Production and manufacturing in Thailand, Malaysia, Indonesia, and the
Philippines (1980–1995 and 1995–2010)
Unit: US$1 million
Year
Growth rate (%)
1980
1995
2010
2014
1980-95
1995-2010
2010-2014
Malaysia
Sales
9,762
285,792
605,156
666,465
12.9
7.4
30.5
Production
104,227
288,338
567,715
596,600
11.8
6.4
14.37
Thailand
Sales
89,201
547,758
800,357
881,832
34.3
3.1
40.53
Production
73,985
525,680
1,644,513
1,880,007
40.7
14.2
117.16
Indonesia
Sales
212,000
384,000
764,710
1,208,019
6.6
220.55
Production
174,700
388,000
702,508
1,298,523
8.1
5.4
296.52
The
Philippines
Sales
70,000
128,162
170,216
296,492
2.2
62.82
Production
41,900
127,016
65,625
-
13.5
-3.2
-
Source: Richard F. Doner and P. Wad, ‚Financial Crises and Automotive Industry
Development in Southeast Asia‛, Journal of Contemporary Asia, Vol. 44, No. 4(2014), p.
668.
Because of the automobile industry
in guiding economic development and
industrialization, these four ASEAN
countries hope that developing their
automobile industries can facilitate
industrial development; however,
differences in the political and economic
history, as well as the development of
industry in these four countries, have
led to varying results. How can the
development of the automobile
industries in these four ASEAN
countries be understood? Do such
developments have political and
economic implications?
Previous studies have considered
the industrial development of ASEAN
countries as a whole. Researchers who
advocate neoclassical economics
consider that national industry typically
develop according to their comparative
advantage; also, market competition
should be encouraged, and economic
rationality should be adopted to
optimize resources allocation (Balassa
1982; Bhagwati 1988, pp. 25-27). Scholar
has even proposed a slogan‛ The End of
History‛ (Fukuyama 1992).
However, neoclassical economics
has fueled much discussion (Chu 2001,
67). Some researchers have indicated
that slow economic development is
related to market and international
factors; economic development in
developing countries has not been
based on the principles of a free market
(Zysman 1995, pp. 1-3; Doherty 1995, pp.
1-3; Jomo 2007, pp. 461-508). For
example, regarding the concept of
developmental state proposed by Japan,
Johnson considered that the rapid
development of East Asian countries
after World War II was related to these
countries’ strenuous efforts to improve
38 The Political Economy of the Automobile Industry
their economy (Johnson 1982; Kumon
1972, pp. 109-141; Rosovsky 1972, pp.
109-141).
In addition to the theory of
developmental state, dependency
theory and dependency development
theory(Doner 1991; Jenkins 1991, pp.
625-645), structure theory(Crouch 1986;
Robison 1992; Robison 1986),
institutional theory(Chang 1994), and
government–business
relations(Laothamatas 1992; Maclntyre
1991; Haggared 1998, pp. 78-104) differ
substantially from neoclassical
economics (these are referred to as the
development school of economics
hereafter).
Since the 2000s, international
systems have developed a division of
labor system in global production and
manufacturing; consequently,
developing countries have faced
problems with industrial liberalization
and protection removal(Wade 2003, pp.
621-644). These theoretical debates have
overlooked the specific historical
conditions and issues about global
industrial innovation (Hill 2004, pp.
354-394).
In addition, the development
model for East Asian countries does not
necessarily suit Southeast Asian
countries (Jomo 2007A; Jomo 2000B;
Stiglitz and Yusof 2001). In reality, since
the 1997 Asian financial crisis, the
political and economic environments of
Southeast Asian countries have changed
substantially. The aforementioned
theoretical debates are mostly focused
on the pre-financial crisis period and do
not provide a comprehensive
comparison. These theoretical
limitations should be viewed from a
different research perspective.
In the present paper, the long-term
strategies of Malaysia, Thailand,
Indonesia, and the Philippines in
developing their automobile industries
are analyzed and summarized. First, the
political and economic characteristics of
each country are analyzed from the
perspective of the development of each
country’s automobile industry
specifically between 1960 and 1997
(when the Asian financial crisis
occurred). This period is referred to as
the period of globalization (Doner and
Wad 2014, pp. 664-687).
2
Second, how
the automobile industries in these four
ASEAN countries adapted to
globalization is discussed. Finally, we
offer a conclusion by our analysis.
The Political Economy Background of
the Automobile Industry in ASEAN:
the State, Government–Business
Relations and Foreign Investment
1. The State
A. Malaysia
Malaysia appears to be a successful
case that follows the development
school of economics. After an incident
of political violence on May 13, 1969,
which occurred following the 1969
election, the state led by Malays
adopted a new economic policy
promoting industrialization as a
2
The beginning of globalization typically
refers to the year of 1994 when WTO was
founded. In this study, the 1997 financial
crisis was used as a cutoff point because of
the following considerations: (a) The
financial crisis forced various countries to
adjust their industrial policies. (b) After the
financial crisis, ASEAN countries began to
transform their political and economic
structures. (c) After the financial crisis, the
ASEAN announced the 1999 Hanoi
Declaration in declaring that ASEAN
countries would intensively integrate the
region and accelerate trade liberalization.