Review of Economics and Development Studies, Vol. 7 (2) 2021, 267-276 267 Revealed Comparative Advantages and Exports Competitiveness of ASEAN-5 Countries in the Global Market Muhammad Shahid Maqbool a , Furrukh Bashir b , Hafeez-ur-Rehman c , Rashid Ahmad d a Department of Economics, Government Graduate College Gojra, Pakistan Email: shahidmakbool@gmail.com b Assistant Professor, School of Economics, Bahauddin Zakariya University, Multan, Pakistan Email: furrukh@bzu.edu.pk c Professor/ Chairman, Department of Economics, University of Management and Technology, Lahore, Pakistan Email: hafeez.rehman@umt.edu.pk d Assistant Professor, School of Economics, Bahauddin Zakariya University, Multan, Pakistan Email: rashid.ahmad@bzu.edu.pk ARTICLE DETAILS ABSTRACT History: Accepted 28 May 2021 Available Online June 2021 This study aims at measuring the comparative advantage and competitiveness of the ASEAN-5 (Malaysia, Indonesia, Philippines, Singapore and Thailand) economies in the world market. The current study employed four indices of Revealed Comparative Advantage namely Revealed Comparative Advantage index (RCA), LnRCA, Vollrath index (RCA#) and Revealed Symmetric Comparative Advantage index (RSCA). The data for the analysis has been taken from International trade center UN-COMTRADE statistics for the exports of electrical machinery for these selected economies from 2003-2020. The findings of the analysis portray that Malaysia, Philippines, Singapore and Thailand had a comparative and competitive advantage, while Indonesia had a comparative and competitive disadvantage in the electrical machinery in the global economy. This study will be helpful for the policy makers to boost human capital formation and to increase technology transfer and innovation to enhance the competitiveness and comparative advantage. © 2021 The authors. Published by SPCRD Global Publishing. This is an open access article under the Creative Commons Attribution- NonCommercial 4.0 Keywords: Comparative Advantage, Competitiveness, ASEAN, Electrical Machinery JEL Classification: N10, L94 DOI: 10.47067/reads.v7i2.360 Corresponding author’s email address: furrukh@bzu.edu.pk 1. Introduction Exports are considered the engine of economic growth that is indispensable for the prosperity and welfare of the nation. An economy can win friends through trade relations among different economies in the world and ensure the optimal allocation of the available resources in the economy. Following the concept of comparative advantage depending on their factor endowments, each economy is likely exporting those products which can be produced at relatively low cost. The ASEAN-5 ( Review of Economics and Development Studies, Vol. 7 (2) 2021, 267-276 268 Malaysia, Indonesia, Singapore, Philippines and Thailand) exports have been rapidly growing over the last few decades. A large share of high-technology products in ASEAN-5 exports is also an indication that t fear of terms of trade deterioration is not warranted for the ASEAN-5 countries, as their exports are of high quality and consequently of higher price (Ghani and Sofyan, 2014). Electrical and electronic machinery and appliances are the major component of manufactured exports accounting about half of the exports in Malaysia. Table 1 Export growth product group 85 of ASEAN-5 economies in the world market during 2003- 2020 Years Malaysia Indonesia Philippines Singapore Thailand 2004 11.672 7.383 10.442 28.236 17.993 2005 9.0549 11.5 -0.676 11.773 2.2067 2006 3.7199 -0.51 10.029 21.093 12.492 2007 3.1989 4.18 -0.163 3.8453 10.942 2008 -1.325 8.816 -6.14 0.1198 -0.192 2009 -11.23 -1.42 -25.24 -18.92 -13.09 2010 23.431 27.31 -8.677 34.292 29.328 2011 9.9971 7.444 -16.39 0.8193 5.2741 2012 -3.315 -3.41 72.43 -1.35 -4.907 2013 2.4126 -3.03 5.5838 5.0018 1.9197 2014 8.1936 -6.64 6.9884 0.7762 4.0742 2015 -8.947 -12.1 12.332 -5.335 -4.453 2016 -2.386 -4.84 -2.882 -2.85 1.1539 2017 17.618 3.909 12.423 8.0301 14.519 2018 20.951 4.575 15.92 3.8862 2.941 2019 -1.371 -3.54 5.5373 -6.361 -3.271 2020 5.4153 8.121 -8.488 9.3566 0.618 Sources; Author’s calculations by using ITC data Table 1 highlights the export growth of ASEAN-5 countries of the product group 85 in the world market. A positive and negative trend of growth of the selected product was seen in the analysis during 2003-2020. Theoretically, the concept of competitiveness cannot be separated from international trade theories. According to Adam Smith (Smith, 1776), countries trade with each other depends on their absolute advantages—countries produce a product in which they have an absolute advantage and will exchange it for commodities in which they do not possess such advantage. In other words, countries export goods for which they use fewer inputs in production, and import goods that others can produce using fewer inputs, reflecting absolute differences in labor productivity. This idea was developed by Ricardo (Ricardo, 1817), arguing that not absolute but comparative advantages are responsible for global trade between nations. In the Ricardian model, production technology differences are the basis of CA and therefore production and trade are driven by the most effective use of resources. According to Ricardo (Ricardo, 1817), the economies should specialize in those commodities where they have a CA in, though technological superiority (high labor productivity) does not guarantee competitiveness. Many studies have employed revealed comparative advantage index to evaluate the comparative Review of Economics and Development Studies, Vol. 7 (2) 2021, 267-276 269 advantage and competitiveness of the exports of different sectors of the world. Balassa and Marcus (1989) also utilized RCA index to examine the competitiveness of USA and Japan during 1967-1983. Amir (2000) measured the export competitiveness between Malaysia and other ASEAN economies by using the RCA index during 1994-1998. The results of this study illustrate that Malaysia reassessed the determinants which influenced its export competitiveness. The export competitiveness of China and ASEAN-5 countries in the USA and Japan was examined by Aziz and Bakar (2005) by employing conventional shift-share analysis during 1992-2003. The findings of the study indicated that China had strong positive net shifts in textile and clothing products in both markets. The Revealed comparative advantage was measured by Abidin and Loke (2008) for Malaysian manufacturing exports from 1996- 2006, and the study concluded that Malaysia had a comparative advantage in electrical and electronics exports. The export competitiveness of electrical and electronic products of Malaysia was examined by Yaacob and Muhammad (2008) by employing RCA index and CMSA. The study measured the export competitiveness between Malaysia and other concerned competitor countries. The findings of the study illustrate that Malaysia had a strong CA in the selected commodities in the US market. The findings of CMSA illustrate that in the first sub-period, Malaysia was competitive in the selected four markets. However, in the second and third sub-period, CMSA results highlight that these selected exports increased due to structural effect. Yahya et al., (2011) measured the export competitiveness of Malaysian products in the Arab gulf market by employing RCA index during 1998-2007. The tea competitiveness was measured by Oktaviana et al., (2016) by employing constant market share analysis in ASEAN economies during 2011- 2014. The findings of the analysis illustrate that the major weakness of tea exports in Singapore, Thailand, Malaysia and Vietnam was the effect of market distribution. The determinants of export competitiveness were examined by Amanbayev and Masih (2017) by using time series data. The study concluded that inflation, interest rate, money supply and exchange rate were the major factors of export competitiveness of Malaysia. Yakob and Zam (2017) investigated the comparative advantage of the manufacturing export sector of Malaysia by utilizing several indices of RCA. This study measured RCA indices of 144 industries during the time span from 2010-2015. The findings of the analysis illustrate that high technology products had a high comparative advantage in the world market. Shuquan (2019) used shift share analysis technique to compute net gain and losses for the ASEAN-5 and China from 1993 to 2007. During the first period (1993-1997), all selected five economies observed positive export growth. However, China and Philippines were champions in terms of net shift with positive value. During the second period (1998-2002), all ASEAN countries except China showed the negative net shift value, and the similar trends for third period (2003-2007) was observed also. The export competitiveness of leather exports of Pakistan was measured by Maqbool et al., (2019 a, b) by employing CMSA during 2003-2014. The results of the analysis indicate that Pakistan was competitive in the leather sector. The competitiveness of top five cotton exporting economies was measured by Maqbool et al., (2020) by using RCA indices The findings of the study depicts that Pakistan, India, China and USA had a comparative advantage , whereas Vietnam had a comparative advantage during 2008- 2017 and comparative disadvantage from 2003-2007. Maqbool et al., (2020) examined the trade competitiveness of Pakistan’s cereal products in the global market by using several indices from 2003- 2018. The results illustrate that Pakistan was competitive in the concerned sector during the selected time span. The present study measured comparative advantage and competitiveness of product group 85 (Electrical machinery and equipment and parts thereof; television image and sound recorders and reproducers, sound recorders and reproducers, and parts and accessories of such articles) of ASEAN-5 Review of Economics and Development Studies, Vol. 7 (2) 2021, 267-276 270 economies. There is no valuable study available in the literature that has employed these four indices to measure the competitiveness of product group 85 of the selected economies. This present study will be beneficial and helpful for the policy makers of the economy to formulate their policies to boost economic position of the economy in the world market. 2. Methods and material The present study focuses on the analysis of the competitiveness of the product group 85 of ASEAN-5 economies with an objective to measure the comparative advantage of its exports and to point out the position of this sector in the global market. The concept of comparative advantage is set by Balassa (1965) and the original model is explained as follows ( Balassa, 1965); RCA ∑ ⁄ ∑ ⁄ (Source: Erkan and Kazim, 2014) = Electrical machinery exports of the economy ∑ = Country’s total exports = Global Electrical machinery exports ∑ =Total exports of the world The value of RCA index greater than 1 indicates CA, or in the terminology of Balassa, a revealed comparative advantage (Rivlin, 2000). The current study employs logarithms to the RCA index and LnRCA>0 indicates CA, while LnRCA<0 highlights the comparative disadvantage of the economy (Faustino, 2008).To contain the problem of skewness, the index of revealed symmetric comparative advantage has been employed. The RSCA index is defined as RSCA = (Source: Akhtar et al., 2009 and Ignjatijevic et al., 2013) Vollrath (1991) commenced the index for comparative advantage, and this index is considered a good measure of measuring competitiveness because this index eliminates the dilemma of double- counting in global market (Gnidchenko and Salnikov, 2015). The Vollrath index is explained as RCA# = { (∑ ) } { (∑ ) *(∑ ∑ ) (∑ )+ (∑ ) } ( Source: Topcu and Sarigul, 2015) Where Country’s Electrical machinery exports ∑ = Country’s total exports ∑ = World’s Electrical machinery exports ∑ ∑ = World’s total exports Review of Economics and Development Studies, Vol. 7 (2) 2021, 267-276 271 Table 2: RCA Classifications (Source; Hinloopen, 2001) 3. Results and discussions Table 3 (a): Various Revealed Comparative Advantage Indices Related to the Electrical machinery exports of ASEAN economies 2003-2020 MALAYSIA PHILIPPINES INDONESIA Years RCA RSCA LNRCA RCA# RCA RSCA LNRCA RCA# RCA RSCA LNRCA RCA# 2003 2.767 0.469 1.018 3.951 3.725 0.577 1.315 6.633 0.736 -0.152 -0.307 0.705 2004 2.535 0.434 0.93 3.443 3.717 0.576 1.313 6.656 0.667 -0.2 -0.405 0.631 2005 2.518 0.431 0.923 3.383 3.617 0.567 1.286 6.195 0.633 -0.225 -0.457 0.596 2006 2.277 0.39 0.823 2.912 3.426 0.548 1.231 5.623 0.529 -0.308 -0.636 0.49 2007 2.237 0.382 0.805 2.801 3.35 0.54 1.209 5.24 0.508 -0.326 -0.677 0.471 2008 2.125 0.36 0.754 2.553 3.515 0.557 1.257 5.411 0.5 -0.333 -0.692 0.466 2009 2.208 0.377 0.792 2.745 3.107 0.513 1.134 4.573 0.537 -0.301 -0.621 0.5 2010 2.157 0.367 0.769 2.656 2.12 0.359 0.751 2.557 0.506 -0.328 -0.682 0.468 2011 2.299 0.394 0.832 2.833 2.102 0.355 0.743 2.472 0.466 -0.364 -0.764 0.432 2012 2.217 0.378 0.796 2.693 3.346 0.54 1.208 4.907 0.482 -0.35 -0.731 0.448 2013 2.202 0.375 0.789 2.682 3.154 0.519 1.149 4.514 0.473 -0.358 -0.748 0.439 2014 2.252 0.385 0.812 2.79 3.001 0.5 1.099 4.228 0.444 -0.385 -0.812 0.409 2015 2.12 0.359 0.752 2.638 3.152 0.518 1.148 4.908 0.406 -0.423 -0.903 0.367 2016 2.142 0.364 0.762 2.693 3.119 0.514 1.137 4.881 0.393 -0.436 -0.935 0.354 2017 2.192 0.373 0.785 2.79 3.115 0.514 1.136 4.878 0.348 -0.483 -1.055 0.312 2018 2.359 0.405 0.858 3.109 3.422 0.548 1.23 5.779 0.345 -0.487 -1.064 0.309 2019 2.383 0.409 0.869 3.175 3.416 0.547 1.228 5.83 0.372 -0.458 -0.988 0.334 2020 2.295 0.393 0.831 3.12 3.083 0.51 1.126 5.188 0.351 -0.481 -1.048 0.31 Sources; Author’s calculations by using ITC data Sr. No Classificationso of RCA Interpretations A 0 < RCA ≤ 1 Indicates no CA B 1 < RCA ≤ 2 Shows weak CA C 2 < RCA ≤ 4 Depicts moderate CA D RCA > 4 Highlights strong CA Review of Economics and Development Studies, Vol. 7 (2) 2021, 267-276 272 Table 3 (b): Various Revealed Comparative Advantage Indices Related to the Electrical machinery exports of ASEAN economies 2003-2020 SINGAPORE THAILAND Years RCA RSCA LNRCA RCA# RCA RSCA LNRCA RCA# 2003 2.771 0.47 1.019 4.024 1.566 0.221 0.449 1.732 2004 2.832 0.478 1.041 4.2 1.526 0.208 0.423 1.677 2005 2.78 0.471 1.022 4.04 1.389 0.163 0.329 1.486 2006 2.806 0.475 1.032 4.13 1.303 0.132 0.265 1.375 2007 2.754 0.467 1.013 3.92 1.282 0.124 0.248 1.344 2008 2.65 0.452 0.975 3.571 1.202 0.092 0.184 1.24 2009 2.504 0.429 0.918 3.361 1.127 0.06 0.12 1.151 2010 2.583 0.442 0.949 3.537 1.14 0.065 0.131 1.166 2011 2.444 0.419 0.894 3.147 1.133 0.062 0.125 1.155 2012 2.414 0.414 0.881 3.088 1.073 0.035 0.07 1.085 2013 2.442 0.419 0.893 3.163 1.069 0.033 0.067 1.081 2014 2.411 0.414 0.88 3.131 1.083 0.04 0.08 1.098 2015 2.428 0.416 0.887 3.283 0.99 -0.01 -0.01 0.988 2016 2.424 0.416 0.885 3.3 0.968 -0.02 -0.03 0.963 2017 2.31 0.396 0.837 3.064 1.002 9E-04 0.002 1.002 2018 2.197 0.374 0.787 2.828 0.984 -0.01 -0.02 0.981 2019 2.141 0.363 0.761 2.729 0.956 -0.02 -0.05 0.948 2020 2.189 0.373 0.784 2.929 0.922 -0.04 -0.08 0.907 Sources; Author’s calculations by using ITC data Review of Economics and Development Studies, Vol. 7 (2) 2021, 267-276 273 Figure 1: Revealed comparative advantage index of ASEAN-5 economies from 2003-2020 The aim of the current study is to examine export performance and competitiveness in the electrical machinery exports in the ASEAN-5 economies by employing RCA, RSCA, LnRCA and Vollrath index from 2003-2020. Figure 1 depicts the trend of RCA index of ASEAN-5 countries in the selected export sector during 2003-2020. In table 3 (a,b), the findings of present study illustrate that Malaysia Review of Economics and Development Studies, Vol. 7 (2) 2021, 267-276 274 had a moderate CA in the electrical machinery exports having the values of RCA> 1during 2003-2020. The positive trend of LnRCA and RSCA depicts that Malaysia paid much attention on the specialization in the concerned sector and the positive values of these indices indicate comparative advantage. Moreover, the competitive advantage was observed by utilizing Vollrath index and the results show that Malaysia had a competitive advantage during the selected time period (Mohammad, 2020). The RCA index of Philippines highlights that Philippines had a moderate comparative advantage from 2003-2020. The positive indices of RSCA and LnRCA indicate that Philippines had CA in the concerned export sector. In addition, the competitive advantage was also seen in this sector during 2003-2020. Philippines had a higher RCA index among the other selected economies in the global market in electrical machinery exports (Aldaba, 2020). Similarly, Singapore had a comparative and competitive advantage in this product group exports having the RCA values greater than 1 from 2003- 2020. The indices of RSCA and LnRCA also highlights the comparative advantage in Singapore during the selected time span (Jayawickrama & Thangavelu, 2010). In Indonesia, the RCA index describes that Indonesia had a comparative disadvantage in the current export sector from 2003-2020 because the RCA index is less than 1. The negative indices of RSCA and LnRCA highlight that Indonesia had a comparative disadvantage in this sector during above mentioned time period. The competitive disadvantage was also seen by Vollrath index during 2003- 2020 in the selected product group in the world market (Tampubolon, 2020). In Thailand, the results of RCA, RSCA, LnRCA and RCA# indices depict that Thailand had a comparative and competitive advantage in the years from 2003-2014 and in the year 2017, while it had a comparative and competitive disadvantage in the remaining years (Apaitan et al., 2020). 4. Conclusion This study aims to to measure the comparative advantage and competitiveness in the electric machinery in the selected ASEAN-5 economies by employing a set of revealed comparative advantage indices. The data has been collected from the International trade center (ITC) on the exports of electrical machinery of these economies during 2003-2020. The results of the study describe that Malaysia, Thailand, Singapore, Philippines had a comparative and competitive advantage in the selected product, whereas Indonesia had a comparative and competitive disadvantage. 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