Ganeshan Wignaraja

Engaging Small and Medium Enterprises in Production Networks: Firm-Level Analysis of Five ASEAN Economies

The Association of Southeast Asian Nations (ASEAN) small and medium enterprises (SMEs) are under scrutiny for their engagement in production networks following recent emphasis on increasing intra-regional trade, rebalancing, and inclusive growth in Asia. Using a data set covering 5,900 firms in five ASEAN economies at different stages of development, this paper analyses the participation of SMEs in production networks, determinants, and policy implications. It finds that although large firms dominate production network engagement in ASEAN economies, there are signs that SMEs have modestly increased their participation since the late-1990s. This is linked to firm-specific factors (e.g., firm size, foreign ownership, skills, technological capabilities, and access to credit) as well as a supportive business environment. Tackling residual supply-side and policy constraints can further the participation of ASEAN SMEs in production networks.

Asia-Latin America Free Trade Agreements: An Instrument for Inter-Regional Liberalization and Integration?

Trade integration and free trade agreement (FTA)-led cooperation between Asia and Latin America has increased since the early 2000s. Using new criteria, this paper examines whether Asia-Latin America FTAs have facilitated market-led integration by liberalizing trade and behind the border regulatory barriers. Overall Asia-Latin America FTAs provide the foundations for inter-regional integration by liberalizing goods and services trade as well as some regulatory barriers. Future FTAs can support deeper integration by reducing residual regulatory barriers. Other policy priorities include forming a large inter-regional FTA, stimulating business use of FTAs and accelerating structural reforms.

Regional Trade Agreements and Enterprises in Southeast Asia

This paper undertakes a comparative and firm-level analysis of the impact of regional trade agreements (RTAs) in Indonesia, Malaysia and the Philippines. It finds that firm-heterogeneity matters in RTA use. Acquiring knowledge about RTAs, building technological capabilities, and membership of industrial clusters affect the likelihood of RTA use at firm-level. A lack of information about RTAs and the absence of RTAs with major trading partners explain non-use of RTAs. Key policy implications include the need to improve business support for RTAs, to conclude RTAs with major trading partners, and to create a database on preference use in RTAs.

Trade policy and growth in Asia

This paper examines the changing relationship between trade policy, production networks, and economic growth in Asia. It traces East Asia’s rise to the coveted “Factory Asia” league with rapid growth over several decades through trade policy anchored on outward-oriented industrialization strategies, including a voluntary liberalization approach under the Asia-Pacific Economic Cooperation (APEC) and a multilateral approach under the General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO) system. It explores the implications of various stresses to the performance of Factory Asia such as the consequences of the global financial crisis, the risk of protectionism, the persistence of residual behind-the-border regulatory barriers, the failure to conclude ambitious WTO multilateral trade negotiations, and the relative exclusion of small and medium-sized enterprises (SMEs). Next, it examines the evolving trade policy response in major East Asian economies centered on free trade agreements (FTAs) to support the functioning of Factory Asia and key policy challenges posed by FTAs, including the insufficient depth of FTAs, the risk of an Asian noodle bowl of multiple rules of origin, the potential for raising use of FTA preferences, and the emergence of mega-regional FTA negotiations. Finally, it considers policy implications at the national, regional, and global levels for supporting Factory Asia and growth in Asia.

Why Do SMEs Not Borrow More from Banks? Evidence from the People's Republic of China and Southeast Asia

This study examines the relationship between firm characteristics and borrowing from commercial banks by small and medium-sized enterprises (SMEs) in the Peoples Republic of China (PRC) and five Southeast Asian economies (Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam). Analysis of microdata from enterprise surveys highlights key aspects of SME finance since the global financial crisis, including sources of credit, lender types, and collateral types. First, SMEs typically resort to internal sources rather than external finance (including borrowing from banks) and trade credit. Second, when it comes to external finance, SMEs typically use informal non-bank credit sources more than banks. Third, there is a positive and significant association between bank borrowing and certain characteristics of SMEs, notably financial audits, firm age, and export participation. Fourth, personal assets of SME owners tend to matter more as collateral for SME borrowing from banks than other collateral types. Improving credit guarantee systems, enhancing monitoring and credit scoring by banks, and widening the scope of collateral are possible ways to facilitate increased bank borrowing by SMEs.

Assessing the Experience of South Asia–East Asia Integration and India's Role

This paper examines the gains for South Asian economies from integrating with East Asia and India’s role in this process. Evidence of increased pan-Asian integration exists but the process is uneven. Bilateral trade has grown. As have bilateral foreign direct investment flows and free trade agreements (FTAs), albeit at a slower pace than trade. The integration process has been led by India and Pakistan with limited participation of smaller South Asian economies. Tackling key impediments in cross-border infrastructure, FTAs, trade barriers and business regulations, and barriers to services will foster further integration. Computable general equilibrium (CGE) simulations suggest that a South Asia–East Asia FTA offers the most gains for South Asia and that India has an incentive to include its neighbors in such an arrangement rather than going it alone with East Asia. The rest of South Asia will gain by deepening South Asian integration and fostering ties with East Asia.

Regional Trade Agreements in Integrating Asia

The structure and policy architecture of the world economy, as it emerges from the historic challenges now underway, will be affected by the dramatic rise of Asian economies and deepening connections among them. This important book examines the rapid transformation of the Asian economy, the challenges it faces, emerging regional solutions, and how Asia can play a more constructive role in the global economy.

Main Findings and Policy Implications

The spread of Asia’s free trade agreements (FTAs) has sparked an important debate on the impact of such agreements on business activity. This pioneering study uses new evidence from surveys of East Asian exporters – including Japan, the People’s Republic of China, the Republic of Korea and three ASEAN economies of the Philippines, Singapore and Thailand – to shed light on the FTA debate.

Economic Implications of Deeper South Asian–Southeast Asian Integration: A CGE Approach*

Using a computable general equilibrium model, this paper estimates the potential gains from deepening integration across South Asia and Southeast Asia. If the two regions succeed in dropping inter-regional tariffs, reducing non-tariff barriers by 50 percent, and decreasing inter-regional trade costs by 15 percent—which the paper suggests are ambitious but nevertheless attainable—welfare in South Asia and Southeast Asia would rise by 8.9 percent and 6.4 percent of GDP, respectively, by 2030. Hence, we conclude that deepening South Asian regional cooperation together with building links to Southeast Asia would pay off rich dividends.

Does Finance Really Matter for the Participation of SMEs in International Trade? Evidence from 8,080 East Asian Firms

This paper studies factors associated with firm participation in export markets, focusing primarily on firm size and access to credit, based on a survey sample comprising observations of 8,080 small and medium enterprises (SMEs) (with fewer than 100 employees) and non-SME firms in developing East Asian countries across sectors. The main findings suggest the interdependent relationships between export participation, firm size, and access to credit. SMEs participating in export markets tend to gain more access to credit, while potential scale economies (firm sizes) of SMEs are positively associated with participation in export markets. The estimation results also point to the supportive influences of foreign ownership, worker education, and production certification on export participation, and the positive effects of financial certification, managerial experience, and collateral/loan value on access to credit for SMEs.