ASEAN: Regional Trends in Economic Integration, Export ... - USITC

Regional Integration, Export Competitiveness, and Inbound
Investment
Leading Competitive Factors
The ASEAN region has long been an attractive destination for the production of
computer components and other electronics. Singapore began producing electronics for
export in the 1960s, and Malaysia became a competitor shortly thereafter, attracting
foreign investment from Intel, AMD, Hewlett-Packard, Hitachi, and others during the
1970s. 24 Beginning in the 1980s, components firms from Japan, Taiwan, Korea, and
Singapore sought to lower their costs by moving more manufacturing offshore, largely to
locations such as Malaysia, the Philippines, and Thailand. 25 As costs rose and labor
became scarce in Malaysia in the 1990s, Thailand attracted more investment, particularly
in the HDD industry. 26 Since the early 2000s, Vietnam has emerged as a new competitor
in the industry. This section will examine the competitive factors that, in addition to
government policies, determine the competitiveness of ASEAN countries within the
global supply chain for computer components. These include diversity, cost, and
productivity of the labor pool, development of supporting industries, transportation
infrastructure, macroeconomic conditions, market size, and other factors.
Labor
One of the most important competitive factors in the computer components industry is
the availability and relative cost 27 of both skilled professionals and assembly workers.
Compared with other manufacturing sectors, the computer components industry is skillintensive
in that, due to the rapid pace of innovation, it relies more heavily on an
adequate supply of well-trained engineers and specialized technicians. 28 Companies must
be able to find engineers and technicians locally or easily bring them into a country in
order for that country to become or remain competitive. In addition, in order to produce
components competitively, a country must have an available pool of relatively unskilled,
productive assembly workers that can be hired at a competitive wage. Thus, it is not only
skill availability or labor cost that determines the competitiveness of a country’s labor
pool in this industry. Rather, it is the diversity of the labor pool—the availability of
workers at a wide range of skill levels needed in the components industry and their
corresponding cost—that gives a country a competitive advantage in attracting
investment and jobs in the computer components industry. 29
Each of the countries in ASEAN has its own unique labor challenges. In Singapore, it is
difficult to find labor at most skill levels that is cost-competitive with that found in other
components-producing countries. The manufacturing jobs that remain in Singapore tend
to be very specialized technical positions. One of the multinational firms that continues to
operate a manufacturing facility in Singapore has moved many of the jobs that used to be
24 Rasiah, “Expansion and Slowdown in Southeast Asian Electronics Manufacturing,” 2009, 124.
25 Ibid., 125.
26 Ibid., 125.
27 For the purposes of this section, the “cost” of labor refers not simply to workers’ compensation but to
the definition of “labor cost” as published by the Bureau of Labor Statistics (BLS), which factors in
differences in worker productivity. BLS defines labor cost as total labor compensation divided by real output.
For more information, see the BLS Web site, http://www.bls.gov/lpc/faqs.htm#P06 (accessed June 1, 2010).
28 BLS, “Computer and Electronic Product Manufacturing.” (accessed March 23, 2010).
29 Multilateral Investment Guarantee Agency (MIGA), Benchmarking FDI Competitiveness in Asia, 2003,
9.
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