<strong>Trade</strong> Patterns <strong>and</strong> Global Value Cha<strong>in</strong>s <strong>in</strong> <strong>East</strong> <strong>Asia</strong>C. Bus<strong>in</strong>ess process outsourc<strong>in</strong>g <strong>and</strong> computer servicesOffshore outsourc<strong>in</strong>g is not conf<strong>in</strong>ed to the manufactur<strong>in</strong>gsector. Outsourced service activities range from simpleback <strong>and</strong> front office rout<strong>in</strong>es to more complex research<strong>and</strong> development (R&D) work. Data process<strong>in</strong>g,call centres, virtual assistance, legal support (legaltranscription, draft<strong>in</strong>g contracts, legal representation,etc), medical support (medical transcription, <strong>in</strong>terpret<strong>in</strong>gx-rays, etc), f<strong>in</strong>ance <strong>and</strong> account<strong>in</strong>g, software <strong>and</strong>applications development <strong>and</strong> R&D are all activities thatenterprises can assign to foreign firms. All these activitiesare designated as bus<strong>in</strong>ess process outsourc<strong>in</strong>g (BPO)or <strong>in</strong>formation technology-enabled services (ITES).Of the <strong>Asia</strong>n develop<strong>in</strong>g economies, it is India <strong>and</strong>the Philipp<strong>in</strong>es that are benefit<strong>in</strong>g <strong>in</strong>creas<strong>in</strong>gly fromoffshored computer <strong>and</strong> IT-enabled bus<strong>in</strong>ess services.It is estimated that India earned US$ 36.4 billiondur<strong>in</strong>g the 2008-09 f<strong>in</strong>ancial year from computer <strong>and</strong>ITES/BPO services. 4 This is equivalent to 34 per centof the total commercial services India exported <strong>in</strong> thisperiod. Computer services alone generated US$ 26.6billion, while BPO services brought <strong>in</strong> US$ 8.4 billion.In the Philipp<strong>in</strong>es, the ITES/BPO <strong>in</strong>dustry, whichis predom<strong>in</strong>antly composed of call centre services(account<strong>in</strong>g for nearly 70 per cent of related exports),is estimated to have grown by 46 per cent annuallybetween 2004 <strong>and</strong> 2008. 5 Accord<strong>in</strong>g to the Bus<strong>in</strong>essProcess Association of the Philipp<strong>in</strong>es (BPAP), theBPO <strong>in</strong>dustry is estimated to have earned US$ 7.3billion <strong>in</strong> revenue <strong>and</strong> provided 442,164 jobs.D. Logistics services <strong>and</strong> distribution: The unique role of Hong Kong (Ch<strong>in</strong>a)<strong>and</strong> S<strong>in</strong>gaporeFollow<strong>in</strong>g changes <strong>in</strong> the organization of production(i.e. outsourc<strong>in</strong>g/offshor<strong>in</strong>g), enterprises have become<strong>in</strong>creas<strong>in</strong>gly dependent on logistics services. Logisticsservices <strong>in</strong>clude core elements such as cargo h<strong>and</strong>l<strong>in</strong>g,storage <strong>and</strong> warehous<strong>in</strong>g, transport agency services<strong>and</strong> related freight logistics services as well as noncoreservices such as packag<strong>in</strong>g <strong>and</strong> supply-cha<strong>in</strong>consult<strong>in</strong>g.Due to their excellent <strong>in</strong>frastructure <strong>and</strong> connectivity,Hong Kong (Ch<strong>in</strong>a) <strong>and</strong> S<strong>in</strong>gapore play core roles <strong>in</strong> the<strong>global</strong> supply cha<strong>in</strong> by offer<strong>in</strong>g logistics <strong>and</strong> entrepôtservices. This is <strong>in</strong> addition to their productive capacity.Trad<strong>in</strong>g companies <strong>in</strong> Hong Kong (Ch<strong>in</strong>a) <strong>and</strong> S<strong>in</strong>gaporematch buyers <strong>and</strong> sellers <strong>in</strong> different markets. Besidesthis <strong>in</strong>termediation activity, companies <strong>in</strong> S<strong>in</strong>gapore <strong>and</strong>Hong Kong (Ch<strong>in</strong>a) also perform specialized services(such as quality control or simple manufactur<strong>in</strong>g orprocess<strong>in</strong>g, like sort<strong>in</strong>g or packag<strong>in</strong>g). This activity hasenabled Hong Kong (Ch<strong>in</strong>a) to become the world’slead<strong>in</strong>g re-export specialist. In 2009, re-exportsrepresented 95 per cent of Hong Kong’s (Ch<strong>in</strong>a) totalexports, or US$ 313 billion. In S<strong>in</strong>gapore as well, reexportsare fast ga<strong>in</strong><strong>in</strong>g <strong>in</strong> importance. The share of reexports<strong>in</strong> total exports rose from 34 per cent <strong>in</strong> 1990to 49 per cent <strong>in</strong> 2009. The comb<strong>in</strong>ed re-exports ofHong Kong (Ch<strong>in</strong>a) <strong>and</strong> S<strong>in</strong>gapore represented 11 percent of <strong>Asia</strong>’s total merch<strong>and</strong>ise trade <strong>in</strong> 2009.Numerous foreign affiliates <strong>in</strong> Hong Kong (Ch<strong>in</strong>a) <strong>and</strong>S<strong>in</strong>gapore serve as regional headquarters <strong>in</strong> the <strong>East</strong><strong>Asia</strong>n region, provid<strong>in</strong>g a wide range of bus<strong>in</strong>ess services(bus<strong>in</strong>ess coord<strong>in</strong>ation, sourc<strong>in</strong>g of raw <strong>and</strong> semi-f<strong>in</strong>ishedcomponents, technical support, f<strong>in</strong>anc<strong>in</strong>g, market<strong>in</strong>g, etc.)to their subsidiaries throughout the region.The share of <strong>in</strong>termediate goods <strong>in</strong> the total re-exportsof Hong Kong (Ch<strong>in</strong>a) has risen significantly <strong>in</strong> recentyears, from 48 per cent <strong>in</strong> 2000 to 58 per cent <strong>in</strong> 2008.This <strong>in</strong>crease reflects the importance of commercialexchanges between regional production networks.While the orig<strong>in</strong> of imports is relatively diversified, reexportsfrom Hong Kong (Ch<strong>in</strong>a) are ma<strong>in</strong>ly bound forCh<strong>in</strong>a (43 per cent of re-exports <strong>in</strong> raw materials <strong>and</strong>manufactures) (see Figure 4). Tak<strong>in</strong>g advantage of itsproximity to the coastal prov<strong>in</strong>ces, Hong Kong (Ch<strong>in</strong>a)has also shifted its manufactur<strong>in</strong>g tasks to the ma<strong>in</strong>l<strong>and</strong>by re-export<strong>in</strong>g an <strong>in</strong>creas<strong>in</strong>g share of <strong>in</strong>termediate<strong>in</strong>puts for outward process<strong>in</strong>g. Ch<strong>in</strong>ese Taipei, with ashare of 16 per cent, is also a major market for re-exportsof <strong>in</strong>termediate goods from Hong Kong (Ch<strong>in</strong>a).24
Figure 4Hong Kong’s (Ch<strong>in</strong>a) imports <strong>and</strong> re-exports of <strong>in</strong>termediate goods, by orig<strong>in</strong> <strong>and</strong> dest<strong>in</strong>ation (percentage)I. From massdem<strong>and</strong> to <strong>global</strong>supply <strong>cha<strong>in</strong>s</strong>1009080Orig<strong>in</strong>sII. Organizationof the <strong>global</strong>production process7060504030201001995 2009Republic of KoreaPhilipp<strong>in</strong>esCh<strong>in</strong>ese TaipeiMalaysiaJapanIndonesiaIndiaCh<strong>in</strong>aOthersIII. Infrastructureservices <strong>in</strong> <strong>global</strong><strong>value</strong> <strong>cha<strong>in</strong>s</strong>IV. The evolutionof tariff policiesHONG KONG(CHINA)V. Foreign direct<strong>in</strong>vestmentVI. Integrateddiversity100908070Dest<strong>in</strong>ationsVII. An evolutionaryperspective onproduction networks<strong>in</strong> the <strong>Asia</strong>-US region60504030VIII. <strong>Trade</strong> <strong>in</strong><strong>in</strong>termediate goods201001995 2009Ch<strong>in</strong>aOthersIX. Vertical trade<strong>and</strong> trade <strong>in</strong><strong>value</strong> addedSource: Based on UN Comtrade Database.X. Cross-regionalspillover ofeconomic growth25
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