Trade in Services between ASEAN and EC Member States: Case Studies for West Germany, France, and the Netherlands 9789814376266

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The Institute of Southeast Asian Studies was established as an autonomous organization in 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the multi-faceted problems of stability and security, economic development, and political and social change. The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. A ten-man Executive Committee oversees day-to-day operations; it is chaired by the Director, the Institute's chief academic and administrative officer. The ASEAN Economic Research Unit is an integral part of the Institute, coming under the overall supervision of the Director who is also the Chairman of its Management Committee. The Unit was formed in 1979 in response to the need to deepen understanding of economic change and political development in ASEAN. The day-to-day operations of the Unit arc the responsibility of the Co-ordinator. A Regional Advisory Board, consisting of a senior economist from each of the ASEAN countries, guides the work of the Unit.

TRADE IN SERVICES BETWEEN ASEAN AND EC MEMBER STATES Case Studies for West Germany, France, and the Netherlands Rolf J. Langhammer Kiel Institute of World Economics

Research Notes and Discussions Paper No. 73 ASEAN Economic Research Unit INSTITUTE OF SOUTHEAST ASIAN STUDIES 1991

Published by Institute of Southeast Asian Studies Heng Mui Keng Terrace Pasir Panjang Singapore 0511 All rights reseiVed. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 199llnstitute of Southeast Asian Studies, Singapore The responsibility for facts and opinions expressed in this publication rests exclusively with the author and his interpretations do not necessarily reflect the views or the policy of the Institute or its supporters.

Cataloguing in Publication Data

Langhammer, Rolf J. Trade in seiVices between ASEAN and EC member states: case studies for West Germany, France, and the Netherlands. (Research notes and discussions paper /Institute of Southeast Asian Studies ; no. 73) 1. SeiVice industries--ASEAN countries. 2. SeiVice industries--European Economic Community countries. 3. ASEAN countries--Commerce--European Economic Community countries. 4. European Economic Community countries--Commerce--ASEAN countries. I. Institute of Southeast Asian Studies. II. Title. III. Series. DS501 1596 no. 73 1991 sls91-2040 ISBN 981-3035-75-7 ISSN 0129-8828 Printed in Singapore by Printmart Lithographers Pte Ltd

CONTENTS

I

Introduction

1

II

The Role of Private Services in ASEAN Countries' Balance of Payments

3

ASEAN Trade in Services with West Germany

6

III

Major Findings Country-Specific Results IV

ASEAN Trade in Services with France Overall Patterns Country-Specific Patterns

6

8 13

13 14

v

ASEAN Trade in Services with the Netherlands

17

VI

ASEAN-EC Trade in Services: A Synopsis

22

VII

Conclusions

25

Appendices

26

References

66

I

INTRODUCTION

Most of the recently published empirical studies on the international trade in services in general (e.g., Stern & Hockman 1986a and 1986b; Nusbaumer 1987, Arndt 1986; Langhammer 1989) and ASEAN trade in services in particular (Pang & Sundberg 1985; Praet 1985; Lee [Tsao] Yuan 1988; Lee & Naya 1988; Arndt 1989) have ended with two important qualifications: first, they deplored a significant lack of conceptual clarity in the sense that services as "invisibles" often escape from precise definitions and that the transborder movement of a service is unsatisfactorily determined by ownership of goods and residence of persons. Secondly, they dismissed the empirical basis as weak and sometimes even non-existent as many Central Banks do not keep detailed records on financial transactions between service-receiving and service-exporting countries handled by the commercial banks (e.g., in the case of the U.K. as the third largest exporter of services in the world). Sector-specific datasets such as transport or tourist statistics would offer no better alternative as they document volumes rather than income flows. While the first caveat cannot be avoided, more can be done with the second if endeavours are made to expand the empirical basis beyond the IMF Balance of Payments Statistics which do not disaggregate transborder payments for services by regions or partner countries. This paper contributes to the existing sources by analysing data released by three EC member countries' Central Banks (Deutsche Bundesbank, Banque de France, De Nederlandsche Bank) on payments and receipts for services traded between West Germany, France, and the Netherlands on the one hand and the five founding member states of ASEAN on the other. Overall trade between the two groups of countries is expected to account for a non-neglible share in North-South trade in services as both groups hold leading positions as suppliers and purchasers of services. In 1984, France, West Germany, and the Netherlands ranked 2nd, 4th and 7th as world exporters of services, respectively (ranking 3rd, 4th, and 6th as importers), while Singapore, Thailand, the Philippines, and Indonesia were on ranks 2, 11, 13, 14, and 17 among developing countries' exporters of services.

2

Trade in Services between ASEAN and EC Member States

Within each of the three Central Bank's datasets, shortcomings due to different accounting frameworks are systematic, and thus they do not distort analyses of time series within each set. Between them, however, the different frameworks weigh more heavily. They warrant a tentative and cautious interpretation if general patterns of a division of labour in services between ASEAN and EC countries are to be found. The paper is structured as follows: Chapter II analyses the changing role of services in the five ASEAN countries' balance of payments until 1987. This serves to update the usually displayed source of information on ASEAN countries' world export and imports of services, that is, the IMF BoP statistics (e.g. see ASEAN-U.S. Initiative 1989, p.67, Table 3.3) . Only private non-factor services are dealt with. Thus, investment income as well as income from migration (labour remuneration) is taken out of consideration according to the generally accepted separation of factor income and services. Chapters III to V highlight the development of transactions in services between ASEAN countries on the one hand and West Germany, France, and the Netherlands during the seventies and eighties on the other. Under the constraints of limited comparability of the three EC members' datasets, Chapter VI elaborates on common as well as countryspecific elements of bilateral transactions in services between ASEAN and EC countries. Chapter VII concludes on the results.

II

THE ROLE OF PRIVATE SERVICES IN ASEAN COUNTRIES' BALANCE OF PAYMENTS

Traditionally, services play very different roles as sources of export earnings in ASEAN countries. They are least important for Indonesia where they accounted for only 5 per cent of total earnings including merchandise exports in 1987, although there has been a gradual increase since 1980 (Table 1). Malaysia is the other ASEAN country relying on earnings from services but to a small extent (about 12 per cent in 1987) whereas the three other members display service shares of 20 per cent and more. The Philippine result, however, has to be discounted somewhat as it depends on a catch-all sub-sector in the IMF accounting scheme ("other goods, services and income") and hence cannot be verified with respect to clearly defined non-factor services. In terms of surplus or deficit positions of individual countries in individual service sectors, the basic results analysed by Lee Yuan (1988, Table 5.1) for 1984 and reported again by Arndt (1989, p.6) still hold: first, Indonesia remained a net importer of shipment services and other transportation as well as of all services. Secondly, Malaysian residents seem to have travelled abroad more frequently, although the country enjoyed a surplus in passenger services and a balanced position in other transportation services. Thirdly, the Philippines, the smallest ASEAN trader in services, has maintained surplus positions in other transportation as well as in travel but displays large deficit positions in shipment and -- less importantly -- passenger services. Fourthly, Singapore is a net importer of shipment services and a net exporter in other transportation services which, however, as far as the latter sector is concerned, appears to be a net position. Its travel surplus is still remarkable though it has declined since 1984. Singapore's service performance in general is subject to special attention because of the country's role as an entrep6t trader. Finally, Thailand as a tourist resort has continuously expanded its travel surplus which was larger than its deficit in other identifiable services.

TABLE 1: Share of Private Non-Factor Services in Total Exports and Imports

~

....,

EXPORTS 1980

1981

1982

Indonesia

1.5

1.9

2.5

2.8

Malaysia

8.1

10.2

11.7

12.0

Philippines

17.3

21.1

23.3

23.2

Singapore

24.8

30.2

33.1

Thailand

17.5

17.9

19.1

1983

~

1984

1985

1986

1987

2.7

4.3

5.5

5.4

10.6

11.4

12.9

11.8

20.5

28.8

30.6

24.5

31.0

24.8

22.6

22.5

21.5

21.6

20.2

21.2

19.9

19.4

1980

1981

Indonesia

21.1

22.7

20.9

19.3

21.5

Malaysia

22.1

19.6

20.4

23.1

24.3

Philippines

14.6

16.1

18.3

17.3

15.6

Singapore

11.4

11.1

12.0

12.5

Thailand

16.1

16.4

17.4

16.8

1983

1984

1985

1986

1987

28.2

25.7

25.2

25.4

26.3

24.4

13.9

14.0

14.3

13.0

13.9

14.8

14.0

16.7

17.2

17.5

16.4

Total exports (imports) comprise exports (imports) of non-factor services merchandise trade. SOURCE: IMF, Balance of Payments Statistics, 1988 Yearbook.

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