A Study On The Competitiveness Of Japanese Investment In ASEAN Automotive Industry

The ongoing trend of economic globalization has resulted in a tightening of international relations, and significantly altered the landscape of the global market. As the rate of globalization advanced, governments were forced to recognize the intimate relation between national and industrial competitiveness, and the importance of industrial competitiveness to the nation’s economic growth.The growth of the automotive industry within ASEAN nations was heavily influenced by Japanese investments. Starting in the 1960s, Japan’s automotive industry advanced into the ASEAN market. Propelled by a growing market and the policies of member nations, Japan’s automotive instituted a transfer of technology and further supported the development of the ASEAN automotive industry. As a result of this, Japanese automotive makers hold a significant share of the market. While there are exceptions, for instance Malaysia where domestic makers hold approximately 60% of the market, in Thailand and India Japanese cars have seized 80-90% of the market. In 2013 Thailand produced 2,450,000 cars, ranking 9th in the world. Of those approximately 1,330,000 were sold domestically, while the remaining 1,120,000 were exported. This put Thailand a head above any other ASEAN nation, earning them the name "The Detroit of South-east Asia". In 2013 the number of cars produced in Indonesia reached approximately 1,200,000. With domestic sales topping 1,230,000 in the same year, this marks a year-on-year increase since 2010. In light of these numbers it becomes clear that investigating the ASEAN automotive industry in relation to Japanese investments is of imperative importance.In this paper I have investigated the competitiveness of the Thai and Indonesian automotive industry, applying the Trade Competitive Index, Revealed Comparative Advantaged Index, and Constant Market Share Analysis methods. In addition, Michael E. Porter’s Diamond Model from his paper The Competitive Advantage of Nations was utilized to analyze and pinpoint the components influencing the competitiveness of the Thai and Indonesian automotive industry, culminating in a proposal on how this may be improved.The results of this investigation indicate that while the Thai automotive industry maintains a relatively strong competitive edge, this is not the case for Indonesia. Thailand accepted an influx of foreign capital sourced primarily from Japan, encouraging the growth of a healthy automotive industry cluster. Indonesia needs to learn from Thailand:cultivating the workforce and industry, and strengthening government policy. In addition, it is shown that Japanese investments have a significant impact on the development of the ASEAN automotive industry.