of Singapore. These strengths have helped them to overcome the disadvantages of scale. Except for Singapore, their economies and employment are still largely based on agriculture, with their main products being rice, maize, rubber, timber, sugar, and crude oil. However, industrialization is proceeding quickly, and manufactured goods have reached 20 percent of the gross domestic product (GDP). This figure is the crossover point, at which some nations begin a decline in manufacturing and a transition to service- and knowledge-based postindustrial structures.

Common characteristics of the ASEAN economies are as follows:

  • The ASEAN countries have adopted—to varying degrees—open economies that have led to increasing external trade, foreign investment, and technology transfer.

  • As a result of natural endowments and political stability, the area has grown faster than most developing countries.

  • ASEAN external exports have grown 43 percent faster than world exports and doubled as a percentage of world exports, from 1.76 to 3.6 percent.

  • The engine behind ASEAN’s improving external trade has been the United States; U.S. imports from ASEAN have grown 16 percent faster and exports to ASEAN have grown 12 percent slower than U.S. trade with the rest of the world.

  • Despite growth in manufacturing, Japanese and U.S. investment in ASEAN has been strongest in agriculture and extractive industries (Buchanan, 1986).

Problems and Challenges

The structure of the five ASEAN economies is such that they are inherently more competitive than complementary. Hence, prosperity depends largely on the external engines of growth, the United States and Japan. The policy of import substitution is likely to aggravate this situation. However, ASEAN trade with PEC countries other than the United States and Japan has grown faster than has trade with the latter. Despite inter-ASEAN Preferential Trading Arrangements, substantial tariff barriers of up to 50 percent persist. All ASEAN governments have ambitious industrialization plans that will be difficult to harmonize and that will, in turn, eventually compete with those of South Korea and Taiwan. Unless demand rises with increased production, industrialization in the region will be like “musical chairs,” as each country expects the countries on the next rung up on the industrialization ladder to vacate some of their seats.

ASEAN is also facing problems in the agricultural sector. Prices of primary commodities have declined by 1.25 percent per annum since 1900 (Drucker, 1986; Inoguchi, 1986; World Bank, 1986). In the Philippines in particular,

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