國立中正大學經濟學系
國際經濟學博士 學位論文

Department of Economics
National Chung Cheng University

Ph.D. Dissertation

東協貿易與外人直接投資之研究分析

ESSAYS ON ASEAN TRADE
AND FOREIGN DIRECT INVESTMENT

指導教授：劉文獻 博士
Advisor: Dr. Liu, Wen-Hsien

研究生：梁梅苑
Advisee: Luong Thi Mai Uyen

中華民國 111 年 7 月
July 2022

ACKNOWLEDGEMENTS

First of all, I would like to express my sincere gratitude to the National Chung Cheng
University Scholarship and the support of Thai Nguyen University of Technology, Vietnam
for giving me a chance to study abroad. I would like to say a big thank you to all members
of the Department of Economics at National Chung Cheng University for their approval, so
I could be accepted to get into the doctoral program here.

From the bottom of my heart, I would like to say a huge thank you to my advisor, Dr.

Liu, Wen-Hsien. Without his patience, help and dedicated guidance, this day would never
have come. I am not a self-confident person. Thus, during the last three years and half, as his
student, I made many mistakes and there were several times I lost all the motivation and
energy to do anything. However, he is so kind and large-hearted. He always gives me
valuable advice and encouragement to help me keep going on and effort at my best.
“Professor Liu, sorry, and thank you for all things”.

I also would like to say a special thank you to the committee members of my
dissertation, Dr. Tsai, Pan-Long, Dr. Chen, Ho-Chuyan, Dr. Ou Yang, Pu-Man, Dr. Tang,
Meng-Chi, and Dr. Chen, Wei-Chih. I received a lot of valuable comments and suggestions
that help me develop my thoughts and my methodologies.

I am extremely grateful to Dr. Wang, Yu-Lin, Dr. Huang, Bwo-Nung, Dr. Chu, Shiou-
Yen, Dr. Ferng, Li-Kung, Dr. Chen, Fang-Yueh, Dr. Ueng, Shyh-Fang, Dr. Tseng, Fu-Ming,
and Dr. Lai, Hung-Pin. All the excellent courses I took from you improved my academic
reading and writing skills and expanded my limited knowledge. It helps me a lot in my pursuit
of educational enrichment. Many thanks should also go to the department’s staffs, Ms. Yean,

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Sue-Fang and Ms. Huang, Hsiao-Tung. Whenever I have troubles and questions related to
paperwork or procedure, they always help me with full of kindness and responsibility.

I would be remiss if not mention my friends. I would like to say a big thank you to Mrs.
Nguyen Thi Hoang Oanh, who is my colleague in Vietnam as well as my senior at National
Chung Cheng University. She introduced this doctoral program here to me and provided
advice regarding learning and life in Taiwan. I am also thankful to my friends in Vietnam
and Taiwan, I want you to know how much I value all the times we share and encourage
together.


Finally, I could not have undertaken this journey without the unconditional support and
trust of my family. No words would ever be enough to thank my parents and my husband.
Thank you for being healthy and thank you for being strong enough to help me take care of
my little children during all the time I have stayed far from home. To my dear daughters (Anh
Thu and Minh Thu) who only have received my distant love through daily video calls for
almost 5 years since they were very young, let me say to them: “Thank you for growing up
healthy and being dutiful and kind kids. I love you so much.”

Sincerely thanks!
Luong Thi Mai Uyen

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PREFACE

The Association of Southeast Asian Nations (ASEAN) was established to enhance the
cooperation among the ASEAN members and other countries in economic, political, security,
military, educational and sociocultural integration. It is composed of ten members located in
Southeast Asia, such as Brunei Darussalam, Cambodia, Lao PDR, Indonesia, Malaysia,
Myanmar, Philippines, Singapore, Thailand and Vietnam. Cohesion between the countries in
all dimensions became tighter after Cambodia, the last member, joined in 1999. In particular,
in 2003, at the 9th ASEAN Summit, the ASEAN leaders affirmed the necessity of an ASEAN
Community.

ASEAN has reached a population of over 660 million in 2020 and covered an area of
approximately 4.5 million square kilometers. Recently, the ASEAN economy is an important
component of the global economy. It combines a gross domestic product of more than
US$3.1 trillion and its share in world exports has reached 7% in recent years. ASEAN has
also become one of the most attractive investment destinations in the developing world. The
inward FDI to ASEAN has grown rapidly and reached over US$137 billion in 2020. One of

the most important goals of ASEAN is to integrate the global economy and improve the
competitiveness of its members. All the ASEAN members recognize the benefits of this
integration and commit to further integration.

To discuss the ASEAN trade and FDI more in detail, I construct the dissertation as
follows. The overviews of ASEAN trade and FDI are introduced in the first chapter.

Chapter 2 aims at measuring the absolute and the relative Theil indices to investigate
how the export concentration of ASEAN has changed and which component has the key
contribution during the period from 2004 to 2018. I also decompose the Theil indices into
within-group and between-group components. The results show that the ASEAN exports tend
to diversify and they are spread more equally across destination countries. In most cases, the

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inequality levels across countries importing from ASEAN within a subgroup (i.e. within-
group component) play a more important contribution to the overall concentration levels. By
separating the overall sample into several sets of subgroups by income and region, we find
that for the countries in Africa and Europe, the high-income countries led the trends of the
level of the ASEAN export concentration. However, for the countries in America, the non-
high-income countries played that role. The results also show the gradual equality tendency
across the ASEAN members in importing from ASEAN.

Chapter 3 looks at the spatial effect of FDI inflow and trade in ASEAN. I apply the
spatial Durbin model (SDM) and the dynamic spatial Durbin model (DSDM) to examine the
third-country effects of FDI and trade on the FDI inflow to ten ASEAN countries from 1999
to 2019. Empirical results confirm the significant and negative spatial impacts of the inward
FDI and the one-period lagged export value in neighboring countries on the FDI inflow to
the host country. It refers to the existence of competition in attracting FDI among the ASEAN
members. However, it also shows the positive third-country impacts of the one-period lagged

inward FDI and the export value on FDI inflow to the host country.

Chapter 4 discusses the impacts of the COVID-19 pandemic on export in ASEAN. I
apply the difference-in-differences model to the exports of ten ASEAN countries over 36
months (January 2018-December 2020). The results provide evidence of the significant
negative impacts of COVID-19 on the ASEAN export. In this chapter, I also utilize the data
of the number of new confirmed cases and the number of deaths in both the ASEAN countries
and their trade partners in 12 months of the year 2020 to show the significant impacts from
both supply and demand aspects. The increase in the number of new cases in the exporting
countries as well as the increase in the number of deaths in the importing countries decreases
the export value in the ASEAN countries.

The dissertation ends with a brief review of the main empirical findings, followed by
the limitations of the study and suggestions for further research.

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TABLE OF CONTENTS

CHAPTER 1 INTRODUCTION............................................................................................ 1
CHAPTER 2 HOW CONCENTRATED IS THE ASEAN EXPORT? AN ANALYSIS OF
THEIL INDICES .................................................................................................................... 4

2.1 Introduction .................................................................................................................. 4
2.2 Literature Review ......................................................................................................... 8
2.3 Data and Methodology ............................................................................................... 12

2.3.1 Data...................................................................................................................... 12
2.3.2 Methodology........................................................................................................ 13
2.4 Empirical Results........................................................................................................ 16

2.4.1 Income-level analysis .......................................................................................... 16
2.4.2 Regional analysis................................................................................................. 19
2.4.3 Regional and income analysis ............................................................................. 22
2.4.4 Intra-ASEAN analysis ......................................................................................... 25
2.5 Conclusions ................................................................................................................ 27
CHAPTER 3 FOREIGN DIRECT INVESTMENT AND TRADE IN ASEAN
COUNTRIES: A SPATIAL ECONOMETRIC ANALYSIS............................................... 29
3.1 Introduction ................................................................................................................ 29
3.2 Literature Review ....................................................................................................... 35
3.2.1 The development of the spatial econometrics ..................................................... 35
3.2.2 The application on the ASEAN studies ............................................................... 40
3.3 Methodology and Data ............................................................................................... 42
3.3.1 Methodology........................................................................................................ 42

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3.3.2 Data...................................................................................................................... 45
3.4 Empirical Results........................................................................................................ 47
3.5 Conclusions ................................................................................................................ 55
CHAPTER 4 THE IMPACTS OF THE COVID-19 PANDEMIC ON EXPORT IN THE
ASEAN COUNTRIES ......................................................................................................... 57
4.1 Introduction ................................................................................................................ 57
4.2 Literature Review ....................................................................................................... 61
4.3 Methodology and Data ............................................................................................... 64

4.3.1 Methodology........................................................................................................ 64
4.3.2 Data...................................................................................................................... 67
4.4 Empirical Results........................................................................................................ 71
4.5 Conclusions ................................................................................................................ 81
CHAPTER 5 SUMMARY AND FUTURE RESEARCH ................................................... 83

REFERENCES ..................................................................................................................... 85
APPENDIX .......................................................................................................................... 96

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ASEAN LIST OF ABBREVIATES
AFTA
AIA Association of Southeast Asian Nations
CCI The ASEAN Free Trade Area
CSSE The ASEAN Investment Area
DID The commodity concentration index
DSDM Center for Systems Science and Engineering
EU The difference-in-differences
FDI Dynamic Spatial Durbin model
GDP European Unions
GMM Foreign Direct Investment
HHI Gross Domestic Products
HS The generalized method of moments method
IMF the Herfindahl-Hirschman Index
JHU Harmonized Commodity Description and Coding Systems
NUTS The International Monetary Fund
OECD Johns Hopkins University
PPML Nomenclature of Units for Territorial Statistics
SITC The Organization for Economic Co-operation and Development
SDM The Poisson pseudo maximum likelihood method
UNCTAD The Standard International Trade Classification
U.K. Spatial Durbin model
U.S. The United Nations Conference on Trade and Development
VAR The United Kingdom
WDI The United States

The vector autoregressive model
The World Bank’s World Development Indicators

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LIST OF FIGURES

Figure 2.1 ASEAN trade value in the period 2004-2018 .....................................................5
Figure 2.2 Shares of export value of ASEAN members in the period 2004-2018 ................6
Figure 2.3 Shares of export value by partners in the period 2004-2018 ...............................6
Figure 2.4 Decomposition between high-income and non–high-income countries .............18
Figure 2.5 Decomposition among four subgroups separated by regions .............................21
Figure 2.6 Decomposition among eight subgroups separated by regions and income.........23
Figure 2.7 Decomposition between ASEAN and non-ASEAN countries............................26
Figure 3.1 FDI inflows to ASEAN in the period 2010-2019 ...............................................31
Figure 3.2 Shares of FDI inflows to ASEAN in the period 2010-2019 ...............................31
Figure 3.3 ASEAN trade value in the period 2010-2019 .....................................................33
Figure 3.4 The spatial dependence models for cross-sectional data ...................................36
Figure 4.1 The number of new COVID-19 cases in ten ASEAN countries in 2020............58
Figure 4.2 The number of COVID-19 deaths in ten ASEAN countries in 2020..................58
Figure 4.3 The export value of ten ASEAN countries in the period 2018-2020..................59
Figure 4.4 The export value of ASEAN in the period 2018-2020 .......................................60
Figure 4.5 Trends of export values of the control and treatment years ................................72
Figure 4.6 Trends of export values of the control and treatment groups..............................73
Figure 4.7 The effect of COVID-19 on the ASEAN export.................................................75
Figure 4.8 The impacts of COVID-19 on the export of the treatment and control groups
.............................................................................................................................................. 77
Figure A1 Comparison of different weights between two subgroups separated by income
.............................................................................................................................................. 96


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Figure A2 Comparison of different weights among four subgroups separated by regions
.............................................................................................................................................. 97
Figure A3 Comparison of different weights among eight subgroups separated by regions and
income ..................................................................................................................................98
Figure A4 Comparison of different weights between ASEAN and non-ASEAN subgroups
.............................................................................................................................................. 99
Figure A5 Decomposition among four subgroups separated by regions excluding China
.................................................................................................................................................. 100
Figure A6 Decomposition among eight subgroups separated by regions and income,
excluding China ....................................................................................................................101
Figure A7 Decomposition between ASEAN and non-ASEAN subgroups, excluding China
.................................................................................................................................................. 102

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LIST OF TABLES

Table 3.1 Descriptive statistics.............................................................................................46
Table 3.2 Variable descriptions and sources ........................................................................46
Table 3.3 Moran’s I test for spatial autocorrelation of FDI..................................................47
Table 3.4 Results of the spatial Durbin model ...................................................................50
Table 3.5 The average impacts from the recursive process for SDM ................................52
Table 3.6 Results of the dynamic spatial Durbin model ....................................................54
Table 3.7 The average impacts from the recursive process for DSDM ...............................55
Table 4.1 The number of new confirmed cases per million population in 2020..................67
Table 4.2 Variable descriptions ............................................................................................69
Table 4.3 Summary statistics................................................................................................70
Table 4.4 Results of DID model .........................................................................................76

Table 4.5 Results of the dynamic DID model for the treatment and control groups............78
Table 4.6 The results of the fixed-effect model....................................................................80
Table A1 ASEAN export value to different subgroups......................................................103
Table A2 List of economies by region ...............................................................................104
Table A3 Absolute Theil indices and its components of eight subgroups .........................105
Table A4 List of 112 ASEAN trade partners .....................................................................106

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CHAPTER 1
INTRODUCTION

One problem concerned in low-income countries is the export concentration. The
concentration of export might be on either the range of product classification or the range of
destinations. The product concentration shows whether a country’s export share is distributed
among a large range of products or a small number of products. Whereas, the destination
concentration shows whether a country’s export share is distributed among a large range of
countries or a small number of countries. In Chapter 2 of this dissertation, we focus on the
destination concentration. When the export is more concentrated, these countries may be
more threatened by fluctuations in export price and sudden decline (disappearing) of the
export market compared with the high-income countries. Thus, export diversification is a
very important policy goal for all countries, especially the low-income ones. Following the
U-shape relationship between production and export diversification introduced by Cadot et
al. (2011), low-income countries should pursue export diversification instead of export
concentration to reach their economic goals. The majority of ASEAN members belong to
low-income countries so this topic is notable to consider.

ASEAN was established with the signing of the Bangkok Declaration by the
governments of five countries (Indonesia, Malaysia, Philippines, Singapore and Thailand) in
1967. Then, the other countries located in Southeast Asia joined ASEAN, Brunei in 1984,

followed by Vietnam in 1995, Laos and Myanmar in 1997, and Cambodia in 1999. ASEAN
with five founding countries is called ASEAN-5. Since the 1980s, with only six members at
that time (five founders and Brunei Darussalam), ASEAN has pursued outward-oriented

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trade and FDI policies to expand trade and FDI inflows. In 1992, the six members signed the
AFTA to support trade and attract FDI. Signing the AFTA becomes the requirement for
joining ASEAN of the four other countries in Southeast Asia (Cambodia, Lao PDR,
Myanmar and Vietnam). This confirms the objectives and motivations of ASEAN in trade
expansion and attracting FDI. This leads me to investigate the determinants of trade and FDI
in ASEAN.

This dissertation consists of a collection of three essays on trade and FDI in ASEAN.
These essays deal with some aspects of international trade and FDI in ASEAN including how
to use the Theil index to assess the level of export market concentration, the spatial effects
of the determinants of FDI and the COVID-19 impact on trade. The first essay (presented in
Chapter 2) is concerned with the change in export market concentration. In this chapter, I
address the measurement of the level of export market concentration, namely, the Theil
indices. The advantage of this index that makes it different compared to other indices in
assessing economic equality is this index can be used itself and its decompositions to track
the inequality within a subgroup and the inequality across subgroups. Thus, I calculate the
Theil index to analyze the level of export market concentration in ASEAN. Then, I
decompose the Theil indices into two components, namely, within-group and between-group
components, which refer respectively to the inequality across the countries in subgroups and
the inequality between subgroups that are classified by levels of income or regions. By doing
so, I identify which group of countries the ASEAN export focuses on and how unequal the
ASEAN exports to different destination countries are.

Chapter 3 introducing the second essay is about the spatial effects of the neighboring

countries on the FDI inflow to the ASEAN countries. The research questions are whether the
FDI inflow into the members of ASEAN has any influence on each other and whether the

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trade value in one country affects the FDI flow into other countries. The method used in this
chapter is the spatial Durbin model which allows me to examine the spatial effects of not
only the dependent variable (FDI) but also the independent variable (trade value).
Furthermore, I apply the dynamic spatial Durbin model to show the spatial effects of the one-
period lagged inward FDI and trade value. The results confirm the indirect impacts of
neighboring countries’ trade and FDI on FDI in the ASEAN countries

Chapter 4 (the third essay) undertakes a quantification of the impacts of the COVID-
19 pandemic on export in ASEAN from January 2018 to December 2020. I apply the DID
method to compare results from two groups, one is treated by COVID-19 and the other is not.
I use the year 2020 as the treatment year because COVID-19 started in early 2020. In most
ASEAN countries, the pandemic spread dramatically from March 2020 so I define January
and February of the year as the pre-pandemic period and ten months from March to December
as post-pandemic. I choose the years 2018 and 2019 as control years that are unrelated to the
COVID-19 pandemic. In this chapter, we also use the numbers of COVID-19 cases and
deaths in both the ASEAN countries and the ASEAN trade partners to measure the presence
of COVID-19 in the change of the ASEAN export during the year 2020. The findings of this
chapter confirm the negative effects of COVID-19 on the ASEAN export.

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CHAPTER 2
HOW CONCENTRATED IS THE ASEAN EXPORT? AN

ANALYSIS OF THEIL INDICES


2.1 Introduction

ASEAN was established in 1967 by the governments of Indonesia, Malaysia,
Philippines, Singapore, and Thailand to accelerate economic growth, social progress, and
cultural development in Southeast Asia. Since 1999, it is composed of ten members located
in Southeast Asia. Cohesion between the countries in all dimensions became tighter after
Cambodia, the last member, joined in 1999. In particular, in 2003, at the 9th ASEAN Summit,
the ASEAN leaders affirmed the necessity of an ASEAN Community. Not only ASEAN has
reached a population of 647.74 million in 2018 and covered an area of approximately 4.5
million square kilometers, but also the ASEAN economy is an important component of the
global economy. The ASEAN’s GDP in 2018 reached more than US$3.06 trillion (in current
U.S. dollar) accounting for a 3.55% share of the world GDP. Its share in world exports has
reached 7% in recent years (ASEAN, 2017). This statistic suggests that the ASEAN exports
are an important component of global trade. Figure 2.1 depicts the trade value of ASEAN for
15 years, from 2004 to 2018. The figure shows that, over this period, both the ASEAN
exports and imports increased rapidly and more than doubled. They dropped in 2009 because
of the 2008 financial crisis. In 2015-2016, a decrease in trade value was recorded. However,
in 2018, the ASEAN export reached over US$1,436 billion, an increase of nearly 2.5 times
compared with the value in 2004. Figure 2.2 illustrates the share of export value of each

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Source: ASEAN Statistic
Figure 2.1 ASEAN trade value in the period 2004-2018
Figure 2.1 ASEAN trade value in the period 2004-2018

ASEAN member. This figure shows that Singapore was the largest exporter, with a share of
around 30% of the ASEAN total, followed by Thailand, Malaysia, and Vietnam. In Vietnam,
the share of export increased rapidly (4% in 2004 to 16% in 2018). The largest markets of

the ASEAN exports are illustrated in Figure 2.3. Collectively, countries in ASEAN called
intra-ASEAN comprise the largest market of the ASEAN exports, with a 25% share of the
total export value of ASEAN. The other markets of the ASEAN exports are China (10.6%),
the EU (11.4%), the U.S. (10.8%), Japan (9.9%) and the Republic of Korea (4%). In
particular, the ASEAN exports to China during this period increased rapidly. In 2018, the
ASEAN exports to China reached over US$198 billion, an increase of nearly fourfold
compared with the 2004 value.

5

Source: ASEAN Statistic
Figure 2.2 Shares of export value of ASEAN members in the period 2004-2018

Source: ASEAN Statistic
Figure 2.3 Shares of export value by partners in the period 2004-2018
6

ASEAN has eight members that are low-income countries. One problem that
concerns the policymakers in low-income countries is “the vulnerability that arises from
export concentration” (Cadot et al., 2013). When the export is more concentrated, these
countries may be more threatened by fluctuations in export price and sudden decline
(disappearing) of the export market compared with the high-income countries. Export
diversification is a very important policy goal for all countries, especially the low-income
ones. Many studies focus on the relationship between export concentration and economic
growth, such as Imbs and Wacziarg (2003), Koren and Tenreyro (2007) and Cadot et al.
(2011). They show a hump-shaped relationship between production and export
diversification, which means that at the early stage of economic development, exports
diversify and after the turning point they start to specialize at higher levels of development.
Lee and Zhang (2019) find that diversification in export may encourage economic growth
and lower economic volatility in low-income countries. Other studies figure out the

relationship between export diversification and trade openness. Haddad et al. (2013) find that
export diversification plays a key role in reducing the transmission of external shocks. These
studies suggest that low-income countries should pursue the export diversification policy to
reach their economic growth goal. Some indices such as the Gini index, the Herfindahl-
Hirschman Index (HHI) and the Theil index are used to calculate the level of export
concentration. However, the Theil index has a very important feature compared with others.
It is used to measure regional differences in economic development levels and to analyze the
contributions of the main sources to the total differences by decomposing the regional overall
difference into two parts: within-regional difference and between-regional difference.

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In this chapter, I attempt to contribute to the limited literature by analyzing the level
of ASEAN export concentration on a range of ASEAN trade partners. Furthermore, to
identify which group of countries the ASEAN export focuses on and how unequal the
ASEAN exports to different destination countries are, I construct the Theil indices to
investigate the changes in the level of the ASEAN export concentration from 2004 to 2018.
The Theil indices are decomposed into two components, namely, within-group and between-
group components, which refer respectively to the inequality across the countries in
subgroups and the inequality between subgroups that are classified by levels of income or
regions. By doing so, I can assess the within-group and between-group components of
concentration after splitting the sample into distinct subgroups.

This chapter is organized as follows. Section 2.2 reviews the literature. Section 2.3
provides details on data and methodology. Section 2.4 presents the empirical results. Finally,
Section 2.5 concludes the chapter.

2.2 Literature Review

Export concentration is a popular topic in recent years. Many studies show the

relationship between export concentration and economic growth or export growth. By using
the decomposition of intensive and extensive margins (the variation in bilateral trade flows
across countries due to the change in the average size of an existed exporter or the newly
established exporters, respectively) they try to find which margin has a higher contribution
in the growth. The first group intimates the dominance of the intensive margin. Evenett and
Venables (2002) use 3-digit (SITC) trade data (around 200 product categories) of 23
developing countries for 28 years from 1970 to 1997 and conclude that the intensive margin

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contributes about two-thirds of total export growth. Helpman et al. (2008) use the real trade
volume data of 158 countries to show the key role of the intensive margin. Besedes and Prusa
(2011) use the UN Commodity Trade Statistics from 1975 to 2003 and show the more
important contribution of the intensive margin than the extensive margin to the trade growth
in developed countries. Brenton and Newfarmer (2007) analyze SITC 5-digit level trade data
(3,078 products) of 99 countries in 20 years and find that the intensive margin accounts for
about 80% of trade growth. Amurgo-Pacheco and Pierola (2008) also find that extensive
margin only accounts for about 14% of total export growth by analyzing the HS6 level trade
data for a set of 24 countries from 1990 to 2005. For the specific country, Reis and Taglioni
(2013) use the firm-level data of Pakistan to confirm this viewpoint. By contrast, the others
show a higher contribution of the extensive margin to export growth. Hummels and Klenow
(2005) analyze the United Nations Conference on Trade and Development (UNCTAD)
cross-section trade data at the HS6 level of 126 countries for the year 1995 and find that the
extensive margin explains 62% of trade growth. Cadot et al. (2011) find that although the
intensive margin is the dominant component, the extensive margin is the component that
leads to change in the export concentration.

Several indices are used to measure the export concentration. Meilak (2008) analyzes
eight indices, namely, the Concentration Ratio, the HHI, the Hall-Tideman Index, the
Rosenbluth Index, the Comprehensive Concentration Index, the Hannah and Key Index, the

Entropy measure, and the Diversification Index to show the inverse relationship between
export concentration and country size. Imbs and Wacziarg (2003), Koren and Tenreyro
(2007), Cadot et al. (2011), Cadot et al. (2013) and Aditya and Acharyya (2013) use the
commodity concentration index (CCI), the HHI, the Gini Index to show the U–shaped
relationship between income and export concentration level. Cadot et al. (2011) also calculate

9