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ERIA Presentation at 18th East Asian Economic Association International Conference

22 October 2023

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Seoul, 22 October 2023: The Economic Research Institute for ASEAN and East Asia (ERIA) was heavily involved in the 18th East Asian Economic Association (EAEA) International Conference, held at Seoul National University, October 21-22.

On the second day of the conference, ERIA’s session on Trade, Employment and Aging in East Asia was chaired by Arsenio Balicasan from the National Economic and Development Authority (NEDA), with an opening introduction by Professor Fukunari Kimura, ERIA’s Chief Economist. ERIA economists Dr Rashesh Shresta and Dr Wan Seok Chang also took part in the session discussions.

ERIA expert researcher, Dr Doan Thi Thanh Ha, as the first speaker, began the session outlining her research on technical barriers to trade (TBTs), product quality and trade margins. Dr Ha explained the influence of TBTs on Chinese firms' trade margins and product quality, while considering a number of firm-specific factors. She primarily focused on measures perceived as trade barriers and employed a comprehensive database covering firm-product-year transactions, complemented by the World Trade Organisation's (WTO) Specific Trade Concerns database.

The findings showed TBT imposition increases the likelihood of firms exiting the export market, but surviving exporters experience higher sales and export prices. To adapt to TBTs, firms invest in research and development and import more input, leading to improved product quality and the offsetting of price increases, resulting in lower quality-adjusted export prices.

The session continued with Dr Lili Yan Ing, ERIA’s Lead Advisor for Southeast Asia Region, who provided a comprehensive exploration of the automation landscape in Indonesia, shedding light on the driving factors, trade dynamics, and firm-level implications. With automation gaining momentum globally since the 1980s, a surge in wages in developed countries has spurred the increased adoption of automation equipment. This technology not only enhances workforce efficiency but also improves precision, accuracy, and overall firm productivity.

However, the potential displacement of workers is a concern, making it crucial to understand how automation impacts both developed and developing nations. In this context, Indonesia is a compelling case study, showcasing an impressive annual automation growth rate of 24% since 2007 and a large labour force, making it vulnerable to substantial social and economic challenges arising from automation's rapid expansion.

Examining Indonesia's trade dynamics, research shows a significant increase in the import of automation equipment over the past two decades. Indonesia, being a relatively minor producer of such equipment, saw its imports grow substantially, contributing to a trade deficit in automation equipment.

These insights were drawn from data collected using the UN Comtrade and the World Bank World Integrated Trade Solution (WITS) databases, and also delved into firm-level impacts, highlighting the positive association between automation and firm performance. Automating firms were found to exhibit higher productivity, produce a broader variety of output, and be actively engaged in exports and imports, shaping a promising future for Indonesia's evolving industrial landscape.

The proposed theoretical framework also helps rationalise these empirical findings, providing a solid foundation for understanding the role of automation in Indonesia's economic trajectory.

Professor Yasuhiko Saito, ERIA’s Senior Advisor to the President on Population Ageing, as the third speaker delivered a presentation on the issue of population ageing and how the working life expectancy has evolved in Japan. His analysis showed that working life expectancy has risen in Japan over time, but as a share of remaining life expectancy, it is falling. This means that a larger portion of life is spent in the 'non-working state.' But working life expectancy varies greatly by certain conditions, for example, it is three times higher for those who were working at age 60, compared to those who were not working. He pointed that this type of study, which requires longitudinal surveys, is necessary to develop policies to deal with ageing issues in the region. ERIA has been supporting such data collection activities in the Philippines and Viet Nam.

Dr Lili Yan Ing Presentation

Dr Doan Thi Thanh Ha Presentation

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