The Southeast Asian Perspective on Globalization
Dr. Seiji F. Naya
Director, Department of Business, Economic Development and Tourism
State of Hawaii (United States)
Trade has become one of the main engines of the world growth since the end of World War II. Every country that grew fast in the post-war period did so by engaging in production for export markets and by opening to the influx of foreign goods, investment and technology, as was the case, among others, of Germany, Western Europe, Japan and more recently, East Asia.
The multilateral trading system has been decisive in the expansion of economic activities across national boundaries: by opening world markets and setting stable rules for trade, it has helped deliver better jobs, growth and development worldwide.
As a result of rapid expansion of international trade, the share of global exports in GDP increased from 8% in 1950 to 26% in 1998. In recent decades, this trend was complemented with the growing flows of foreign direct investments, with annual amounts that went from 24 billion dollars in 1973 to 827 billion dollars in 1999.
In the case of Mexico, foreign trade has been instrumental in the deep transformation of its economy by attracting investment, consolidating a manufacturing export base and creating jobs.
In the last decade, economic growth has been strengthened by the expansion of exports as well as by the increasing flows of foreign investment which has enabled Mexico to reap the benefits of globalization.
The increased presence of Mexico in international markets is due mainly to the liberalization of the external sector: foreign trade as well as investment and financial flows. The opening of the economy reflects Mexico's interest to participate in the increasing globalized and interdependent international context. Since the 1980's an active strategy of diversification and intensification of economic ties abroad has been actively pursued, through bilateral and multilateral ties with countries and regions that make it possible to consolidate economic growth.
Mexico is fully committed to free trade as an instrument to achieve economic growth and job creation. Therefore, the Mexican government will continue seeking free trade agreements with other countries or regions, in full consistency with World Trade Organization rules and in a perspective of open regionalism and trade expansion.
In this spirit, two new trade agreements are expected to come into effect this year: one with the European Union and the other one with Israel.
Regarding the results in the export activity, the WTO ranks Mexico as eighth exporter worldwide' and the first exporter in Latin American (with 43% of regional exports and 38% of regional imports). Moreover, in 1999 Mexico became the second U.S. trading partner of the United States.
In 1999 Mexico's foreign trade amounted to 279 billion dollars, twice the amount registered in 1994 (140.2 billion dollars). Exports reached 137 billion dollars - of which 90% were manufactured goods - while imports amounted to 142 billion dollars.
In recent years (1995 - 1999), the export sector is one of the most dynamic areas of the Mexican economy and the foremost source of job creation:
- Since 1994 the number of exporters has risen 70% reaching around 40,000
- The export activity accounts for 70% of the new job created in manufactures
- Employment in the export activity is generally better paid: in 1998 firms exporting 80% or more of their production paid salaries that were 59% higher than in the rest of the industry
- Regarding the composition of exports, in 1982 oil exports represented 67% of total exports, while in 1999 oil sales contributed only with 7.3%
Aside of trade, Mexico's economic opening along with a sound management of economic policy, has promoted high levels of productive investment. From 1994 to 1999, the country received 70 billion dollars in foreign direct investment, which ranks Mexico as the third worldwide recipient of this kind of funds among emerging economies.
The agreement with the European Union together with NAFTA, strengthens Mexico's position as a manufacturing center and secures access for its exporters to North America and the European Union, the two largest world markets. Mexico's location coupled with trade agreements with six Latin American countries, also guarantee easy access to this region.
The internationalization of the Mexican economy has transformed its productive plant into a reliable producer and exporter of manufactures, ranging from TV sets to automobiles and from refrigerators to computers.
In 1999 Asia was the third partner of Mexico after North America and Europe. Total trade with Asia amounted to 15,120 million dollars, which represented 5% of Mexico's total trade during that year (278,767 million dollars). Exports to Asia reached 1,893 million dollars while imports amounted to 13,227 million dollars. From 1997 to 1999, the deficit that characterizes Mexico's trade with that region was aggravated by the economic recession that pervaded most countries of Southeast Asia.
Notwithstanding the low participation of Asia in Mexico's trade, it must be noted that in the last decade trade with that region more than tripled from 4.4 billion dollars in 1990 to 15 billion dollars in 1999.
Besides, there may be also an underestimation of these flows due to the fact that many operations bound for or originating in Asia are registered in the United States as a final destination.
Since one of the challenges facing Mexico's foreign trade is market diversification, it is looking forward to establish closer links with Asian countries, in particular those belonging to the Pacific Basin area.
This region has great potential now that economic growth has resumed after the imbalances of recent years. For its part, Mexico's solid economic position and good prospects were underscored by the recent granting of investment grade rating to its instruments of sovereign debt.
The signing of NAFTA and the Trade Agreement with the European Union transformed Mexico into one of the most attractive investment centers for Asian enterprises, not only through direct investment, but also joint ventures, shelter and subcontracting programs and strategic alliances.
Several economic activities offer a good potential to enhance trade and investment relations with Asia Pacific. Investment opportunities have been identified, among others, in the following sectors: textile and apparel, automotive and auto-parts and electric-electronic, and biotechnology, tourism and services.
Regarding trade, the food and beverage industry as well as construction materials offer Mexican exporters a very good prospect to do business in Asia.
Since 1993 Mexico is a member of the Asia Pacific Economic Forum, which has contributed to the strengthening of trade and investment relations with one of the most dynamic regions in the world.
Also, Mexico has started talks for an investment agreement with Japan, its main trade partner in Asia, with which the Mexican government already has a Cooperation Agreement (with JETRO) since last year. Finally, in September 1999 Mexico and Singapore agreed to start a preliminary evaluation of the convenience to establish a free trade agreement between the two countries.
In order to contribute to the fostering of economic relations between Mexico and Asia, Bancomext, the Mexican Bank for Foreign Trade, has played an active role by offering financial and promotional services designed to improve Mexican firms' competitiveness and to attract foreign investment and joint ventures into Mexico.
38 representative offices abroad enable Bancomext to identify trade and investment opportunities worldwide. In Asia, we have representative offices in Taiwan, Korea, Malaysia, Singapore, Hong Kong, Tokyo and Osaka, all of which have allowed us to develop a comprehensive network of business contacts in the region.
Also, once a year Bancomext organizes the denominated Asia-Mexico Forum, which is the premier encounter between Asian and Mexican entrepreneurs seeking business opportunities.
This year, the Forum includes specialized seminars on electric-electronics, automotive-autoparts and textile and apparel, as well as business meetings and trade shows.
Information on investment opportunities will be available as well as first hand related information, such as: industrial costs, availability of raw materials and infrastructure among others.
Singapore, Hong Kong, Taipei, Seoul, Tokyo and Osaka are the cities where the Forum will take place between the 10 and the 21 of April.
Since Mexico is fully immersed in the international currents of goods, services and flows of funds and technology, it offers a unique opportunity to those firms interested in participate in the global economy. A stable macroeconomic environment along with its strategic location makes it an ideal investment center.
I would like to invite you to consider Mexico as your best business option. For information on Mexico's business opportunities, you may contact Bancomext offices where trained personnel will be glad to help you.