KUALA LUMPUR, April 10 -- The use of non-equity modes (NEMs) of production has been increasing in both Lao PDR and Myanmar, as demonstrated in exports from these countries as new forms of trade.
For example, an estimated US$274 million in electrical machinery and US$132 million in garments from Lao PDR, and an estimated US$1 billion in garments, over 70 per cent of total garment exports from Myanmar are via NEM. (US$1 = RM4.30)
This is according to new findings by the ASEAN-Japan Centre on NEMs in their reports, ‘Non-Equity Modes of Trade in ASEAN: Lao People’s Democratic Republic’ and ‘Non-Equity Modes of Trade in ASEAN: Myanmar’.
According to a statement, both country firms are in the infancy stage of participation in NEMs, using subcontracting, management contracts and franchising, among others.
NEM firms face a significant challenge. Transnational corporations (TNCs) can easily terminate their contracts, particularly if the quality of services or goods supplied does not meet their competitive standards or when more competitive suppliers emerge in other countries.
The governments should assist in the development of NEM capabilities, so that local firms can take advantage of appropriate TNC-driven economic synergies as competition forces TNCs to make continuous improvements in the quality and pricing of suppliers.
In addition, in upgrading the labour force and improving investment conditions, the governments should strengthen the basic infrastructure and the science, technology and innovation infrastructure.
Both governments should consider implementing and strengthening the regulatory framework for NEM firms to enable NEM firms to export, expand their employment and upgrade technologically.
More details at https://www.asean.or.jp/en/trade-info/nem_papers/
-- BERNAMA
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