Will ASEAN countries be a potential choice for the export of pollution intensive goods?

Abstract

China, being the world's largest exporter, has now certain environmental commitments such as to achieve carbon neutrality before 2060. These commitments of China has raised a reasonable concern regarding the expected reduction in the production and export of pollution intensive goods in the future. Besides China, the most efficient countries in the region to produce these goods are most of the member countries from ASEAN. The current study therefore aims to analyze if in the future, China reduces the production and export of these goods, whether the selected ASEAN countries can be the next choice for the export of pollution intensive goods. Based on the data availability for the period 1990-2019, this study considers five selected ASEAN countries (ASEAN-5). The results are based on the Auto Regressive Distributive Lag (ARDL) bound testing approach to cointegration and Error Correction Modeling (ECM). The aggregate analysis of five pollution intensive goods (pulp and paper (341), industrial chemicals (351), non-metallic minerals products (369), iron and steel (371) and non-ferrous metals (372)) suggests that Foreign direct investment (FDI) inflow can significantly increase the export of pollution intensive goods only in case of Indonesia, Malaysia and Thailand. However, there is no significant effect of FDI on the export of pollution intensive goods in case of Philippines and Singapore. The disaggregate analyses of the five pollution intensive goods suggest that in each of the ASEAN-5 countries, FDI inflow can significantly increase the export of pollution intensive goods in some of these industries rather than in all of them. In nutshell, it is concluded that ASEAN-5 countries can be a potential choice for the export of pollution intensive goods in some of the pollution intensive industries but not in all of them.

Keywords: ASEAN; FDI; Pollution haven hypothesis; Pollution intensive goods.