Author : Siwage Dharma Negara
Abstract :
In recentyears, electronics and textiles industries havefaced intense competitive challenges in the domestic and international markets. These two industries have to cut their costs of production to remain competitive with similar industries in other countries that have lower costs of production, especially China. This paper examines the determinants of thefragmentation of Indonesia j mamifacturing industries to countries with low labour costs, especially Cambodia, Laos, Myanmar and Vietnam (CLMV). Results from a small-scale survry show that profit is the key factor ]or firms relocating to the CLMV countries. Vietnam is perceived to be a betterprospective destination for fragmentation because of its relatively strong investment incentives, itifrastructure and access
to markets. In contrast, CLM countries wereperceived to be less attractive compared with Vietnam because of their relatively lessfavourable business climate. For fragmentation to CLM countries to be worthwhile, that is, for firms to operate ifftcientIy, these countries need toprovide better infrastructure, better investment incentives and a more competitive business climate.
Keywords: Fragmentation, Electronics, Textiles, Garments, ASEAN, CLMV