About the forum
Since the 1980s, the modular production network has been spreading fast in the manufacturing sector. Progress in transportation skills and information and communication technologies has led the production process to be increasingly compartmentalized into tasks that include research and development, design, procurement, manufacturing, assembly, distribution, marketing and sales. Different tasks are undertaken across borders, which underpins the emergence and deepening of the global value chain (GVC). The global decline in trade costs has shored up expansion of the GVC, while at the firm level increasing intra-industry trade and efficiency-driven foreign direct investments by multinational corporations have led to expansion in offshore production, either within the firm or through outsourcing. Asia has been no exception to that trend.
Asia’s GVC participationāmeasured by the share of gross exports of which the production involves at least two countriesāindicates that GVC participation has deepened since 2000. Asian countries at the same time are intensifying production and trade interconnectedness within the region, demonstrating growing regional value chain (RVC) linkages.
According to ADB’s Multi-Regional Input-Output data, where the 62 economies covered include 26 in Asia, the region’s GVC participation rate was 67.2% in 2000 and grew gradually to peak at 69.7% in 2011. That slowed for a few years in tandem with a slump in global trade growth, and had rebounded somewhat to 68% by 2017. While recovery in international trade growth could help explain this trend, in-depth discovery of the underlying factors behind changes in GVC participation remains the provenance of empirical investigation.
Deepening GVC participation can bring substantial economic benefits, owing to better utilization of cost advantages, locational comparative advantages, and other types of efficiency gain. While GVC participation can also offer opportunities for technological transfer and the absorption of production skills at the firm and industry levels, it may increase vulnerability to global economic shocks and geopolitical risks as economies become more connected with others. With services accounting for an increasing portion of economic growth and becoming embedded into manufacturing activities as essential value-added components, the role of the services sector in deepening the GVC is also drawing more attention from policy makers. With this in mind, it is important for policy makers in the region to gain an up-to-date understanding of drivers of the GVC and its economic and development impact if they are to come up with effective policy responses.
Questions to be addressed
This year’s ADB-Asian Think Tank Development Forum will provide a venue to share ideas and experiences among affiliated scholars on the drivers and impact of the GVC by exploring the following questions:
- How are the dynamics of the GVC changing and what main characteristics define Asian economies’ GVC and RVC participation?
- What distinctive features at industrial and sectoral levels cause the patterns of Asian economies’ GVC and RVC participation to differ from those in other regions?
- How can different Asian economies’ relative position (upstreamness and downstreamness) in the GVC be assessed at sectoral and country levels? How have the GVC linkage patterns (backward versus forward) of Asian economies been changing and how are they forecast to evolve in future? To what extent are these trends anchored to the development stages of economies and their industrial structures?
- What are the main drivers of GVC and RVC expansion in Asia, including cost, market access, cultural, and technological factors? What factors do multinational companies and small and medium-size enterprises have in common and in what respects do they differ when it comes to GVC and RVC participation?
- What are the economic and development impacts of GVC at country and regional levels? What policy implications can be drawn to better utilize the opportunities offered by GVC expansion while coping with potential negative impacts?
- How are various services sectors becoming embedded into GVC networks in regional economies and what economic impact is expected from this phenomenon? What would the policy implications be in this regard?
- What are the enabling factors to foster an economy’s GVC and RVC participation while maximizing its economic benefits, and how can their contributions be measured particularly from least developing country’s perspective? (e.g., quality infrastructure, capacity building, enabling policy environment and policy reforms, lowering trade barriers including non-tariff measures, etc.)