CHANGING LANDSCAPE OF GLOBAL VALUE CHAINS: REDEFINING ROLE OF ASIAN

ECONOMIES

Dr Neha Gupta

Fellow

Indian Council for Research on International Economic Relations (ICRIER)

New Delhi, India

Introduction Anticipation of greater consolidation of GVCs post-crisis and faster shifting of powers

from developed North to emerging South (Cattaneo, Gereffi, & Staritz, 2010), with

more challenges for the latter

But trend shows slowing down of GVCs; challenges now more for South to stay

competitive in GVCs, capture high value added shares and adopt to changing digital

technologies and Industry 4.0 (AI, IoT, big data analytics, robotics)

Traditional trade theories fail to explain recent trends

Comparative advantages not only in production tasks, but would be in terms of data

flows, IPR regulation and progression of digitalization (Banga, 2019b)

World trade is under constant uncertainty post-crisis due to rising protectionism, tariff

wars and declining FVA content of exports, but Asia has registered highest regional

trade during 2008-18 (WTO, 2019)

Share of intermediates still stable & significant (export shares: 43% in 2006, 44% in

2017; import shares: 44% and 45% respectively) – Revival of GVCs at slower pace

Share of developing economies increased in global trade, FDI outflows and inflows;

Developing Asia as main drivers of growth in 2018 (WTO, 2019)

2

3

REGIONSExports Imports

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

Developing

economies43.6 43.4 42.4 43.2 43.5 41.0 40.9 39.7 40.7 41.1

Developing

Latin

America

5.6 5.8 5.7 5.8 5.7 6.2 6.3 5.9 5.8 5.8

Developing

Europe1 1.1 1.1 1.1 1.1 1.5 1.5 1.5 1.6 1.4

Developing

Asia26.8 28.9 28.4 28.4 28.1 25.6 25.3 25.0 26.2 27.1

Developed

economies52.4 53.5 54.9 53.8 53.2 56.3 57.0 58.2 57.1 56.6

Shares of regions in world’s merchandise trade (%)

4

A: Shares of countries'/regions' merchandise

intermediate exports in their total merchandise

world exports (%)

B: Shares of merchandise

intermediate imports in total

merchandise exports

(%)

Region/Country 2008 2012 2017 2008 2012 2017

North America 15.1 14.3 13.6 52 51.7 51.5

EU 28 39.8 33.9 33.8 45 42.5 40

Japan 5.9 5.6 4.6 36.3 37 35.9

Developing Asia 23.5 27.2 31.8 37.7 39.3 37.8

Developing South

Asia1.5 1.9 2 41.2 48.8 50.1

Developing

Southeast Asia7.2 8 8.7 52.2 51.5 50.4

Developing East

Asia14.7 17.3 21.2 43.6 43.4 38.7

Shares of regions in Merchandise exports (%)

Objectives and Methodology

To review how GVCs theories have progressed over the years and whether

they have been modelled post-crisis as per changing AI/robotics & digital

economy aspects.

To review, post-crisis foreign trade, FDI and industrial policies of Asian

economies to understand how well they are equipped to deal with changes.

To analyse trends in Asian GVCs in terms of backward and forward

linkages during 2011-16 particularly in comparison with EU and America.

To suggest policy measures to reshape Asia’s role in changing GVCs and

industrial-digital revolution.

Data collected using secondary sources, that is, OECD-WTO TiVA database

(2018) along with Government’s announced policy documents

5

Literature Review and Evolution of GVCs

Began as RSCs in East Asian economy and soon spread to South-East Asia;

China emerged as epicenter of GVCs in Asia (Dickens, 2010; WEF, 2012;

Baldwin, 2012; Banga, 2013)

Conceptually evolved from ‘value chain’ (Porter, 1990), ‘production chain’

(Dickens, 1992), ‘global commodity chains (GCC)’ (Gereffi &

Korzeniewicz, 1994), ‘global production network’ (Henderson, 2002; Coe,

Hess, Yeung, Dickens, & Henderson, 2004), ‘global production sharing’

(Athukorala & Menon, 2010), ‘trade in tasks’ (Grossman & Rossi-Hansberg,

2006; Nathan, 2010), ‘global supply chains (GSCs) and GVCs’ (Gereffi et

al, 2001; Baldwin, 2012; Banga, 2013)

GVCs began in garment and electronics, and soon spread to capital-intensive

industries, mainly machinery (Athukorala & Menon, 2010)

Ultimate gains under GVCs depend on how much value added is exported

by the country (Gupta, 2015; Banga, 2014)

6

Changing Theories of GVCs

Flying-geese theory

Fragmentation theory (Jones & Kierzkowski, 1990; Kimura &

Ando, 2005; Ando & Kimura, 2009)

New Economic Geography (Kimura & Obashi, 2009)

Theory of ‘snakes and spiders’ (Baldwin & Venables, 2013)

Move from trade-nexus to trade-investment nexus, then trade-

investment-services-IP nexus; growing nexus of trade-

investment-services-IP-DT-Industry 4.0

Theory of DT-driven Upgrading in GVCs (Szalavetz, 2019)

7

8

Theory of Snakes and Spiders

9

Traditional Smiley Curve of GVCs (Baldwin, 2012)

10

Smiley Curve after factoring into Digital Economy aspects (Mayer, 2018)

11

Framework of ‘DT-driven upgrading in GVCs’

12

Main Policy Documents of Asian countries post crisisCountry Document

South Asia

India

Foreign trade policy of India (2015-20); ‘Make in India’ Initiative; Foreign trade policy of India (2009-14);

Proposed New Industrial Policy (Yet to be released, in 2019-20); National Manufacturing Policy, 2012 (to be

subsumed into the New Industrial Policy, yet to be released); Consolidated FDI Policy (2017 and 2016 both);

Science, Technology and Innovation (STI) Policy, 2013

Afghanistan

IT Industry Development Policy, 2015-2020; Afghanistan National Peace And Development Framework (ANPDF)

2017 to 2021 – (covers features of trade and investment policy); National Export strategy, 2018-22

Bangladesh

Export Policy 2015-2018; Export Policy 2018-21 (approved by cabinet but yet to be published); Import Policy

2015-2018; Outline Perspective Plan of Bangladesh (2010-2021): Making Vision 2021 A Reality’ (basic document

for National Industrial Policy 2016)

Pakistan

Investment Policy, 2013-2018; Trade Related Investment Policy Framework 2015-23; New Industrial Policy, 2018

by Pakistan Business Council (PBC); Digital Pakistan Policy, 2018; Strategic Trade Policy Framework 2015-18,

STPF 2018-23 (Not yet released)

Nepal

Nepal Trade Integration Strategy (NTIS) 2016; Trade policy 2015; Industrial Policy 2010 (new policy did not come

in public domain after 2010)

Sri Lanka Vision 2025; National Export Strategy of Sri Lanka 2018-2022; New Trade Policy, 2017

Bhutan Economic Development Policy 2016

East Asia

China

Made in China 2025; Foreign Investment Law of the People’s Republic of China (PRC or China) ; New Generation

of Artificial Intelligence Development Plan

Japan

Japan Revitalisation Strategy - Toward the Fourth Industrial Revolution, 2016; Japan Revitalisation Strategy-Japan

is Back, 2013; Growth Strategy, 2019; Foreign Investment Strategy 2018; New Economic Policy Package, 2017

Korea Plan for the Fourth Industrial Revolution, 2017

13

Country Document

South-East Asia

Singapore

Report of the Committee on the Future Economy, 2017 ; Research Innovation Enterprise 2020 Plan

(released in 2016)

Myanmar

Myanmar Investment Promotion Plan 2016/17 - 2035/36; Myanmar Sustainable Development Plan (2018 –

2030); National Export Strategy 2015-2019 (first plan ever); National Export Strategy 2020-2025 (to be

formally released); Myanmar Industrial Development Vision: Next Frontier in Asia: Factory, Farm, and

Fashion (2015)

Cambodia

Rectangular Strategy for Growth, Employment, Equity and Efficiency: Building the Foundation toward

Realizing the Cambodia Vision 2015 (2018); Cambodia Industrial Development Policy 2015 – 2025; Law

on the Investment of the Kingdom Of Cambodia, 1994

Philippines Development Plan, 2017-22; Development Plan, 2014-16

Malaysia Eleventh Malaysia Plan 2016-2020: anchoring growth on people

Thailand The Twelfth National Economic And Social Development Plan (2017-2021); Thailand 4.0 Policy

Vietnam

Vietnam’s Socio-Economic Development Strategy for the Period of 2011-2020; National digital

transformation scheme 2019 (to be launched); Overall strategy for international integration through 2020,

vision to 2030 (approved in 2016); Strategy on exports and imports for 2011-2020, with visions to 2030;

Industrial Development Strategy through 2025, vision toward 2035 (signed in 2014)

Indonesia Long-Term National Development Plan Of Indonesia (RPJPN), 2005-2025

Main Policy Documents of Asian countries post crisis

Asian Changing Policies EA re-invented trade and industrial policies post-crisis to revive economy and not

lose share in GVCs, and stay at par with developed North in DT & automation

[China, Japan, Korea with strategy for Industry 4.0, AI, etc.]

SEA have holistic development plans with features of export promotion, GVCs

integration (along with focus on human resources, strengthening innovation & ICT)

Plan to reach certain income level viz. middle income country by 2030 (Myanmar), upper

middle country by 2022 (Philippines)

Exclusive focus of DE & Industry 4.0 by Singapore, Thailand, Cambodia

SA bringing more dedicated trade & industrial policies with focus on promoting

country’s brand, GVCs integration, etc. mainly in India, Pakistan, Afghanistan &

Bhutan [readiness for DT adoption in Pakistan, Afghanistan, & Industry 4.0 in India]

Anticipated flatter smiley curve due to DT for South may not come fully true; Rather

Asia may lead certain industry value chains and gain value added

14

15

FVA share of gross exports in the world (%)

Region 2005 2008 2009 2011 2012 2014 2015 2016

South Asia (SA) 18.8 24.5 21.8 25.1 25.1 23.0 19.1 16.1

ASEAN/SEA 31.4 30.5 28.1 28.9 29.1 29.2 28.9 28.2

East Asia (EA) 14.5 17.8 14.7 18.1 17.6 16.5 13.5 12.7

North America

(NA)8.1 9.9 7.6 9.7 9.7 8.7 7.7 7.4

EU 28 10.4 12.7 10.8 14.0 14.3 12.9 12.2 11.6

South and

Central

America (SCA)

10.2 10.5 8.2 8.8 9.4 10.1 10.3 8.7

16

Region wise FVA share of gross exports (2011) (%)

17

Region wise FVA share of gross exports (2016) (%)

18

Differences in FVA share of gross exports (2016-2011)

Regi

on

Agric

ultur

e,

fores

try &

fishi

ng

Manufa

cturing

Food

prod

ucts,

beve

rage

s &

toba

cco

Text

iles,

app

arel

&

leat

her

pro

duct

s

Woo

d &

its

pro

duct

s

Pap

er &

its

pro

duct

s

Coke

&

refin

ed

petr

oleu

m

prod

ucts

Chemic

als &

pharma

ceutical

product

s

Rub

ber

&

plas

tic

pro

duct

s

Othe

r

non-

meta

llic

mine

ral

prod

ucts

Basic

meta

ls &

fabri

cate

d

meta

l

prod

ucts

Com

pute

rs,

elect

ronic

&

elect

rical

equi

pme

nt

Mach

inery

&

equi

pme

nt

Moto

r

vehicl

es

Othe

r

trans

port

equi

pme

nt

Other

manu

factur

ing;

repair

etc.

Tot

al

busi

nes

s

serv

ices

SA (1.8) (12.2) (1.5) (3.9) (3.3) (7.5) (23.3) (7.5) (2.8) (10.1) (8.0) (9.6) (8.6) (10.4) (13.5) (9.9) (2.6)

SEA 3.5 (2.8) (1.1) 1.9 2.0 (2.4) (8.8) (3.6) (4.0) (2.8) (0.4) (3.4) (1.9) (2.4) (3.7) (2.7) 0.0

EA (1.4) (6.1) (3.2) (2.9) (3.0) (6.3) (20.5) (8.5) (6.3) (4.9) (10.2) (4.6) (4.8) (4.1) (4.4) (3.4) (2.4)

NA (1.6) (3.4) (1.7) (0.6) (0.2) (1.0) (15.7) (3.5) (2.1) (1.6) (1.7) (1.1) (1.1) (1.9) (0.3) (1.1) (1.0)

EU28 (1.4) (3.4) (1.3) (1.7) (1.6) (1.8) (11.2) (3.0) (2.3) (2.5) (5.5) (1.9) (1.6) (1.6) 0.8 (1.2) (0.1)

SCA (0.1) (1.0) (0.1) (1.3) (3.1) (1.5) (4.8) (1.4) (0.5) (0.5) (2.0) (0.9) (0.4) 0.3 4.2 1.3 (0.9)

Asia’s Backward Linkages – Trend Analysis Traced in ICT/electricals, machinery and transport equipment, coke/petroleum

oil, metals, even chemicals, rubber,/plastics and textiles/leather.

During 2011-16, significant fall in FVA content in gross exports, mainly for EA

(mainly China) and SA (India), i.e., rise in DVA content

Post-crisis, rearrangement of Asian GVCs linkages in manufacturing – focus on

domestic industries in the wake of rising protectionism

ASEAN countries still better linked to GVCs for machinery, metals, ICT

Integration of US & SCA declined over the years (presence in few industry

value chains of coke oil and automotive)

In food value chains, ASEAN dominated even with few EU and EA countries

In textiles, leather, paper, machinery, chemicals, rubber, plastic and minerals

value chains, ASEAN, Mexico, Hong Kong and Chinese Taipei continued to

have significant backward integration

Singapore, Vietnam, Hong Kong, Chinese Taipei are important links in wood

value chains

19

20

Country wise FVA share of gross exports (2011) – Only manufacturing (%)

Country

Food

produ

cts,

bevera

ges &

tobacc

o

Textil

es,

appar

el &

leathe

r

produ

cts

Wood

& its

produ

cts

Paper

& its

produ

cts

Coke

&

refine

d

petrol

eum

produ

cts

Chemical

s &

pharmace

utical

products

Rubb

er &

plasti

c

produ

cts

Other

non-

metal

lic

miner

al

produ

cts

Basic

metals

&

fabric

ated

metal

produ

cts

Compu

ters,

electro

nic &

electric

al

equipm

ent

Machi

nery &

equipm

ent,

nec

Motor

vehicl

es&

trailer

s

Other

transp

ort

equip

ment

Other

manufact

uring;

repair

etc.

South Asia

India 7.7 17.2 11.5 25.7 64.5 29.4 23.9 32.4 37.6 40.7 34.4 33.9 33.3 34.0

ASEAN

Brunei

Darussalam 41.3 18.4 33.8 29.6 8.2 15.2 31.0 9.0 12.6 37.1 32.8 36.8 31.9 21.5

Cambodia 23.6 41.7 13.7 46.4 41.8 38.7 45.8 35.4 46.0 41.6 40.9 40.2 37.0 33.1

Indonesia 9.2 22.1 7.1 16.8 21.8 18.8 29.0 8.5 16.9 35.5 35.8 20.2 40.3 18.8

Malaysia 33.0 35.1 22.1 30.1 29.9 40.4 48.7 33.3 53.0 60.4 46.9 60.3 55.2 42.4

Philippines 11.5 17.8 23.0 32.7 58.9 35.8 36.0 28.2 27.6 35.9 31.4 34.9 34.5 25.5

Singapore 40.9 37.9 37.9 35.3 84.3 45.8 40.2 46.8 45.8 45.9 46.4 40.2 44.0 41.1

Thailand 19.6 25.9 31.3 35.8 58.4 42.4 49.2 35.5 56.7 57.6 58.9 51.9 52.4 47.2

Viet Nam 37.9 45.5 49.7 45.8 43.8 50.9 54.2 34.7 53.0 54.7 61.2 51.8 56.4 49.6

East Asia

Japan 11.5 18.5 12.6 10.5 57.4 18.1 15.9 13.3 26.6 16.0 13.4 12.4 14.6 15.1

Korea 30.7 34.4 33.3 33.5 80.9 46.1 38.9 37.8 50.3 41.5 38.6 37.8 42.3 37.2

China 10.3 13.1 16.5 16.8 42.4 21.4 22.3 16.0 25.2 31.4 21.2 20.7 20.2 16.0

Hong Kong 32.3 41.0 40.4 33.9 53.1 39.9 35.3 39.0 60.0 48.6 64.6 43.4 39.4 39.2

Chinese

Taipei 36.8 44.5 45.3 43.2 83.2 63.6 50.4 45.0 56.7 37.4 49.1 45.9 43.3 39.6

21

Country wise FVA share of gross exports (2016) – only manufacturing (bold figures indicate decline in shares from 2011 to 2016) (%)

Country

Food

produc

ts,

bevera

ges &

tobacc

o

Textile

s,

appar

el &

leathe

r

produ

cts

Wood

& its

produ

cts

Paper

& its

produ

cts

Coke &

refined

petrole

um

produc

ts

Chemicals

&

pharmace

utical

products

Rubbe

r &

plastic

produ

cts

Other

non-

metalli

c

miner

al

produ

cts

Basic

metals

&

fabrica

ted

metal

produc

ts

Comput

ers,

electroni

c &

electrica

l

equipme

nt

Machin

ery &

equipm

ent, nec

Motor

vehicle

s&

trailers

Other

transpo

rt

equipm

ent

Other

manufactu

ring;

repair etc.

South Asia

India 6.2 13.4 8.2 18.1 41.2 21.9 21.2 22.3 29.6 31.1 25.8 23.5 19.8 24.1

ASEAN

Brunei

Darussalam 44.8 21.5 31.6 30.9 5.3 12.5 30.4 10.1 13.2 40.4 35.5 39.7 33.5 23.1

Cambodia 20.7 37.0 12.6 42.4 49.8 39.5 44.4 36.3 44.3 38.5 36.3 34.9 38.9 27.9

Indonesia 7.3 20.0 6.4 15.1 14.5 13.7 25.6 7.0 14.9 26.4 27.8 16.2 33.3 16.2

Malaysia 26.7 35.3 18.5 26.6 19.2 35.2 43.8 29.8 46.4 54.6 43.6 55.6 49.7 34.0

Philippines 10.5 16.2 21.8 28.4 37.9 28.5 31.9 24.0 23.1 38.9 31.7 40.9 35.8 24.8

Singapore 39.0 34.7 37.5 31.4 73.6 43.0 34.4 46.4 49.3 43.6 44.3 39.7 39.2 42.5

Thailand 15.9 20.8 26.4 27.2 43.6 32.2 41.4 28.4 48.0 47.9 52.2 45.8 47.6 39.2

Viet Nam 36.8 44.8 49.4 43.8 31.1 46.4 51.8 32.5 50.5 61.4 62.3 51.5 54.3 48.2

East Asia

Japan 10.1 17.6 13.3 9.7 42.1 14.1 12.6 10.9 18.5 13.6 10.5 10.4 15.2 12.9

Korea 24.5 28.9 25.4 23.5 64.8 31.6 27.8 26.0 34.4 34.0 28.5 27.8 33.4 28.5

China 7.8 9.4 13.4 11.7 29.7 14.4 15.1 10.9 15.9 25.1 15.2 15.8 15.3 12.3

Hong Kong 25.5 34.0 33.8 29.1 43.1 31.0 28.3 31.0 59.1 47.5 66.5 39.7 34.0 38.9

Chinese

Taipei 27.2 32.6 32.7 33.0 57.1 45.9 35.7 32.8 46.2 27.7 43.0 40.1 38.6 32.7

22

DVA in exports of intermediate products as a share of total gross exports (%)

Region 2005 2008 2009 2011 2012 2014 2015

India (South Asia)42.9 41.6 39.5 38.1 37.9 38.8 40.0

ASEAN41.4 42.9 43.3 44.4 43.8 43.1 42.8

East Asia44.3 42.2 42.9 40.6 40.8 42.8 46.3

NA50.8 50.6 51.1 52.0 51.2 51.0 51.1

EU 2848.1 46.4 46.4 44.6 44.6 45.2 45.8

SCA59.4 61.5 62.4 65.9 64.7 62.9 60.5

23

Region-wise DVA in exports of intermediates as a share of total exports (2011) (%)

24

Region-wise DVA in exports of intermediates as a share of total exports (2015) (%)

25

Differences in DVA in exports of intermediates as a share of total exports (2015-2011)

Region

Agric

ultur

e,

fores

try &

fishi

ng

Man

ufact

urin

g

Food

prod

ucts,

beve

rages

&

toba

cco

Textil

es,

appar

el &

leathe

r

produ

cts

Woo

d &

its

prod

ucts

Pape

r &

its

prod

ucts

Coke

&

refine

d

petro

leum

prod

ucts

Chemi

cals &

pharm

aceuti

cal

produ

cts

Rub

ber

&

plast

ic

prod

ucts

Othe

r

non-

meta

llic

mine

ral

prod

ucts

Basi

c

met

als

&

fabr

icat

ed

met

al

pro

duc

ts

Co

mp

uter

s,

elec

tro

nic

&

elec

tric

al

equ

ipm

ent

Mac

hin

ery

&

equi

pme

nt

Mot

or

vehi

cles

Oth

er

tran

spo

rt

equi

pme

nt

Othe

r

man

ufact

urin

g;

repa

ir

etc.

Tota

l

busi

ness

servi

ces

SA 2.3 4.9 (4.6) 2.8 18.2 12.2 9.9 4.0 2.5 15.7 6.7 6.5 2.9 2.2 2.0 4.6 (2.6)

SEA (1.6) 2.0 (1.9) 3.5 (1.0) (1.2) 0.8 2.0 3.0 3.2 (1.2) 6.9 1.4 (0.3) 1.1 3.5 (1.4)

EA 2.9 6.3 1.3 4.1 3.3 2.2 4.9 4.4 5.8 6.3 8.3 10.2 5.3 (3.2) 1.7 1.2 2.7

NA 3.1 0.6 (0.3) (1.2) 1.6 (1.6) 9.9 (0.6) (0.3) (1.2) (2.8) 5.1 1.9 7.2 2.7 9.5 (1.7)

EU28 1.5 3.8 (1.8) 4.0 7.5 0.8 24.3 (3.3) 6.0 5.4 7.2 9.7 6.3 0.6 3.8 (0.2) 1.0

SCA 2.1 (1.6) (1.9) 3.1 2.6 (1.2) (1.8) (4.4) (1.4) 1.1 (0.5) 1.6 (0.3) 0.7 (4.3) (2.1) (4.2)

26

Country-wise DVA in exports of intermediates as a share of total exports (2011) – only manufacturing (%)

Food

produ

cts,

bevera

ges &

tobacc

o

Textil

es,

appar

el &

leathe

r

produ

cts

Wood

& its

produ

cts

Paper

& its

produ

cts

Coke

&

refined

petrole

um

produc

ts

Chemicals

&

pharmace

utical

products

Rubb

er &

plasti

c

produ

cts

Other

non-

metall

ic

miner

al

produ

cts

Basic

metals

&

fabrica

ted

metal

produc

ts

Comput

ers,

electron

ic &

electric

al

equipm

ent

Machin

ery &

equipm

ent, nec

Motor

vehicle

s&

trailer

s

Other

transp

ort

equipm

ent

Other

manufact

uring;

repair etc.

India (SA) 40.3 34.3 19.8 39.1 26.3 43.5 55.4 41.4 44.2 27.5 26.2 20.1 16.1 14.6

ASEAN

Brunei

Darussalam 11.9 11.8 46.4 24.0 4.7 76.2 55.3 82.4 86.5 17.6 38.4 1.1 32.1 5.2

Cambodia 31.5 16.7 75.8 46.5 6.9 27.3 40.4 44.5 42.1 25.3 14.2 15.4 19.0 13.4

Indonesia 34.8 27.1 84.7 70.1 59.6 67.8 59.0 82.4 79.6 33.8 24.0 29.8 13.3 17.4

Malaysia 25.9 22.2 68.0 49.7 57.5 50.3 43.7 60.0 43.4 22.1 19.5 13.5 11.8 16.9

Philippines 35.9 12.7 72.1 55.4 32.9 53.9 56.0 66.4 70.0 38.9 29.3 28.9 23.1 40.4

Singapore 22.3 12.9 40.5 53.6 12.6 40.0 47.1 49.7 45.9 33.2 23.6 19.8 13.6 15.6

Thailand 34.2 34.1 64.4 50.3 33.1 50.3 42.3 57.1 39.3 23.7 14.7 15.8 12.7 8.8

Viet Nam 26.1 20.1 47.2 42.6 42.7 40.4 38.0 59.0 44.0 22.1 13.8 25.9 14.4 9.6

East Asia

Japan 39.0 61.6 37.8 76.8 34.8 68.8 71.3 79.7 70.0 49.9 32.8 26.9 22.0 19.5

Korea 29.1 44.5 50.5 54.2 15.8 46.4 50.9 54.2 45.4 33.7 20.9 18.7 18.6 14.8

China 39.7 33.3 68.5 66.4 46.2 59.3 62.1 72.2 65.7 32.2 32.8 25.6 21.5 17.0

Hong Kong 18.6 28.0 5.7 51.2 38.5 41.8 55.7 55.5 35.3 29.9 11.6 3.0 18.8 16.3

Chinese

Taipei 24.2 38.5 45.9 47.7 13.9 32.5 42.8 50.6 39.9 38.1 18.3 16.6 14.9 12.2

27

Country-wise DVA in exports of intermediates as a share of total exports (2015) – only manufacturing (bold ones indicate decline from 2015 to 2011) (%)

Food

produc

ts,

bevera

ges &

tobacc

o

Textil

es,

appar

el &

leathe

r

produ

cts

Wood

& its

produ

cts

Paper

& its

produ

cts

Coke

&

refined

petrole

um

produc

ts

Chemicals

&

pharmace

utical

products

Rubb

er &

plastic

produ

cts

Other

non-

metall

ic

miner

al

produ

cts

Basic

metals

&

fabrica

ted

metal

produc

ts

Comput

ers,

electron

ic &

electric

al

equipm

ent

Machin

ery &

equipm

ent, nec

Motor

vehicle

s&

trailer

s

Other

transpo

rt

equipm

ent

Other

manufactu

ring;

repair etc.

India (SA) 35.7 37.2 38.1 51.4 36.2 47.5 58.0 57.1 50.9 33.9 29.1 22.4 18.2 19.1

ASEAN

Brunei

Darussalam 15.3 7.9 34.2 5.4 3.3 37.4 49.8 81.2 85.6 15.1 25.9 0.6 23.8 3.5

Cambodia 33.0 26.2 83.2 50.1 0.6 47.4 48.5 58.7 50.4 41.9 23.6 29.9 23.1 17.1

Indonesia 31.3 33.1 86.4 68.1 59.6 68.3 60.9 87.9 77.9 41.8 28.1 27.3 14.4 21.0

Malaysia 25.0 24.2 70.1 52.1 61.9 53.9 46.7 66.0 47.0 29.1 25.0 16.0 15.5 22.1

Philippines 33.8 22.5 76.6 53.5 36.8 62.1 61.0 75.0 74.3 43.4 33.7 26.5 24.3 42.0

Singapore 22.9 17.8 35.9 54.9 16.6 40.7 50.6 46.3 45.3 37.9 24.1 18.8 17.4 22.1

Thailand 33.9 33.6 69.0 48.9 37.7 56.5 48.1 61.0 44.7 32.5 17.9 17.5 15.3 14.5

Viet Nam 25.4 24.5 47.9 42.4 47.5 44.1 40.8 59.2 44.9 22.4 14.9 23.0 12.9 9.4

East Asia

Japan 33.9 53.8 36.2 73.0 34.9 67.3 72.2 77.8 73.7 54.8 40.6 23.7 22.5 27.3

Korea 29.9 47.8 56.3 60.5 21.0 55.3 60.4 65.1 57.6 44.7 28.6 19.5 23.3 22.3

China 40.4 36.9 71.2 68.1 48.5 62.8 68.1 77.3 73.1 40.2 38.1 25.8 21.0 18.2

Hong Kong 30.8 28.7 0.3 39.6 36.0 45.1 61.1 61.8 34.9 27.0 10.4 4.9 19.7 19.1

Chinese

Taipei 26.3 46.7 51.8 53.2 18.1 43.0 52.8 61.7 49.7 50.4 25.9 15.4 18.6 18.6

Asia’s Forward linkages: Trend Analysis Significant in selected value chains only - wood, paper, rubber & plastic,

mineral products, metals and even chemicals

Rise in FL in GVCs in manufacturing for all regions except SCA

Highest by EA and SA

EU has highest forward participation, while NA has lowest

ASEAN’s FL increased only by 2 percentage points during 2011-15

But ASEAN & Japan, China, Korea and US have significant role in

chemicals/pharma value chains

Japan has higher FL in textiles value chains in 2011 & 2015, and improved

shares in ICT value chains in 2015

India as key player in value chains of wood, paper, metals, rubber/plastic,

chemicals, metals, minerals with rising shares during 2011-15

FL by regions lower in automotive, machinery and transport equipment, but

shares did not decline much – potential area for Asian growth28

Policies to Reshape Asia in GVCs Improve policy synchronization of FDI, foreign trade and industrial policies with eye

on development of Industry 4.0 and digital technologies [viz. bringing Digitally

Informed FTP for India as suggested by Banga (2019b)]

Rise in 4th Industrial Revolution but with a view to support export-oriented

domestic industries

As challenges more for Developing Asia in terms of jobs restructuring , applying

smart production in traditional industries, adopting to AI, etc., better preparedness

is required from both government and private agencies

Unless different Asian economies’ cooperate, they will even fail to compete

Reforms at country level, then at regional level in varied industry VCs

Create dynamic cross-region linkages in machinery, automotive, textiles

29

Policies to Reshape Asia in GVCs India can strengthen growing forward linkages in metals, minerals, paper, rubber,

plastics; as well as better link its services sector to GVCs of EA and SEA

ASEAN, SA can increase capacities for linkages in ICT, electrical machinery and

transport equipment

Scope lies in improving role of Asia as the key supplier in food, textile/leather

value chains

Asia can lead differently by adopting new models of globalization, trade,

automation and digitization but with consideration of social and environmental

aspects (viz. bringing more green products, keeping human resources at par with

robots in production)

Learn lessons from success stories but with caution to fulfil country’s own

domestic requirements

30

Conclusion Changes in theories moved from flying geese to fragmentation to upgrading in

GVCs to snakes and spiders pattern, & now to DT driven upgrading in GVCs

Smiley curve of GVCs may change due to DT thereby widening gap between

North and South; but recent policy announcement in EA, SEA and also SA may

help capturing higher value added gains

Initiatives are rising to boost domestic manufacturing to move up GVCs, such as

Made in China 2025, Make in India, etc. (even Made in Afghanistan for IT

products, Make in Pakistan, etc.)

Conversely, significant fall in FVA content of gross exports for EA and SA

(India), who are witnessing rise in forward linkages

ASEAN continues to have strong GVC integration in manufacturing

Although China entered GVCs are slowing down, but with DT and smart

manufacturing & associated changes in FTP, along with maturing of EU and US

value chains, Asia can easily capture vacant and new spaces by incorporating

fresh innovative thinking and well-thought policy changes

Trends show that Asia has potentials and all set to emerge as big manufacturing

player with different look in GVCs (holistic-development based GVCs)

31

Thank You

32