OECD-ERIA Joint Regional Symposium (June 13, 2016 @Hanoi, Vietnam)

Making the most out of GVC participation

Fukunari Kimura

Chief Economist, Economic Research Institute for ASEAN and East Asia (ERIA)

Dean, Graduate School of Economics, Keio University

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How to utilize GVCs?

• ASEAN and East Asia have explored effective usage of global value chains (GVCs), particularly in machinery industries.

• Vietnam has quickly followed ASEAN forerunners.

– Possibilities in Tiers 3, 2, and 1b.

– The central theme now: Tier 1a (forming industrial agglomeration with production networks and accelerating technology transfer/spillover)

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A new development strategy for ASEAN and East Asia

Connectivity

Medium grades High grades Turnpike connectivity

Innovation

Process innov. Product innov.

Under-developed economy before industrialization

Hock up with global value chains (the 1st unbundling): resource-based/labor-intensive industries

Participate in production networks (the 2nd unbundling: Jump-start industrialization with machinery industries

Form industrial agglomeration:

Accelerate technology transfer/spillover

Create innovation hub:

Urban amenities

Attract/nurture human resources

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[Cambodia, Laos, Myanmar]

[Vietnam, Philippines, Indonesia]

[Thailand, Malaysia, Singapore]

Source: ERIA (2015).

Source: Obashi and Kimura (2016).

The 2nd unbundling

The 1st unbundling

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Figure 2.9. Three Channels to Get Access to Technology

Source: ERIA (2015). 5

Policies for Vietnam

• FTA strategies – TPP and Vietnam-EU FTA

• Set a standard for trade/investment liberalization and international rule making

• Accelerate domestic reform

– AEC and RCEP • Competitors or collaborators?

• Polices for forming industrial agglomerations – Full size: 100km diameter – Infrastructure

• Highway network • Large-scale ports/airports • Large and stable supply of infrastructure services (e.g., electricity)

• Preparation for innovation

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Figure 4.3.1. City Size with Nighttime Light from Satellite (conti.)

Source: ERIA-IDE GSM Team.

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Figure 4.3.1. City Size with Nighttime Light from Satellite (conti.)

Source: ERIA-IDE GSM Team.

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Figure 4.3.1. City Size with Nighttime Light from Satellite (conti.)

Source: ERIA-IDE GSM Team.

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References

• Economic Research Institute for ASEAN and East Asia (ERIA) (2015) The Comprehensive Asia Development Plan 2.0 (CADP 2.0): Infrastructure for Connectivity and Innovation. Jakarta: ERIA.

• Obashi, Ayako and Kimura, Fukunari. (2016) “Deepening and Widening of Production Networks in ASEAN.” ERIA Discussion Paper 2016-09 (http://www.eria.org/publications/discussion_papers/DP2016-09.html).

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