This technical report was written by Stacey Frederick for the Donor Committee for Enterprise Development (DCED) Business Environment Working Group. It examines how the business environment can support positive integration and upgrading of formal firms in global value chains (GVCs). It addresses the role of the business environment and reform regarding attracting lead firms and supporting positive effects from investment, increasing the quality and supply of domestic firms, facilitating linkages between foreign and domestic firms, and supporting integration into new chains via regional trade agreements. These are discussed in this report as they relate to factors affecting competitiveness in GVCs.
This report analyzes four digital innovations that have the potential to disrupt global value chains: the Internet of Things (IoT); blockchain; artificial intelligence (AI); and advanced manufacturing. While advances in information and communication technology have largely worked in concert in the past to support the expansion and fragmentation of global value chains the impact of these innovative digital technologies are unlikely to be uniform. The report evaluates these new technologies in the context of financial, pharmaceutical, and automotive industries to arrive at three key takeaways. First, the private sector’s competitiveness will increasingly depend on an ability to collect, store, organize, and analyze data. Second, regional value chains will emerge as global trade orients more around regional poles. And third, big tech firms could disrupt global value chains, although it appears as likely that they will collaborate with existing firms in established markets. The report was published by the Atlantic Council and written by Jack Daly and Nick Brown, related experts Bart Oosterveld and Ole Moehr.
This research uses the global value chain (GVC) framework to analyze Central America’s participation in global manufacturing value chains, to understand the region’s competitiveness drivers and to evaluate potential risks to continued participation if US trade policies were to change. Central America’s entry into manufacturing GVCs has been through the insertion in various chains including apparel, wire harnesses (automotive) and medical devices. These sectors span low-, medium-, and high-tech manufacturing. They are important contributors to the region’s export basket, and the US is central to their trade. To understand how the region operates in these manufacturing sectors, this report analyzes the participation of select countries in each of the three value chains: apparel (El Salvador, Guatemala, Honduras, and Nicaragua), wire harnesses (Honduras and Nicaragua) and medical devices (Costa Rica and Dominican Republic).
Having built its economy on a strong manufacturing base, Korea is now at a crossroads and must redefine its growth drivers for the future. Its strong commitment to process and product improvement have seen steady gains in productivity and output in the past. However, its manufacturing sector is coming under growing pressure on two fronts. In labor-intensive operations, Korea increasingly competes with lower cost countries which are building up their capabilities, particularly China and others from Asia, while, in capital- and knowledge-intensive stages of the chain, Korea is up against the world’s most advanced industrialized countries – the US, EU and Japan, which are all rapidly innovating, defining brand new industries, and ramping up new production technologies that will shape the future of manufacturing itself.
Traditional development paradigms would suggest that, to survive these challenges, Korea aim to move out of manufacturing and into services. With an underperforming services sector, this provides a somewhat pessimistic outlook for Korea’s future. It also presents policymakers with an overwhelming task as the “services” sector is broadly defined and covers a very wide range of activities, including everything from construction to finance and insurance and tourism, drawing on a wide range of skills and other capabilities and requiring a considerable transformation of the economy. The global value chain (GVC) paradigm, however, suggests that the country leverage its existing strengths in manufacturing to lead its upgrading into services, while at the same time, consolidating its leadership as a production technologies specialist. Korea has established a formidable leadership in its manufacturing chains to date based on strengths in science and technology, manufacturing and an emphasis on applied research and development (R&D). By identifying future sources of value in these manufacturing GVCs, Korea can pursue a much more targeted approach to drive the development of a stronger services sector while focusing on the highest value manufacturing segments.
This study analyzed Korea’s participation in two of its leading manufacturing sectors: electronics and shipbuilding.
Shipbuilding in Korea has been a lynchpin of industrial development, national security, and source of employment and foreign exchange for the country since the 1970s. From relatively humble beginnings in 1972, when Korean national economic development plans identified shipbuilding as a key industrial sector for development, the big three Korean shipbuilding firms, Hyundai Heavy Industries, Samsung, and Daewoo have become dominant firms in the global shipbuilding industry, producing sophisticated commercial vessels for customers around the world. Today, the shipbuilding industry contributes about 2% to Korea’s GDP (OECD 2015), directly employs approximately 200,000 workers, particularly in rural areas, and makes up between 7-8% of total exports (KOMEA 2016). Shipbuilding is routinely among the top three most valuable Korean export industries, competing with automobiles and electronics for the top spot (KOMEA 2016).
This chapter investigates the shipbuilding value chain and Korea’s position in the regional and global industry.
The automobile and transportation industries have been considered a classic example of a producer-driven value chain. Duke GVC Center researchers, in collaboration with scholars at other universities, have published a wide range of articles on the automotive and transportation industries in the United States, Canada, Mexico, China, Korea, the Philippines, and Brazil.
This report provides an overview of the shipbuilding global value chain and the Philippines current position and opportunities for upgrading. It was prepared for USAID/Philippines, through the Science, Technology, Research and Innovation for Development (STRIDE) Program.
This report uses the GVC framework to examine the role of the Philippines in the global automotive industry and identify opportunities for upgrading. The country’s strength in the sector is in electrical and electronic automotive components, with approximately two-thirds of its US$3.98 billion exports in 2014 falling in one of these categories. The Philippines has a particularly strong foothold in wire harnesses, exports of which increased by 129% from 2007 to 2014 to allow it to become the world’s fourth largest global exporter. The prominence of the cluster affords the country a number of upgrading opportunities moving forward. Otherwise, the relatively small size of the domestic market has constrained the development of the industry, with local companies unable to generate the economies of scale necessary to compete in an increasingly consolidated global environment.
Strong growth in the global aerospace sector has created opportunities for new entrants. In recent years, the Philippines has successfully entered into this industry, although at a much smaller scale than the few other developing countries in the sector. This report seeks to understand the complexity of the industry and the numerous subsystems of which it is composed in order to provide insight for continued upgrading strategies.
The introduction outlines the analytical framework of the study, examines the Philippines recent economic growth and revitalization of the manufacturing sector, and provides an introduction to the Philippines investment, trade and education policies.
Key findings for the Philippines in Manufacturing Global Value Chains project were presented at a public forum at the Makati Diamond Residential Suites in Manila on June 2, 2016. The presentation highlighted the position of the Philippines in each of the five industries (aerospace, automotive, electronics & electrical, chemicals and paper) and focused on potential upgrading trajectories for each. Photos from the event can be accessed at the following link.