Driving structural change through global value chains integration

This article is brought to you in association with the United Nations. World-renowned policy experts and academics, as well as high-level practitioners and policymakers came together today for the 2018 Forum on Globalization and Industrialization to explore the potential of Global Value Chains (GVCs) for driving structural change. Participation in GVCs provides important opportunities for firms to access international markets, absorb new technology, and rapidly expand their economies of scale. However, technology requirements for entering into GVCs are more demanding than ever and there is a tangible risk that developing economies will remain trapped in lower value-added activities along the value chains. “Harnessing the potential of GVCs for broad-based economic development requires active and purposeful policies. It also requires an understanding of the characteristics and dynamics of GVCs across different regions and industries,” said LI Yong, Director General of the United Nations Industrial Development Organization (UNIDO), at the opening. The participants looked into how GVCs can lead to inclusive and sustainable development and how countries at different stages of development can ensure their participation in those value chains. “Supply chain linkages are a key channel for foreign direct investment (FDI)-driven sustainable industrialization. Firms that engage in FDI are more productive and more sustainable than those that do not,” said Ana Novik, Head of Investment Division at the Organisation for Economic Co-operation and Development. “Therefore, host economy SMEs can benefit from supply chain linkages with foreign multinational enterprises through transfers of knowledge and technology.” Policy challenges and options for utilizing the potential of GVC for broad-based economic development were also discussed. “Government and policymakers must take a holistic view of participation GVCs. The policies must not just focus on what needs to be done domestically, but also internationally through trade and investment agreements,” said Rebecca Fatima Sta Maria, Senior Policy Fellow at the Economic Research Institute for ASEAN and East Asia. “Governments must also review investment policies to ensure that they attract investments, which are aligned to their goals for sustainable and inclusive development. This means focusing not just on environment impact but also the social impact of FDI.” Albert Ting, Chairman of CX Technology Corporation added, “The successful development models of East Asia can be modified and adopted by others to achieve better success in inclusive sustainable industrial development and poverty alleviation.” Two new UNIDO reports, which contributed to the structure of the event, were launched during the Forum: “The Global Value Chains and Industrial Development: Lessons from China, South-East and South Asia” and “Structural Change for Inclusive and Sustainable Industrial Development”. The Forum was organized by UNIDO and the Kiel Centre for Globalization (KCG) at the Kiel Institute for the World Economy (IfW Kiel), in cooperation with China’s University of International Business and Economics (UIBE). The event was also made possible with financial support from the People’s Republic of China.