The emergence of global value chains has opened up new ways to achieve development and industrialization. However, new evidence shows that not all countries have gained from participating in global value chains, and that country-specific characteristics matter for economic upgrading in global value chains.
... See More + This paper uses two panel data sets of developing and industrialized countries at the sectoral level to relate global value chain participation as a buyer and seller to domestic value added. These are combined with a wide range of policy measures at the country level that can play a role in economic upgrading through global value chains, by targeting global value chain integration or the quality and conditions of input and output factors. First, the study finds that global value chain integration increases domestic value added, especially on the selling side, which holds across all income levels. Second, the results highlight the importance of policy for economic upgrading through global value chain integration. Although the study cannot claim causal evidence, all the assessed policy areas are consistently shown to mediate the effects of global value chains and magnify the gains for domestic value added. Third, a detailed analysis shows that several policy areas mediate the gains from global value chains more through integration as a seller. Finally, the study observes that many of the results are driven by high- and upper-middle-income countries.
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Policy Research Working Paper WPS8007 MAR 16, 2017
Vietnam has emerged as an Asian manufacturing powerhouse, carving out a role for itself within global value chains (GVCs). By specializing in assembly functions on behalf of primarily foreign firms, Vietnam has markedly increased its domestic value added, as reflected by its gross exports, which have grown by 16.6 percent annually between 1995 and 2011.
... See More + This export-oriented development strategy has created jobs, propelled economic growth, and reduced poverty. As successful as Vietnam has been, within the context of GVCs, its specialization has been in low value-added,end-production activities. Its challenge is to move up the value chain into higher value-added functions. Even more ambitious would be to grasp the opportunity to become an originator of products by nurturing a nascent set of domestic firms that have the potential to carve out an “invented in Vietnam” niche in local, regional, and global markets. In short, Vietnam is at a crossroads. It can continue to specialize in low value-added assembly functions, withindustrialization occurring in enclaves with little connection to the broader economy or society; or it can leverage the current wave of growth to diversify and move up the chain into higher value-added functions. Success will require Vietnam’s policy makers to view the processes of development differently and to take new realities of the global economy more fully into account.Vietnam at a Crossroads: Engaging in the Next Generation of Global Value Chains identifies policies and targeted interventions that will drive development by leveraging GVC participation while also taking into account major trade policy shifts and rapid technological advances. Readers will gain a strong understanding of Vietnam’s current and potential engagement with GVCs and will learn about strategic policy tools that can help developing countries achieve economic prosperity in the context of compressed development. Its findings will be of particular interest to policy makers, development practitioners, and academics.
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This report's focus is making global value chains (GVCs) more inclusive. To achieve inclusiveness is by overcoming participation constraints for Small and Medium Enterprises (SMEs) and facilitation access for Low Income Developing Countries (LIDCs).
... See More + The underlying assumption is that most firms in LIDCs are SMEs. Even larger firms in LIDCs are likely to face similar challenges to SMEs, including a less supportive domestic operating environment and weaker institutions that lead to higher fixed costs and challenges to compete on the international markets. The two major points of this report are (1) participation in GVCs is heterogeneous and uneven, across and within countries, and (2) available data and survey-based evidence suggest that SMEs’ participation in GVCs is mostly taking place through indirect contribution to exports, rather than through exporting directly. The report makes the case that policy action, at the national and multilateral level, can make a difference in achieving more inclusive GVCs through: a holistic approach to reform spanning trade, investment, and domestic policies countries and investments in expanding the statistical base and analysis of GVCs and in sharing knowledge on best practices on enabling policies and programs. The report elaborates on three broad areas of recommendations: (1) establishing a trade and investment action plan for inclusiveness defining clear and achievable objectives on trade and investment policy and identifying the necessary complementary domestic policy actions; (2) complementing trade, investment, and domestic policy actions by providing the needed political leadership and support to enhance collaboration across the sectors, and establishing global platforms for sharing best practices; and (3) providing political support for the establishment of a multi-year plan to expand and upgrade the statistical foundation necessary to increase the capacity of all countries to identify and implement policies that can contribute to stronger, more inclusive and sustainable growth and development, globally.
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Economic, technological, and political shifts as well as changing business strategies have driven firms to unbundle production processes and disperse them across countries.
... See More + Thanks to these changes, developing countries can now increase their participation in global value chains (GVCs) and thus become more competitive in agriculture, manufacturing and services. This is a paradigm shift from the 20th century when countries had to build the entire supply chain domestically to become competitive internationally. For policymakers, the focus is on boosting domestic value added and improving access to resources and technology while advancing development goals. However, participating in global value chains does not automatically improve living standards and social conditions in a country. This requires not only improving the quality and quantity of production factors and redressing market failures, but also engineering equitable distributions of opportunities and outcomes - including employment, wages, work conditions, economic rights, gender equality, economic security, and protecting the environment. The internationalization of production processes helps with very few of these development challenges. Following this perspective, Making Global Value Chains Work for Development offers a strategic framework, analytical tools, and policy options to address this challenge. The book conceptualizes GVCs and makes it easier for policymakers and practitioners to discuss them and their implications for development. It shows why GVCs require fresh thinking; it serves as a repository of analytical tools; and it proposes a strategic framework to guide policymakers in identifying the key objectives of GVC participation and in selecting suitable economic strategies to achieve them.
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The Service Trade Competitiveness Diagnostic (STDC) Toolkit is part of a larger agenda of trade competitiveness work developed by the World Bank's International Trade Unit in recent years.
... See More + Services are a key input in countries' trade competitiveness, as well as a new source of trade diversification, making it critical to understand what factors and main constraints matter most for services competitiveness. The Toolkit provides a framework, guidelines, and set of practical tools to conduct a thorough analysis and diagnostic of trade competitiveness in the services sector with a methodology that sheds light on a country's ability both to export services and improve its export performance through policy change. This Toolkit is designed to be used in a modular way. Either a full country diagnostic can be undertaken or various parts of the toolkit can be used to address specific questions of interest, whether they pertain to existing services performance, the potential for expansion and growth in services trade, or policy options to increase competitiveness in services trade. The output of an STCD can be used to assess either the overall performance of a country's services sector or the performance of individual sub-sectors. This Toolkit complements the analytical framework for trade in goods provided by the Trade Competitiveness Diagnostic Toolkit (World Bank, 2012), and allows policymakers and experts in developing countries to better integrate services into their overall trade strategies. In addition, it will also be of interest to international organizations and development practitioners in both policymaking institutions and academia.
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Publication 93714 JAN 14, 2015
Hollweg,Claire Honore; Van Der Marel,Erik Leendert; Saez,Juan Sebastian; Taglioni,Daria; Zavacka,VeronikaDisclosed
This economic update provides an overview for 2013 and early 2014 in Malaysia and an analysis of structural trends in trade competitiveness. The economy overcame a weak start in 2013 to experience GDP growth through 2014.
... See More + The improved performance was driven mainly by a recovery in exports, including of the long-ailing electrical and electronics sector. The outlook remains favorable and GDP is expected to continue growing through 2015. Growth will be sustained by positive external conditions, with foreign demand outweighing headwinds in domestic demand. Investment and imports of capital goods will remain robust as large projects move forward. Medium-term fiscal consolidation remains on track and the debt-to-GDP ratio has stabilized, but additional spending measures are needed for the Government to meet its 2014 deficit target. The central bank has signaled that it may have to tighten policy to avoid the build-up of financial imbalances. Labor markets are healthy, and Malaysia has enjoyed higher employment levels, real wage gains, and higher labor incomes. External risks to the economic outlook have receded, but the high share of Malaysia's foreign debt means it is sensitive to international volatility. Boosting exports to fully leverage the improved external environment will be critical for sustained growth. The report's analysis of Malaysia's trade competitiveness focuses on its ability to grow exports and the domestic value-added. Malaysia's exports had been faltering since before the Global Financial Crisis. The core electrical and electronics sector declined in the 2000s, and Malaysia's domestic value-added is relatively low due to limited domestic linkages. Exports of services have also lagged and remain an area of significant potential. Restrictive Government policies play a role in hindering export growth, although the Government has recently embarked on a liberalization of service sectors. Improving domestic value-added tasks will require addressing skill gaps. Finally, Malaysia's upcoming chairmanship in ASEAN offers concrete avenues to boost trade competitiveness.
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Global value chains (GVCs) are playing an increasingly important role in business strategies, which has profoundly changed international trade and development paradigms.
... See More + GVCs now represent a new path for development by helping developing countries accelerate industrialization and the servicification of the economy. From a firm perspective, production in the context of GVCs highlights the importance of being able to seamlessly connect factories across borders, as well as protect assets such as intellectual property. From the policy maker perspective, the focus is on shifting and improving access to resources while also advancing development goals, and also on the question of whether entry into GVCs delivers labor-market-enhancing outcomes for workers at home, as well as social upgrading. GVCs can lead to development, but, at the country level, constraints such as the supply of various types of labor and skills and inadequate absorptive capacity remain. GVCs can create new opportunities on the labor demand side, but supply and demand cannot meet if the supply is missing. This potential gap illustrates the importance of embedding national GVC policies into a broader portfolio of policies aimed at upgrading skills, physical and regulatory infrastructure, and enhancing social cohesion.
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Real growth in global trade has decelerated significantly since its sharp recovery in 2010. Year-on-year growth in global real trade1 decelerated from 13.3 percent at the end of the first quarter of 2010, to 9.9, 3.1, and 0.5 percent at the end of the first quarters of 2011, 2012, and 2013, respectively, while picking back up to 3.9 percent in the year leading up to the fourth quarter of 2013.
... See More + This aggregate deceleration in global trade includes absolute declines in real trade for many product categories and regions. In the wake of the great trade collapse of 2008-9, understanding of the behavior of trade in slowdowns has improved. Among the many explanations offered for the great trade collapse, including explanations related to uncertainty, trade financing, and new protectionist measures by governments, there has been a significant focus on whether the emergence of global value chains (GVCs) in international trade, and their behavior, are a contributing factor in trade slowdowns.
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Malaysia's economy regained momentum but yearly growth is set to decelerate in 2013. Export recovery into 2014 is expected to offset slower domestic demand and lead to a pick-up in growth.
... See More + Fiscal consolidation is picking up pace with subsidy cuts, sin tax increases, and less generous public service bonuses. The full implementation of the minimum wage in January 2014 will provide an additional boost to households, as will increased cash transfers that are part of the government's strategy for subsidy rationalization and modernizing social protection. Malaysia performs very well with respect to access to education. Enrolments at primary and lower secondary levels are nearly universal and recent gains in pre-primary education have been note-worthy. Among East Asian countries that participated in the 2012 Program for International Student Assessment (PISA), Malaysian students only outperform their Indonesian peers, and lag even lower-income countries (including, by a wide margin, Vietnam). Expenditure on basic education is more than double that of other Association of Southeast Asian Nations (ASEAN) countries and the decline in learning outcomes occurred while inputs to education were expanding and the size of the student population was falling. The key constraints to improving the quality of basic education thus relate not to the quantity of inputs but institutions. 46 percent of principals report a lack of qualified teaching staff as a constraint, and Ministry of Education (MOE) admits that in recent years some candidates enrolling in teacher training institutions did not meet minimum requirements of academic achievement at the secondary level. Lifting these constraints entails refining some of the measures recommended in the Education Blueprint for high-performing education system: (1) moving towards school-based decision-making; (2) improving parental involvement and enhancing accountability; and (3) improving incentives and recruitment for teachers. The government may consider piloting fixed contract recruitments with tenure contingent on performance, and tying retraining and up-skilling efforts with certification.
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Over the past two decades, international trade has become a privileged engine of growth for much of the developing world. With the global economy evolving continuously and rapidly, countries must pay close attention to their positioning on the map of global trade and production.
... See More + Within this framework, countries must also become aware of how they fare relative to competitors and to their past export performance. Of particular importance is the extent to which their performance is driven by exporter own supply-side capacity as opposed to external or compositional factors, including product and geographical specialization and how these trends compare across countries. This paper describes a new initiative that uses quarterly data for 2005q1-2013q1 to compute comparable indicators of export performance for 228 countries and territories. The database, the Export Competitiveness Database, reveals interesting patterns in trade performance. Export performance, stripped of compositional effects, was strongest for countries from the Asia and Pacific region, on average. Moreover, such performance was almost entirely driven by exporting country specific factors, with changes reflecting growth in volume rather than price developments. All emerging and developing regions have, on average, improved export performance. The indicators in the database trace the legacy of supply-side capacity and the overall export performance of the double-dip recession in the euro area. An illustrative set of results suggests that the paper's measure of competitiveness correlates to a country's nominal and real effective exchange rate, factors that are commonly perceived as important determinants of competitiveness.
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Policy Research Working Paper WPS6733 DEC 01, 2013
Two otherwise identical firms that enter the same market in different months, one in January and one in December, will report dramatically different annual sales for the first calendar year of operations.
... See More + This partial year effect in annual data leads to downward biased observations of the level of activity upon entry and upward biased growth rates between the year of entry and the following year. This paper examines the implications of partial year effects using Peruvian export data. The partial year bias is very large: the average level of first-year exports of new exporters is understated by 65 percent and the average growth rate between the first and second year of exporting is overstated by 112 percentage points. This paper re-examines a number of stylized facts about firm size and growth that have motivated rapidly expanding theoretical and empirical literatures on firm export dynamics. Correcting the partial year effect eliminates unusually high growth rates in the first year of exporting, raises initial export levels, and shifts 10 percent of market entrants from below to above the median size. Revisiting an older set of facts on firm size and growth, the paper finds that correcting for partial year biases reduces the number of small firms in the firm size distribution and weakens the negative relationship between firm growth and firm size.
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Policy Research Working Paper WPS6711 NOV 01, 2013
Bernard, Andrew B.; Massari, Renzo; Reyes, Jose-Daniel; Taglioni, DariaDisclosed
The World Bank Group (WBG) wrote this report as part of a project designed to assess the competitiveness of the logistics sector in Greece and to develop policy recommendations.
... See More + The World Bank is carrying out the project at the request of the Greek Ministry of Development, Competitiveness, Infrastructure, Transport, and Networks (currently split into the Ministry of Development and Competitiveness and the Ministry of Infrastructure, Transport and Networks). The report is part of a technical assistance package provided by the World Bank Group to the Government of Greece on enhancing the business environment and trade logistics. The package has been facilitated by the Task Force for Greece (TFGR, an arm of the European Commission), which arranged the financing from the EC technical assistance budget. The document is structured in the following way: First, it provides an overview of the state of logistics in Greece, comparing the country to its peers and highlighting some of the important features that distinguish the country's situation. Second, it provides detailed, technical observations on specific aspects of the logistics environment in Greece. Third, the report describes key actions, drawn from both expert observations and the working groups' conclusions that the Greek government may want to undertake to improve its logistics performance. Finally, in the Annexes it describes the intensive, consultation process that is allowing key stakeholders within the business and policy-making communities in Greece to provide inputs for a national logistics strategy.
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Pakistan's trade performance is disappointing. Despite being in a very dynamic region, the country's position in world trade has barely changed over the past three decades.
... See More + The trade to gross domestic product (GDP) ratio showed only a very small increase in the last decade. Exports generally lack sophistication, and dynamism (as marked by entry and exit in foreign markets and new exports) has declined in recent years, coinciding with the reversal of trade policy to a less open stance since the mid-2000s. Open trade is central to any growth strategy worldwide, no successful growth story has exclusively featured inward-looking growth. Restoring the country's place in international markets is thus critical for resuming growth, raising productivity, and creating jobs. To improve its trade competitiveness, Pakistan needs to simplify tariffs and trade regulations in order to reduce the anti-export bias; accelerate deep preferential trade agreements to encourage trade creation; fully normalize trade relations with India to benefit from growth there; and address logistical weaknesses to reduce trade costs.
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Brief 79559 JUN 01, 2013
Reis, Jose G.; Taglioni, Daria; Kunaka, Charles; Pitigala, NihalDisclosed
In recent years, global value chains have played an increasing role in business strategies, profoundly affecting international trade and development paradigms.
... See More + Global value chains now represent a major source of socio-upgrading opportunities and a new path for development. Trade, competitiveness and development policies should be reshaped accordingly to seize these opportunities and avoid the risks associated with greater participation in global value chains. This paper provides a framework and analytical tools for measuring and improving a country's performance with respect to participation in global value chains. With a clear operational focus, it provides guidance for countries willing to join, maintain participation, and/or move up global value chains. With the ultimate objective to increase the value (the development content) for trade, it also offers strategies to maximize the benefits and minimize the risks of developing countries' participation in global value chains.
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Policy Research Working Paper WPS6406 APR 01, 2013
This paper reviews Pakistan's recent trade performance, its trade policy and trade costs. Different dimensions of trade performance growth and orientation, diversification and sophistication are assessed, complemented by an in-depth analysis of export dynamics in the period 2001-10 using firm-level data.
... See More + An econometric exercise is also performed to identify the impact of tariffs, exchange rates, fixed costs to export, foreign demand, and preferential trade policy on the ability of firms to increase their exports. The analysis of Pakistan's trade policy includes tariffs, effective protection and trade restrictiveness estimates, as well as an assessment of the role of preferential trade agreements in the context of regional integration. Finally, the main characteristics of trade facilitation and logistics are analyzed, covering the capacity, performance, quality of services and degree of integration of the logistics system.
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Working Paper (Numbered Series) 86255 MAR 01, 2013
As globalization progresses and investment is mobile, it is ever more important for policy makers to understand drivers of growth and exports at the micro-level: Which products are being produced and exported?
... See More + Which firms populate the domestic economy? Are they successful in exporting? How are firms affected by exogenous shocks and policy intervention? Through the use of descriptive statistics and econometric analysis, this paper assesses the trade competitiveness of Pakistan using micro-data. The case of Pakistan is interesting since the country's recent trade policy has reverted to a protectionist path since the mid-2000s and trade performance is stagnating, as indicated by a decrease in its trade-to-gross domestic product ratio over the past decade and low levels of sophistication of exports. The main findings of the paper are the following. Like many other countries, Pakistan posts a high concentration of exports in the hands of a limited number of large exporters. The dominance of few exporters has increased over time and it seems associated with the changes in trade policy. Low rates of product innovation and experimentation and a low ability of the Pakistani export sector to enter into new higher growth sectors are other features emerging from the data. All in all, the mediocre performance seems to be associated with internal problems with trade-related incentives, business environment, and governance, in addition to the well-known external constraints.
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Policy Research Working Paper WPS6341 JAN 01, 2013
The failure of trade economists to anticipate the extreme drop in trade post Lehman Brothers bankruptcy suggests that the behavior of trade in exceptional circumstances may still be poorly understood.
... See More + This paper explores whether uncertainty shocks have explanatory power for movements in trade. VAR estimations on United States data suggest that domestic uncertainty is a strong predictor of movements in imports, but has little effect on exports. Guided by these results, the paper estimates a bilateral model with focus on the impact of importer uncertainty on foreign suppliers. It finds that there is a strong negative relationship between uncertainty and trade and that this relationship is non-linear. Uncertainty matters most when its levels are exceptionally high. The paper does not find evidence of learning from past turmoils, suggesting that prior experience with major uncertainty shocks does not reduce the effect on trade. In line with the expectations, the negative effect of uncertainty shocks on trade is higher for trade relationships more intensive in durable goods. Surprisingly, however, the effect of durability is non-linear. Supply chain considerations or the possibility that the relationships with the highest durability lead to important compositional effects may have a bearing on the results. The results are robust to excluding the post Lehman shock, suggesting that the trade response during the 2008-2009 crisis has been similar to past uncertainty events.
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Policy Research Working Paper WPS6226 OCT 01, 2012
