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Shift in value chains beyond manufacturing can benefit developing economies, says report

Shift in value chains beyond manufacturing can benefit developing economies, says report

16 Nov 2021

Global value chains present significant growth opportunities for developing economies even in the wake of the Covid-19 pandemic, and their contribution to the world economy may be much larger than normally reported, according to a report released by the Asian Development Bank (ADB).

The Global Value Chain Development Report 2021: Beyond Production said that with the expansion of trade in intellectual property services, global value chains have spread beyond manufacturing, presenting opportunities for more inclusive growth in developing economies. 

“Global value chains — the multicountry cross-border production networks that bring a product or service from conception to market — may be twice as large as commonly reported if the ‘missing value’ of trade in intellectual property services is taken into account,” said the report which was virtually launched on Tuesday (Nov 16).

The report was jointly published by ADB, the Research Institute for Global Value Chains at the University of International Business and Economics, the World Trade Organisation, the Institute of Developing Economies — Japan External Trade Organisation, and the China Development Research Foundation.

At the same time, the report said, that border closings and mobility restrictions during the Covid-19 pandemic have exposed vulnerabilities in global value chains, contributing to product shortages and sparking discussions about “reshoring” production.

ADB president Masatsugu Asakawa said the report breaks new ground by showing that the value-added in global value chains are increasingly generated outside of manufacturing.

“As we recover from Covid-19, our enhanced new knowledge of where value is created, and how it’s shared, requires us to reinvigorate value chains in ways that increase opportunities to participate in the global economy, especially for lower-income economies and small and medium-sized businesses,” he said.

While the Covid-19 pandemic has placed global value chains under significant strain, the report said they are showing resilience and playing a life-saving role in delivering protective equipment and vaccines.

“Innovative solutions such as e-commerce and remote work were scaled up in response to the pandemic,” the report noted.

Beyond Covid-19, it said, global value chains also face risks from geopolitical tensions and climate change.

“Surveys indicate that 90% of global value chains have been affected by the combined shocks of the pandemic and trade tensions between China and the United States,” it added.

Source: Bernama