SECONDOECD-ASEAN INVESTMENT

POLICY CONFERENCE

Day 2

Integrating ASEAN firms into global value chains through investment

10-11 December 2014Jakarta, Indonesia

GVCs are an important driver of productivity and economic growth across countries, both in developed and developing countries

Outline:

1. Firms rely more on access to world class inputs in order to increase their productivity – in other words, they import in order to export successfully.

2. The services sectors play a vital role in well-functioning GVCs.

3. Participation in GVCs is not automatic, depends to some extent on fixed factors but also policies play a significant role both to facilitate integration and upgrading

The rise in GVCs: why does this matter?

The rise in GVCs: firms rely heavily on access to

world class inputs to boost their productivity

0

10

20

30

40

50

60

70

80

GVC Participation, as % of gross exports, 1995 and 2009

2009 Participation index, backward 2009 Participation index, forward 1995 Participation index

% of gross exports

Source: OECD-WTO TiVA database. Note: the indicator is expressed as the share of foreign inputs (back participation) and domestically

produced inputs used in third countries’ exports (forward participation) in a country’s gross exports as proposed by Koopman et al. (2010)

0

2

4

6

8

10

12

14

16

18

20

Global trade ingoods andservices

Non-TNC trade All TNC-relatedtrade

Intra-firm trade NEM-generatedtrade, selected

industries

TNC arm'slength trade

Global gross trade (exports of good and services), by type of TNC involvement, 2010

USD Trillion, estimates

Global

trade in

goods and

services

Non-TNC

trade

All TNC-

related

trade

Intra-firm

trade

NEM-

generated

trade,

selected

industries

TNC arm’s

length

trade

FDI is an important driver of GVC participation

FDI stock vs GVC Participation

Global gross trade (exports goods and services),

by type of TNC involvement, 2010

Source: OECD-WTO TiVA database; UNCTAD statistics;

UNCTAD (2013), World Investment Report: Global Value Chains: Investment and Trade for Development, Geneva.

TNC-related trade: ~80%

Estimates

~19 ~4

~15~6.3

~2.4

~6.3

0

10

20

30

40

50

60

70

80

-1 0 1 2 3 4 5 6 7

FDI as a share of GDP, 1995-2009 (log)

GVC Participation Index, 1995-2005¹

Ownership matters: contribution of foreign

affiliates to domestic value added in exports

Figure 11. Share of national value added under control of foreign affiliates, 2010

OECD countries, Foreign affiliates share of national value added by sector

Source: OECD, Activity of Multinational Enterprises Database, Eurostat, Inward FATS Database, June 2013.

0

10

20

30

40

50

60

70

80

90

%

Manufacturing Total services, except finance and insurance Total business economy, except finance and insurance

Source: OECD, Activity of Multinational Enterprises Database, Eurostat, inward FATS database, June 2013

Competitiveness in GVCs: the role of services

~half of total value added in exports

0

10

20

30

40

50

60

70

80

90

Services value added, as % of Gross Exports, 2009

Domestic services value added content of gross exports Foreign services value added content of gross exports

% of gross exports, 2009

Source: OECD-WTO TiVA database

Services account for a large share of value

creation in the manufacturing sector

Source: OECD-WTO TiVA database

To what extent the increased interconnectedness between countries through GVCs calls for different policies?

What are the opportunities and challenges of GVCs for ASEAN countries?

What type of policies are needed to foster greater integration into GVCs and to maximize the potential benefits to the domestic economy?

What are the risks and opportunities of Responsible Business Conduct in dealing with this additional layer of complexity of increased fragmentation of international production networks?

Discussion question to the panel

Thank You

For further information

OECD Global Value Chains

http://www.oecd.org/industry/ind/global-value-chains.htm

OECD Trade in Value Added Database

http://www.oecd.org/sti/ind/measuringtradeinvalue-addedanoecd-wtojointinitiative.htm

Policy Framework for Investment (and User’s Toolkit)

www.oecd.org/daf/inv/mne/pfi.htm

www.oecd.org/investment/toolkit/

Investment Policy Reviews

www.oecd.org/investment/countryreviews.htm

Thank You

For further information

OECD Global Value Chains

http://www.oecd.org/industry/ind/global-value-chains.htm

OECD Trade in Value Added Database

http://www.oecd.org/sti/ind/measuringtradeinvalue-addedanoecd-wtojointinitiative.htm

Policy Framework for Investment (and User’s Toolkit)

www.oecd.org/daf/inv/mne/pfi.htm

www.oecd.org/investment/toolkit/

Investment Policy Reviews

www.oecd.org/investment/countryreviews.htm

Participation of countries in Global

Value Chains

Figure 9. ASEAN-7 GVC Participation Index, % of total exports (1995, 2009)

Source: Miroudot, S. and K. De Backer (2013), “Mapping Global Value Chains”, OECD Science, Technology and Industry

Working Paper, OECD Publishing. Note: The indicator is expressed as the share of foreign inputs (backward participation) and

domestically produced inputs used in third countries' exports (forward participation) in a country's gross exports as proposed by

Koopman et al. (2010).

0%

10%

20%

30%

40%

50%

60%

70%

80%

2009 Backward Participation 2009 Forward Participation 1995 Participation Index

Table 5. ASEAN-7, Top 3 sectors with highest gross exports, 2009

Source: OECD-WTO, Trade in Value Added (TiVA) Database, May 2013.

C ambo diaAgriculture, hunting,

forestry and fishing

Textiles, textile

products, leather and

footwear

Wholesale and retail

trade; Hotels and

restaurants

Indo nesia

Food products,

beverages and

tobacco

Chemicals and non-

metallic mineral

products

M ining and quarrying

M alaysiaElectrical and optical

equipment

Chemicals and non-

metallic mineral

products

M ining and quarrying

P hilippinesElectrical and optical

equipment

Transport and storage,

post and

telecommunication

Wholesale and retail

trade; Hotels and

restaurants

Singapo reElectrical and optical

equipment

Chemicals and non-

metallic mineral

products

Transport and storage,

post and

telecommunication

T hailandElectrical and optical

equipment

Chemicals and non-

metallic mineral

products

Food products,

beverages and tobacco

Viet N amAgriculture, hunting,

forestry and fishing

Textiles, textile

products, leather and

footwear

M ining and quarrying

Legend: High domestic

value added

High foreign value

added