Fernando Mistura, OECD, 2014 ASEAN-OECD Investment Policy Conference
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This presentation by Fernando Mistura was made at the session "Integrating ASEAN firms into global value chains through investment" during the 2nd ASEAN-OECD Investment Policy Conference held on 10-11 December 2014. Find out more at: http://www.oecd.org/daf/inv/investment-policy/2014-asean-oecd-investment-policy-conference.htm
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Similaire à Fernando Mistura, OECD, 2014 ASEAN-OECD Investment Policy Conference
Similaire à Fernando Mistura, OECD, 2014 ASEAN-OECD Investment Policy Conference (20)
Plus de OECD Directorate for Financial and Enterprise Affairs
Plus de OECD Directorate for Financial and Enterprise Affairs (20)
Fernando Mistura, OECD, 2014 ASEAN-OECD Investment Policy Conference
- 1. SECOND OECD-ASEAN INVESTMENT POLICY CONFERENCE Day 2 Integrating ASEAN firms into global value chains through investment 10-11 December 2014 Jakarta, Indonesia
- 2. 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?
- 3. 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)
- 4. 0 2 4 6 8 10 12 14 16 18 20 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 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
- 5. 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
- 6. 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
- 7. Services account for a large share of value creation in the manufacturing sector Source: OECD-WTO TiVA database
- 8. 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
- 9. 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
- 10. 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
- 12. 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
- 13. 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 dia Agriculture, 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 alaysia Electrical and optical equipment Chemicals and non- metallic mineral products M ining and quarrying P hilippines Electrical and optical equipment Transport and storage, post and telecommunication Wholesale and retail trade; Hotels and restaurants Singapo re Electrical and optical equipment Chemicals and non- metallic mineral products Transport and storage, post and telecommunication T hailand Electrical and optical equipment Chemicals and non- metallic mineral products Food products, beverages and tobacco Viet N am Agriculture, hunting, forestry and fishing Textiles, textile products, leather and footwear M ining and quarrying Legend: High domestic value added High foreign value added
Notes de l'éditeur
- Good Morning Let me make a short presentation to introduce the next panel discussion on ASEAN integration into GVCs In the recent decades we have seen a significant shift in the landscape of international production. GVCs are today a dominant feature of the global economy. In ASEAN is not different. Production is increasingly fragmented around the world and components are traded across borders multiple times before the final product reaches its final market. Why does this matter? First, firms rely on access to world class inputs in order to increase their productivity – in other words, they import in order to export successfully. Second, the services sectors play a vital role in well-functioning GVCs. Services are not just important contributors to economic growth and jobs in their own right, they also provide essential contributors to competitive manufacturing sectors. Third, participation in GVCs is not automatic, depends to some extent on fixed factors (geographic location, resource endowment) but also policies play a significant role in the integration of firms into GVCs, and above all in facilitating upgrading opportunities and higher value added generation.
- They are an important driver of productivity and economic growth across countries, both developed and developing countries. Why does this matter? First, firms rely on access to world class inputs in order to increase their productivity – in other words, they import in order to export successfully. Second, the services sectors play a vital role in well-functioning GVCs. Services are not just important contributors to economic growth and jobs in their own right, they also provide essential contributors to competitive manufacturing sectors. Third, participation in GVCs is not automatic, depends to some extent on fixed factors (geographic location, resource endowment) but also policies play a significant role in the integration of firms into GVCs, and above all in facilitating upgrading opportunities and higher value added generation.
- Today a country’s competitiveness depends as much on the capacity to import high-quality inputs as on the capacity to export. Provide access to cheaper, more differentiated, and better quality inputs. Today more than 50% of world manufacturing imports are intermediate goods, and more than 70% of world’s service imports are intermediate services. Instead of specialising in an industry full vertical chain, firms and consequently countries are specialising in specific tasks/activities within global value chains. Chart explanation As you can see from the chart, a large share of countries’ exports today are related to their participation in GVCs: either due to backward participation [BLUE COLUMN] – or foreign inputs used in a country’s exports; or due to forward participation [GRAY COLUMN] – domestically produced inputs used in other country’s exports. ASEAN7 economies have similar levels of GVC participation of many OECD economies. But to some varying degrees. A few are heavily integrated while others are less so In most ASEAN7 economies, participation is still driven by foreign inputs used in their own exports. Indonesia’s high degree of forward participation is closely linked to its large exports of natural resources intermediates (e.g. mining and chemicals). The regional production networks plays an important role in boosting ASEAN economies integration and value-added generation. In a few prominent industries among ASEAN economies, such as transport parts and equipment, and electric equipment, the foreign content of exports is above 40%.
- FDI plays a central role in GVC Participation. As you can see from the left chart, the correlation between the level of FDI stock in countries and their GVC participation is significantly positive. At least initially, as expected, greater integration is more likely associated with greater backward participation Countries with greater levels of FDI are found to have higher foreign inputs used in exports But these are also the countries with the greatest trade value added contribution to GDP Naturally, the MNC plays a central role in the international production networks, with a large share of cross-border trade taking place within their affiliates network. UNCTAD estimates that MNCs account for about 80% of global trade, and that about 33% of global trade relates to intra-firm trade. While centred in MNCs, production networks leave considerable space for linkages between domestic and foreign firms.
- And ownership does matter in terms of value added creation: Foreign controlled firms are generally few, but they usually contribute to a large share of the domestic value added embedded in exports. And while part of the value generated stays in the country in the form of labour compensation, other part may eventually be repatriated. Countries ability to participate in GVCs is instrumental for economic integration, but benefiting from GVCs depends on how much value added a country creates/capture in GVCs. Policy needs to help countries extract the most of it to upgrade within value chains and enhance domestic value added in exports Countries location on value chains affects how much they benefit form participating. Certain activities, such as R&D and design, as well certain services, tend to create more value added than others, such as assembly, although this differs by industry.
- It is impossible to discuss GVCs without recognizing the importance of the service sector. While services comprise about only a quarter of total trade in goods In value added terms it reaches up to 70% in developed countries, averaging almost 50% across OECD countries. In ASEAN, the total services content (domestic and foreign) in exports varied between 20% and 56% across ASEAN economies Highest services content are seen in Singapore, Philippines and Cambodia.
- But most importantly, the line between goods and services has never been more blurred. To some extent there has been a “servicification” of manufacturing products. Global production networks rely increasingly on services-related activities both upstream and downstream in the value chain. In a number of key export industries of ASEAN economies, the service content of manufacturing exports is particularly high. Policies – including FDI policies – cannot treat services and goods separate anymore. They are strongly linked. Services add value to manufacturing both by facilitating manufacturing exports: logistics, communication services, business services, etc. And also by enhancing product differentiation and upgrade (design, development, marketing, after-sales services). This places an important responsibility on trade and investment policies as we have seen and discussed during the forum, but also on a broader range of productivity-enhancing policy areas that help facilitate integration and capturing a greater share of value added.
- In the recent decades we have seen a significant shift in the landscape of international production. Global value chains, or GVCs, are today a dominant feature of the global economy. Production processes are fragmented around the world and components are traded across borders multiple times before the final product reaches its final market. Firms rely more heavily on intermediate inputs from suppliers across the globe or regions. Today more than 50% of world manufacturing imports are intermediate goods, and more than 70% of world’s service imports are intermediate services. Instead of specialising in an industry full vertical chain, firms and consequently countries are specialising in specific tasks/activities within global value chains. Companies do not need anymore to create their own global supply chain, they – particularly SMEs - can join existing international production networks in specific segments of the chain. Chart explanation Today a country’s competitiveness depends as much on the capacity to import high-quality inputs as on the capacity to export. Outsourcing and offshoring improve country’s export competitiveness in GVCs by providing access to cheaper, more differentiated, and better quality inputs. As you can see from the chart, a large share of countries’ exports today are related to their participation in GVCs: either due to backward participation [BLUE COLUMN] – or foreign inputs used in a country’s exports; or due to forward participation [GRAY COLUMN] – domestically produced inputs used in other country’s exports. ASEAN7 economies have similar levels of GVC participation of many OECD economies But to some varying degrees. A few are heavily integrated while others are less so In most ASEAN7 economies, participation is still driven by foreign inputs used in their own exports. Indonesia’s high degree of forward participation is closely linked to its large exports of natural resources intermediates used in third countries exports (e.g. mining and chemicals). The regional production networks plays an important role in boosting ASEAN economies integration and value-added generation. In a few prominent industries among ASEAN economies, such as transport parts and equipment, and electric equipment, the foreign content of exports is above 40%.