GVCs and FDI Attraction: Case Study and Policy Implications
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Professor Gary Gereffi's presentation at the South-Southeast Commission and FIDESUR covers: - GVCs, FDI Attraction and Upgrading - The Medical Devices Value Chain in Costa Rica - GVCs and Clusters in Mexico
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GVCs and FDI Attraction: Case Study and Policy Implications
- 1. GVCs AND FDI ATTRACTION: Case Study and Policy Implications 1 Gary Gereffi Director, Duke CGGC Duke University South-Southeast Commission and FIDESUR Merida, Mexico April 24, 2017
- 2. AGENDA 1. GVCs, FDI Attraction and Upgrading 2. The Medical Devices Value Chain in Costa Rica 3. GVCs and Clusters in Mexico
- 3. © 2015 CGGC, Duke University© 2015 CGGC, Duke University WHERE ARE THE HIGH-VALUE ACTIVITIES IN GVCs? 3
- 4. COSTA RICA IN THE MEDICAL DEVICES GVC 4
- 5. Components Manufacturing Plastics extrusion & molding Precision metal works Electronics development Software Development Weaving/Knittin g Textiles Assembly Packaging Sterilization Assembly / Production Distribution & Marketing Resin Metals Chemicals Textiles Input Suppliers Disposables US$575.5 million Instruments US$270.5 million Capital Equip. US$32.5 million Therapeutics US$301 million Main Segments: Exports Post-Sales Services Consulting Maintenance, Repair Training Research & Product Development Regulatory Approval Process Development Sustaining Engineering Prototype Local firms are mainly in packaging & support services (12 of 19) versus 4 in limited role in plastics molding & metal finishing and 1 OEM with exports under $2 million. Number of Firms 0 - 5 6 - 10 11 - 15 16 - 20 COSTA RICA IN THE MEDICAL DEVICES GLOBAL VALUE CHAIN, 2012 Wholesale distributors Individual Patients Doctors & Nurses Hospitals (Public/Private) 5
- 6. 0 200 400 600 800 1,000 1,200 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ExportValues($USMilion) Year Costa Rica's Medical Exports by Product Category: 1998-2011 Disposables Therapeutics Instruments Capital Equipment EVOLUTION OF MEDICAL DEVICES EXPORTS FROM COSTA RICA, 1998-2011 • Disposables still the largest product category exported, but no longer a strong growth area. • Exports in surgical instruments have grown steadily since 2005. • Therapeutics has become 2nd largest category since 2008; likely to increase as newly established firms complete transfer of new product lines. • Limited export of highest value capital equipment (eg. Electronic/software devices) 6
- 7. Entry Year Firm Characteristics Main Product Export Category Core Market Segments Product Examples Select Firms Up to 2000 24 firms: 8 US 15 CR 1 German 4 OEMs 8 Components 1 Input distributor 7 Packaging 1 Finishing 3 Support services Disposables Drug delivery; Women’s health Intravenous tubing (I) Mastectomy bra (I) Hospira; Baxter; Amoena; Corbel 2001–2004 13 firms: 9 US 3 CR 1 Colombian 3 OEMS 6 Components 1 Finishing 1 Logistics provider 2 Support services Instruments Endoscopic surgery Biopsy forceps (II) Arthrocare; Boston Scientific; Oberg Industries 2005–2008 8 firms: 7 US 1 Puerto Rico 2 OEM 4 Components 1 Packaging 1 Finishing Therapeutics Cosmetic surgery; Women’s health & urology Breast implants (III) Minimally invasive devices for uterine surgery (II) Allergan; Tegra Medical; Specialty Coating Systems 2009–2012 21 firms: 16 US 1 CR 1 Ireland 1 Japan 2 Joint ventures (US-CR) 5 OEMS 7 Components 2 Non-OEM assemblers 1 Input Distributor 2 Sterilization 2 Packaging Therapeutics Disposables Instruments Cardiovascular Drug delivery Heart valves (III) Dialysis catheters (III) Guide wires (III) Compression socks (I) Abbott Vascular St. Jude Medical Covidien Moog Synergy Health Volcano Corp. FIRMS IN THE COSTA RICA MEDICAL DEVICES SECTOR 7
- 8. © 2015 CGGC, Duke University UPGRADING SUCCESS: A LEADING MEDICAL DEVICES MNC 2010 Initial plant reopens after restructuring • 2004: Manufacturing functions • 2012: Engineering for process improvements Focused on cardiology segment; strategy – to alleviate R&D costs in the US. Functional Upgrading • Biopsy forceps Labor intensive, basic metal works & extrusion. • Urethral stent Thermoforming, laser marking, coating capabilities. • Guide Wires Sophisticated Laser cutting & welding. • Today – CR facilities cover 42 manufacturing processes. Product & Process Upgrading • Gastroenterology segment Urology Cardiovascular Market Diversification • Recent co-location of sterilization vendors will allow the firm to export directly to global distribution centersForward Linkages 2004 First production plant opens in Costa Rica (10,000m2) 2008 Second plant opens. (32,000m2) First plant restructuring 2005 2011 Exports: US$18 million Exports: US$120 million 8
- 9. BRAZIL Y MEXICO: EXPORTACIONES DE DISPOSITIVOS MEDICOS 1998-2011 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 1998 2000 2002 2004 2006 2008 2010 ExportValue(US$Million) MEXICO • Disposables: largest product category & growing • Brazilian government & private sector actors working to promote price- competitive, mid-tech exports. • Stabilizing disposables exports • Strong focus in instruments • Growing gains in capital equipment participation in electronics value chains 0 50 100 150 200 250 300 350 400 450 500 1997 1999 2001 2003 2005 2007 2009 2011 ExportValue(US$Million) Year BRAZIL 9
- 10. IMPLICATIONS OF C.R. MEDICAL DEVICES CASE FOR GVC UPGRADING AND INDUSTRIAL POLICY • GVC upgrading is broader than innovation systems • Use high-value activities to diversify and climb GVCs • Move to profitable niches in GVCs (diverse “rents”) • Downgrading outcomes are a recurrent issue in GVCs • GVC lead firms were drivers of upgrading (FDI & trade to enter high-tech niches of medical devices GVC) • Innovation bottlenecks require strengthening of NIS (e.g., sterilization and creation of Masters in Med Device Engineering) • Target MNCs that will strengthen country’s GVCs and find ways to diminish size of low-tech segments • Strengthen the role of domestic suppliers and use TNCs as learning platforms • Explore international partnerships to expand country’s capabilities and footprint in GVCs 10
- 11. © 2013 Duke CGGC Linking Clusters & GVCs in Mexico to Regional and Global Contexts
- 12. Automobile production in 2007 and 2011 1 USA TRADITIONAL 2 USA NEW 3 Mexico TRADITIONAL 4 Mexico NEW 5 Ontario CA
- 14. Gary Gereffi ggere@soc.duke.edu Center on Globalization, Governance & Competitiveness (CGGC) Grey Building, Suite 0010, Lower Level | 2020 W. Main St. | Durham, NC 27705
Notes de l'éditeur
- See if we can include more examples – upgrading in the grain segment.
- The pattern that this has followed so far has typically been to relocate/source high value activities from developed countries (often knowledge dependent) and low value activities in developing countries (labor & input costs). This has increase the “depth of the curve”. Example Turkey in the apparel sector.
- Costa Rica entered the Medical Device sector with the arrival of Baxter. Prior to 2000, no substantial exports in any other product category. In 2000, the Hospira production operations come on line, doubling exports in disposables. Steadily increase production through 2003/4. In 2004, firms start exporting surgical instruments, this is driven by Boston Scientific’s arrival and production of gastro-biopsy forceps. BS continues to expand its product line. In 2008, Allergan expands its production to include new products, and Costa Rican exports jump significantly in the therapeutics category. In 2010, St Jude Medical enters Costa Rica with more therapeutic devices, increasing therapeutics share of total exports further.
- Boston Scientific (BS) established its first operations in Costa Rica in Global Park, Heredia in 2004. The firm expanded its production space in Coyol Park in 2008, with the addition of almost 32,000m2 LEED certified space and then re-fitted its initial plant, which came online in 2010. The firm now has approximately 40,000m2 of production space in the country. Product and Process Upgrading: The firm initially manufactured gastro-biopsy forceps in Costa Rica. This labor-intensive product required basic metal works and extrusion, with minimal stamping and automation. The firm then transferred the production of urethral stents to Costa Rica. This product requires thermoforming, laser marking and coating capabilities. These new competencies were thus developed within the Costa Rican production facility. Soon, they became the only BS plant in the world that produces these product groups. Guide wires are the most recent products to be transferred to the Costa Rican facility. These products require more sophisticated laser cutting and welding processes. The newer products are less labor intensive that the original product group. The Costa Rica operations now cover 42 different manufacturing processes. Market segment diversification: The firm’s initial product falls into the gastroenterology segment, followed by products in the urology and finally the cardiovascular segment. Forward Linkages: The firm has been shipping its finished products back to Rhode Island for sterilization, adding time and cost to the final products. Recent co-location of its sterilization vendors in Costa Rica will allow the firm to export directly to its distribution centers around the world. Functional Upgrading: The production plant in Costa Rica was initially focused on manufacturing functions. Today, the locally based engineering team is beginning to do process based improvements. They work hand-in-hand with the R&D team in the US. This team is specifically focused on the cardiology segment. This shift in strategy has been to help alleviate R&D costs in the US.
- Multiple countries in Latin America are participating in the industry – tool to provide comparisons.
- Irene wants us to delete the first bullet?
- 1) Governance\\\ 2) Slide 14 - it is not clear what the blue shading means on the diagram 3) Slide 15 - there is quite a lot of text 4) Slide 17 - Its really difficult to read due to the large amount of information 5) Slide 21 - the message isn't immediately clear from the graphic 6) Slide 22 - circle the important data points in red 7) Slide 22, 23, & 24 - contains overwhelming amount of information 8) Slide 26 - 2nd point needs clarification 9) Slide 27 - 10) Slide 28 - Karina and I can work on this on the plane tomorrow to find a good way to present these methodologies on one slide.