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Publication(Washington, DC: World Bank, 2021-05-13) Qiang, Christine Zhenwei ; Liu, Yan ; Steenbergen, Victor ; Heher, Ulla ; Paganini, Monica ; Eltgen, Maximilian Philip ; Chong, Yew KeatThis book examines the role of foreign direct investment (FDI) in global value chains (GVCs). To stimulate economic transformation through GVCs, policy makers in developing countries need to better understand the business strategies of multinational corporations (MNCs), internationalization pathways for domestic firms, and how policies can create a favorable environment for both types of firms. Part I brings together the latest theories and empirical evidence to illustrate the mutually reinforcing relationship between FDI and GVC participation. It argues that MNCs have driven the phenomenal rise of GVCs in the past three decades as they have unbundled production processes and spread their networks on a global scale. Domestic firms benefit considerably from their participation in GVCs as they learn from MNCs through investment, partnerships, or trade. Part II includes six case studies examining the approaches of developing countries to leveraging FDI to stimulate and facilitate GVC participation and upgrading. The cases include Kenya (horticulture), Honduras (apparel), Malaysia (electronics), and Mauritius (tourism). Another case focuses on the digital economy for the Republic of Korea, India, and China. Each case study presents a different approach by which policy makers have leveraged FDI to stimulate and facilitate GVC participation and upgrading. A quantitative case study on Rwanda and West Bengal, India, uses firm- and transaction-level data to provide new insights into the dynamics between MNCs and domestic firms in selected value chains. The report also discusses the recent COVID-19 (coronavirus) pandemic and its potential impact on FDI and GVCs. The outbreak has triggered new questions about GVCs and accelerated precrisis global trends such as digitalization and economic nationalism. How MNCs and their supplier firms respond to the supply and demand shocks as well as policy uncertainties will play a critical role in crisis responses and recovery.
Publication(Washington, DC: World Bank, 2019-09-16) World Bank Group ; Development Research Center of the State Council, The People's Republic of ChinaAfter more than three decades of average annual growth close to 10 percent, China's economy is transitioning to a 'new normal' of slower but more balanced and sustainable growth. Its old drivers of growth -- a growing labor force, the migration from rural areas to cities, high levels of investments, and expanding exports -- are waning or having less impact. China's policymakers are well aware that the country needs new drivers of growth. This report proposes a reform agenda that emphasizes productivity and innovation to help policymakers promote China's future growth and achieve their vision of a modern and innovative China. The reform agenda is based on the three D's: removing Distortions to strengthen market competition and enhance the efficient allocation of resources in the economy; accelerating Diffusion of advanced technologies and management practices in China's economy, taking advantage of the large remaining potential for catch-up growth; and fostering Discovery and nurturing China's competitive and innovative capacity as China approaches OECD incomes in the decades ahead and extends the global innovation and technology frontier.
Publication(Washington, DC: World Bank, 2019-06-18) World BankChina proposed the Belt and Road Initiative in 2013 to improve connectivity and cooperation on a transcontinental scale. This study, by a team of World Bank Group economists led by Michele Ruta, analyzes the economics of the initiative. It assesses the connectivity gaps between economies along the initiative’s corridors, examines the costs and economic effects of the infrastructure improvements proposed under the initiative, and identifies complementary policy reforms and institutions that will support welfare maximization and mitigation of risks for participating economies.
Publication(Washington, DC: World Bank, 2017-09-20) Hallward-Driemeier, Mary ; Nayyar, GauravGlobalization and new technologies are impacting the desirability and feasibility of what has historically been the most successful development strategy. Manufacturing has been seen as special, promising both productivity gains and job creation. But trade is slowing. Global value chains (GVC) are maturing. Robotics, artificial intelligence, 3D printing, and the Internet of things are shifting what makes locations attractive for production and threatening significant disruptions in employment. There is a risk of increased polarization, within countries and across countries. Shifting the attention from high-income countries, this report takes the perspective of developing countries to ask: -- If new technologies reduce the importance of low-wage labor, how can developing countries compete? -- Do countries need to industrialize to develop? -- How can countries at different levels of development take advantage of new opportunities? Development strategies need to broaden. Different manufacturing sub-sectors can still provide productivity growth or jobs; fewer can deliver both. Many of the pro-development characteristics traditionally associated with manufacturing--tradability, scale, innovation, learning-by-doing--are increasingly features of services. With faster diffusion of technology, it will be all the more important for countries to improve the enabling environment, remain open to trade, and support capabilities of firms and workers to ensure future prosperity is shared.