Global value chains remains resilient despite pandemic challenges

by NURUL SUHAIDI / pic by TMR FILE 

GLOBAL value chains (GVC) has proven to be quite resilient in the face of recent challenges and present growth opportunities among developing countries, according to a report released by the Asian Development Bank (ADB).

In its report titled ‘Global Value Chain development 2021: Beyond Production,’ the bank explores the transformation, increasing economic risk affecting global value chains which present the opportunity for services-led growth.

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, the report, which  was virtually launched on Tuesday, stated.

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.

The report noted 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 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 found 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 stated global value chains also face risks from geopolitical tensions and climate change.

Surveys indicate 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.