The Asean + 3 region will remain a highly attractive location for investments into global value chains (GVCs) once the pandemic abates, notes Khor Hoe Ee, chief economist at the Asean + 3 Macroeconomic Research Office (AMRO).
The macroeconomic watchdog monitors the economies of the Asean +3, which comprises of nations in Asean, China, Japan and Korea.
The region’s relevance to GVCs comes as its middle class become more affluent and a larger pool of labour upskills to serve the needs of the digital economy.
Businesses have in turn begun to adopt new technologies and create more commercial opportunities, observes Khor in a webinar on April 7.
To be sure, GVCs already form an integral part of the Asean + 3 economies, for it takes up half of their regional and global trade volumes.
However, disruptions from natural disasters, trade tensions, and more recently – the pandemic – have resulted in a debate over the future of trade regimes and the possibility of a reconfiguration in GVCs.
One perspective is for a China + 1 strategy – where China remains the main supply and consumer node while certain operations come under the purview of its neighbours.
Another perspective is that GVCs will alter as digital technologies transform production processes and reshape GVCs.
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This requires the Asean + 3 region to upgrade its digital competencies, champion greater and boost its competitiveness in the fourth industrial revolution.
Denis Hew, director of the Asia-Pacific Economic Cooperation’s policy support unit mulls that “digital solutions have now become a necessity rather than an option for many firms”.
“The digitisation of GVCs can improve risk management and reduce logistical bottlenecks,” he added in the same webinar that Khor spoke at.
Still, enhancing the resilience of these value chains requires a rethinking of policies such as in the areas of data security and human capital management, mulls Hew.
Going forward, Khor and Hew believe that policymakers in the Asean + 3 region should focus on building the infrastructure needed to benefit from the fourth industrial revolution.
Aside from this, they should secure sustainable funding to drive growth while strengthening global and regional frameworks for greater integration, the economists add.
