A new study by the APEC Policy Support Unit revealed that foreign direct investment provides an important pathway to global value chain participation, showing that participation develops as investments accumulate.
“When member economies hold a central position in the foreign direct investment network, they have the tendency to also be hubs in the global value chain trade network,” said Dr Akhmad Bayhaqi, a senior analyst with the APEC Policy Support Unit.
“And when economies participate in global value chains, it provides avenues to pursue industrialization and economic upgrading. This is especially the case for many developing economies,” Dr Bayhaqi added.
The APEC region has been a major recipient of foreign direct investment (FDI), holding 52 percent of global inward accumulated value of FDI. The region hosts nearly 68 percent of the world’s total inflow of FDI, based on recorded transactions in 2020.
FDI plays an important role for economies because it brings together capital, skills, know-how and innovation needed to beat the competition in the global market. The study found that developing economies in East Asia have been particularly enthusiastic about the economic upgrading prospects of integrating into the global value chain.