Abstract
Globally, trade has become increasingly organized in value chains and is characterized by fragmented production processes: 60 % of trade is in intermediate goods and 85 % is linked to multinational enterprises. Firms in developing countries can specialize in tasks and specific business services to connect to these value chains, offering remarkable opportunities provided that they find their areas of comparative advantage.
Aid for trade can help developing economies plug into regional and global production networks. Countries in Asia received disbursements of $86 billion from 2006 to 2012, helping address infrastructure deficits, reduce the thickness of borders, and improve business environments. Firms from Central Asia to the Pacific have taken advantage of these improvements, connecting to manufacturing, information and communications technology, and agri-food value chains.
This chapter examines the aid strategies and programs for linking firms in developing Asia to value chains (including through regional approaches), and assesses the trade and development results. This analysis is based on self-assessment from these countries, bilateral and multilateral donors, and the private sector. It is complemented with aid for trade data extracted from the Organisation for Economic Co-operation and Development (OECD) Creditor Reporting System database; findings from evaluations, case studies, and empirical studies; and broader trade and development literature.
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Notes
- 1.
For example, by 2020, Unilever expects developing markets to account for 70 % of total sales. Unilever is already using a rural sales force comprising 2,800 poor women in Bangladesh who sell the products of seven major companies, including Unilever. By the end of 2014, 12,000 more women are expected to join this endeavor.
- 2.
The United Nations Global Compact and OECD Guidelines for Multinational Enterprises are two voluntary initiatives that promote corporate responsibility. Together, they define and enhance the relationship between businesses and international standards, and provide a comprehensive model for responsible business practices. The United Nations Global Compact asks companies to embrace, support, and enact, within their sphere of influence, a set of core values in the areas of human rights, labor standards, the environment, and anticorruption.
- 3.
Global estimates of philanthropic assistance flows are about $56 billion–$75 billion per year, including assistance from foundations and corporations as well as private giving and voluntary contributions (Kharas and Rogerson 2012).
- 4.
Moss (2010) suggested a “doing business” facility to determine a country’s eligibility for technical and financial assistance on the basis of a third-party measurement of its performance in addressing business constraints.
- 5.
Justine Greening, Secretary of State for International Development in the United Kingdom, recently outlined three important issues for DFID in pursing private sector development. In addition to reducing regulatory, infrastructure, legal, and institutional barriers, DFID will help unlock the abilities of entrepreneurs and businesspeople in developing countries to drive economic growth and greater investment by businesses. Greening also wants “to see UK companies [join] the development push” (Greening 2014, p. 5).
- 6.
There are only a few evaluations of long-term impact and sustainability, but the indications are positive. In general, it is difficult to assess private sector outcomes due to a range of conceptual and methodological constraints (OECD 2011b).
- 7.
Before the OECD Development Assistance Committee first met in 1961, its forerunner, the Development Assistance Group, met in Tokyo to review incentives for private investment in developing countries and to discuss possible multilateral investment guarantee systems. The first OECD Development Assistance Committee High Level Meeting recommended the further exploration of ways to promote and safeguard the flow of private capital to less developed countries.
- 8.
- 9.
Using this definition, the World Bank estimated that innovative fundraising generated $57.1 billion in official flows between 2000 and 2008. Of this, alternative sources of concessional flows, including solidarity levies and contributions, represented $11.7 billion (Sandor et al. 2009).
- 10.
OECD conducts capacity building and provides technical assistance and advice to a number of countries in the Middle East and North Africa, Eurasia, and Southeast Asia to encourage a sound business climate for investment, enhanced productivity, competitiveness, and entrepreneurship to raise living standards and to alleviate poverty.
- 11.
To establish benchmarks for measuring aid for trade flows, WTO members agreed to use as proxies the following categories in the OECD Creditor Reporting System: (i) technical assistance for trade policy and regulations (e.g., helping countries develop trade strategies, negotiate trade agreements, and implement their outcomes); (ii) trade-related infrastructure (e.g., building roads, ports, and telecommunications networks to connect domestic markets to the global economy); (iii) productive capacity building, including trade development (e.g., supporting the private sector to exploit their comparative advantages and diversify their exports); (iv) trade-related adjustment (e.g., helping developing countries with the costs associated with trade liberalization, such as tariff reductions, preference erosion, and declining terms of trade); and (v) other trade-related needs, if identified as trade-related development priorities in partner countries’ national development strategies.
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Hynes, W., Lammersen, F. (2016). Donor Support for Connecting Firms in Asia to Value Chains. In: Wignaraja, G. (eds) Production Networks and Enterprises in East Asia. ADB Institute Series on Development Economics. Springer, Tokyo. https://doi.org/10.1007/978-4-431-55498-1_13
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