Global value-chains and connectivity in developing Asia - with application to the Central and West Asian region

An increasingly important part of international trade consists of fragmentation of the production process, with differing tasks in the global value chain (GVC) being undertaken in different locations. The paper traces the origins of the GVC phenomenon, attempts to measure the significance of GVCs, and analyzes why some countries participate in GVCs while others do not. GVCs rely on timely delivery of parts and components at every stage, with no unnecessary costs to crossing borders. West and Central Asian countries have been nonparticipating because their economies are characterized by high costs of doing business, obtrusive border controls, and other obstacles. Governments may be reluctant to undertake necessary reforms, and wary of the potential for increased volatility and inequality that sometimes accompany GVC participation. However, the cost of non-participation is falling behind in economic prosperity. Import-substituting industrialization is no longer a serious option, because no country with an integrated car or computer industry can hope to be competitive with goods produced along efficient GVCs.