Do Exports from Developing Economies Still Matter in Global Value Chains? Evidence from Malaysia, Thailand and Vietnam

Abstract

Abstract:Amid ever-growing global value chains (GVCs), a major controversial topic relates to the extent to which developing economies benefit from participating in such value chains. To measure these gains, this paper examines data pertaining to value-added in exports from three Southeast Asian economies—Malaysia, Thailand and Vietnam. The study estimates the sectoral income elasticities of the export demand of each country over the period 1980–2017, revealing that the highest income elasticities are observed in low value-adding sectors such as primary products, resource-based goods and low-tech industries. This implies that the three countries have been involved in simple and not high-skill tasks within GVCs. The paper also examines the sectoral domestic share of value-added (DVA) and foreign share of value-added (FVA) of exports of the three economies using the OECD Trade in Value-added (TiVA) database over the period 2005–15. We find that DVA in the medium- and high-tech industries that add greater value is smaller than FVA in all three countries. Overall, these results suggest that developing nations need to step up their participation in GVCs through process and/or function upgrading.