FDI Inflows and Global Value Chains in the ASEAN in Recent Years

Abstract

The current paper studies whether foreign direct investment (FDI) stocks led to higher linkages along regional and global value chains (R-GVC) in the Association of South East Asian Nations (ASEAN) against the backdrop of the developments such as entry into force of the Regional Comprehensive Economic Partnership Agreement, COVID-19 pandemic, geopolitical events and growth of sectors such as those related to sustainability, health and electronics. It finds that high FDI has accompanied high R-GVC linkages in the recent years and FDI stock is a statistically significant predictor of R-GVCs in the ASEAN. The paper argues the ASEAN countries, though in favourable FDI and R-GVC situations, must adopt strategies to move up the value chains. Further analysis of the nature of R-GVC linkages of the ASEAN should provide insights on future policies.