Globalisation and Industrial Development: Hossein Jalilian - - PowerPoint PPT Presentation

Globalisation and Industrial Development:

Hossein Jalilian (University of Bradford) Presented at: WIDER Development Conference “Transforming Economies” Bangkok, Thailand 11-13 September 2019

Structure of presentation

• Industrialisation and Development
• Globalisation and industrialisation

– Phases of globalization – Stylised facts – Impacts of globalization – China‘s impact on developing countries

• Potential future impacts

– Role of Belt and Roads Initiative (BRI)

Industrialisation and Development

• Historical analysis of structural change
• Importance of Manufacturing:

– Engle’s Law – Externalities in manufacturing

• Economies of Scale, Scope and Agglomeration
• Learning by doing and learning
• Backward and forward linkages

– Trade and technology transfer

• Demand-pull and Supply-push factors
• Changes over time

Globalisation and industrialisation

• Phases of globalization (Baldwin 2016)
• First unbundling

– Reduced cost of shipping

• Second unbundling

– Reduced cost of locating manufacturing production in different geographical locations

• Third unbundling

– Reduced cost of face-to-face communication between individuals in different part of the world » Driven by ITC

Stylised facts

• Share of trade in GDP

5 10 15 20 25 30 35 40 45 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Percent of GDP High income Low income Lower middle income Middle income Upper middle income

Cont….

• Share of net export in GDP
• 25
• 20
• 15
• 10
• 5

5 10 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Percent of GDP High income Low income Lower middle income Middle income Upper middle income

Cont….

• Share of MVA in GDP

5 10 15 20 25 30 35 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 High income Low income Lower middle income Middle income Upper middle income

Cont….

• Share of Manufactured export in total export

10 20 30 40 50 60 70 80 90 % of Merchandised Export High income Low income Lower middle income Middle income Upper middle income

Cont….

• Tariff rates

5 10 15 20 25 30 35 40 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 % High income Low income Lower middle income Middle income Upper middle income

Cont….

• Time required starting a business

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 10 20 30 40 50 60 70 Number of days High income Low income Lower middle income Middle income Upper middle income

Cont….

• Impacts of globalization

– Uneven impact – Potential for De-industrialisation

• Production fragmentation

– GVCs – Offshoring/Outsourcing

• Increased mobility of capital
• Speed of technical change

– Increased competition

• Participation of China, India…..

China’s impact on DCs

• Increased competition for low/medium tech

products

Selected indicators of China's economy (Lin 2011) China's output as % of world output 1979 1.8 2010 9.3 China's global export, 1979-2009 Growth per year over the period 16% Share of world export in 2009 26% China's share of manufactured export in total export in 2009 Machinery and transport equipment 47.3% Miscellaneous manufactured 26.8%

Cont….

– Terms of trade deterioration

• Exit of some DC’s from selected sectors
• Increased cost of inputs

– Benefitting some DCs

• Relocation of FDI

– Away from some and into China

• Impacts:

Technology classification of MVA

3,0 4,0 5,0 6,0 7,0 8,0 1990-94 1995-99 2000-04 2005-09 2010-14 Value added as % of GDP

Low technology manufactures

LI LMI UMI HI 0,0 1,0 2,0 3,0 4,0 5,0 1990-94 1995-99 2000-04 2005-09 2010-14 Value added as % of GDP

Low and medium technology manufactures

LI LMI UMI HI 5,0 7,0 9,0 11,0 13,0 15,0 17,0 1990-94 1995-99 2000-04 2005-09 2010-14 Value added as % of GDP

All manufactures

LI LMI UMI HI 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 1990-94 1995-99 2000-04 2005-09 2010-14 Value added as % of GDP

Medium high and high technology manufactures

LI LMI UMI HI

Share of MVA in GDP

Based on industrial classification

10,0 12,0 14,0 16,0 18,0 20,0 22,0 24,0 % EA EIE, exc. China EIE, inc. China IE LDC

Share of MVA in GDP

Based on income classification

10,0 12,0 14,0 16,0 18,0 20,0 22,0 24,0 % LI LMI UMI, exc. China UMI, inc. China HI

Potential future impacts

• Change in China’s development policy

– Innovative, inclusive and sustainable growth

• Shift into advance manufacturing
• Environmental concerns
• Increased wages

– Differences between provinces

• Increased outbound investment

– Belt and Road Initiatives (BRI)

• Implications

– Increased market opportunities for others – Relocation of some GVC away from China

Role of BRI

• Infrastructure development in some DCs

– Presenting opportunities and threats for industrial development – Reduced transportation cost

• Increased incentive to export

– Increasing local competition for manufactures

• Opportunities for some DCs to join GVC

– If complementary factors are present