October 6, 2019
Project Proposal for Policy Research Network on Contemporary Southeast Asia
(National Graduate Institute of Policy Studies, GRIPS, Tokyo and ERIA, Jakrta)
Foreign Direct Investment, Global Value Chains, and Economic Growth
Shujiro Urata and Mari Pangestu
I. The objectives and main issues for the project
East Asian economies have achieved rapid economic growth since the end ofWorld War II. Growth performance was particularly remarkable from the mid-1980s tothe late 2000s before the Global Financial Crisis. Among the East Asian economies,China achieved exceptionally high economic growth. Although not as high as the growthrate achieved by China, the members of the Association of Southeast Asian nations,
ASEAN Member States (AMS), registered quite high growth rates. Considering slowing
down of the Chinese economy due to demographic change and other factors, AMS have avery good chance to overtake China in the economic growth race in the future.
Rapid economic growth of AMS and other East Asian economies is attributableto various factors, both internal and external factors, although these two kinds of factors
are closely related and thus distinguishing them is not straightforward. Internal factors
include stable and sound macroeconomic policies, availability of well-developed
infrastructure, availability of low-wage workers, while external factors include rapid andsubstantial expansion of foreign trade and foreign direct investment (FDI). Indeed, itshould be noted that the expansion of foreign trade and FDI was realized because offavorable internal economic situation discussed above. More specifically on external
factors, global supply chains (GVCs), which have been constructed by multinational
corporations through FDI, contributed to economic growth of the countries involved inGVCs, as GVCs brought them opportunities for exploiting their comparative advantage,
expanding foreign trade, acquiring technologies, etc. In light of the observations above,
this project attempts to identify the roles of FDI, GVCs and foreign trade in promoting
economic growth for selected AMS in unstable global economic situation, and to draw
policy implications for achieving economic growth. Possible areas for policy
recommendations include those on regional economic integration, enhancing connectivity,
human resource development, and research and development.

The papers prepared for the project are expected to cover the following items;the patterns and trends of inward FDI, the factors affecting inward FDI such as FDI andtrade policies, infrastructure, and human resources; the patterns and extent of GVC
participation (parts and components trade and/or trade in value added data), the factors
affecting GVC participation; the impacts of FDI, trade, and GVCs on economic growthwith a focus on their contribution to productivity increase possibly through technology
transfer. The paper should also analyze the impacts of China-US trade war, which has
been under way since 2018, on GVC, international trade, FDI, and economic growth.
II. Possible papers and paper writers
1.Indonesia (Dionisius A. Narjoko, ERIA), 2.Malaysia (Cassey Lee, ISEAS),
3.Philippines (Rafaelita Aldaba, PIDS) , 4.Singapore (Shandre Thangavelu, Universityof Adelaide), 5.Thailand (Archanun Kophaiboon, Thammasat University), 6.Vietnam(Nguyen Huy Hoang and Chuck Dinh Nguyen), 7. Cambodia (Shandre Thangavelu anda co-author)

8. Overview of FDI, trade, GVCs (Ayako Obashi, Aoyama GakuinUniversity)
III. Output: Edited book
IV. Timeframe
1st workshop, December 2019
2nd workshop, July 2020
Final draft: December 2020
Final workshop: Early 2021