Asia’s global value chains face geopolitical and technological challenges, requiring a balance of openness, diversification, and digital innovation to maintain competitiveness and navigate fragmented global markets.
Challenges and Opportunities in Asia’s Global Value Chains
Global value chains (GVCs) are crucial to Asia’s economic growth but face significant disruptions due to geopolitical tensions, the pandemic, and emerging technologies. These networks must evolve in response to US-China trade conflicts and pressures on cross-border production. The question arises: Can Asia adapt its GVC-driven model in this challenging environment? The answer lies in embracing transformative changes. As tensions escalate, companies are shifting operations outside China to other Asian countries, notably ASEAN, which have invested heavily in infrastructure and regulations. Countries like Vietnam and Indonesia are attracting investments in electronics and electric vehicles, while Malaysia, Thailand, and the Philippines are expanding in semiconductors and digital services.
Strategies for Resilience and Adaptation
The pandemic highlighted vulnerabilities in GVCs, prompting a reevaluation of supply chain models. Diversification, resilience, and national security are now priorities over “just in time” approaches. Full self-sufficiency isn’t practical, so Asian economies must balance efficiency with flexibility, embracing digital readiness and AI to remain competitive. Technology can help mitigate geo-economic fragmentation, boost productivity, and increase resilience. Policies should support workforce reskilling and cross-sector mobility, preparing for technology-driven disruptions. Similar shifts occurred post-Plaza Accord in the 1980s, and Asia must now leverage its growing middle class to become both producer and consumer in global trade, deepening trade ties globally.
Path Forward for Asian Economies
To thrive, Asia must strengthen regional integration, invest in infrastructure and human capital, and foster industry specialization. Building robust production networks and stimulating intra-regional demand are essential. Encouraging strategic hubs, such as EVs in Indonesia and digital services in the Philippines, will drive sectoral growth. Balancing resilience with openness is crucial, avoiding protectionism that can hinder innovation. The world is entering a new phase of globalization that is more digital and dynamic. Asia’s success depends on innovation, adaptability, and proactive responses to geopolitical shifts. GVCs will continue to evolve, and Asia has the potential to lead in this new era.
Source: How Asia Can Thrive in the Next Era of Global Value Chains – ASEAN+3 Macroeconomic Research Office
