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View this email in your browser <https://mailchi.mp/law/perspective-365?e=763bcf158c> 哥伦比亚大学国际直接投资展望中文版都可以在我们的网站查看: https://ccsi.columbia.edu/content/columbia-fdi-perspectives <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=61932ff4a6&e=763bcf158c> . *Columbia FDI Perspectives* Perspectives on topical foreign direct investment issues Editor-in-Chief: Karl P. Sauvant ([log in to unmask]) Managing Editor: Matthew Conte ([log in to unmask]) *The Columbia FDI Perspectives are a forum for public debate. The views expressed by the authors do not reflect the opinions of CCSI or our partners and supporters.* No. 365 September 4, 2023 *How can governments help small enterprises integrate into global value chains?* <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=acf43d2264&e=763bcf158c> by Gaurav Pundir* <#m_7739666089594106821__edn1> A 1% increase in global value chain (GVC <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=e14aacd23a&e=763bcf158c>) participation is estimated to boost per capita income by more than 1%, compared to 0.2% income gain from standard trade. Two distinct attributes of GVCs—hyper-specialization and enduring firm-to-firm relationships—make participating enterprises more productive and higher profit earners. For example, Ethiopian firms <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=545c41e25d&e=763bcf158c> integrated in GVCs are more than twice as productive as those engaged in standard trade. It is thus imperative for micro, small and medium-size enterprises (MSMEs) to go global <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=6adfebb40f&e=763bcf158c> to build and sustain their long-term competitive advantage. MSMEs can partake in GVCs through supply-chain linkages via trade, by directly importing inputs and exporting outputs; via FDI, by supplying to, or sourcing from, domestic affiliates of foreign MNEs; or linking-up with foreign MNEs indirectly through established, large domestic firms. This *Perspective* offers policy recommendations to leverage the FDI route to deepen the integration of host country MSMEs into GVCs. MSMEs face multiple hurdles to internationalizing: the informal status of many of them <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=6fbcda37bb&e=763bcf158c>; susceptibility to exogenous shocks; and lack of skills, technology, capital, and financing. MSMEs also find it onerous to comply with investment regulations. However, due to hyper-specialization underpinning GVCs, MSMEs can relax some of the constraints by focusing on the production of intermediate goods and services where they have a comparative advantage. A study <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=3aa6774fb0&e=763bcf158c> found that a typical US MNE sources 25% of its total inputs from more than 6,000 MSMEs. Integration with GVCs fosters durable MNE-MSME linkages that promote the diffusion of technology and knowhow. A 2018 survey <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=ca2feb22b2&e=763bcf158c> of 1,476 apparel, textile and ICT firms in Ethiopia and Vietnam found that firms with strong linkages were 38% more likely to receive assistance than those without strong MNE relationships. MSMEs can thus move up the value chain while learning-by-exporting and importing. In Kenya, South Africa and Uganda, global supermarket chains have helped their MSME suppliers <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=f5ed7234ee&e=763bcf158c> to improve horticulture processes to fulfill demand for higher quality products and sustainable sourcing standards, resulting in higher export yields as local suppliers moved up the value chains. In GVCs, affiliates of foreign MNEs support their domestic MSME suppliers—they become more productive as a result. Costa Rican firms exemplify this: after beginning to supply MNEs, Costa Rican firms experienced a 6-9% gain in productivity within four years due to FDI spillovers. In sub-Saharan African countries, geographical proximity of domestic firms <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=7b82a7f856&e=763bcf158c> with foreign affiliates explains up to 30% of productivity gains. Survey evidence from Thailand supports the centrality of holding internationally recognized quality certifications <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=f6133a113c&e=763bcf158c> for integration into GVCs. More generally, MSMEs gain managerial skills, the capacity to innovate, acquire new technologies, and reduce costs—all of which also benefits host countries by strengthening domestic enterprises. However, not all MSMEs can successfully link-up with GVCs. Those with adequate capabilities need to be identified, while those that are almost linkage-ready need to be helped. An example is the Czech Republic’s Supplier Development Programme <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=78120dea76&e=763bcf158c> in the electronics and automotive sectors: it offered targeted need-based training to over 50 identified MSMEs, enabling their participation in sectoral GVCs. MNE-MSME linkages alone do not suffice. Host country policies related to trade, investment and the absorptive capacity of domestic firms have a profound impact on the extent to which linkages materialize and result in enhanced MSME participation in GVCs. Some policy recommendations to enhance FDI-induced host country MSME participation in GVCs are: - Encourage the adoption of digital tools by MSMEs, as these reduce their information constraints. MSMEs with a digital presence in the form of a webpage <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=7129a50dd9&e=763bcf158c> have a higher chance to become exporters. Government e-Marketplace <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=42e7897447&e=763bcf158c> in India has catalyzed the adoption of digital technologies by including MSMEs in public procurement. - Facilitate the international certification of MSMEs, to improve their absorptive capacity for spillovers from FDI and foster MNE linkages. The Zero Defect Zero Effect Certification <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=8466442bfa&e=763bcf158c> initiative of India’s government helps MSMEs to transform into international leaders, by strengthening national certification and testing capacity to ensure compliance with international standards. - Conceive a business matching program to deepen linkages. Singapore and Thailand have successfully embedded MSMEs in GVCs <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=6c632ead29&e=763bcf158c> following this strategy. - Adopt policies to attract FDI from first-tier MNE suppliers, to facilitate indirect access to GVCs. Since 2012, Samsung <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=73d8e4a5e4&e=763bcf158c> has developed such an ecosystem in the electronics sector in Vietnam. By 2020, first-tier Vietnamese suppliers increased more than tenfold, to 50 <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=1c3b28657d&e=763bcf158c> . - Provide incentives to MSMEs to upgrade their capacities to stay competitive and remain integrated in GVCs. For example, the subsidies provided by the Economic Development Board of Singapore <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=cec74cdcd6&e=763bcf158c> to allow local MSMEs to temporarily employ engineers from foreign MNEs has facilitated technology transfer, deepened linkages and embedded local firms in GVCs. - Facilitate access to credit through matching grants and loan guarantees to boost MSME financing—a significant hurdle in GVC participation. In Germany, Bürgschaftsbanken <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=8338fbe43d&e=763bcf158c> constitute a network of 17 guarantee banks that fund roughly a third of all MSME loans. FDI can cause substantial changes in the export structure of host economies through higher GVC participation. MSMEs can play an important role in this process, but governments need to adopt clear and targeted policies and support mechanisms that enable these firms to become linkage ready. ------------------------------ * <#m_7739666089594106821__ednref1> Gaurav Pundir ([log in to unmask]) is Deputy Secretary, Department of Commerce, Government of India. The views expressed are his own and do not reflect the position of the Government of India. The author wishes to thank Gary Gereffi, Jerry Haar and Quan Zhao for their helpful peer reviews. *The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Gaurav Pundir, ‘How can governments help small enterprises integrate into global value chains?’ Columbia FDI Perspectives, No. 365, September 4, 2023. Reprinted with permission from the Columbia Center on Sustainable Investment (*http://ccsi.columbia.edu <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=8c3ba5dd5c&e=763bcf158c>*).” A copy should kindly be sent to the Columbia Center on Sustainable Investment at *[log in to unmask] <[log in to unmask]> For further information, including information regarding submission to the *Perspectives*, please contact: Columbia Center on Sustainable Investment, Matthew Conte, [log in to unmask] *Most recent Columbia FDI Perspectives* <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=8c2f4b0e1e&e=763bcf158c> - No. 364, Gary Clyde Hufbauer, ‘Learning from Brexit: what parallels for decoupling from China <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=c4666dd18e&e=763bcf158c>?’ *Columbia FDI Perspectives*, August 21, 2023 - No. 363, Karl P. Sauvant, ‘The new WTO Investment Facilitation for Development Agreement <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=17388187bd&e=763bcf158c>,’ *Columbia FDI Perspectives, *August 7, 2023 - No. 362, Zbigniew Zimny, ‘30 years after the fall of Communism: lessons learned for inward FDI <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=408b955f58&e=763bcf158c>,’ *Columbia FDI Perspectives*, July 24, 2023 *All previous FDI Perspectives are available at https://ccsi.columbia.edu/content/columbia-fdi-perspectives <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=b4d5522649&e=763bcf158c>* . *Other relevant CCSI news and announcements* - *September 12, 2023:* CCSI is co-hosting an environmental summit entitled “Strategic Dialogue on Climate Action, Biodiversity Conservation, and Sustainable Investment in Latin America” as part of the Science Summit at the United Nations General Assembly (UNGA78). *For more details, and to register, visit our website <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=c65948564b&e=763bcf158c>.* Karl P. Sauvant, Ph.D. Senior Fellow Columbia Center on Sustainable Investment Columbia Law School - Columbia Climate School *Copyright © 2023 Columbia Center on Sustainable Investment (CCSI), All rights reserved.* [log in to unmask] *Our mailing address is:* Columbia Center on Sustainable Investment (CCSI) Columbia Law School - Columbia Climate School, Columbia University 435 West 116th Street New York, NY 10027 Add us to your address book <https://columbia.us6.list-manage.com/vcard?u=ab15cc1d53&id=a61bf1d34a> unsubscribe from this list <https://columbia.us6.list-manage.com/unsubscribe?u=ab15cc1d53&id=a61bf1d34a&e=763bcf158c&c=404a6824d0> update subscription preferences <https://columbia.us6.list-manage.com/profile?u=ab15cc1d53&id=a61bf1d34a&e=763bcf158c&c=404a6824d0> [image: Email Marketing Powered by Mailchimp] <http://www.mailchimp.com/email-referral/?utm_source=freemium_newsletter&utm_medium=email&utm_campaign=referral_marketing&aid=ab15cc1d53&afl=1> -- *Karl P. 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Second Edition <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3830031>,* "Agenda for Practice-oriented Research <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4103768>", "How Would a Future WTO Agreement on Investment Facilitation for Development Encourage Sustainable FDI Flows, and How Could it be Further Strengthened? <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4084032>”, "Green FDI: Encouraging Carbon-neutral Investment <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3943705>", "More Attention to Policies! Improving the Distribution of FDI Benefits <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3818974>", "Facilitating Sustainable FDI in a WTO Investment Facilitation Framework: Four Concrete Proposals <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3496967>", "An Inventory of Concrete Measures to Facilitate the Flow of Sustainable FDI: What? Why? How? <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3739179>", are available at https://ssrn.com/author=2461782 . ____ AIB-L is brought to you by the Academy of International Business. For information: http://aib.msu.edu/community/aib-l.asp To post message: [log in to unmask] For assistance: [log in to unmask] --- You must be an active AIB member to post to AIB-L . AIB-L has a moderator which checks messages for basic relevance. However, AIB does not edit or screen messages for accuracy or reliability of content. All subscribers are recommended to perform their own due-diligence before responding to any requests or calls. AIB accepts no liability for the content of this email, or for the consequences of any actions taken on the basis of the information provided.