A new policy brief from the APEC Policy Support Group calls for more aggressive development, adoption and investment in Fourth Industrial Revolution technologies in the APEC region to support member economies’ efforts to move up the value chain, which will make them more flexibility and increased economic returns.
The Fourth Industrial Revolution refers to the combination of digital technologies from different fields with inventions in a wide range of fields such as information technology hardware and software, connectivity, data management, user interfaces, power supplies, and consumer goods, smart homes, etc. Vehicle and healthcare applications.
“Participation in global value chains is a common way for economies to join the global production and innovation ecosystem, but we also know that the income generated by each stage of the value chain is unevenly distributed,” said senior researcher Dr Akhmad Bayhaqi. Analysts in the policy support sector.
Dr. Bayhaqi explained the concept of a “smile curve” in a value chain, where the two ends of the smile – closer to producers at one end and consumers at the other – have a higher view of added value than those in the middle. “This intermediate point is the labor-intensive manufacturing stage, which usually adds less relative value,” he explained.
Dr. Bayhaqi added: “To increase the revenue and benefits of participating in global value chains, member economies can shift their positions to upstream R&D activities, or downstream branding and marketing activities.”
According to the policy brief, this is where the development and adoption of Fourth Industrial Revolution technologies comes into play. An economy’s level of technological advancement can affect its position in global value chains.
For example, investing in R&D and improving workforce skills can help member economies leapfrog to higher stages, while more traditional approaches, such as specialization, can help member economies gradually build up their chains of technological and productive capacity while enhancing value.
In 2019, the APEC region contributed 80% or $699 billion of global exports of Fourth Industrial Revolution products and 63% or $533 billion of its global imports. China is the world’s largest exporter, followed by Chinese Taipei, Japan, South Korea and Mexico. In terms of imports, the US and China were the two major contributors, with 24% and 21% of imports, respectively.
The policy brief also measures the performance of innovative APEC economies in the area of the Fourth Industrial Revolution by assessing the number of sets of patent applications covering similar technical content. Over the past 20 years, patent families in the APEC region have increased sixfold, from more than 9,000 in 2000 to nearly 57,000 in 2019. These patents are primarily for connectivity, home, consumer products, and information technology hardware and software. The economies with the most active patent filings, such as Canada; China; Japan; South Korea; Chinese Taipei; and the United States, also show high patent content embedded in their value chains.
“Global value chains, as a form of trade networks between multinational corporations and their globally distributed suppliers, can be channels for the transfer of knowledge, know-how and innovation,” explained Dr. Bayhaqi.
“Advanced digital production technologies can bring benefits and opportunities for integration and upgrading, such as leveraging big data analytics to improve production efficiency,” he concluded.
The benefits of adopting and investing in Fourth Industrial Revolution technologies go beyond increased income and benefits, the policy brief said. This is a forward-looking strategy that allows member economies to continue their innovative growth paths as required by APEC’s Putrajaya Vision. At the same time, the successful adoption of these technologies depends on enabling factors such as: closing the digital skills gap through digital literacy training; upskilling the local workforce; and knowledge transfer in priority areas through foreign direct investment.
To read the full policy brief, Digital Technology and Global Integration: Innovative Growth Opportunities for APEC Policy Support Sectors, visit this link.