SL’s participation in regional value chains records growth during 2015-19: ADB

• But ranked sixth least regionally integrated country in 2019
• Participation in complex RVC and GVCs also remained weak in 2019

Sri Lanka ‘s participation in regional value chains (RVC) recorded stronger growth relative to global value chains (GVC) during 2015-2019, according to a latest report by the Asian Development Bank (ADB).

A flagship ADB publication, the Asian Economic Integration Report 2021 released on Wednesday looks at Asia and the Pacific’s progress in regional cooperation and integration, and examines the initial impact of the pandemic on trade, cross-border investment, financial integration, and the movement of people.

“Nepal, Bhutan, Sri Lanka, the Kyrgyz Republic, and Mongolia—had stronger RVC participation growth relative to GVC as their intensity ratios rose by at least 8 percent between 2015 and 2019. But dynamics differ across economies. Nepal, Bhutan, and Sri Lanka had RVC participation rates growing faster than GVC linkages,” the report stated. 

Despite the growth recorded in RVC participation during the period, Sri Lanka was ranked sixth least regionally integrated country in 2019 among selected countries in the Asia Pacific in terms of overall RVC participation rate, which measures the share of gross exports that involves production in at least two economies in the same region using cross-border production networks.

Meanwhile, the country was the fifth least globally integrated nation in 2019 among selected countries in the Asia Pacific in terms of overall GVC participation rate, which measures the share of gross exports that involves production in at least two economies using cross-border production networks.

Further, Sri Lanka’s participation in complex RVC and GVCs also remained weak in 2019. In particular, the country’s participation in complex GVCs was the weakest among all selected countries in Asia Pacific in the report.

Meanwhile, defying the regional trend, Sri Lanka’s export volumes growth accelerated 7.2 percent YoY in 2019 compared to 0.4 percent YoY recorded in 2018. “The region’s export volume barely grew at 0.05 percent in 2019, a significant drop from the 2018 growth rate of 3.5 percent. Most major exporter economies in Asia had either negative or decelerating growth rates,” the report stated.

Meanwhile, ADB pointed out that even a partial reshoring of supply chains, which became a popular strategy during the pandemic, could significantly reduce international trade.

“When the supply chains are reshored by 10–20 percent, global exports, imports, and total trade are estimated to decrease by 13–22 percent,” it said.

The report notes that the region’s trade performance, while hit hard during the first half of 2020, is expected to recover faster than anticipated.