Global Value Chains in the Time of COVID-19
211
Revealed comparative advantage in EBRD economies, log scale
FIGURE 5.6 Which countries will take advantage of the diversification of global supply chains? Uzbekistan, frozen vegetables
512
Jordan, sports clothing
256 Morocco, fertilizers
128 Kazakhstan, ferro-alloys 64
Bulgaria, Egypt, Arab Rep. Hungary, North Macedonia, Morocco, Romania, Serbia, Tunisia, Ukraine, insulated wires and cables
Lithuania, Poland, Romania, Slovak Republic, furniture
32 16 8 4 Hungary, Poland, Romania, Slovak Republic, car parts
2 1 5
10
Turkey, clothing 20
40
China's global market share (%), log scale Basic and fabricated metals Food products Motor vehicles and other transport Textiles, apparel, footwear Wood and paper products
Chemicals and pharmaceutical products Machinery and equipment Other manufacturing Vegetable products
Source: Javorcik 2020. Note: EBRD = European Bank for Reconstruction and Development.
Should new investment opportunities emerge, they will require new priorities for investment policies and investment promotion reforms. Policy makers should reflect on the market’s possible shifts and let business realities guide their policy responses, building on economic fundamentals. These suggestions will entail realigning investment incentive regimes to the new national development priorities likely to emerge after COVID-19, such as job creation. Governments should also resist protectionist policies. And reforms are needed to ensure the limitation or phasing out of crisis- related investment screening and approval mechanisms to allow FDI to resume normal entry. Tackling the complex challenges presented by the current global environment will require global leadership and cooperation. The pandemic has illustrated the shared public health and economic vulnerabilities that countries face. It has also highlighted the critical importance of exchanging data, sharing information on good practices, and strengthening collaboration. The magnitude and scale of the current crisis require policy makers to deploy their full arsenal of policy tools to improve business confidence and boost countries’ investment competitiveness. An unprecedented synchronized and coordinated policy response was critical to containing the 2008 global financial crisis. Once again, the times are testing policy makers. They must rise to the occasion by showing global leadership and collaboration.
