Can foreign direct investment help economies climb global value chains?

May 18, 2022

Foreign direct investment (FDI) plays an important role in economies as it extends local economies the capital, skills, know-how, and innovation required to stay competitive in the global market. FDI that is channeled through global value chains offers even more potential in transforming developing economies into manufacturing-oriented centers. In this note, based on a policy brief on FDI and global value chains (GVCs) supported by the Hinrich Foundation, we focus on three economies – China, Indonesia, and Viet Nam – which exemplify the link between FDI inflows, participation of developing economies in GVCs, and the consequent economic upgrading that such participation in GVCs promotes.