 Welcome to the ninth webinar, the wider webinar series, How is COVID-19 Changing Development? The wider webinar series features a lineup of eminent researchers and different specialists who present new research and implications the FOC of COVID-19 for global development efforts and economic, political, and social impacts for the global South. That of today's webinar is International Trade and Supply Chains. What can we tell about the recovery post COVID-19? The growth of international trade and expansion of global value chains over the last 30 years has been quite remarkable. And the effects on development is very clear to see. Incomes have risen, productivity has gone up, and poverty has fallen. The fragmentation of production and knowledge transfer inherent in global value chains are in no small part responsible for these advances. At this moment, however, there is reason to worry that this trade-led path to development is under threat. Since 2008, after the global financial crisis, trade and global value chain growth have languished. COVID-19 has brought further concerns. Many governments now worry about the robustness and resilience of global value chains. This webinar will discuss emerging evidence on new patterns of international trade and global value chains, current policy challenges in light of the pandemic and implications for development. We have two distinguished economies to speak on this topic. Firstly, we have Daria Taglioni, who's research manager, trade international integration, the European research group at the World Bank, where she's held various positions and roles, including team-task lead for the World Development Report 2020, principal economist in the International Finance Corporation, and the World Bank's global lead on global value chains. Daria will be drawing for the World Development Report 2020 in her presentation. You also have a discussant, Professor Selim Raihan. Selim Raihan is professor at the Department of Economics, University of Taka Bangladesh, and the executive director of the South Asia Network on Economic Modelling, Sunim, in short. He's an honorary senior research fellow at the University of Manchester. Selim is one of South Asia's leading trade economists, and we're speaking about, in particular, the implications of the pandemic on trade and value chains with the focus on South Asia. Now, a few logistical issues. First, you must type in your questions using the Q&A feature that you see on your screen. I will read out the questions on your behalf. Second, the webinar will be recorded and shared later on our YouTube channel afterwards. I would like to invite Daria to speak for around 20 minutes. Daria, over to you. Thank you. Thank you, Kunal. And thanks for inviting me hopefully next time in Helsinki. So, as Kunal said, I will be drawing from the report on the World Development Report on Global Value Chains. And there is an important reason for this, is that the economics behind what's happening doesn't need to be revisited. The models work, and somehow what we are experiencing is in line with what economic models and empirics tell us. And so I want to start with the world we have left. And it is a world where trade and global value chains blossomed within a relatively liberal environment for trade and investment. And firms and countries were able to specialize to make contributions in narrow slices of the chain. So in the first part of my presentation, I will go over how this world worked. And then I will show the world we are in today. So, we have, we come from a long period of sustained international integration. And so if we take a global value chains trade as a share of global trade, it has grown consistently since the early 70s going from 37% in 1970 to 52% at the 10 years ago, at the height of just before the global crisis. And then has been retrenching since then. And probably, as Kunal said, with COVID-19, we will see a further drop over this. But one important point is before coming to what this world looked like is to give some sense of who's in it and what we are talking about. And so the first point to remember is that there are no insiders and outsiders to global value chains. It's really a sweeping global phenomenon where all countries participate, but each in different ways. It's a bit like the Anna Karenina book, right? And so we have some countries that are participating mainly by exporting commodities to the rest of the world. Then there are other countries that are participating by predominantly being in limited manufacturing. There are countries that from initial, breaking into initial labor-intensive manufacturing have grown and specialized in advanced manufacturing and services. And finally, there are countries that specialize in innovative activities. And when we talk about global value chains, it's a phenomenon that affects trade, foreign direct investment, firms' ownership, innovation, intellectual property. But one easy way to try to measure it is to look at those cases, those actors where there is a trade in parts and components happening. And so there can be cases where there is this forward participation, so the commodity producers, they do participate with their exports in the production of others. There are other countries in the middle that import these commodities to export to other countries that then transform further. So it's this import to export. And then there are countries that are at the end of the chain and that they participate with backward participation for instance, mainly in the assembly function by importing all inputs. And all countries can grow irrelevant of which position they occupy in this scheme. The other question that I wanted to clarify up front is what we are talking about. Often people say why is this global value chains different from trade? Okay, we understand it's important exports, but what is, is there something really special about it? And in the WDR we discussed with, in the WDR team we thought a lot about this and we really think that the two distinguishing features are that we have this hyper-scale, hyper-specialization, this specialization in very narrow activities. And then on the other, which to me is even more important is the firm to firm relationships that are not one of relationships like when you go to the market with between anonymous actors, but are actually repeated interactions over time and are through marriages, through partnerships. And this have been in both cases phenomenon, phenomenon engines of growth because they allowed an unprecedented transfer of know-how technology thanks to this long-term partnerships and the hyper-specialization has allowed to participate, to partake in the global economy before learning to do very complex activities and actually learning by doing. And so we then have the drivers that are the traditional drivers of trade, geography, endowments, market-sized institutions and we have outcomes in terms of it produces growth and jobs, it leads to poverty reduction, but there are also some implications that make the world less equal and there are some strains on the environment. But policies can maximize the ability to leverage growth from global value chains and mitigate the costs. And so the main message I want to leave you today is that global value chains have boosted incomes and created better jobs and reduced poverty across the board. But as I said, this makes impact on the environment and inequality and that even after the COVID-19 crisis or during the COVID-19 economic crisis, they can't support development but policy has to play its role and in particular developing countries need to keep reforming themselves and industrialized countries need to pursue open and predictable policies. But right now in many respects, the opposite is happening. So why global value chains trigger growth? Well, we see that firms that both import and export, which is our proxy for global value chain participation are more productive than one-way traders or non-traders. And we tried this with aggregated data, with the disaggregated data and on countries at all levels of development. And here you can see that these bars are the premium on productivity of firms that both export and import, the green bars that export only the blue bars and that import only the purple bar over firms that neither import nor export. And so you can see that consistently the firms that export and import are the most productive in Ethiopia, in Vietnam and across the board in developing countries and actually also in developed countries. So I want to now leave you to one question, which we will immediately then look at what's the situation and the question, it's up here. When do countries see their income grow the most? So when they are commodity driven, when they break into manufacturing for the first time or when they specialize in advanced services and manufacturing? Great, so share the results, right? So we have that 10% of you said that countries grow the most when they are commodity driven. 29% they said that it is when they break into manufacturing and 61% when they specialize in advanced services and manufacturing. I will show you now, that in fact the answer is, let's see if I managed to move on, that countries grow the most when they move from commodities into manufacturing for the first time. There is something special about this transformation, the first transformation is the one that is critical is because a large mass of population jumps to a much higher per capita income. And so we started this at the World Bank and we see that after 20 years of jumping into limited manufacturing countries are 57%. GDP per capita is 57% higher. Innovative activities is 32%. Of course in levels when countries are in innovative activity the level of income is much higher, but the qualitative jump is higher when the countries break into simple manufacturing. And that's also in fact when countries that are the most supportive of globalization and then in further phases, possibly because they see the growth of incomes slowing down in part, there is some skepticism that mount in. So here's the thing, it's an interesting story with what happens. So basically countries incomes become higher and the countries start to import and export. And what happens is that they actually become more capital intensive. So the units of labor per unit of production go down because there is much more technology involved in what countries produce when they get into global value chains. However, because of this capital intensity and this technology, these countries are able to produce at a larger scale. Remember in the framework we said that this scale is one of the two important factors of this phenomenon. And because of the larger scale, it actually becomes employment delivering. So employment grows because of the scale even though per unit of production there are less units of employment. And this is an important fact. So it produces employment but this employment is more capital intensive. And then because it brings more productivity and because it brings more employment, the result is that we also see a substantial poverty reduction. And this is from Vietnam where we looked at the provinces that moved into this import to export are exactly those where the poverty rate decreased the fastest in the 10 years between 2004 and 2014. So you might be asking, okay, that's interesting for the past but now we have all these technologies that automate production. So there is no, it's the train has passed. Well, that's not the case. We actually looked at those industry that automated the most in the North and those are precisely the industries that started importing more parts and components from developing countries. So again, the scale effect, the scale story comes up but there are of course also costs to the participation. And so there are costs between which companies get the most profit revenue. And this is actually the lead firms in a global value chain which experience rising profit margins and suppliers the countries which are for the most part in developing countries are often the ones that are being squeezed. We see that as I said before the labor share overall declines because there is a bigger share of this wealth that goes to capital and the global value chains the reward skilled workers against the unskilled. And also normally we find that they produce more jobs for women and youth but these are in the lower value added segments of the value chain and in the working functions. We see less women in leadership functions in global value chains firms that we see in normal firms. And finally there is a problem of tax revenue rising tax revenue is challenging. And so in fact the tax story is the big I think this slide shows the failed promise of globalization in the sense this slide shows that while it since the 1980s the income of the top 1% and the corporate income the two purple lines went steadily down the income of the median worker went up and this is in 65 economies around the world. And so that's really the missed promise. We generated a system that is way more efficient produces more wealth but then because of profit shifting practices we are unable to tax it properly and to redistribute it across the society. And so raising tax revenues challenging and if we want to trade I will show at the end that if we want trade to keep being beneficial coming to international agreements on taxation will be key. And this is particularly important for developing countries where the revenue loss from profit shifting is higher in percentage of GDP. So that's the part of the world that we left. Now the world we are coming in we live in a world of resurgent technonationalism closing borders and rising protectionism and this trend has been amplified by the COVID-19 pandemic. What does it mean? And here I will just give you the highlights because we would need another 20 minutes presentation to show the results. But so what we see from the early evidence is that first of all in global value chains demand and supply shocks are magnified. It's enough for one link not to work to see the reverberations, spill overs effects across all the supplier network all the firms involved, all the countries involved but both the contraction and the negative shock is magnified and also the rebound the growth is magnified for the very same reason there are both the negative and the positive shocks are magnified in this world. The direct suppliers and the direct buyers are actually those that are most hardly hit but as soon as you move to the suppliers of the suppliers or the buyers of the buyers the negative or this magnification effect decay very fast. And also it's true we saw some shocks due to demand and supply to which actually the global value chains adjust very well and I would be happy to give you examples in the Q&A session but we also saw that a lot of the problems with the functioning of this global value chains were due to government policies that were rigid and didn't adapt fast enough and they have generated the ripple effects up and down the value chain. The effects on FDI and on trade have been polarized and very different. So we have the most developing countries most emerging markets suffered enormously but China gained a lot. China is back on track and developed countries are more or less even according to the last we estimate of the IMF. Small companies are the ones that were the hardest it large corporations especially if they were data intensive they tried. High density face-to-face activities suffered and as I said activities with a lot of input digital inputs they actually tried. The informal sector suffered a lot the list protected became even less protected the unskilled suffered the young suffered more than the old women suffered more than the old. And so in a way we can say that the poor became poorer with COVID and that each became richer and this is really what we need to address. But we have something at the World Bank some colleagues need to carry out some firm surveys on large world corporations and there is one interesting result while most firms expected some profit loss the majority of the firms have chosen to maintain their business strategies intact with respect to input sourcing diversification of product sites and offshoring because they say for them this global structure brings resilience through diversification and that's exactly what the work development report was also saying. So we have however with COVID we are more aware of the dependencies and vulnerabilities in GVCs which have been laid bar and therefore it creates a new urgency in the search for answers to three sets of questions. One is about where our bottlenecks what happens when firms and countries are suddenly cut off from some crucial input what are the key dimensions of vulnerability what are the bottlenecks? Another set of questions are whether firms unrelated to global value chains are more adversely impacted by COVID or not and whether our government should help only domestic firms through the crisis or firms that actually help the domestic economy even if they are from another country. And finally, the third question is whether there is an alternative path to sustain poverty reduction than international integration and this is the next polling question for you. Is there an alternative path to sustain poverty reduction other than international trade? Yes, no or not sure. So the winner according to the audience is no there is not an alternative path 75% is convinced that we don't have an alternative path and that's actually also what my colleagues that looked at this question with the data found. So you have basically two engines of sustained poverty reduction. You have to have a large middle class at home or if you don't have a large and growing and thriving middle class at home you need to have the international economy the global demand to make up for that. And so we find that all the countries that are above the median they might have the possibility with their domestic middle class to eventually consider doing away with trade but actually this is not the case for countries that are below the median and international trade is needed. And so to conclude, we need to deepen trade in traditional trade cooperation and there are many areas we need to reduce. Still there are many areas and many parts of the world where we can do a lot to reduce tariff and non-tariff barriers. We need stronger rules on subsidies and SOEs. We need to combat tariff escalation and reconsider the usefulness of special and differential treatment but we also need to look beyond trade to keep trade open and beneficial and in particular to four areas international cooperation on taxes, international cooperation on competition policy and in particular competition policy around international data flows and on the environment. Thank you very much. Thank you, Darya. Your presentation is very interesting especially as you said the picture of the pandemic for the world economy it could be quite significant and especially on the trade-led path economic development which has been as you mentioned very powerful poverty reduction. We'll come back to the Q&A on to this question that you raised. Let's move on to the discussant Professor Selim Ryan over to you. Thank you, Professor Senor. I must thank you in a wider for inviting me to this very important event and Darya made a very, very comprehensive presentation. So in my short intervention I'll focus on COVID-19 and international trade in South Asia and some of the very emerging issues and the important issues to consider. So we all know that the COVID-19 has large distressing effects on international trade in South Asian countries. So I am going to present to you some recent data especially if you look at the exports exports are a large deep in most of the South Asian countries and I'm here I'm presenting to you data for the recent data for four South Asian countries. If you look at Bangladesh you can see that during March and August the export declined by around 30% compared to a past year the same period in the past year. In India it has been around 23% in Pakistan it has been around 12% in Sri Lanka it is may around 26%. There are varying degrees but actually most of the South Asian countries they are suffering quite a lot in terms of reaction and export. But we also need to keep in mind that when it comes to trade it's not on the export but imports saw a large deep too and when it comes to integrating with the global economy actually if we don't take the mercantilist approach imports are extremely important because of the industrial development of the South Asian countries many of the South Asian countries that rely quite a lot on import of raw materials and capital missionaries. So if we look at the import data again during March and August this year compared to the same period in last year you can see Bangladesh's import declined by around 26% India's case to 36% Pakistan 14% and Sri Lanka 37% that means that these countries they are actually when it comes to integrating with the global trade as well as participation in the global value chain the COVID period has actually made quite a lot distressing effect on these economies. Now if we want to actually look at the recovery or the issues of recovery how these countries can actually recover from this COVID-19 situation and make come back to the kind of normal path. So while we actually talk about the recovery the recovery of interest in South Asian countries they largely depends on the recovery of the global economy no doubt but South Asian countries also need to get their domestic fronts right. Daria in her presentation talked quite a lot about the global trade the pattern of global trade as well as some of the global norms and participation in the global trade how some of the trade rules can also be very, very important for developing countries. But I in my short presentation I want to focus more on the domestic front because here I find that most of the South Asian countries are actually they are quite lagging behind. So I thought that there could be three important points to consider for the post COVID-19 recovery in most of the South Asian countries. First the benefits of the stimulus packages have remained unequal so far and which is not conducive for recovery. You know that most of the South Asian countries they actually announced stimulus packages for to support their domestic industries as well as the export industries to recover from the crisis. But as we gather more and more evidence now we are finding that the stimulus package the distribution of the stimulus packages or the kind of way it has been managed it has not been very equal distribution and many exporters or many firms which are actually participating in the trade probably at a limited scale they are actually left out. So there are cases where dominant firms they're actually taking the larger share. So I just want to highlight share one of the very recent findings from Bangladesh where Sanem conducted a large scale survey on the firms and we found that the dominant firm dominant secretary in Bangladesh, the ready-made governments they actually got the largest benefit of the stimulus packages where many other sectors where they have the potentials to actually expand their export or potentials to integrate with the global economy they were left behind. So what is my policy solution? The success of the stimulus packages depends on three things. Financing we all know that financing is an extremely important issue. Most of the South Asian countries they have low tax GDP ratio and they are finding it extremely difficult to generate these huge resources to provide the stimulus package. But at the same time, we are finding that the management and the monitoring of the stimulus package has already been kind of problematic. So that's I think it's extremely important that while we these three things are addressed so that the stimulus package can actually benefit most of the affected sectors in the South Asian countries. My second point is that the South Asian countries their integration with the GVC global value chain is limited. And I just want to show you this slide where this is the figure I have taken from the economic complexity index that database where you can see these boxes actually show the composition of export of the eight South Asian countries. You can see there's a high dominance of this green part which is actually the ready-made governments or text and clothing. But apart from India, most of the other South Asian countries they are not actually have very diversified export basket. But even you look at India, there are issues whether this even with this diversified export basket whether they are now in the phase of kind of so-called what in what in Donnie Roderick's language the kind of premature deindustrialization. So there are issues even for Bangladesh whether you can see that integration with the global value chain is highly dominated by one particular sector, the ready-made government sector. So similar stories you will find in other South Asian countries too, countries too. That means the integration of the global value chain has been limited and there are huge potentials to actually integrate in the global value chain too. So what is the policy solution? Why this is happening? In my view, we find that there are serious problems with the trade industry, FDI policies in most of the South Asian countries. Especially they are not favorable in helping these countries to integrate further with the global value chain. And probably whether even if you have trade industrial policy, they are kind of biased towards the dominant sector. So you don't have a kind of industrial policy where other sectors can also get the benefit. For example, in Bangladesh, our analysis shows that most of the policies, trade policies, industrial policies, they are actually favoring one particular sector, the ready-made government sector whereas most of the other exporter interceptors they are left behind. So we need to have substantial reform to address these insufficient trade industrial FDI policies. I know that during the crisis time, probably reform is not a very popular agenda but probably during the crisis time, policy makers, they have the kind of opportunity to get out of their comfort zone and think about this reform very seriously compared to the normal time. My final point is that the South Asian countries trade logistics are not conducive for the effective GVC integration. Here I'm presenting to you the Logistic Performance Index which is derived from the World Bank's database of the very latest Logistic Performance Index database of 2018. And here I'm comparing South Asia with Eastern Southeast Asian countries. And you can see that most of the South Asian countries probably apart from India, all the South Asian countries they're seriously lagging behind than most of their counterparts in our computer countries in East and Southeast Asian countries. So if you even look at the subcomponents of the Logistic Performance Index, most of the South Asian countries they are seriously lagging behind. So my final policy section is that there is an improvement in trade logistics critical for the post COVID-19 recovery and effective integration with the global value chain. I'll stop here and I'll be very glad to take any questions or comments. Thank you. Over to you. Thank you, Sir. Thank you so much. We have several questions already in the chat. Let me start off with one question of my own which is to Daria. Daria, do you think that the effect of the pandemic on the world economy's issue on trade will be less than what we saw from the global financial crisis? The global financial crisis was quite a long, deep effect. While in the case of the pandemic do you think it will be relatively short, intense perhaps for this year, maybe early next year or a quick recovery? What is your sense? I think there are reasons for thinking that it will be bigger and reasons for thinking that it will be smaller. So the big difference is that so far there has not been a destruction of assets to the extent that we saw in the global financial crisis. And we know that a financial crisis might come but we also have a long time to prepare to respond to that. And that's an important factor. On the other hand, we know that until when the health crisis is not over there won't be an economic recovery. And so this uncertainty we know from trade that there are permanent effects from the uncertainty. And so it will be really linked to that. But one important point is really, I think one factor is really this huge polarization. And so I think again, it will depend on policy whether it will be bigger or smaller because if policy embraces sustainability and inclusiveness, we will maybe even have helped the transition towards the data economy that was going to happen. And we have accelerated and we will end up with a boost in productivity. But if we do not embrace this inclusive a different way of doing policy then we will have strains and even social conflict for a long time. And the collaboration on the vaccines and the collaboration on the way we will distribute the vaccines will be, I think, a test on what the new globalization will look like. Thank you, Daria. Now, let me also now ask some questions from the chat that we have received. So the first question is from Vidya Mani. She asked the following question to artists for Daria. The supply chain bullwhip effect suggests that the deeper tier suppliers will suffer far more than downstream players. That is volatility effect can magnify it as you go further up the supply chain. Can you talk about the economic effects from the COVID-19? Would it exaggerate this particular effect having a stronger effect on deeper tier suppliers rather than downstream players? What would be your answer to this question? So this is something that people are still looking at. There are, theoretically, can go both ways and depends on how specialized the suppliers are. From past shocks like the tsunami in Japan, the triple shock of tsunami earthquake and nuclear meltdown in Japan, we know that as soon as you move out of the immediate suppliers and buyers, actually, it's true there might be more volatility, but these firms are not totally dependent on the firm that was affected by the shock. And so diversification helps. So it's an empirical matter ultimately, but I have reasons to believe that diversification helps. Thank you very much, Daria. I have a question from a colleague of ours, Ricardo Santos, two questions, actually. Ricardo, I've allowed you to speak if you want to ask your question live. Hello. Thank you, Kunal. And thank you, Daria, for the very thought-provoking and Salim also for the very thought-provoking presentations. I have two different questions, so I probably I'll start with, I'll probably read both of them, but they are quite different. So the first one is, so arguably poverty reduction, such as was the case in Vietnam, happens through increase per capita consumption. So through the shift in occupation. Arguably also, this is not a simple process, it's actually rather complex. For instance, shifts from agriculture to labor-intensive manufacturers are not the same, as shifts from agriculture to extractives or to capital-intensive manufacturers, even within global value chains. Are you able to peek into the labor contribution and the employment black box and assure us that the global value chains are actually promoting structural transformation towards first-stage manufacturing in most cases? Or is Vietnam the last example of an old lost dynamic? So that would be a first question. The second is more related to COVID itself. So COVID seems to have strengthened the insourcing narrative and somehow the threat of divesting from offshoring of some relatively labor-intensive global value chain links and investment on automated insured links that replace those. Is this a credible threat, a visible threat? And if so, what challenges does this bring to poverty and inequality reduction? Thanks Ricardo. So these are ready to great questions and I think actually both Darya and Selim can take a step and answer these questions. Darya, you wanna go first? I mean, given that I spoke so much, let's have, if I don't want to throw Selim under the bus but Selim, if you wanna go first, I'm also happy. Darya, please go ahead. No worries, please go ahead. Okay, so let me start with the first one. So indeed Vietnam, it looks like has been really good at managing this transition. So what we looked is that actually Ethiopia is following a similar path. I mean, when we looked at, we picked the countries at different levels of transition and we saw that actually there is other countries that are following the same path. And I do really think that the reason is both this ability to build scale and this firm-to-firm relationship. It's true that it's more complex activities but you are not doing them alone. You are actually embedded into a new benefit of the know-how and the knowledge of firms that are used to this handling of complex activities. So in a way it's like if this firm-to-firm relationships allow to import institutions and to allow the domestic producers to leverage us on this foreign institutions to learn about this transition. So we see that in motion in the countries in Africa as well, manufacturing, it's Ethiopia but we have other cases, Kenya more on the services sector and both for regional value chains, for instance, South Africa than with global value chains. On the COVID, the narrative of doing away with offshoring and technology, I think these are two things that are happening. So I think the smaller firms, the firms that have, they are the month more localized domestically or within the macro region. We see that they are either reinshoring or nearshoring but the purely global companies, as I said, the survey from my colleagues seems to say that they have no intention to change their global diversification strategies. Automation is a different story. It's true that this crisis is automating production everywhere but what we saw when we looked at that in the WDR is that actually automation of production because it delivers this scale economies is also generating income and demand effects. And so there is less demand for that particular item that is maybe automated but there is much more demand for a wider variety of parts and components. Or for instance, we've showed the case of hearing aids that became completely 3D printed. Well, they are 3D printed but they're not 3D printed at home or in the small shop, I don't know, in the rich country. They are still 3D printed in massive factories in developing countries and then exporting them to the market and to trade it. So there are more jobs and more trade but indeed for the skilled workers and for the machines together. And the more complex economy that it generates, generates more jobs but in more variety sectors. So at the extensive margin, if you look at the intensive margin, you will only see the negative effects. Thanks, Daria. So Selim, I want to ask this question in particular relation to Bangladesh because Bangladesh more than any other country in South Asia has really taken advantage of labor intensive GVCs, particularly to apparel. So first of all, first question is that, do you think that has led to significant poverty reduction? So are there kind of closures we see with labor intensive GVCs in apparel and poverty reduction? And secondly, what is the threat of outsourcing for balance issues, particularly in the apparel sector? And we see now, what's the comment? Definitely, the ready-made government sector in Bangladesh, you are very much right that actually it has contributed to a reduction in poverty over the past few decades and that has been kind of in two different empirical studies. It has been shown quite, it has been quite straightforward, especially it has also contributed to women empowerment. But I also agree with Daria in her presentation, she made that probably we are at a very lower end of the value chain, global value chain where you have little bargaining power, so that even if you have employment generation, we're actually in poverty, but we have seen in decades over decades, the wage in the ready-made government sector did not improve much and also the working condition, there are serious issues. But your point, the second point is that whether the COVID-19 situation, what we are observing, I wanted to highlight one particular point is that, you remember that infamous Rana Plaza event in 2013 where the big building collapse, the factory collapse, and after that over the last six, seven years, there has been a growing tendency of automation in the ready-made government sector, level-replacing technology. And during this COVID, the fear might be that this can also be speed up, this kind of automation, especially to minimize the human interaction and also to gain the more productivity or so probably that can also happen. And in the recent time, what we are observing, there have been some cases that the ready-made government sector, because of this COVID situation, cancellation of orders and reduced demand in the North American, European, Indian, especially these two major export destinations, this sector is actually under pressure. And because of the second wave, which is now forthcoming and which is already there in many of these European countries, there is a fear that the sector will be actually will be under serious pressure. So all these things are actually in a very complex situation where the investors of the firms, actually we have conducted a big survey through Sanim, and they have found that they are actually not in a very much in a confident situation, and what is going to happen in the next three or four months in the ready-made government sector to devise that strategy. So I think this will be very, very important in the coming days. Over to you, Professor Sanim. Thanks, sir. Thanks, Sanim. I have not two questions from Professor Andy Sumner. Andy, I've given you permission to speak. So you've been unmuted. You want to ask your questions live to Daria and Sanim? Yeah, sure. Can you hear me OK? Yes, we can. Thanks. There's an amazing moment when people have given you the unmute in this world we now live in. So I have, well, there's actually three questions, and I don't want to take too much time. So I'll run through them relatively quickly. In a way, they relate to thinking about issues about global production and global inequality. In fact, as I've started speaking, someone started drilling the road outside. So if you think about global inequality as having two components, the within-country component and the between-country component, clearly GVC's, the strength of GVC's potentially is around reducing the between-country inequality seen as what you've said and what is well-known. GVC's may well have a strong association with rising within-country inequality. So I think the three questions I had were really... I mean, first of all, I wondered what you made of the kind of mixed blessings thesis of Marcel Timmer in the recent Journal of Development Studies paper that the productivity gains are clear enough, but the formal sector employment gains are much less clear when he looked at the data. And they also suggested a non-linear relationship, a non-linear relationship where the benefits are really... When countries join global value chains and then these benefits diminish over time as countries head towards middle-income productivity levels. Then the second question is really the very well-known Richard Baldwin thesis about COVID-19 and tradeable services. Do you think we're going to see this tradeable services revolution tele-migrating as he calls it and how does that fit with GVC's? And then the final question is more philosophical. Does it matter the economic development is no longer about deep industrialization? It's no longer about building industries. It's about doing tasks and creating some value-added jobs. I mean, does that leave developing countries vulnerable when companies switch suppliers? I mean, how should countries deal with that? And have we given up on the big ideas about economic development being an economic transformation and deep industrialization? Thank you. Daniel, this is a really great question. Do you want to answer it? Yeah, I'll try to be very short in the interest of time. So on the Timmer and Pal hypothesis, so that's a bit what I've showed, right? That we have more income creation but it's more capital-intensive activities. And so the units of labor that go into one unit of production diminish and clearly so you will not see a one-to-one increase in employment with an increase in growth but it's really this scale effect that gives you the positive labor effect. And then you have to have policy assisting this process of transformation. So it cannot be left in the private hands. Only you need to assist this process of transformation and the same to make sure that it transfer into formal jobs. But we also know from any study of development that informal jobs are most prevalent into the poorer countries because basically people move to formal jobs because there is more security as soon as they can. So policy has to do its part to help this process but we need to recognize that there is growth coming and then the question is how you distribute and use it in gainful ways. Which also brings me to the last question you have on the deep industrialization versus thin shallow industrialization. So this is like an opportunity. Like it's a lack of devaluation. Devaluation can be good if you do something with that moment of respite that you have or can be bad if you just don't do anything with it. And so the idea is not that you just stay into this specialized activities then you do not achieve any more deep industrialization. You still have to have a program which is actually what Vietnam is doing anchored on empowering your human capital building infrastructure and making your economy more complex and so that's an entry point. But then ultimately you need to achieve structural transformation the way frankly most of the Asian East Asian countries did right. So and the third one on Richard Baldwin which is my PhD supervisor by the way story on telemigrants. I totally actually I helped him correct the draft of that book. So you open an open door basically. I agree. I think we're experiencing a transformation in towards digital services. And I will tell you more that this use of data intensive services we're having it will survive the COVID crisis because we are investing into learning about using these technologies. And so those are fixed costs and so there will be staircases. So yes, I think we will see a new wave a real globalization driven by data intensive services. Thank you Daria. I have a question from Vidya Mani. I'm going to see what Vidya would ask you a question like I can unmute you. Go ahead. Thank you so much for giving me the opportunity to ask and Daria and Salim thank you for a wonderful presentation. The question I had was in some of the policy announcements that you're seeing post COVID-19. There seems to be a lot more focus on policies that should encourage domestic production, domestic consumption, little pull away from the global value chains. I don't see that possible but there is seems to be a focus on that. How well do you think are the countries placed with respect to their domestic or regional value chains as opposed to the global value chains? Or do you see that making any impact going forward? Salim do you want to try? Do you want to answer this question? Yes, I can try. Yes, thank you. Thank you Vidya for very, very interesting question. I think this is a challenge of maybe not only the South Asian countries many developing countries they're also facing. If I give you the kind of experience from Bangladesh you're right there are many policies and many programs now during this COVID-19 especially through the stimulus packages fiscal support, monetary kind of support through monetary policies and there are many kind of supporting programs as well. But though they are targeting both the expo oriented sectors as well as the domestic sectors but we are seeing that very interestingly that the expo oriented sector especially those sectors which are very efficient in handling or having many kind of they have very strong loving power they are actually getting the most benefit most of the benefit which have been announced so far, the policies. So, but in the domestic front the large especially if I want to highlight that we haven't talked about the SMEs the role of SMEs today especially how they are also integrated the global value chain either directly or indirectly they have a very important role in the domestic value chain as well as in the global value chain many of the expo oriented sectors they have actually backward linkages with many of these SMEs but when it comes to SMEs I think they are facing a lot of challenges now to get the benefit out of these announced packages and just to give you one example so far the official statistics show that only 25% of the announced stimulus package have been dispersed for the SMEs. So, when it comes to that that's why I'm saying that when it comes to announcement probably there are kind of announcement or for supporting policies for domestic oriented sectors as well as the expo oriented sectors but when it comes to getting the benefit out of it I think the most more efficient firms who are actually capable of handling many of these things and there you can bring in all this political economy issues, institutional issues they are actually getting the benefit out of it. So, I can see that's why I tried to mention the point that the distribution of the stimulus packages or the benefit of the stimulus packages have been have remained unequal in most of these countries. Thanks, Selim. I have a question from Sean Ray and I'm also Sean, I'm going to allow you to unmute you if you want to ask a question live. Go ahead. Yeah, thank you. Thank you, Punada. Wonderful presentation Daria. I hope you can hear me. Yeah, very well. Thanks. So what I would, you've pointed out that the pandemic has actually been quite unequal in terms of the effect it has had on small versus large firms and many other kind of equalizing effects. So what would be in your opinion the policies that countries can undertake to overcome some of these challenges and integrate better into global value chains? Yeah, thanks. So I think that we need to look at growth and sustainability and inclusiveness as part of the same framework. I think we are used in the past to think about growth and then we say when we'll be rich, we'll worry about sustainability, inclusiveness. And I think we do not have time for that anymore because social tensions will kick in and simply growth will anyway be stifled. So we need to have the two together. And so I think we need, I mean, the big problem of this crisis is also, we haven't talked about it at all, but there is a big elephant in the room. We are generating a lot of debt. Every country is getting hugely indebted. We need the big policies with big multipliers and those are digital and environment. And so inclusiveness, the digital and environment have to be the areas where we invest to make basically as a guiding principle for the policies that we are doing forward. We are having going forward. Thanks, Daria. And one last question I have for Selim. Selim, what do you think with the RCEP, which was very recently signed, this very large trade agreement, for GVC trade in Asia and particularly South Asia? Do you see a lot of possibilities here, particularly for Bangladesh or maybe other South Asian countries? You are very much right that RCEP probably, this is one of the biggest events in the international trade in recent time, especially after the deadlock in the WTO negotiation and many of the trade wars we have witnessed in recent years. So I think definitely South Asian countries, they have many things, actually they need to consider it seriously about how they can actually integrate with when you talk about the larger Asian integration, and RCEP can be a step towards that larger integration. We all know that China is the largest trading partner for most of the South Asian countries. And though despite that India and China, we have seen some tensions. I think it is kind of a greed or kind of a general perception among other South Asian countries that integration with China can really help, not only through trade, but also through FDI. So I think I can see a very positive vibe, especially immediately after the RCEP was signed, there weren't programs organized by Ministry of Foreign Affairs in Bangladesh aware to how we can Bangladesh can actually integrate with the RCEP. So I can see that there will be a growing demand for a larger integration with this initiative from Bangladesh and from other South Asian countries as well. Thank you, Siddharth. We are out of time and so I want to now end the webinar. I want to say that I'm somebody who always believed that globalization is very important with all its problems. Globalization has caused a lot of challenges for poverty reduction. We know that from the East Asian experience. And certainly I hope that the pandemic and what we've seen in the last few years post-208 is a temporary aberration and we can go back to what Daria called re-globalization, which would be very wonderful. Thank you so much Daria and Siddharth for your presentations and very, very thoughtful response to the many questions we had today. Thank you and thanks to everyone who participated and thanks especially those who asked the questions today. Bye. Thank you. Bye. Bye-bye.