Slovakia GVCs Participation Essay

Globalization era is synonymous with integration and countries have embarked on making their mark in international business world. The participation of nations in the global value chains is highly attributed to economic integration. Basically, GVCs entail integration of expertise of manufacturers and suppliers of various products across production stages and in numerous locations abroad. Nations are able to not only trade commodities but as well knowhow of production thereby increasing their returns. The main indicator of to measure participation in GVCs show the percentage of a nation's exports making part of the GVCs (Miroudot & Backer, 2013, p.18). Slovakia involvement in GVCs is to a large extent driven by intermediaries. To be precise, foreign intermediaries on the exports of the country enhance its high participation rate. This paper will analyze participation of Slovakia in global value chain in relation to Germany. It is important to note that smaller countries' participation in the GVCs is higher due to the fact that they have more upstream links. This result from an attempt to get a huge portion of intermediate oversee inputs.

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As can be clearly seen from figure 1 below, Slovakia ranked second in GVC participation of counties per OECD publication in 2009. The country's backward participation was at 44 percentage. Its forward participation in global value chain was 17 percent due to a number of reasons as will be discussed below. On the other hand, Germany's backward participation was 27 percent. The country's forward participation was however 22.

Involvement of foreign countries as intermediates in Slovakia's exports is attributed to high GVC participation. The country have numerous intermediates manufactured which are then included in exports for other nations. As it is clearly shown in the figure, Germany's GVC participation is explainable by both downstream as well as upstream links. This participation is through the country's exports. It is important to note that backward participation of Slovakia is higher than that of Germany. It means the country's foreign intermediates usage in Slovakia's exports is higher than that of Germany. Germany's forward participation in the Global Value Chain is higher than that of Slovakia. The differences in their GVC participation is clear where Slovakia is ranking top with a total participation percent of 61 compared to Germany which stands at 49 percent (Kaa, 2018, p.5)).

The high backward GVC participation of Slovak republic can be attributed to export of transport equipment and electrical appliances. The shift Eastward of GVCs for European nations in these manufacturing industries for past decades is the reason for Slovakia's higher forward participation. It is also notable that various manufacturing industries in addition to transport equipment and electrical appliances require numerous intermediates from oversee. As illustrated in the figure below, Slovakia's service industry show much higher forward participation.

The above figure 2 depicts the significance of Global Value Chain participation of Slovakia and it is factual that above average of demand for finished manufactured products and services include value added from overseas. A sharp difference can be seen in figure 3 below where Germany's GVCs participation is services forward participation driven. The country participates manufacture of GVCs for machinery, chemicals, transport and electrical equipment as well as metals by acquiring intermediates from countries in Central Europe. Its services GVCs participation is through downstream links as well as the country's intermediate in export of other nations (Figure 3).

There is a huge difference in the GVCs forward participation in business services between Germany and Slovakia whereby the former is much higher. In Slovakia, participation in GVCs is highest in the manufacturing of transport equipment which stands at close to 14 percent and electrical appliances at 13.5 percent. The same trend can be observed in Germany where the country's GVCs participation if higher on manufacturing of electrical equipment. It is however, highest in chemicals and minerals manufacturing. Both countries perform poorly in GVCs participation when it comes to farming and construction industries.

Slovakia's participation in Global Value Chain is attributable to an industrialization program initiated back in 1949. The program has seen much success and increased production has helped the economic growth of the nation to a large extent. The need to have state of the art technology in manufacturing has enhanced Slovakia to embrace services. In fact, one third of the country's export manufacturing is service value added. This is however lower than that of Germany which stands at 40 percent. In a nut shell, the trends being observed in GVCs participation are as a result of a country's geographical distance, factors of production, technology as well as political and economic policies. Slovakia has highly participated in GVCs and its investments and trade are organized with production processes spread across borders in various countries. The country has done well in Global Value Chains and its exports diversification from sophisticated production processes is significant. The country has attracted direct foreign investment resulting to numerous changes in its economic dynamics.

References

Diaz-Mora, C., Gandoy, R. and Gonzalez-Diaz, B., 2017. STRENGTHENING THE STABILITY OF EXPORTS THROUGH GVC PARTICIPATION: The who and how matters.

Miroudot, S. and De Backer, K., 2013. Mapping global value chains. OECD Trade Policy Papers. 2013. 159, (159).

https://www.cepal.org/sites/default/files/events/files/presentation_sebastien_miroudot_y_koen_de_backer.pdf

Stats, O.E.C.D., 2012. Organisation for economic co-operation and development-statistical division. Online verfugbar unter: http://stats. oecd. org/WBOS/Index. aspx.

https://stats.oecd.orgVan de Kaa, D.J., 2002. The idea of a second demographic transition in industrialized countries. Birth, 35, p.45.

http://websv.ipss.go.jp/webj-ad/WebJournal.files/population/2003_4/Kaa.pdf

Worz, J. and Benkovskis, K., Participation in Global Value Chains and the Contribution of Services to Exporting. Schwerpunkt Aussenwirtschaft 2014/2015, p.211.