Private sector development is imperative to alleviate poverty and drive economic development. In developing countries, small and medium sized enterprises make up the majority of the private sector and provide most of the employment. As such, growth in the private sector generates income for many parties. The UN Sustainable Development Goals(SDGs) underscore the role of the private sector even further. Highlighting inclusiveness and sustainability, the SDGs mention the need to foster SMEs’ capacity and to enhance their participation in the global value chains(GVCs). A number of leading donors have developed Aid for Trade strategies, identifying trade capacity building or access to GVCs as key areas for support. According to the OECD DAC Statistics, Korea has provided substantial trade-related support to developing countries. However, Korea has primarily focused on hard infrastructure, such as roads and railways. It is necessary for Korea to diversify the scope of its trade-related support to foster growth in the private sector and its participation in GVCs.
   The objective of this study is to present a strategy and implementation plan for Korea’s Aid for Trade. In particular, we focused on strengthening developing countries’ access to GVCs. We reviewed literature to provide an overview of discussions in the international community regarding GVC participation and economic development. In the case study of Vietnamese participation in GVC, we conducted a field study as well as quantitative data analysis. Finally, we undertook an extensive literature review in order to analyze the AfT strategies and GVC support programs by major donors and multilateral organizations. Incorporating the findings from each section, we suggested an overarching policy direction on AfT for the Korean government to contribute to the GVC participation of developing countries’ SMEs. The following is a summary of the chapters of this report.
   This study begins by presenting discussions on the role that GVC participation plays from the perspective of developing countries when it comes to advancing sustainable development. From a developing country perspective, we review the discussions on how participation in global trade will foster sustainable development, the benefits and barriers to GVC participation, and policy measures to promote GVC participation. The SDGs emphasize SME productivity enhancement, export competitiveness, and high-quality job creation in connection to participation in GVCs. Nevertheless, developing countries face a number of complex constraints to participate in GVCs. Such challenges vary depending on the stages of GVC participation, that is, entry – integration – upgrading. Therefore, different policy measures are required depending on the stages of GVC participation.
   In Chapter 3, we identify the benefits and constraints of GVC participation for SMEs in developing countries. As a concrete example, we selected Vietnam, a major export partner and also an ODA recipient of Korea. Based on data analyses, we draw implications for developing a support strategy. First, we analyze the supply and purchase relationship of Vietnamese enterprises in the electronics and food processing industries. Conducting an empirical analysis of the productivity premium associated with GVC participation, we seek the correlation between GVC participation and technology competence as well as the level of technological competence required to upgrade within the GVCs.
   An examination of the supply and purchase relations of Vietnamese electronics and food processing enterprises revealed different characteristics between the two industrial sectors. In the electronics industry, enterprises – often large in size – supplied intermediate goods to the global market. In the food processing industry, local SMEs procured intermediate goods to domestic food processing enterprises, and these larger enterprises engaged in the GVCs by providing final goods to the global market. In other words, enterprises in the food processing industry engage with the GVCs through the export of finished products, whereas enterprises in the electronics industry often subcontract with foreign companies. Companies in the electronics industry are highly focused on a small number of overseas buyers. Therefore, they are exposed to a large chance of progressing into a structure that is dependent on overseas firms. On the other hand, the transfer of technology was more likely in the electronics sector compared to food processing.
   The correlation between participation in GVCs and corporate productivity premium revealed different impacts according to the level of GVC participation. Despite large employment, firms with high GVC participation rate displayed low productivity, signaling that the learning effect of GVC participation is low. Analysis of the correlation between participation of GVCs and technology competence from 2013 to 2017 was also low, meaning that there was little technology development.
   Summing up the analysis from Chapter 3, we conclude that in Vietnam – and other similar countries – Korea should focus on assisting the enterprises to advance within the GVCs by enhancing their technology capacity. Needless to mention, adequate institutions and policy are required. In particular, cooperation between enterprises could be enhanced rather than measures to facilitate trade and reduce trade costs. During the field study, we observed a large demand for increasing partnership between enterprises to foster technological capacity. In response, an innovative partnership program between and among the public and private sector can be beneficial.
   In Chapter 4, we review the strategies and programs regarding AfT and GVC participation of selected donors and multilateral organizations. Upon conducting a thorough investigation, we identified a number of characteristics shown by different donors and organization. The German Federal Ministry of Economic Cooperation and Development (BMZ) has been promoting Aid for Trade under an organized strategy since the early 2000s. The United States Agency for International Development (USAID) emphasizes strengthening trade capacity in order to expand participation in GVC. In addition, the Swiss State Secretariat for Economic Affairs (SECO) promotes SME trade capacity building under an SME development strategy. As a designated UN agency for industrial development, the UNIDO supports SME development and trade capacity building. In sum, all of the organizations reviewed maintained some level of strategy regarding AfT or GVC participation. They provided systematic support based on their respective strategies. While considering the various challenges and barriers to GVCs, they also took account of their own strength and advantages in designing the intervention. Some noteworthy characteristics of these organizations can be summarized as follows.
   To begin with, BMZ supports developing country enterprises to participate in GVCs by improving quality-related infrastructure and enhancing production capacity. Furthermore, BMZ actively encourages participation from the private sector – both German and developing countries. On the other hand, USAID supports a broader inclusion of developing country stakeholders to GVCs by increasing agricultural productivity, developing service industries, conforming to international standards, increasing private sector participation, and improving trade-related institutions. The Swiss SECO diversifies its partnership strategy and performance framework according to the country’s development stage. In the case of Vietnam, SECO works to promote entrepreneurship, sustainable trade and competitiveness, and resource efficiency for Vietnamese SMEs. UNIDO assists trade-related institutional building and trade cluster development, maximizing the use of its vast network of cooperating partners.
   Korea has accomplished remarkable economic growth over the past decades, largely due to active trade. Therefore, Korea possesses a wealth of experience in trade and development. However, these valuable experiences have not yet been applied to intenational development cooperation. Furthermore, official development assistance(ODA) is delivered in an uncoordinated manner without clear guidance or strategy on AfT. In addition to stressing the urgent need to develop guidance/strategy on AfT, the study suggests the following points for further consideration.
   First, it is necessary to expand AfT activities beyond economic infrastructure construction projects to those that can improve production capacity. Our analyses and interviews with local enterprises in Vietnam confirmed that production capacity building is most needed for developing countries to create high value-added products and climp up to the next stage of the GVCs. Since there is no AfT strategy at present, Korea can highlight the relevance of production capacity building in SDGs 2, 8, and 9, and promote the private sector in developing countries to participate in the GVCs.
   Second, GVC-related interventions require an industry-specific approach. In our analysis, different industry sectors showed significant differences in the challenges and capacity to access the GVCs. Therefore, support programs must be customized by industry to address the different challenges each industry is facing. For example, in the case of electronics, transfer of technology can occur during interactions with foreign companies through the close link between local firms and overseas firms. However, the food processing industry has little need for interaction with foreign companies during production, and therefore technology diffusion is unlikely. ODA to promote further cooperation between Korean and Vietnamese enterprises can be beneficial for the electronics sector, whereas knowledge sharing on trade regulation and support on regulation-related capacity building is more valuable for the food processing industry. International Development cooperation programs for different industries must vary in line with the characteristics of the industries.
   Third, there is a need to further enhance private-to-private partnership between enterprises in developing countries and Korea. The German BMZ promotes a program to enhance the technical capacity of developing countries so they can access to and advance within the GVCs. A noteworthy element is that the program targets its support to EU (and German) companies which will expand their businesses to developing countries while integrating the value of mutual benefit. We also experienced a strong desire from the private sector in Vietnam to collaborate more closely with the Korean private sector during the field research. Especially for a middle-income country like Vietnam, and for a technology-intensive sector like electronics, the public sector should take on a role that is innovative in encouraging active private partnership between two countries.
   Finally, it is important to provide consistent support to elevate the trade-related capacities of individuals and institutions at parmer countries. Considerations should also be made to harmonize development cooperation and trade policy throughout these support measures. While Korea is already providing support to trade facilitation programs, there is room to improve. Our field study has revealed a number of challenges in non-tariff barriers in trade, such as sanitary and phytosanitary(SPS) measures. For instance, in order to foster Vietnamese enterprises’ participation in the GVCs, technical assistance is needed to improve the capacities of Vietnamese food processing enterprises to meet SPS. 

국문요약

제1장 서론

제2장 개도국의 GVC 참여와 지속가능한 발전
1. 국제무역 참여와 지속가능한 발전
2. GVC 참여 혜택
3. GVC 참여 제약요인
4. 개도국의 GVC 참여를 위한 지원과제

제3장 개도국의 GVC 참여 현황과 제약요인: 베트남 사례분석
1. 베트남의 GVC 참여 현황과 특징
    가. 교역 현황
    나. 베트남 GVC 참여 현황과 특징
2. 베트남 기업의 GVC 참여와 경제적 영향
    가. 공급-구매 관계 분석
    나. GVC 참여에 따른 생산성 프리미엄 분석
3. 베트남 기업의 기술역량과 GVC 참여
4. 시사점

제4장 주요국의 개도국 GVC 참여 지원 정책과 사례
1. 독일
    가. AfT 전략과 GVC 지원
    나. 개도국 민간부문 지원정책
    다. 지원 프로그램
2. 미국
    가. USAID 무역역량 강화전략
    나. 지원 프로그램
3. 스위스 SECO
    가. SECO의 중소기업 지원전략
    나. 지원 프로그램
4. 유엔산업개발기구(UNIDO)
    가. SME 지원전략
    나. 지원 프로그램

제5장 결론
1. 우리나라 AfT 개선과제
2. 개도국 GVC 참여 지원을 위한 AfT 정책방안
    가. 생산역량 강화 지원 확대
    나. 산업별 특화된 접근
    다. 우리나라 기업과 협력 촉진
    라. 무역관련 제도 지원 및 개선

참고문헌

부록
1. 베트남의 산업 구조
2. GVC 참여지수
3. SECO의 대베트남 중소기업 지원 및 GVC 참여 사업 목록
4. UNIDO 탄자니아 IUMP 프로그램 성과지표
5. 우리나라의 개도국 생산역량 구축 관련 주요 지원사업
6. OECD DAC 회원국의 Aid for Trade 현황

Executive Summary