Reconfiguring Growth Through Global Value Chains: Participation, Positioning, and Policy Lessons from Pakistan and Its Regional Competitors

This paper examines how a country’s integration into global value chains (GVCs) influences its economic growth. GVCs have transformed international trade by shifting the focus from final goods to fragmented production networks across countries. Using panel data from 2000 to 2022 and employing the generalized method of moments (GMM)
approach, we separate traditional and GVC-led trade to evaluate their differential impacts on multiple macro indicators, including gross domestic product (GDP) per capita, total factor productivity, export intensity, and others. We distinguish between the dual dimensions of GVCs—participation and positioning, where participation constitutes
forward/backward (F/B) trade ratios as critical determinants of long-term competitiveness. We find that forward linkages tend to hinder growth in low-income countries, while backward linkages enhance the export-to-GDP ratio. For middle-income nations like Pakistan, enhancing forward linkages is the most effective way to improve export performance and boost economic growth. We then assess Pakistan’s position within the GVC, as reflected in measures of upstreamness and downstreamness. Our comparison of Pakistan with other countries finds that it lags behind India, Bangladesh, and China, as it is characterized by strong downstream and weak forward linkages that limit value-added exports. A sectoral comparison, particularly between India's and Bangladesh's textile industries, further contextualizes Pakistan’s structural limitations. Policy strategies are proposed to deepen value addition and move Pakistan up the GVC ladder.