Thursday, April 16, 2015

Setting the stage for African success in global value chains | The Trade Post

Setting the stage for African success in global value chains | The Trade Post: "Value chains, whether they are regional or global, offer developing countries new opportunities to engage bigger markets, gain new skills, and innovate. As developing countries participate in increasingly complex production processes, they gain knowledge and modern techniques from foreign companies. When Toyota makes car parts in Thailand, for example, Thailand imports the company’s technology, managerial and business practices, and more.

Historically, GVC-related opportunities for economic development have come in the form of manufacturing: East Asian countries saw tremendous growth and poverty-reduction as a result of their engagement in electronics and automobile production. Observers have long lamented – and studied – Africa’s difficult relationship with manufacturing. Currently, the continent’s share of manufacturing in GDP is lower than most developing countries, and it is declining. In “Can Africa Industrialise?” John Page postulates that the steep manufacturing decline in the 1980s and 1990s happened because the continent shed protectionist and import substitution policies that had propped up manufacturing. With these policy changes, African economies shifted to producing more in sectors in which they were internationally competitive, including natural resources and agricultural products.

In recent years, global value chains have become much more diverse than manufacturing: no longer are offshore workers in developing countries just soldering microchips or sewing t-shirts. They are using advanced technology to package locally grown fruits and vegetables, and they are providing back-end administrative support to US companies. Take flowers – they might be grown in Colombia or Kenya, but they are sold in the US or Europe. They must be kept cool and fresh through sophisticated cold-chain logistics and be transported quickly to market.  Or take shared-services centers in India. They must have fast internet technology and an educated workforce. This business-driven modernization drives development. "

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