Wednesday, October 20, 2021

World Bank to “report’ on Global Value Chains and small countries

The World Bank has hinted its 2020 Development Report will be dedicated to investigate the feasibility of participation by low income countries in the Global Value Chains (GBVs), the inter-continental financial institution says.

The bank says this comes on account of “today’s unprecedented, relatively expanded economic interdependence through trade, lower tariffs and rapid technological change.”

The report will also seek to highlight fragmented but interlinked patterns of production across borders.

The report will seek to determine if it is feasible, profitable or cost effective or sustainable for low-income countries to participate in high-productivity job-generating activities as entailed in GVCs.

“It may be easier to put a foot in the door but moving up remains hard in many ways. GVCs can reduce the range of required entry “capabilities”. The fragmentation of production makes it possible for firms from low-income countries to enter foreign markets without the need to build entire production processes at home,” the Concept Note corroborated. In this context examples of what Japan and Korea did in the 1970s up to the 1980s, are cited.

It has since emerged that lower income countries can benefit from initial specializing in niche tasks of technologically intensive industries such as wire harnesses in the automotive and aerospace sectors and gain access to the global markets for their output through the value chain, achieving greater economies of scale.

It is against this backdrop that, the World Bank, through the Concept Note posits that its forthcoming Report (WDR 2020) issued early this year, for soliciting comments and suggestions up to March end aims to analyze what the new globalization means for development especially in low income countries.

For instance, whether for countries that are not yet part of GVCs, is there a development path through trade given the rapidly advancing technologies and freed policy space which can no longer be taken for granted?

And if this path is available to countries, and as to whether they have gains to make from trade and GVCs on their own, as well as by working together?

Mention is further made of how these worldwide changes have boosted global trade growth at twice the rate of income growth from the early 1990s until the 2008 credit crunch.

Trade is increasingly flowing through global value chains (GVCs), where firms in one country produce and sell parts, components and tasks, as well as services, often through multiple borders to firms in other countries. But it appears, it has now been established that the playing field is not level and the growth of GVCs is patchy.

Today, it was motivated, that However, what currently prevails is that in the same vein, the compatibility and quality requirements inherent in coordinating fragmented production across several countries make it harder for developing countries to participate in global value chains.

Additionally, the report will consider questions such as, whether GVCs are an opportunity or an obstacle to development for low income countries.  How do GVCs affect income growth and the distribution of gains? An observation is made of the ever latent danger that some countries could remain stuck in performing dead-end tasks.

World Bank further presumes that in competitive markets the gains from GVCs could be broadly shared, but submits that they could also be unequally distributed if buyers or sellers have too much market power. As such, that matters for poverty reduction.

One of the envisaged implications is the consideration for countries to realign their tax compliance, subsidies and regulatory policies with the new global dispensation, and therefore sustainable development and economic empowerment. From this premises, a condusive business environment is envisioned.
Within the purview of its scrutiny, the Bank will also give due consideration to determining  practicable models for social protection assistance and safety nets with a view  to uplift those would have been left behind. Again, it expects to recommend retraining the existing labor force to adapt to changing nature of work as dictated by innovation.

It has not been possible to solicit comment or local research perspective from the Botswana Institute of Development Policy Analysis(BIDPA) because of new protocol demanding  permission to interview  the Experts.

RELATED STORIES

Read this week's paper