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Tuesday, 01 March 2016

Connecting to the world through regional value chains

Integrating into the global economy will require Africa to first look inwards: by creating successful regional value chains, African economic actors might become competitive enough to enter global value chains. The widespread claim that globalisation largely benefits developed nations should not prevent us from grasping this core truth: globalisation has fundamentally altered the nature of international trade and the political economy. As a result of technological advancements, the world has become a smaller and more efficient place. Firms – multinational corporations or companies (MNCs) in particular – adapted to this environment by moving away from local production, towards coordinating various stages of the production process across different countries and suppliers. This revolution of the traditional supply chains has given birth to what trade economists call “global value chains” or GVCs. In a bid to lower costs, multinational corporations have created GVCs by offshoring or outsourcing their business activities where they can be most efficiently performed. These activities range from design and research, assembly of parts, to marketing or other related services. This shift in the geographical location of production processes has provided developing countries and transition economies with the opportunity to integrate themselves into the global economy. The undoubted leader in this endeavour has been China and its mighty labour force and manufacturing sector. Trailing behind in this regard are African, Caribbean, and Pacific countries (ACP). This article sheds light on Africa in particular.

Source: ICTSD