How can developing countries benefit from participating in global value chains?

Participating in global value chains (GVCs) can benefit developing countries in several ways. It can enhance economic growth, create employment opportunities, and foster technological advancements. By integrating into GVCs, these countries can access international markets, attract foreign direct investment, and gain knowledge transfer from more advanced economies. Additionally, participation in GVCs allows developing nations to specialize in specific stages of production, leading to increased efficiency and competitiveness in the global marketplace.

GVC benefits developing countries through market access and capacity building. One of the national program that some of these goverments have introduced is 'Offset Program' with the objective to bring best value for national procurement especially in defence. An example of this program is where researches in developing countries can have join research with researches in Cambridge University in the UK. This 'Offset Program' is governed through a Supplementary Contract (SC) to the Main Contract. This SC has key outlined deliverables to support the nation-building agenda of that specific countries. It is organised under the Ministry of Finance.

PART B: The Global Value Chain provides necessary leverage for participating economies to ramp up both trade advantages (closing deficits) as well as attract FDIs. For instance, I have observed around Africa that business sustainability is a big issue. Many factories are established to start and finish products, end to end. This often poses a challenge in sourcing inputs and skilled manpower for all the processes. The GVC concept is different. In plain words, it says a factory in Nigeria could be set up to manufacture automobile body parts, whereas a counterpart in Egypt manufactures the engines.

It is a win-win situation and maybe the best way to create add value for the organizations and countries. It is or must be the future...bi-multilateral cooperating to improve strategic solutions...

Having worked in Mexico for years, I’d say Global Value Chains (GVCs) offer Mexico access to new markets, technologies, and knowledge, which leverages its strategic location and trade agreements. Mexico is eager to expand its exports, particularly in its manufacturing sector, including automotive and electronics, and recently the pharmaceutical supply chain via near-shoring. GVC involvement also improves Mexico's production quality & efficiency, adhering to international standards, and diversifying into areas like design and branding. This can enhance the competitiveness of Mexican exports globally. To maximize these benefits, Mexico must focus on ensuring skilled labor, fair wages, and adherence to environmental and social standards.

Organic growth to developing countries as influenced by the growth of supply chain driven by other, mostly resided in developed countries.

Participating in GVCs also poses some challenges for African countries, such as: Facing increased competition from other low-cost producers who may have lower labor costs, better infrastructure, or more favorable trade policies. Lacking the necessary business environment to attract FDI and trade partners into GVCs, such as a stable macroeconomic framework, a sound legal system, a transparent regulatory regime, or a conducive tax system. Experiencing skills shortages in high-skilled tasks that are required for GVC participation, such as engineering, information technology, or management. Dealing with social and environmental impacts of GVC participation on workers’ rights, labor standards, environmental protection, or cultural diversity.

Some of the challenges of GVS participation are linked to the supply chain demand which includes the chain cycle, from planning, allocation of resources, selection of specific commodities for procurement to distribution as well as dispensing. In most cases this does not involve the local produces. But with technology like blockchain, the theory of farm to plate can be achieved.

Compliance with international standards and regulations can be challenging for smaller firms in developing countries, leading to barriers to entry into certain markets. And most developing countries can be facing political instability or economic uncertainties which makes it hard to attract and retain foreign investment which leads to negatively impacting their participation in GVCs.

GVC participation poses challenges for developing countries, like barriers due to inadequate infrastructure, finance, skills, and technology. Trade restrictions and intellectual property rights further limit competitiveness. Dependence on limited markets or lead firms can weaken bargaining power and policy autonomy, making them susceptible to external shocks like price volatility. To attract investment, they may compromise on labor or environmental standards, potentially harming local industries and causing regional trade imbalances.

Developing countries need to negotiate upfront on their positioning in the GVC...Leveraging on developing countries strategic & high value procurement such on defence systems.

I feel that smaller economies should create their own rhythm & reverse-engineer the chain: Unleash your hidden talents, whether they be special abilities, cutting-edge technology, or resources you excel in. Find the ideal companions: GVCs who seek for your magical touch. Provide something special: focus on important phases, go green, and dominate your niche. Make calculated risks and maximize your strengths to join the dance. The intelligent, not the strong, succeeds. With the help of this reverse-engineered GVC, you may take your proper position as a useful tool rather than simply background noise. Get to work writing your song!

Some of the strategic policies include: Developing RVCs that leverage the comparative advantages of different African countries and create synergies among them. Digitally delivering services that enable access to markets beyond physical borders and reduce transaction costs for GVC participants. Investing in green economy sectors that can generate new opportunities for GVC participation while addressing environmental challenges such as climate change or biodiversity Strengthening CSR practices by multinational companies operating in GVCs that can benefit not only the host countries but also the source countries through fair trade agreements/development assistance programs

Yes, the context provided is highly useful. Developing countries indeed need well-thought-out strategies to effectively engage in Global Value Chains (GVCs). Investing in infrastructure, education, and R&D strengthens their foundational capabilities, driving productivity and innovation. Upgrading within the value chain allows them to transition to higher-value activities, enhancing competitiveness. Moreover, fostering strong linkages with various stakeholders not only expands market access but also facilitates knowledge transfer and boosts bargaining power. Prioritizing quality, safety, and sustainability standards ensures credibility and trustworthiness in GVCs, further solidifying their position in the global market.

To maximize GVC benefits, developing countries should invest in infrastructure, education, and R&D to boost productivity and innovation. Upgrading capabilities for higher-value activities and differentiated products is crucial. Strengthening diverse linkages within GVCs enhances market access and bargaining power. Supporting local firms and clusters fosters domestic growth. Enforcing quality, safety, and sustainability standards, along with protecting workers’ rights, enhances global reputation and competitiveness.

African countries must first develop a formiddable Regional Value Chains through the AfCFTA and Regional Economic Communities in order to directly benefit from GVCs.

One noteworthy example of successful GVC participation is Vietnam's garment and textile industry. By integrating into global supply chains, Vietnam experienced significant export growth, technological advancement, and skill development. This demonstrates how strategic participation in GVCs can drive economic progress and enhance a country's competitive edge.

Partcipation in GVC should be the strategy for low to middle medium income countries to enjoy initial economic growth but it is organic. High middle income countries therefore, need to change strategy to create its own GVC through its strategic home grown tech innovations in capturing global market.

One fascinating insight is Vietnam's evolution in Global Value Chains (GVCs). Over time, Vietnam strategically invested in infrastructure and education, shifting from low-value to high-value sectors like electronics. This approach attracted foreign investment, bolstered exports, and showcased the value of strategic planning for developing countries in GVCs.

Developing countries must craft policies supporting GVC integration and protecting local interests. Diversifying the economy is key to mitigate global market risks. Strategies should promote inclusive growth, avoiding labor exploitation, and adopt sustainable practices. Embracing digital technologies enhances market access, while risk management strategies are vital for handling external shocks. Collaborative efforts with international bodies are essential, alongside regular impact assessments for ongoing improvements.