Global Value Chains can help Developing Countries in better growth outcomes: World Bank

GENEVA: In an era of slowing trade and growth, developing countries can achieve better outcomes for its people through reforms to boost their participation in global value chains, according to a latest World Bank report.

In the report titled “World Development Report 2020: Trading for Development in the Age of Global Value Chains” that was released recently,

the bank argues that these reforms can help developing countries expand from commodity exports to basic manufacturing, while ensuring that economic benefits are shared more widely across society.

“Global value chains have played an important part in the growth, by enabling firms in developing countries to make significant gains in productivity, and by helping them transition from commodity exports to basic manufacturing,” World Bank Group Chief Economist Pinelopi Koujianou Goldberg said.

She said that in the age of global value chains, all countries have much to benefit by speeding up reforms that increase commerce and boost growth.

The global value chains today account for nearly 50 per cent of trade worldwide, the World Bank said in its report.

“But their growth has plateaued since the financial crisis of 2008,” it said.

According to the report, creation of the European single market—together with the integration of China, India, and the Soviet Union into the global economy—created huge new product and labour markets, and so firms could sell the same goods to more people and take advantage of economies of scale leading to the further deepening of GVCs.

The report highlights the steps countries can take to attract GVC investments, even if they have been largely left out of the value chain revolution.

Small steps—such as speeding up customs and reducing border delays—can yield big benefits for countries making the transition from commodity exports to basic manufacturing.

“For many goods traded in global value chains, a day’s delay is equal to imposing a tariff in excess of one

per cent. In addition, investments that improve connectivity by modernising communications and roads, railways, and ports can yield large benefits,” it said.