Wednesday, October 23, 2019

Value chains, new paths of development, according to the World Bank

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In a report released on October 8, the Washington institution recalls the importance of all the steps from product design to distribution, those value chains that have contributed for the past decade to reducing poverty in the world. emerging countries.

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It is the new transmission belt of the world trade. Value chains (ie all stages in the design, manufacture and distribution of a product) play a vital role in GDP growth, improving the quality of jobs and reducing of poverty, according to the World Bank which dedicates to them its annual report on the development in the world, published Tuesday, October 8th. Bursting with multiple tasks and scattered throughout the world, these channels offer emerging market companies the opportunity to enter the global economy, bringing with them part of the local economic fabric. Sign of their importance: Intermediate goods, which contribute to the manufacture of a finished product, now account for more than half of world trade.

To illustrate his point, the institution based in Washington gives the example of the South Korean giant Samsung, which is sourcing from 2,500 companies around the world to manufacture its smartphones. The two provinces of Vietnam where some of these suppliers are located have become the richest in the country and the "Poverty has dropped considerably," according to the report.

More jobs for women

According to World Bank estimates, a 1% increase in a country's participation in these global value chains would increase per capita incomes by 1%, twice as much as traditional trade. Second, countries that are most integrated in global value chains would have been most successful in fighting poverty. This makes the Washington institution say that they contribute more to development than the mere export of finished products. Another advantage: the companies integrated in these value chains employ more women than the average observed in the countries where they are established, even if they are still rare to access managerial or managerial positions.

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This advocacy for value chains is not unanimous. In a note published in August 2017, the United Nations Conference on Trade and Development (Unctad) is concerned about "Risk of specialization on a narrow fringe of production" and of "The dependence of multinational companies on access to these value chains". And Uncttd to conclude: "Such superficial integration is also reflected in the asymmetry of power between suppliers and contractors, and in the weak negotiating capacity of developing countries."

A production organization that risks contributing to global warming

To benefit from these value chains, the World Bank recommends, in particular, the acceleration of investments in road, port or rail infrastructure to strengthen their connectivity and avoid the creation of prosperous enclaves disconnected from the rest of the country. States must also rely on training because these channels mainly benefit skilled jobs, at the risk of widening inequalities in countries where the reservoir of unskilled labor is important.

"Governments must ensure that global value chains benefit many social groupsespecially the poor and the womenand that the environment is protected "says Pinelopi Koujianou Goldberg, chief economist at the World Bank. This organization of global production risks, in fact, contributing to global warming by increasing the distances traveled between the different stages of production, and by producing more waste because of the packaging used for their transport, especially in the electronic sector.

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