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The Importance of Global Value Chains in Trade Development

  Feb 7, 2020

Between 1990 and 2015, Kenya transitioned from commodity-based Global Value Chains (GVCs) participation to limited manufacturing; mainly in agribusiness and apparel. However, regardless of Kenya’s participation in GVCs growing by about 10% in the past 25 years, GVC linkages are still weaker in comparison to the global average.

Global Value Chains-led trade is a key indicator for the development of trade in Africa and the world over, which in turn has a positive impact on trade, accelerated economic growth and reduced poverty in developing countries.

Speaking during the media policy breakfast for journalists, Dr. George Njenga, Executive Dean Strathmore University Business School emphasized the need for the Kenyan government to rethink strategies on how to lower the distribution costs of goods and services as it would benefit Kenyans immensely. “We have never negotiated our place in the GVC because we have either been colonized or completely crippled by corruption,” he said.

According to the World Development Report 2020, GVCs now account for almost half of all trade the world over. “Global Value Chains accounts for almost 50% of global trade today. Over the past 30 years, GVCs have helped poor developing countries grow faster, lifting many out of poverty,” reads the report in part.

The report directly links GVCs to tackling inequality, poverty, unemployment and business environment challenges. “GVCs can further boost inclusive and sustainable growth, create better jobs and reduce poverty, if developing countries implement deeper reforms and industrial countries pursue open, predictable policies. “

Pinelopi Koujianou Goldberg, Vice President, Development Economics and Chief Economist for the World Bank Group speaking at the media policy breakfast for journalists spoke about the importance of GVCs in trade development. “The main reason why Kenya and other sub-Saharan Africa countries are missing out on the benefits of GVCs is that their manufacturing and labor costs are out of line with the national income levels,” she said.

She highlighted the importance of having a trade agreement in place in regions and among neighboring countries. “GVCs trade is more than four times larger between countries that share a deep trade agreement than between countries with no trade agreement,” she said.

Learn about the Strathmore Institute of Public Policy and Governance (SIPPG) here 

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