Global Value Chains

With the release of the World Development Report 2020 by the World Bank titled Trading for Development in the Age of Global Value Chains, conversations have revolved around the importance of Global Value Chains (GVCs).

World Bank’s Group Senior Vice President and Chief Economist, Prof. Pinelopi Koujianou Goldberg, made a presentation at the University of Nairobi on Monday, January 20, 2020 highlighting specific issues on GVCs covered in the report.

“A global value chain breaks up the production process across countries. Firms specialize in a specific task and do not produce the whole product, said Prof. Goldberg. “GVCs can continue to boost growth, create better jobs, and reduce poverty provided that developing countries undertake deeper reforms and industrial countries pursue open, predictable policies.”

Prof. Goldberg noted that GVCs powered the surge of international trade after 1990 and now account for almost half of all trade.

“This shift enabled an unprecedented economic convergence: poor countries grew rapidly and began to catch up with richer countries. Since the 2008 global financial crisis, however, the growth of trade has been sluggish and the expansion of GVCs has stalled. Meanwhile, serious threats have emerged to the model of trade-led growth. New technologies could draw production closer to the consumer and reduce the demand for labor. And conflicts among large countries could lead to a retrenchment or a segmentation of GVCs.”

Bringing the discussion home, Prof. Goldberg looked at the Kenyan situation.

“Kenya's GVC participation is subdued. Between 1990 and 2015, Kenya transitioned from a commodity-based GVC participation to limited manufacturing, mainly agribusiness and apparel,” she revealed. “Kenya's GVC participation grew by about 10 percentage points in the past 25 years yet GVC linkages are still weaker than the global average.”

The Deputy Vice-Chancellor, Academic Affairs, Prof. Julius Ogeng’o also added his views on the Kenyan situation.

“In Kenya, some organizations like Twiga Foods and Victory Fish are leveraging technologies like Blockchain to streamline value chains, enable the farmers to gain from their produce and provide financing.  These unique inclusivity solutions are partly the reason why poverty in Kenya declined from 46.8% in 2006 to 36.1% in 2016,” he said. “As a university interested in research for development, I welcome research and greater discourse in value chains as a strategy to grow our exports to regions such as the Middle East or at least improve the local distribution of food from areas of surplus to areas of deficit so as to discourage unnecessary importations. We welcome support to study how Kenya’s devolved strategy of development can deepen use of value chains to reduce poverty.”

While looking at the why global value chains are key to poverty reduction, Prof. Karuti Kanyinga, Director, Institute for Development Studies emphasized the need for policy continuity and policy stability to promote growth in developing countries in the just concluded launch of the World Development Report 2020.

A panel discussion moderated by Prof. Bitange Ndemo from the School of Business brought out important issues in the evolving trade environment. The panelists were Prof. Goldberg, Dr. Anastasia Nyalita, Kenya Healthcare Federation, Prof. Muranga Njihia

Dean, School of Business and Paul Kamau from the Institute for Development Studies.

https://www.worldbank.org/en/publication/wdr2020