Friday 29 November 2019
The Arab Monetary Fund has launched a new periodic research series entitled "Policy Summary", aimed at supporting decision-making in Arab countries by providing
Brief research on the most important priorities and topics of interest to member countries with recommendations for policymakers.
The seventh issue of the series touched on the theme of "integration into global value chains", noting that the widespread term Global Value Chain, GVC in recent decades was the result of changes in the global economy, the decline in freight and transport costs, the decline in global tariff and trade barriers, the increasing pace of economic openness and the improvement of the business climate by many countries to encourage and attract more direct investment flows.
This comes in the light of the high level of global technology, increased number and complexity of production stages, and high levels of local, regional and global competition.
The summary noted that "integration into global value chains increases productivity and income levels, as a result of the characteristics of value chains, particularly the long-term relationship between companies or organizations, as well as excessive specialization in specific production or tasks."
"Integration into global value chains has enabled local companies to engage heavily with foreign companies that possess knowledge and techniques, and the export process no longer requires mastery of the entire production process in the light of excessive specialization at a certain stage of production," he said.
"Companies that participate in global value chains in developing countries have been able to record higher levels of productivity and greater income levels than countries that are more involved in traditional trade," he said.
Studies indicate that a 10 percent increase in participation in global value chains increases average productivity by about 1.6 percent and per capita GDP by 11 to 14 percent.
Studies have shown that integration into global value chains provides more and better jobs, and companies integrated into global value chains tend to employ more women than other companies, contributing to the achievement of the Sustainable Development Goals.
"As a result of the increase in both income and employment growth rates, integration into global value chains has helped
to achieve a significant reduction in poverty rates in some developing countries, most notably China, which is due to the fact that the economic gains from
Integration with global value chains is greater than the gains made under integration into traditional trade."
In terms of the extent to which Arab countries are integrated into global value chains, studies have shown an improvement in the contribution of intermediate goods to total exports to a number of Arab countries, with some Arab countries accounting for about 25 percent of their total exports during the period (2010-2015).
The share of imports of intermediate goods accounted for between 20 and 30 percent of the total imports of a number of Arab countries.
Some Arab countries have been interested in promoting the integration of companies into global value chains as a means of achieving the goal of economic diversification and sustainable and inclusive development, as decision makers in these countries have adopted policies aimed at integrating their economies into global trade, investment and production networks, including Tunisia, Egypt, Morocco, Jordan and Lebanon. As a result, these countries have made progress in integrating into global value chains.