Global Value Chain

The value chain has moved from all stages of production done in one country to a global value chain where production processes are located across different countries. In today’s world, a finished product is often an outcome of manufacturing and assembling in multiple countries with the value being added at each stage of the production process.  Often, the task that adds the most is usually before or after the production of the product, such as marketing or product design. Countries engage in this process by backward or forward linkage. Backward linkage is when a company sources input product from another country and forward linkage is when the product produced by the company serves as an input product that is used to produce another product in another country. This leads to job-to-job creation and economic growth. However, only countries that have the right trade and investment policies will enjoy the benefit of the global value chain.

The benefits of global value chains are numerous, and it ranges from the integration of knowledge and experts in key stages of production to job creation and increases in the standard of living. A developing country such as Nigeria has not been able to enjoy the full benefits of the global value chain because of challenges faced in aligning the global value chain with the nation’s development strategies and meeting some international trade policies required. Over the years, countries involved in the global value chain have recorded sharp growth and increased income. The poor countries grew faster and began to catch up with the richer countries. Examples of countries that have benefited from this process are China, Vietnam, and Bangladesh to mention a few. Research has shown that these countries became integral to the global value chain, hence, their per capita income grow more than twice its normal rate. These countries are known to export products labeled as ‘high-technology’, examples are phones, televisions, and so on.

However, for developing countries to benefit from the global value chain, there is a need to consider the following:

• Involve in activities that attract investors
• Aligns some areas of national policies to accommodate the global value chain, that is, conforming to international standards. Examples of some of these policies are trade policy, regulation of business services, business taxes, and investment policy
• Ensure the involvement of private sectors
• Encourage advances in information and technology communication, and innovations in logistics. All to encourage ease of inter-border production.

The global value chain also has some risks associated with the process. The process can sometimes cause a widening economic gap between countries because the division of labor and participation increases economic exposure. For instance, when a global agreement is terminated, it causes job loss and negative wage growth.

The benefit associated with the global value chain, in a developing country like ours, outweigh the risk because the global value chain will create economic growth by helping to solve a major ongoing crisis of brain drain. It allows professionals to remain in their country while they earn commensurate pay for services rendered without necessarily relocating abroad.