Global value chains in the least developed countries of the world: threats and opportunities for local producers

Abstract

Global value chains (GVCs) often represent one of the few options for local firms and suppliers in developing countries to get access to larger markets and to new technologies. While the potential benefits from GVCs for medium-income developing countries are well documented, the studies dealing with the impact of GVCs on low-income, poorer countries are scarce. To explore these issues, the paper uses primary and secondary empirical evidence and discusses how GVCs may affect upgrading, technological capabilities and competitiveness in the least developed countries (LDCs). This paper suggests that the opportunities exist, but are hardly utilised, and depend on a number of circumstances that may or may not occur. Public policies have an important role to play to improve the prospects of leveraging these opportunities and raising the probability of a positive effect on local firms. This paper focuses on the prospects of upgrading in natural resource-intensive LDCs from their participation in GVCs, and argues in favour of capacity building for policy formulation and implementation, strengthening the national standards infrastructure, defining the research priorities and disseminating research results to small- and medium-sized enterprises, and suggests that cluster-based development policies may offer better perspectives.

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