Policy Briefs

Assessing Participation of CAREC Countries in Global and Regional Value Chains
Friday, 31 January, 2020

The emergence of GVC, global value chains, around more than two decades ago transformed the way economists think about countries’ comparative advantage and specialization in production. It has also transformed the understanding of what it takes for a country to be successfully integrated into world trade networks and derive maximum benefit from global trade. Participation in GVC became of crucial importance not only for larger emerging markets but also for smaller developing economies. For them, higher GVC participation translated, among other things, into increased sophistication and diversification of exports (Kowalski, P. et al., 2015); access to international markets, knowledge spillovers, and technology transfers (Slany, 2017); more opportunities for SMEs, as they exploited their speed and flexibility to carve a niche in the global market.

And yet, developing countries find it hard to integrate into global value chains. For them, the impediments to GVC participation are often linked to institutional factors: contract enforceability, the strength of the business environment, degree of property rights protection. These factors along with the quality of the labor force, lack of infrastructure, determine the degree to which these countries can participate and benefit from GVC. (OECD, 2013).