Promoting Regional Value Chains in North Africa

Promoting Regional Value Chains in North Africa

The global economy is currently witnessing the development of global value chains (GVC) in which intermediate goods and services are being traded through fragmented production processes and spread across several countries. In this system, multinational companies play a pivotal role and, according to UNCTAD, GVCs coordinated by these companies have triggered nearly 80% of the global trade of inputs and products. The strong growth of communication networks contributed widely to this transformation.

In the light of this, developing countries’ integration in global trade is gradually taking place through their inclusion in GVCs (trade-generated added value accounts, on average, for nearly 30% of developing countries’ GDPs) and through the support to the private sector using proactive public policies with regard to financing, research and access to foreign markets.

GVCs’ contribution to development goes beyond the positive correlation between the participation in GVCs and the growth rate of GDP per capita. Indeed, it also leads to long-term positive economic impacts on industrial sophistication.

In the 2000s, North African countries launched national strategies to upgrade their industries to take advantage of GVCs, however, their strategies have quickly proven their limits due to the size of the region’s economies and their low capacity to integrate in the most profitable segments of these chains.

Despite North African countries’ diversification efforts, their share in the global manufactured product market remains insignificant, accounting for slightly over 1% between 1975 and 2008, while the share of Eastern Asian countries jumped from 1.7% to 20% (ECA, 2012).

Given the current challenges and context, and based on the recommendations of the 27th ICE meeting on the theme “Unlocking North Africa’s potential as a growth pole”, the ECA Office for North Africa conducted a study on “Developing regional value chains to accelerate the diversification and sophistication of North African economies”. The outcomes of this study made it possible to assess where North Africa lies with regard to GVCs, on the one hand, and on the other hand to identify the possible approaches and necessary conditions to promote regional value chains in North Africa, as well as between North Africa and other African regions, for a sustainable, transformative and job-generating growth in Africa.