Global Value Chains - UNCTAD Paragraph 166 Course

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Global Value Chains (GVCs)
for
Building National Productive Capacities
Fiorina Mugione, Chief, Enterprise Policies and
Capacity Building Section
Division on Investment and Enterprise
Fiorina.mugione@unctad.org
PRESENTATION OUTLINE
• Importance of Global Value Chains
• How can small and medium
enterprises improve their positioning in
global value chains and reap benefits?
• Best practices and policy options
GLOBAL VALUE CHAIN: TEXTILE AND GARMENTS
Raw materials
Wool
Raw cotton
Apparel
Textile
Spinning
Weaving
Knitting
Dyeing,
Printing,
Finishing
Component network
Brand-name
apparel
companies
Overseas
buying
offices
Retail Outlets
Cutting
Sewing
Finished
Garments
Production network
Trading
companies
Export networks
Marketing networks
VALUE ADDED FORMATION IN THE TEXTILE AND
GARMENTS SUPPLY CHAIN
Raw
Cotton
Textile
Yarn
11.3% 11.3% 6.9%
Source: Gherzi
Finishing
16.0%
Garment
production
54.5%
MAPPING THE VALUE CHAIN
1.
2.
3.
4.
Identify final markets
Identify key functions/ activities
Identify participants
Map participants according to functions
they perform
5. Map inter-relationships between
participants
GLOBAL VALUE CHAIN:THE AUTOMOTIVE
INDUSTRY
Interior &
Electrics
Transmission &
Gearboxes
Engine
Finance
Service
Energy
Breaks and
suspension
Glasses
Aftermarket
PartsTyres
Chassis
UPSTREAM
DOWNSTREAM
COLOMBIA: SUPPLY CHAIN FOR THE
AUTOMOTIVE INDUSTRY
Source: Departamento Nacional de Planeación
GOVERNANCE STRUCTURES OF VALUE
CHAINS
Buyers
Integrated
• Producer driven
Firm
Buyers
Lead
Firm
price
– Large firm or TNC controls
production network
– Upstream and downstream linkages
– Capital and technology intensive
industries (i.e. automobiles, aircraft)
• Buyer driven
Suppliers Suppliers
Suppliers
Lead firms coordinate the
value chain : innovate,
create brands, control the
whole production process
– Decentralised production network
– Labour intensive industries (large
retailers and branded manufactureres,
i.e. GAP, Nike)
UPGRADING IN GLOBAL VALUE CHAINS
– Improving Process
Introduction of better quality control systems
or new production equipment.
– Improving Products
A footwear producer shifts from mass
produced low-cost shoes to more fashionintensive footwear sold for higher prices
– Specialising in new
functions
Moving from a manufacturing to a design
function.
– Moving to a new VC
Move from TV to computer monitor
production
CASE STUDY: SOFTWARE INDIA
• Challenges
– Moving up the value chain, away from low cost
services:
• Understand what the client wants
• Long term relationship (know how,
investment, trust)
• Retention of trained and experienced people
(high rotation)
– Provide whenever possible niche solutions in
new « open » areas such as security, biometrics,
system integration)
Source: UNCTAD, forthcoming.
IMPACT OF VALUE CHAIN UPGRADING
 Increased growth in incomes and employment
 Increased efficiency in the linkages between
buyers and sellers
 Improved delivery in the quantity and quality of
supporting services
 Increased cooperation and coordination among
stakeholders
 Improved and accelerated learning and benefit
flows
POLICY MEASURES
Improving the investment climate
Providing strategic guidance and policy
coordination
Specific linkage
policies
Strategic FDI
attraction
Source: Altenburg, 2005.
Strengthening
absorptive
capacity
SUPPLY CAPACITY BUILDING
• South Africa
 The Workplace Challenge
 The Competitiveness Fund
 The Sector Partnership Fund
 Overcoming the information gap
 Encourage investment in local manufacturing
 Reduce imports and logistic costs
 Enhance technology, skills and managment of local
suppliers
CLUSTER DEVELOPMENT
• Based on specialised skills and networking
dynamics
– Electronics in Malaysia
– Electronics in Mexico
– Automotive industry in Thailand
CLUSTER DEVELOPMENT IN THAILAND
 Automotive industry in Thailand
 Cost competitiveness based on low
factor input costs, which are raising now.
 Challenge: improve productivity and
lower costs or move up to the next tier
within the GVC.
 Opportunity: subregional coordinated
strategy to involve neighboring countries to
become lower tier suppliers.
Source: Thailand Automotive Institute
PUBLIC-PRIVATE PARTNERSHIPS
• Czech Republic Supplier Development Programme
 Matchmaking, seminars, fairs, capacity building
• Business Linkage Programme Uganda
 Supported by UNCTAD and its local EMPRETEC centre
• Projecto Vínculos Brazil
 i.e. linkage partnership between Petrobas and Sebrae under
the National Mobilization Programme for the Oil and Natural
Gas Industry
 Managment training
 Enhancing technical level (quality, health safety and CSR management
systems)
Ghana
X
Fanny Naana Yawa AnkuUganda
is a young woman X
who
until recently engaged
in tailoring out of
Brazil
X
Zimbabwe
X
El Salvador
a little outlet
Accra. After
being admitted
Nina
XinInteriors,
a Ugandan
SME to
the EMPRETEC
Fanny opened
Brazilian EMPRETEC
foundedprogramme,
by Nina Karugaba,
benefited
Divine Ndhlukula, CEO ofThe
Securico
The
Fundación
Empresarial
para lafrom
Fashion.
EMPRETEC
Programme,
by Naku’s
the business
development
Jordan
X her first store,
Security (Pvt.) Ltd.,
provides
security implemented
Acción Social
(FUNDEMAS),
which
gaveable
her
customized
help in creating
a the
SEBRAE,
has been
to
services
promote
of Enterprise
Uganda,
services and money transfers
for
Chile
X
manages
the EMPRETEC
Centre
in
El as wellrunning
business
plan
as strategies
for various
best
practices within
the country.
institution
the EMPRETEC
A participant
the local
commercial
andof
domestic
properties
Salvador,
promotes
the culture
of programme
horizons
and capacities
of her business. In
in Uganda.
training
stated:
“This
andentrepreneurial
financial institutions.
Divine
started
Thanks
to
the
excellent
performance
corporate
social
responsibility,
addition
to planning, EMPRETEC
provided
One
of
the
strategies
of EMPRETEC
is
gaveinme
theachieved
courage
to
open
my
hercourse
company
2001.
in
more
than
10
years
of
and
innovation.
guidance
and to
implementation,
helpinghandher to
tomore
use the
power
of networks
After
three
help years of training,
own business. entrepreneurship
I became
efficient
operations,
EMPRETEC Chile has
raise capital
for the
her
entrepreneurs
navigate
through
holding
andbusiness.
mentoring, the company
in information
seeking
and
knowing
Today,
her business
has
not
only
grown
Uruguay
been
selected
by
the
Government
to
X
The to
Centre
obtained
the certification
various
processes
of
business
has
increased
creation
the amount of tax
which
institutions
seek
for
support.
in terms of profits, turnover
and
develop
curricula
for
primary
and
ISOwhich
9001:2000
for
system
of Fanny
Today,
has itexpanded
business
to
development.
revenue
providesher
to the
Government
It also taught
me
points
areits
employment
creation,
but and
also
secondary
PROEX
schools.
EMPRETEC
assisted
quality
management.
Pablo
Durán,
of
include
20
employees
five
from
$30,000and
to $850,000
annually, at
important and(as
what
into
geographically
she to
hastake
opened
an
participating
companies
to
make
them
Pan Santa
Eduvigis,
saysshowroom/boutiques.
“my sucha combined
Nowofshe
says that
Formal
programmes,
as the
cost
$12,000.
Enterprise
account
in a business.
This
important
office
in Malawi).
Divine
isexport-ready,
anisevaluation
active
A
recent
with
confirmed
74
per
that
cent
of
professional
life want
is Linkage
divided
into
two:
thanks
to Uganda
the programme’s
training
and that
Business
Programme,
also
also assisted
six firms
for start-ups,
especially
ifthan
you
tocent
member
of a mentorship
programme,
more
participants
50
per
creating
of
EMPRETEC
an
export
before
and
afterinEMPRETEC.
After
encouragement
- “I know
I want
and I in
assist
the growth
and
development
have linked
with what
26 local
businesses
right. Thank
you,
EMPRETEC.”
andstart
sponsors
the annual
EMPRETEC
programme
department.
participants
experienced
two years,ofI local
am sending
my
canfirst
getconnecting
there
enterprises
by
order to streamline
them
their supply chains.
Zimbabwe Award for increased
Young product
quality
and
containertotolarge
export
my products
to hard”.
by working
transnational
corporations.
Entrepreneurs
profitability.
Thailand.”
EMPRETEC
Click on the orange dots to get some examples.
Business Linkages: Uganda
• Six firms have teamed up
with 26 local businesses to
streamline their supply
chains.
• For example, Uganda
Breweries assists over 2,000
farmers with supply chain
management and guarantees
barley supplies locally. In
Western Uganda, Kinyara
Sugar Works Limited has
introduced a new credit
scheme enables farmers to
save and access small loans.
Signing of partnership agreements
in Uganda
Business Linkages: Brazil
Projeto Vinculos: 11 large
corporations are helping over
80 local partners upgrade in
order to meet quality and
environmental standards. For
example, following a
successful pilot phase, BASF
has decided to extend its
supplier upgrading
programme to all its Brazilian
operations, covering 100 per
cent of the costs.
Projeto Vinculos in Brazil
Business Linkages: Vietnam
• Unilever
Viet Nam plans to
step up domestic production
by 59 per cent.
• Unilever Viet Nam supports
the training and development
of SMEs in total productive
maintenance (TPM) in safety,
hygiene, performance
monitoring and a
manufacturing sustainability
improvement programme.
• Domestic producers became
exporters
IN CONCLUSION
• Global value chains which operate in a transparent
and accountable way can be engines for economic
growth and sustainable development
• Innovative policies to favour business upgrading
essential for sustainable development and SME
support
• Important to include in the Aid for trade initiative
the enterprise dimension in building productive
capacities, to unleash enterpreneurial talents and
skills in developing countries
• Dynamics effects of regional integration and
South-South co-operation
• Public Private Partnerships deliver good results
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