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Resource Endowment and Participation in Manufacturing GVCs
Figure 4.3 Links to All Manufacturing GVCs, by Country Group
GVC integration (%) 100 90 80 70 60 50 40 30 20 10 0 –10 –20 37 45 59
23
33 55
All nonresource rich
Non-oilresource rich
Oil exporters Non-resourcerich MICs Non-resourcerich LICs Benchmark group
Backward integration 2015 Forward integration 2015 ∆ GVC participation 2015–1995 ∆ Backward integration 2015–1995 ∆ Forward integration 2015 GVC participation 2015
Source: Abreha et al. 2019. Note: GVC = global value chain; LICs = low-income countries; MICs = middle-income countries.
while rising by 10 percent in minerals and metals exporters (non-oil-resource rich) and 6 percent in the external comparators. Therefore, minerals and metals exporters were integrating into manufacturing GVCs more than the external comparators during that period.
Oil exporters and minerals and metals exporters show higher forward links compared with non-resource-rich countries, whereas non-resource-rich countries have higher backward links relative to the other two groups. This evidence suggests that the higher forward links are potentially associated with exports of natural resources, which in turn explains a significant part of the higher GVC participation rates of oil exporters and minerals and metals exporters. Thus, the FVA content of exports of countries endowed with natural resources tends to be low, whereas the DVX tends to be high, predominantly constituting exports of low-value-added oil, minerals, and metals.
Resource Endowment and Participation in Manufacturing GVCs
Variation between Oil Exporters, Minerals and Metals Exporters, and Non-Resource-Rich Countries
In the non-resource-rich group, Rwandan manufacturers have greater linkage rates to GVCs in aggregate compared with their counterparts in Malawi, Senegal, and Uganda. However, backward links are stronger in Uganda and
Malawi, and backward links grew the most in Uganda between 1995 and 2015, as shown in figure 4.4. In addition, links to GVCs increased in some countries (for example, Malawi and Uganda) but declined in others (for example, Rwanda and Senegal).
Among minerals and metals exporters, the Democratic Republic of Congo has the highest GVC participation rate because of strong forward links, and South Africa has the highest backward linkage rate (figure 4.5). GVC participation rates are higher for Zambia than for Ghana, but forward links are slightly higher in Ghana. Moreover, forward and backward linkage rates increased in Ghana, the Democratic Republic of Congo, and South Africa, but they remained the same (forward linkage) or declined (backward linkage) in Zambia. Among oil exporters, participation rates are higher in Nigeria than in Cameroon but have declined in Nigeria (figure 4.6). Thus, not all resource-rich countries have experienced an increase in participation rates.
Links to manufacturing GVCs are facilitated by an economy’s size and structure, closeness to larger economies, common language and borders, regional trade agreements, and colonial ties.
The cross-country differences in participation rates within each group of countries are attributable to some of the factors highlighted in annex 4A.
Figure 4.4 Links to Manufacturing GVCs: Non-Resource-Rich Countries
GVC integration (%) 100 90 80 70 60 50 40 30 20 10 0 –10 –20 34 44
24 29
Malawi Rwanda Senegal Uganda
Backward integration 2015 Forward integration 2015 ∆ GVC participation 2015–1995 ∆ Backward integration 2015–1995 ∆ Forward integration 2015–1995 GVC participation 2015
Source: Abreha et al. 2019. Note: GVC = global value chain.
Figure 4.5 Links to Manufacturing GVCs: Minerals and Metals Exporters
GVC integration (%) 100 90 80 70 60 50 40 30 20 10 0 –10 –20 65
27 39
31
Congo, Dem. Rep. Ghana South Africa Zambia Backward integration 2015 Forward integration 2015 ∆ GVC participation 2015–1995 ∆ Backward integration 2015–1995 ∆ Forward integration 2015–1995 GVC participation 2015
Source: Abreha et al. 2019. Note: GVC = global value chain.
Figure 4.6 Links to Manufacturing GVCs: Oil-Rich Countries
GVC integration (%)
70 60 50 40 30 20 10 0 –10 –20 33 59
Cameroon
Nigeria Backward integration 2015 Forward integration 2015 ∆ GVC participation 2015–1995 ∆ Backward integration 2015–1995 ∆ Forward integration 2015–1995 GVC participation 2015
Source: Abreha et al. 2019. Note: GVC = global value chain.
Participation rates in GVCs for local firms are likely to be greater with counterparts in larger economies, neighboring countries, and countries with common colonial ties. Participation in common regional trade agreements is also likely to promote entry into manufacturing GVCs. Physical distance to major international markets is another important determinant of links to manufacturing GVCs, but this is the case only for non-resource-rich countries.1 These factors, identified as potential influencers of participation in manufacturing GVCs, are pertinent to backward and forward links.
Variation in the level, growth, and direction of links to GVCs across industries within countries and country groups provides a basis for industrial policies to exploit comparative advantages to facilitate links to manufacturing GVCs.
Links to GVCs were substantially higher in some industries, such as food and beverages and textiles and apparel, in the group of non-resource-rich countries than in the benchmark group in 2015. The higher links in food and beverages reflect higher import content of exports of that industry in the non-resource-rich group, as measured by the indicator for backward links
Figure 4.7 Links to Manufacturing GVCs, by Industry: Benchmark Countries
GVC integration (%) 100 90 80 70 60 50 40 30 20 10 20 29 75
65 85
49 62
55
0 –10 –20 Food and beveragesTextiles and apparelWood and paperPetroleum, chemical andnon-metallic mineralproductsMetal productsElectrical and machineryTransport equipmentAll manufacturing Backward integration 2015 Forward integration 2015 ∆ GVC participation 2015–1995 ∆ Backward integration 2015–1995 ∆ Forward integration 2015–1995 GVC participation 2015
Source: Abreha et al. 2019. Note: GVC = global value chain.
(figures 4.7 and 4.8). The share of exports of food and beverages that ended up as inputs in the exports of destination countries to third parties was slightly higher for the benchmark group, reflecting lower exports of intermediates in the non-resource-rich countries in comparison. Links to manufacturing GVCs declined by large margins across all seven industries in the non-resource-rich country group over the period.
In countries exporting minerals and metals, links in textiles and apparel and electrical and machinery were higher than in the benchmark group, with stronger forward links in electrical and machinery, which reflects higher exports of intermediates in the industry in 2015. The import content of electrical and machinery exports, as captured by backward linkage rates, was identical in the two country groups. However, there was a decline in GVC links in electrical and machinery in the benchmark group because of backward links, whereas backward links increased in that industry among minerals and metals exporters in Sub-Saharan Africa during the period (figures 4.7 and 4.9).
Characteristics of Establishments Linked to GVCs
Establishments that are linked to GVCs through the export of products with imported intermediate input content tend to be relatively large enterprises of
Figure 4.8 Links to Manufacturing GVCs, by Industry: Non-Resource-Rich Countries
GVC integration (%) 100 90 80 70 60 50 40 30 20 10 0 –10 24 36 48
51 58
50 62
37
–20 –30 Food and beveragesTextiles and apparelWood and paperPetroleum, chemical andnon-metallic mineralproductsMetal productsElectrical and machineryTransport equipmentAll manufacturing
Backward integration 2015 Forward integration 2015 ∆ GVC participation 2015–1995 ∆ Backward integration 2015–1995 ∆ Forward integration 2015–1995 GVC participation 2015
Source: Abreha et al. 2019. Note: GVC = global value chain.
