I.1 Examples of national policy to support global value chain participation

FIGURE I.1 Examples of national policy to support global value chain participation

Commodities to limited manufacturing Limited manufacturing to advanced manufacturing and services Advanced manufacturing and services to innovative activities

Fundamentals Policy priorities

Foreign direct investment: adopt supportive investment policy and improve the business climate

Endowments

Market size

Geography

Institutions

Finance: improve access to banks

Labor costs: avoid rigid regulation and exchange rate misalignment

Access to inputs: reduce tariffs and NTMs; reform services Finance: improve access to equity finance

Technical and managerial skills:

educate, train, and open to foreign skills Advanced skills: educate for innovation and open to foreign talent

Standardization: harmonize or mutually accept standards

Market access: pursue trade agreements

Trade infrastructure: reform customs; liberalize transport services; invest in ports and roads Market access: deepen trade agreements to cover investment and services

Advanced logistics services: invest in multimodal transport infrastructure

Basic ICT connectivity: liberalize ICT services; invest in ICT infrastructure

Advanced ICT services: expand high-speed broadband

Governance: promote political stability

Standards certification: establish conformity assessment regime Governance: improve policy predictability; pursue deep trade agreements

Contracts: enhance enforcement

Intellectual property rights: ensure protection

Source: World Bank 2020. Note: ICT = information and communication technology; NTMs = nontariff measures.

• Kenya shows how pioneering foreign investment helped create a route to international markets for local firms in horticulture. Supplier relationships with multinational corporations (MNCs) exposed local firms to global product standards and certification and helped such firms master the required processes and technologies.

• Honduras used special economic zones and international trade and investment agreements to develop its textile and apparel industry. The combination of new infrastructure, regulatory flexibility, and lower trade costs helped boost investor confidence and attract export-processing FDI.

• Malaysia used targeted investment promotion, incentives, and facilitation to attract “superstar” firms and help jump-start its electrical and electronics (E&E) industry. Evolving linkages and incentive programs supported cluster development and a gradual shift toward higher-value-added activities.

• Mauritius shows how FDI liberalization and alliances with MNCs helped expand and upgrade its tourism industry. Local companies engaging in such partnerships