I) Embedding GVCs in development strategy

Policies aimed at supporting a country’s involvement in GVCs should not be developed in isolation from the broader context of a country’s development strategies and efforts to support private sector development. A broad range of policy areas can influence a country’s ability to become involved in and benefit from GVCs. These include education policy and skills development, infrastructure development, initiatives to improve public governance, the tax framework, and the corporate governance framework, to name but a few.

In addition, policies focused on final goods and services are less effective in a global economy characterized by GVCs:

· GVC-related development strategies require more targeted policies focusing on fine-sliced activities in GVCs. They also increase the need for policies dealing with the risk of the middle-income trap, as the fragmentation of industries increases the risk that a country enters an industry only at its low-value and low-skill level.

· The need to upgrade in GVCs and move into higher value added activities strengthens the rationale for building partnerships with lead firms for development. At the same time, GVCs call for a regulatory framework to ensure joint economic and social and environmental upgrading to achieve sustainable development gains.

· Finally, GVCs require a more dynamic view of development. Development strategy and industrial development policies should focus on determinants that can be acquired or improved in the short term and selectively invest in creating others for medium- and long-term investment attractiveness, building competitive advantages along GVCs, including through partnerships with business.

For policy makers, a starting point for the incorporation of GVCs in development strategy is an understanding of where their countries and their industrial structures stand in relation to GVCs. That should underpin an evaluation of realistic GVC development paths, exploiting both GVC participation and upgrading opportunities.

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