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Understanding Global and Regional Value Chains – A focus on services sector
Komi Tsowou Economist, African Trade Policy Center
Regional Integration and Trade Division
United Nations Economic Commission for Africa
Measuring the contribution of financial services to regional value chains in Nigeria
ECA
Measuring the contribution of financial services to regional value chains in Nigeria
ECA
WWW.UNECA.ORG
OUTLINE
• Basics on Global Value Chains (GVCs) /
Regional Value Chains (RVCs)
• Trade policy space and the AfCFTA
• Role of Services sector in GVCs/RVCs
• Project on Services Trade : an overview
Basic concepts in trade, GVCs/RVCs ECA
Gross trade flows: gross value of exports/imports
Trade in Value Added: approach to quantify the sources (by country and industry) of value that is added in the production of traded goods and services;
GVCs/RVCs : International structure/organization of production, trade and investments of goods and services located across various regions/countries/firms
Value Added vs. Gross measures of trade ECA
Illustration: cocoa to chocolates
Nigeria Belgium China
Gross Exports (X) of intermediates (100)
Gross X of final goods/services (300=100
+ 200)
Value added X = 200
Value Added X = 100
An illustration of the GVCs: Nutella chocolate ECA
Source : C. Degain and V. Kummritz. WTO-Chair Workshop on GVCs and TiVA (2017)
Basic concepts in trade, GVCs/RVCs ECA
Backward linkages: import of foreign inputs to produce goods/services for export
Forward linkages : exports of intermediates/inputs to GVC partners to produce their goods and services for exports
African countries GVC participation by sector, backward and forward integration, 2011
Source : UNECA, Economic Report on Africa 2015
Why do GVCs/RVCs matter ? ECA
• GVCs/RVCs weight on trade policy space
• US-China “trade war”
• Soft versus hard Brexit
• Free trade areas and their implications for economies
• GVCs/RVCs/trade/labors nexus
• Labor markets competition across countries worldwide
• Political pressure in advanced economies;
• Finer division of labor by firms, countries, regions
•Competition, business profitability, etc.
ECA
Case of trade policy space : the
African Continental Free Trade Area
(AfCFTA)
Picture from 2018 Africa Trade Forum concluded in Lagos, Nigeria
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Chart TitleCase of trade policy space : AfCFTA ECA
• African economies are fragmented : difficulties to build
competitive productive capacities and RVCs
• 22 African countries have populations under 10m
• Trade frustrated by more than 100 unique land borders
between 54 countries
• AfCFTA to consolidates Africa into $2.3tr market of
1.3bn people and to allow scale economies, improved
competition, lower business costs and promotion of
RVCs
African countries by population: 2015 estimates
Case of trade policy space : AfCFTA ECA
• AfCFTA Scope : trade in goods and services, investment, intellectual property rights, competition policies
• Removal of non-tariff barriers, including burdensome customs procedures or excessive paperwork for traders and Cooperation between customs authorities ;
• Progressive liberalization of services;
• Easing of trade (for both inputs and outputs) and services to facilitate the establishment of RVCs;
• Private sector to access trade remedies strategic domestic industries can be safeguarded;
• Dispute settlement mechanism for the resolution of any disputes that may arise between State Parties of the AfCFTA agreement;
• Integrated markets to boost trade and industrialization --- addressing fragmentation of African economies and creation of RVCs/ Better integration to GVCs
Role of services sector ECA
Source : C. Degain and V. Kummritz. WTO-Chair Workshop on GVCs and TiVA (2017)
Dynamic services sector : critical for the success of Africa’s behind the border Agenda
Categorization of services in the modern
productive systems ECA
Standalone Services --- Embodied Services ---Embedded Services
Standalone Services
Services that are offered independently, or which constitute the main core of a productive structure.
Embodied services
Services inputs consumed as intermediates in the production of final goods or services
Embedded services
Non standalone services that can only be used in conjunction with a manufactured goods (but not embodied : their value is not typically included in the value of good)
“Servicification” of production systems (for goods and services)
E.g: Financial services used by a manufacturer to sources inputs; transport services: a manufacturer uses domestic and international transport links to ship their goods to consumers.
Example : apps or software that can be purchased and used on a personal electronic device;
E.g: a Bank which provides loans to
consumers; a restaurant, which offers diners hospitality services
Why a Project on Services Trade ? ECA
• Services are an important category of economic activity and trade, as well as critical enablers for trade in goods
• Services constitute increasingly important inputs for global and regional value chains and are thus key for benefiting from global trade
• Services foster inclusiveness (services are strong employment generators, create an enabling environment, enable better access)
• Address data gaps in services sector to assess its contribution and maximise its full potential
• Specific countries requests
Why a Project on Services Trade ? ECA
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Ethiopia Gambia, The Kenya Mali Nigeria Togo
Per
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Country
Services Employment % Total Services % GDP Services Trade % GDP
Services employment as a percent of total employment, services value added as a
percent of GDP, and services trade relative to GDP, project countries, 2014.
Why a Project on Services Trade ? ECA
Financial sector’s contribution (direct) to GDP in Nigeria …
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Q1
/18
Q2
/18
Q3
/18
Q4
/18
Q1
/19
Overview ECA
Donor: UN Development Account
Implementing agencies: UNCTAD and UNECA
Project countries: Ethiopia, Gambia, Kenya, Mali, Nigeria, Togo
Duration of project: 2018-2021
National Implementing partners for Nigeria : Federal Ministry of Industry, Trade and Investment and the Bank of Industry
Country Focal person : Mr Leonard Kange, General Manager, Large Enterprises– Bank of Industry, Nigeria
National Consultant (project lead): Ms Chinwe Egwim, Economist & Project Lead for Nigeria
Value of the project ECA
•Measuring regional services value chains
• Use of input-output tables (from national statistical offices and international data sources)
•Use of surveys to compile data
•Analysing selected RVCs (financial services sector in Nigeria) and developing action plans for better integration into GVCs/RVCs --- maximise the full potential of the private sector
•Strengthen linkages and reduce leakages
Measuring the value added contribution of financial services sector
How much content is domestic and how much is foreign value added ?
How strong are the linkages within financial sub-sectors and between financial sector and other economic sectors (or sub-sectors) at national and regional levels ?
How can the target countries further develop their financial sectors to position themselves as regional hubs while learning from success stories ?
TransportFinancial
serv.
Trade
Dom. VA
Foreign VA
Dom. VA
Foreign VA
Agriculture
Dom. VA
Foreign VA
Manufact.
Dom. VA
Foreign VA
Dom. VA
Foreign VA
Focus on Financial services Sector
In country activities ECA
Quantitative and qualitative analysis of regional value
chains in services (selected services sector)
National capacity building activities on the contribution
of services to regional value chains
Measurement and analysis of specific services RVCs
National seminar and advisory services to develop
action plan to design and implement policies which
promote integration into value chains and fully benefit
the private sector
Borderless Activities ECA
Online knowledge sharing platform to exchange
experiences, lessons learned and best practices on
measuring and analysing services value chains
Guidebook on best practices and experiences in
services value chains analysis in Africa (documenting
experiences from project)