The World Bank has tasked developing nations to explore the potentials buried in Global Value Chains (GVCs) and be self-reliant, as economic benefits are shared more widely across society.
In its World Development Report 2020, the international lender explained that GVCs have powered an economic transformation, allowing the poorest countries to quickly climb the development ladder. Such chains, according to the report, enable developing countries to specialize and grow wealthier without having to build whole industries from scratch.
Chief Economist, World Bank Group, Pinelopi Koujianou Goldberg, said, “Global value chains have played an important part in growth, by enabling firms in developing countries to make significant gains in productivity, and by helping them transit from commodity exports to basic manufacturing.
“In the age of global value chains, all countries have much to benefit by speeding up reforms that increase commerce and boost growth. Countries need trade to develop, and an open, predictable environment benefits everyone. To ensure sustained social support for trade, policymakers need to ensure that the benefits of global value chains are widely shared among a broad range of groups—especially the poor and women and that the environment is protected.”
The Work Bak report states that, “Today, global value chains account for nearly 50% of trade worldwide. But their growth has plateaued since the financial crisis of 2008,” the report finds. It added that trade frictions have created uncertainties over market access, causing firms to consider delaying investment plans.
“Moreover, the gains from participating in global value chains have not been distributed equally across and within countries. Environmental costs are growing, mainly from higher carbon dioxide emissions due to transportation of intermediate goods across greater distances.”
What are GVCs?
- The era of companies manufacturing things primarily in one country has fizzled out. Today, a single finished product often results from manufacturing and assembly in multiple countries, with each step in the process adding value to the end product.
- Through GVCs, countries trade more than products; they trade know-how and make things together. Imports of goods and services matter as much as exports to successful GVCs.
- GVCs integrate the know-how of lead firms and suppliers of key components along stages of production and in multiple offshore locations. The international, inter-firm flow of know-how is the key distinguishing feature of GVCs.
- Promote productivity and growth: A 1% increase in participation is estimated to boost per capita income levels by more than 1%—about twice as much as standard trade. In Ethiopia, firms participating in global value chains are more than twice as productive as similar firms that participate in standard trade.
- Reduce poverty: Since gains in growth from global value chains are larger than from trade in final products, their impact on poverty reduction is also larger. Regions in Mexico and Vietnam that participated more intensively in global value chains experienced greater reductions in poverty.
- Deliver better jobs: Firms in global value chains draw people into more productive manufacturing and services activities and tend to employ more women, supporting structural transformation in developing countries.
Despite these challenges, the report found that Global Value Chains can continue to be a force for sustainable growth — if developing countries undertake environmental protection measures, particularly efforts to reduce production subsidies and carbon pricing, deeper policy reforms and advanced economies pursue open, predictable policies.
The report showed how countries can take the initiative to achieve better outcomes — by choosing from a range of options customized for their specific stage of development. These options, it said include stronger policies to reduce carbon emissions (like pricing environmental degradation) and to help displaced workers find new jobs.
Central banks digital currencies pose a threat against the U.S dollar
In general, digital currencies could weaken the power of U.S. sanctions and the ability of the U.S. Treasury to watch illicit financial flows.
A new report by America’s biggest bank, JP Morgan Chase, said the U.S dollar is being faced with a major threat as many central banks’ digital currencies continue to gain traction.
Analysts, including Josh Younger, the head of U.S. interest-rate derivatives strategy and Michael Feroli, the chief U.S. economist, wrote in a report saying this:
“There is no country with more to lose from the disruptive potential of digital currency than the United States.
“This revolves primarily around U.S. dollar hegemony. Issuing the global reserve currency and the medium of exchange for international trade in commodities, goods, and services convey immense advantages.”
Aditi Kumar and Eric Rosenbach also recently penned an opinion piece for Foreign Affairs in which they noted that “Just recently, America’s arch-rival China became the first major economy to carry a real test of a national digital currency.”
In general, electronic currencies could weaken the power of U.S. sanctions and the ability of the U.S. Treasury to watch illicit financial flows. A digital Chinese currency (yuan) combined with China’s developed electronic payment systems may give China more future influence than it ever bargained for.
What Nigerians should know about Digital currencies
A digital currency is a cash balance recorded electronically on a store value card or other physical devices, which could someday replace the physical notes of the naira, for instance.
Digital currencies can be decentralized, that is where the control over the cash supply can come from diverse sources. Digital currencies can also be centralized, where there is a midway point of control over cash supply, just like the way central banks work.
Although JP Morgan does not see the U.S dollar being overthrown as the world’s reserve currency anytime soon, experts warned that the U.S dollar dominance could weaken. This is because its processing trade settlement and the SWIFT system could make it more vulnerable.
The American bank continued by saying:
“Offering a cross-border payment solution built on top of a digital dollar would, particularly if designed to be minimally disruptive to the structure of the domestic financial system, be a very modest investment to protect a key means to project power in the global economy,
“For high-income countries and the U.S. in particular, digital currency is an exercise in geopolitical risk management.”
Federal Reserve Chairman Jerome Powell said months ago that the Federal Reserve was taking a critical view on the issues regarding a digital currency.
Dollar gains against major currencies
U.S dollar stood firm against major currencies on Monday as fears over rising tensions between America and China over Beijing’s plans to begin
The U.S dollar was up on Monday morning during London’s trading session after protests in Hong Kong yesterday escalated U.S-China tensions.
US dollar stood firm against major currencies on Monday as fears over rising tensions between America and China heightened.
The American Dollar Index that monitors the U.S dollar against a basket of other major currencies was slightly up 0.02% to 99.945 by 11.10 am Nigerian local time.
What it means: Nigerians hoping to meet a foreign exchange payment obligation, transactions via the dollar to countries like Europe, Japan, would have the need to pay fewer dollars to fulfill such transactions.
Meanwhile, the friendship between the Americans and Chinese has soured lately since the outbreak of the COVID-19 pandemic. US President Trump and President Jinping of China have traded words against each other issues surrounding COVID-19, including accusations of lack of transparency and cover-ups.
Consequently, the U.S. Commerce Department added 33 Chinese businesses to a blacklist on Friday, and some U.S. Senators proposed sanctions on those businesses.
“The biggest concern is the tension between the United States and China, things were already bad, and it is likely to get worse because of the Hong Kong security law. This supports risk-off trades, which is positive for the dollar and the yen,” Tekuya Kanda, the general manager of research at Gaitame.com Research Institute, told Reuters.
Air Peace to evacuate stranded Indians from Lagos to Kerala
A list of the passengers to be attended to has already been given and the flight shall depart Lagos on May 30, 2020, to Cochin Airport, Kerala.
The management of Air Peace Nigeria has been contacted by the Indian High Commission in Nigeria to undertake the evacuation of stranded Indian nationals to Kerala, India. This was disclosed by the airline via its Twitter handle.
The airline explained that a list of passengers that would be attended to have been released and it has started reaching out to the Indians on Saturday.
It stated, “A list of the passengers to be attended to has already been given to us and we have commenced reaching out to them. The flight shall depart Lagos on May 30, 2020, to Cochin Airport, Kerala.”
The flight is not free anyway. According to the airline, payments are expected immediately and they are Economy is $1.300 and Business class is tag $1,700. “You are equally allowed to pay in Naira at N460/$,” it added.
PUBLIC NOTICE (23-05-2020) pic.twitter.com/bn0xNxnRmO
— Air Peace (@flyairpeace) May 23, 2020
However, some Indians in Nigeria has reacted with mixed feelings to the development on Twitter. While some were ready to join the flight back home, others called for the refund of ticket fare booked a week ago.
For instance, Jayant Khamesra requested for the refund ticket fare of N568, 100, which he paid for a flight from Lagos to Delhi.
He said, “Please refund ticket fare P47812 LAGOS to DELHI. No show by Air Peace and it is been 1 week now, there has been no refund or confirmation of the same. Reference ALHN79 amount N568,100. I am sure a good world-class carrier like Air Peace won’t delay refunds purposely. Please act fast.
Pls refund ticket fare P47812 LAGOS to DELHI – NO SHOW by AirPeace and it’s been 1 week now —- there has been no refund or confirmation of the same. Reference ALHN79 Amount 568100 NGN. Am sure a good world class carrier like AIRPEACE won’t delay refunds purposely. Pls act fast
— Jayant Khamesra (@JKhamesra) May 23, 2020