TRADE

Global value chain can drive Kenya's growth - World Bank

Kenya challenged to ensure value addition on its products

In Summary

•A report by the Organization for Economic Co-operation Development(OECD) reveals that Africa’s participation in global trade and investment flows remains low when compared with other regions.

•The World Development Report 2020 advocates for the importance of Global Value Chains in tackling inequality and poverty.

World Bank headquarters
World Bank headquarters

Kenya has a tremendous opportunity for economic growth through trade in the global value chain, a senior economist at World Bank has said.

A report by the Organization for Economic Co-operation Development(OECD) reveals that Africa’s participation in global trade and investment flows remains low when compared with other regions.

The World Development Report 2020 advocates for the importance of Global Value Chains in tackling inequality and poverty.

A global value chain(GVC) is the series of stages in the production of a product or service for sale to consumers.

Each stage adds value, and at least two stages are in different countries.

According to the report, deep trade agreements between countries are linked to GVC growth.

Challenges such as poor infrastructure in Kenya such ass poor connectivity limits global trade as these in turn leads to high trade costs.

Restrictive trade and investment policies in the country also pose a great barrier to global trade.

“We call upon the African Free Continental Area To rethink how to allow free trade,” a pabnelist said during a recent policy meeting held in Nairobi.

The African Continental Free Trade Area (AfCFTA) came into effect on May 30, 2019.

Kenya in the global value chain has limited manufacturing in the country as some products produced here, are exported to be processed in other countries.

An example is Lipton Tea which is imported from United Kingdom , processes some of its tea from Kenyan tea farms.

When firms produce and process product in their own country, this makes them more productive and also leads to creation of more jobs.

Kenya also has low adoption of international quality and standards which is a barrier in dealing in the global value chain.

Kenya should therefore tackle the underlying challenges and look at the global value chain as a key development indicator in accelerating economic growth.