Monday 14 June 2021
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Is Namibia ready to tap into global value chains to promote economic growth?

The International Monetary Fund Mission completed its 2019 Article V1 and concluded that the economy will continue to contract during this year.
0t recommended that the Namibian authorities should embark on structural reforms aimed at strengthening productivity and competitiveness.
Such reforms should lift business confidence and strengthen long-term growth potential of the economy.
The Mission concluded that over time, it is important to remove obstacles to the shortage of well- educated and skilled workers and foster the adoption of new technologies.
One way of achieving these goals is for Namibia to tap into global value chains.
The World Bank has recently released a draft World Development Report 2020 titled “Trading for Development in the Age of Global Value Chains”.
The Report argues that poor countries could grow faster and catch up with rich countries if they could participate in global value chains.
Global value chains have a potential of boosting economic growth, create jobs and reduce poverty provided developing countries implement deeper reforms.
The reforms include the liberalizing of trade at home and negotiating of trade liberalization abroad to overcome constraints of a small economy; improving transportation and communication in order to address the disadvantage of a remote location; investing in human capital; and attracting foreign direct investment to remedy the scarcity of capital, technology and management skills.
Global value chains involve the fragmentation of production across countries.
Global value chains may take place through forward or backward participation.
Forward participation takes place when a country exports inputs that are incorporated into production for the export of other countries.
A good example of forward participation is the export of raw materials from Namibia to other countries for processing. Yellow cake uranium is exported from Namibia to other countries to be processed into nuclear energy.
In mean time blister copper is imported into Namibia by Dundee Precious Metals for smelting at their facility in Tsumeb. Group PSA of France imports Peugeot and Opel parts for their car assembly facility at Walvis Bay.
These cars are exported to other African countries. This is a form of backward participation. A country imports input and exports a finished good.
This leads to import and export led growth.
Global value chains involve long-term firm-to-firm relationships.
This relationship makes global value chains a particularly powerful engine for growth and a natural vehicle for technology transfer.
Firms develop shared interests in specialising in specific tasks. They exchange technologies and learn from each other.
Global value chains are driven by factors such as a country’s geography, endowments, institutions and market size. Geography matters because it determines how a country is connected to markets.
Distance and the resulting trade costs can be an obstacle to trade. Improving connectivity helps a country to participate in global value chains.
In this regard Namibia’s location as coastal state, is well positioned to tap into global value chains.
However, Namibia’s market size is a disadvantage.
Namibia’s membership of various trade agreements such the African Continental Free Trade Area open- up larger markets which could be exploited to the country’s advantage.
While Namibia is endowed with natural resources, the country lucks in technology, capital and skilled labour.
For Namibia to tap into global value chains the country should be business friendly by creating a strong business climate and deepening trade cooperation.
Namibia has strong institutions which protect trade agreements. Our courts are independent. They enforce agreements and protect investors. This puts the country in better position to attract foreign direct investment.
Global value chains require strong environmental protection to ensure that environmental risks are minimized.
The Tsumeb smelter is a case in point. Initially there were fears of pollution around Tsumeb. Government had to put into place monitoring mechanism in order to control pollution.
As the economy continues to contract Namibia should develop strategies of tapping into global value chains as one of the ways of reviving the economy.
The World Bank Development Report 2020 gives pointers as to how countries could benefit from global value chains. Namibia should not be left out of this opportunity.
Our policy makers should formulate strategies which encourage foreign firms to cooperate with local businesses for mutual benefit.
Global value chains should unlock Namibia’s manufacturing potential. This is one way of diversifying the economy.

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