International Development Lending and Global Value Chains in Africa

Image: Flickr, Stephen Jaffe
Image: Flickr, Stephen Jaffe

Participating in the production of global production fragmentation by connecting to global value chains (GVCs) provides a ‘golden’ opportunity for developing countries to access international markets and boost economies.

International institutions such as the World Bank, International Monetary Fund, and the United Nations Industrial Development Organization have expended great effort to promote proper policies that can help low-income countries take advantage of such opportunities. This work explores the extent to which international development lending can support African countries in trading intermediate goods with foreign partners, with the goal of further specializing in high value—added activities within cross—national production networks. The empirical analysis relies on a dataset that includes both Chinese and World Bank loans to a set of 35 African countries from 2000 to 2018. Based on this research, it appears that Chinese lending increases the involvement of borrowing countries in the international trade of intermediate goods, while World Bank loans contribute to move African countries toward higher valued added activities along GVCs.

1 Jan 2021