Increasing the skills of workers is critical for participating in and expanding regional


production value chains


The fundamentality of human capital


H Advanced economies, free trade areas and AfCFTA L


ooking at the global development landscape, advanced economies in Europe, North America and East


Asia tend to be the most regionally integrated areas. Research points out that they have certain common attributes such as higher levels of human capital, stronger technological capacities and infrastructure, and greater access to credit, investments, as well as to foreign firms and production networks. From the trade perspective, regional


economic integration usually takes form in common free trade areas or customs unions, offering members preferential trade access to each other’s markets. As proven by recent analyses, we see this through the Association of Southeast Asian Nations (ASEAN) and increased South-South trade, which are features of 21st century globalization.


Regional economic integration in sub-Saharan Africa and Central Asia is comparatively less, partially due to the limited availability of financial and human capital resources, constraints in production and distribution capacity, as well as difficulties in meeting stringent trade requirements. UNIDO is leading the implementation of a framework called the ‘Third Industrial Development Decade for Africa’ to propel the continent’s structural transformation, which is also helping national governments address barriers to the opportunities offered by the newly established African Continental Free Trade Area (AfCFTA). AfCFTA, as now the world’s largest free trade area, provides immense potential for increased industrialization, diversification and job creation in Africa.


SPOTLIGHT SPOTLIGHT


Borderless production systems S 38


ome industries where activities can be more easily separated, such as electronics, automotive


or garments, are more conducive to regional economic integration as proven by history. The fragmentation of industrial production processes, and the dispersion of tasks and activities within these sectors, has led to the emergence


of borderless production systems, which can also be regional in scope and referred to as regional value chains. At the same time, thanks to the rapid development of digital technologies, regional economic integration is increasingly becoming apparent across all sectors. If we look at developing countries and economies in transition,


while it is the local firms – small- and medium-sized enterprises – which account for most economic activity and job creation, only a small proportion manage to join such value chains effectively. The opportunities to integrate into regional and global value chains vary also based on the country’s stage of development.


uman capital is one of the fundamental factors driving industrial development. Investing in human capital helps local industrial firms improve their efficiency and productivity, which also increases their chances of linkages with foreign firms and production networks. Increasing the skills of workers is therefore critical for participating in and expanding regional production value chains. It also offers significant opportunities for developing countries to become part of the global economy, to absorb knowledge and technology, and add value to their industrial products. UNIDO has, for instance, a long-standing partnership program with Hewlett Packard which addresses skills training needs for vulnerable youth in the Middle East and North Africa (MENA) region. The program teaches essential entrepreneurship and business skills and usage of information technology tools to young people in the MENA region, given the importance placed on youth employment in countries’ national development plans. It contributes to the development of micro- and small- sized enterprises, in turn stimulating economic and social development in the region. Another initiative promoting skills development, and at the same time South- South cooperation, is Morocco’s Training Academy for Heavy-duty Equipment and Commercial Vehicles, which delivers training for young people from Morocco, Côte d’Ivoire and Senegal. Established in partnership with the Volvo Group, the Academy delivers labor market-oriented training, matching the needs of the private sector.


PHOTO: UNIDO


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