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New Framework Helps Countries and Companies to Respond Disruptions in Global Value Chains

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The World Economic Forum, in partnership with the United Nations Development Programme (UNDP), announces today a new Strategic Value Framework to help stakeholders in global value chains, understand and respond to the impacts of disruptions, brought on by emerging technologies, the climate emergency and trade tensions.

The paper explores three global value chains: the cotton industry; the electronics industry; and the automotive industry. It explains that by measuring and effectively responding to disruptions in these three global value chains, the total value could increase about 65% over three years. No response could result in a loss of up to 28% in those global value chains.

“Global Value Chains are undergoing profound changes”, said Borge Brende, President, World Economic Forum. “Stakeholders should no longer stand alone in this complex environment, but rather form new partnerships and take a multistakeholder approach to more efficiently use, transform and trade resources. The World Economic Forum and United Nations Development Programme provide a pioneering platform, where public and private sectors, including international organizations, come together for collaborative action and gain access to advanced tools, such as the Strategic Value Framework.”

Businesses and governments can respond to potential disruptions by reorienting business models in three key ways:

· From upstream to downstream: The importance of tailoring supply to customer needs is growing

· From economies of scale to economies of skills: Innovation and a talented and specialist workforce are becoming increasingly important

· From focusing on the costs of focusing on products: Generating value will depend on a wider view across global value chains

“Global value chains have helped fuel significant global economic development and GDP growth, but the current global system of production will evolve radically in the next decade,” said UNDP Administrator Achim Steiner. “This reports highlights some of the disruptive trends and how new forms of public-private partnership can help mitigate these threats and secure more inclusive and sustainable development.”

An interactive tool created as part of the Strategic Value Framework allows users to explore how disruptions, such as emerging technologies, the climate emergency and trade tensions, could impact their existing global value chains. The outcomes of the framework serve to inform and guide stakeholders in the transition to the future of production and global value chains.

The Government of Bangladesh will be a pioneer, using this tool to facilitate dialogues and actions on the textile industry, the country’s most important export business.

“The manufacturing textile sector represents 80% of Bangladesh total export,” said Mohammed Shahriar Alam, State Minister for Foreign Affairs of Bangladesh. “We need new partnerships and proactive approaches, with tools such as the Strategic Value Framework, to be better prepared for the future of production and global value chains.”

The Strategic Value Framework was created in collaboration with A.T. Kearney.

A session on preparing for value chain disruptions will be discussed at the Sustainable Development Impact Summit, which will take place in New York on 23-24 September. This year’s meeting will convene more than 700 regional and global leaders from government, business, civil society, and academia. The meeting will explore four themes:

transforming markets; accelerating climate action; financing sustainable development; and mobilizing action for inclusive societies.

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ADB Project to Improve Fiscal Management, Develop Capital Markets in Armenia

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The Asian Development Bank (ADB) has approved a $40 million-equivalent policy-based loan attached to reforms that help strengthen fiscal sustainability and develop the financial and capital markets in Armenia. These are crucial enablers of private sector development.

Armenia’s economic growth over the last few years has been hampered by low levels of investment, both foreign and domestic, given the high costs of local currency finance and related constraints in the financial system. Efficiency-promoting upgrades in public investment and fiscal management are also needed to ensure sustained improvements in fiscal outlook and sovereign risk pricing.

“Financial markets remain nascent in Armenia, which limits the development of the country’s private sector and the banking industry,” said ADB Senior Financial Sector Economist for Central and West Asia Mr. João Farinha Fernandes. “This also constrains public finance and fiscal management, while exposing the economy to financial stability risks. ADB’s assistance is intended to help ensure that Armenia develops a conducive fiscal and financial intermediation environment where private sector players, both big and small, can contribute to growth and development.”

ADB approved a $50 million policy-based loan in November 2018 as part of an ongoing programmatic engagement on financial reforms to strengthen public debt and fiscal risk management, and to develop financial markets in Armenia.

The Second Public Efficiency and Financial Markets Program continues these reforms by strengthening the effectiveness of the government’s fiscal risk management function; promoting the development of fiscally responsible public–private partnerships; and enhancing market transparency and predictability in public debt management. The program will also improve the infrastructure of the government securities market and money market infrastructure, enhancing the sustainability and resilience of Armenia’s finance sector.

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Bangladesh Can Boost its Exports with Better Logistics

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To meet the needs of its growing economy and to boost export growth, Bangladesh needs to improve its transport and logistics systems, says a new World Bank report launched today. 

The report Moving Forward: Connectivity and Logistics to Sustain Bangladesh’s Success, finds that by making logistics more efficient, Bangladesh can significantly boost export growth, maintain its position as a leading ready-made-garments and textile producer, and create more jobs. The report notes that congestion on roads and in seaports, high logistics costs, inadequate infrastructure, distorted logistics service markets, and fragmented governance hamper manufacturing and freight, further eroding Bangladesh’s competitive edge and putting its robust growth path at risk. 

“Bangladesh’s congested transportation and often unsophisticated logistics systems impose high costs to the economy,” said Mercy Tembon, World Bank Country Director for Bangladesh and Bhutan. “By making its logistics more efficient, Bangladesh can significantly optimize its connectivity, business environment, and competitiveness, putting the country on the right path to become a dynamic upper-middle-income country.”

Efficient logistics, the report argues, has become one of the main drivers for global trade competitiveness and export growth and diversification. For Bangladesh, improving its logistics performance provides an opportunity to increase its world market share in garments and textiles, which account for 84 percent of its total exports, expand into new markets, and diversify its manufacturing and agriculture into high-value products. 

The report notes that improving Bangladesh’s logistics requires a system-wide approach based on greater coordination among all public institutions involved in logistics and with the private sector, increasing the effective capacity of core infrastructure, and removing distortions in logistics service markets to reduce costs and improve quality. At a regional level, harmonizing its logistics systems and aligning its customs with that of its neighbors could turn Bangladesh into an important node for regional freight flows and further boost its trade. 

“There’s no doubt that reforms and investments for better transport and logistics will yield Bangladesh substantial economic benefits and strengthen its competitive advantage,” said Matías Herrera Dappe, Senior Economist at the World Bank and author of the report. “But the solution to logistics is not just to invest more but to invest better, by focusing on the service gap, and creating the incentives for high quality and competitive logistics services.”

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New development models to drive growth and employment for youth in Africa

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The United Nations Environment Programme (UNEP) today launched the Global Environment Outlook-6 (GEO-6) for Youth in Africa report on the margins of the 17th session of the African Ministerial Conference on the Environment (AMCEN).

The report analyses the economic opportunities that Africa’s natural resources can provide for job creation and sustainable development. It also provides a package of solutions to tackle Africa’s youth unemployment through the Green Economy.

“This Publication is anchored substantively in the UNEP’s sixth Global Environment Outlook (GEO-6) Regional Assessment for Africa,” said Juliette Biao Koudenoukpo, Director of UNEP’s Regional Office for Africa. “This Assessment has a very clear message; Africa has an opportunity to use its large young population to drive its growth.”

Africa’s youth remains the most hit by unemployment. One-third of Africa’s 420 million youth aged 15 to 35 are unemployed. Of these, 35 per cent are vulnerably employed and 19 per cent are inactive. These numbers will increase dramatically unless urgent actions are not taken.

The report recommends that Africa’s natural capital should be managed sustainably to enhance the livelihoods of African young population, create more sustainable and decent jobs as well as increase social and economic cohesion.

“The Green Economy calls for a paradigm shift in the way that we produce and consume. If young people are the centre of such a shift, they will secure a sustainable future replete with sustainable livelihoods,” said Professor Lee White, Minister for Environment, Forest and Oceans of Gabon and outgoing President of AMCEN. “The Global Environment Outlook-6 for Youth, Africa: A Wealth of Green Opportunities digs deep into that future and shows young people how they can secure their livelihoods through green jobs.”

Natural resources remain a key source of employment in Africa. Eight out of ten people’s employment on the continent are supported by natural resources. Nearly six million Africans are employed in the fisheries and aquaculture sector, ten million people work in the wildlife sector and an average of 54 per cent in the agricultural sector.

The report includes case studies and success stories on African youth who have invested in natural resources to develop entrepreneurship, improve their knowledge and skills as well as create jobs and sustain their livelihoods.

The report calls on governments to encourage youth to invest in green economy through creating platforms for innovation in sustainable development. While confirming the potential of youth in leading green growth in Africa, the report strongly establishes the correlation between green economy and decent jobs.

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