But COVID-19 poses unprecedented challenges to global value chains by disrupting both the supply of goods and also the demand for them. How has the coronavirus pandemic affected firms in developing countries that are engaged in global value chains? How are firms adapting to the new normal? What is the role for policy?
“This perfect storm of demand and supply shocks could potentially derail early successes in economic growth and poverty reduction achieved in some countries in the region… Active private-public partnerships to support affected industries and to provide safety nets for workers, are critical to supporting commerce and helping to sustain lives and livelihoods during and after [COVID-19].”
While experiences may vary by country, governments and firms in developing countries can learn from one another as good practices and policy lessons emerge. A recent conversation on Ethiopia and Vietnam brought together representatives of governments and businesses in these two countries to address exactly those three questions.
How has the pandemic affected firms in developing countries that are engaged in GVCs? The pandemic has led to widespread disruptions to GVCs. In Ethiopia, the fall in consumer demand for clothing and the closure of retail stores in high-income countries has significantly hit apparel and textile suppliers. The impact has not been the same across the industry. Firms focusing on sporting goods are bouncing back, as containment measures are lifted and stores in key markets are reopening, while firms that provide formal attire remain subdued.
In Vietnam, electronics value chains have been impacted by lockdowns of overseas suppliers and disruption to logistics services, affecting both shipping of raw materials and electronic components – and delivery of final products to consumers.