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Local embeddedness, upgrading and skill development: global value chains and foreign direct investment in Lesotho’s apparel industry

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  • Cornelia Staritz
  • Mike Morris

Abstract

Many low-income countries (LICs) are integrated into apparel global value chains (GVCs) through foreign direct investment (FDI). This is also the case in Lesotho, which developed into the largest Sub-Sahara African (SSA) apparel exporter to the US under the African Growth and Opportunity Act (AGOA). More recently, a new apparel export market opportunity has emerged in Lesotho, that of the regional market of South Africa. The two export markets, the US and South Africa, are supplied by different types of FDI firms, affiliates of largely Taiwanese transnational producers and of South African manufacturers that are incorporated into distinct value chains. This paper assesses the implications for upgrading integration into these two value chains in Lesotho, the first value chain characterized by Taiwanese investment and feeding into the US market under AGOA and the second characterized by South African investment and feeding into the South African market. These value chains differ with regard to ownership patterns, end markets, export products, governance structures and firm set-up, investors’ motivations and perceptions on the main challenges. These different characteristics have crucial impacts on upgrading possibilities, including functional, process and ‘local’ upgrading. Thus, from the perspective of upgrading and sustainability, ownership patterns, local embeddedness and market diversification matter. The emergence of South Africa as an alternative end market and the different value chain dynamics operating in the South African retailer-governed value chain open up new opportunities away from those of the AGOA-/Taiwanese-dominated value chain.

Suggested Citation

  • Cornelia Staritz & Mike Morris, 2013. "Local embeddedness, upgrading and skill development: global value chains and foreign direct investment in Lesotho’s apparel industry," Global Development Institute Working Paper Series ctg-2013-20, GDI, The University of Manchester.
  • Handle: RePEc:bwp:bwppap:ctg-2013-20
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    References listed on IDEAS

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    1. Simon Roberts & John T. Thoburn, 2004. "Globalization and the South African textiles industry: impacts on firms and workers," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(1), pages 125-139.
    2. Sanjaya Lall, 2005. "FDI, AGOA and Manufactured Exports by a Landlocked, Least Developed African Economy: Lesotho," Journal of Development Studies, Taylor & Francis Journals, vol. 41(6), pages 998-1022.
    3. Phelps, Nicholas A. & Stillwell, John C.H. & Wanjiru, Roseline, 2009. "Broken Chain? AGOA and Foreign Direct Investment in the Kenyan Clothing Industry," World Development, Elsevier, vol. 37(2), pages 314-325, February.
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    5. Mike Morris & Cornelia Staritz & Justin Barnes, 2011. "Value chain dynamics, local embeddedness, and upgrading in the clothing sectors of Lesotho and Swaziland," International Journal of Technological Learning, Innovation and Development, Inderscience Enterprises Ltd, vol. 4(1/2/3), pages 96-119.
    6. Kaplinsky, Raphael & Morris, Mike, 2008. "Do the Asian Drivers Undermine Export-oriented Industrialization in SSA," World Development, Elsevier, vol. 36(2), pages 254-273, February.
    7. John Humphrey & Hubert Schmitz, 2002. "How does insertion in global value chains affect upgrading in industrial clusters?," Regional Studies, Taylor & Francis Journals, vol. 36(9), pages 1017-1027.
    8. Palpacuer, Florence & Gibbon, Peter & Thomsen, Lotte, 2005. "New Challenges for Developing Country Suppliers in Global Clothing Chains: A Comparative European Perspective," World Development, Elsevier, vol. 33(3), pages 409-430, March.
    9. Cornelia Staritz, 2011. "Making the Cut? Low-Income Countries and the Global Clothing Value Chain in a Post-Quota and Post-Crisis World," World Bank Publications, The World Bank, number 2547, Juni.
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    Cited by:

    1. Louise Curran & Khalid Nadvi, 2015. "Shifting trade preferences and value chain impacts in the Bangladesh textiles and garment industry," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 8(3), pages 459-474.
    2. Shengjun Zhu & Canfei He, 2018. "Upgrading in China’s apparel industry: international trade, local clusters and institutional contexts," Post-Communist Economies, Taylor & Francis Journals, vol. 30(2), pages 193-215, March.
    3. Cornelia Staritz & Mike Morris, 2013. "Local embeddedness and economic and social upgrading in Madagascar’s export apparel industry," Global Development Institute Working Paper Series ctg-2013-21, GDI, The University of Manchester.
    4. NJ Matsoma & IM Ambe, 2016. "Factors Affecting Demand Planning in the South African Clothing Industry," Journal of Economics and Behavioral Studies, AMH International, vol. 8(5), pages 194-210.
    5. Yanhua Chen & Suqiong Wei & Hongou Zhang & Yuehua Gao, 2019. "Spatiotemporal Evolution of the Taiwanese-Funded Information Technology and Electronics Industry Value Chain in Mainland China," Sustainability, MDPI, Open Access Journal, vol. 11(11), pages 1-18, June.
    6. John Pickles, 2012. "South African horticulture: opportunities and challenges for economic and social upgrading in value chains," Global Development Institute Working Paper Series ctg-2012-13, GDI, The University of Manchester.
    7. Thomas Bernhardt, 2013. "Developing countries in the global apparel value chain: a tale of upgrading and downgrading experiences," Global Development Institute Working Paper Series ctg-2013-22, GDI, The University of Manchester.
    8. Thomas Farole & Deborah Winkler, 2014. "Making Foreign Direct Investment Work for Sub-Saharan Africa : Local Spillovers and Competitiveness in Global Value Chains," World Bank Publications, The World Bank, number 16390, Juni.
    9. Morris, Mike & Staritz, Cornelia, 2014. "Industrialization Trajectories in Madagascar’s Export Apparel Industry: Ownership, Embeddedness, Markets, and Upgrading," World Development, Elsevier, vol. 56(C), pages 243-257.

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