Forward-backward linkage in developing countries

Forward-backward linkage in developing countries   In developing countries, to achieve successful economi続きを読む

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Forward-backward linkage in developing countries

 

In developing countries, to achieve successful economic growth and job creation, it is crucial to expand the industrial scale. A. Hirschman (1958) focused on this issue by examining industry linkages and proposed that there is a mutual relationship between forward and backward linkages in the expanding industry. Forward linkage refers to the fact that the product of a newly emerging industry is supplied as a material to another industry. It contributes to allowing the emergence of other new industries. Backward linkage refers to the fact that the product of the newly emerging industry induces demand for materials and enables the emergence of supply industries.

Morris & Fessehaie (2014) discus how African countries can realize value-added commodity-based industrialization from the viewpoint of forward-backward linkage. In Africa, where primary products are abundant, in order to produce value-added products, it is necessary to consider backward linkage, such as expanding the supply side of resources, and forward linkage, such as the need for new products to part of the global value chain. In addition, the article points out the importance of policies and strategies that take into account both linkages and skills development so that people can manage new jobs. They also indicated that a lack of skills has hindered local people from improving corporate competitiveness, establishing innovation, adopting world-class manufacturing, and implementing supply chains.

Analysis of forward and backward linkage can suggest what may be an efficient investment for industrial development. Tesafa (2014) performed a forward-backward coefficient analysis with other industrial sectors in manufacturing in Ethiopia. For forward linkages, food, textile, and non-metal industries related to the services sector, while the leather industry related to the export sector. In terms of backward linkage, there were various relationships among industries, such as the food industry, which relates with the service sector, the leather industry with the agricultural sector, and the metal industry with the import sector. This analysis contributes to suggesting an efficient capital input strategy that includes other sectors to expand each manufacturing industry.

By considering forward-backward linkages in this way, it is possible to structurally grasp the expansion of the industry and its spread to other sectors. By clarifying each industry’s correlation with other sectors, it contributes to planning the investment of capital for the efficient expansion of an industry that will contribute to economic growth and job creation.

(Yujiro Yamazaki)

References:
Hirschman, A.O., 1958. The Strategy of Economic Development. Yale University Press, New Haven, CT.
Morris, M. and Fessehaie, J. (2014) “The industrialisation challenge for Africa: Towards a commodities based industrialisation path.” Journal of African Trade 1 pp. 25–36.
Tesafa, F. (2014) “Forward and backward linkage analysis of manufacturing industries in Amhara region, Ethiopia.” National Monthly Refereed Journal of Research In Science & Technology. 3. pp. 14-26.