Costed Action Plan for SADC Industrialization Strategy and Roadmap III. CRITERIA FOR VALUE CHAIN ENTRY AND POTENTIAL VALUE CHAINS IN SADC The identification of potential regional and global value chains is an extremely complex process. National accounting and statistical data are helpful, but in a world of fastchanging market conditions, volatile exchange rates and rapid technological change and where decision-making is decentralized, not just across countries but continents, even intensively researched and detailed value chain studies can be no more than indicative of current and prospective opportunities. Furthermore, it is simply impossible to predict how individual entrepreneurs and managers will behave. Although there is no way that these conditions can be simulated or predicted, intensive research into value chain experiences both within SADC and abroad will be needed to facilitate value chain decision-making by SADC policy makers and business people. Within this context, a number of factors provide the basis for determining value chain participation and criteria for potential value chain identification and selection. 3.1 Determinants of Value Chain Entry Structural characteristics are the main determinants of global/regional value chain participation, especially in emerging markets. The key determinants are: a) Market Size. The larger the domestic market, the lower the backward VC participation of a country and the greater is the forward engagement. This is because larger markets imply a greater variety of domestic intermediates. b) Level of Development The higher per capita incomes the greater is the degree of forward and backward participation. Developed economies source more from abroad and sell a bigger share of gross exports in the form of intermediates. c) Industry Structure The greater the share of manufacturing value added (MVA) in GDP, the higher the degree of backward integration and the lower is the extent of forward engagement. d) Location and Remoteness GVC activity is centred around manufacturing hubs. The greater the distance to the main manufacturing hubs of Asia, Europe and North America, the lower is the degree of backward participation, which also means that there are likely to be more opportunities within the region for the domestic and cross-border 28