Countries with poor infrastructure and distant to the economic centers can be marginalized and locked from the opportunity of participating in the global value chains and, consequently, the opportunity of upgrading the economic structure.

Developing countries face daunting challenges, ranging from the accessibility and quality of transportation, telecommunication, and water supply, to institutions and regulations to facilitate trade. The large infrastructure gaps, particularly for the least developed countries, might deprive them of the opportunity to upgrade their economic structure through participation in global value chains. World Bank (2017) indicated that the performance of Sub‐ Sahara Africa’s infrastructure currently ranks below all other developing regions: road density has declined over the past 20 years in Africa, and only 35% of the population has access to electricity, with rural access rates less than one‐third urban ones. The report estimated that closing the infrastructure quantity and quality gap in Sub‐Sahara Africa relative to the best performers in the world could increase the growth of GDP per capita in the region by 2.6 percent per year, or 1.7 percent per year if it were to close the gap with the median of the rest of the developing world.

Transport costs can be prohibitively high. Transport costs, according to developing‐country suppliers, remain the main obstacle to entering, establishing, or moving up in global value chains (OECD and WTO, 2013). Transport prices for most African landlocked countries range from 15 to 20 percent of import costs, approximately two to three times more than in most developed countries (Teravaninthorn and Raballand, 2009). According to a recent IMF report (IMF, 2015), the quality of infrastructure in Africa is about half that found elsewhere in the world, credit‐to‐GDP ratios about a third of ratios elsewhere, and tariffs on average four times higher than elsewhere. The slow and unpredictable land transport keeps most of Sub‐Saharan Africa out of the higher value added segments of the value chains, including electronics (Christ and Ferrantino, 2011).

Firms in the least developed countries are more likely to suffer from the burden of high transaction costs. Besides conducive business environment and strong human capital, efficient and reliable infrastructure services (including telecoms, internet, express service delivery, and customs clearances) for coordinating the dispersed production become the essential condition of the location choice in the production supply chain. With below‐average infrastructure quality in most countries and the lack of regional co‐ordination of trade facilitation effort, South Asia has the highest intra‐regional trade costs after the African regions (Kowalski et al., 2015). Ahmed et al. (2010) noted high transaction costs are bottlenecks for South Asian countries to promote regional or international trade, with 140 to 200 signatures required for trading between India and Nepal, and over four days of waiting time for trucks to cross the border between Bangladesh and India. Facilitating trade by focusing on publication of customs information, notifications, advance rulings, documentation requirements, and international standards can reduce trade costs mostly in less developed counties (Moïsé and Sorescu, 2013).

High logistic costs due to weak supply chains are often another barrier for the least developed countries. Lacking reliable supply chains, firms in less developed countries encounter much higher logistic costs and are virtually eliminated from just‐in‐time production. High inventory costs post a double penalty for firms participating in global manufacturing value chains with extra logistics 9