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TMCNet:  Development: Value chain: a good tool for growth

[April 06, 2014]

Development: Value chain: a good tool for growth

(Express Tribune (Pakistan) Via Acquire Media NewsEdge) The agriculture sector is the foundation of Pakistan's economy. It currently contributes 21 percent to the GDP, generates employment opportunities for 45 percent of the country's labour force and provides 60 percent of the rural population with livelihood. Furthermore, it plays a crucial role in ensuring food security, generating overall economic growth and reducing poverty.

However, commercial agriculture and agribusiness development in Pakistan faces obstruction on multiple fronts. On the production side, it is hampered by energy constraints, transport issues and a lack of adequate storage infrastructure and, on the external side, weak institutions, policy issues and a lack of proper governance also present their own challenges. Further worsening the situation is the fact that access to financial and business development services, as well as modern technology, has remained inadequate.

Economic development Economic development involves the transformation of agriculture-based economies into more urban, industrial and service-based economies. This implies that the flow of resources, goods, services, knowledge and information between urban and rural areas increase. Agricultural production in rural areas and consumption in urban centers are becoming more and more separated. However, it is rural production that has to provide growing cities with affordable and quality food.

Value chain approach Value chain approach seems to be the keyword in recent debates on agricultural development, rural economic development and agribusiness promotion. Value chains describe productive processes around a product from the provision of inputs to production, transportation, transformation, processing, marketing, trading, and retailing to final consumption. Value chains have developed rural-urban linkages to provide potential benefits for both, rural producers and urban consumers. Value chain promotion provides an effective way of fostering rural-urban linkages.

Firstly, the concept provides a useful analytical framework for market as well as sub-sector analysis. Since production only translates into income once consumers actually buy goods, the value chain approach encourages looking at the production process from the consumer's perspective. Secondly, the metaphor of the chain emphasises the fact that most goods are produced by a sequence of interlinked actors and activities. The approach focuses on the analysis of the institutional arrangements that link the various economic players. And thirdly, it highlights the importance of private sector development for the purpose of fostering agricultural growth and aligning the agricultural sector development with urban and other trends in society. All in all, it provides a fairly holistic framework, which can encompass a number of different development activities.

Public-private partnership In this context, the government should develop an enabling environment for private-sector led agribusiness development. This includes interventions at national and provincial levels to redefine roles and responsibilities as well as strengthening regulatory framework in the sector, particularly compliance with international standards, and to create strategic alliances through public-private partnerships to promote sector development.

Horticulture policies must emphasise on promoting greater participation of the private sector and convergence of the programmes and project implementation by various development agencies and government departments within the sub-sector at the provincial level. Further, provincial policies should emphasise on prioritising crops and products based on a resource audit and comparative advantage followed by formulating an action plan with realistic time horizons to implement the policies.

Road to development The value chain approach is becoming increasingly relevant due to the increasing rural-urban disconnect that is adversely affecting Pakistan's economy. By analysing the various processes and activities that exist from when production begins to the point when the finished good is consumed, value chain approach provides the impetus required to increase efficiency, and production, while simultaneously decreasing costs. Increasing efficiency is but one path to economic development but if Pakistan's transformation to an industrialised economy is to be completed, then the value chain approach is an important tool to have.

The author is a development professional and Editor of book 'Sindh at the Cross Roads of Disasters'.

Published in The Express Tribune, April 7th, 2014.

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