gvc analysis elements of successful global value chain (gvc) engagement - mapping
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www.fao.org/ag/ags
GVC analysis
Resource material prepared for an Advanced Training of Trainers Advanced Workshop to enhance Pro-poor Policy Formulation and Implementation at Country Level (GCP/RAS/276 & TCP/RAS/3405 )30th May - 3rd June 2016, Hanoi, Vietnam.
elements of successful Global Value Chain (GVC) engagement
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Supply chain
Input supplier
sProduce
rsAssembl
ers, tradersProcess
orsRetailer
s
Flow of services, goods, products and information
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A simple value chain
Design and product
development
Production
Inward logisticsTransforming
inputsPackaging
Marketing Consumption&
recycling
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Value Chain Mapping•Mapping the flow of inputs – goods and
services – in the value chain can determine the influence of behaviour and the important roles of other actors in its success.
•The focus is usually on:▫Functions ▫Actors ▫Relationships ▫Enablers
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Distribution of rewards• A value chain perspective analyses how firms,
regions and countries are linked to the global economy.
• This will determine the distributional outcomes of global production systems
• Informs about the needs to upgrade capacity to benefit from global integration.
• By focusing on the institutions that drive international specialisation, value chain analysis identifies policy levers which can be used to alter these distributional patterns.
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Sources of Rent – rewards for entrepreneurial activity•Distributional outcome
▫Capital -- for its entrepreneurship, risk-taking and ownership of technology),
▫labour (for its effort), and ▫to the owners of natural resources (land
ownership and stewardship).•Sustainable incomes needs to be
measured as▫Value-added (that is output value minus
input costs) at each step of the value chain
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Examining the determinants of income distribution•Identifying the nature and extent of
barriers to entry along the chain•Sources of comparative advantage
▫core competences and dynamic capabilities▫inter-firm relationships▫locational advantages/disadvantages
•Government policies▫Incentives, disincentives, access rights, etc
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Value Chain Map of off-season vegetable production in Nepal
Source: USAID 2011
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Common Flow of Vegetables in Nepal
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Inter-provincial wholesalers
Hotels, Restaurants
Service Provision
Financial Services• Loans• Saving• Insurance
Non-financial service• Extension
services• Plant health• Market
information• Soil testing
Physical input• Seeds• Fertilizers• Pesticides• Equipment• Irrigation
Governance
Importers
CHANNEL 2
Imported channel (0.51 million tons)
Production
Aggregation
Wholesaling
Retailing
Domestic Consumers (0.93 million tons)Consumption
CHANNEL 1
Domestic channel ( 0.42 million tons)
Retailers
Wholesalers
Producers
Collectors
Vegetable Value Chain in CambodiaSource: Duong and Khin (2016, Draft)
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Inter-provincial wholesalers
Hotels, Restaurants
Service Provision
Financial Services• Loans• Saving• Insurance
Non-financial service• Extension
services• Plant health• Market
information• Soil testing
Physical input• Seeds• Fertilizers• Pesticides• Equipment• Irrigation
Governance
Importers
CHANNEL 2
Imported channel (0.51 million tons)
Production
Aggregation
Wholesaling
Retailing
Domestic Consumers (0.93 million tons)Consumption
CHANNEL 1
Domestic channel ( 0.42 million tons)
Retailers
Wholesalers
Producers
Collectors
56%
44%
3% 37%16%
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Relationships within a VC•The value creation is relied upon effective
relationships▫Vertical and Horizontal Linkages
•Vertical Linkages▫attained through cooperation between the
different players or firms▫benefits in transferring skills and share
knowledge to reduce transactions costs
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Vegetable Value Chain in Cambodia• Production system
▫ Seasonal production▫ Led by smallholders with limited land▫ Mainly traditional production methods▫ Issues re handling of agrochemicals etc▫ Limited knowledge on harvesting and handling▫ High spoilage
• Post-harvest handling system▫ Traditional methods▫ Lack of knowledge/facilities▫ No processors or exporters
• Weak supporting infrastructure▫ Certification and quality control inadequate
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Horizontal Linkages•Relationships among different players
operating at the same level of a value chain▫Benefits from planning and coordination▫Farmer associations,
Avoiding gluts, managing pest and disease risks
▫Traders unions, etc. Supply coordination Price setting
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Points to remember•Two key aspects of VCA …
▫Understand the sources, key leverage points and approaches that will maximize value impact
▫How to facilitate VC activities by bringing together the capacities of the public sector, the private sector, and civil society into an effective partnership
▫Identify performance measures that reflect contribution to well-being – economic, environmental and social
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Conclusion• Value chain mapping help understand how current
activities in a production system links to local capacity in meeting consumer demand for particular goods and services
▫ By enumerating and quantifying input-output relations, it can assesse broad-based impacts on poverty reduction in agriculture in the context of globalization
▫ Informs how economic integration into global product markets can enhance local benefits
▫ Identifies ways to improving performance in order to realize full potential of domestic resources
• Value chain mapping thus informs policy analysis that seeks to facilitate gainful links and address risks in Global Value Chain engagement.