Promoting Agricultural Value Chains
In the OIC Member Countries
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This points towards the need for private sector involvement. However, the business
environment and investment climate in many OIC countries is rather poor. Out of 189
countries that are compared by the World Bank’s Doing Business Report 2015 on a variety of
indicators on starting a business and protecting investors, the OIC Member Countries score an
average of 126 out of 189. The overall poor performance of OIC countries in this field hampers
private sector involvement for infrastructural development in the agricultural sector.
Governance and value chain actors
Agricultural production in the OIC is characterised by the dominance of small-scale holdings of
5 ha or less. Almost 40 percent of the agricultural land is under production by such small-scale
farmers which constitute more than 80 percent of all farms in operation in the OIC. The vast
majority of these producers are not part of any organised networks and associations, and do
not have access to formal value chains. Rather, they trade through ‘informal’ chains where
products undergo little value adding activities and quality standards are low.
At the same time, many OIC countries also have a parallel, commercial agricultural sector
based on medium to large scale farming enterprises which are often integrated into the large
value chain through vertical integration or at least feature high(er) degrees of vertical
coordination. These chains surpass smallholder chains in terms of value creation due to higher
levels of mechanisation, higher productivity and efficiency, compliance with food safety and
quality standards, and access to modern processing and retailing outlets.
While the dominance of smallholder farmers and the resulting co-existence of informal and
formal value chains characterise most OIC Member Countries, different degrees of activity and
different types of policies can be observed to promote the inclusion of small-scale farmers into
formal value chains. Some countries do not appear to have a specific policy on smallholders;
whereas, others pursue one or more of four main policy mechanisms to integrate smallholder
farmers into formal value chains: (1) integrated co-development of smallholder farmers and
commercial agriculture by establishing institutionalised linkages between the two; (2)
producer organisation to reduce the number of chain actors and facilitate access to formal
markets for small-scale farmers; (3) public-private partnerships to foster smallholder
integration, for instance with donor agencies or large multinational companies; and (4) donor
or NGO programmes to assist farmers in linking to formal value chains.
Trade
Exports of agricultural products from OIC Member Countries have increased tremendously
from 2002 (US$ 33.8 billion) to 2012 (US$ 132.7 billion). Asian OIC countries are the top
exporters, with 75 percent, followed by Arab countries, with 15 percent. The biggest exporters
of agricultural products are Indonesia, Malaysia and Turkey (all net exporters). These
countries together account for 63 percent of the OIC’s total agricultural commodity exports.
Imports of agricultural product have also increased from US$ 53.5 billion in 2002 to US$ 208
billion in 2012. As imports are higher than exports, the OIC is a net importer of food products.
Typically, countries belonging to the Arab Group are importers of agricultural products,
comprising 50 percent of the OIC import value; followed by the Asian Group with 41 percent.
At a country level, the biggest importers are Saudi Arabia, Malaysia and Indonesia, comprising
27 percent of total OIC imports.