Promoting Agricultural Value Chains:
In the OIC Member Countries
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in the Pakistani cotton chain, processing units are also mostly small-scale which further
increases the fragmentation of the value chain. Such a dispersed value chain set-up represents
a challenge in terms of improving efficiency and the value added and captured by each chain
actor.
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. In the case of
Malaysia, for example, there is a high occurrence of large-scale plantations that are often part
of larger industrial conglomerates. These big agribusiness companies increasingly expand
their upstream operations abroad by acquiring plantations in other, land-rich countries. Some
also venture into downstream operations, such as refineries, to increase their value added. The
Malaysian agribusiness companies showcase the tentative, yet increasing trend of emerging
country actors to become involved in all stages of the value chain rather than merely being
suppliers of raw materials. Significant opportunities to increase the value added of
emerging country actors are associated with this trend.
The co-existence of both formal and informal value chains calls for efforts to integrate
smallholder farmers into formalised chains. OIC countries offer a highly diverse picture
with regard to how they seek to promote smallholder inclusion. This study has identified four
main (non-exclusive) policy mechanisms used in OIC countries. Indonesia, Senegal, Malaysia
and Bangladesh aim to promote an integrated development of smallholder farmers and
commercial agriculture by establishing institutionalised linkages between the two, such as
contract farming schemes. Uganda, Turkey, Jordan, Egypt or Mauritania, for instance, have
policies in place to promote producer organisation in order to reduce the number of chain
actors and facilitate access to formal markets for small-scale farmers. Other countries are
(often simultaneously) promoting the use of public-private partnerships to foster
smallholder integration, for instance with donor agencies or large multinational companies.
Uganda, Indonesia, Egypt and Nigeria serve as examples of OIC countries supporting this
approach. Finally, a number of OIC countries heavily rely on donor or NGO programmes to
assist farmers in linking to formal value chains. There are also still some OIC countries that
have not yet articulated a specific policy to promote smallholder inclusion or that have not
implemented such a policy, including Saudi Arabia, Chad and Oman.
6.1.5 Trade
Trade in agricultural products in OIC Member Countries has grown tremendously from
2002 to 2012. There are big differences in trade flows within the OIC. The Arab region
constitutes the biggest importer of agricultural products within the OIC (about 50 percent of
all agricultural imports), while the Asian region is the main exporter of agricultural products
within the OIC (75 percent of all exports). Both import and export trade flows are dominated
by high income countries: 54 percent total OIC agricultural exports go to high income
countries while 51 percent of all OIC imports come from high income countries. At the same
time, an increase in intra-OIC can be observed over the past ten years, but still agricultural
trade among OIC Member Countries is only 3.2 percent of all trade activities of OIC countries.
Overall, export levels remain low in the OIC. Food is mainly produced for domestic
consumption purposes and not oriented towards the demands of overseas consumers.