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Promoting Agricultural Value Chains

In the OIC Member Countries

7

Introduction

Background

More than ever, agricultural value chains are at the heart of international and national efforts

to unlock economic growth, promote rural development, and ensure access to food for a

growing world population. As value chains become increasingly global in scope, they are not

only powerful vehicles for coordinating production and consumption, but effectively

determine trade patterns and the integration of countries in the global economy. Across

sectors, production processes at the local level are now closely linked to markets which may be

in other countries and continents, involving a growing number of nonfarm processes before a

product reaches its final destination. Traditional ways of agricultural production, with farmers

producing for unspecified demands and relying on local markets to absorb whatever they

produce, are increasingly being replaced by practices that involve greater coordination along

value chains and higher levels of control by buyers, such as manufacturers and retailers.

As international markets continue expanding and a fast-growing middle class in emerging and

developing economies fuels global consumption, significant opportunities arise for countries to

use their agricultural sectors and gain better control over production, trade and distribution.

Policy efforts have therefore more and more looked beyond issues of agricultural productivity

and focused on the structural connective tissue linking farmers with processors, retailers and

other value chain actors. The dynamic nature of value chains has drawn attention to several

recent trends, such as quality based rather than price based competition, international product

standards, technological advancements and agricultural innovations, which underpin value

chain competitiveness and determine how producers can position themselves within value

chains.

Staying abreast of development trends is particularly relevant for the 57 Member Countries of

the Organisation of Islamic Cooperation (OIC), where approximately half of the population

lives in rural areas and agriculture is a major source of income and employment. While the

total share of agriculture in national GDP in OIC countries has declined from 16.3 percent in

1990 to 10.3 percent in 2012, agriculture is still considered an important economic activity

and provides employment for nearly 35 percent of the total OIC population (Alpay, 2014).

Raising the contribution of agriculture to development by means of value chain promotion is

therefore an opportunity recognised and emphasised by the OIC’s Standing Committee for

Economic and Commercial Cooperation (COMCEC) Agriculture Working Group. However, it is

also observed that value chain dynamics pose context-specific challenges and place new

demands on actors in and around the agricultural sector to cope with and compete in changing

environments. Important barriers in this regard comprise the lack of an enabling context

offering institutional and infrastructural support, availability of resources and effective

coordination in value chains.

This analytical study was commissioned by COMCEC in preparation of the 6

th

Meeting of the

COMCEC Agriculture Working Group on 8 October 2015, to deliver an assessment of the

current state of agricultural value chains in OIC Member Countries. Taking a value chain

perspective on agriculture provides a point of reference and reflection on how producers

operate in domestic and international markets within the context of wider dynamics. The

value chain framework takes into account the position of all players in the chain and has

frequently been used to pay particular attention to small-scale producers to promote inclusive