Promoting Agricultural Value Chains:

In the OIC Member Countries

production will also need to increase in the face of a growing global population. Estimates

forecast the world’s population to exceed 9 billion by 2050, which will require significant

increases in agricultural outputs and will amplify pressure on the environment and natural

resources. The FAO predicts a necessary increase of 70 percent in food production by 2050 in

order to meet the growing demand for food (FAO, 2009). Yet, levels of resource degradation

and land and water scarcity are already rising whilst the impacts of climate change are

increasingly becoming manifest or looming on the horizon. Raising agricultural productivity

next to improving efficiencies in value chains and accessing global markets is thus one of the

critically discussed issues that many producing countries are facing.

2.1.2

Shifting governance structures and roles of public and private sectors

Since the 1980s, the global agro-food system has undergone fundamental restructuring. On the

one hand, neoliberal reforms have led to the retreat of the state and public bodies from

regulating production and trade of agricultural products. Markets for most agricultural

products have been liberalised to accelerate economic growth by stimulating increased private

sector participation, with the exception of some key commodities, such as rice in Asia (Asian

Development Bank, 2012). On the other hand, the reduced role of the state has been

counteracted by the emergence of large multinational corporations as powerful chain actors –

so-called lead firms – epitomising a far-reaching transformation of governance structures into

‘buyer-driven’ value chains. By occupying strategic positions along value chains these

companies have become able to govern agricultural value chains and determine how financial,

material and human resources are allocated along the chains (Gereffi et al., 1994; Gereffi et al.,

2005).

The growing influence of modern retailers and supermarkets is particularly striking. Based on

their enormous buying power and well-known consumer brands, they are able to dictate cost-

cutting measures and product specifications to their suppliers in an effort to differentiate

themselves from competitors (Lee et al., 2012). While the trend of increased retail power was

first visible in the developed markets of Europe and North America, supermarket chains are

also becoming increasingly dominant in Latin America, Southeast Asia, and gradually in Africa.

The restructuring of governance structures in global value chains has considerable

implications for the terms of participation in these chains. Firstly, the distribution of value

added and income along chains has shifted away from producing countries towards powerful

buyers, resulting in declining gains for suppliers in developing countries (Talbot, 1997;

Daviron & Ponte, 2005). The degree of buyer power is such that lead firms are able to limit the

choices and strategies available to producers to increase their gains from participating in

global chains (Kaplinsky, 2000).

Secondly, the transformation of global agro-food systems has led to the rise of private product

and process standards that encompass not only food safety issues, but also environmental and

ethical aspects. While also the number of public regulations for food safety has increased in

important consumer markets, particularly in the European Union, the contemporary agrifood

system is increasingly governed by an array of private food safety and quality standards. These

have become de facto market requirements for suppliers in developing countries (Reardon et

al., 2003; Hatanaka et al., 2005; Henson et al., 2005). This indicates a shift from price-based to

quality-based competition (Henson & Reardon, 2005), in which notions of quality exceed

physical or objectively measurable attributes (Daviron & Ponte, 2005).