Promoting Agricultural Value Chains
In the OIC Member Countries
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More and more countries are looking for ways to take part in global value chains. The idea is
that participating in world markets provides better avenues for development than
protectionism. Global value chains can offer opportunities such as increased GDP growth, job
creation and diversification into new products and markets. At the same time, the global
expansion of value chains may pose challenges for OIC member countries, specifically the ones
that are considered least developed. Issues such as sustainable development, labour rights, the
regulation of multinational companies, as well as the breath and spread of value chains need to
be considered (Islamic Development Bank (IDB) Group, 2013).
A study by the United Nations Conference on Trade and Development (UNCTAD) reports that
engaging in global value chains is accompanied by higher GDP growth rates. Most sluggish
growth is recorded for countries with a low GVC participation growth rate and low growth of
the domestic value added share of exports (0.7 percent). Higher domestic value addition
without increased participation in GVCs correlates with higher GDP growth (1.2 percent).
However, integration in GVCs without increase in domestic value added seems to offer higher
GDP growth (2.2 percent). The highest GDP growths are recorded for those countries that have
a high GVC participation growth rate and, at the same time, manage to increase their domestic
value added in exports (a median GDP growth of 3.4 percent). In a similar vein, recent UNCTAD
research shows that the share of OECD countries in total value added created by GVCs is found
to be 67 percent. The so-called Newly Industrialised Countries such as Korea and Singapore
capture around 11 percent, BRICS countries comprises 14 percent of which China’s share is 9
percent. The share of the Rest of the World which includes all LDCs and other developing
countries is only 8 percent. Most OIC member countries belong to the latter category. OIC
member countries with the highest shares include Malaysia (0.8 percent of total value added
created by GVCs) and Indonesia (0.6 percent). However, the share of foreign value added is
relatively high for Malaysia (around 40 percent compared with 15 percent for the United
States). Indonesia has a higher domestic value added, driven by a high share of mining
products which feed into other country’s value chains (Islamic Development Bank (IDB)
Group, 2013).
In agriculture, around 16 percent of the world food production enters international trade. This
means that national and local markets absorb most of the food that farmers grow. Most
farmers do not sell on the international market, directly or indirectly. In the OIC, a focus on
regional value chains has been observed of late. Growing demand in OIC Member Countries
make these markets lucrative for other OIC Member Countries. These markets can also be
more attractive for producers based in OIC Member Countries, in particular for small and
medium sized enterprises (SMEs), compared with developed country markets. They also tend
to impose fewer requirements and less stringent standards than developed countries.
Moreover, OIC Member Countries share common relationship networks and cultural norms
that can facilitate trade (Islamic Development Bank (IDB) Group, 2013).