Promoting Agricultural Value Chains
In the OIC Member Countries
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4.6 Infrastructure for value chain development and agro-processing
With regard to value chains, infrastructure consists of activities such as accounting, legal,
finance, control, public relations, quality assurance and general (strategic) management. The
more generally accepted definition of infrastructure refers to the fundamental facilities and
systems serving a country, including the services and facilities necessary for its economy to
function.
In many OIC countries, infrastructure underlying production, processing and marketing
systems is inefficient and fragmented (Alpay, 2014; COMCEC, 2014). Agricultural value chains
are highly dependent on a large number of small operators, ranging from small-scale farmers
and individual middlemen and traders, to small-sized processing units and small wholesalers
and retailers. These rely on weak, inadequate and outdated infrastructure, which increases
transaction costs and the overall costs of production and marketing. Poor access to transport
limits value chain inclusion, as farmers located far from major roads and urban centres are
much less likely to market most of what they produce. High post-harvest losses of up to half of
what is produced are a consequence of the inadequate infrastructure in many OIC countries
(COMCEC, 2013). Poor infrastructure also limits farmers’ crop choices, often preventing them
from growing high-value, perishable crops that must be transported to a trader or processor
very soon after harvest. Finally, persistent gaps in infrastructure in many OIC countries keeps
transportation costs as high as 77 percent of the value of exports (Alpay, 2014), putting
pressure on the margins by the value chain actors involved and reducing the countries’
competitiveness.
Similarly, market and retail infrastructure is insufficient in many OIC Member Countries:
roadside markets are very common, where the produce is exposed to sun, elevated
temperatures, dust and dirt, which increases spoilage and health risks for consumers (ESCWA,
2013).
Investments to improve road infrastructure, to extend and upgrade rural feeder roads in main
production zones and to establish cold stores are therefore critical in many OIC countries.
Wholesale and retail infrastructure also needs improvement. Finally, investments in ports and
railway systems tend to have high payoffs. It is not enough to invest in new infrastructure and
upgrade the existing infrastructure, as maintenance is also key (COMCEC, 2013).
Access to electricity – as well as its cost and the reliability of supply – is another central
component of infrastructure for value chain development and agro-processing. In many
African OIC Member Countries less than half of the population has access to electricity (World
Bank, 2015) (see also Figure 4-1).
This means that it is very difficult, if not impossible, to produce and to market crops for which
a cold chain is needed. Increased access to electricity is an important factor in expanding cold
storage facilities, which enables farmers to command a higher price for their produce than if
they sell it immediately after the harvest.
In several OIC Member Countries, power outages or shortages remain a major problem. In
fiscal year 2011–2012, power shortages cost Pakistan about US$ 12.5 billion, which is the
equivalence of approximately 6 percent of its GDP (Shah, 2013).