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2 Increased Importance of Value Chains

The growth of value chains in emerging and developing countries is related to two factors: the growth of demand for high-value products in local markets, and increased exports of high-value commodities to high-income countries.

First, domestic consumption of high-value crops such as fruits and vegetables in developing countries increased by 200 percent in 1980–2005, while consumption of cereals stagnated during that period. This growth relates to increasing incomes and urbanization, and is reflected in the rapid growth of modern food industries and retail chains (“supermarkets”) in urban market segments (Reardon et al., 2003). Modern retail companies have expanded rapidly throughout the developing world and have set high standards for food quality and safety (Dolan and Humphrey, 2000; Henson et al., 2000). Important factors behind the spread of modern food industries have been liberalized investment policies and the associated inflow of Foreign Direct Investment (FDI) in developing country food sectors. FDI stocks expanded from less than 10 percent of GDP in the early 1990s in most developing and emerging countries to 25 percent in 2005 in Southeast Asia and the transition countries, and 30 percent in Africa and Latin America. In the majority of African countries the agri-food sector accounts for a vast share of FDI inflows (UNCTAD, 2010).

Second, high-value food exports – including fruits and vegetables, meat and milk products, fish and seafood products – from developing countries increased more than 300 percent in the period 1980–2005 and now constitute more than 40 percent of total developing country agri-food exports (World Bank, 2008). The growth in high-value agricultural export products from developing countries has been much faster than the growth in traditional tropical exports such as coffee, cocoa, and tea, which decreased in overall importance (Figure 1). For Asia, the shift toward nontraditional and high-value exports started earlier, but for Africa, Latin America, and the Caribbean the decreasing importance of traditional crops and the growth in fruits and vegetable exports mainly took place over the past two decades.

Fig. 1. Changing structure of developing countries' agro-food exports, 1985–2005[1] Source: Maertens et al. (2009)

These non-traditional exports mainly concern products such as fruits, vegetables, flowers, fish, and seafood, which are consumed in fresh or processed form and for which the value (per weight or per unit) is typically much higher than for more bulky primary commodities destined for further processing, such as the typical tropical products. In Africa, the exports of fruits and vegetables has increased from 1.9 billion U.S. dollars in 1990 to 5.6 billion U.S. dollars in 2007 (FAOSTAT, 2010). Several African countries, including very poor countries such as Côte d'Ivoire, Ethiopia, and Senegal, have become important suppliers of fresh fruits and vegetables to EU markets. Similarly, several poor Latin American countries (Guatemala, Honduras, Bolivia) have successfully increased their exports of fresh vegetables to the United States.

The importance of this shift from traditional to non-traditional export commodities is twofold. First, many developing countries have for decades been highly dependent on one or just a few export commodities, which has made countries vulnerable, for example to volatilities and shocks in world market prices. The shift toward non-traditional exports implies more diversified export portfolios, which reduces these vulnerabilities. Second, non-traditional exports are high-value products for which the value per unit or per weight is much higher as compared to typical traditional tropical exports such as coffee, tea, and cocoa. This creates opportunities for rural income generation and poverty reduction among smallholder producers in these countries.

  • [1] Tropical products include coffee, cocoa, tea, nuts and spices, textile fibres, sugar, and confectionary. Temperate products include cereals, animal feed, and edible oils. Highvalue products include fruits, vegetables, fish, seafood, meat, and meat products, milk and dairy products. Other products include tobacco and cigarettes, beverages, rubber, and other processed food products. Developing countries include all lowand middle-income countries in Africa, Central-America, South-America and the Caribbean; East Asia, South Asia, Southeast Asia and Central Asia.
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