Value Chain Programme
implementation
Merten Sievers- Value Chain Development and Business
Services Coordinator, Enterprise Department, ILO
Geneva
And
Haritha Wedathantri – LED Consultant, Sri Lnaka.
Bangkok, June 2010
Sector/VC selection as a crucial step
Criteria
Size
Relevance to the poor?
(MSEs, women, workers)?
Poverty and Employment
change potential?
High number of poor or
disadvantaged groups (poor
close to markets: producers,
workers, consumers)
„Stepping-up“ (productivity,
market share, work quality).
„Stepping-out“ (new markets,
jobs, opportunities)
Intervention potential?
Feasibility of stimulating value
chain development for Decent
Work through systematic market
change
Relevance
Prospects
Considerati
ons
Priorities
Capacity
Feasibility
Sector selection…examples
CRITERIA
DESCRIPTION
Unmet Market Demand and
Growth Potential
•Evidence of strong effective unmet demand for products being produced
Buyers have ready market for products but are unable to meet demand
Potential for growth and continued competitiveness of subsector
Potential Increase in Income
and Wealth
Potential for increased revenues at all levels of subsector
Projected increases in sales, profits, or returns to labor
Opportunities For Linkages
•Potential forward/backward linkages between large and small
enterprises
Large buyers are overlooking SEs as a source of supply, or are unable
to organize them to meet their demands
Potential For Employment
Generation
•Potential for enterprises (large and small) to create new employment
opportunities as the subsector develops or expands
Number of SEs
•Number of SEs operating in the subsector
Value-Added Potential
•Potential for SEs to add value to raw materials and gain higher earnings
Potential For Increases in
Productivity
•Potential for technologies or management systems to increase the
productivity and earnings of enterprises in the subsector
Government or Donor Interest / •Government interest in a subsector (can translate into positive linkages
with government services, and favorable policies)
Existing Support Programs
Existing programs that can provide synergy and complementary
activities
[1] Source: www.actionforenterprise.org
Sector selection…examples
Competitiveness
•Competitiveness of the subsector on the world market and/or of
SEs in the subsector
Agency Mandates
•Mandates such as participation of women, rural focus, or
environmental impact can be considered and weighted in
accordance with the importance the agency puts on them
Principle #1
Significant Pro-Poor Impact – our
mission

•
Focus on poverty reduction
•
Linking target SEs to effective markets
•
Breadth of impact - #’s
•
Depth of impact – increased income /
improved livelihoods
•
Relates to cost efficiency of program
Principle #2
Tailored, Demand-Driven Programs
and Services – meeting local needs

•
Customized to target population
•
Adapted to local context
•
Designed to reach a specific target
market
•
Overcomes identified constraints
•
Leverages existing opportunities
Principle #3
Sustainability – long term benefit

•
Support sustainable business models
•
Commercial businesses
•
Profitable basis
•
Costing and pricing models
•
Social sustainability
•
Environmental sustainability
•
Well designed facilitation and exit
strategy
Principle #4
Develop Market Systems – systemic
change for long term and
widespread impact

•
Beyond a few targeted
•
Beyond a few buyers
•
Entire market systems from input
supplies to support markets, end
markets, enabling environment, value
chain relationships etc.
•
Strengthen a system to promote
sustainability and competitiveness of
the industry
9
Principle #5
Replication and Resiliency: Market
uptake and learning

•
Supporting sustainability and scale-up
•
Building learning systems
•
Trade associations
•
Private service markets
•
Informal learning
•
Formal institutions
The VCD intervention… what can we do?
1. Strengthening vertical business linkages and
embedded services
2. Strengthening the capacities of member-based
organizations and horizontal linkages
3. Engage national and International lead buyers or
suppliers in the chain e.g. through PPPs
4. Strengthening business service providers (generic
or sector specific)
5. Value Chain Finance (direct and indirect)
6. Introducing certification, social and quality
standards
7. Improving the business environment for Value
Chains
8. More…?
3. Engage lead
buyers: e.g.
through
National Business
standard setting
Environment
and PPPs
4. Strengthening
business service
providers
2. MBOs
and vertical
likages
Final Consumers
Global
Retailers
National
Retailers
Exporters
Sector-specific
providers
Cross-cutting
providers
Wholesalers
Buyers
Producers
5. Value Chain
Finance
1. Vertical
linkages:
embedded
services
Financial (cross
cutting)
Input Suppliers
Embedded
Services
7. Improve
business
environment
The Intervention:
METHODS OF INTERVENTION
DIRECT PROVISION
 Direct delivery of
training
 Deal making
FACILITATION
 Services delivered
through local
providers (time
bound subsidies?)
HOW?
DIRECT PROVISION
IMPLEMENTER
IMPLEMENTER
Producers
HOW?
FACILITATION
Implementer
And now… let us watch a movie
Participative Value Chain Analysis and
development
VCA empowers VC stakeholders to take informed decisions
The Kyrgyz Textile Value Chain
Electricity
supply
and
Powercuts
Local retailers
Intermediarie
s
Intermediaries: (Biek
Cargo Company
handles most)
Dordoy Wholesale and retail
market
Intermediaries
4000 Garment producers (mainly sewing):
•Micro and small producers
•Medium sized producers
Local Fabrics (erratic
production, low
volume)
23 Knitwear
producers
Intermediaries
Garment Input
retailers (Madina
Market, Bishkek)
Local Wool production
Imported inputs from China, UAE,
Korea and Uzbekistan
Export
handlers
Small quantity Export by taxi
Patent
System
Local End Market:
10-15% of
production
Key Business
Services
Export market:
85-90% of
production
Wholesale markets in
Russia
Same Intermediary buys input
and places orders in companies
Tax and
other
Inspectors
Direct re-export to CIS countries
Export
Certification
System
Small shops in Russia
and Kazakhstan (higher
end market)
Open Air retail markets
in Russia and Kazakhstan
Key regulatory
issues
Export and
quality
certification
by
government
Local Textile
and Garment
Fairs
(LEGPROM)
Machine
maintenan
ce
Services
Business
Managemen
t training
Vocational
training for
employees
Financial
Services
The Constraint-Solution-Provider-Intervention
Continuum
What is
preventing
the
producers
from
reaching
target
markets?
e.g., lack of
access to
affordable
inputs
What will
this look like
if the market
system is
functioning
well?
e.g., access
to affordable
inputs
Who can
provide the
needed
service or
support on
an ongoing
basis?
e.g.,
commercial
suppliers sell
in sachets or
to groups
What can
the program
do to
facilitate the
change
needed in
the market
system?
e.g., train
suppliers on
targeting
customers,
form groups
Group Exercise:
 Select one Value Chain per group
 Identify:
 3 Main Constraints/Bottlenecks
 Sustainable Solutions and Solution
provider
 Intervention
 Prepare a presentation on a flip-chart per
group
Thank You
[email protected]
BDS:
www.bdsknowledge.org
www.microlinks.org
Business environment:
www.businessenvironment.org
www.doingbusiness.org