Training/Workshop

Value Chain Development and Inclusive Business

9-12 January, 2012 Birendranagar, Surkhet

SUSTAINABLE ECONOMIC DEVELOPMENT & VALUE CHAINS

Implementing Partners:

Sustainable Development
Development that meets the needs of the present without compromising the ability of future generations to meet their own needs
Some Major Issues Unfair distribution Social inclusion and gender Power balance Gap between rich and poor

Some Major Issues

Over exploitation of natural resources Forest degradation Climate Change

Ecological
Viable

Bearable

Social

Equitable
Some Major Issues Free market economy (private sector development) Competitiveness Growth (especially rural economy)

Economic

Source UN, Burdtland Report

VCD and Sustainable Development

In ecological programs, entry and focus is from here In social programs/rural development entry and focus is from here

Ecological Social
In MSME promotion programs entry and focus is from here

VCD is an effective approach to promote Sustainable Economic Development

Economic

VC and Sustainable Economic Development Can we comprehensively solve all the component of SD successfully with one project/programme?
If the focus of the programme is sustainable economic development than there is need to balance issues concerning environment, social justice, health, security or equitable distribution of benefits

Three Essential Component of Sustainable Economic Development

Free Market Economy (Competitive private sector): Supporting the private sector and strengthening its competitiveness A strong private sector leads to:

Additional jobs, income thus contributing to GDP and poverty reduction

It is perceived as the engine for future growth

VCD can be a key instrument to foster free

market economy

Sustainable Economic Development contd..

Rural economy and its growth: Providing opportunities in rural areas is essential Why ? - to enhance the growth of the rural areas - By creating jobs and income opportunities for the rural population to reduces the gaps between growing urban areas and rural areas that are left behind - provide answers to growing urban migration

Hence, VCD is a good approach to strengthen

rural economic sectors

Sustainable Economic Development contd..

Sustainable natural resource management: People tend to manage resource better when they can have direct benefit from it. Companies and VC chain actors and consumers can contribute to sustainable management of natural resources by improving the way they purchase, process, trade, consume and dispose the products

The important point is that the VC approach can

positively contribute to sustainable NRM

Going beyond TRICKLE- DOWN concept

A generic definition:
Growth is pro-poor, when the income of the poorest

(e.g. of the lowest quintile) increases more than the

average income

PPG stresses the need to make the poor participate

directly in the economic growth, and does not rely on 'trickle down processes or social transfers

pro-poor economic growth Pro-poor growth = greater employment and income of poor people

Economic growth = greater volume sold, higher value products (the cake grows)

Poverty alleviation = the poor benefit from the income generated (the poor get their share of the cake)

Source GTZ, ValueLink

Pro-poor growth and MSMEs

MSMEs provide highest employment in most economies (self +formal/informal employment)

Hence, MSMEs development is essentially linked with propoor growth and hence, Majority of businesses engages MSMEs as: Unique advantages in performing certain functions of the chain Non-repetitive production processes Seasonal activities Low entry costs Relative labor intensiveness Small production volumes Critical to achieving competitiveness

Trends: Development Assistance in the 20th Century

GIVE A MAN A FISH

Donor

Service Provider

MSMEs

Development partners support one/few providers NGOs provide free/highly subsidised services Small number of small enterprises/small farmers gain access to services designed by donor/NGO

Services stop when funding stops

TRENDS: DONOR AID IN THE 21st CENTURY

TEACH A MAN TO FISH
Development Agenda Commercial Orientation

MSME Donor
Service Provider

MSME MSME MSME MSME MSME MSME MSME MSME

Source USAID Micro Links

Facilitator

Service Provider

Service Provider

Can small firms and MSMEs compete?

Yes. By improving their capacity and efficiency Yes By improving quality and taking advantage of product differentiation

Yes By taking advantage of increases and changes in demand

One way to support small firms and producers become competitive is by applying the Value Chain Development Approach in economic development programme.