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IstanbulIstanbul,, 18 November 2008 18 November 2008

Europe and CIS

Jacek CukrowskiJacek CukrowskiEconomic Development and Trade Advisor, Economic Development and Trade Advisor,

UNDP, Europe and the CISUNDP, Europe and the CIS

Bratislava Regional CentreBratislava Regional Centre

Trade facilitation and Trade facilitation and inclusive access to inclusive access to

marketsmarkets

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OutlineOutline

Market economy and trade Market economy and trade

Access to marketAccess to market

Key challenges in rural areasKey challenges in rural areas

Outside border trade facilitationOutside border trade facilitation

ConclusionsConclusions

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Market economy and Market economy and trade trade

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Markets are of fundamental importance in the Markets are of fundamental importance in the livelihood strategy of most of the population livelihood strategy of most of the population urban and rural householdsurban and rural households rich and poorrich and poor

It is important to produce goods but in order to make It is important to produce goods but in order to make profit it is even more important to be able to sell them profit it is even more important to be able to sell them with good marginwith good margin

Possibility to buy cheap goods increases profit of Possibility to buy cheap goods increases profit of entrepreneurs and household consumptionentrepreneurs and household consumption

Markets and tradeMarkets and tradeEurope and CIS

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Trade is a source of jobs and contributes to poverty Trade is a source of jobs and contributes to poverty reductionreduction in cities about 70% of small and medium enterprises operate in the in cities about 70% of small and medium enterprises operate in the

area of trade and services (Karshi, Uzbekistan; 2008) area of trade and services (Karshi, Uzbekistan; 2008)

Trade is also a source of income of a large number Trade is also a source of income of a large number of people (often women) running unregistered of people (often women) running unregistered businessesbusinesses

Better educated and more entrepreneurial urban Better educated and more entrepreneurial urban population quickly adapted to market conditions population quickly adapted to market conditions and learned how to operate in market environmentand learned how to operate in market environment

Trade in urban areasTrade in urban areasEurope and CIS

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Rural population lack of understanding of the Rural population lack of understanding of the markets markets their limited business and bargain power, their limited business and bargain power,

required to interact on equal terms with required to interact on equal terms with professional market intermediaries, means that professional market intermediaries, means that they are passive players in the market they are passive players in the market

they can be exploited by those with whom they they can be exploited by those with whom they have market relationshave market relations

they fail to realize the full value of their they fail to realize the full value of their productionproduction

Trade in rural areasTrade in rural areasEurope and CIS

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Access to marketAccess to market- obstacles- obstacles

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Distance to markets - lack and quality of Distance to markets - lack and quality of roads to get to them (or roads that are roads to get to them (or roads that are impassable at certain times of the year)impassable at certain times of the year) it results in high transportation costs and high it results in high transportation costs and high

transaction costs, both to buyers and sellerstransaction costs, both to buyers and sellers transport costs – combined with storage and transport costs – combined with storage and

processing constraints – are particularly important for processing constraints – are particularly important for producers that need to sell their products locally and producers that need to sell their products locally and in most cases in short period of timein most cases in short period of time

it leads to uncompetitive, monopsonistic marketsit leads to uncompetitive, monopsonistic markets to the markets where single buyer dictates priceto the markets where single buyer dictates price

Physical access to marketsPhysical access to marketsEurope and CIS

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Markets in rural areas are characterized by Markets in rural areas are characterized by extreme asymmetry extreme asymmetry

large number of small producers and a few market large number of small producers and a few market intermediaries operating in a given geographical areaintermediaries operating in a given geographical area

market relations are characteristically uncompetitive, market relations are characteristically uncompetitive, unpredictable and highly inequitableunpredictable and highly inequitable

Farmers often become dependent on local Farmers often become dependent on local agrifirms or very few market intermediaries agrifirms or very few market intermediaries coming to their villages to buy agricultural coming to their villages to buy agricultural produceproduce

Market structureMarket structureEurope and CIS

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Poor understanding of the marketPoor understanding of the market little or no information on market conditionslittle or no information on market conditions recent administrative regulationsrecent administrative regulations prices and the quality and sanitary standards prices and the quality and sanitary standards

Lack of effective collective organization that can Lack of effective collective organization that can give the power required to interact on equal give the power required to interact on equal terms with other, generally larger and stronger, terms with other, generally larger and stronger, market intermediaries market intermediaries

No experience of market negotiation and little No experience of market negotiation and little appreciation of own capacity to influence the appreciation of own capacity to influence the terms and trade conditionsterms and trade conditions

Lack of skills, Lack of skills, organization and organization and informationinformation

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Key challenges in rural Key challenges in rural areasareas

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Key challenges in rural areas Key challenges in rural areas (1)(1)

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Key sector: AgricultureKey sector: Agriculture

About 70% of agricultural production (fruits and vegetables) About 70% of agricultural production (fruits and vegetables) cannot be directly consumed – need to be processedcannot be directly consumed – need to be processed Today farmers sell their products at low prices to very few local companies or, in Today farmers sell their products at low prices to very few local companies or, in

extreme cases, do not sell at allextreme cases, do not sell at all

Prices for fruits and vegetables for agro-processing are very Prices for fruits and vegetables for agro-processing are very low low Lack of competitiveness on “buyers market” (very few potential buyers)Lack of competitiveness on “buyers market” (very few potential buyers)

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Key challenges in rural areas Key challenges in rural areas (2)(2) Lack of information about Lack of information about

sorts requiredsorts required standards standards

packaging, sanitary, qualitypackaging, sanitary, quality

Difficulties of the planning processDifficulties of the planning process Lack of experience how to operate in market environmentLack of experience how to operate in market environment

Lack of entrepreneurial culture negotiation skillsLack of entrepreneurial culture negotiation skills

Lack of information about potential trade partnersLack of information about potential trade partners

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Outside border trade Outside border trade facilitationfacilitation

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What can be done ? (1) What can be done ? (1) Europe and CIS

Support development of small agro-Support development of small agro-processing firms and agro-processing processing firms and agro-processing cooperativescooperatives job creation (income generation)job creation (income generation) increased competitiveness on buyer’s market increased competitiveness on buyer’s market

(higher prices for fruits and vegetables for agro-(higher prices for fruits and vegetables for agro-processing) processing)

use of fruits that without processing could be use of fruits that without processing could be lostlost

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What can be done ? (2) What can be done ? (2) Europe and CIS

Support establishment of Support establishment of Information/Marketing/Export centersInformation/Marketing/Export centers providing information about providing information about

the marketthe market information about the most demanded sorts of fruits information about the most demanded sorts of fruits

and vegetablesand vegetables required product standards and grade systems,required product standards and grade systems,

providing communication services, building providing communication services, building marketing and export skillsmarketing and export skills

providing sales support, establishing links with providing sales support, establishing links with national and international trading partnersnational and international trading partners

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What can be done ? (3) What can be done ? (3) Europe and CIS

Create conditions to extend a Create conditions to extend a value value chainchain building storage and packaging facilitiesbuilding storage and packaging facilities building food processing units, drying, etc.building food processing units, drying, etc.

Market and possibility of earning profits or Market and possibility of earning profits or develop the business should affect the choicedevelop the business should affect the choice

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What can be done ? (4) What can be done ? (4) Europe and CIS

EnsureEnsure trade mainstreaming into local trade mainstreaming into local pro-poor development strategiespro-poor development strategies take into account specificity of trade in urban take into account specificity of trade in urban

and rural areasand rural areas emphasize needs for creating enabling emphasize needs for creating enabling

business environment and building business environment and building entrepreneurial capacitiesentrepreneurial capacities

Advocate for mainstreaming trade into Advocate for mainstreaming trade into national development plansnational development plans including national development/improving living including national development/improving living

standards/poverty reduction strategies standards/poverty reduction strategies

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Conclusions Conclusions

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Trade is a source of jobs, income and may have Trade is a source of jobs, income and may have significant impact on poverty reduction in urban and significant impact on poverty reduction in urban and rural areasrural areas

Trade is restricted by a number of obstacles to access Trade is restricted by a number of obstacles to access the marketsthe markets distance to markets, market structures, lack of skills, organization and distance to markets, market structures, lack of skills, organization and

informationinformation

Outside border trade facilitation can help to use Outside border trade facilitation can help to use opportunities provided by trade especially in rural areas opportunities provided by trade especially in rural areas development of agro-processing sector, creation of development of agro-processing sector, creation of

Information/Marketing/Export centers, value chain extension, Information/Marketing/Export centers, value chain extension, mainstreaming trade to development strategiesmainstreaming trade to development strategies

Main messagesMain messagesEurope and CIS

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Thank you…Thank you…

United Nations Development Programme,United Nations Development Programme,

Europe and the Commonwealth of Independent States,Europe and the Commonwealth of Independent States,

Bratislava Regional CentreBratislava Regional Centre

http://europeandcis.undp.orghttp://europeandcis.undp.org

Jacek.Cukrowski@undp.orgJacek.Cukrowski@undp.org

Europe and CIS