Labor Markets Core Course 2013: Inclusive Value Chains


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Labor Markets Core Course 2013: Inclusive Value Chains

  1. 1. Inclusive Value ChainsLabor Market Policy CourseMay 14, 2013Kwang KimSenior Consultant, Finance and Private SectorDevelopment
  2. 2. Agenda• Why Value-Chains?• Elements of a Value-Chain Analysis• Country Examples• Implications to Policy and Operations• Q&A
  3. 3. Why value chains?Jobs growth must dramatically increase to “Bend the Arc of History”600 MILLIONjobs needed over the next 15yrs to sustaincurrent employment rates (WDR2013)1 MILLIONjobs needed per month for the next 10yrs inAfrica and South Asia alone (WDR 2013)OFFSHORINGjobs offshoring might be reversing –good for US and EU, bad for EMTRADITIONAL / PIECEMEALINTERVENTIONS ARE NOT ENOUGHWE NEED TRANSFORMATIVESOLUTIONS – TO SPUR LONG TERMCOMPETITIVENESS AND JOBCREATIONWhat has changed since the crisis? And what is needed now?jobs lost globally during the financialcrisis (WDR 2013)22 MILLION%PopulationTimeSHARED PROSPERITYPOVERTY
  4. 4. Why value chains?Value chains (and similar industry approaches) aims at filling a “missing middle”Macro-stability, investment climate reforms andinnovation policiesMentoring, networking and financing support to firms,grass roots and entrepreneursINDUSTRY LEVEL FIRM LEVELECONOMY WIDEMulti-sectoral interventions bringing together publicand private sectors to unlock value chains and clusters“We found that we can deliver very fast when we concentrate on the sectors that count”(YB Senator Dato’ Sri Idris Jala, Minister in Prime Minister’s Office and CEO, PEMANDU, Government of Malaysia)
  5. 5. Why value chains?Sector contribution to Kyrgyzstan’s GDP and Employment by Sector, 2000-201137.8%32.3%20.3%27.0%21.5%28.3%35.2%46.3% 51.4%0%10%20%30%40%50%60%70%80%90%100%1 2 3ServicesIndustryAgriculture49.6%37.0% 34.0%11.9%18.7% 20.6%38.4%44.2% 45.3%0%10%20%30%40%50%60%70%80%90%100%1 2 3ServicesIndustryAgricultureSectorcontribution tovalue added (as% of GDP)Sectorcontribution tototalemployment2000-2003 2004-2007 2008-20112000-2003 2004-2007 2008Source: World Bank WDI dataEmployment has beendirected to sectors with lowervalue added to growth.Agriculture contributed to20% of total growth in 2008-2011, while employing 34%of the total labor force in2008.Kyrgyzstan policy options:(1) either shift jobs to othergrowth sectors, or (2)upgrade its agriculture sectortowards higher growthactivities (e.g. agribusiness)
  6. 6. What is a value chain?Example: Brazil’s shrimp industry value chain – long list of constraints to growthLarvaeproductionFishing inputs Small ship owners Hydraulic firmsFeed manufacturersUniversitiesDistributionchannelShibuilding firmsPackaging industryIndustrialProductionShrimp livestock• Shipbuilding• Equipment maintenance• Marine fishing• Feeding• Artificial insemination• Matrix selection andcultivation• Maturation• Spawning• Nauplius cleaning• Larviculture• TransportationIndustry assocationsTraining CentersCaptureFishermen’s cooperativesFishing familiesLogistics firms Navigation firmsWarehousingGenetic selectionChemical and bacterologicanalysis labPacking firms (Granel)Research bodiesTransportation firms• Feeding cycle• Parameter control• Biometric control• Biomass control• Water renewal• Fertilization• Shipping and handling• Freezing• Packaging• StorageTrading Companies•Marketing•Sales•DistributionImportersIntegration areabetween small andlarge producersSource: Monitor Country Competitiveness/OTF Group, 2000
  7. 7. Why value chains?Example: opportunities for honey producers in Brazil0. in barrel to USA(Sales price, AAPI)US$Bottled honey,Ethnic Latin market in USA**Source: interviews with Simplício Mendes Producr associon, USA market research, USAID-CRESCE Brasil analysis, 2005Organic honey, EUA*US$1,05 / kgUS$17 / Kg* Representative supermarket price, USAActual segments that AAPI iscompetingSegments where AAPI isnot competingBottled honey(bears)In the USA*US$12 / KgUS$10,5 /Kg(Goya)US$23,3 /Kg(Apis Vidavia BREX)US$11,4 /Kg(St Barbara)
  8. 8. Why value chains?What is a value-chain?Describes full range of activities required to bring a product or servicethrough the different phases of production, including physicaltransformation, the inputs of various producer services, and responseto consumer demand (Kaplinsky, Raphael, and Morris (2000).It is not… The same as sectors Just a transaction within the supply chain Stand-alone Business Development Services (BDS) A static descriptionValue-chain approaches look at the full range of issues facing the flow ofproduction to market
  9. 9. Agenda• Why Value-Chains?• Elements of a Value-Chain Analysis• Country Examples• Implications to Policy and Operations• Q&A
  10. 10. OverviewFive Elements of a Value-Chain Analysis (Upgrading)1. SectorPrioritization2. MarketAnalysis3. Value-ChainMapping4. BenchmarkPerformance5. PrioritizedAction PlansDiscovery:Multi-sectoranalysis:coffee,tourism, teachosenWhere tocompete:Generic vs.premiumcoffee:premiumchosenLong list ofconstraints andopportunitiesidentifiedPrioritizedissues,quantified gainsE.g. Qualityprograms
  11. 11. 1. Use Sector Prioritization to Justify Project ScopePrioritization Steps“Funnel” Process1. Long Listing Pre-selected from a preceding effort/factor or use(10, 30, or 100+) technical criteria such as economic (e.g. exportlevels), development impact (e.g. SMEconcentration), and feasibility (e.g. presence of achampion)2. Short Listing Interviews, research, field visit, consultations,industry workshops(3, 10, or 20+)3. Final Decision Approval by main stakeholder(s) / client(1, 3, or 5+)SectorSelectionMarketAnalysisValue-ChainMappingPerformance &BenchmarkPerformance &GapsWhat does this figure reminds you of?YOU ARE SELECTED!
  12. 12. SectorSelectionMarketAnalysisValue-ChainMappingPerformance &BenchmarkPerformance &Gaps1. Use Sector Prioritization to Justify Project ScopeWhat is your experience in prioritizing a sector or value-chain?WBG Project P112011. Source: ITC, based on UN COMTRADE Statistics.Opportunities
  13. 13. 2. Market AnalysisOperational EffectivenessStrategicEffectivenessWrongproduct,rightthingsRightproduct,rightthingsMostthingswrongRightproduct,wrongthingsSectorSelectionMarketAnalysisValue-ChainMappingPerformance &BenchmarkPerformance &GapsHave you ever worked hard on something that was unnecessary?Market analysis helps you focus on the right products!
  14. 14. MM ofbags (60 kg)Source: USDA and Bloomberg0204060801001201994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02ConsumptionWorld Coffee Production versus Demand(1994 -2002)Slides produced by OTF Group (2003)OTF Group materials - not for wider distribution2. Market AnalysisRwanda Coffee Strategy & the World Coffee Market SectorSelectionMarketAnalysisValue-ChainMappingPerformance &BenchmarkPerformance &Gaps
  15. 15. 2. Market AnalysisRwanda Coffee Strategy & the World Coffee MarketMM ofbags (60 kg)Source: USDA and Bloomberg0204060801001201994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02Production Consumption0.000.200.400.600.801.001.201.401.601.802.001991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Source: International Coffee OrganizationUS$/lbWorld Coffee Price Index(Annual Average C-Price NY)World Coffee Production versus Demand(1994 -2002)Slides produced by OTF Group (2003)OTF Group materials - not for wider distributionSectorSelectionMarketAnalysisValue-ChainMappingPerformance &BenchmarkPerformance &Gaps
  16. 16. 3. Value-Chain MappingInput to Markets – Rwanda tourism industry mapSectorSelectionMarketAnalysisValue-ChainMappingPerformance &BenchmarkPerformance &GapsHave you ever tried to get somewhere without a roadmap?Henning, et. al, USAID/OTF Group, 2008DisorganizedHigh valuewildlife &safetySmall firms,variablequalityMeetingqualitystandardsInadequateTechnicalAssistance
  17. 17. 4. Measuring Performance & BenchmarkingCost Analysis: Jamaica Food Processor35% 29%30%51%17%7%13%10%5% 3%0%20%40%60%80%100%Normal SeasonalOverheadEnergy & TransportLabor directRaw materialsPackagingSource: JCCP/OTF, 2004. Recent increase in energy prices are not reflected, but the cost analysis above remain largely valid, per firms consulted (2010)A small percentage decrease in raw materials & packaging could offsetlarge increases in other cost items.SectorSelectionMarketAnalysisValue-ChainMappingPerformance &BenchmarkPerformance &GapsWhen you are busy, how do you prioritize?
  18. 18. 5. Prioritized Action PlanJoint Public-Private Action Plan - Illustrative ExampleSource: Guatemala Enhancing MSME Productivity Project, 2011Coffee Sector StudyWashing StationsSectorSelectionMarketAnalysisValue-ChainMappingPerformance &BenchmarkPerformance &Gaps1 Public2Public-Private3 Private1 2 3 4 5Regulatoryand taxenvironmentInfrastructureAccess tofinanceSkilled andtrainedlaborAccess totechnologies andR&DSource: Kassim, S., “Using PPD to Build Competitive Industries,” 2011
  19. 19. Let’s review…• Understand the importance of value-chains in the context of BankoperationsWhy they are important?• Understand components of value-chain analysis using practicalexamplesWhat are they?
  20. 20. Agenda• Why Value-Chains?• Elements of a Value-Chain Analysis• Country Examples• Implications to Policy and Operations• Q&A
  21. 21. Pakistan
  22. 22. PakistanKhyber Pakhtunkhwa (KP) and tribal areas5,882176 94 76 73 4101000200030004000500060007000Suicide attackerpayout (sum)Militant stipend(monthly)Police (monthly) Marble miner(monthly)Unskilledlabourer(monthly)Triballevy/paralimilitary(monthly)Source of income for young men in Pakistan, in USDSource: Marble data from PASDEC, other data provided by KP Southern Area Development Project (KP-SADP) via stakeholderconsultations in communities, 2012
  23. 23. PakistanFATA in 2008 – How to Generate Jobs?Projected job creation in FATA Marble Industry (2005-2015)01000020000300004000050000600002005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Total jobsSource: Based on 10% national job growth rate used by SWOG Dimensional Stone Strategy, 2006.Actual
  24. 24. PakistanExpanding jobs through the marble value chain in KPProject Components (PAD):(1) Machinery Pool ($ 4.0 M)(2) Training Center ($ 3.15 M)(3) Market Access ($ 0.23 M)
  25. 25. Guatemala
  26. 26. GuatemalaKey economic challenges Quantity and quality of jobs Informality 80% of jobs concentrated in MSMEs Fragmented MSMEs MSMEs separated from global value chains Low cooperation within the value chain Baja calidad de los productos agrícolas y Baja calidad de los servicios turísticos 95% de la madera se utiliza como combustible y el restocomo insumo primario Low infrastructure maintenance High economic inequality 51% of population live in povertyJobsEconomicfragmentationLow valueaddedPoor Humanand PhysicalCapitalSource: Country Economic Memorandum, 2010
  27. 27. GuatemalaEnhancing MSME Productivity ProyectLOAN: US$32 millionsPERIOD: 5 yearsOBJETIVE: Strengthen MSME through:I) MSME Support PoliciesII) Integrating MSMES into value chains
  28. 28. GuatemalaHow does this project help create quality jobs in Guatemala?Value chain prioritization Transparent public-privatedialogueInvestment prioritization Capacity building of governmentagenciesRisk management New Business DevelopmentServices (BDS)Matching grants Linking skills with industry needsClean production technologies National Quality InfrastructureValue ChainsMSME SupportPolicies
  29. 29. GuatemalaHow is this approach different?OldBank-led based on analysisIndividual transactionsScattered effortsThe same beneficiaries, mainlypolitical criteriaLittle technical assistance to MSMEsLittle accountabilityNewStakeholder-driven based on analysisMSME value chain integrationPrioritization of effortsInclusion of MSME, use of technicalcriteriaTechnical and financial supportMeasurable support
  30. 30. MINECOExeutiveCommitteePIUCoordinatorComponent 1TechnicalSpecialistCoordinatorComponent 2TechnicalSpecialistCoordinatorComponent 3(PIU)ProcurementSpecialistProcurementOfficerFinancialManagementSpecialistFinancialManagementOfficerM&E SpecialistM&E OfficerSafeguardSpecialistAgribusiness Working GroupTourism Working GroupAssistantGuatemalaProject Organization
  31. 31. Agenda• Why Value-Chains?• Elements of a Value-Chain Analysis• Country Examples• Implications to Policy and Operations• Q&A
  32. 32. Agenda• Why Value-Chains?• Elements of a Value-Chain Analysis• Country Examples• Implications to Policy and Operations• Q&A
  33. 33. with HDNJobs andProductivityImplications to WBG projectsEffective value chain approaches integrate and leverage all capabilities of WBGOverall quality of workforceIndustry-specific skills
  34. 34. An End NoteThe Virtuous Cycle ModelEconomic Growth Social EquitySustainability ProductivityIncreased wealthacross thevalue-chainInnovationSales ofcomplexproductsInvestment inhuman, social,and physicalcapitalVirtuous Cycle
  35. 35. Thank you!Additional WBG Resources (intranet)https://ci (see “Sector Prioritization”)“Clusters for Competitiveness: A Practical Guide & Policy Implications forDeveloping Cluster Initiatives”Contact:Kwang W. Kim (
  36. 36. Back-up
  37. 37. CI Sector Prioritization Discussion FrameworkEquityDimensions VariablesCriteriae.g. up / downstreamdemand7 Forms of Capital*3. Feasibilitye.g. shareIndustry structureSpillovers and linkagesGrowth ratesMarket Share (relative advantage)EmploymentShare of micro and SME firmsProductivity (TFP, Labor)Sophistication (value added)Workforce DisplacementPoliticalGrowthCapabilityTechnicalEffort, cost, time for reformsand infrastructureFinanciale.g. share of exportse.g. growth of exportsand investmentse.g. loss of jobs dueto high TFPe.g. inequalitye.g. quality of lifeIncomeEndowments* Wolfensohn-Fairbanks Modele.g. employability, skills1. Economice.g. Project feasibilitye.g. Project costs andbenefitse.g. Leadershipe.g. Institutional structuree.g. Psychology andmindsetse.g. Winners and Losers2. SocialInequality (Gini)(Direct and indirect impact)e.g. Energy usage,material usage, airemissions, wasteEnvironmental impact
  38. 38. The four Elements of the Porter DiamondNational and industry competitiveness is created by upgrading the four elementsDemandConditionsFactorConditionsContext forFirmStrategyand RivalryRelated andSupportingIndustriesPrimary, secondary, tertiary educationVocational schoolsConsulting firms and expertiseIndustry-academic collaborationMore competitive Dynamic environment for competition and business strategy, e.g. predictablebusiness environment (e.g. competition, IP Policy), high variety and number of firmsLess competitive Lack of fair competition, e.g. collusive practices, frequent policy changes, a few firmsdominate the industry, high entry and exit barriers, high informalityPublic-private feedback mechanisms, including Industry-academic collaborationCertification (e.g. HAACP)
  39. 39. Implications to Policy and OperationsThe case of Chile: workforce development through global value chain upgradingPrivate Sector Workforce InitiativesPublic Sector Workforce InitiativesInternal programs to train workers Internal programs to trainworkersHAAP standards training• Government Scholarships toUniversity of California• Tax incentives for foreigncompanies to train personnelPublic-Private Sector Workforce Initiatives• The role specialized training agencies (e.g. CORFO’s supply development program, OTIC-AGROCAP trained more than 100,000 workers)• 9,000 workers certifiedSource: Duke CGGC, 2011