1 Istanbul, 18 November 2008 Europe and CIS Jacek Cukrowski Economic Development and Trade Advisor, UNDP, Europe and the CIS Bratislava Regional Centre Trade facilitation and inclusive access to markets

2 Outline  Market economy and trade  Access to market  Key challenges in rural areas  Outside border trade facilitation  Conclusions Europe and CIS

3 Market economy and trade Europe and CIS

4  Markets are of fundamental importance in the livelihood strategy of most of the population urban and rural households urban and rural households rich and poor rich and poor  It is important to produce goods but in order to make profit it is even more important to be able to sell them with good margin  Possibility to buy cheap goods increases profit of entrepreneurs and household consumption Markets and trade Europe and CIS

5  Trade is a source of jobs and contributes to poverty reduction in cities about 70% of small and medium enterprises operate in the area of trade and services (Karshi, Uzbekistan; 2008) in cities about 70% of small and medium enterprises operate in the area of trade and services (Karshi, Uzbekistan; 2008)  Trade is also a source of income of a large number of people (often women) running unregistered businesses  Better educated and more entrepreneurial urban population quickly adapted to market conditions and learned how to operate in market environment Trade in urban areas Europe and CIS

6  Rural population lack of understanding of the markets their limited business and bargain power, required to interact on equal terms with professional market intermediaries, means that they are passive players in the market their limited business and bargain power, required to interact on equal terms with professional market intermediaries, means that they are passive players in the market they can be exploited by those with whom they have market relations they can be exploited by those with whom they have market relations they fail to realize the full value of their production they fail to realize the full value of their production Trade in rural areas Europe and CIS

7 Access to market - obstacles Europe and CIS

8  Distance to markets - lack and quality of roads to get to them (or roads that are impassable at certain times of the year) it results in high transportation costs and high transaction costs, both to buyers and sellers it results in high transportation costs and high transaction costs, both to buyers and sellers  transport costs – combined with storage and processing constraints – are particularly important for producers that need to sell their products locally and in most cases in short period of time it leads to uncompetitive, monopsonistic markets it leads to uncompetitive, monopsonistic markets  to the markets where single buyer dictates price Physical access to markets Europe and CIS

9  Markets in rural areas are characterized by extreme asymmetry large number of small producers and a few market intermediaries operating in a given geographical area large number of small producers and a few market intermediaries operating in a given geographical area market relations are characteristically uncompetitive, unpredictable and highly inequitable market relations are characteristically uncompetitive, unpredictable and highly inequitable  Farmers often become dependent on local agrifirms or very few market intermediaries coming to their villages to buy agricultural produce Market structure Europe and CIS

10  Poor understanding of the market little or no information on market conditions little or no information on market conditions recent administrative regulations recent administrative regulations prices and the quality and sanitary standards prices and the quality and sanitary standards  Lack of effective collective organization that can give the power required to interact on equal terms with other, generally larger and stronger, market intermediaries  No experience of market negotiation and little appreciation of own capacity to influence the terms and trade conditions Lack of skills, organization and information Europe and CIS

11 Key challenges in rural areas Europe and CIS

12 Key challenges in rural areas (1) Europe and CIS  Key sector: Agriculture  About 70% of agricultural production (fruits and vegetables) cannot be directly consumed – need to be processed Today farmers sell their products at low prices to very few local companies or, in extreme cases, do not sell at all Today farmers sell their products at low prices to very few local companies or, in extreme cases, do not sell at all  Prices for fruits and vegetables for agro- processing are very low Lack of competitiveness on “buyers market” (very few potential buyers) Lack of competitiveness on “buyers market” (very few potential buyers)

13 Europe and CIS Key challenges in rural areas (2)  Lack of information about sorts required sorts required standards standards packaging, sanitary, quality packaging, sanitary, quality  Difficulties of the planning process Lack of experience how to operate in market environment Lack of experience how to operate in market environment  Lack of entrepreneurial culture negotiation skills  Lack of information about potential trade partners

14 Outside border trade facilitation Europe and CIS

15 What can be done ? (1) Europe and CIS  Support development of small agro- processing firms and agro-processing cooperatives job creation (income generation) job creation (income generation) increased competitiveness on buyer’s market (higher prices for fruits and vegetables for agro- processing) increased competitiveness on buyer’s market (higher prices for fruits and vegetables for agro- processing) use of fruits that without processing could be lost use of fruits that without processing could be lost

16 What can be done ? (2) Europe and CIS  Support establishment of Information/Marketing/Export centers providing information about providing information about  the market  information about the most demanded sorts of fruits and vegetables  required product standards and grade systems, providing communication services, building marketing and export skills providing communication services, building marketing and export skills providing sales support, establishing links with national and international trading partners providing sales support, establishing links with national and international trading partners

17 What can be done ? (3) Europe and CIS  Create conditions to extend a value chain building storage and packaging facilities building storage and packaging facilities building food processing units, drying, etc. building food processing units, drying, etc.  Market and possibility of earning profits or develop the business should affect the choice

18 What can be done ? (4) Europe and CIS  Ensure trade mainstreaming into local pro-poor development strategies take into account specificity of trade in urban and rural areas take into account specificity of trade in urban and rural areas emphasize needs for creating enabling business environment and building entrepreneurial capacities emphasize needs for creating enabling business environment and building entrepreneurial capacities  Advocate for mainstreaming trade into national development plans including national development/improving living standards/poverty reduction strategies including national development/improving living standards/poverty reduction strategies

19 Conclusions Europe and CIS

20  Trade is a source of jobs, income and may have significant impact on poverty reduction in urban and rural areas  Trade is restricted by a number of obstacles to access the markets distance to markets, market structures, lack of skills, organization and information distance to markets, market structures, lack of skills, organization and information  Outside border trade facilitation can help to use opportunities provided by trade especially in rural areas development of agro-processing sector, creation of Information/Marketing/Export centers, value chain extension, mainstreaming trade to development strategies development of agro-processing sector, creation of Information/Marketing/Export centers, value chain extension, mainstreaming trade to development strategies Main messages Europe and CIS

21 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 Centre Europe and CIS