10 February 2013

Ethiopia: Value Chain Hoopla


Development debate of the time involves more buzz words than actual operational approaches. Its dictionary changes faster than its results.

Confusing words and phrases, such as; 'sustainability', 'participation', 'empowerment', 'integrated development' and 'poverty reduction', are all just parts of the ever-expanding vocabulary. Amazingly, this dictionary of terms has created a sphere where the all too common laymen will not have any understanding.

Its Ethiopian chapter is no different. Though hyper-local in action, the local sphere also shares this typological trend, as much as its international darling does.

My recent conversation with a high-placed development expert has shown me that 'value chain' is the new buzz phrase in the local sphere. There seems to be a biblical passion amongst professionals of the day to talk about value chains. This very phrase is used to mean end-to-end production chains, stretching from input supply to consumption.

All the major donors, whose experts cherish their suits and ties more than results, have adopted the phrase. By adoption, I mean that they have started to recite the phrase as many times a day as possible.

I always wonder about the stark similarity between the learning approaches of the development sphere and Ethiopian religious schools. Both teach concepts through continuous recitation. Less effort is invested in helping people to understand the true meaning of concepts, debating about them or getting them right in their own way. As in love, a very emotional experience, one is allowed to reason things only after getting it right.

It seems like the developmentalists have found yet another leverage through which to reference their grip over the resources they dictate. It appears as though another phase in the development evolution has arrived.

My bewilderment about the adoption of the phrase and its contemporary popularity was furthered after the expert that I talked to explained to me the chains in which their organisation is engaged. As if to bash the highly valued theory of comparative advantage, popularised by the economist David Ricardo, all donors are now involved in incubating agricultural value chains. And all are pitching their money into coffee, sesame, flower, spices and diary.

Ricardian analysis of value had shown the world that countries should invest their money in areas where they excel. A later adjustment to the theory, however, showed that value has to be calculated as a dynamic vector quantity that changes with time and through shifts in production type. It is this later adjustment to the theory that the local value chain hoopla overlooks.

Besides, information remains asymmetrically distributed, even within value chains. And the donors seem to give little attention to the distortion that it is causing in the production systems. Integrating production chains alone can not bring change to people's lives, rather it must also be supplemented with the effective movement of market information.

As it appears, the value chain approach is creating production islands. A player in the coffee value chain has little opportunity to know about what is going on in the sesame value chain, if public policy is to follow donor policy. This would leave the former with a high production risk, by limiting the probability of switching production.

At the end of the whole value chain approach resides a mentality that advocates self-sufficiency. Values could be optimised by a nation that is involved in end-to-end production, the argument seems to go.

Amazingly, this very integration seems to disregard the comparative advantages and costs of adding value. It only buys into the concept of economies of scale.

Ultimately, the approach is in favour of agrarian production. In a way, it limits structural economic transformation. Yet, all the major donors remain fond of it.

This passion could be a driver of results, however, only if it could be underpinned with investments in market information platforms, inter-value chain knowledge sharing, a mindset that views values comprehensively and a deliberate investment bias towards the high-end of value chains.

Without this, the trend will simply be another comfortable developmentalism idea, devoid of any sustainable contribution towards individual livelihoods or national economies.

Getachew T. Alemu Is the Op-Ed Editor for Fortune.

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