Consider the ease of property registration in Egypt in the 2006/07 period:
registration entailed completing seven different procedures, a process that took at least 193 days and would cost an equivalent of 1% of the value of the prop-erty to be registered. For each of these values, Egypt is ranked against other world economies and assigned a percentile ranking of 58.7%, 86.4% and 11.8%, respectively. Taking a simple average of these values gives the stage-level percentile ranking of 52.3% for Egypt’s property registration processes.
The same process is repeated for each of the business life stages, to produce 10 stage-level percentile rankings (these easily can be translated into a 1–178 rank-ing relative to other countries’ performance in performrank-ing the same operations as indicated above for Egypt), whose simple average is the country-level percen-tile ranking. This percenpercen-tile ranking is used to assign an Ease of Doing Business position for Egypt in the world economy, in this case, 126 out of 178.
Appendix 3. The Global Competitiveness Index (GCI). (From World Economic Forum, 2006.) Competitiveness
pillar Measures Components
Basic requirements
Institutions Rules that shape incentives and define the way economic agents interact in an economy
Public institutions: public-sector accountability, efficiency, transparency; independence of judiciary; respect of property rights;
government inefficiency; levels of public security
Private institutions: corporate ethics;
accountability Infrastructure Quality of physical
infrastructure, i.e.
energy, transport and telecommunications
Overall infrastructure quality; railway infrastructure development; quality of port infrastructure; quality of air transport infrastructure; quality of electricity supply; telephone lines Macroeconomy Level of macroeconomic
stability
Fiscal indicators (government deficit, national savings rate, inflation, interest rates, government debt);
trade-weighted real effective exchange rate
Efficiency enhancers
Health and education Quality of primary health and education
Health: medium-term business impact of malaria, tuberculosis and HIV/
AIDS; infant mortality;
life expectancy; TB prevalence;
malaria prevalence; HIV prevalence Education: primary school enrolment
continued
Appendix 3. Continued.
Competitiveness
pillar Measures Components
Higher education Quality of educational system
Secondary and tertiary enrolment rates; quality of education as assessed by business community (quality of science, maths and management schools); availability of specialized training for
workforce Market efficiency Extent to which goods,
labour and finance are allocated efficiently for maximum productivity
Goods: market openness, level of distortive government intervention;
market size
Labour: cooperation in
employer–employee relations;
flexibility of labour regulations;
extent of gender bias in the workplace
Financial: access to credit; quality of capital; soundness of banking sector
Technological readiness
Agility with which an economy adopts existing technologies to enhance the productivity of its industries
Availability of information and communications technologies (ICTs) and other technologies;
aggressiveness of firm adoption of new technologies;
FDI and technology transfer;
cellular telephones;
Internet users;
personal computers Innovation and sophistication
factors Business
sophistication
Ability of business leaders to manage companies efficiently
Quantity and quality of local suppliers, level of development of production processes, extent to which companies are turning out the most sophisticated products, networks and supporting industries
Innovation Extent of design and development of cutting-edge products and processes
Business investment in research and development; quality of scientific research; extent of collaboration in research between universities and industries; protection of intellectual property
Appendix 4. Components of the Business Competitiveness Index (BCI). (From Porter, 2004.) I. Company operations and strategy
Production process sophistication Nature of competitive advantage Extent of staff training
Willingness to delegate authority Capacity of innovation
Company spending on research and development Value chain presence
Breadth of international markets Degree of customer orientation Control of international distribution Extent of branding
Reliance on professional management Extent of incentive compensation Extent of regional sales
Prevalence of foreign technology licensing II. National business environment
(a) Factor conditions Physical infrastructure Administrative infrastructure Human resources
Technology infrastructure Capital markets
(b) Demand conditions Buyer sophistication
Sophistication of local buyers, products and processes Government procurement of advanced technology products Presence of demanding regulatory standards
Laws relating to information and communications technologies (ICTs) Stringency of environmental regulations
(c) Related and supporting industries Local supplier quality
State of cluster development
Local availability of process machinery
Local availability of specialized research and training services Extent of collaboration among clusters
Local supplier quantity
Local availability of components and parts (d) Context for firm strategy and rivalry
Incentives: extent of distortive government subsidies Favouritism in decisions of government officials Cooperation in labour–employer relations Efficacy of corporate boards
Intellectual property protection
Protection of minority shareholder interests Regulation of securities exchanges Effectiveness of bankruptcy laws
continued
Appendix 4. Continued.
Competition: hidden trade barriers Intensity of local competition Extent of locally based competitors Effectiveness of antitrust policy Decentralization of corporate activity Business costs of corruption
Costs of importing foreign equipment Centralization of economic policy making Prevalence of mergers and acquisitions Foreign ownership restrictions
Appendix 5. Components of the Investment Compass (IC). (From UNCTAD web site http://
compass.unctad.org/Page1.egml?country1=&country2=®ion=&sessioncontext=
246934608&object=SC.app.objects.methodology.)
Key area Variables Indicators
Resource assets Human capital School enrolment in tertiary Science and engineering students Illiteracy rate
Production of minerals Availability of raw
materials
Production of agricultural commodities
Energy reserves
Market size GDP (purchasing power parity) (PPP)
Per capita income (PPP) Effective market size Total population
Infrastructure ICT Internet hosts
Internet users Mobile phones Telephone main lines Basic infrastructure Air transport freight
Water access
Electricity transmission and distribution losses Electricity production Port activity
Road network Railway freight
Operating costs Labour costs Monthly wage for professional work Monthly wage for administrative
work
Monthly wage for technical work Monthly wage for clerical work
continued
Appendix 5. Continued
Key area Variables Indicators
Business costs Rental office costs
International telecommunications charge
Local telecommunications charge Electricity charge
Economic performance and governance
Macroeconomic performance
Unemployment rate Government surplus/deficit Current account balance Inflation
Real economic growth Governance Creditworthiness rating
Human development index Regulatory quality
Rule of law
Government effectiveness Political stability
Voice and accountability Taxation and incentives Business and professional
services (present value of tax)
Business and professional services (direct and indirect)
Information and communications technology (present value of tax) (PV tax)
ICT (direct and indirect)
Tourism (PV tax) Tourism (direct and indirect) Manufacturing (PV tax) Manufacturing (direct and indirect)
Regulatory framework Entry Standards of treatment
Land ownership and transfer Openness of main sectors to FDI
Operation Performance requirements
Preferential trade arrangements with major markets
Labour market regulation Foreign workforce regulations Foreign exchange regulation on
current operations
Size of regional/integrated trade area
Import duties
Protection and exit Number of taxation treaties signed Number of bilateral investment
treaties signed
Liquidation and expropriation Dispute settlement
ling Environments for Competitive Agro-industries 181
Policy field Rationale Major issues
Investment policy Quality of investment policies directly influences investment decision, driven by principles including transparency, property protection and non-discrimination
Enforcement, transparency, accessibility of laws and regulations Efficient ownership registration of property
Protection of intellectual property Effective contract enforcement Effective compensation expropriation Non-discrimination principle
Implementation of international arbitration instruments Investment
promotion and facilitation
Provide aim to correct for market failures and leverage the strong point of a country’s investment environment
Government strategy for sound business environment
Establishing and adequately funding investment promotion agency Streamlining administrative procedures for new investments Maintaining dialogue with investors
Evaluating costs and benefits of investment incentives Facilitating investment linkages between businesses Trade policy Support more and better-quality investment
by expanding opportunities to reap scale economies and by facilitating integration into global supply chains
Reducing border costs and inefficiencies Reducing trade policy uncertainty
Participation in international trade agreements Review of trade policy to reduce distortions Impact of trade policy on input prices
Alternative means of achieving public policy objectives Targeting policy to attract investment towards weak sectors Competition
policy
Favours innovation and contributes to conditions conducive to new investment
Clear, transparent, non-discrimination competition policy Are competition authorities adequately resourced?
Ability to address anticompetitive practices
Capacity to evaluate impact on market entry of other policies Capacity to evaluate the costs and benefits of industrial policies Role of competition authorities in case of privatization
Extent of cooperation in international competition issues
continued
R. Christy etal.
Policy field Rationale Major issues
Tax policy Level of tax burden and design and administration of tax policy influence business costs and returns on investment
Average tax burden on domestic profits, accounting for statutory provisions, tax-planning opportunities and compliance costs Tax burden consistent with investment attraction strategy Tax burden consistent with goals and objectives of tax system Neutrality of tax system to nationality of investor, firm size, age of
business entity, ownership structure, industry sector, location Consistency of main tax provisions with international norms
Presence of unintended tax opportunities resulting from targeted tax incentives, and their impact on cost-effectiveness of system Tax expenditure account reporting and use of sunset clauses to
inform and manage the budget process
Extent of tax treaty network and presence of strategies to counter abusive cross-border tax-planning strategies
Corporate governance
Influences confidence in investors, cost of capital, overall functioning of financial markets and development of more sustainable sources of financing
Presence of coherent, consistent regulatory framework backed with effective enforcement
Extent to which framework ensures equitable treatment of shareholders Institutional structure for legal redress in case of violation of
shareholder rights
Procedures and institutions for shareholder empowerment
Standards and procedures for timely, reliable and relevant disclosure Does framework ensure effective monitoring of management by the board?
Voluntary incentives and training to encourage and develop a good corporate governance culture
Has national corporate governance system been reviewed?
For state-owned enterprises, extent of government interference in management and market operations
Policies for promoting responsible business conduct
Good conduct policies (respecting human rights, environmental protection, labour relations and financial accountability) help attract enterprises that contribute to sustainable development
Extent to which responsibilities ascribed to the business sector are clear
Steps taken to communicate responsible business behaviour to investors Presence of framework to support company disclosures about
business operations
ling Environments for Competitive Agro-industries 183
continued Government role in strengthening the base case for responsible conduct Government participation in intergovernmental cooperation
to promote international principles for responsible business Human resource
development
Policies that develop and maintain a skilled, adaptable and healthy population and ensure the full and productive
deployment of human resources, thus a favourable investment environment
Presence of coherent and comprehensive human resource development policy framework
Strategies for increased participation in basic schooling and to improve the quality of instruction so as to leverage assets Incentives for individuals to invest in higher education and
lifelong learning
Extent to which government promotes training programmes and evaluates effectiveness of investment environment
Presence of coherent strategy to tackle the spread of pandemic diseases Mechanisms to promote and enforce core labour standards
Extent to which labour market regulations support job creation and the government’s investment attraction strategy
Steps taken to unwind unduly restrictive practices covering the deployment of workers from investing enterprises
Programmes to assist large-scale labour adjustment Steps to ensure that labour regulations support an
adaptable workforce Infrastructure and
financial sector development
Ensure scarce resources are channelled to the most promising projects and address bottlenecks that limit private investment
Processes used to evaluate infrastructure investment needs Measures adopted to uphold transparency and procedural
fairness in bidding for infrastructure development contracts Market access for potential investors in telecommunications
and extent of competition
Access to electricity services on a least-cost basis for a wide range of users
Processes for development and maintenance of transport infrastructure Investment needs and private-sector involvement in water management Capacity of financial sector and quality of regulatory framework Laws and regulations governing credit access
R. Christy etal.
Appendix 6. Continued.
Policy field Rationale Major issues
Public governance
Regulatory quality and public-sector integrity important for establishing credibility with investors and for reaping development benefits of investments
Presence of a coherent and comprehensive regulatory reform framework
Mechanisms for managing and coordinating regulatory reforms across different levels of government
Extent to which regulatory impact assessments are used to evaluate the consequences of economic regulations for the investment environment
Public consultation mechanisms and procedures established to improve regulatory quality
Extent to which the administrative burdens on investors are measured and qualified
Extent to which international anticorruption and integrity standards have been implemented in national legislation Extent to which institutions and procedures ensure transparent,
effective and consistent enforcement of anticorruption laws and regulations
Existence of review mechanisms to assess the performance of laws and regulations on anticorruption and integrity
Government participation in international initiatives aimed at fighting corruption and improving public-sector integrity
ling Environments for Competitive Agro-industries 185
Section Issues
1. General information Age of enterprise, legal status, ownership, number of operating facilities, main product line, other income-gener-ating activities
2. Sales and supplies Share of local market, percentage of sale into different markets, source of inputs, days of inventory at hand, supply delivery delays, competitors in domestic market
3. Investment climate constraints on the firm
Severity of obstacles in telecommunications, electricity, transport, access to land, tax rates, tax administration, customs and trade regulations, labour regulations, skills and education of available workers, business licensing and operating permits, access to financing, cost of financing, economic and regulatory policy uncertainty, macroeconomic instability, corruption, crime, anticompetitive or informal practices, conflict resolution 4. Infrastructure
and services
Frequency and duration of service interruptions, average utility costs, access to computer and the Internet, affiliation to chamber of commerce and services received, quality and affordability of business services 5. Finance Contribution to working capital and new investments of finances from different sources (e.g. internal funds, loans,
investment funds, rental income), access to credit or overdraft facilities, interest rate on loans, frequency of external auditor reviews
6. Business–government relations
Efficiency of government in delivering services, consistency and predictability of officials’ interpretation of regula-tions, days to import/export, restrictiveness of labour regularegula-tions, time spent complying with regularegula-tions, bribes as percentage of annual sales, percentage of sales reported for taxes, influence on national laws and regula-tions of lobbying efforts by various entities (firms, business associaregula-tions, labour unions, local government) 7. Conflict resolution
and legal environment
Confidence in judicial system, proportion of sales on credit, percentage of sale to government and state-owned enterprises, time spent in payment dispute resolution, proportion of disputes resolved by court action
8. Crime Percentage of sale spent on security and protection payments, losses due to theft, vandalism or arson, share of crimes reported to the police and share solved
9. Capacity, innovation, learning
Average capacity utilization, rate of growth in sales, share of profits reinvested, range of products, use of technology from foreign-owned firms, position on technology relative to competitors, innovation initiatives recently taken by firm, ways of acquiring technological innovations, sources of pressure to reduce production costs and to develop new products and services
10. Labour relations Average number of workers, education levels, total compensation, proportion of foreign employees, time spent recruiting, formal training offered to employees, percentage of unionized workforce, frequency of labour disputes, proportion of female employees, level of top management experience
11. Productivity Total sales; input costs; market value of production; energy costs; manpower costs; interest charges and financial fees; spending on new assets; value of assets sold; amount spent on rentals, leases and licences; amount spent on research and development; net value of assets; value of liabilities
186 © FAO and UNIDO 2009. Agro-industries for Development (C.A. da Silva et al.)
Introduction
Small-scale farmers, who form the bedrock for global agrifood supply, are faced with markets in an unprecedented state of flux. Domestic markets are undergoing rapid but uneven modernization, and higher value and export mar-kets are increasingly the preserve of larger-scale suppliers.
The modernization of domestic markets, particularly in Latin America and Asia, has been driven by a wave of investments in emerging economies by domestic and transnational food manufacturers and retailers over the past two decades. Combined with rising urbanization, and changes in consumer preferences and purchasing power, these have led to a growth of modern organized food retailing, which has outpaced the growth of per-capita GDP by a factor of 3–5 (Reardon and Huang, 2008).
These changes are generating intense policy debate, particularly regarding the opportunities facing small farmers and the rural poor. The 2008 World Bank World Development Report (WDR) (World Bank, 2007b) notes that in transforming economies, where the majority of the rural poor live, ‘the rising urban–rural income gap accompanied by unfulfilled expectations creates politi-cal tensions. Growth in agriculture and the rural non-farm economy is needed
6 Business Models That Are Inclusive of Small Farmers*
B
ILLV
ORLEY,
1M
ARKL
UNDY2 ANDJ
AMESM
ACG
REGOR31Head, Sustainable Markets Group, International Institute for Environment and Development (IIED), London, UK; 2Agroenterprise Specialist, International Center for Tropical Agriculture, CIAT, Cali, Colombia; 3Researcher,
International Institute for Environment and Development (IIED), London, UK
* This chapter draws heavily on the work of the Regoverning Markets consortium (www.
regoverningmarkets.org) and the associated international conference ‘Inclusive Business in Agrifood Markets: Evidence and Action’ held in Beijing on 5–6 March 2008. Contributions are also acknowledged from the ‘New Business Models for Sustainable Trade’ project led by the Sustainable Food Laboratory and Rainforest Alliance, ‘Inclusion of small producers in value chains’ – a partnership between Cordaid, Vredeseilanden and IIED; and framework funding to IIED from the Swedish International Development Agency (SIDA). Comments on an earlier draft by Jose Reijter (Cordaid) are gratefully acknowledged.