Access to markets is increasingly seen as an essential element in providing a route out of poverty, but the nature of those markets is changing. Small producers face new difficulties, for example in meeting high standards, but also see new initiatives, for example in fair trade companies. This report surveys what small producers must now do to achieve effective and sustainable access to markets, and how different private and public organisations can contribute to this.
Market structures for an increasing number of commodities and services require differentiated products and understanding of how markets work, not simply competitive products and prices. A producer must become aware of the possibility of a market and then must understand what it requires in terms of quality and standards. It must develop a long term relationship with buyers. All this means that the producing company or group itself must be well organised and able to act effectively. It must also have access to the inputs including investment and infrastructure, and must understand and meet the legal trading requirements. Market access initiatives on their own cannot help those who do not meet these pre-conditions.
Both private and public initiatives can help producers meet some of these needs, but they have different advantages and act under different circumstances. Direct foreign investment can provide all the basic marketing and production functions. Investors also have the experience to meet transport needs and to encourage governments to adapt or remove barriers to trade. Subcontracting by large private buyers provides the same information and marketing advantages as investment, but more limited access to production, finance, and technology inputs, and probably less assistance on policy. Developing country producers themselves can develop many of the same production advantages and linkages, but need to find ways of meeting the needs for information about markets.
Alternative trading companies can be considered as variations of the local company and external buyer models, with some additional objectives (most notably emphasis on how a good or service is produced and the need for more than a commercial relationship between producers and consumers). In terms of the needs identified here, they provide similar services to buyers, but sometimes with more emphasis on creating sustainable local firms.
Official agencies offer more limited types of assistance, but unlike private firms they can be targeted explicitly at small producers or traders, or at particular sectors like agriculture. Countries’ own governments have less knowledge of foreign markets than companies or agencies based in importing countries, but can offer greater continuity and develop awareness of other information sources. Aid programmes are now starting to offer some programmes which link production to marketing and awareness assistance, and the traditional providers of agricultural research are also starting to look at the links to markets. IFAD has moved from concentration on agricultural assistance to looking also at markets, and it has the advantage over export and import promotion agencies that it can help producers to develop local and regional markets as well as exports. One of the important changes in the structure of markets has been the increasing sophistication and rising quality standards of markets within developing countries, so that assistance is more needed at that level.
Although the private and local government initiatives offer the only explicitly long term, and therefore sustainable, assistance, both have potential disadvantages (lack of direct interest in promoting local firms or lack of information and funds, for example). A combination of the other types of assistance may therefore offer an alternative. If external advice or assistance can build up local services, public and private, for producers, this may help provide sustainable production. Advice which covers the whole transition from local sales through national to export is an important role for an agency like IFAD which has existing good knowledge of producers.
The wide range of needs and levels of development of suppliers in developing countries and the different conditions in different products and markets mean that a range of types of assistance is necessary; it is not possible to define worldwide priorities, and setting priorities will require examination of each situation. The framework suggested here could provide a tool for doing this. This could be tested and improved by commissioning detailed country studies which would indicate which types of initiative had worked in which circumstances. There is also a need to create a network which could bring together existing studies and existing information on the ground of the effects of investment and trade on poverty and of the effects of commercial and public sector initiatives to increase market access.
