Synthesis Documents

Industrial Value Chain Diagnostics: An Integrated Tool (2011)

    New industrial challenges exist for both low and middle income countries, among these, to i) build up industries so as to benefit from value addition in commodities originating from developing countries, ii) turn non-competitive industries into competitive ones that create income and employment, iii) meet the Millennium Development Goals, particularly the overarching goal of poverty reduction, and iv) make industrial development compatible with a sustainable use of natural resources and the elimination of negative effects on climate change through energy use. However, it is especially the smaller and less developed countries that are increasingly challenged by competition and trade barriers, while at the same time under pressure to introduce new technologies and systems of production. Consequently, less developed countries could lose opportunities to effectively participate in global value chains and may be illequipped to compete in national and regional markets.

    This document offers a tool for diagnosing industrial value chains. It provides guidance on defining the elements necessary for the development and upgrading of entire value chains. The focus is on industrial value chains, meaning those
    that engage in the processing and transformation of primary products into consumable goods and thereby generate value added. Unlike conventional value chain analysis,this tool places particular emphasis on the processing and manufacturing segment with its downstream (market) and upstream (supplies) relationships. It adds to the existing literature on value chain analysis1 by introducing the “industrial perspective” and complements other value chain analysis tools that centre on “primary production” and “market orientation”.

    Summary of results
    The diagnostic tool essentially generates three outputs:
    (a) A detailed mapping of the actors in a specific value chain in a given country and the interactions amongst them.
    (b) A description of the status of development in the value chain with regard to
    seven analytical dimensions, including the sourcing of input and supplies, production capacity and technology, end-markets and trade, governance, value
    chain finance, sustainable production and energy use, and business environment and socio-political context.
    (c) The identification of constraints to and opportunities for value chain development leading to strategies to implement and finance interventions among agents that support chain development