by Daniele Gelz, Aid for Trade Project manager, UNDP Eurasia
My elevator pitch normally runs something like this: “We support small scale producers in Central Asia to improve the quality of their products and reach more markets. Over the past four years alone, the Aid for Trade project supported the creation of 4,000 new jobs and US$560 million in export contracts”.
Those are impressive numbers, but as we celebrate ten years of the Aid for Trade project, let’s look at what challenges our clients have faced and what we’ve learned as we took the project to the next level.
Global markets are ruthless.
Ten years ago, we began with pushing local products to regional and global markets.
In Central Asia, we found farmers often produce too little and at low quality, and so we supported them to improve both volume and standards. But even if quantity and quality are high, producers still have to compete on price.
Global markets can drive prices down, leading businesses to cut corners and to sacrifice quality, safety, staff pay and environmental concerns to be able to compete.
That means raising the bar is crucial.
Much of development work focuses on big cash crops even if they’re not sustainable or have bad returns for investment in the long-run. To move away from this, we chose instead to concentrate on high added-value products.
Take peanuts. As a raw material they cost nothing. Making peanut butter makes you a bit more profit, whereas extravagant peanut “crème” or a special “wild” peanut butter gets you even more, especially if you can export to foreign markets. But if you just sell the peanuts for export, it only creates the harvester’s job and the real money is made abroad, where the fancy crème is then made.
In short, focusing on a narrower but superior market segment entails better than average returns, which creates more, but also more stable, jobs. Such was the case with our support for two young entrepreneurs in Uzbekistan.
In 2015, we supported Islombek and Nasrullo to start a textile company with seed funding for equipment for polo-shirts targeting the durable market segment. The business ideas were fully driven by the entrepreneurs, UNDP only de-risked some investments and supported market linkages.
Four years after working with us, they have reached a production capacity of 15 tons per month and export contracts worth US$500,000.Islombek and Nasrullo are about to open a new facility for up to 400 staff.
Even something as common as cheese can have added value. By making and distributing quality cheese, a factory in Kyrgyzstan adds value to the milk collected from thousands of local households.
Nurilya Orozumbekov took over a struggling cheese business in 2015. She knew producing high quality cheese would be the key to a viable business. The programme helped her with market intelligence, technical advice and procurement support. The company now has contracts with larger supermarkets in the capital, ensuring consistent sales and better profits.
What you don’t know can hurt you and your business
Another issue our producers face is limited access to information that will help them mitigate problems and connect with markets. Where are the best seeds being sold? What’s the likelihood that pests may destroy crops at certain times of the year? New data is helping farmers to answer these questions.
That means they can adapt. Have you ever seen the yellow sticky pieces farmers put in their fields to catch insects? We used these traps to monitor pests in Uzbekistan. The data collected was uploaded to a cloud-based system that predicts breakouts and sends text messages to alert farmers, who can then combat and minimise outbreaks. My all-time favourite? Predatory bugs that eat pests but die during the frost.
With this new cloud-based monitoring system, farmers used 40 percent less pesticides, saving money, and had a 20 percent increase in production.
In Uzbekistan, we helped build a trading platform that supported US$153 million in exports within three years. In Tajikistan, another platform called the Agricultural Market Information System (AIMS) brings a wealth of agricultural and marketplace knowledge straight to farmers through their mobile phones.
Data can also radically improve market intelligence.
That brings us to trade intelligence. You can make the most delicious vegan mulberry bars from the Pamir mountains, but if you don’t know where the markets are and what their standards are, it will be next to impossible to pitch your product. These unique products don’t need to compete on price and quantity, but they do need access to the right markets. We have calculated that $1 worth of investment in trade intelligence leverages $35 in revenue.
Industrialised countries and large companies have access to unparalleled data and information on trade flows, standards and whether to enter new markets. They live in the world of megatrends. Backed by armies of statisticians, large businesses can spot important trends, such as the rise of superfoods or the spread of artificial intelligence, and apply and test these trends.
Prediction is everything.
The often cited US$12 trillion in business opportunities which will be unlocked if we achieve the SDGs are partially based on these megatrends. Our aim is to make these opportunities visible to governments and the private sector in Central Asia.
So we’re tapping into the world of data. We paired up with the International Trade Center (ITC), which provides high-quality statistics and trade intelligence tools, and EUROMONITOR, a market leader in megatrends analysis. We want to futureproof investments against climate change and trends, identifying products and value chains that will work in the future and create jobs that allow for upward mobility.
Together, we are using big data to identify the most competitive sustainable products of tomorrow, taking into account their employment potential, impact on women and carbon footprint.
This cannot be a one-off exercise. Data is changing constantly, and industrialised nations and companies have entire departments to keep on top of markets. Our clients are losing this battle of information, which means losing opportunities for growth.
For our next act…
As we enter the next stage of the Aid for Trade project, we will be supporting the private sector to identify products that are sustainable and future-proofed, and create good jobs. We will also continue to support our governments to continue to run these analyses to understand where future opportunities lie.
Are you now wondering what the next big product will be? I will give you some hints — plant-based protein, nutrient dense/functional foods… We’ll let you know once we hit the markets.
The Aid for Trade project was launched 17th July 2009. Its current focus is on Central Asian countries, supporting the private sector in improving productive capacities and creating decent jobs. The project is funded by the Government of Finland.
*3000 at the height of season, 1000 throughout the season