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Agro-Industry

Agro-Industry

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Agro-Industry & Development
Agro-Industry & Development

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Categories:Types, Research, Science
Published by: Jorge Alejandro DelaVega Lozano on Apr 22, 2012
Copyright:Attribution Non-commercial

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11/27/2012

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United Nations IndustrialDevelopment OrganizationInternational Fund for AgricultureDevelopmentFood and AgricultureOrganization
T
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This document has not been edited officially
 
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INTRODUCTION
 
Agro-industry, i.e. the processing, preservation and preparation of agriculturalproduction for intermediate and final consumption
2
, performs a number of crucialfunctions that support development and poverty alleviation. This paper arguestherefore that agriculture in connection with industry needs to be recognised bysenior-level policy makers and industry leaders as a competitive, value-addingbusiness sector, that has a positive development impact and contributes to economicgrowth. Rather than focusing on agricultural productivity only, policy makers mustconsider the competitiveness of the entire agro-value chain. A comprehensiveapproach could include e.g. supporting small agro-producers and SMEs, enablingmarket access and developing a supportive institutional environment.
I
MPORTANCE OF AGRO
-
INDUSTRY FOR DEVELOPMENT
 1.
 
Employment and income generation
Agro-industry plays a fundamental role in employment creation and incomegeneration. Particularly the food and beverages processing sector remains important atall levels of economic development.
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Within the EU it is a leading employer with13% of employment in manufacturing, in the US it is the third most important sectorwith 9% of total manufacturing employment. Taking only into account countrieswhere data is available the ILO calculates global employment in the formal food andbeverages sector at 22 million. However, one should bear in mind that in developingcountries an estimated average of 60% of workers in food and beverages areemployed in the informal economy. In addition to the direct employment effect,vibrant agro-industry is found to generate employment in downstream and upstreamsectors such as agriculture, commerce and services.Agro-industry can play a strategic role in pro-poor growth strategies, particularly indeveloping countries where 75% of the poor live in rural areas. As possibilities forincome generation are restricted in rural areas, rural non-farm earnings from trading,agro-processing, manufacturing, commercial, and service activities constitute asignificant part of household income. For developing countries as a whole, non-farmearnings account for 30 to 45% of rural household income. They complementagricultural wages and serve household risk diversification and the evening out of consumption patterns. With low capital requirements and undemanding localmarketing channels the rural non-farm economy offers opportunities for poorhouseholds (particularly women headed households), small-scale farmers and othersmallholders, representing an important instrument for rural poverty alleviation. Thedevelopment of agro-industry can also have an important impact on the localagricultural sector as well as the livelihoods of small holder farmers, provided theycan produce on a stable basis, supplying regular quantity and quality.
2
According to the International Standard Industrial Classification (ISIC) agro-industry consists of: i) food and beverages; ii) tobacco products; iii) paper and wood products; iv) textiles, footwear and apparel; v) leather products; and vi) rubber products.
3
 
The following is based on Wilkinson and Rocha (2008).
 
 
3
Box 1.
In the Dominican Republic, women compriseroughly 50% of the labor force employed in horticultureprocessing; in Mexico, the share of women engaged inpackaging is 80-90%; in Zimbabwe women represent 91%of horticultural workers; in Chilean fruit production,female employment increased almost 300% between 1982and 1992, an impressive pattern when compared to anational growth rate of 70% for the female labor force; andin Ecuador, Kenya and Uganda, women representrespectively 70%, 75%, and 85% of workers inhorticulture, to name but a few examples.
Source:Wilkinson and Rocha (2008).
In terms of employment composition, rural industries (manufacturing) account forapproximately one fifth of rural non-farm employment, consisting mostly of occupations in agro-industries. Indirectly, however, other activities such as commerceand retailing, construction, equipment manufacture, transport, logistics and trade aretypically associated with agro-related manufactures and agribusiness.
Table 1. Composition of Rural Non-Farm Employment by World Regions
Source: Haggblade, Hazell and Reardon (2005).
The importance of agro-industry for employment isfurther emphasised by high andincreasing levels of femaleinvolvement, especially in thenon-traditional, high-valueagro-chains (i.e. horticulture,fruits and fish products).Female employment in suchsectors can range between 50and 90% (Box 1). However,strong gender segmentation inproduction and processing tends to consign women to more vulnerable forms of work (casual, temporary and seasonal), lower paid and more labour-intensive preparationand/or processing.
2.
 
Contribution to GDP and manufacturing
An extended definition of the agro-processing sector which includes not only agro-industries but also distribution and trading activities, would roughly account for morethan a third of the GDP in Indonesia, Chile, Brazil and Thailand, and between 20 and25% in Sub-Saharan countries. The entire food system, including the production of primary goods and commodities, marketing and retailing, would account for morethan 50% of developing countries’ GDP (based on World Bank, FAO and UNIDOdatabases).

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