635($',1*7+(*$,16)520*/2%$/,6$7,21

:+$7&$1%(/($51(')5209$/8(&+$,1

$1$/<6,6"

,'6:RUNLQJ3DSHU

5DSKDHO.DSOLQVN\

6800$5<

,Q UHFHQW \HDUV JOREDOLVDWLRQ KDV EHHQ DVVRFLDWHG ZLWK LQFUHDVLQJ LQHTXDOLW\ ZLWKLQ DQG EHWZHHQ FRXQWULHV
DQG ZLWK D VWXEERUQO\ ODUJH VKDUH RI WKH ZRUOG·V SRSXODWLRQ OLYLQJ LQ SRYHUW\ ,I WKH ¶ORVHUV· KDG EHHQ
FRQILQHGWRWKRVHZKRGLGQRWSDUWLFLSDWHLQWKHJOREDOHFRQRP\WKHQWKHSROLF\LPSOLFDWLRQVZRXOGEHFOHDU
²MRLQWKHUXVK%XWZKHQ DVLVWKHFDVH WKH¶ORVHUV·LQFOXGHWKRVHZKRKDYHSDUWLFLSDWHGLQJOREDOSURFHVVHV
WKHQWKHSROLF\FKDOOHQJHLVPXFKPRUHGDXQWLQJ,WLVQRWVRPXFKDPDWWHURIZKHWKHUWRSDUWLFLSDWHLQJOREDO
SURFHVVHVEXWKRZWRGRVRLQDZD\ZKLFKSURYLGHVVXVWDLQDEOHLQFRPHJURZWKIRUSRRUSHRSOHDQGIRUSRRU
FRXQWULHV,QWKHVHFLUFXPVWDQFHVSROLF\QHHGVWRDGGUHVVSURFHVVHVRISURGXFWLRQDQGSURGXFWGHYHORSPHQW
LQFOXGLQJERWKLQWUDILUPRUJDQLVDWLRQDQGWKHUHODWLRQVKLSEHWZHHQILUPV,WDOVRQHHGVWRDGGUHVVWKHZD\V
LQZKLFKSRRUSURGXFHUVDQGSRRUFRXQWULHVFRQQHFWZLWKSURGXFHUVDQGFRQVXPHUVLQWKHJOREDOHFRQRP\
9DOXHFKDLQDQDO\VLV²ZKLFKLQFOXGHVWKHZKROHF\FOHRIWKHRUJDQLVDWLRQSURGXFWLRQDQGGHOLYHU\RI
SURGXFWVIURPLQFHSWLRQWRXVHDQGUHF\FOLQJ²SURYLGHVDWRROIRUPDSSLQJWKHVHFUXFLDOGRPDLQVRISULYDWH
DQGSXEOLFSROLF\%XWPRUHWKDQWKDWE\IRFXVLQJRQWKHG\QDPLFVKLIWLQJRISURGXFHUUHQWVWKURXJKWKHFKDLQ
RQ WKH SURFHVVHV ZKHUHE\ NH\ DFWRUV SURYLGH JRYHUQDQFH WR SURGXFWLRQ ZKLFK RFFXUV RQ D JOREDO EDVLV YDOXH
FKDLQ DQDO\VLV SURYLGHV LPSRUWDQW LQVLJKWV LQWR WKH SROLF\ FKDOOHQJHV FRQIURQWLQJ ERWK SULYDWH DQG SXEOLF
DFWRUV
7KLV SDSHU UHYLHZV WKH XQHTXDO FKDUDFWHU RI UHFHQW SURFHVVHV RI JOREDOLVDWLRQ VXPPDULVHV WKH NH\
WKHRUHWLFDOFRQFHSWVZKLFKFKDUDFWHULVHWKHFRQFHSWRIYDOXHFKDLQVDQGLOOXVWUDWHVWKHFRQWULEXWLRQRIYDOXH
FKDLQ DQDO\VLV WKURXJKVXPPDULHVRI IRXU FKDLQ FDVHVWXGLHV IUHVK IUXLW DQG YHJHWDEOHV FDQQHG GHFLGXRXV
IUXLWIRRWZHDUDQGDXWRPRELOHFRPSRQHQWV ,WFRQFOXGHVZLWKDGLVFXVVLRQRISUDFWLFDOZD\VRIKRZYDOXH
FKDLQDQDO\VLVFDQLQIRUPSROLF\

,DPJUDWHIXOWR-RKQ+XPSKUH\+XEHUW6FKPLW] +DQV6LQJHUDQG$GULDQ:RRGIRUWKHLU KHOSIXO FRPPHQWV RQ DQ

HDUOLHUGUDIW,UHJUHWWKDWWKHUHPDLQLQJHUURUVDQGZHDNQHVVHVDUHPLQHDORQH


‹,QVWLWXWHRI'HYHORSPHQW6WXGLHV
,6%1


,1752'8&7,21

)RU PDQ\ RI WKH ZRUOG·V SRSXODWLRQ WKH JURZLQJ LQWHJUDWLRQ RI WKH JOREDO HFRQRP\ KDV SURYLGHG WKH
RSSRUWXQLW\ IRU VXEVWDQWLDO LQFRPH JURZWK 7KLV LV UHIOHFWHG QRW RQO\ LQ KLJKHU LQFRPHV EXW DOVR LQ WKH
LPSURYHG DYDLODELOLW\ RI EHWWHU TXDOLW\ DQG LQFUHDVLQJO\ GLIIHUHQWLDWHG ILQDO SURGXFWV +RZHYHU DW WKH VDPH
WLPH JOREDOLVDWLRQ KDV KDG LWV GDUN VLGH 7KHUH KDV EHHQ DQ LQFUHDVLQJ WHQGHQF\ WRZDUGV JURZLQJ
XQHTXDOLVDWLRQZLWKLQDQGEHWZHHQFRXQWULHVDQGDJURZLQJLQFLGHQFHLQWKHDEVROXWHOHYHOVRISRYHUW\QRW
MXVW LQ SRRU FRXQWULHV 7KHVH SRVLWLYH DQG QHJDWLYH DWWULEXWHV RI JOREDOLVDWLRQ KDYH EHHQ H[SHULHQFHG DW D
QXPEHURIGLIIHUHQWOHYHOV²WKHLQGLYLGXDOWKHKRXVHKROGWKHILUPWKHWRZQWKHUHJLRQWKHVHFWRUDQGWKH
QDWLRQ 7KH GLVWULEXWLRQDO SDWWHUQ HPHUJLQJ LQ UHFHQW GHFDGHV RI JOREDOLVDWLRQ LV WKXV VLPXOWDQHRXVO\
KHWHURJHQHRXVDQGFRPSOH[
,I WKRVH ZKR KDG ORVW IURP JOREDOLVDWLRQ KDG EHHQ FRQILQHG WR WKH QRQSDUWLFLSDQWV WKH SROLF\
LPSOLFDWLRQV ZRXOG EH FOHDU ² WDNH HYHU\ VWHS WR EH DQ DFWLYH SDUWLFLSDQW LQ JOREDO SURGXFWLRQ DQG WUDGH
+RZHYHUWKHFKDOOHQJHLVPXFKPRUHGDXQWLQJWKDQWKLVVLQFHWKHORVHUVLQFOXGHPDQ\RIWKRVHZKRKDYH
SDUWLFLSDWHG DFWLYHO\ LQ WKH SURFHVV RI JOREDO LQWHJUDWLRQ +HQFH WKHUH LV D QHHG WR PDQDJH WKH PRGH RI
LQVHUWLRQLQWRWKHJOREDOHFRQRP\WRHQVXUHWKDWLQFRPHVDUHQRWUHGXFHGRUIXUWKHUSRODULVHG
7KUHHFHQWUDOTXHVWLRQVDULVHIURPWKHVHREVHUYDWLRQV)LUVWZK\KDVWKHUHEHHQVROLWWOHFRUUHVSRQGHQFH
EHWZHHQWKHJHRJUDSKLFDOVSUHDGRIHFRQRPLFDFWLYLW\DQGWKHVSUHDGLQJRIWKHJDLQVIURP SDUWLFLSDWLQJ LQ
JOREDOSURGXFWPDUNHWV"6HFRQGO\WRZKDWH[WHQWLVLWSRVVLEOHWRLGHQWLI\DFDXVDOOLQNEHWZHHQJOREDOLVDWLRQ
DQGLQHTXDOLW\"$QGWKLUGO\ZKDWFDQEHGRQHWRDUUHVWWKHXQHTXDOLVLQJWHQGHQFLHVRIJOREDOLVDWLRQ"7KHVH
WKUHHUHODWHGTXHVWLRQVKDYHLPSRUWDQWPHWKRGRORJLFDOLPSOLFDWLRQV²ZKDWLVWKHEHVWZD\WRJHQHUDWH WKH
LQIRUPDWLRQ UHTXLUHG WR GRFXPHQW WKHVH GHYHORSPHQWV LQ SURGXFWLRQ DQG DSSURSULDWLRQ DQG KRZ FDQ ZH
LGHQWLI\SROLF\LQVWUXPHQWVZKLFKPLJKWDUUHVWDQGSHUKDSVSDUWLDOO\UHYHUVHWKHVHGHYHORSPHQWV"
,WLVWKHFHQWUDOFRQWHQWLRQRIWKLVSDSHUWKDWYDOXHFKDLQDQDO\VLVSURYLGHVDQLPSRUWDQWIUDPHZRUNIRU
DGGUHVVLQJ WKHVH FUXFLDO TXHVWLRQV ,Q GHYHORSLQJ WKLV DUJXPHQW LQ 6HFWLRQ  ZH ZLOO EULHIO\ FKURQLFOH WKH
FRUUHODWLRQ EHWZHHQ JOREDO LQWHJUDWLRQ DQG JOREDO XQHTXDOLVDWLRQ DQG SRVLW D FDXVDO UHODWLRQVKLS EHWZHHQ
LQFUHDVLQJLQHTXDOLW\DQGWKHJOREDOLQWHJUDWLRQRISURGXFWLRQDQGWUDGH,Q6HFWLRQZHRXWOLQHWKHFHQWUDO
HOHPHQWV RI YDOXH FKDLQ DQDO\VLV DQG WKLV LV IROORZHG LQ 6HFWLRQ  E\ D VHULHV RI VKRUW FDVH VWXGLHV ZKLFK
LOOXVWUDWHWKHFRQWULEXWLRQWREHPDGHE\YDOXHFKDLQDQDO\VLVLQXQGHUVWDQGLQJWKLVFDXVDOUHODWLRQVKLS7KH
SDSHUFRQFOXGHVE\GUDZLQJFRQFOXVLRQVIRUERWKIXWXUHUHVHDUFKDQGSROLF\GHVLJQDQGLPSOHPHQWDWLRQ

*/2%$/,6$7,21$1'81(48$/,6$7,21

*OREDOLVDWLRQ LV QRW D QHZ SKHQRPHQRQ LW KDV HEEHG DQG IORZHG RYHU WKH SDVW FHQWXU\ 7KHUH DUH PDQ\
PHDVXUHVRI¶JOREDOLVDWLRQ·QRQHRIZKLFKLVIUHHIURPLPSHUIHFWLRQV+RZHYHURQHLQGLFDWLRQRIJURZLQJ
LQWHJUDWLRQLVWKHSURSRUWLRQRISURGXFWLRQZKLFKLVWUDGHGWKLVKDVJURZQVLJQLILFDQWO\LQPRVWSDUWVRIWKH
JOREDO HFRQRP\ 7DEOH   7KH VKDUS JURZWK LQ WUDGH*'3 VKDUHV IRU &KLQD DQG ,QGLD DUH SDUWLFXODUO\

 $QDVVRFLDWHGSRLQWZKLFKZHZLOOFRQVLGHULQODWHUGLVFXVVLRQLVWKHQDWXUHRIWKHVHWUDGLQJUHODWLRQVKLSV


VLJQLILFDQWDVZHVKDOOVHHEHORZ6LPLODUOHYHOVRILQWHJUDWLRQFDQEHIRXQGZLWKUHVSHFWWRILQDQFLDOIORZV
DQGFRPPXQLFDWLRQV

Table 1: Trade as a proportion of GDP

,PSRUWV([SRUWVDVDRI*'3    

%\LQFRPHFDWHJRULHV
+LJKLQFRPH    
0LGGOHLQFRPH 
8SSHUPLGGOHLQFRPH    
/RZHUPLGGOHLQFRPH 

%\UHJLRQ
(DVW$VLD 3DFLILF    
/DWLQ$PHULFD &DULEEHDQ    
6XE6DKDUDQ$IULFD    
/RZLQFRPHH[FO&KLQD ,QGLD   
&KLQD    
,QGLD    

:RUOG    

6RXUFH:RUOG'HYHORSPHQW,QGLFDWRUV

%HIRUHFRQVLGHULQJGLVWULEXWLRQDOLVVXHVLWLVLPSRUWDQWWRUHFRJQLVHWKDWPDQ\RIWKHZRUOG·VSRSXODWLRQKDYH
H[SHULHQFHGVLJQLILFDQWLPSURYHPHQWVLQOLYLQJVWDQGDUGVLQUHFHQW\HDUV7KLVLVSDUWLFXODUO\WUXHRIHDVW$VLD
DIWHUWKHVDQG&KLQDDQG,QGLDDIWHU)RUH[DPSOHWKH&KLQHVHHFRQRP\JUHZDWDQDQQXDOUDWHRI
SHUFHQWGXULQJWKHVDQGRISHUFHQWGXULQJWKHILUVWKDOIRIV0XFKRIWKHEHQHILWVRI
WKLVJURZWKKDYHILOWHUHGWKURXJKWRDODUJHQXPEHURISHRSOH
%XWDWWKHVDPHWLPHDVJOREDOLVDWLRQKDVEHHQDVVRFLDWHGZLWKDQLPSURYHPHQWLQOLYLQJVWDQGDUGVIRU
PDQ\ZKDWKDVKDSSHQHGWRWKHGHJUHHRIJOREDOLQHTXDOLW\"&RQVLGHUHGDWWKHOHYHORIFRXQWULHVWKHSDWWHUQ
RI LQWHUFRXQWU\ LQFRPH GLVWULEXWLRQ KDV EHFRPH FRPSOH[ ZLWK WKH GHYHORSPHQW RI D ¶WZLQSHDN·
GLVWULEXWLRQDOSDWWHUQ7ZRJURXSVRIFRXQWULHVKDYHHPHUJHGEHWZHHQDQG²WKRVHFOXVWHUHGDWD
OHYHORIILYHSHUFHQWRI86*'3ZRUNHUDQGWKRVHZKHUHHDUQLQJVDUHEHWZHHQRQHDQGWZRWKLUGVRI86
OHYHOV -RQHV 
%XWGRHVWKLVFRUUHVSRQGWRDZRUVHQLQJRILQWHUFRXQWU\LQFRPHGLVWULEXWLRQ"2QWKHRQHKDQGLWLV
DUJXHG WKDW WKH UDSLG JURZWK RI &KLQD DQG ,QGLD LQ UHFHQW \HDUV KDV OHG WR D QDUURZLQJ RI LQWHUFRXQWU\
LQFRPH GLIIHUHQWLDOVWKDW LV WR DQ LPSURYHPHQW LQ LQWHUFRXQWU\ LQFRPH GLVWULEXWLRQ :ROI   7KLV LV
EHFDXVHWKHVHWZRFRXQWULHVZKLFKKDYHVHHQDVLJQLILFDQWULVHLQDYHUDJHSHUFDSLWDLQFRPHVDFFRXQWIRUD

 7KHVHDUHZLGHO\FKURQLFOHGHYHQWV%XWVHH%DOGZLQDQG0DUWLQ  IRUDUHFHQWUHYLHZRIWKLVHYLGHQFHDQGD

KHOSIXOFRPSDULVRQZLWKOHYHOVRILQWHJUDWLRQGXULQJWKHODWHQLQHWHHQWKFHQWXU\


YHU\ODUJHVKDUHRIJOREDOSRSXODWLRQ7KHUHIRUHFRPSDULQJLQFRPHGLIIHUHQWLDOVEHWZHHQFRXQWULHVRQ WKH
EDVLVRISRSXODWLRQZHLJKWHGDYHUDJHLQFRPHVSURGXFHVDQHTXDOLVLQJWUHQG
%XW JOREDO LQFRPH LQHTXDOLW\ FDQ DOVR EH PHDVXUHG LQ UHODWLRQ WR LQGLYLGXDO LQFRPHV UDWKHU WKDQ WR
LQWHUFRXQWU\DYHUDJHLQFRPHV$V(KUHQSUHLVSRLQWVRXW (KUHQSUHLV HYHQLIWKHHVWLPDWLRQVXVHGE\
:ROIZLWKUHJDUGWRWKHLQWHUFRXQWU\GLVWULEXWLRQRILQFRPHDUHFRUUHFW ZKLFKDVZHKDYHVHHQLQIRRWQRWH
LVGLVSXWHG WKHIODZLQ:ROI·VDUJXPHQWLVWKDWLWGRHV QRWWDNH DFFRXQW RI ZRUVHQLQJ LQHTXDOLW\ ZLWKLQ
&KLQD VHHEHORZ 7KDWLVDOWKRXJKDYHUDJHLQFRPHLQ&KLQDPD\KDYHULVHQZRUVHQLQJLQFRPHLQHTXDOLW\
PHDQV WKDW YHU\ ODUJH QXPEHUVRI WKH &KLQHVH SRSXODWLRQKDYH HLWKHU EHHQ H[FOXGHG IURP WKH JDLQV IURP
JURZWKRUPD\HYHQEHZRUVHRII,IWKLVLVIDFWRUHGLQWRWKHDQDO\VLVWKHQWKHVKDUHRIJOREDOLQFRPHJRLQJ
WRLQGLYLGXDOVKDVLQGHHGEHFRPHPRUHXQHTXDOGXULQJWKHSDVWWZRGHFDGHV
7KHJURZWKRIJOREDOLQHTXDOLW\KDVEHHQPLUURUHGE\WKHJURZWKRILQHTXDOLW\ZLWKLQFRXQWULHVERWKLQ
WKHKLJKDQGORZLQFRPHZRUOGV

• ,QKLJKLQFRPHHFRQRPLHVLQJHQHUDOLQFRPHGLVWULEXWLRQKDVWHQGHGWREHFRPHPRUHXQHTXDO 6WUHHWHQ
 SDUWLFXODUO\LQWKH$QJOR6D[RQHFRQRPLHV 'XQIRUG
• ,QWKHFRQWH[WRIDYHU\UDSLGSDFHRIHFRQRPLFJURZWKDQGLQWHJUDWLRQLQWRWKHJOREDOHFRQRP\²WKH
H[SRUW*'3UDWLRURVHIURPSHUFHQWLQWRSHUFHQWLQ²&KLQDH[SHULHQFHGDVKDUS
ULVH LQ LQHTXDOLW\ 7KLV ZDV EHWZHHQ XUEDQ DQG UXUDO DUHDV FRDVWDO DQG LQWHULRU SURYLQFHV DQG ZLWKLQ
XUEDQDQGUXUDODUHDV .KDQ
• ,Q&KLOHRIWHQWKRXJKWWREHWKHSDUDGLJPDWLFJDLQHUIURP JOREDOLVDWLRQ WKH JLQLFRHIILFLHQW LQFUHDVHG
IURPLQWRLQ 5RGULN
• ,QHTXDOLW\EHWZHHQVNLOOHGDQGXQVNLOOHGZDJHHDUQHUVKDVWHQGHGWRLQFUHDVHLQWKHLQGXVWULDOO\DGYDQFHG
FRXQWULHV :RRGDQG DQGLQ/DWLQ$PHULFDRYHUWKHSDVWGHFDGH :RRG
• ,QHTXDOLW\KDVJURZQPDUNHGO\LQWKHWUDQVLWLRQHFRQRPLHV +XPDQ'HYHORSPHQW5HSRUW
• $EVROXWH OHYHOV RI SRYHUW\ KDYH VKRZQ OLWWOH VLJQ RI UHGXFLQJ $FFRUGLQJ WR WKH :RUOG %DQN WKH
QXPEHUVRISHRSOHOLYLQJEHORZWKHHTXLYDOHQWRIGD\ LQSXUFKDVLQJSRZHUSDULW\ILJXUHV ZLOO
KDYH JURZQ IURP EQ WR EQ  SHU FHQW RI JOREDO SRSXODWLRQ  EHWZHHQ  DQG  :RUOG
%DQN (YHQLQ&KLQDZKLFKJUHZUDSLGO\ZLWKLWVLQFUHDVLQJSDUWLFLSDWLRQLQJOREDOPDUNHWVWKHUH
LVHYLGHQFHWKDWWKHQXPEHUVLQSRYHUW\DWEHVWVWDELOLVHGDQGPD\HYHQKDYHLQFUHDVHG

2QHSRVVLEOHH[SODQDWLRQIRUWKHVHULVLQJOHYHOVRILQHTXDOLW\LVWKDWJOREDOLVDWLRQKDVE\SDVVHGPXFKRIWKH
ZRUOG·VSRSXODWLRQSDUWLFXODUO\WKRVHOLYLQJLQSRRUFRXQWULHV3HUKDSVEXWLWLVHYLGHQWIURP7DEOHWKDW
PRUHDQGPRUHHFRQRPLFDFWLYLW\LQYLUWXDOO\DOOFRXQWULHVLVDIIHFWHGE\WKHJOREDOLQWHUFKDQJHRIJRRGVDQG
VHUYLFHV OHW DORQH RWKHU FRPSRQHQWV RI JOREDOLVDWLRQ  0RUHRYHU PDQ\ RI WKRVH FRXQWULHV ZKLFK KDYH

 +RZHYHU:ROI·VFRQFOXVLRQVKDYHEHHQTXHVWLRQHGDVUHVXOWLQJIURPDVPDOOVDPSOHRIFRXQWULHVDQG/XQGEHUJ
DQG 0LODQRYLF FLWH VWXGLHV XVLQJ ODUJHU VDPSOHV ZKLFK HVWLPDWH WKDW LQWHUFRXQWU\ LQFRPH LQHTXDOLW\ KDV LQGHHG
LQFUHDVHG /XQGEHUJDQG0LODQRYLF 
 ¶«XQWLODERXW&KLQDDFKLHYHGDUHPDUNDEOHUHGXFWLRQLQWKHLQFLGHQFHRISRYHUW\>%XW@>D@IWHUWKHPLGV
WKHUDWHRIUHGXFWLRQLQSRYHUW\GUDVWLFDOO\VORZHGGRZQDQGDUJXDEO\ZDVKDOWHGRUHYHQUHYHUVHG· .KDQ



VXIIHUHGIURPGHFOLQLQJLQFRPHVKDUHVKDYHH[SHULHQFHGJURZLQJWUDGH*'3UDWLRV)RUH[DPSOH6DKDUDQ
$IULFD·V WUDGH*'3 UDWLR URVH IURP  WR  SHU FHQW EHWZHHQ  DQG  6R WKH H[SODQDWLRQ IRU
LQFUHDVHGLQHTXDOLW\ZLOOKDYHWRDOVRH[SODLQKRZLWLVWKDWFRXQWULHVDQGUHJLRQVFDQJURZWKHLUSDUWLFLSDWLRQ
LQJOREDOH[FKDQJHDQGDWWKHVDPH WLPHVHH D GHFOLQH LQ WKHLUUHODWLYH LQFRPH VKDUHV DQG DOVRVRPHWLPHV
HYHQLQWKHLUDEVROXWHVWDQGDUGVRIOLYLQJ )RUWKLVUHDVRQWKHIRFXVRIDWWHQWLRQPXVWDOVROLHZLWKWKHPRGH
LQZKLFKILUPVFRXQWULHVDQGUHJLRQVSDUWLFLSDWHLQWKHSURFHVVRIJOREDOSURGXFWLRQDQGH[FKDQJH
$Q H[SODQDWLRQ IRU WKHVH GHFOLQLQJ FRXQWU\ VKDUHV LQ JOREDO LQFRPH LQ WKH FRQWH[W RI JURZLQJ
SDUWLFLSDWLRQ LQ JOREDO PDUNHWV FDQ EH IRXQG LQ WKH FRQFHQWUDWLRQ RI GHYHORSLQJ FRXQWULHV LQ FRPPRGLW\
VHFWRUV 7KHVH KDYH H[SHULHQFHG GHFOLQLQJ WHUPV RI WUDGH RYHU D VXVWDLQHG SHULRG 6LQJHU  3UHELVFK
  7KLV LV LQGHHG D SUREOHP VWLOO HQFRXQWHUHG LQ PDQ\ GHYHORSLQJ FRXQWULHV SDUWLFXODUO\ LQ 66$ $V D
FRQVHTXHQFHLWKDVORQJEHHQKHOGWKDWVWUXFWXUDOFKDQJHVKRXOGDLPZKHUHYHU SRVVLEOH WR HQFRPSDVV WKH
WUDQVLWLRQ IURP WKH JURZLQJ DQG H[WUDFWLRQ RI SULPDU\ FRPPRGLWLHV WR WKH PDQXIDFWXUH RI LQGXVWULDO
SURGXFWV%XWKHUHVLQFHWKHPLGVZHKDYHVHHQDQHPHUJLQJWUHQGIRUWKHWHUPVRIWUDGHRIDUDQJHRI
PDQXIDFWXUHGFRPPRGLWLHV²SDUWLFXODUO\WKRVHSURGXFHGE\GHYHORSLQJFRXQWULHV²WRGHFOLQH )LJXUH ,W
LVVLJQLILFDQWWKDWWKLVGHFOLQHLQWKHWHUPVRIWUDGHRIGHYHORSLQJFRXQWU\PDQXIDFWXULQJH[SRUWVFRLQFLGHV
ZLWK&KLQD·VHQWU\LQWRJOREDOPDUNHWV

Figure 1: Price of LDC manufactured exports relative to IAC manufactured exports of machinery,
transport equipment and services

110

100

90
1980=100

80

70

60

50
1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

6RXUFH:RRG

 7KHIDOOLQJPDQXIDFWXULQJWHUPVRIWUDGHRIGHYHORSLQJFRXQWULHVZHUHK\SRWKHVLVHGLQWKHHDUO\VE\+DQV
6LQJHU 6LQJHU :RRG·VFDOFXODWLRQRIIDOOLQJWHUPVRIWUDGHLQPDQXIDFWXUHGH[SRUWVLVFRUURERUDWHGE\D
UHFHQWVWXG\RIWKHEDUWHUWHUPVRIWUDGHLQPDQXIDFWXUHVEHWZHHQGHYHORSLQJFRXQWULHVDQGWKH(XURSHDQ8QLRQ
ZKLFKHVWLPDWHVDQDQQXDOUDWHRIGHSUHFLDWLRQRISHUFHQWEHWZHHQDQG 0DL]HOVHWDO ,QD
IXUWKHUVWXG\IRFXVLQJRQWKHWHUPV RIWUDGHLQPDQXIDFWXUHVEHWZHHQ WKH 86 DQG GHYHORSLQJ FRXQWULHV IRU WKH
SHULRG²0DL]HOVHWDO  FRQFOXGHWKDW¶>R@YHUWKHZKROHSHULRGWKHUHODWLYHWHUPVRIWUDGHWUHQG
RIGHYHORSLQJFRXQWULHVFRPSDUHGZLWKWKDW RIGHYHORSHGFRXQWULHVKDVVLJQLILFDQWO\ ZRUVHQHG 0DL]HOV HW DO
   ,W LV VLJQLILFDQW WKDW ERWK WKHVH UHFHQW VWXGLHV E\ 0DL]HOV HW DO 'R QRW UHIOHFW WKH IDOO LQ GHYHORSLQJ
FRXQWU\PDQXIDFWXUHGH[SRUWSULFHVZKLFKIROORZHGWKH(DVW$VLDQFULVLVRI²
 )RUGDWDRQ&KLQD·VUDSLGO\JURZLQJVKDUHRIJOREDOPDUNHWVLQODERXULQWHQVLYHSURGXFWVVHH.DSOLQVN\  


7KHSUREOHPRIIDOOLQJUHWXUQVQRWRQO\FRQIURQWVHFRQRPLHVEXWDOVRLQGLYLGXDOILUPV:KHQILUPVFRQILQH
WKHLU FRPSHWHQFHV WR WKH VLPSOH DVVHPEO\ RI LPSRUWHG PDWHULDOV WKH\ EHFRPH VXEMHFW WR LQFUHDVLQJ
FRPSHWLWLRQ DQG KHQFH WRIDOOLQJ UHWXUQV )RU H[DPSOH LQ WKH 'RPLQLFDQ 5HSXEOLF LQ WKH HDUO\ V WKH
DVVHPEO\RIMHDQVLQH[SRUWSURFHVVLQJ]RQHVRFFXUUHGLQWKHFRQWH[WRILQWHQVHUHJLRQDOFRPSHWLWLRQ RIWHQ
VXUIDFLQJLQFRPSHWLWLYHGHYDOXDWLRQV UHVXOWLQJLQVXVWDLQHGIDOOVLQXQLWSULFHV 7DEOH 

Table 2: Increasing competition and declining unit prices: the case of jeans manufacturing in the
Dominican Republic

9ROXPH 8QLWSULFH 
SHUZHHN
-DQXDU\  
2FWREHU  
'HFHPEHU  
)HEUXDU\ $UUDQJHPHQWWHUPLQDWHGDQGDVVHPEO\WUDQVIHUUHGWR+RQGXUDV
7RWDOLQYHVWPHQWLQHTXLSPHQWE\'RPLQLFDQ5HSXEOLFILUPZDV86

6RXUFH.DSOLQVN\  

7KH FRQVHTXHQFH RI WKH IDLOXUH RI LQGLYLGXDO ILUPV JURXSV RI ILUPV DQG QDWLRQDO HFRQRPLHV WR LQVHUW
WKHPVHOYHVDSSURSULDWHO\LQWRJOREDOPDUNHWVLVWKDWWKHVSHFWUHLVUDLVHGRI¶LPPLVHULVLQJJURZWK·7KLVGHVFULEHV
D VLWXDWLRQ ZKHUH WKHUH LV LQFUHDVLQJ HFRQRPLF DFWLYLW\ PRUH RXWSXW DQG PRUH HPSOR\PHQW  EXW IDOOLQJ
HFRQRPLFUHWXUQV)RUH[DPSOHRYHUWKHSDVWWZRGHFDGHV%UD]LOLDQVKRHSURGXFHUVKDYHFRPPDQGHGPRUH
WKDQSHUFHQWRIJOREDOOHDWKHUVKRHH[SRUWV$WWKHVDPHWLPHEHWZHHQDQGDYHUDJHUHDOZDJHV
LQWKHVHFWRUZHUHVWDJQDQWDQGGXULQJWKHIROORZLQJGHFDGHWKH\IHOOE\DSSUR[LPDWHO\SHUFHQWLQUHDO
WHUPV 6FKPLW]   ,Q WKH 'RPLQLFDQ 5HSXEOLF UHDO ZDJHV DV PHDVXUHG LQ LQWHUQDWLRQDO SXUFKDVLQJ
SRZHU  IHOO E\  SHU FHQW GXULQJ WKH VHFRQG KDOI RI WKH V ODUJHO\ DV D FRQVHTXHQFH RI FRPSHWLWLYH
GHYDOXDWLRQVLQWKHUHJLRQ .DSOLQVN\ 
,V LW SRVVLEOH WR GHWHUPLQH WKRVH IDFWRUV ZKLFK GULYH WKH GLVWULEXWLRQ RI WKH JDLQV IURP JOREDO
SURGXFWLRQ DQG H[FKDQJH H[SODLQLQJ ERWK ZK\ VRPH SDUWLHV KDYH JDLQHG DQG RWKHUV KDYH ORVW IURP
JOREDOLVDWLRQ" 0RUHRYHU FDQ ZH WKHQ XVH WKLV DQDO\VLV WR LGHQWLI\ SROLF\ OHYHUV ² UHOHYDQW DW WKH OHYHO RI
LQGLYLGXDOVKRXVHKROGVILUPVUHJLRQVDQGFRXQWULHV²ZKLFKPD\OHDGWRDGLIIHUHQWDQGPRUHIDYRXUDEOH
GLVWULEXWLRQDORXWFRPH"7KHREMHFWLYHRIWKLVSDSHULVWRVKRZWKDWYDOXHFKDLQDQDO\VLVKDVDQLPSRUWDQWUROH
WRSOD\LQPHHWLQJWKHVHREMHFWLYHV

 7KH DELOLW\ RI 'RPLQLFDQ 5HSXEOLF ILUPV WR XSJUDGH ZDV FRQVWUDLQHG E\ WKH WHUPV RI WKH &DULEEHDQ 7UDGH
,QLWLDWLYHZKLFKOLPLWHGWKHLUFDSDFLW\WRXWLOLVHORFDOWH[WLOHLQSXWV .DSOLQVN\ 
 $QH[WHQGHGGLVFXVVLRQRILPPLVHULVLQJJURZWKQHHGVWRWDNHDFFRXQWRIWKHSXUFKDVLQJSRZHUSDULW\RILQFRPHV
ZKHWKHU IDOOLQJ EDUWHU WHUPV RI WUDGH DUH DVVRFLDWHG ZLWK IDOOLQJ LQFRPH WHUPV RI WUDGH DQG RI WKH RSSRUWXQLW\
FRVWV RI H[SRUWLQJ DFWLYLWLHV LQ WKH FRQWH[W RI IDOOLQJ EDUWHU WHUPV RI WUDGH 6RPH RI WKHVH LVVXHV DUH GLVFXVVHG
IXUWKHULQ.DSOLQVN\DQG5HDGPDQ  


7+(&2175,%87,212)9$/8(&+$,1$1$/<6,6

0DQ\ IDFWRUV DVVRFLDWHG ZLWK JOREDOLVDWLRQ ZLOO DIIHFW WKH GLVWULEXWLRQ RI UHWXUQV )RU H[DPSOH PDFUR
HFRQRPLF GLVWXUEDQFHV DVVRFLDWHG ZLWK FDSLWDO PRELOLW\ DQG SDUWLFXODUO\ FDSLWDO YRODWLOLW\  FDQ KDYH PDMRU
FRQVHTXHQFHVIRUWKHOLYLQJVWDQGDUGVRIPDQ\PLOOLRQVRISHRSOHDVZDVWKHFDVHIROORZLQJWKH$VLDQFULVLV
RI  *ULIILWK-RQHV DQG &DLOORX[   %XW DV ZH VKDOO VHH LQ WKH FDVHVWXGLHV LQ 6HFWLRQ  EHORZ
LQVRIDUDVGLVWULEXWLRQLVDQRXWFRPHRIWKHJOREDOLVDWLRQRISURGXFWLRQDQGH[FKDQJHYDOXHFKDLQDQDO\VLV
SURYLGHVDYDOXDEOHPHWKRGRORJLFDOWRROIRUH[SODLQLQJWKHVHGHYHORSPHQWV

:KDWLVDYDOXHFKDLQ"
7KHYDOXHFKDLQGHVFULEHVWKHIXOOUDQJHRIDFWLYLWLHVZKLFKDUHUHTXLUHGWREULQJDSURGXFWRUVHUYLFHIURP
FRQFHSWLRQ WKURXJK WKH LQWHUPHGLDU\ SKDVHV RI SURGXFWLRQ LQYROYLQJ D FRPELQDWLRQ RI SK\VLFDO
WUDQVIRUPDWLRQ DQGWKH LQSXW RI YDULRXV SURGXFHU VHUYLFHV  GHOLYHU\ WR ILQDO FRQVXPHUV DQG ILQDO GLVSRVDO
DIWHUXVH&RQVLGHUHGLQLWVPRVWHOHPHQWDU\IRUPLWWDNHVWKHVKDSHDVGHVFULEHGLQ )LJXUH  DOWKRXJK LQ
UHDOLW\YDOXHFKDLQVDUHFRQVLGHUDEO\PRUHH[WHQGHGWKDQWKLV$VFDQEHVHHQIURPWKLVSURGXFWLRQSHUVHLV
RQO\RQHRIDQXPEHURIYDOXHDGGHGOLQNV0RUHRYHUWKHUHDUHDUDQJHRIDFWLYLWLHVZLWKLQHDFKOLQNRIWKH
FKDLQ RQO\WKRVHIRUSURGXFWLRQDUHGHWDLOHGLQWKH)LJXUH 

Figure 2: A simple value chain

'(6,*1 352'8&7,21 0$5.(7,1*

,QZDUGORJLVWLFV

7UDQVIRUPLQJLQSXWV

3DFNDJLQJ

(WF

7KH FRQFHSW RI WKH YDOXH FKDLQ ZDV XVHG LQ WKH V DQG WKH V E\ DQDO\VWV FKDUWLQJ D SDWK RI
GHYHORSPHQWIRUPLQHUDOH[SRUWLQJHFRQRPLHV *LUYDQ ,WZDVDOVRDGRSWHGLQUHFHQW)UHQFKSODQQLQJ
OLWHUDWXUHLQWKHIRUPRIWKHILOLqUH%XWGXULQJWKHVYDOXHFKDLQDQDO\VLVKDVEHFRPHZLGHO\XVHG2QH
SULPDU\VRXUFHVRIWKHUHFHQWSURPLQHQFHRIWKHYDOXHFKDLQDVDQDQDO\WLFDOVWUXFWXUHWRRODULVHVIURPWKH
ZRUNRI0LFKDHO3RUWHUZKRLGHQWLILHVWZRNH\FRQVWUXFWVWKDWDUHQHFHVVDU\IRUWKHXSJUDGLQJRIQDWLRQDO
FDSDELOLWLHV 3RUWHUDQG 7KHILUVWLVVRPHZKDWFRQIXVLQJO\UHIHUUHGWRDVWKHYDOXHFKDLQ
GLVWLQJXLVKLQJ GLIIHUHQW VWDJHV RI WKH SURFHVV RI VXSSO\ LQERXQG ORJLVWLFV RSHUDWLRQV RXWERXQG ORJLVWLFV
PDUNHWLQJDQGVDOHVDQGDIWHUVDOHVVHUYLFH DQGWKHVXSSRUWVHUYLFHVWKH ILUP PDUVKDOV WR DFFRPSOLVKWKLV
WDVN VWUDWHJLF SODQQLQJ KXPDQ UHVRXUFH PDQDJHPHQW WHFKQRORJ\ GHYHORSPHQW DQG SURFXUHPHQW  7KLV
FRUUHVSRQGVZLWKGLIIHUHQWFRPSRQHQWVRIWKHSURGXFWLRQOLQNLQWKHYDOXHFKDLQVNHWFKHGRXWLQ)LJXUH
DERYH  7KH LPSRUWDQFH RI WKH YDOXH FKDLQ LQ WKLV VHQVH LV WKDW LW GUDZV DWWHQWLRQ DZD\ IURP DQ H[FOXVLYH


IRFXV RQ SK\VLFDO WUDQVIRUPDWLRQ ZLWKLQ WKH ILUP WR LQFOXGH WKH VXSSRUW VHUYLFHV UHTXLUHG WR VXVWDLQ
SURGXFWLRQ3RUWHUFRPSOHPHQWVKLVFRQFHSWRIWKHYDOXHFKDLQZLWKWKHFRQFHSWRIWKHYDOXHV\VWHP7KHYDOXH
V\VWHP EDVLFDOO\ H[WHQGV WKH LGHD RI WKH YDOXH FKDLQ WR LQWHULQGXVWU\ OLQNDJHV DQG WKHUH LV QR HVVHQWLDO
GLIIHUHQFHEHWZHHQWKHWZRFRQFHSWVEDUWKHLUVFRSH,WLVDOVRFOHDUWKDWLQHVVHQFHWKHYDOXHV\VWHPLVQRW
WKDWGLIIHUHQWIURPWKHFRQFHSWRIWKHILOLqUHGLVFXVVHGDERYHQRUIURPWKHXVHRIWKHSKUDVH¶YDOXHVWUHDP·VHW
RXWLQDQLQIOXHQWLDOERRNE\:RPDFNDQG-RQHV :RPDFNDQG-RQHV $VHFRQGSULPDU\VRXUFHRIWKH
UHFHQW SURPLQHQFH RI WKH FRQFHSW RI WKH YDOXH FKDLQ DULVHV IURP WKH ZRUN RI *HUHIIL EXLOGLQJ RQ ZRUOG
V\VWHPDQDO\VLV:HVKDOOFRQVLGHUWKLVOLWHUDWXUHLQPRUHGHWDLOEHORZ
&RQVLGHUHGLQWKLVZD\WKHYDOXHFKDLQLVPHUHO\DGHVFULSWLYHFRQVWUXFWDWPRVWSURYLGLQJDKHXULVWLF
IUDPHZRUN IRU WKH JHQHUDWLRQ RI GDWD +RZHYHU UHFHQW GHYHORSPHQWV RI WKH YDOXH FKDLQ IUDPHZRUN KDYH
EHJXQWRSURYLGHDQDQDO\WLFDOVWUXFWXUHZKLFKDVZHVKDOOVHHEHORZSURYLGHVLPSRUWDQWLQVLJKWVLQWRRXU
WZLQFRQFHUQVZLWKWKHGHWHUPLQDQWVRIJOREDOLQFRPHGLVWULEXWLRQDQGWKHLGHQWLILFDWLRQRIHIIHFWLYHSROLF\
OHYHUVWRDPHOLRUDWHWUHQGVWRZDUGVXQHTXDOLVDWLRQ7KHUHDUHWKUHHLPSRUWDQWFRPSRQHQWVRIYDOXHFKDLQV
ZKLFKQHHGWREHUHFRJQLVHGDQGZKLFKWUDQVIRUPDQKHXULVWLFGHYLFHLQWRDQDQDO\WLFDOWRRO

• 9DOXHFKDLQVDUHUHSRVLWRULHVIRUUHQWDQGWKHVHUHQWVDUHG\QDPLF
• (IIHFWLYHO\IXQFWLRQLQJYDOXHFKDLQVLQYROYHVRPHGHJUHHRI¶JRYHUQDQFH·
• (IIHFWLYHYDOXHFKDLQVDULVHIURPV\VWHPLFDVRSSRVHGWRSRLQWHIILFLHQF\

7KUHHNH\HOHPHQWVRIYDOXHFKDLQDQDO\VLV

%DUULHUVWRHQWU\DQGUHQW 
7KHWKHRU\RIHFRQRPLFUHQWZDV ILUVW IRUPXODWHGE\ 5LFDUGR ZKR GLVWLQJXLVKHG EHWZHHQUHQW DV D IDFWRU
LQFRPH²¶>L@QSRSXODUODQJXDJHWKHWHUPLVDSSOLHGWRZKDWHYHULVDQQXDOO\SDLGE\DIDUPHUWRKLVODQGORUG·
²DQGHFRQRPLFUHQW²¶5HQWLVWKDWSRUWLRQRIWKHSURGXFHRIWKHHDUWKZKLFKLVSDLGWRWKHODQGORUGIRUWKH
XVHRIWKHRULJLQDODQGLQGHVWUXFWLEOHSRZHUVRIWKHVRLO· 5LFDUGR +HUH5LFDUGRZDVKLJKOLJKWLQJ
WKHVLJQLILFDQWUROHSOD\HGE\VFDUFLW\VLQFHHFRQRPLFUHQWGRHVQRWDULVHIURPWKHGLIIHUHQWLDOIHUWLOLW\RIODQG
LWVHOI ZKLFKZDVFHQWUDOWR5LFDUGR·VDQDO\VLV EXWIURPXQHTXDODFFHVVWRWKLVUHVRXUFH

 /LWHUDOO\WKHZRUGILOLqUHPHDQV¶WKUHDG·DQGZDVXVHGLQWKHODWHVDQGHDUO\VWRGHVFULEHWKHSHUFHLYHG
QHHGIRU)UHQFKLQGXVWULDOFDSDELOLW\WRVSDQWKHFRPSOHWHWKUHDGRIDYDOXHFKDLQ
 8QIRUWXQDWHO\WKHSKUDVH¶YDOXHFKDLQ·FRYHUVERWKWKHKHXULVWLFDQG DQDO\WLFDO FDWHJRULHV 7KLV KDV OHG VRPH WR
VHDUFKIRUDGLIIHUHQWQRPHQFODWXUH)RUH[DPSOH*HUHIILKDVFRLQHGWKHSKUDVH¶JOREDOFRPPRGLW\FKDLQ *&& ·
*HUHIIL DQGLQDUHFHQWFRQWULEXWLRQDUJXHVWKDWWKH*&&LVGLVWLQFWLQWKDWLWLQFRUSRUDWHVDQLQWHUQDWLRQDO
GLPHQVLRQWKDWLWIRFXVHV RQ SRZHURIOHDGILUPVDQGWKHFRRUGLQDWLRQRIJOREDODFWLYLWLHVDQGWKDWLWH[SOLFLWO\
UHFRJQLVHV WKH LPSRUWDQFH RI RUJDQLVDWLRQDO OHDUQLQJ *HUHIIL E  7KHVH DUH SUR[LPDWH WR WKH WKUHH
FKDUDFWHULVWLFVZKLFKZHDGGUHVVLQWKLVSDSHU%XWDOWKRXJKUHSUHVHQWLQJDPDMRUFRQWULEXWLRQWRRXUWKLQNLQJRQ
JOREDO SURGXFWLRQ QHWZRUNV *HUHIIL·V SKUDVH ¶JOREDO FRPPRGLW\ FKDLQ· VXIIHUV EHFDXVH WKH ZRUG ¶FRPPRGLW\·
LPSOLHVWKHSURGXFWLRQRIXQGLIIHUHQWLDWHGSURGXFWVLQSURFHVVHVZLWKORZEDUULHUVWRHQWU\7KHSUREOHPZLWKWKLV
DVZHVKDOOVHHEHORZLVWKDWWKHVHDUFKIRUVXVWDLQDEOHLQFRPHJURZWKUHTXLUHVSURGXFHUVWRSRVLWLRQWKHPVHOYHV
SUHFLVHO\ LQ QRQFRPPRGLW\ KLJK EDUULHUV WR HQWU\ DFWLYLWLHV LQ WKH YDOXH FKDLQ )RU WKHVH UHDVRQV DQG LQ WKH
DEVHQFHRIDQDJUHHGSKUDVHRORJ\ZHZLOOFRQWLQXHWRXVHWKHZRUGV¶YDOXHFKDLQ·EXWWRGRVRLQDQDQDO\WLFDO
FRQWH[W
 )RUDORQJHUGLVFXVVLRQRIHFRQRPLFUHQWVHH.DSOLQVN\  


 %XW DV 6FKXPSHWHU VKRZHG VFDUFLW\ FDQ EH FRQVWUXFWHG 7KDW LV LW FDQ DULVH IURP SXUSRVLYH DFWLRQV
UDWKHUWKDQDVDFRQVHTXHQFHRIWKHERXQW\RIQDWXUH)RU6FKXPSHWHUWKHHQWUHSUHQHXUSOD\HGDXQLTXHUROH
LQ¶WKHFDUU\LQJRXWRIQHZFRPELQDWLRQV· 6FKXPSHWHU (QWUHSUHQHXULDOVXUSOXVLVWKHUHWXUQWR
WKHLQQRYDWLRQRID¶QHZFRPELQDWLRQ·DQGDULVHVZKHQWKHSULFHRIWKHSURGXFWIROORZLQJWKHLQWURGXFWLRQRI
WKH¶QHZFRPELQDWLRQ·SURYLGHVJUHDWHUUHWXUQVWKDQDUHUHTXLUHGWRPHHWWKHFRVWRIWKHLQQRYDWLRQ7KHVH
UHWXUQV WR LQQRYDWLRQ DUH D IRUP RI VXSHUSURILW DQG DFW DV DQ LQGXFHPHQW WR UHSOLFDWLRQ E\ RWKHU
HQWUHSUHQHXUV
)LJXUHVKRZVWKHSURFHVVDWZRUN,QHDFKLQGXVWU\WKHHTXLOLEULXPLVGHILQHGE\WKH¶DYHUDJH·UDWHRI
SURILW)ROORZLQJWKHLQWURGXFWLRQRID¶QHZFRPELQDWLRQ·WKHHQWUHSUHQHXUUHDSVD¶VXUSOXV·²ZKDWZHPLJKW
WHUPDSURGXFHUUHQW7KHQDVWKHQHZFRPELQDWLRQLVFRSLHG²DSURFHVVRIGLIIXVLRQ²WKHSURGXFHUUHQWLV
ZKLWWOHGDZD\SULFHVIDOODQGWKHLQQRYDWLRQDFFUXHVLQWKHIRUPRIFRQVXPHUVXUSOXV%XWDOOWKLVGRHVLVWR
UHQHZWKHVHDUFKIRUD¶QHZFRPELQDWLRQ·HLWKHUE\WKHVDPHHQWUHSUHQHXURUDQRWKHUHQWUHSUHQHXULQWKH
FRQWLQXDOVHDUFKIRUHQWUHSUHQHXULDOVXUSOXV

Figure 3: The generation and dissipation of entrepreneurial surplus

5DWHRISURILW
,QQRYDWLRQ ,QQRYDWLRQ ,QQRYDWLRQ

$YHUDJHUDWH
RISURILW

(QWUHSUHQHXULDO6XUSOXV

7LPH

7KXVLQVXPPDU\

• (FRQRPLFUHQWDULVHVLQWKHFDVHRIGLIIHUHQWLDOSURGXFWLYLW\RIIDFWRUV LQFOXGLQJHQWUHSUHQHXUVKLS DQG

EDUULHUVWRHQWU\ WKDWLVVFDUFLW\
• (FRQRPLFUHQWPD\DULVHQRWMXVWIURPQDWXUDOERXQW\EXWDOVRDVSURGXFHUVXUSOXVHVWKDWDUHFUHDWHGE\
SXUSRVLYH DFWLRQ 7KHVH DXJPHQWHG UHQWV KDYH EHFRPH LQFUHDVLQJO\ LPSRUWDQW VLQFH WKH ULVH RI

 $OWKRXJKPRQRSRO\UHQW DVGHILQHGE\WKHUHQWVHHNLQJOLWHUDWXUH DOVRDULVHVDVDUHVXOWRISXUSRVLYHDFWLRQLWLV

XVHIXOO\GLVWLQJXLVKHGIURPYDULRXVIRUPVRILQQRYDWLRQUHQWVWKDWUHIOHFWWKHVHDUFKIRUQHZFRPELQDWLRQV·LQWKH
SXUVXLWRIHQWUHSUHQHXULDOVXUSOXV


 WHFKQRORJLFDOLQWHQVLW\LQWKHPLGQLQHWHHQWKFHQWXU\ )UHHPDQ DQGWKHJURZWKRIGLIIHUHQWLDWHG
SURGXFWVDIWHUWKHV 3LRUHDQG6DEHO 
• 0RVWHFRQRPLFUHQW LV G\QDPLF LQ QDWXUH HURGHG E\WKH IRUFHVRI FRPSHWLWLRQ 3URGXFHUUHQW LV WKHQ
WUDQVIHUUHGLQWRFRQVXPHUVXUSOXVE\WKHSURFHVVRIFRPSHWLWLRQ
• 7KHSURFHVVRIFRPSHWLWLRQ²WKHVHDUFK IRU ¶QHZ FRPELQDWLRQV· WR DOORZ HQWUHSUHQHXUV WR HVFDSH WKH
W\UDQQ\ RI WKH QRUPDO UDWH RI SURILW DQG WKH VXEVHTXHQW ELGGLQJ DZD\ RI WKLV HFRQRPLF UHQW E\
FRPSHWLWRUV²IXHOVWKHLQQRYDWLRQSURFHVVZKLFKGULYHVFDSLWDOLVPIRUZDUG

$VPRUHDQGPRUHFRXQWULHVKDYHGHYHORSHGWKHLUFDSDELOLWLHVLQLQGXVWULDODFWLYLWLHVVREDUULHUVWRHQWU\LQ
SURGXFWLRQ KDYH IDOOHQ DQG WKH FRPSHWLWLYH SUHVVXUHV KDYH KHLJKWHQHG )LJXUH   7KLV KDV EHFRPH
SDUWLFXODUO\DSSDUHQWVLQFH&KLQDZLWKLWVDEXQGDQWVXSSOLHVRIHGXFDWHGODERXUHQWHUHGWKHZRUOGPDUNHWLQ
WKH PLGV ,W LV WKLV WRR ZKLFK XQGHUOLHV WKH IDOOLQJ WHUPV RI WUDGH LQ PDQXIDFWXUHV RI GHYHORSLQJ
FRXQWULHV VHHDERYH &RQVHTXHQWO\WKHSULPDU\HFRQRPLFUHQWVLQWKHFKDLQRISURGXFWLRQDUHLQFUHDVLQJO\
WREHIRXQGLQDUHDVRXWVLGHRISURGXFWLRQ:HVKDOOGLVFXVVWKLVLQPRUHGHWDLOLQ6HFWLRQEHORZ

Figure 4. Competitive Pressures in the Value Chain

COMPETITIVE PRESSURES
&203(7,7,9(35(6685(6

'(6,*1 352'8&7,21 0$5.(7,1*

&203(7,7,9(35(6685(6

*RYHUQDQFH
$VHFRQGFRQVLGHUDWLRQZKLFKKHOSVWRWUDQVIRUPWKHYDOXHFKDLQIURPDQKHXULVWLFWRDQDQDO\WLFDOFRQFHSWLV
WKDWWKHYDULRXVDFWLYLWLHVLQWKHFKDLQ²ZLWKLQILUPVDQGLQWKHGLYLVLRQRIODERXUEHWZHHQILUPV²DUHVXEMHFW
WRZKDW*HUHIILKDVXVHIXOO\WHUPHG¶JRYHUQDQFH· *HUHIIL 7KDWLVWKHUHDUHNH\DFWRUVLQWKHFKDLQ
ZKRWDNHUHVSRQVLELOLW\IRUWKHLQWHUILUPGLYLVLRQRIODERXUDQGIRUWKHFDSDFLWLHVRISDUWLFXODUSDUWLFLSDQWV
WRXSJUDGHWKHLUDFWLYLWLHV

 7KHVKDUHRIPDQXIDFWXULQJH[SRUWVURVHIURPLQWRSHUFHQWLQ .KDQ 


 :K\LVWKLVLPSRUWDQW",WLVEHFDXVHRIWKHQDWXUHUDWKHUWKDQWKHH[WHQWRIWUDGHLQWKHUHFHQWHUDRI
JOREDOLVDWLRQ)RUPDQ\FRXQWULHVWKHWUDGH*'3VKDUHVLQWKHODWHWKHDUO\WKFHQWXU\DQGWKHODWHWK
FHQWXU\ ZHUH QRWGLVVLPLODU 7KH NH\ GLIIHUHQFH LV WKDW LQ WKH HDUOLHU SHULRG WKLV WUDGH ZDV ODUJHO\ LQ DUPV
OHQJWK UHODWLRQVKLSV ZLWK ILQDO SURGXFWV EHLQJ ODUJHO\ PDQXIDFWXUHG LQ D SDUWLFXODU FRXQWU\ DQG WKHQ
H[SRUWHG%\FRQWUDVWLQWKHODWWHUSHULRGWUDGHZDVLQFUHDVLQJO\LQVXEFRPSRQHQWVDQGVHUYLFHVDQGZDV
FRQVHTXHQWO\ FRQVLGHUDEO\ PRUH FRPSOH[ )HHQVWUD  +XPPHOV ,VKLL DQG <L   7KLV FRQWUDVW
DOORZVXVWRPDNHWKHXVHIXOGLVWLQFWLRQEHWZHHQZKDWPLJKWEHFDOOHG¶LQWHUQDWLRQDOLVDWLRQ·LQWKHODWHWK
FHQWXU\DQG¶JOREDOLVDWLRQ·LQWKHODWHWKFHQWXU\ 7KHLQWULFDF\DQGFRPSOH[LW\RIWUDGHLQWKHJOREDOLVDWLRQ
HUDUHTXLUHVVRSKLVWLFDWHGIRUPVRIFRRUGLQDWLRQQRWPHUHO\ZLWKUHVSHFWWRORJLVWLFV ZKRVKLSVZKDWZKHUH
DQGZKHQ EXWDOVRLQUHODWLRQWRWKHLQWHJUDWLRQRIFRPSRQHQWVLQWRWKHGHVLJQRIWKHILQDOSURGXFWVDQGWKH
TXDOLW\ VWDQGDUGV ZLWK ZKLFK WKLV LQWHJUDWLRQ LV DFKLHYHG ,W LV WKLV UROH RI FRRUGLQDWLRQ DQG WKH
FRPSOHPHQWDU\UROHRILGHQWLI\LQJG\QDPLFUHQWRSSRUWXQLWLHVDQGDSSRUWLRQLQJUROHVWRNH\SOD\HUVZKLFK
UHIOHFWVWKHDFWRIJRYHUQDQFH
7KLV FRQFHSW RI JRYHUQDQFH ² DQG WKH GLVWLQFWLRQ EHWZHHQ GLIIHUHQW W\SHV RI FKDLQV ² LV D PDMRU
FRQWULEXWLRQWRRXUXQGHUVWDQGLQJRIWKHZRUNLQJVRIYDOXHFKDLQV:KDWLWGRHVLVWRWKURZOLJKWRQWKRVH
IDFWRUVGHWHUPLQLQJWKHQDWXUHRIWKHLQVHUWLRQRIGLIIHUHQWSURGXFHUVLQWRWKHJOREDOGLYLVLRQRIODERXU)RU
DV ZH REVHUYHG LQ 6HFWLRQ  DERYH LW LV QRW MXVW D PDWWHU RI ZKHWKHU SURGXFHUV SDUWLFLSDWH LQ WKH JOREDO
HFRQRP\ZKLFKGHWHUPLQHVWKHLUUHWXUQVWRSURGXFWLRQEXWKRZDQGRQZKDWWHUPVWKHGRVR
([WHQGLQJ*HUHIIL·VFRQFHSWLWLVSRVVLEOHWRGLVWLQJXLVKWKUHHIRUPVRIJRYHUQDQFHEDVHGRQSULQFLSOHV
RIFLYLFJRYHUQDQFH7KHEDVLFUXOHVZKLFKGHILQHWKHFRQGLWLRQVIRUSDUWLFLSDWLRQLQWKHFKDLQQHHGWREH
VHW 7KLV FDQ EH WHUPHG ¶OHJLVODWLYH JRYHUQDQFH· ,W LV DOVR QHFHVVDU\ WR DXGLW SHUIRUPDQFH DQG WR FKHFN
FRPSOLDQFHZLWKWKHVHUXOHV²WKLVFDQEHVHHQDV¶MXGLFLDOJRYHUQDQFH·+RZHYHULQRUGHUWRPHHWWKHVHUXOHVRI
SDUWLFLSDWLRQ WKHUH QHHGV WR EH VRPH IRUP RI SURDFWLYH JRYHUQDQFH ZKLFK PLJKW EH WHUPHG ¶H[HFXWLYH
JRYHUQDQFH· ZKLFKSURYLGHVDVVLVWDQFHWRYDOXHFKDLQSDUWLFLSDQWVLQPHHWLQJWKHVH RSHUDWLQJUXOHV 0XFK RI
WKHH[LVWLQJGLVFXVVLRQRIJRYHUQDQFHIDLOVWRUHFRJQLVHWKLVWKUHHIROGGLVWLQFWLRQZKLFKLVRQHRIWKHUHDVRQV
ZK\WKHUHLVRIWHQFRQIXVLRQDERXWZKLFKSDUW\DFWXDOO\JRYHUQVDSDUWLFXODUYDOXHFKDLQDQGDUHOXFWDQFHWR
UHFRJQLVHWKDWGLIIHUHQWSDUWLHVPD\HQJDJHLQGLIIHUHQWIRUPVRIJRYHUQDQFHLQWKHVDPHFKDLQ$V)LJXUH
VKRZVWKHVHJRYHUQDQFHUROHVPD\EHSURYLGHGIURPZLWKLQRUIURPZLWKRXWWKHFKDLQ

 )RUDVLPLODUDQGWRVRPHH[WHQWRYHUODSSLQJGHFRPSRVLWLRQRIGLIIHUHQWIRUPVRIJRYHUQDQFHVHH'RODQHWDO
 


 Figure 5: Examples of legislative, judicial and executive value chain governance

([HUFLVHGE\SDUWLHVLQWHUQDOWRFKDLQ ([HUFLVHGE\SDUWLHVH[WHUQDOWRFKDLQ
/HJLVODWLYH • 6HWWLQJVWDQGDUGVIRUVXSSOLHUVLQ • (QYLURQPHQWDOVWDQGDUGV
JRYHUQDQFH UHODWLRQWRRQWLPHGHOLYHULHV
IUHTXHQF\RIGHOLYHULHVDQGTXDOLW\ • &KLOGODERXUVWDQGDUGV

-XGLFLDO • 0RQLWRULQJWKHSHUIRUPDQFHRI • 0RQLWRULQJRIODERXUVWDQGDUGVE\

JRYHUQDQFH VXSSOLHUVLQPHHWLQJWKHVHVWDQGDUGV
([HFXWLYH • 6XSSO\FKDLQPDQDJHPHQWDVVLVWLQJ
JRYHUQDQFH VXSSOLHUVWRPHHWWKHVHVWDQGDUGV
• 3URGXFHUDVVRFLDWLRQVDVVLVWLQJ
PHPEHUVWRPHHWWKHVHVWDQGDUGV
1*2V
• 6SHFLDOLVHGILUPVPRQLWRULQJ
FRQIRUPDQFHWR,62VWDQGDUGV
• 6SHFLDOLVHGVHUYLFHSURYLGHUV
• *RYHUQPHQWLQGXVWULDOSROLF\VXSSRUW

%XLOGLQJRQWKLVFRQFHSWRIJRYHUQDQFH*HUHIILKDVPDGHWKHYHU\XVHIXOGLVWLQFWLRQEHWZHHQWZRW\SHVRI
YDOXHFKDLQV7KHILUVWGHVFULEHVWKRVHFKDLQV ZKHUH WKH FULWLFDO JRYHUQLQJUROH LVSOD\HG E\ D EX\HU%X\HU
GULYHQ FKDLQV DUH FKDUDFWHULVWLF RI ODERXU LQWHQVLYH LQGXVWULHV DQG WKHUHIRUH KLJKO\ UHOHYDQW WR GHYHORSLQJ
FRXQWULHV VXFKDVIRRWZHDUFORWKLQJIXUQLWXUHDQGWR\V7KHVHFRQGGHVFULEHVDZRUOGZKHUHNH\SURGXFHUV
LQ WKH FKDLQ JHQHUDOO\ FRPPDQGLQJ YLWDO WHFKQRORJLHV SOD\ WKH UROH RI FRRUGLQDWLQJ WKH YDULRXV OLQNV ²
SURGXFHUGULYHQFKDLQV+HUHSURGXFHUVWDNHUHVSRQVLELOLW\IRUDVVLVWLQJWKHHIILFLHQF\RIERWKWKHLUVXSSOLHUVDQG
WKHLUFXVWRPHUV,QPRUHUHFHQWZRUN*HUHIILKDVSRLQWHGRXWWKDWSURGXFHUGULYHQFKDLQVDUHPRUHOLNHO\WR
EHFKDUDFWHULVHGE\)',WKDQDUHEX\HUGULYHQFKDLQV *HUHIILD 
,Q HDFK RIWKHVH FKDLQV SURGXFWLRQ LV WR YDU\LQJ GHJUHHV DIIHFWHG E\ WKH WKUHH IRUPV RI JRYHUQDQFH
&RQVLGHUIRUH[DPSOHWKHFDVH RI ZKDW *HUHIIL FDOOV ¶WULDQJOH PDQXIDFWXULQJ· LQWKH WR\ YDOXH FKDLQ ZKHUH
SURGXFWLRQLQ&KLQDLVFRRUGLQDWHGE\7DLZDQHVHLQWHUPHGLDULHVDQGGHVWLQHGIRUEX\HUV DQGILQDOPDUNHWV
LQ WKH 86 7KH VWDQGDUGV ZKLFK WKHVH SURGXFHUV KDYH WR PHHW IRU H[DPSOH XVLQJ OHDGIUHH SDLQWV  DUH
OHJLVODWHG E\ JRYHUQPHQW DQG E\ WKH XV UHWDLOHU ² OHJLVODWLYH JRYHUQDQFH %RWK SDUWLHV ZLOO W\SLFDOO\ DOVR
PRQLWRU FRPSOLDQFH ZLWK WKHVH VWDQGDUGV ² MXGLFLDO JRYHUQDQFH 7KH 7DLZDQHVH LQWHUPHGLDULHV ZLOO WKHQ
FRRUGLQDWH SURGXFWLRQ WKURXJK D UDQJH RI VXSSOLHUV DQG RIWHQ DOVR VXEVXSSOLHUV  DQG ZKHUH QHFHVVDU\
SURYLGHDVVLVWDQFHWRILUPVZKRKDYHWRPHHWWKHVWDQGDUGVSUHYDLOLQJLQWKHFKDLQ²H[HFXWLYHJRYHUQDQFH
*RYHUQDQFH LQ RWKHU FKDLQV ² IRU H[DPSOH LQ WKH FRPSXWHU LQGXVWU\ ² PD\ EH PRUH FRPSOLFDWHG ZLWK D
UDQJH RI EX\LQJ SDUWLHV OHJLVODWLQJ DQG PRQLWRULQJ GLIIHUHQW VWDQGDUGV DQG VSHFLDOLVHG VHUYLFH SURYLGHUV
FRPSOHPHQWLQJWKHUROHSOD\HGE\OHDGILUPVLQH[HFXWLYHJRYHUQDQFH

6\VWHPLFHIILFLHQF\
$ WKLUG DQDO\WLFDO HOHPHQW RI YDOXH FKDLQ DQDO\VLV LV WKDW LW PRYHV WKH IRFXV RI DWWHQWLRQ IURP SRLQW WR
V\VWHPLF WKDWLVYDOXHFKDLQ HIILFLHQF\:K\PLJKWWKLVEHLPSRUWDQW"$XVHIXOH[DPSOHFDQEHGUDZQIURP
WKHVWUDWHJLFUHVWUXFWXULQJRIRQHRI(XURSH·VPDMRUUHWDLOHUV7HVFRKDVDFKLHYHGDVLJQLILFDQWJURZWKLQLWV
PDUNHWVKDUHDQGSURILWDELOLW\IURPLWVDELOLW\WRVOLPGRZQLWVRZQLQYHQWRULHVHQVXULQJDSURFHVVRIMXVWLQ
WLPHGHOLYHULHVIURPLWVRZQZDUHKRXVHVDQGWKRVHRINH\VXSSOLHUVWRLWVUHWDLOVWRUHV%XWLWKDVLQFUHDVLQJO\


FRPHWRUHDOLVHWKDWWKHVHDFWLYLWLHVDFFRXQWIRURQO\DWKLQVKDUHRIWKHSURGXFW·VWRWDOYDOXHDGGHGDQGXQOHVV
LW¶JRYHUQV·LWVFKDLQWRDFKLHYHEURDGHUOHYHOVRIV\VWHPLFLQWHJUDWLRQOLWWOHPRUHFRXOGEHGRQHWRDFKLHYH
FRPSHWLWLYHDGYDQWDJH)RUH[DPSOHLQDQH[HUFLVHGHVLJQHGWRLGHQWLI\DUHDVRIZDVWHGDFWLYLW\LQWKHYDOXH
FKDLQRIDSDUWLFXODUSURGXFWDQDQDO\VLVRIWKHYDOXHDGGHGDFWLYLWLHVLQYROYHGLQWKHSURGXFWLRQDQGFRROLQJ
RI D WLQ RI FRFD FROD ZDV XQGHUWDNHQ 7KLV UHYHDOHG WKDW LQ DQ RSWLPXP VLWXDWLRQ LW ZRXOG WDNH D WRWDO
PLQLPXPWLPHRIWKUHHKRXUVWRSURGXFHWKHFRPSOHWHSURGXFW<HWLQUHDOLW\WKHDFWXDOHODSVHGWLPHLQWKLV
SURFHVV ZDV  GD\V OHDGLQJ WR D VLJQLILFDQW FRVW LQ ZRUNLQJ FDSLWDO WKURXJKRXW WKH FKDLQ :RPDFN DQG
-RQHV 7HVFRKDVWKXVEHJXQWRSXWVLJQLILFDQWUHVRXUFHVLQWRWU\LQJWRLPSURYHHIILFLHQF\WKURXJKRXW
WKH FKDLQ VLQFH LW KDV FRPH WR UHDOLVH WKDW WKH DFWLYLWLHV ZKLFK LW LV GLUHFWO\ UHVSRQVLEOH IRU LQ LWV LQWHUQDO
RSHUDWLRQVDFFRXQWIRURQO\DVPDOOVKDUHRIWRWDOSURGXFWFRVWV
$VYDOXHFKDLQVEHFRPHLQFUHDVLQJO\GLVDUWLFXODWHGDQGVXEMHFWWRDILQHUDQGILQHUGLYLVLRQRIODERXU²
DQ LQHYLWDEOH SURFHVV JLYHQ WKH LQFUHDVLQJ NQRZOHGJH FRQWHQW RI SURGXFWLRQ ² VR WKH DELOLW\ WR PDNH DQ
LPSDFW RQ FRPSHWLWLYHQHVV E\ LPSURYLQJ WKH HIILFLHQF\ RI LQGLYLGXDO OLQNV LQ WKH FKDLQ KDV EHFRPH
LQFUHDVLQJO\ OLPLWHG 6\VWHPLF LQWHJUDWLRQ LQYROYHV FORVHU FRRSHUDWLRQ EHWZHHQ OLQNV LQ WKH FKDLQ DQG WKLV
RIWHQ LQYROYHV HQKDQFHG UHVSRQVLELOLWLHV IRU JRYHUQRUV DV ZHOO DV WKH JURZWK RI JUHDWHU OHYHOV RI WUXVW
EHWZHHQ GLIIHUHQW OLQNV LQ WKH FKDLQ 3HUKDSV PRVW LPSRUWDQWO\ IURP RXU SHUVSHFWLYH YDOXH FKDLQV
LQFUHDVLQJO\ VSDQ QDWLRQDO ERXQGDULHV DQG JRYHUQRUV WKHUHIRUH DUH DOVR IRUFHG WR OHDUQ KRZ WR XSJUDGH
SURGXFHUVLQORZLQFRPHFRXQWULHV

 +RZ GR WKHVH WKUHH DQDO\WLFDO FKDUDFWHULVWLFV RI YDOXH FKDLQV UHODWH WR RXU
FRQFHUQVZLWKVSUHDGLQJWK HJDLQVIURPJOREDOLVDWLRQ"

7KHVH WKUHH DQDO\WLFDO HOHPHQWV ² G\QDPLF UHQWV JRYHUQRUVKLS DQG V\VWHPLF HIILFLHQF\ JDLQV ² DUH FORVHO\
OLQNHG7KHFHQWUDOGULYHULVWKHSUHYDOHQFHRIFRPSHWLWLRQZKLFKIRUFHVGRZQSURILWVE\ORZHULQJEDUULHUVWR
HQWU\ DQG ZKLFK LQFUHDVHV DV SURGXFHUV LQ PRUH DQG PRUH FRXQWULHV HQWHU JOREDO WUDGH 7KLV LQGXFHV
SDUWLFLSDQWV WKURXJKRXW WKH FKDLQ WR VHDUFK IRU QHZ IRUPV RI UHQW ,Q DFKLHYLQJ WKLV WKH PRUH SRZHUIXO
DFWRUVLQWKHFKDLQDUHLQFUHDVLQJO\UHTXLUHGWRLQGXFH DQGDVVLVW WKHLUVXSSOLHUVDQGFXVWRPHUVWR FKDQJH
WKHLURZQRSHUDWLQJSURFHGXUHV$WWKHVDPHWLPHWKH\FRQWLQXDOO\VHDUFKIRUQHZVXSSOLHUV V\VWHPDWLFDOO\
VWULYLQJWRORZHUEDUULHUVWRHQWU\LQRWKHUOLQNVLQWKHFKDLQ DQGFXVWRPHUV7KHVHREMHFWLYHVUHTXLUHWKHPWR
DFW DV YDOXH FKDLQ JRYHUQRUV DOWKRXJK WR YDU\LQJ GHJUHHV 7KH UHVXOWLQJ JURZWK LQ WKH VRFLDO GLYLVLRQ RI
ODERXU UHTXLUHV WKDW WKHVH JRYHUQRUV DFW RYHU DQ LQFUHDVLQJO\ ODUJH JHRJUDSKLFDO DQG LQVWLWXWLRQDO WHUUDLQ WR
VHDUFKIRUV\VWHPLFHIILFLHQF\
:H REVHUYHG LQ 6HFWLRQ  WKDW DV WKLV JOREDO VSUHDG RI DFWLYLWLHV KDV LQFUHDVHG VR WKH LQWHUFRXQWU\
GLVWULEXWLRQRILQFRPHKDVEHFRPHPRUHFRPSOH[DQGJHQHUDOO\KDVZRUVHQHG+RZDUHWKHVHSKHQRPHQD
OLQNHG")LUVWEDUULHUVWRHQWU\DUHWKHGHWHUPLQDQWVRIWKHGLVWULEXWLRQRIUHQWV7KDWLVWKH\GHWHUPLQHZKR
JDLQVDQGZKRORVHVLQWKHFKDLQRISURGXFWLRQ7KRVHZKRFRPPDQGUHQWVDQGKDYHWKHDELOLW\WRFUHDWH

 ,Q WKHLU  ERRN *HUHIIL .RU]HQLHZLF] DQG .RU]HQLHZLF] QRWHG WKDW ¶>W@KH *&& DSSURDFK H[SODLQV WKH
GLVWULEXWLRQRIZHDOWKZLWKLQDFKDLQDVDQRXWFRPHRIWKHUHODWLYHLQWHQVLW\RIFRPSHWLWLRQZLWKLQGLIIHUHQWQRGHV·
EXWIDLOWRWDNHWKLVDQDO\VLVIRUZDUG S  ,DPJUDWHIXOWR+XEHUW6FKPLW]IRUSRLQWLQJRXWWKLVTXRWHWRPH


QHZGRPDLQVRIUHQWZKHQEDUULHUVWRHQWU\IDOODUHWKH EHQHILFLDULHV %\ FRQWUDVW WKRVH ZKR DUH VWXFN LQ
DFWLYLWLHVZLWKORZEDUULHUVWRHQWU\ORVHDQGLQDZRUOGRILQFUHDVLQJFRPSHWLWLRQWKHH[WHQWRIWKHVHORVVHV
ZLOOLQFUHDVHRYHUWLPH6HFRQGO\WKHJURZLQJDUHDVRIUHQWDUHLQFUHDVLQJO\IRXQGLQWKHLQWDQJLEOHSDUWVRI
WKHYDOXHFKDLQ$GLVWLQFWGHYHORSPHQWRYHUWKHSDVWGHFDGHKDVVHHQWKHEDUULHUVWRHQWU\LQPDQXIDFWXULQJ
²IRUPHUO\DNH\VFDUFHFDSDELOLW\ORGJHGSUHGRPLQDQWO\LQWKHLQGXVWULDOO\DGYDQFHGFRXQWULHV²EHJLQWRIDOO
0RUHDQGPRUHFRXQWULHVZLWKORZHUDQGORZHUZDJHFRVWV HVSHFLDOO\&KLQDDQG,QGLD KDYHGHYHORSHGWKH
FDSDFLW\WRUHOLDEO\WUDQVIRUPSK\VLFDOLQSXWVLQWRKLJKTXDOLW\SK\VLFDORXWSXWVDWDORZFRVW,WLVWKLVZKLFK
H[SODLQVWKHGLPLQLVKLQJWHUPVRIWUDGHRIGHYHORSLQJFRXQWULHVH[SRUWVRIPDQXIDFWXUHVREVHUYHGDERYH$W
WKHVDPHWLPHFRS\ULJKWDQGEUDQGQDPHVKDYHDYHU\ORQJOLIH PRUHWKDQ\HDUVIRUWKHIRUPHUDQGLQ
SHUSHWXLW\ IRU WKH ODWWHU  DQG WKHVH UHSUHVHQW ¶DEVROXWH DQG LPPXWDEOH· IRUPV RI HFRQRPLF UHQW ,W LV QRW
VXUSULVLQJ WKHUHIRUH WKDW WKH KLJK LQFRPH FRXQWULHV LQ JHQHUDO DQG WKH 86 LQ SDUWLFXODU  KDYH SODFHG VR
PXFKHPSKDVLVRQLQWHOOHFWXDOSURSHUW\ULJKWVLQUHFHQW\HDUV6LPLODUO\DVYDOXHFKDLQVEHFRPHLQFUHDVLQJO\
FRPSOH[ DQG VXEMHFW WR FRRUGLQDWLRQ WKH UHQW DFFUXLQJ IURP JRYHUQRUVKLS LWVHOI D SDUWLFXODU IRUP RI
UHODWLRQDOUHQW².DSOLQVN\ KDVJURZQ
7KHVHGHYHORSPHQWVFDQEHHYLGHQFHGLQDQXPEHURISURPLQHQWWKXPEQDLOH[DPSOHV 0RUHGHWDLOLV
SURYLGHGLQ6HFWLRQEHORZ )RUH[DPSOH1LNHQRZFRQFHQWUDWHVRQWKH¶'· GHYHORS DQG¶6· VHOO UDWKHU
WKDQRQWKH¶0· PDNH DQG¶%· EX\ RI LWV YDOXH FKDLQ 7KH ZLQQHUV LQFOXGH 1LNH DV WKH FRRUGLQDWRU DQG
WKURXJK LWV LQVWLWXWLRQDOLVDWLRQ RI GHVLJQ DQG PDUNHWLQJ DQG NH\ FHOHEULWLHV VXFK DV 0LFKDHO -RUGDQ 7KH
ORVHUVDUHWKHIDFWRU\RZQHUVDQGWKHSUHGRPLQDQWO\VHPLVNLOOHGZRUNHUVLQGHYHORSLQJFRXQWU\SURGXFWLRQ
VLWHVDV1LNHUHORFDWHVSURGXFWLRQWRORFDOHVZLWKORZHUZDJHVRUZKHUHWKHSUHVVXUHVRIFRPSHWLWLRQLQGXFH
JRYHUQPHQWVWRGHYDOXHKHQFHXQGHUPLQLQJWKHLQWHUQDWLRQDOSXUFKDVLQJSRZHURIGRPHVWLFZDJHV3HUKDSV
PRUHVLJQLILFDQWO\WKH)RUG0RWRU&RPSDQ\ ZKLFKLQWKHILUVWWZRGHFDGHVRIWKHWKFHQWXU\SLRQHHUHG
WKH GHYHORSPHQW RI QHZ IRUPV RI RUJDQLVDWLRQDO DQG WHFKQRORJLFDO UHQWV LQ PDQXIDFWXULQJ  KDV UHFHQWO\
EHJXQWRUHVWUXFWXUHLWVHOI,WVHHVLWVIXWXUHSURILWVDVLQFUHDVLQJO\DULVLQJIURPLWVFRPPDQGRYHULWVEUDQG
QDPHDQGLQWKHSRZHUDQGHIILFLHQF\RILWVJRYHUQRUVKLS&RQVHTXHQWO\LWKDVEHJXQWRLQFUHDVHLWVDFWLYLWLHV
RYHUWKHZLGWKRIWKHFKDLQ EX\LQJLQWRDIWHUPDUNHWVSDUHVDXWROHDVLQJDQGPDUNHWLQJ DQGWRUHGXFHWKH
GHSWK RI LWV DFWLYLWLHV LQ LQGLYLGXDO OLQNV SDUWLFXODUO\ LQ PDQXIDFWXULQJ ZKHUH LW LV HYHQ WKLQNLQJ RI VXE
FRQWUDFWLQJ DVVHPEO\ SUHYLRXVO\ LWV FRUH HFRQRPLF UHQW  7KH ORVHUV KHUH DUH ILUPV DQG ZRUNHUV LQ WKH
DVVHPEO\VXEDVVHPEO\DQGFRPSRQHQWVVHFWRUVZKRDUHVXEMHFWWRLQFUHDVLQJFRPSHWLWLRQIURPDUDQJHRI
RWKHUVXSSOLHUVRUVXSSO\LQJFRXQWULHV
$OORIWKLVDIIHFWVWKHLQWHUFRXQWU\GLVWULEXWLRQRILQFRPH%XWSDUWLFLSDWLRQLQJOREDOYDOXHFKDLQVDOVR
DIIHFWVWKHLQWUDFRXQWU\GLVWULEXWLRQRILQFRPH7KLVLVEHFDXVHWKHUHTXLUHPHQWVRIILQDOSURGXFWPDUNHWVLQ
KLJKLQFRPHPDUNHWVLQYDULDEO\UHTXLUHFDSDELOLWLHVZKLFKDUHRXWVLGHRIWKHUHDFKRISRRUSHRSOHDQGSRRU
IDUPV DQG HQWHUSULVHV RIWHQ 60(V  7KHVH GHPDQGV WHQG WR EH PRUH H[DFWLQJ LQ ¶JRYHUQHG YDOXH FKDLQV·
WKDQ LQ DUPVOHQJWK WUDGH 7KLV LV EHFDXVH WKLV ODWWHU IRUP ORZ EDUULHUV WR HQWU\ DQG ORZ UHWXUQV DUH
XQDWWUDFWLYHWRWKHUHQWVHHNLQJHQWUHSUHQHXUVKLSZKLFKSOD\VVXFKDQLPSRUWDQWUROHLQWKHSURGXFWLRQDQG
H[FKDQJH RI PRUH GLIIHUHQWLDWHG DQG JHQHUDOO\ OHVV FRPSHWLWLYH  JRRGV DQG VHUYLFHV &RQVHTXHQWO\ VPDOO


IDUPV DQG ILUPV DQG WKRVH SHRSOH UHOLDQW IRU WKHLU LQFRPHV IURP VPDOOKROGLQJV DQG VPDOO HQWHUSULVHV PD\
VXIIHUDQGWKRVHORFNHGLQWRODUJHIDUPSURGXFWLRQPD\JDLQ

 +RZ GRHV YDOXH FKDLQ DQDO\VLV GLIIHU IURP FRQY HQWLRQDO LQGXVWU\ VWXGLHV DQG
IURPZKDWVRFLDOVFLHQWLVWV DQGHVSHFLDOO\HFRQRPLVWV QRUPDOO\GR" 

7UDGLWLRQDOO\WKHIRFXVRQSURGXFWLYHDFWLYLWLHVDQGWKHLQVHUWLRQRIORFDOSURGXFHUVLQWRJOREDOPDUNHWVKDV
EHHQ RQ WKH HFRQRPLF EUDQFK DQG WKH HFRQRPLF VHFWRU 'HYHORSLQJ FRXQWULHV KDYH EHHQ VHHQ WR KDYH D
SRWHQWLDOFRPSDUDWLYHDGYDQWDJHLQWKHSULPDU\EUDQFKDQGWKHLQGXVWULDOFRXQWULHVLQVHFRQGDU\HFRQRPLF
DFWLYLWLHV DQG YDOXHDGGHG WUDGHG VHUYLFHV :LWKLQWKH LQGXVWULDO EUDQFK WKH IRFXV KDV PRVW RIWHQ EHHQ RQ
LQGLYLGXDOVHFWRUV EDVHGRQ,6,&RU6,7&+6FODVVLILFDWLRQV VXFKDVFORWKLQJVKRHVFKHPLFDOVHOHFWURQLFV
IRRGSURFHVVLQJDQGLQDQDWLRQDOFRQWH[W+HQFHWKHDQDO\VLVKDVWHQGHGWRIRFXVRQWKHVL]HDQGJURZWKRI
WKHVHFWRULQWHUPVRIHPSOR\HHVDQGJURVVRXWSXW UDWKHUWKDQQHWYDOXHDGGHG WUDGHSHUIRUPDQFHDQGWKH
VL]HGLVWULEXWLRQRIILUPV
9DOXH FKDLQ DQDO\VLV WKURZV PRUH OLJKW RQ WKH GHWHUPLQDQWV RI LQFRPH GLVWULEXWLRQ ERWK ZLWKLQ DQG
EHWZHHQFRXQWULHVDQGHVSHFLDOO\RYHUWLPHWKDQWKLVWUDGLWLRQDOLQGXVWU\DQDO\VLV)RUH[DPSOH

• %HFDXVH LW IRFXVHV RQ WKH G\QDPLFV RI UHQW D YDOXH FKDLQ SHUVSHFWLYH IRUFHV WKH DQDO\VLV WR WUDQVFHQG
HFRQRPLFEUDQFKHVDQGVHFWRUV)RUH[DPSOHLQWKHIRUHVWU\DQGIXUQLWXUHFKDLQWKHUHQWULFKDFWLYLWLHV
DUH LQFUHDVLQJO\ IRXQG LQWKH JHQHWLFV RI VHHG GHVLJQ DQG LQ WKH GHVLJQ DQG EUDQGLQJ RI WKH IXUQLWXUH
UDWKHUWKDQLQWKHLQGLYLGXDODJULFXOWXUDOLQGXVWULDORUVHUYLFHVXEVHFWRUV ZKLFKWHQGWREHWKHGRPDLQ
RIWUDGLWLRQDOEUDQFKDQGVHFWRUDODQDO\VHV ,WLVRQO\WKURXJKDFRPSUHKHQVLYHYLHZRIWKHZKROHFKDLQ
WKDWWKHOLQNVLQWKHFKDLQRUVHJPHQWVLQSURGXFWPDUNHWVZKLFKDUHFKDUDFWHULVHGE\KLJKRUJURZLQJ
UHQWFDQEHLGHQWLILHG
• 5HODWHG WR WKLV YDOXH FKDLQ DQDO\VLV PDNHV LW SRVVLEOH WR WUDFH WKURXJK D SDUWLFXODU WKUHDG RI UHQWULFK
DFWLYLWLHVZKLFKDUHQRWHDVLO\FDSWXUHGE\EUDQFKDQGLQGXVWU\DQDO\VLV)RUH[DPSOHZHKDYHREVHUYHG
WKDWLQWDQJLEOHNQRZOHGJHLVLQFUHDVLQJO\FKDUDFWHULVHGE\KLJKEDUULHUVWRHQWU\DQGWKDWWKHRZQHUVRI
WKLV NQRZOHGJH JDLQ PRVW IURP WKH JOREDOLVDWLRQ RI SURGXFWLRQ DQG H[FKDQJH 6LPLODUO\ JRYHUQDQFH
DFWLYLWLHVDUHRIWHQVXEMHFWWRVLJQLILFDQWEDUULHUVWRHQWU\DQGKHQFHSURYLGHKLJKUHWXUQV7KLVEHLQJWKH
FDVHWKHDELOLW\WRLGHQWLI\UHQWULFKDFWLYLWLHVDORQJWKHZKROHFKDLQRIDGGHGYDOXHSURYLGHVWKHNH\WR
XQGHUVWDQGLQJWKHJOREDODSSURSULDWLRQRIWKHUHWXUQVWRSURGXFWLRQ
• 7KHGDWDZKLFKDUHFKDUDFWHULVWLFDOO\JHQHUDWHGLQPRVWEUDQFKDQGVHFWRUDODQDO\VHVPDNHLWGLIILFXOWWR
LQWHUSUHW WKH VLJQLILFDQFH RI NH\ LQGLFDWRUV VXFK DV ¶RXWSXW· ¶VDOHV· DQG ¶FRVWV· &RQVHTXHQWO\ WKH
GHWHUPLQDQWV RI LQFRPH GLVWULEXWLRQ DUH GLIILFXOW WR XQUDYHO 7UDGH VWDWLVWLFV DUH HVSHFLDOO\ SUREOHPDWLF
KHUH VLQFH WKH\ SURYLGH OLWWOH FDSDFLW\ WR XQSLFN YDOXH DGGHG )RU H[DPSOH LQ WKH ODWH V WKH
'RPLQLFDQ5HSXEOLFVDZDVLJQLILFDQWLQFUHDVHLQWKHJURVVYDOXHRIVKRHRXWSXWDQGH[SRUWV%XW¶VKRH
SURGXFWLRQ·RFFXUUHGLQ(3=VXWLOLVLQJLPSRUWHGLQSXWV²WKHYDOXHRIDVKRHH[SRUWZDVDPHUH

 7KLVGLVFXVVLRQKDVEHHQKHOSIXOO\LQIRUPHGE\PHPRVSUHSDUHGIRUWKH6SUHDGLQJWKH*DLQVIURP*OREDOLVDWLRQ
UHVHDUFKQHWZRUNE\*HUHIIL6WXUJHRQDQG+XPSKUH\  DQG:RRG  


 %\FRQWUDVWXQLWVKRHH[SRUWVIURP,WDO\PD\PRUHIXOO\UHIOHFWYDOXHDGGHG,QZKDWVHQVHVWKHQPD\
WKHVKRHVHFWRUVLQWKHVHWZRFRXQWULHVEHFRPSDUHGXQOHVVDYDOXHFKDLQDQDO\VLV²LQFRUSRUDWLQJDPRUH
VRSKLVWLFDWHGPDSSLQJRILQSXWRXWSXWUHODWLRQVKLSV²LVXWLOLVHG"
• 7KHG\QDPLFQDWXUHRIUHQWVJHQHUDWHGLQWKHJOREDODFWLYLWLHVRIDYDOXHFKDLQDUHREVFXUHGE\DIRFXVRQ
QDWLRQDOLQGXVWULHV)RUH[DPSOHZKHQSURGXFWLRQRFFXUVLQWKHFRQWH[WRIIDOOLQJJOREDOSURGXFW SULFHV
QDWLRQDODFFRXQWLQJV\VWHPVPD\UHIOHFWDJURZWKLQDFWLYLW\DQGYDOXHZKLFKGRHVQRWFRUUHVSRQGZLWK
WKH LQWHUQDWLRQDO SXUFKDVLQJ SRZHU RI WKLV VHFWRUDO DFWLYLW\ 7KH SUREOHP LV SDUWLFXODUO\ DFXWH ZKHQ
GHFLVLRQV DERXW QDWLRQDO UHVRXUFH DOORFDWLRQ ² DIIHFWLQJ LQFRPH VWUHDPV RYHU WLPH ² DUH PDGH ZLWKRXW
UHIHUHQFHWRWKHJOREDOG\QDPLFVRIUHWXUQVWRGLIIHUHQWDFWLYLWLHVLQWKHFKDLQ7KXVLWLVWKHJOREDOIRFXV
RIYDOXHFKDLQDQDO\VLVZKLFKPRUHDFFXUDWHO\LGHQWLILHVVXLWDEOHRSSRUWXQLWLHVWRDXJPHQWLQFRPHVLQD
QDWLRQDOFRQWH[WWKDQWKHQDWLRQDOIRFXVRILQGXVWU\VWXGLHV
• 6WXGLHVRIPDUNHWVWUXFWXUHZKLFKIDLOWRORFDWHWKHDQDO\VLVZLWKLQDYDOXHFKDLQSHUVSHFWLYHDUHQRWDEOH
WR DGHTXDWHO\ H[SODLQ WKH GHWHUPLQDQWV RI ILUPVL]H GLVWULEXWLRQ )RU H[DPSOH WKH KLJK FRQFHQWUDWLRQ RI
RZQHUVKLS LQ WKH 6RXWK $IULFDQ IXUQLWXUH LQGXVWU\ GRHV QRW DULVH IURP PDUNHW FRQGXFW ZLWKLQ WKH
IXUQLWXUHVHFWRU,QVWHDGLWLVH[SODLQHGE\KLJKOHYHOVRIFRQFHQWUDWLRQLQWKHUHWDLOVHFWRUZKLFKLQWXUQ
LVOLQNHGWRFRQFHQWUDWLRQLQILQDQFLDOLQWHUPHGLDWLRQ .DSOLQVN\DQG0DQQLQJ 6LPLODUREVHUYDWLRQ
KDYHEHHQPDGHZLWKUHVSHFWWRWKHIRRWZHDULQGXVWU\EXWLQWKLVFDVHWKHLQWHUVHFWRUDOOLQNDJHVZKLFK
DUHLQYROYHGVSDQQDWLRQDOERXQGDULHV 6FKPLW]DQG.QRUULQJD 

6RPXFKIRUWKHFRQWHQWRIUHVHDUFKHQTXLU\%XWZKDWRIWKHLPSOLFDWLRQVIRUGLVFLSOLQDU\IRFXV"

• %HFDXVHYDOXHFKDLQHQTXLU\VSDQVGLIIHUHQWHFRQRPLFEUDQFKHVDQGVHFWRUVHIIHFWLYHDQDO\VLV UHTXLUHV
WKH SDUWLFLSDWLRQ RI GLIIHUHQW GLVFLSOLQHV 7KLV LV PRVW FOHDUO\ WKH FDVH LQ UHODWLRQ WR WKH IRFXV RQ
DJULFXOWXUDODQGPDQXIDFWXULQJSURGXFWLRQV\VWHPVEXWWKHIRFXVRQWKHG\QDPLFVRIUHQWDOVRUHTXLUHV
LQSXWV IURP PDQDJHPHQW VWXGLHV DQG HQJLQHHULQJ 0RUHRYHU VLQFH SRZHU LV D NH\ FRPSRQHQW RI
JRYHUQDQFHDQGWUXVWLVFULWLFDOWRHQKDQFHGLQWHUILUPFRRSHUDWLRQDQGQHZIRUPVRIZRUNRUJDQLVDWLRQ
WKHUH LV D VLPXOWDQHRXV QHHG WR GUDZ RQ WKH LQVLJKWV RI SROLWLFDO VFLHQFH DQG VRFLRORJ\ ,W LV IRU WKLV
UHDVRQ WKDW :RRG UHIOHFWV WKDW YDOXH FKDLQ DQDO\VLV SURYLGHV ¶D PHHWLQJ JURXQG IRU HFRQRPLFV EXVLQHVV
DGPLQLVWUDWLRQDQGLQGXVWULDOVRFLRORJ\LQWKHVWXG\RIRQHLPSRUWDQWDVSHFWRIJOREDOLVDWLRQQDPHO\WKH
VLPXOWDQHRXVHFRQRPLFLQWHJUDWLRQRIFRXQWULHVDQGGLVLQWHJUDWLRQRISURGXFWLRQSURFHVVHV· HPSKDVLV
DGGHG  :RRG 
• $QXPEHURIFKDOOHQJHVDUHSRVHGWRPXFKRIWUDGLWLRQDOHFRQRPLFDQDO\VLV7KH+HFNVFKHU2KOLQIDFWRU
SULFHHTXDOLVDWLRQWKHRUHPSUHGLFWVWKDWLQDQRSHQHFRQRP\IDFWRUUHWXUQVVXFKDVZDJHVZLOOWHQGWR
FRQYHUJHDFURVV DQGZLWKLQVRPH QDWLRQDOERXQGDULHV<HWWKLVLVRIWHQQRWWKHFDVHLQSDUWGXHWRWKH
IDOOLQJFRVWVRIPRELOLW\DVKLJKO\VNLOOHGZRUNHUVRSHUDWLQJZLWKLQFRRUGLQDWHGYDOXHFKDLQVLQWHUDFWZLWK
VNLOOHGDQGXQVNLOOHGZRUNHUVLQGLIIHUHQWHFRQRPLHV :RRG 7KHDELOLW\WR LGHQWLI\ DQG FDSWXUH
WKHUROHSOD\HGE\WKHVHPRELOHVNLOOVLVVLJQLILFDQWO\HQKDQFHGZKHQDQDO\VLVRFFXUVWKURXJKWKHOHQVRI


 WKHYDOXHFKDLQ0XFKHFRQRPLFDQDO\VLVRILQFRPHGLVWULEXWLRQDOVRWHQGVWRIRFXVRQWKHLQGLYLGXDODV
WKHXQLWRIDFFRXQWDQGLWLVFHUWDLQO\WKHFDVHWKDWLQFRPHVGRDFFUXHWRLQGLYLGXDOSHRSOHDVKROGHUVRI
DVVHWV IRU H[DPSOH VNLOOV DQG HTXLW\  <HW ZKLOH LQGLYLGXDOV PD\ UHFHLYH LQFRPHV WKHVH UHWXUQV DUH
GHILQHGE\WKHLUSDUWLFLSDWLRQLQLQVWLWXWLRQV WKDWLVILUPV ZKLFKV\VWHPDWLFDOO\SXUVXHSROLFLHVGHVLJQHG
WR HQKDQFH WKHVH LQFRPHV E\ FRQVWUXFWLQJ EDUULHUV WR HQWU\ DJDLQVW FRPSHWLWLRQ 8QGHUVWDQGLQJ WKH
SURFHVVHVZKHUHE\EDUULHUVWR HQWU\ DUH FRQVWUXFWHGWDNHV WKH DQDO\VLV EH\RQGWKH GRPDLQ RIPXFK RI
HFRQRPLFDQDO\VLVZKLFKWUHDWVWHFKQRORJLFDOSURJUHVVDVH[RJHQRXVDQGIDLOVWRUHFRJQLVHWKHDELOLW\RI
ILUPVWRFRQVWUXFWWKHFRPSHWLWLYHHQYLURQPHQWLQZKLFKWKH\RSHUDWH UDWKHUWKDQDFWLQJDVSULFHWDNHUV 
0RUHRYHUDQXQGHUVWDQGLQJRIWKHQDWXUHDQGLPSRUWDQFHRIWUXVWLQLQWHUILUPUHODWLRQVKLSVZLWKLQWKH
YDOXHFKDLQUHTXLUHVHFRQRPLVWVWRDOVRHQJDJHZLWKWKHFRQWLQJHQF\DQGVRFLRORJ\RIWKHGHWHUPLQDQWV
RIVRFLDOFDSLWDO
• ,QDVLPLODUZD\RWKHUGLVFLSOLQHVDUHDOVRIRUFHGWRUHWKLQNWKHLUDQDO\WLFDOIUDPHZRUNVE\ D IRFXV RQ
YDOXHFKDLQV:RRGDUJXHVWKDWHFRQRPLFVQRWRQO\SURYLGHVDQDFFRXQWLQJIUDPHZRUNLQZKLFKYDOXH
FKDLQVFDQEHPDSSHGEXWDOVRIRUFHVWKHHQTXLU\WRIRFXVRQWKHHFRQRPLFGHWHUPLQDQWVRIORFDWLRQ
QRWDEO\ RQ FRVW VWUXFWXUHV :RRG   7KXV D FRPSOHPHQWDU\  GLYLVLRQ RI ODERXU FDQ EH
FKDUDFWHULVHGDVRQHLQZKLFKHFRQRPLVWVGHWHUPLQHWKHEDVLVRIFRPSDUDWLYHDGYDQWDJH WKDWLVWKHSRWHQWLDO
ZKLFK GLIIHUHQW HQYLURQPHQWV SURYLGH IRU UHDSLQJ HFRQRPLF UHQWV  DQG RWKHU GLVFLSOLQHV LGHQWLI\ WKH
GHWHUPLQDQWV RI FRPSHWLWLYH DGYDQWDJH WKH IDFWRUV ZKLFK H[SODLQ ZK\ VRPH ILUPV DUH DEOH WR DSSURSULDWH
WKHVHHFRQRPLFUHQWV 

'RWKHVHDWWULEXWHVRIYDOXHFKDLQDQDO\VLVLPSURYHWKHSROLF\UHOHYDQFHRIUHVHDUFK"2XUSULPDU\FRQFOXVLRQ
LVWKDWWKLVDQDO\WLFIUDPHZRUNSURYLGHVWKHSRWHQWLDOIRULGHQWLI\LQJWKRVHSROLF\DFWLRQV²ERWKE\SULYDWH
DQGSXEOLFDFWRUV²ZKLFKPD\LQIOXHQFHGLVWULEXWLRQDORXWFRPHV :H ZLOO UHWXUQ WR WKLV LQ WKH FRQFOXGLQJ
GLVFXVVLRQEHORZEXWWKUHHREVHUYDWLRQVFDQEHPDGHDWWKLVVWDJH

• $V ZH KDYH VHHQ YDOXH FKDLQ DQDO\VLV FRYHUV D UDQJH RI LQWHUFRQQHFWHG HFRQRPLF DFWLYLWLHV VSDQQLQJ
EUDQFKHVDQGVHFWRUVDQGWKXVSURYLGHVWKHSRWHQWLDOIRUFRRUGLQDWLQJZKDWPLJKWEHWHUPHG¶MRLQHGXS
SROLFLHV·EHWZHHQGLIIHUHQWDUPVRIJRYHUQPHQW
• %\ IRFXVLQJ RQ WKH LQVWLWXWLRQDO GHWHUPLQDQWV RI UHQW YDOXH FKDLQ DQDO\VLV SRLQWV SROLF\ WRZDUGV
LQVWUXPHQWV ZKLFK LQIOXHQFH WKH EHKDYLRXU RI LQGLYLGXDOV JURXSHG ZLWKLQ ILUPV DQG RWKHU RUJDQLVDWLRQV ZKLFK
VKDSHWKHGLVWULEXWLRQRIUHWXUQVIURPSURGXFWLRQDQGH[FKDQJH7KXVWKHNH\WRVXVWDLQLQJWKHJURZWK
DQGVSUHDGRILQFRPHVOLHVLQWKHDELOLW\WRLQIOXHQFHWKHEHKDYLRXURIJURXSVRISHRSOHDFWLQJLQFRQFHUW
UDWKHUWKDQWKDWRILQGLYLGXDOVZKREHQHILWIURPWKHVHMRLQWDFWLYLWLHV
• %\ IRFXVLQJ RQWKH G\QDPLFV RIUHQW YDOXH FKDLQ DQDO\VLV SRLQWVSROLF\ WRZDUGV WKH GHYHORSPHQW RI WKRVH
FDSDELOLWLHVDQGLQVWLWXWLRQDOWUDMHFWRULHVZKLFKZLOOVXVWDLQLQFRPHVRYHUWLPH

 $VDFRQVHTXHQFHWKHJURZLQJFRQFHQWUDWLRQLQWKH,WDOLDQ6SDQLVKDQG*UHHNUHWDLOVHFWRUVLVOLNHO\WRXQGHUPLQH
WKHKLVWRULFVWUHQJWKRIWKH60(VHFWRUVLQWKHVHFRXQWULHV


7KHVH DUH VWURQJ DVVHUWLRQV ZKLFK PDNH SRZHUIXO FODLPV IRU WKH SULPDF\ RI YDOXH FKDLQ DQDO\VLV %XW FDQ
WKHVHDVVHUWLRQVEHERUQHRXWLQSUDFWLFH",QWKHIROORZLQJ6HFWLRQZHSURYLGHVRPHH[DPSOHVWR VXSSRUW
WKHVHFODLPVEDVHGLQODUJHSDUWRQWKHILQGLQJVRIZRUNZKLFKZHKDYHXQGHUWDNHQLQDVHULHVRIVHOHFWHG
YDOXHFKDLQV

620(,//8675$7,9(&$6(678',(6

,QLOOXVWUDWLQJWKHVHFODLPVZHZLOOVLWXDWHWKHDQDO\VLVLQWHUPVRIWKHWKUHHDQDO\WLFDOFRPSRQHQWVRIYDOXH
FKDLQDQDO\VLV²WKHFKDQJLQJFRPSRVLWLRQRIUHQWVWKHUROHSOD\HGE\JRYHUQRUVDQGWKHV\VWHPLFQDWXUHRI
FKDLQHIILFLHQF\²DQGZLWKDIRFXVRQWKHGLVWULEXWLRQDODQGSROLF\LPSOLFDWLRQVRIZKDWKDVEHHQREVHUYHG
7KHFDVHVWXG\PDWHULDOFRQVLGHUVWKHSURGXFWLRQH[SRUWDQGPDUNHWLQJRI

• )UHVKIUXLWDQGYHJHWDEOHV 'RODQ+XPSKUH\DQG+DUULVV3DVFDO+XPSKUH\DQG2HWHU
• &DQQHGGHFLGXRXVIUXLW .DSODQDQG.DSOLQVN\
• )RRWZHDU 6FKPLW]6FKPLW]DQG.QRUULQJD
• $XWRPRELOH FRPSRQHQWV %DUQHV DQG .DSOLQVN\ D DQG E IRUWKFRPLQJ +XPSKUH\ 
+XPSKUH\IRUWKFRPLQJ

$V ZH KDYH VHHQ WKH G\QDPLFV RI HFRQRPLF UHQW DUH VXEMHFW WR FKDQJH DV D FRQVHTXHQFH RI LQFUHDVLQJ
FRPSHWLWLYHSUHVVXUHVZKLFKRIWHQRYHUZKHOPKLVWRULFDOO\VLJQLILFDQWEDUULHUVWRHQWU\ZLWKLQGLIIHUHQWSDUWV
RI WKH YDOXH FKDLQ 7KLV PHDQV WKDW VWDWLF SRVLWLRQLQJ RI SURGXFHUV HLWKHU ZLWKLQ SDUWLFXODU DFWLYLWLHV LQ
SDUWLFXODUOLQNVRIWKHFKDLQ IRUH[DPSOHDVVHPEOLQJUDWKHUWKDQPDWHULDOVIRUPLQJ RULQSDUWLFXODUOLQNVLQ
WKHFKDLQ IRUH[DPSOHWUDQVIRUPLQJLQSXWVLQWRRXWSXWVUDWKHUWKDQPDUNHWLQJ DUHOLNHO\WREHDVVRFLDWHG
ZLWKGHFOLQLQJWHUPVRIWUDGHDQGKHQFHZLWKDZRUVHQLQJRIUHODWLYHDQGRUUHDOLQFRPHV
7DEOHLOOXVWUDWHVWKLVG\QDPLFSURFHVVE\VXPPDULVLQJWKHH[SHULHQFHRIIRXUYDOXHFKDLQV²IUHVKIUXLW
DQGYHJHWDEOHV ))9 FDQQHGGHFLGXRXVIUXLW &') IRRWZHDUDQGDXWRPRELOHFRPSRQHQWV

)UHVKIUXLWDQGYHJ HWDEOHV 
))9 UHSUHVHQW D VWUDWHJLF DQG JURZLQJ PDUNHW IRU UHWDLOHUV LQ WKH LQGXVWULDOO\ DGYDQFHG FRXQWULHV ERWK
EHFDXVH WKH\ DUH RQH RI WKH IHZ LWHPV IRU ZKLFK FRQVXPHUV ZLOO FKDQJH WKHLU FKRLFH RI VWRUHV DQG DOVR
EHFDXVH WKH\ DUH LQFRPH HODVWLF SURGXFWV 7KH SHU FDSLWD LQFRPH RI VKRSSHUV FDQ EHVW EH JDXJHG E\ WKH
VKDUH RI ))9V LQ WKHLU VKRSSLQJ WUROOH\V  0RUHRYHU ))9 LV DV \HW DW OHDVW  ODUJHO\ XQEUDQGHG KHQFH
SURYLGLQJUHWDLOVWRUHVZLWKWKHDELOLW\WRZKROO\DSSURSULDWHPDUNHWLQJUHQWVUDWKHUWKDQVKDULQJWKHVHZLWK
EUDQGHGVXSSOLHUV,WKDVWKXVEHFRPHDVWUDWHJLFVHFWRUIRUUHWDLOHUVLQKLJKLQFRPHFRXQWULHV

 8QOHVV RWKHUZLVH VWDWHG WKLV GLVFXVVLRQ LV GUDZQ IURP 'RODQ +XPSKUH\ DQG +DUULVV3DVFDO   DQG
+XPSKUH\DQG2HWHU  


 Table 3: The dynamic distribution of rents in four value chains

6HFWRU /LQNVLQYDOXH 3ULPHVRXUFHRIHFRQRPLFUHQW ,PSOLFDWLRQVIRUSURGXFWLRQDFWLYLWLHV

FKDLQ 3DVW 3UHVHQW )XWXUH
6HHGGHVLJQ 6HHGGHVLJQ *URZLQJFDSDELOLWLHV FOLPDWLFVSHFLILF DUH
DQGQHZ JHQHUDOLVHGDQGFRPSHWLWLRQKLJK
*URZLQJ SURGXFW
*URZLQJ GHYHORSPHQW 6HHGGHVLJQ (FRQRPLFUHQWVLQLQWDQJLEOHV VHHGGHVLJQ
)UHVK IUXLW 3RVWKDUYHVW QHZSURGXFW JURZLQJSUDFWLFHVSK\WRVDQLWDU\SUDFWLFHV
DQG SURFHVVLQJ &RRUGLQDWLRQ GHYHORSPHQW HWF 
YHJHWDEOHV RIYDOXH
([SRUWLQJ FKDLQ %DWWOHEHWZHHQUHWDLOFKDLQVDQGEUDQGQDPHV
HIILFLHQF\ IRUVKHOIGRPLQDQFH
5HWDLOLQJ :KROHVDOH
5HWDLOFKDLQV
6HHGGHVLJQ *URZLQJFDSDELOLWLHV FOLPDWLFVSHFLILF DUH
JHQHUDOLVHGDQGFRPSHWLWLRQKLJKLQWHQVH
*URZLQJ (XURSHDQ FRPSHWLWLRQOHDGVWRIDOOLQJWHUPVRIWUDGH
*URZHUV DQG86 /RZEDUULHUVWRHQWU\PHDQWKDWUHQWVDUHORZ
3RVWKDUYHVW LQ6RXWK JURZHUVDQG %X\HUV WKURXJKRXWWKHFKDLQ
&DQQHG SURFHVVLQJ $IULFDDQG IUXLWFDQQHUV
GHFLGXRXV $XVWUDOLD 5HWDLOFKDLQ :LWKLQLQGLYLGXDOOLQNVHFRQRPLFUHQWVDUH
IUXLW ([SRUWLQJ %X\HUVDQG RZQEUDQGV LQFUHDVLQJO\LQLQWDQJLEOHV VHHGGHVLJQ
H[SRUWDJHQWV JURZLQJSUDFWLFHVSK\WRVDQLWDU\SUDFWLFHV
%X\HUV :KROHVDOH EUDQGQDPHVDQGPDUNHWLQJ 
%UDQGQDPHV
5HWDLOLQJ %DWWOHEHWZHHQUHWDLOFKDLQVDQGEUDQGQDPHV
IRUVKHOIGRPLQDQFH
/HDWKHU /HDWKHU

'HVLJQ 'HVLJQ 'HVLJQ 'HVLJQLVFULWLFDODVLQFUHDVLQJFRPSHWLWLRQLQ

SURGXFWLRQIRUFHVGHFOLQLQJWHUPVRIWUDGH
$VVHPEO\ $VVHPEO\
)RRWZHDU %X\HUVSOD\GRPLQDQWUROHLQJOREDOVRXUFLQJ
([SRUWLQJ
%UDQGQDPHVRIJURZLQJLPSRUWDQFH
%X\HUV %X\LQJ %X\LQJ

5HWDLOLQJ 5HWDLOLQJ 5HWDLOLQJ

5DZPDWHULDO
SURFHVVLQJ
0DQXIDFWXULQJFRPSHWHQFHVEHFRPH
'HVLJQ 'HVLJQ 'HVLJQ 'HVLJQ ZLGHVSUHDGJURZWKRIJOREDOVRXUFLQJEXW
LQWHQVHFRPSHWLWLRQOHDGVWRIDOOLQJWHUPVRI
)RUPLQJ )RUPLQJ &RRUGLQDWLRQ &RRUGLQDWLRQ WUDGH5HQWDFKLHYHGE\PRYLQJWRGLIIHUHQWOLQNVLQ
RIYDOXH RIYDOXHFKDLQ WKHFKDLQ
$XWRPRWLYH $VVHPEO\ $VVHPEO\ FKDLQ
FRPSRQHQWV :LWKLQLQGLYLGXDOOLQNVHFRQRPLFUHQWVDUH
([SRUWLQJ 6RPHLQ LQFUHDVLQJO\LQLQWDQJLEOHV GHVLJQNQRZOHGJH
IRUPLQJDQG LQSXWVLQWRSURGXFWLRQEUDQGQDPHVDQG
2(0XVHU DVVHPEO\ PDUNHWLQJ

6SDUHV 2(0EUDQG 2(0EUDQG

QDPH QDPH

)RU))9VHH3DVFDO+DULVHWDO  DQG+XPSKUH\DQG2HWHU  )RU&')VHH.DSODQDQG.DSOLQVN\  IRUIRRWZHDUVHH6FKPLW]

 DQG6FKPLW]DQG.QRUULQJD  IRUDXWRVDQGFRPSRQHQWVVHH%DUQHVDQG.DSOLQVN\ DDQGE DQG+XPSKUH\  DQG

 

6LQFH WKLV LV D VHFWRU ZKHUH SURGXFWLRQ LQ VRPH FDVHV LV JHRJUDSKLFDOO\ ERXQGHG IRU FOLPDWLF UHDVRQV DQG
ZKHUH LW LQYROYHV ODUJH LQSXWV RI UHODWLYHO\ XQVNLOOHG ODERXU QRW MXVW LQ JURZLQJ EXW DOVR LQ VRUWLQJ DQG
SDFNDJLQJ LPSRUWVLQWRILQDOWHPSHUDWHPDUNHWVIURPGHYHORSLQJFRXQWULHVKDYHEHHQJURZLQJUDSLGO\)RU


H[DPSOHLPSRUWVRI+6 SHDVDQGEHDQV DQG+6 DUWLFKRNHVDVSDUDJXVPXVKURRPVDQGVZHHW
SHSSHUV WRWKH(8H[SDQGHGE\SHUFHQWEHWZHHQDQG +XPSKUH\DQG2HWHU 
%HIRUHWKHPDMRUUHWDLOHUVGRPLQDWHGWKHPDUNHWIRU))9VJURZHUVDQGZKROHVDOHUVWHQGHGWRRSHUDWH
LQ D QHDUSHUIHFW PDUNHW RI DUPVOHQJWK UHODWLRQVKLSV 3ULFH ZDV WKH PDMRU GHWHUPLQDQW RI PDUNHW VKDUH
JRYHUQHGE\VHDVRQDODYDLODELOLW\%XWRQFHWKHVHODUJHUHWDLOHUVEHJDQWRPDUNHW))9VHULRXVO\WKH\EHJDQWR
LPSRVH QHZ FULWLFDO VXFFHVV IDFWRUV RQ WKH LQGXVWU\ ² TXDOLW\ ZKLFK ZDV SULPH  FRQVLVWHQF\ RI SURGXFW
UHOLDELOLW\ RI VXSSO\ LQFUHDVLQJO\ PHDQLQJ \HDUURXQG DYDLODELOLW\ DFKLHYHG E\ JOREDO VRXUFLQJ  SULFH DQG
FRQIRUPDQFH WR H[WHUQDO KHDOWK DQG HQYLURQPHQWDO VWDQGDUGV 7KHVH SRVHG ZKROO\ QHZ FKDOOHQJHV WR
JURZHUVSDUWLFXODUO\WKRVHLQGHYHORSLQJFRXQWULHVZKRZHUH XQXVHG WR WKH FULWLFDO VXFFHVV IDFWRUV LQ KLJK
LQFRPHPDUNHWV
7KHVH QHZ FULWLFDO VXFFHVV IDFWRUV FRPELQHG ZLWK WKH GHYHORSPHQW RI SURGXFWLRQ LQ ORFDOHV GLVWDQW
IURP WKH ILQDO PDUNHW PHDQW WKDW WKH UROH SOD\HG E\ ZKROHVDOHUV ZKR WUDGLWLRQDOO\ VRXUFHG VXSSOLHV IURP
UHJLRQVSUR[LPDWHWRILQDOPDUNHWVDQGZKRRSHUDWHGDWDQDUPVOHQJWKIURPJURZHUVEHJDQWREHHURGHG
7KHLUIXQFWLRQVFDPHWREHSOD\HGE\DFRPELQDWLRQRIWZRSDUWLHV([SRUWDJHQWVLQWKHSURGXFLQJFRXQWULHV
DVVXUHGDQGPRQLWRUHGVXSSOLHVDQG¶FDWHJRU\PDQDJHUV· WKDWLVLPSRUWHUV LQWKHEX\LQJFRXQWULHVOLDLVHG
ZLWK UHWDLOHUV DQG H[SRUW DJHQWV DQG VRPHWLPHV ZLWK ODUJH SURGXFHUV  %XW WKH LQFUHDVLQJ DYDLODELOLW\ RI
UHOLDEOHDQGKRPRJHQHRXVVXSSOLHVKDVLQUHFHQW\HDUVDOVRSODFHGDSUHPLXPRQWKHGHYHORSPHQWRI QHZ
SURGXFWVDQGQHZYDULHWLHV)RUH[DPSOHLQWKHHDUO\VHDUO\VHDVRQVDODGWRPDWRHVDQGQHZSRWDWRHV
SURGXFHG LQ &\SUXV FRPPDQGHG SUHPLXP SULFHV ,Q DQRWKHU H[DPSOH ,VUDHOL VFLHQWLVWV GHYHORSHG 
YDULHWLHVRIORRVHVNLQFLWUXVSURGXFWV,QVRPHFDVHVWKLVSURFHVVRIQHZSURGXFWGHYHORSPHQWZDVGLYRUFHG
IURP SURGXFWLRQ LWVHOI $OWKRXJK ,VUDHOL VHHG VFLHQWLVWV GHYHORSHG QHZ VWUDLQV RI WRPDWRHV LQVWHDG RI
JURZLQJWKHVHYHJHWDEOHVWKHPVHOYHV LQDUHJLRQZLWKDVLJQLILFDQWZDWHUVKRUWDJH WKH\PDGHWKHLUUHWXUQV
E\VHOOLQJWKHVHHGVWR0RURFFDQDQG6SDQLVKJURZHUV
:KR SURYLGHV JRYHUQDQFH LQ WKLV YDOXH FKDLQ" 'ULYHQ E\ WKH VHDUFK IRU FRPSHWLWLYH DGYDQWDJH DQG
SUHVVXUHVIURP1*2VDQGWKHUHJXODWRU\DXWKRULWLHVWKHUHWDLOHUVVHWWKHVWDQGDUGV ¶OHJLVODWLYHJRYHUQDQFH·
DQGGHPDQGWKDWFRPSOLDQFHEHDXGLWHGE\WKHFDWHJRU\PDQDJHUVZKRLQWXUQPDNHVLPLODUGHPDQGVRIWKH
H[SRUW DJHQWV ORFDWHG LQ SURGXFLQJ FRXQWULHV ¶MXGLFLDO JRYHUQDQFH·  7KH SURDFWLYH JRYHUQDQFH IXQFWLRQV
¶H[HFXWLYH JRYHUQDQFH·  DUH H[HUFLVHG E\ D FRPELQDWLRQ RI GHYHORSLQJ FRXQWU\EDVHG H[SRUWHUV DQG WKH
FDWHJRU\PDQDJHUVEDVHGLQILQDOPDUNHWV%XWHIIHFWLYHH[HFXWLYHJRYHUQDQFHUHTXLUHVDQDFWLYHSUHVHQFHLQ
ERWKILQDOSURGXFWPDUNHWVDQGLQVRUWLQJDQGSDFNDJLQJLQWKHJURZLQJFRXQWULHV+HQFHWKHUHLVDJURZLQJ
WHQGHQF\IRUHTXLW\OLQNVDFURVVWKHVHYDULRXVOLQNVLQWKHYDOXHFKDLQDQGDQXPEHURIGHYHORSLQJFRXQWU\
SURGXFHUV DQG H[SRUW DJHQWV KDYH EHJXQ WR HVWDEOLVK D SUHVHQFH LQ PDMRU FRQVXPLQJ FRXQWULHV DV KDV
RFFXUUHGLQFDQQHGGHFLGXRXVIUXLWDVZHVKDOOVHHEHORZ 
1HYHUWKHOHVVGHVSLWHWKHUHQWVDFFUXLQJWRSURGXFWGHYHORSPHQWWKHOLRQ·VVKDUHRIUHZDUGVDVZHFDQ
VHH IURP 7DEOH  FRQWLQXH WR EH UHDOLVHG LQ WKH PDUNHWLQJ HQG RI WKH FKDLQ 7KDW LV WKH\ DUH ORFDWHG LQ

 %\FRPSDULVRQLPSRUWVRIZRRGHQIXUQLWXUHVDLGWREHDUHODWLYHO\UDSLGO\JURZLQJH[SRUWLWHPIURPGHYHORSLQJ
FRXQWULHVRQO\JUHZE\SHUFHQWLQWKHVDPHSHULRG


UHWDLOLQJZKHUHWKHPDUJLQVDFFRXQWIRUPRUHWKDQDTXDUWHURIWRWDOSURGXFWSULFH FRPSDUHGWRSHUFHQW
JRLQJWRSURGXFHUVLQWKHFDVHRI=LPEDEZHDQPDQJHWRXW 

Table 4: Cost structure of African FFV exports to the UK

2QHWRQQHH[SRUWORWRIPDQJHWRXW ([SRUWRIIUHVKYHJHWDEOHVIURP
IURP=LPEDEZH .HQ\D
6WDJH 3ULFHSHU RIILQDOSULFH RIILQDOSULFH
WRQQH
3URGXFHU   
([SRUWHU  
3DFNDJLQJ   
$LUIUHLJKWDQG
KDQGOLQJ D

  

727$/&,)IURP   
$IULFD

,PSRUWHUFKDUJHVDQG  E
 
FRPPLVVLRQ
6XSHUPDUNHW
6WRFNRXW F
 
2WKHUFRVWV   
0DUNXS  
7RWDOSULFH   

1RWH

D  :KLOHWKHDLUIUHLJKWFKDUJHVPLJKWDSSHDUKLJKWKH\PDWFKWKRVHIRUWKH*DPELDLQWKHHDUO\V,QWKLVFDVHDLUIUHLJKWFRVWVFDPHWR

RIWKHWRWDO&,)H[SRUWFRVW

E  ,QFOXGHVDLUSRUWKDQGOLQJWUDQVSRUWDQGVWRUDJHLQ8.DVZHOODVLPSRUWHU·V LHFDWHJRU\PDQDJHU FRPPLVVLRQ,QWKH.HQ\DQH[DPSOHWKH

8.DLUSRUWFRVWVPD\EHLQFOXGHGLQWKH¶DLUIUHLJKWDQGKDQGOLQJ·FDWHJRU\

F  ,QFOXGHVORVVHVIURPXQVROGSURGXFHHWF

6RXUFH'RODQ+XPSKUH\DQG+DUULVV3DVFDO 

+HQFHZHFDQREVHUYHDVKLIWLQJLQFLGHQFHRIUHQWLQWKLVFKDLQ²IURPSURGXFWLRQWRSURGXFWGHYHORSPHQW
YDOXHFKDLQFRRUGLQDWLRQDQGPDUNHWLQJ%XWLIEDUULHUVWRHQWU\FRQWLQXHWREHHURGHGDWYDULRXVSRLQWVLQ
WKHFKDLQWKHQLWLVSRVVLEOHWKDW))9VZLOOEHFRPHDFRPPRGLW\ LQ WKH VDPH ZD\ DV WHD DQG FRIIHH7KH
VWUHQJWKRIWKHVHEDUULHUVWRHQWU\LVDV\HWXQWHVWHGLQVRPHNH\GRPDLQVEXWZKDWLVFOHDULVWKDWPHUHO\
JURZLQJFURSVLVXQOLNHO\WRSURYLGHVXEVWDQWLDOUHZDUGV7KHNH\FKDOOHQJHFRQIURQWLQJGHYHORSLQJFRXQWU\
SURGXFHUVWU\LQJWRLQFUHDVHWKHLUVKDUHRIUHWXUQVIURPWKLVYDOHFKDLQLVWRUDSLGO\GHYHORSWKHFDSDFLW\WR
GHYHORSQHZYDULHWLHVDQGWRFRRUGLQDWHSURGXFWLRQDQGORJLVWLFVDORQJWKHFKDLQ
6RPXFKIRUWKHLQWHUFRXQWU\GLVWULEXWLRQRIUHWXUQV%XWZKDWRIWKHLQWUDQDWLRQDOVSUHDGRILQFRPHV
LQ WKLV VHFWRU" 7KH HYLGHQFH VXJJHVWV WKDW WKH QDWXUH RI WKH QHZ FULWLFDO VXFFHVV IDFWRUV LQ ILQDO PDUNHWV
UHTXLUHVWUDFHDELOLW\ZLWKUHJDUGWRSK\WRVDQLWDU\VWDQGDUGV0RUHRYHUWKHODUJHVFDOHVRUWLQJDQGSDFNDJLQJ
IDFLOLWLHVDQGWKHQHHGWRHQVXUHUHIULJHUDWLRQDQGH[SHGLWLRXVKDQGOLQJRIDLUIUHLJKWHGH[SRUWVLQYROYHVVFDOH
HFRQRPLHV LQ SRVWKDUYHVWLQJ DFWLYLWLHV %RWK RI WKHVH IDFWRUV FRQVWUDLQ WKH UROH ZKLFK FDQ EH SOD\HG E\


VPDOOKROGHUIDUPHUVDQG60(V LQ WKH SURFHVVLQJ DQG H[SRUWLQJ OLQNV LQ WKH FKDLQ $OUHDG\ WKH WHQ OHDGLQJ
H[SRUWHUVDFFRXQWIRUSHUFHQWRI.HQ\D·V))9H[SRUWVDQGWKHIRXUODUJHVWERXJKWOHVVWKDQSHUFHQW
RIWKHLUVXSSOLHVIURPVPDOOIDUPV=LPEDEZHLVHYHQPRUHFRQFHQWUDWHG²WKHRQO\WZRRIWKHODUJHVWVL[
H[SRUWHUVZKLFKXWLOLVHGSURGXFHIURPVPDOOIDUPHUVDFTXLUHGOHVVWKDQSHUFHQWIURPWKLVVRXUFH
,QVRIDU DV WKH VSUHDG RI LQFRPHV LV FRUUHODWHG ZLWK VFDOH WKLV VXJJHVWV WKDW SDUWLFLSDWLQJ LQ JOREDO
PDUNHWVUHLQIRUFHVLQHTXLWLHVLQLQFRPHGLVWULEXWLRQ%XWWKHOLQNEHWZHHQVFDOHDQGLQFRPHGLVWULEXWLRQDQG
WKHLQGLUHFWHIIHFWVRISURGXFLQJIRUJOREDOPDUNHWVDUHFRPSOH[SUREOHPV7KH\UHTXLUHWKHDQDO\VLVWRIRFXV
LQWHU DOLD RQ WKH LQWUDKRXVHKROG GLVWULEXWLRQ RI LQFRPH WKH GLVWULEXWLRQ RI GLIIHUHQW DVVHWV ZLWKLQ WKH
KRXVHKROG WKH FRQVXPSWLRQ EDVNHW RI WKRVH HPSOR\HG LQ WKH YDOXH FKDLQ DQG WKH RSSRUWXQLW\ FRVW RI
UHVRXUFHVGHYRWHGWRWKHSURGXFWLRQDQGSURFHVVLQJRI))9V,WLVWKXVWRRHDUO\WRMXGJHZKDWWKHLPSDFW
RIJOREDOLVDWLRQZLOOEHRQWKHLQWUDFRXQWU\GLVWULEXWLRQRILQFRPHLQORZLQFRPHSURGXFLQJFRXQWULHV

&DQQHGGHFLGXRXVIUXLW 
&')LVDPRUHSURFHVVHGSURGXFWWKDQ))9DQGE\VRPHDFFRXQWVLVWKXVDQLGHDOVHFWRUIRUORZLQFRPH
FRXQWULHVWRGLYHUVLI\LQWRDQGWRLQFUHDVHWKHLUVKDUHRIUHWXUQVLQWKHYDOXHFKDLQ *LUYDQ <HWWKH
UHWXUQVDFFUXLQJWRWKHJURZHUV SHUFHQW DQGWKHUHWDLOHUVLQWKHULFKFRXQWULHV SHUFHQW DUHQRW
GLVVLPLODU WR WKH FDVH RI ))9 7DEOH   ,Q WKH SDVW EHIRUH WKH (8 SURYLGHG VXSSRUW IRU (XURSHDQ
SURGXFHUVWKHPDMRUVRXUFHVRIUHQWZHUHWREHIRXQGLQWKHJURZLQJDQGFDQQLQJOLQNVRIWKHYDOXHFKDLQ
)RUWKLVUHDVRQWKHSULPDU\OLHQRQYDOXHFKDLQUHWXUQVDFFUXHGWRSURGXFHUVLQ6RXWK$IULFDDQG$XVWUDOLD
ERWK RI ZKLFK KDG HIILFLHQWO\ RUJDQLVHG DJURSURFHVVLQJ LQGXVWULHV %XW GXULQJ WKH V WKH (XURSHDQ
8QLRQEHJDQWRSURYLGHLQFUHDVLQJVXSSRUWWRWKHGRPHVWLFLQGXVWU\ERWKRQWKHRXWSXWVLGH WKURXJKWDULII
SURWHFWLRQ DQGYLDVXEVLGLHVWRIUXLWLQSXWV7KXVGHVSLWHKDYLQJERWKORZHUFRVWVRISURGXFWLRQDQGKLJKHU
VWDQGDUGV RI TXDOLW\ VRXWKHUQ SURGXFHUV ZHUH LQFUHDVLQJO\ VTXHH]HG RXW RI JOREDO PDUNHWV E\ (XURSHDQ
SDUWLFXODUO\*UHHN SURGXFHUV3URWHFWHGLQWKH(XURSHDQPDUNHWWKH\XVHGWKHVHWUDGHSROLF\UHQWVWRFURVV
VXEVLGLVHVDOHVWRWKLUGPDUNHWVVXFKDV-DSDQDQG/DWLQ$PHULFD6LPLODUO\86IDUPHUVDQGFDQQHUVZHUHDOVR
SURWHFWHGE\DFRPELQDWLRQRIWDULIIVDQGVSXULRXV)RRGDQG'UXJ$GPLQLVWUDWLRQSK\WRVDQLWDU\VWDQGDUGV

 7KHVHDUHWKHVXEMHFWRIIXWXUHUHVHDUFKDWWKH,'6

 7KLVGLVFXVVLRQLVGUDZQIURP.DSODQDQG.DSOLQVN\  
 7KHVH UHWXUQV DUH WR VXSHUPDUNHW RZQ EUDQGV $V ZH VKDOO VHH ODWHU EUDQGHG SURGXFWV VHOO DW D FRQVLGHUDEOH
SUHPLXP,QWKHFDVHRIWKHVHEUDQGHGJRRGVWKHVKDUHRIUHWXUQVJRLQJWRWKHIUXLWJURZHUVDQGSURFHVVRUVDUH
VLJQLILFDQWO\ORZHU


 Table 5: Breakdown of canned peach value chain

6WDJHLQYDOXHFKDLQ &RQWULEXWLRQWRILQDOSURGXFWYDOXH 
:LWKLQ6RXWK$IULFD

3HDFKHV 
&DQV 
6XJDU 
&DQQLQJ 
/DERXU 
2WKHU HJGHSUHFLDWLRQXWLOLWLHVSURILWLQWHUQDO 
WUDQVSRUW

7RWDOLQVLGH6RXWK$IULFD

2XWVLGH6RXWK$IULFD

6KLSSLQJGXWLHVLQVXUDQFHODQGLQJFKDUJHV 
,PSRUWHU·VPDUJLQ 
6XSHUPDUNHWPDUJLQ 

7RWDORXWVLGHRI6RXWK$IULFD 

6RXUFH.DSODQDQG.DSOLQVN\  

+HQFHFXUUHQWO\WZRRIWKHSULPDU\UHFLSLHQWVRI HFRQRPLFUHQW DUH WKH JURZHUV DQG FDQQHUV LQWKH KLJK

LQFRPHFRXQWULHV%XWDVHFRQGLPSRUWDQWOLHQRQYDOXHFKDLQUHWXUQVDFFUXHGWRWKHKROGHUVRIEUDQGQDPHG
SURGXFWV,QWKLVUHVSHFWSURFHVVHGGHFLGXRXVIUXLWVDUHYHU\GLIIHUHQWIURP))97KHUHWDLOFKDLQVRIWHQVHOO
RZQEUDQGFDQQHGIUXLWDWDORVV7KH\WKXVSD\DSUHPLXPIRUPDMRUJOREDOEUDQGHGOLQHV SHUFHQW DQG
IRURWKHUSURGXFHUEUDQGHGOLQHV SHUFHQW )DFHGZLWKWKLVGLVWULEXWLRQRIUHWXUQVIURPWKHYDOXHFKDLQ
6RXWK$IULFDQSURGXFHUVDWWHPSWHGWRPRYHLQWRWKHVHJOREDOO\EUDQGHGLWHPVEXWZLWKOLPLWHGVXFFHVV2QH
RI WKH GRPHVWLF SURGXFHUV ERXJKW WKH 'HO 0RQWH EUDQG QDPH EXW WKLV ZDV RQO\ IRU PDUNHWV RXWVLGH RI
(XURSHDQG1RUWK$PHULFDZKHUHWKHEUDQGQDPHFDUULHGOLWWOHZHLJKW,QDVHFRQGFDVHDUR\DOW\ZDVSDLG
WRDPDMRUEUDQGQDPHKROGHUEXWWKLVZDVVRODUJHWKDWLWFRQVXPHGDOORIWKHEUDQGQDPHUHQWZKLFKZDV
JHQHUDWHG ,WVKRXOGEHQRVXUSULVHEXWWKHFRQWHQWVRIWKHVHEUDQGQDPHSURGXFWVZHUHLGHQWLFDOWRWKRVH
RIWKH6RXWK$IULFDQSURGXFHUV·RZQEUDQGVZKLFKVROGDWDGLVFRXQWRISHUFHQW
*RYHUQDQFHLQWKLVFKDLQLVUHODWLYHO\VLPSOH¶/HJLVODWLYHJRYHUQDQFH·LVSHUIRUPHGE\WKHILQDOSURGXFW
UHWDLOHUV ZKR GHWHUPLQH WKH VWDQGDUGV ZKLFK QHHG WR EH PHW LQIRUPHG E\ QDWLRQDO OHJLVODWLRQ GHILQLQJ
SURGXFWVWDQGDUGV7KHDXGLWLQJRIWKHVHVWDQGDUGV²¶MXGLFLDOJRYHUQDQFH·²LVSHUIRUPHGE\DFRPELQDWLRQ
RIVXSHUPDUNHWUHSUHVHQWDWLYHVZKRYLVLWSURGXFHUVDQGWKH ¶FDWHJRU\ PDQDJHUV·WKDW LV WKH LPSRUW DJHQWV
ZKRPDQDJHWKHSURYLVLRQRISURGXFWVWRWKHVXSHUPDUNHWVDQGZKRWRJHWKHUZLWKWKHVXSHUPDUNHWVVHDUFK


IRUQHZVRXUFHVRIVXSSO\¶([HFXWLYHJRYHUQDQFH·²DVVLVWLQJVXSSOLHUVWRPHHWWKHUHTXLUHGVWDQGDUGV²LV
SURYLGHGWRWKHFDQQHUVE\WKHVXSHUPDUNHWVDQGWRIUXLWWLQDQGVXJDUVXSSOLHUVE\WKHFDQQHUVWKHPVHOYHV
+RZHYHUWKHVHDFWVRIH[HFXWLYHJRYHUQDQFHDUHJHQHUDOO\PRGHVWLQQDWXUH
7KH DELOLW\ RI D QDWLRQDO HFRQRP\ EDVHG LQGXVWU\ WR FRPSHWH LV KHDYLO\ DIIHFWHG E\ WKH V\VWHPLF
HIILFLHQF\RIWKRVHSDUWVRIWKHYDOXHFKDLQZKLFKDUHZLWKLQWKHHFRQRP\$VZHFDQVHHIURP7DEOHIURP
WKH EUHDNGRZQ RI YDOXH DGGHG LQ 6RXWK $IULFDQ &') WKH FDQQLQJ OLQN·V FRQWULEXWLRQ WR RYHUDOO SURGXFW
YDOXHDGGHG SHUFHQW LVRQO\MXVWDERYHWKDWDGGHGE\SHDFKHV SHUFHQW DQGWKHSURGXFWLRQRI
FDQV  SHU FHQW  2QH URXWH RSHQ WR WKH &') LQGXVWU\ ZKLFK ZDV H[SHULHQFLQJ YHU\ ORZ OHYHOV RI
SURILWDELOLW\LQWKHIDFHRI(XURSHDQVXEVLGLHVZDVWRHQKDQFHWKHV\VWHPLFHIILFLHQF\RIWKHFKDLQ+RZHYHU
ORZOHYHOVRIWUXVWDQGFRRSHUDWLRQ²HQGHPLFWRWKH$SDUWKHLG HUD ² PHDQW WKDW DFKLHYLQJ WKHVHV\VWHPLF
JDLQVZDVH[WUHPHO\GLIILFXOW7KLVVXUIDFHGLQLQHIILFLHQFLHVEHWZHHQDOOOLQNVLQWKHFKDLQ²EHWZHHQJURZHUV
DQG FDQQHUV EHWZHHQ VWHHO SURGXFHUV DQG FDQPDNHUV EHWZHHQ FDQPDNHUV DQG FDQQHUV DQG EHWZHHQ
FDQQHUVDQGVXJDUPDQXIDFWXUHUV7KHVHVXERSWLPDOLQWHUILUPOLQNVRFFXUUHGGHVSLWHDWWHPSWVEHLQJPDGH
ZLWKLQ HDFK RI WKH OLQNV WR LPSURYH LQWHUQDO HIILFLHQF\ \HW WKH JDLQV WR HQKDQFHG LQWHUILUP OLQNV IDU
RXWZHLJKHG WKH EHQHILWV DFFUXLQJ WR LQWUDILUP LPSURYHPHQWV 6LPLODUO\ WKHUH ZDV FRQVLGHUDEOH VFRSH IRU
HQKDQFHG LQWHUILUP KRUL]RQWDO OLQNDJHV SDUWLFXODUO\ EHWZHHQ WKH FDQQLQJ ILUPV )RU H[DPSOH HDFK ILUP
UHPDUNHG WKDW LI RQO\ WKH\ SUHVHQWHG D XQLWHG IURQW WR WKH JOREDO EX\HUV WKH\ ZRXOG EH DEOH WR DFKLHYH D
JUHDWHU VKDUH RI YDOXH FKDLQ UHWXUQV LQVWHDG WKHLU ULYDOU\ DOORZHG WKH EX\HUV WR SOD\ RQH ILUP RII DJDLQVW
DQRWKHU
7KHUH DUH VLJQV WKDW LQ WKH IXWXUH UHQWV LQ WKLV FKDLQ DUH OLNHO\ WR EH HURGHG ZLWK IHZ LQGXVWU\
SDUWLFLSDQWVVXVWDLQLQJKLJKLQFRPHOHYHOV'HVSLWHWKHKLFFXSDWWKH6HDWWOHWUDGHURXQGWDONVWKHWUDGHSROLF\
UHQWVZKLFKEXWWUHVVKLJKSURGXFHULQFRPHVLQ(XURSHDQG1RUWK$PHULFDDUHDOPRVWFHUWDLQO\JRLQJWREH
HURGHG0RUHRYHUPDQ\ORFDOHVLQWKHZRUOGDUHVXLWDEOHIRUJURZLQJGHFLGXRXVIUXLW0DUNHWLQJUHQWVWRR
DUHXQGHUWKUHDWZLWKWKHJURZWKRIVXSHUPDUNHWFRQFHQWUDWLRQLQPDMRUPDUNHWVDQGWKHGHYHORSPHQWRI
VXSHUPDUNHWRZQEUDQGVLQDSULFHHODVWLFPDUNHW,WLVVLJQLILFDQWWKHUHIRUHWKDWWZRRI6RXWK$IULFD·VODUJHVW
IUXLWPDQXIDFWXUHUVDUHLQFUHDVLQJO\PRYLQJLQWRJOREDOVRXUFLQJDQGGLVWULEXWLRQDQGKDYHORFDWHGRIILFHVLQ
-HUVH\DQGWKH8.PDLQODQGUHVSHFWLYHO\DW WKH VDPH WLPH DV WKH\ DUH UHGXFLQJ WKHVL]H RIWKHLU GRPHVWLF
SURFHVVLQJRSHUDWLRQV
,QWHUPVRIVSUHDGLQJWKHJDLQVIURPJOREDOLVDWLRQLWLVGRXEWIXOWKDWIXWXUHGHYHORSPHQWVZLOOLQFUHDVH
WKHSURSRUWLRQRIUHWXUQVJRLQJWRORZLQFRPHFRXQWULHV7KHPDMRUGHYHORSPHQWVLQWKHVKDUHRIUHWXUQV
RYHUSURGXFWLRQDQGSURFHVVLQJLVOLNHO\WREHDVKLIWIURPPLGGOHLQFRPHFRXQWULHVVXFKDV6RXWK$IULFDWR
ORZHU LQFRPH FRXQWULHV VXFK DV &KLQD :LWKLQ WKHVH HFRQRPLHV DQG XQOLNH ))9 WKHUH DUH IHZ LQWULQVLF
IDFWRUVRQWKHJURZLQJVLGHZKLFKDIIHFWWKHVL]HGLVWULEXWLRQRIIDUPVDOWKRXJKVFDOHLQWHQVLYHFDQQLQJ DQG
WKH SURGXFWLRQ RI NH\ LQSXWV VXFK DV FDQV DQG VXJDU  DUH OLNHO\ WR UHPDLQ LQ WKH KDQGV RI WKH ODUJHVFDOH
VHFWRU7KHUHVHHPVWKHUHIRUHOLWWOHVFRSHIRUDPHOLRUDWLQJDGYHUVHGLVWULEXWLRQDOWUHQGV²ZLWKLQRUEHWZHHQ
FRXQWULHV²LQWKH&')YDOXHFKDLQ

 6HH.DSODQDQG.DSOLQVN\  IRUGHWDLOVRIWKHVHLQWHUOLQNDJHZHDNQHVVHV


)RRWZHDU 
7KHJOREDOIRRWZHDULQGXVWU\FRPSULVHVDODUJHPL[RIPDUNHWVHJPHQWVDQGSURGXFWVPDGHIURPGLIIHUHQW
V\QWKHWLF DQG QDWXUDO PDWHULDOV %HLQJ D ODERXULQWHQVLYH VHFWRU WKHUH KDV EHHQ D VLJQLILFDQW GHFOLQH LQ WKH
VKDUHRISURGXFWLRQDFFRXQWHGIRUE\KLJKLQFRPHFRXQWULHVLQUHFHQW\HDUVDQGLQVRPHNH\HFRQRPLHVVXFK
DV *HUPDQ\ WKH 8. DQG WKH 86 ZKDW ZDV RQFH D ODUJH DQG YLEUDQW VHFWRU KDV VKUXQN GUDPDWLFDOO\ DQG
FRQWLQXHVWRORVHSURGXFHUVDQGHPSOR\PHQW<HWWKLVLVQRWWUXHIRUDOOVKRHSURGXFHUVDQGLQYDOXHWHUPV
WKHJOREDOOHDWKHUVKRHLQGXVWU\FRQWLQXHVWREHKHDYLO\LQIOXHQFHGE\SURGXFHUVLQ,WDO\6SDLQDQG3RUWXJDO
7KHUHFOHDUO\UHPDLQUHQWVWREHUHDOLVHGLQSURGXFWLRQ DVLV HYLGHQFHG E\WKH FRQWLQXHG SUHVHQFH RI
,WDOLDQSURGXFHUV+RZHYHUWKHSURGXFWLRQVNLOOVLQYROYHGDUHKLJKO\FUDIWRULHQWHGDQGDUHFORVHO\DOOLHGWR
WKHGHVLJQVNLOOVRIWKH,WDOLDQLQGXVWU\7KXVLWKDVEHFRPHLQFUHDVLQJO\HYLGHQW WKDW DV JOREDO SURGXFWLRQ
VNLOOVKDYHGLIIXVHGLQFUHDVLQJO\ZLGHO\VRUHQWVKDYHFRPHWREHFRQFHQWUDWHGLQGHVLJQEUDQGV HVSHFLDOO\LQ
VSRUWV VKRHV  DQG EX\LQJ VNLOOV %X\LQJ DJHQWV ² PDQ\ RI ZKRP ZHUH IRUPHUO\ PDQXIDFWXUHUV EXW ZHUH
IRUFHGRXWE\JURZLQJFRPSHWLWLRQ²DUHODUJHO\ORFDWHGLQWKHILQDOSURGXFWPDUNHWVDQGKDYHSOD\HGDNH\
UROHLQFUHDWLQJWKHFRPSHWLWLRQLQSURGXFWLRQZKLFKHURGHVUHQWVLQWKLVOLQNLQWKHFKDLQ
'XULQJ WKH ODWH V DQG WKH V %UD]LO EHFDPH D PDMRU SURGXFHU RI ZRPHQ·V OHDWKHU VKRHV
DFFRXQWLQJIRUSHUFHQWRIJOREDOVDOHV%XW%UD]LO·V HQWU\ LQWR JOREDOPDUNHWV ZDV PHGLDWHG E\WKH NH\
JRYHUQLQJUROH WKDWLVH[HFXWLYHJRYHUQDQFH SOD\HGE\WKHVHEX\HUVLQSURYLGLQJGLUHFWVXSSRUWWRILUPOHYHO
DQG LQWHUILUP XSJUDGLQJ 2QH EX\HU EHFDPH SDUWLFXODUO\ LPSRUWDQW DFFRXQWLQJ IRU  SHU FHQW RI DOO
%UD]LOLDQ VKRH H[SRUWV DQG  SHU FHQW RI DOO 86 VDOHV RI ZRPHQ·V OHDWKHU VKRHV <HW IROORZLQJ WKH
GHYHORSPHQWRI%UD]LODVDNH\VRXUFHRIVXSSO\GXULQJWKHVDQGWKHVWKHYHU\VDPHEX\HUWKHQ
V\VWHPDWLFDOO\FXOWLYDWHGSURGXFWLRQFDSDELOLWLHVLQ&KLQDLQWKHV7KHUHVXOWZDVDQHURVLRQRILQFRPHV
LQ%UD]LO²DVZHKDYHREVHUYHGHDUOLHUUHDOZDJHVRIVKRHZRUNHUVIHOOE\SHUFHQWGXULQJWKHVDQG
FRUSRUDWHSURILWDELOLW\ZDVVTXHH]HGGXULQJWKHV'XULQJWKHVSURGXFWTXDOLW\VWDQGDUGVLQFUHDVHG
VXEVWDQWLDOO\UHVSRQVLYHQHVVWRRUGHUVLPSURYHGVLJQLILFDQWO\DQGEDWFKHVVL]HVIHOO\HWWKHUHZDVQRLQFUHDVH
LQILQDOSURGXFWSULFHV*OREDOEX\HUV LQFOXGLQJWKLVOHDG86EX\HUILUP DUHQRZFXOWLYDWLQJSURGXFWLRQLQ
9LHWQDPDQGRWKHUORZZDJHHFRQRPLHVVRWKDWLIDQGZKHQWKH\EHQHILWIURPWKH VDPHSULYLOHJHG 0)1
WUDGHVWDWXVLQWKH86&KLQHVHIRRWZHDUSURGXFHUVZLOOVXIIHUIURPWKHVDPHHURVLRQRIUHWXUQV
7KHVH GHYHORSPHQWV LOOXVWUDWH WZR LPSRUWDQW HOHPHQWV RI YDOXH FKDLQ DQDO\VLV )LUVW WKH\ VKRZ KRZ
FRPSHWLWLYHFDSDELOLWLHVFDQVLPXOWDQHRXVO\EHXSJUDGHGDQGGLIIXVHGE\NH\YDOXHFKDLQJRYHUQRUV7KH\DOVR
VKRZKRZUHQWLVG\QDPLFVKLIWLQJQRWRQO\ZLWKLQSURGXFWLRQIURPRQHFRXQWU\WRDQRWKHUEXWDOVRIURP
WKHSURGXFWLRQWRWKHGHVLJQFRRUGLQDWLQJDQGPDUNHWLQJOLQNVLQWKHFKDLQ9DOXHFKDLQDQDO\VLVDOVRVKRZV
KRZ LQGLYLGXDO OLQNV FDQ VXVWDLQ WKH EDUULHUV WR HQWU\ ZKLFK PDLQWDLQ WKHLU DSSURSULDWLRQ RI YDOXH FKDLQ
UHWXUQV$V6FKPLW]DQG.QRUULQJDREVHUYH¶>P@RVWLQWHUYLHZHGEX\HUVVHHNWR FRQWUROWKH GHVLJQ SURFHVV
OLPLWLQJWKHSURGXFHUV·SDUWLFLSDWLRQWRPLQRULVVXHVLQSURGXFWVSHFLILFDWLRQ«>:@LWKRXWWKHLURZQGHVLJQV
SURGXFHUVFDQQRWHPEDUNRQWKHLURZQPDUNHWLQJH[SHULPHQWV· 6FKPLW]DQG.QRUULQJD 
%XW DQ DQDO\VLV RI WKH IRRWZHDU YDOXH FKDLQ LOOXVWUDWHV D WKLUG GHYHORSPHQW 7KLV LV ZKDW *HUHIIL KDV
WHUPHG ¶WULDQJOH PDQXIDFWXULQJ· *HUHIIL D  DQG (UQVW KDV FDOOHG ¶JOREDO SURGXFWLRQ QHWZRUNV· (UQVW

 7KLVGLVFXVVLRQLVGUDZQIURP6FKPLW]  DQG6FKPLW]DQG.QRUULQJD  


 7KLVGHVFULEHVDZRUOGLQZKLFKVKLIWLQJFRPSHWLWLYHDGYDQWDJHOHDGVWRDVLWXDWLRQLQZKLFKSURGXFHUV
ZKRDUHIRUFHGRXWRIWKHPDUNHWWKURXJKFRPSHWLWLRQEHFRPHJRYHUQRUVIRUSURGXFWLRQGHVWLQHGIRUWKLUG
PDUNHWV )RU H[DPSOH LQ ERWK FORWKLQJ DQG IRRWZHDU 7DLZDQHVH SURGXFHUV ZKR LQLWLDOO\ GLVSODFHG
PDQXIDFWXUHUVLQ1RUWK$PHULFDDQG(XURSHKDYHWKHPVHOYHVEHHQGLVSODFHGE\HYHQORZHUFRVWSURGXFWLRQ
IURP &KLQD 7KHLU UHVSRQVH KDV EHHQWR ZLQGGRZQ WKHLU RZQ PDQXIDFWXULQJ RSHUDWLRQV DQG EHFRPH WKH
LQWHUPHGLDULHV ZKR JRYHUQ &KLQHVH SURGXFWLRQ FDSDELOLWLHV DQG FRQVLJQ WKH SURGXFWV WR ILQDO PDUNHWV $
VLPLODU UROH ZDV SOD\HG E\ +RQJ .RQJ FORWKLQJ HQWUHSUHQHXUV LQ 0DXULWLXV DQG LV QRZ WDNLQJ SODFH ZLWK
,WDOLDQVKRHPDQXIDFWXUHUVLQ5RPDQLD
)URP WKH LQWHUFRXQWU\ GLVWULEXWLRQDO SHUVSHFWLYH ZH FDQ REVHUYH WKDW ORZ EDUULHUV WR HQWU\ LQ
SURGXFWLRQHQVXUHWKDWWUDGHDFFHVVSHUPLWWLQJSURGXFHUVZLOOEHIDFHGZLWKDV\VWHPDWLFWUHQGIRUUHWXUQVWR
IDOODVEX\HUVFXOWLYDWHPDUNHWVZLWKHYHUORZHUZDJHV,WLVOLNHO\WKDWDVLQWKHFDVHRIWKHWZRIRRGVHFWRUV
REVHUYHGDERYHUHWXUQVZLOOLQFUHDVLQJO\EHFRQFHQWUDWHGLQGHVLJQDQGPDUNHWLQJDQGLQVRPHVXEVHFWRUV
LQEUDQGLQJ:LWKUHJDUGWRLQWUDFRXQWU\GLVWULEXWLRQORZFDSLWDOFRVWEDUULHUVWRHQWU\SURYLGHWKHFDSDELOLW\
WRLQFOXGHVPDOODQGPHGLXPVL]HGHQWHUSULVHVLQSURGXFWLRQ%XWLIWKLVLVIRUODUJHYROXPHPDUNHWVWKLV
ZLOORQO\RFFXULIWKHUHDUHHIIHFWLYHLQWUDFRXQWU\YDOXHFKDLQFRRUGLQDWRUV)URPWKHSROLF\SHUVSHFWLYHWKH
NH\FDSDELOLW\ZKLFKQHHGVVWUHQJWKHQLQJLVGHVLJQDSDWKSXUVXHGVXFFHVVIXOO\E\WKH6SDQLVKJRYHUQPHQWLQ
WKHHDUO\V*RYHUQPHQWVPD\DOVREHDEOHWRSOD\DUROHLQWKHHVWDEOLVKPHQWRIV\VWHPVDQGPDUNHW
VWUXFWXUHVZKLFKLQFRUSRUDWHVPDOOVFDOHSURGXFHUV

$XWRPRELOHFRPSRQHQWV 
$QDXWRPRELOHLVDQDVVHPEO\RIPRUHWKDQGLVFUHWHFRPSRQHQWV+LVWRULFDOO\ORZOHYHOVRIWUXVWZLWK
VXSSOLHUVLQYROYHGKLJKWUDQVDFWLRQFRVWVVRHPSKDVLVZDVJLYHQWRWKHLQWHUQDOLVDWLRQRISURGXFWLRQE\WKH
DVVHPEOHUVZKRDFFRXQWHGIRUDURXQG²SHUFHQWRIWKHWRWDOYDOXHRIWKHILQDOSURGXFW0RUHUHFHQWO\
IROORZLQJRUJDQLVDWLRQDOLQQRYDWLRQVSLRQHHUHGLQ-DSDQZKLFKKDYHIRVWHUHGWUXVWLQWKHVXSSO\FKDLQWKHUH
KDVEHHQDWHQGHQF\WRRXWVRXUFHDQLQFUHDVLQJSURSRUWLRQRIFRPSRQHQWVLQFOXGLQJWKHDVVHPEO\RIVXE
FRPSRQHQWV,WLVQRWDW\SLFDOWKHUHIRUHIRUILQDODVVHPEO\SODQWVWRQRZDFFRXQWIRUSHUFHQWRUOHVVRI
ILQDOSURGXFWYDOXH
9DULRXV VWUDQGV RI FKDQJH KDYH FRPH WRJHWKHU LQ UHFHQW \HDUV WR DOWHU WKH SDWWHUQ RI WKHVH VRXUFLQJ
DUUDQJHPHQWV)LUVWIURPEHLQJDQDVVHPEO\RIKHDY\PHWDOSLHFHVLQWKHVDQGVWKHDXWRPRELOH
KDV EHFRPH DQ LQFUHDVLQJO\ WHFKQRORJ\LQWHQVLYH SURGXFW ZKRVH DVVHPEO\ RIWHQ LQYROYHV WKH FRPSOH[
LQWHJUDWLRQRIGLYHUVHDXWRPDWLRQWHFKQRORJLHV0RVWDVVHPEOHUVKDYHWKHUHIRUHFKRVHQDSDWKLQZKLFKWKH\
LQFUHDVLQJO\FRQFHQWUDWHRQWKHRYHUDOOGHVLJQDQGV\VWHPVLQWHJUDWLRQRIWKHSURGXFWDQGUHO\RQWKHLUFRUH
FRPSRQHQWSURGXFHUVWRHQVXUHWKDWWKHFRPSRQHQWVLQYROYHVWDWHRIWKHDUWWHFKQRORJLHVERWKLQSURGXFW
DQGGHVLJQ$VHFRQGDQGUHODWHGGHYHORSPHQWKDVEHHQWKHPRYHWRZDUGVPRGXODUGHVLJQDQGVXEDVVHPEO\
LQZKLFKWKHILUVWWLHUVXSSOLHULVH[SHFWHGWRLQFRUSRUDWHDUDQJHRIFRPSRQHQWVLQWRLWVVXEDVVHPEO\VRPH

 7KHUH DUH DOWHUQDWLYH PDUNHW VWUXFWXUHV LQ WKLV VHFWRU ZKLFK ODFNV PDQ\ RI WKH VFDOHLQWHQVLYH FKDUDFWHULVWLFV RI
RWKHUVHFWRUV,QWKHPLG²VWKHDYHUDJHHVWDEOLVKPHQWVL]HRIWKHIRRWZHDUVHFWRUZDVHPSOR\HHVLQ6RXWK
$IULFDLQWKH8.DQGLQ,WDO\ .DSOLQVN\DQG0DQQLQJ 
 7KLVGLVFXVVLRQLVEDVHGRQ+XPSKUH\  DQG%DUQHVDQG.DSOLQVN\ DDQGE 


RI ZKLFK LW PDQXIDFWXUHV DQG VRPH RI ZKLFK LW DFTXLUHV 7KLUG WKH SDFH RI LQQRYDWLRQ KDV LQFUHDVHG
FRQVLGHUDEO\7KLVUHTXLUHVDSDUDOOHODUUDQJHPHQWRIGHVLJQDQGHQJLQHHULQJDFWLYLWLHVLQZKLFKDVVHPEOHUV
DQGYDULRXVWLHUVRIVXSSOLHUVZRUNVLPXOWDQHRXVO\RQWKHRYHUDOOSURGXFWDQGLWVFRPSRQHQWVUDWKHUWKDQLQ
WKHSUHYLRXVVHTXHQWLDODQGDUPVOHQJWKSDWWHUQ)RXUWKQHZIRUPVRILQWHUQDOSURGXFWLRQIORZDQGTXDOLW\
DVVXUDQFH²MXVWLQWLPHSURGXFWLRQ²LQYROYHWKHYHU\FORVHLQWHJUDWLRQRIORJLVWLFVDQGTXDOLW\SURFHGXUHV
EHWZHHQDVVHPEOHUVDQGWKHLUFRPSRQHQWVXSSOLHUV$QGILQDOO\DOORIWKLVLVWDNLQJSODFHDJDLQVWDEDFNGURS
RIWKHJURZLQJOLEHUDOLVDWLRQRIWUDGHDQGLQYHVWPHQWIORZVLQWKHLQGXVWU\DQGZLWKDQDODUPLQJLQFUHDVHLQ
JOREDORYHUFDSDFLW\
$OORIWKHVHGHYHORSPHQWVLQWKHDXWRLQGXVWU\KDYHSURIRXQGLPSOLFDWLRQVIRUWKHVRXUFLQJSROLFLHVRI
WKHDVVHPEOHUVDQGLQGHHGIRUILUVWWLHUVXSSOLHUVIURPWKHLUVHFRQGWLHUVXSSOLHUV$NH\GHYHORSPHQWLVWKH
JURZWK RI JOREDO VRXUFLQJ $Q DVVHPEOHU ZLOO ZRUN FORVHO\ ZLWK LWV FRUH VXSSOLHUV RQ WKH GHVLJQ RI D QHZ
YHKLFOH 7KLV SURGXFW ZLOO ZLWK D IHZ PLQRU PRGLILFDWLRQV EH GHVWLQHG IRU JOREDO RU IRU FURVVQDWLRQDO
UHJLRQDOPDUNHWV2QFHDQDJUHHGGHVLJQRIFRPSRQHQWRUVXEDVVHPEOHGFRPSRQHQWVKDVEHHQUHDFKHGDW
VRXUFHWKHDVVHPEOHUZLOOH[SHFWWRXVHWKLVGHVLJQLQLWVJOREDORSHUDWLRQV,QVRPHFDVHVWKLVPD\LQYROYHDQ
DJUHHG GHVLJQ ZLWK WZR DQG RFFDVLRQDOO\ WKUHH  FRPSRQHQW VXSSOLHUV EXW HYHQ WKHQ LW ZLOO EH RQ WKH
XQGHUVWDQGLQJ WKDW WKHVH GHVLJQV ZLOO EH XWLOLVHG JOREDOO\ 7KXV IRU JOREDO VRXUFLQJ WR ZRUN HIIHFWLYHO\ LW
UHTXLUHVDFRPSRQHQWPDQXIDFWXUHUWRKDYHDQLQFUHDVLQJO\VLJQLILFDQWGHVLJQDQGWHFKQRORJLFDOFDSDELOLW\
%XWLWLVQRWMXVWWKHGHVLJQWKDWWKHDVVHPEOHUKDVWRKDYHFRQILGHQFHLQ,WDOVRQHHGVWREHDVVXUHGWKDW
WKHFRPSRQHQWVZKLFKLWLVDFTXLULQJRQDJOREDOVFDOHZLOOEHSURGXFHGDWDFRPSHWLWLYHSULFHZLWKDGHTXDWH
TXDOLW\FRQIRUPDQFHWRVSHFLILFDWLRQ7KHDVVHPEOHUVWKHUHIRUHZLOOFRPPLWWKHPVHOYHVWRJOREDOVRXUFLQJWR
WKHLUVXSSOLHUVRQWKHXQGHUVWDQGLQJWKDWWKHVXSSOLHUVZLOOFRPPLWWKHPVHOYHVLQWXUQWRIROORZHUVXSSO\7KDW
LV WKDW WKH\ ZLOO HVWDEOLVK SODQWV ORFDWHG LQ SUR[LPLW\ WR DOO WKH VLJQLILFDQW DVVHPEO\ RSHUDWLRQV RI WKHLU
FXVWRPHUVZKHQVFDOHVSHUPLW)DLOLQJWKHLUDELOLW\WRHVWDEOLVKDQGPDQDJHVXFKDGLYHUVHJURXSRIDFWLYLWLHV
WKH\ZLOOHLWKHUZRUNLQMRLQWYHQWXUHVZLWKORFDOSDUWLHVRUOLFHQVHWKHLUWHFKQRORJ\WRFRPSRQHQWSURGXFHUV
7KH SDWWHUQ RI JRYHUQDQFH LQ WKLV YDOXH FKDLQ LV RQH LQ ZKLFK WKH PDMRU EX\HUV ² WKH DVVHPEOHUV LQ
UHJDUGWRWKHILUVWWLHUVXSSOLHUVRUWKHILUVWWLHUVXSSOLHUVZLWKUHJDUGWRWKHVHFRQGWLHUVXSSOLHUV²VHWWKH
VWDQGDUGV ZLWK UHJDUG WR FRVW TXDOLW\ GHOLYHU\ SDUWLFLSDWLRQ LQ HEXVLQHVV EX\LQJ V\VWHPV DQG VR RQ
5HJXODWRU\DXWKRULWLHVPD\DOVRVHWVWDQGDUGV RIWHQSUHVVXULVHGE\FLYLOVRFLHW\RUJDQLVDWLRQV IRUH[DPSOH
ZLWKUHJDUGWRUHF\FOLQJDQGHPLVVLRQVWDQGDUGV7KLVLV¶OHJLVODWLYHJRYHUQDQFH·7KHVDPHSDUWLHVZKRVHWWKH
VWDQGDUGV JHQHUDOO\ PRQLWRU FRQIRUPDQFH WR WKHVH VWDQGDUGV ¶MXGLFLDO JRYHUQDQFH·  7KH DELOLW\ ZKLFK
LQGLYLGXDOOLQNVLQWKHFKDLQSRVVHVVWRPHHWWKHVHVWDQGDUGVLVWKHVXEMHFWRIXSJUDGLQJLQSXWVE\DUDQJHRI
SDUWLHV ¶H[HFXWLYH JRYHUQDQFH·  &ULWLFDOO\ WKH LQGXVWU\ QRZ H[SHFWV WKDW ILUVWWLHU EX\HUV ZLOO XQGHUWDNH
UHVSRQVLELOLW\WRSURPRWHVXSSO\FKDLQOHDUQLQJHQVXULQJWKDWSURGXFHUVLQWKHVHFRQGWKLUGDQGIRXUWKWLHU
GHYHORSWKHFDSDELOLWLHVWRPHHWWKHLQGXVWU\·VFULWLFDOVXFFHVVIDFWRUV %HVVDQWHWDO %XWDVVLVWDQFHLV
DOVRSURYLGHGE\VSHFLDOLVHGVHUYLFHSURYLGHUVLQWKLVLQGXVWU\RIWHQORGJHGLQWKHFRQVXOWLQJDUPVRIODUJH
LQWHUQDWLRQDODFFRXQWLQJILUPV
'HYHORSPHQWV LQ WKLV JOREDO YDOXH FKDLQ KDYH D QXPEHU RI LPSOLFDWLRQV IRU WKH LQWHUFRXQWU\
GLVWULEXWLRQ RI DFWLYLWLHV DQG RI UHWXUQV 2Q WKH RQH KDQG WKH GHVLUH WR LQWHJUDWH SURGXFWLRQ VFKHGXOHV LQ


DVVHPEO\ZLWKWKRVHLQFRPSRQHQWPDQXIDFWXUHDQGWRUHGXFHWKHFRVWVRIKROGLQJLQYHQWRULHVLQWKHYDOXH
FKDLQDVDZKROHKDVPHDQWWKDWWKHUHLVFRQVLGHUDEOHVFRSHIRUGHFHQWUDOLVHGFRPSRQHQWPDQXIDFWXUH2Q
WKHRWKHUKDQGWKHJURZLQJFRQVROLGDWLRQRIWKHDVVHPEO\LQGXVWU\DQGWKHGHVLUHWRVWDQGDUGLVHSURGXFWLRQ
LQ D OLPLWHG QXPEHU RI GHVLJQV DOEHLW ZLWK VXSHUILFLDO H[WHUQDO PRGLILFDWLRQV  KDV PHDQW WKDW WKH JOREDO
VWDQGDUGV RI NH\ EX\HUV ¶MXGLFLDO JRYHUQDQFH·  DUH EHFRPLQJ LQFUHDVLQJO\ LPSRUWDQW 7KXV FRPSRQHQW
SURGXFHUVQHHGWREHFRQQHFWHGWRILQDOEX\HUVWREHLQFRUSRUDWHGZLWKLQDYDOXHFKDLQEXWLQRUGHUWRGR
VRWKH\KDYHWRXWLOLVHJOREDOGHVLJQV7KHFRQVHTXHQFHRIJOREDOVRXUFLQJDQGIROORZHUVXSSO\SROLFLHVE\
WKH DVVHPEOHUV DQG ILUVW WLHU VXSSOLHUV KDV PHDQW WKH HURVLRQ RI ORFDO RZQHUVKLS DQG ORFDO WHFKQRORJ\ LQ
GHYHORSLQJFRXQWULHV,QWHUYLHZVZLWKWKHDVVHPEOHUVLQ6RXWK$IULFDVKRZWKHH[WHQWRIWKLVSUREOHP )LJXUH
 ,Q%UD]LOLQRIWKHODUJHVW%UD]LOLDQFRPSRQHQWPDQXIDFWXUHUVZHUHZKROO\RUPDMRULW\ORFDO
RZQHG%\WKHHQGRIILYHRIWKHVHKDGEHHQWDNHQRYHUE\IRUHLJQILUPVDQGRQO\RQHRXWRIWKH
ODUJHVWVXSSOLHUVUHPDLQHGLQGRPHVWLFRZQHUVKLS +XPSKUH\ 

Figure 6: South African assemblers strategic perspectives on the ownership of component

suppliers

  

:KROO\RZQHGVXEVLGLDULHV

-RLQWYHQWXUHV

/RFDOILUPVZLWKIRUHLJQWHFKQRORJ\

/RFDOILUPVZLWKORFDOWHFKQRORJ\

6RXUFH%DUQHVDQG.DSOLQVN\ D 

:KHUH GRHV WKLV OHDYH ORZ LQFRPH FRXQWU\ SURGXFHUV RI DXWRPRELOH FRPSRQHQWV" ,Q WHUPV RI WKH LQWHU
FRXQWU\GLVWULEXWLRQRIUHWXUQVLWPHDQVWKDWWKHGHVLJQDFWLYLWLHVLQWKLVYDOXHFKDLQ²ZKHUHWKHUHQWVDUH
LQFUHDVLQJO\ WR EH IRXQG ² OLH LQ WKH KDQGV RI D GHFUHDVLQJ QXPEHU RI JOREDO FRPSRQHQWV PDQXIDFWXUHUV
7KHLU FRUH GHVLJQ DFWLYLWLHV DUH EHLQJ XQGHUWDNHQ LQ GHVLJQ FHQWUHV LQ KLJK LQFRPH FRXQWULHV ZLWK RQO\
SHULSKHUDO GHVLJQ DFWLYLWLHV RFFXUULQJ LQ ORZ LQFRPH FRXQWULHV )URP WKH SHUVSHFWLYH RI LQGHSHQGHQW ORZ
LQFRPHFRXQWU\FRPSRQHQWVXSSOLHUVWKHUHDUHIHZDOWHUQDWLYHVWRWKLVJOREDOGLYLVLRQRIODERXU7KH\FDQ
HLWKHUPDQXIDFWXUHWRWKHGHVLJQVRIWKHJOREDOILUVWDQGVHFRQGWLHUFRPSRQHQWVXSSOLHUVRUSURGXFHVSDUH
SDUWV IRU WKH DIWHUPDUNHW %XW WKLV WRR LV KHDYLO\ GRPLQDWHG E\ JOREDO EUDQG QDPHV ZKHUH WKH UHQW LV
FRQFHQWUDWHG 7KHXQEUDQGHGDIWHUPDUNHWLVKLJKO\FRPSHWLWLYHRIWHQH[KLELWLQJORZEDUULHUVWRHQWU\DQGLV
VXEMHFW WR JURZLQJ FRPSHWLWLRQ LQ SURGXFWLRQ DV EX\HUV V\VWHPDWLFDOO\ FXOWLYDWH FRPSHWLWLRQ IURP QHZ
SURGXFHUV ,Q UHJDUGWR WKH LQWUDFRXQWU\ GLVWULEXWLRQ RI UHWXUQVWKLV LV D VHFWRU ZLWK GHFUHDVLQJ VSDFH IRU
60(V LQVRIDUDVWKH\PD\EHDFRQGXLWIRUVSUHDGLQJWKHJDLQVIURPSDUWLFLSDWLRQLQJOREDOPDUNHWV VRWKDW
WKHNH\LQVWUXPHQWRIGLVWULEXWLRQLVOLNHO\WROLHLQZDJHUDWHV+HUHRQWKHRQHKDQGZDJHVLQWKLVVHFWRUDUH
JHQHUDOO\ UHODWLYHO\ KLJK LQ PRVW FRXQWULHV E\ FRPSDULVRQ ZLWK RWKHU VHFWRUV RQ WKH RWKHU KDQG WKH


FRPSRQHQWVHFWRULVEHLQJVXEMHFWWRLQFUHDVLQJFRPSHWLWLRQDQGLWLVSRVVLEOHWKDWWKHSULYLOHJHGVWDWXVRI
WKHVHZRUNHUVZLOOEHHURGHGRYHUWLPH
,QWKHOLJKWRIWKHVHGHYHORSPHQWV+XPSKUH\TXHVWLRQVZKHWKHUSDUWLFLSDWLRQE\GHYHORSLQJFRXQWULHV
LQWKLVYDOXHFKDLQUHSUHVHQWVWKHRSWLPDODOORFDWLRQRIUHVRXUFHV

¶LW LV ZRUWK DVNLQJ ZKHWKHU HIIRUWV WR SURPRWH WKH DXWR LQGXVWU\ DUH ZRUWKZKLOH 7KH LQGXVWU\ LV
LQFUHDVLQJO\ GRPLQDWHG E\ D VPDOO QXPEHU RI DVVHPEOHUV DQG FRPSRQHQW PDQXIDFWXUHUV DQG
FRQFHQWUDWLRQ LQ WKH FRPSRQHQWV VHFWRU LV SURFHHGLQJ UDSLGO\ 7KH LQFUHDVLQJ ROLJRSROLVDWLRQ RI WKH
FRPSRQHQWVLQGXVWU\UDLVHVEDUULHUVWRHQWU\DQGSODFHVWKHSRZHUWRGHYHORSDQGKDQGOH FRPSRQHQW
QHWZRUNV LQ WKH KDQGV RI WKH OHDGLQJ JOREDO VXSSOLHUV 3RWHQWLDOO\ WKLV PDNHV GHYHORSLQJ FRXQWU\
FRPSRQHQWPDQXIDFWXUHUVYHU\YXOQHUDEOH7KHSURWHFWLRQWKH\UHFHLYHIURPFXUUHQWWUDGHUHJLPHVDUH
OLNHO\ WR GHFOLQH ,Q WKHVH FLUFXPVWDQFHV LW PLJKW EH EHWWHU WR IRFXV LQGXVWULDO SURPRWLRQ HIIRUWV DQG
ILQDQFHRQLQGXVWULHVZKLFKRIIHUDFOHDUHUXSJUDGLQJSDWKWRORFDOFRPSDQLHV· +XPSKUH\ 

&21&/86,216

7KHREMHFWLYHRIWKLVSDSHULVWRLOOXVWUDWHKRZYDOXHFKDLQDQDO\VLVFDQFRQWULEXWHWRDEHWWHUXQGHUVWDQGLQJ
RI WKH GHWHUPLQDQWV RI LQWHU DQG LQWUDFRXQWU\ LQFRPH GLVWULEXWLRQ DQG FRQVHTXHQWO\ DOVR WR WKH
LGHQWLILFDWLRQ RI SROLFLHV ZKLFK PLJKW LPSURYH WKH GLVWULEXWLRQDO RXWFRPH RI FRXQWULHV· LQVHUWLRQ LQWR WKH
JOREDO HFRQRP\ :H KDYH DUJXHG WKDW D IRFXV RQ WKUHH HOHPHQWV RI YDOXH FKDLQV ² WKH G\QDPLFV RI UHQWV
ZLWKLQWKHFKDLQWKHJRYHUQDQFHRIWKH FKDLQV DQG WKHLU WUDQVQDWLRQDO V\VWHPLF FKDUDFWHU ² LV QHFHVVDU\ WR
WXUQDQKHXULVWLFFRQVWUXFWLQWRDQDQDO\WLFDOWRRO
,Q WKH SUHFHGLQJ VHFWLRQ ZH SUHVHQWHG D QXPEHU RI FDVHVWXGLHV LOOXVWUDWLQJ WKH ZD\ LQ ZKLFK YDOXH
FKDLQV²XQGHUVWRRGLQWKHLUDQDO\WLFDOVHQVH²FDQH[SODLQZK\VRPHSDUWLHVJDLQHGDQGVRPHORVWIURPWKH
JOREDOLVDWLRQ RI SURGXFWLRQ DQG H[FKDQJH 7KH\ FRQVHTXHQWO\ ZHUH DEOH WR FRQWULEXWH WR DQ H[SODQDWLRQ
URRWHG LQ SURGXFWLRQ DQG H[FKDQJH UDWKHU WKDQ LQ ILQDQFH RU RWKHU VSKHUHV RI JOREDOLVDWLRQ  RI ZK\ WKH
JURZLQJJOREDOVSUHDGRIHFRQRPLFDFWLYLW\KDVQRWEHHQDVVRFLDWHGZLWKDQHTXLYDOHQWVSUHDGLQJRIWKHJDLQV
IURPWKLVHFRQRPLFDFWLYLW\
%XW FDQ YDOXH FKDLQ DQDO\VLV WHOO XV DERXW WKH SROLFLHV ZKLFK DUH UHTXLUHG WR UHYHUVH WKHVH PDOLJQ
RXWFRPHV"+HUHWZRNH\LQVLJKWVDUHSURYLGHGE\YDOXHFKDLQDQDO\VLV)LUVWJOREDOSURGXFWLRQQHWZRUNVDUH
EHFRPLQJ LQFUHDVLQJO\ FRPSOH[ DQG DUPVOHQJWK WUDGH LV LQFUHDVLQJO\ EHLQJ FRQILQHG WR FRPPRGLWLHV ZLWK
ORZUHWXUQV$FFHVVWRKLJKLQFRPH\LHOGLQJDFWLYLWLHVWKHUHIRUHUHTXLUHVSDUWLFLSDWLQJLQJOREDOYDOXHFKDLQV
DQGWKHNH\FKDOOHQJHVDUHWKXVWRLGHQWLI\ZD\VLQZKLFKSRRUFRXQWULHVDQGSRRUSURGXFHUVFDQERWKHQWHU
WKHVH FKDLQV DQG SDUWLFLSDWH LQ ZD\V ZKLFK OHDG WR VXVWDLQDEOH LQFRPH JURZWK 6HFRQG WKH DQDO\VLV RI
JRYHUQDQFHUHODWLRQVZKLFKSHUPHDWHYDOXHFKDLQVOHDGVWRWKHLGHQWLILFDWLRQRIWKHPDMRULQVWLWXWLRQDODFWRUV


 7KLV LV D VHFWRU VXEMHFW WR V\VWHPDWLF ¶FRVWGRZQ· WKDW LV SULFH UHGXFWLRQ  SUHVVXUHV 0RVW RIWHQ WKLV UHTXLUHV
DQQXDOSULFHGHFUHDVHV LQUHDOWHUPV RIPRUHWKDQSHUFHQWLQYLUWXDOO\DOOSURGXFLQJUHJLRQV%XWLQVRPHFDVHV
VXFK DV WKH 8. LQ WKH FXUUHQW SHULRG  SULFH GHIODWLRQ LV UXQQLQJ DW PRUH WKDQ  SHU FHQW DQQXDOO\ LQ PDQ\
FRPSRQHQWVXEVHFWRUV


DQGWKLVSURYLGHVLQVLJKWVLQWRSROLF\OHYHUVZKLFKPLJKWLQIOXHQFHWKHEHKDYLRXURINH\VWDNHKROGHUVLQWKH
YDOXHFKDLQ
9DOXHFKDLQVDUHQRWKRPRJHQHRXVDQGWKHRSSRUWXQLWLHVIRUUHQWDSSURSULDWLRQE\GLIIHUHQWSDUWLHVZLOO
YDU\(VVHQWLDOO\KRZHYHUZKHQWKUHDWHQHGE\FRPSHWLWLRQWKHUHDUHIRXUGLUHFWLRQVLQZKLFKHFRQRPLFDFWRUV
FDQPRYHWKHVHSDWKVDUHQRWPXWXDOO\H[FOXVLYH

• ,QFUHDVLQJWKHHIILFLHQF\RILQWHUQDORSHUDWLRQVVXFKWKDWWKHVHDUHVLJQLILFDQWO\EHWWHUWKDQWKRVHRIULYDOV
• ,QWHUILUPOLQNDJHVFDQEHHQKDQFHGWRDJUHDWHUGHJUHHWKDQWKDWDFKLHYHGE\FRPSHWLWRUV
• ,QWURGXFLQJQHZSURGXFWVRULPSURYLQJROGSURGXFWVIDVWHUWKDQULYDOV
• &KDQJLQJWKHPL[RIDFWLYLWLHVFRQGXFWHGZLWKLQWKHILUPRUPRYLQJWKHORFXVRIDFWLYLWLHVWRGLIIHUHQW
OLQNVLQWKHFKDLQIRUH[DPSOHIURPPDQXIDFWXULQJWRGHVLJQ

7KHDQDO\VLVRIWKHIRXUYDOXHFKDLQVLQ6HFWLRQDERYHVXJJHVWVWKDWRQWKHLURZQWKHILUVWWZRVWHSVDUH
XQOLNHO\ WR UHDOLVH D JUHDWHU VKDUH RI YDOXH FKDLQ UHWXUQV 7KLV LV EHFDXVH WKHVH FDSDELOLWLHV DUH LQFUHDVLQJO\
ZLGHO\GLIIXVHGWKURXJKWKHJOREDOHFRQRP\ XQGHUO\LQJWKH IDOOLQJ WHUPV RIWUDGH RI GHYHORSLQJ FRXQWULHV
WUDGH LQ PDQXIDFWXUHV REVHUYHG LQ 6HFWLRQ   DQG FRQFHQWUDWLRQ LQ WKHVH DUHDV SDUWLFXODUO\ LQ LQWUDILUP
HIILFLHQF\  PD\ ZHOO OHDG WR LPPLVHULVLQJ JURZWK ,Q RWKHU ZRUGV WKH\ DUH JHQHUDOO\ RQO\ WKH QHFHVVDU\
FRQGLWLRQVIRUDQHQKDQFHGVSUHDGLQJRIWKHJDLQVIURPSDUWLFLSDWLQJLQJOREDOPDUNHWV,WLVWKHWKLUGDQG
IRXUWKVWHSVZKLFKDUHOLNHO\WRSURYLGHWKHJUHDWHVWUHVXOWV%XWKHUHSRRUSURGXFHUVDQGSURGXFHUVLQSRRU
FRXQWULHVUXQXSDJDLQVWUHODWLRQVRISRZHUHPEHGGHGLQYDOXHFKDLQJRYHUQDQFH )LJXUH 7KHVHDUHKLJKO\
SURWHFWHG GRPDLQV SUHFLVHO\ EHFDXVH WKH\ DUH UHSRVLWRULHV RI HFRQRPLF UHQW $V ZH VDZ LQ WKH HDUOLHU
GLVFXVVLRQRI IRRWZHDU WKH JOREDO EX\HUV ZKR GRPLQDWH WKLV FKDLQ DUH KDSS\ WR DVVLVW GHYHORSLQJ FRXQWU\
SURGXFHUVLQWKHILUVWWKUHHRIWKHVHSROLF\DOWHUQDWLYHVEXW]HDORXVO\H[FOXGHWKHPIURPWKHIRXUWK

Figure 7: Scope for actions to promote the spreading of gains to low income producers

8SJUDGHZLWKLQ 8SJUDGHUHODWLRQVKLS 5HGHILQLQJDFWLYLWLHV 0RYHWRQHZOLQNVLQ

OLQN EHWZHHQILUPV XQGHUWDNHQZLWKLQ WKHFKDLQ
OLQNV
)UHVK IUXLW DQG 6SHFLDODFWLRQ &ORVHUOLQNVUHTXLUHG ,QGLYLGXDOSURGXFHUV ([SRUWLQJDJHQWV
YHJHWDEOHV QHHGHGIRUVPDOO EHWZHHQSURGXFHUVDQG PD\WDNHUHVSRQVLELOLW\ EHFRPHFDWHJRU\
IDUPVDQGILUPV H[SRUWDJHQWV IRUSRVWKDUYHVW PDQDJHUV
SURFHVVLQJ
&DQQHG GHFLGXRXV 6SHFLDO 1HHGWRLPSURYH /LWWOHVFRSHIRU 0D\EHSRVVLEOHWR
IUXLW DVVLVWDQFH YHUWLFDODQGKRUL]RQWDO DGGLWLRQDODFWLRQ EXLOGJOREDORUUHJLRQDO
QHHGHGIRUVPDOO FRRSHUDWLRQ EUDQGQDPHV
JURZHUV
)RRWZHDU 5HTXLUHGE\DOO 1HHGWRLPSURYH /LWWOHVFRSHIRU 'LIILFXOWDVEX\HUV
ILUPV FRRSHUDWLRQEHWZHHQ DGGLWLRQDODFWLRQ EORFNPRYHLQWR
YHUWLFDODQGKRUL]RQWDO GHVLJQ
OLQNV
$XWRPRELOH 6SHFLDO 6XSSO\FKDLQHIILFLHQF\ 3RVVLEOHIRUILUVWWLHU 'LIILFXOWDVEX\HUV
FRPSRQHQWV DVVLVWDQFH DQGOHDUQLQJDUHFULWLFDO VXSSOLHUVPDLQO\EXW EORFNPRYHLQWR
QHHGHGIRU IHZLQORZLQFRPH GHVLJQ
60(V FRXQWULHV


7KHIDFWWKDWWKHPRYHLQWRRWKHUOLQNVLQWKHFKDLQLVGLIILFXOWGRHVQRWUHGXFHWKHQHFHVVLW\IRUDFWLRQVLQFH
LQ DOPRVW DOO YDOXH FKDLQV WKLV LV FOHDUO\ WKH RSWLPDO URXWH ,W DOVR GRHV QRW PHDQ WKDW ILUPV VKRXOG DOZD\V
SXUVXHWKLVSDWK DW WKH H[SHQVH RI XSJUDGLQJ WKHLU LQWHUQDORSHUDWLRQV LQ LPSURYLQJ WKHLU OLQNV ZLWK RWKHU
SDUWVRIWKHGRPHVWLFFKDLQRULQLQFUHDVLQJWKHUDQJHRIDFWLYLWLHVRUUHSRVLWLRQLQJWKHPVHOYHVZLWKLQWKHOLQN
LQZKLFKWKH\DOUHDG\RSHUDWH,QHDFKRIWKHIRXUFDVHVWKHUHLVVFRSHIRUSXUVXLQJPXOWLSOHREMHFWLYHV
,W LV OLNHO\ WKDW WKH VDPH FRQFOXVLRQ ZLOO DSSO\ WR PDQ\ RWKHU YDOXH FKDLQV LQ ZKLFK SRRU FRXQWULHV
RSHUDWH%XWLQVRPHFDVHVWKHMXGJHPHQWPD\EHWKDWEDUULHUVWRHQWU\DUHVRORZWKURXJKRXWWKHFKDLQWKDW
LWZLOOQHYHUVXSSRUWDFFHSWDEOHOHYHOVRILQFRPH7KLVIRUH[DPSOHPD\EHWKHFDVHLQ&')ZKHUHSURGXFHU
VXUSOXVHVDUHV\VWHPDWLFDOO\FKDQQHOHGLQWRFRQVXPHUVXUSOXVHVWKURXJKWKHFRPSHWLWLYHSURFHVVDQGZKHUH
RYHUWLPHWKHUHWXUQVWRSURGXFWLRQDUHZKLWWOHGDZD\LQ¶DUDFHWRWKHERWWRP·,WLVSRVVLEOHWKDWDVLPLODU
SLFWXUH PD\ HPHUJH LQ WLPH ZLWK UHVSHFW WR ))9 DV EDUULHUV WR HQWU\ DUH HURGHG WKURXJK FRPSHWLWLYH
SURFHVVHV
6RPXFKIRUWKHSROLF\UHVSRQVHIURPWKHFRUSRUDWHVHFWRU%XWZKDWFDQJRYHUQPHQWVGR"*RYHUQPHQWV
KDYHDQXPEHURINH\UROHVWRSOD\)LUVWWKH\FDQSURDFWLYHO\DVVLVWWKHSULYDWHVHFWRUZRUNHUV·RUJDQLVDWLRQV
DQG RWKHU VWDNHKROGHUV WR UHFRJQLVH WKH RSSRUWXQLWLHV DQG WKUHDWV SRVHG E\ SDUWLFLSDWLQJ LQ JOREDO YDOXH
FKDLQV 6HFRQGO\ PHDVXUHV FDQ EH WDNHQ WR DVVLVW SURGXFHUV WR HQWHU WKHVH FKDLQV 7KLUGO\ YDULRXV SROLF\
LQVWUXPHQWVFDQEHXVHGWRVXSSRUWWKHUHSRVLWLRQLQJRIWKHFRUSRUDWHVHFWRUZLWKLQYDOXHFKDLQVVRWKDWWKH\
FDQ GHULYH D JUHDWHU VKDUH RI WKH JDLQV 7KLV RFFXUUHG LQ WKH 8. WKURXJK WKH (QWHUSULVH ,QLWLDWLYH
3URJUDPPHGXULQJWKHVIRUH[DPSOH 6XSSRUWFDQEHSURYLGHGIRUWKHHQKDQFHPHQWRIGHVLJQVNLOOVDV
WKH6SDQLVKJRYHUQPHQWVKRZHGZLWKUHJDUGWRWKHFORWKLQJDQGIRRWZHDULQGXVWULHVLQWKHVDPHGHFDGHDQG
DVORFDOJRYHUQPHQWGRHVLQ%UD]LOIRUIRRWZHDU 6FKPLW] 
%XW IRXUWKO\ SURGXFHU UHQWV DUH QRW WKH RQO\ IRUP RI HFRQRPLF UHQW ZKLFK PD\ EROVWHU WKH UHWXUQV
DFFUXLQJWRSRRUFRXQWULHVDQGSRRUSURGXFHUV .DSOLQVN\ 3URGXFHUVUHTXLUHUHODWLYHO\JRRGDFFHVVWR
DUDQJHRIFRPSOHPHQWDU\DVVHWV)RUH[DPSOHDV:RRGDQG-RUGDQVKRZIRU8JDQGDSK\VLFDOLQIUDVWUXFWXUH
LV DQ LPSRUWDQW GHWHUPLQDQW RI SDUWLFLSDWLQJ LQ JOREDO SURGXFW PDUNHWV SDUWLFXODUO\ LQ WKH PDQXIDFWXULQJ
VHFWRU :RRGDQG-RUGDQIRUWKFRPLQJ ,QWKHSDVWWKLVPHDQWUHODWLYHO\JRRGURDGVUDLOZD\VDQGSRUWVEXW
LQFUHDVLQJO\LWDOVRDSSOLHVWRWHOHFRPPXQLFDWLRQV2WKHUIRUPVRIUHQWZKHUHJRYHUQPHQWKDVDUROHWRSOD\
LQFOXGH ILQDQFLDO LQWHUPHGLDWLRQ UHODWLYHO\ VPRRWK DFFHVV E\ SURGXFHUV WR DGHTXDWH OHYHOV RI SURGXFWLYH
FDSLWDOZKLFKPD\RUPD\QRWEHSURYLGHGE\¶HIILFLHQWO\IXQFWLRQLQJILQDQFLDOPDUNHWV· DQGKXPDQUHVRXUFH
UHQWV DFFHVVWRUHODWLYHO\VNLOOHGZRUNHUVDWUHODWLYHO\ORZZDJHV &ULWLFDOO\LWDOVRLQFOXGHVWUDGHSROLF\UHQWV
ZKHUHWKHJRYHUQPHQWHLWKHUQHJRWLDWHVWUDGHSROLF\SULYLOHJHVRUDFWVWRHURGHWKHSULYLOHJHVRSHQWRRWKHU
SURGXFHUV,WLVDOVRLPSRUWDQWWKDWJRYHUQPHQWVKHOSWKHLUSURGXFHUV²HVSHFLDOO\SRRUSURGXFHUV²WRWDNH
DGYDQWDJHRIWUDGHSROLF\UHQWVVLQFHLQPDQ\FDVHVORZLQFRPHFRXQWULHVGRQRWILOOWKHLUTXRWDVRUEHQHILW
IURPSUHIHUHQWLDOWDULIIVLQKLJKLQFRPHPDUNHWV
,QWKHSUHFHGLQJGLVFXVVLRQRQLQGLYLGXDOYDOXHFKDLQV 6HFWLRQDERYH WKHIRFXVZDVSUHGRPLQDQWO\
SODFHGRQWKHLQVLJKWVSURYLGHGE\YDOXHFKDLQDQDO\VLVWRWKHGHWHUPLQDQWVRIWKHLQWHUFRXQWU\GLVWULEXWLRQ
RI LQFRPH <HW DV ZH VDZ LQ 6HFWLRQ  LQFUHDVLQJ LQHTXDOLWLHV DUH QRW MXVW EHLQJ H[SHULHQFHG DW WKH LQWHU
FRXQWU\ OHYHO EXW DOVR ZLWK UHJDUG WR LQWUDQDWLRQDO GLVWULEXWLRQ DIIHFWLQJ GLIIHUHQW UHJLRQV GLIIHUHQW VL]HG


ILUPV GLIIHUHQW KRXVHKROGV DQG GLIIHUHQW JHQGHUV %XW KHUH WRR YDOXH FKDLQ DQDO\VLV KDV D UROH WR SOD\
SDUWLFXODUO\LQUHJDUGWRWKRVHSURGXFWLRQVWUXFWXUHVZKLFKLQYROYHLQWHUQDWLRQDOH[FKDQJH:KDWLWGRHVGRLV
WRLOOXVWUDWHKRZFULWLFDOVXFFHVVIDFWRUVLQH[WHUQDOPDUNHWVDOOLHGWRJRYHUQDQFHVWUXFWXUHVZLWKLQLQGLYLGXDO
FKDLQV FLUFXPVFULEH WKH UROH SOD\HG E\ GRPHVWLF DFWRUV :H KDYH VHHQ WKH LPSOLFDWLRQV ZKLFK WKLV KDV IRU
60(VLQIXUQLWXUHDQGIRUVPDOOIDUPVLQ))9EXWWKLVLVDQXQGHUH[SORUHGLVVXHSDUWLFXODUO\ZLWKUHJDUGWR
JHQGHUDQGKRXVHKROGGLVWULEXWLRQDOIDFWRUV
,QVXPPDU\LWLVQRWVRPXFKWKDWYDOXHFKDLQDQDO\VLVWHOOVXVDQ\WKLQJQHZIRUPRVWRIWKHVHSROLF\
UHVSRQVHVKDYHIRXQGWKHLUZD\LQWRFRUSRUDWHDQGJRYHUQPHQWGHFLVLRQPDNLQJLQPDQ\FKDLQVDQGLQPDQ\
VHFWRUV%XWZKDWLWGRHVGRLVWRSURYLGHDFRPSUHKHQVLYHIUDPHZRUNIRUD¶MRLQHGXS·VHULHVRIUHVSRQVHV
ZKLFKIRUFHVXVLQWRDZLGHUG\QDPLFDQGPRUHVWUDWHJLFFRQVLGHUDWLRQRIWKHVHLVVXHV3DUWLDODQDO\VLVDQG
SDUWLDOUHVSRQVHVDUHOLNHO\WREHVHYHUHO\VXERSWLPDOLQPHHWLQJWKHFKDOOHQJHVZKLFKDUHSRVHGSDUWLFXODUO\
LQ UHODWLRQ WR PHGLXP DQG ORQJ UXQ SRVLWLRQLQJ RI SRRU SURGXFHUV DQG SRRU FRXQWULHV 7R UHWXUQ WR WKH
EHJLQQLQJ RI WKLV SDSHU SRVLWLRQLQJ DQG SDWK GHSHQGHQF\ DUH FULWLFDO VLQFH SDUWLFLSDWLRQ LQ WKH JOREDO
HFRQRP\ LQ LWVHOI PD\ QRW SURYLGH D SDWK WR VXVWDLQDEOH LQFRPH JURZWK RU WR DQ HTXLWDEOH GLVWULEXWLRQ RI
UHWXUQV


 %,%/,2*5$3+<

%DOGZLQ 5( DQG 3 0DUWLQ   ¶7ZR ZDYHV RI JOREDOL]DWLRQ VXSHUILFLDO VLPLODULWLHV IXQGDPHQWDO
GLIIHUHQFHV·LQ+6LHEHUW HG *OREDOL]DWLRQDQG/DERXU7XELQJHQ0RKU6LHEHFN
%DUQHV - DQG .DSOLQVN\ 5 D IRUWKFRPLQJ  ¶*OREDOLVDWLRQ DQG WKH GHDWK RI WKH ORFDO ILUP" 7KH
DXWRPRELOHFRPSRQHQWVVHFWRULQ6RXWK$IULFD·5HJLRQDO6WXGLHV
%DUQHV - DQG .DSOLQVN\ 5 E  ¶*OREDOLVDWLRQ DQG WUDGH SROLF\ UHIRUP :KLWKHU WKH DXWRPRELOH
FRPSRQHQWVVHFWRULQ6RXWK$IULFD"·&RPSHWLWLRQDQG&KDQJH9ROSS²
%HVVDQW-5.DSOLQVN\5/DPPLQJ$5RVVDQG59DXJKDQ  ¶8VLQJ 6XSSO\ &KDLQVWR7UDQVIHU
/HDUQLQJ DERXW %HVW 3UDFWLFH· 5HSRUW WR 8 . 'HSW RI 7UDGH DQG ,QGXVWU\ %ULJKWRQ &HQWUH IRU
5HVHDUFKLQ,QQRYDWLRQ0DQDJHPHQW8QLYHUVLW\RI%ULJKWRQ
'RODQ&-+XPSKUH\DQG+DUULVV3DVFDO  ¶9DOXHFKDLQVDQGXSJUDGLQJ7KHLPSDFWRI8.UHWDLOHUV
RQ WKH IUHVK IUXLW DQG YHJHWDEOHV LQGXVWU\ LQ $IULFD· ,'6 :RUNLQJ 3DSHU  %ULJKWRQ ,QVWLWXWH RI
'HYHORSPHQW6WXGLHV8QLYHUVLW\RI6XVVH[
'XQIRUG 0   ¶:LQQHUV DQG ORVHUV WKH QHZ PDS RI HFRQRPLF LQHTXDOLW\ LQ WKH (XURSHDQ 8QLRQ·
(XURSHDQ8UEDQDQG5HJLRQDO6WXGLHV9RO1RSS²
(UQVW '   ¶*OREDOL]DWLRQ ,QIRUPDWLRQ 7HFKQRORJ\ DQG WKH &KDQJLQJ *HRJUDSK\ RI ,QQRYDWLRQ
6\VWHPV $ 3ROLF\ 3HUVSHFWLYH RQ *OREDO 3URGXFWLRQ 1HWZRUNV· VSHFLDO LVVXH RI -RXUQDO RI WKH
(FRQRPLFV RI ,QQRYDWLRQ DQG 1HZ 7HFKQRORJLHV ¶,QWHJUDWLQJ 3ROLF\ 3HUVSHFWLYHV LQ 5HVHDUFK RQ
7HFKQRORJ\DQG(FRQRPLF*URZWK· HGLWHGE\$QWKRQ\%DUW]RNDVDQG0RUULV7HXEDO
)HHQVWUD 5 &   ¶,QWHJUDWLRQ RI 7UDGH DQG 'LVLQWHJUDWLRQ RI 3URGXFWLRQ LQ WKH *OREDO (FRQRP\·
-RXUQDORI(FRQRPLF3HUVSHFWLYHV9RO1RSS²
)UHHPDQ&  7KH(FRQRPLFVRI,QGXVWULDO,QQRYDWLRQ/RQGRQ3HQJXLQ%RRNV
*HUHIIL *   ¶7KH 2UJDQL]DWLRQ RI %X\HU'ULYHQ *OREDO &RPPRGLW\ &KDLQV +RZ 8 6 5HWDLOHUV
6KDSH2YHUVHDV3URGXFWLRQ1HWZRUNV·LQ**HUHIILDQG0.RU]HQLHZLF] HGV &RPPRGLW\&KDLQV
DQG*OREDO&DSLWDOLVP/RQGRQ3UDHJHU
*HUHIIL* D ¶,QWHUQDWLRQDOWUDGHDQGLQGXVWULDOXSJUDGLQJLQWKHDSSDUHOFRPPRGLW\FKDLQ·-RXUQDORI
,QWHUQDWLRQDO(FRQRPLFV9RO1R²
*HUHIIL * E  ¶$ FRPPRGLW\ FKDLQV IUDPHZRUN IRU DQDO\VLQJ JOREDO LQGXVWULHV· LQ ,QVWLWXWH RI
'HYHORSPHQW6WXGLHV 
*HUHIIL * 0 .RU]HQLHZLF] DQG 5 3 .RU]HQLHZLF]   ¶,QWURGXFWLRQ· LQ * *HUHIIL DQG 0
.RU]HQLHZLF] HGV &RPPRGLW\&KDLQVDQG*OREDO&DSLWDOLVP/RQGRQ3UDHJHU
*HUHIIL * - +XPSKUH\ DQG 7 6WXUJHRQ   ¶3URSRVDO IRU YDOXH FKDLQ PHHWLQJ· PLPHR %ULJKWRQ
,QVWLWXWHRI'HYHORSPHQW6WXGLHV8QLYHUVLW\RI6XVVH[
*LUYDQ 1   ¶7UDQVQDWLRQDO &RUSRUDWLRQV DQG 1RQIXHO 3ULPDU\ &RPPRGLWLHV LQ 'HYHORSLQJ
&RXQWULHV·:RUOG'HYHORSPHQW9RO1RSS²


*ULIILWK-RQHV 6 DQG &DLOORX[ -   ¶*OREDO FDSLWDO IORZV WR (DVW $VLD VXUJHV DQG UHYHUVDOV· 3DSHU
SUHVHQWHGWR:RUNVKRSRQ*OREDO&DSLWDO)ORZV%ULJKWRQ,QVWLWXWHRI'HYHORSPHQW6WXGLHV
+XPPHOV'-XQ,VKLLDQG.HL0X<L  ¶7KH1DWXUHDQG*URZWKRI9HUWLFDO6SHFLDOL]DWLRQLQ:RUOG
7UDGH·6WDII5HSRUWV1XPEHU1HZ<RUN)HGHUDO5HVHUYH%DQNRI1HZ<RUN
+XPSKUH\ -  IRUWKFRPLQJ  ¶$VVHPEOHUVXSSOLHU UHODWLRQV LQ WKH DXWR LQGXVWU\ JOREDOLVDWLRQ DQG
QDWLRQDOGHYHORSPHQW·&RPSHWLWLRQDQG&KDQJH
+XPSKUH\ -   *OREDOLVDWLRQ DQG 6XSSO\ &KDLQ 1HWZRUNV LQ WKH $XWR ,QGXVWU\ %UD]LO DQG ,QGLD·
PLPHR%ULJKWRQ,QVWLWXWHRI'HYHORSPHQW6WXGLHV8QLYHUVLW\RI6XVVH[
+XPSKUH\ - DQG $ 2HWHU   ¶6WUDWHJLHV IRU 'LYHUVLILFDWLRQ DQG $GGLQJ 9DOXH WR )RRG ([SRUWV $
9DOXH&KDLQ3HUVSHFWLYH3DSHUSUHSDUHGIRU81&7$'%ULJKWRQ,QVWLWXWHRI'HYHORSPHQW6WXGLHV
,QVWLWXWHRI 'HYHORSPHQW 6WXGLHV   ¶%DFNJURXQG1RWHVIRU :RUNVKRSRQ 6SUHDGLQJ WKH *DLQV IURP
*OREDOLVDWLRQZZZLGVDFXNLGVJOREDOFRQIZNVFIKWPO
-RQHV&  ¶2QWKH(YROXWLRQRI:RUOG,QFRPH'LVWULEXWLRQ· -RXUQDORI (FRQRPLF 3HUVSHFWLYHV
9RO1RSS²
.DSODQ'(DQG5.DSOLQVN\  ¶7UDGHDQG,QGXVWULDO3ROLF\RQDQ8QHYHQ3OD\LQJ)LHOG7KH&DVHRI
WKH'HFLGXRXV)UXLW&DQQLQJ,QGXVWU\LQ6RXWK$IULFD·:RUOG'HYHORSPHQW9RO1RSS²

.DSOLQVN\5  ¶([SRUW3URFHVVLQJ=RQHVLQWKH'RPLQLFDQ5HSXEOLF7UDQVIRUPLQJ0DQXIDFWXUHVLQWR
&RPPRGLWLHV·:RUOG'HYHORSPHQW9RO1RSS²
.DSOLQVN\5  ¶*OREDOLVDWLRQ,QGXVWULDOLVDWLRQDQG6XVWDLQDEOH*URZWK7KH3XUVXLWRIWKH1WK5HQW·
'LVFXVVLRQ3DSHU%ULJKWRQ,QVWLWXWHRI'HYHORSPHQW6WXGLHV8QLYHUVLW\RI6XVVH[
.DSOLQVN\5  ¶,V*OREDOLVDWLRQDOOLWLVUHDOO\FUDFNHGXSWREH"·-RXUQDORI ,QWHUQDWLRQDO3ROLWLFDO
(FRQRP\9RO1RSS
.DSOLQVN\5DQG&0DQQLQJ  ¶&RQFHQWUDWLRQFRPSHWLWLRQSROLF\DQGWKHUROHRIVPDOODQGPHGLXP
VL]HGHQWHUSULVHVLQ6RXWK$IULFD·V,QGXVWULDO'HYHORSPHQW·-RXUQDORI'HYHORSPHQW6WXGLHV9RO
1RSS²
.DSOLQVN\5DQG-5HDGPDQ  ¶*OREDOLVDWLRQDQG8SJUDGLQJ:KDWFDQ DQGFDQQRW EH/HDUQWIURP
,QWHUQDWLRQDO7UDGH6WDWLVWLFVLQWKH:RRG)XUQLWXUH6HFWRU"·PLPHR%ULJKWRQ&HQWUHIRU5HVHDUFKLQ
,QQRYDWLRQ 0DQDJHPHQW 8QLYHUVLW\ RI %ULJKWRQ DQG ,QVWLWXWH RI 'HYHORSPHQW 6WXGLHV 8QLYHUVLW\ RI
6XVVH[
.KDQ$5  ¶3RYHUW\LQ&KLQDLQWKH3HULRGRI*OREDOL]DWLRQ1HZ(YLGHQFHRQ7UHQGDQG3DWWHUQ·
,VVXHVLQ'HYHORSPHQW'LVFXVVLRQ3DSHU*HQHYD,/2
/XQGEHUJ0DQG%0LODQRYLF  ¶7KHWUXWKDERXWJOREDOLQHTXDOLW\·)LQDQFLDO7LPHVWK)HEUXDU\
0DL]HOV$.%HUJH7&URZHDQG7%3DODVNDV  ¶7UHQGVLQWKH0DQXIDFWXUHV7HUPVRI7UDGHRI
'HYHORSLQJ&RXQWULHV·PLPHR2[IRUG)LQDQFHDQG7UDGH3ROLF\&HQWUH4XHHQ(OL]DEHWK+RXVH


0DL]HOV$HWDO  ¶7KH0DQXIDFWXUHV7HUPVRIWUDGHRI'HYHORSLQJ&RXQWULHVZLWKWKH8QLWHG6WDWHV
²·PLPHR2[IRUG)LQDQFHDQG7UDGH3ROLF\&HQWUH4XHHQ(OL]DEHWK+RXVH
3LRUH 0 - DQG & 6DEHO   7KH 6HFRQG ,QGXVWULDO 'LYLGH 3RVVLELOLWLHV IRU 3URVSHULW\ 1 <RUN
%DVLF%RRNV
3UHELVFK5  7KH(FRQRPLF'HYHORSPHQWRI/DWLQ$PHULFDDQGLWV3ULQFLSDO3UREOHPV1HZ
<RUN(&/$81'HSDUWPHQWRI(FRQRPLF$IIDLUV
5LFDUGR '   7KH 3ULQFLSOHV RI 3ROLFWLFDO (FRQRP\ DQG 7D[DWLRQ /RQGRQ 'HQW 5HSULQWHG
 
5RGULN'  7KH1HZ*OREDO(FRQRP\DQGGHYHORSLQJ&RXQWULHV0DNLQJ2SHQQHVV:RUN3ROLF\
(VVD\1R:DVKLQJWRQ2YHUVHDVGHYHORSPHQW&RXQFLO
6FKPLW] + D  ¶)URP DVFULEHG WR HDUQHG WUXVW LQ H[SRUWLQJ FOXVWHUV· -RXUQDO RI ,QWHUQDWLRQDO
(FRQRPLFV9RO1RSS²
6FKPLW]+  ¶6PDOO6KRHPDNHUVDQG)RUGLVW*LDQWV7DOHVRID6XSHUFOXVWHU·:RUOG'HYHORSPHQW
9RO1RSS²
6FKPLW]+DQG3.QRUULQJD  ¶/HDUQLQJIURP*OREDO%X\HUV·,'6:RUNLQJ3DSHU%ULJKWRQ
,QVWLWXWHRIGHYHORSPHQW6WXGLHV
6FKXPSHWHU-  7KH7KHRU\RI(FRQRPLF'HYHORSPHQW2[IRUG2[IRUG8QLYHUVLW\3UHVV
6LQJHU +   ¶7KH GLVWULEXWLRQ RI JDLQV EHWZHHQ ERUURZLQJ DQG LQYHVWLQJ FRXQWULHV· $PHULFDQ
(FRQRPLF5HYLHZ9ROSS²
6LQJHU+  ¶7KH'LVWULEXWLRQRI*DLQV5HYLVLWHG·UHSULQWHGLQ$&DLUQFURVVDQG03XUL HGV   
7KH6WUDWHJ\RI,QWHUQDWLRQDO'HYHORSPHQW/RQGRQ0DFPLOODQ
6WUHHWHQ3  ¶*OREDOL]DWLRQ7KUHDWRU6DOYDWLRQ·LQ$6%KDOOD HG   *OREDOL]DWLRQ*URZWK
DQG0DUJLQDOL]DWLRQ1HZ<RUN0DFPLOODQDQG,'5&
81'3  +XPDQ'HYHORSPHQW5HSRUW2[IRUG2[IRUG8QLYUVLW\3UHVV
:RPDFN - 3 DQG ' 7 -RQHV   /HDQ 7KLQNLQJ %DQLVK :DVWH DQG &UHDWH :HDOWK LQ <RXU
&RUSRUDWLRQ1<RUN6LPRQ 6FKXVWHU
:ROI0  ¶7KHELJOLHRIJOREDOLQHTXDOLW\·)LQDQFLDO7LPHVWK)HEUXDU\
:RRG $   1RUWK6RXWK 7UDGH (PSOR\PHQW DQG ,QHTXDOLW\ &KDQJLQJ )RUWXQHV LQ D 6NLOO
GULYHQ:RUOG2[IRUG&ODUHQGRQ3UHVV
:RRG $   ¶2SHQQHVV DQG ZDJH LQHTXDOLW\ LQ GHYHORSLQJ FRXQWULHV WKH /DWLQ $PHULFDQ
FKDOOHQJHWR(DVW$VLDQFRQYHQWLRQDOZLVGRP·:RUOG%DQN(FRQRPLF5HYLHZ9RO1R²

:RRG$  ¶*OREDOLVDWLRQDQGWKH5LVHLQ/DERXU0DUNHW,QHTXDOLWLHV·(FRQRPLF-RXUQDO9RO
1R  SS ²+DUWRJ :RUOG %DQN   3RYHUW\ 5HGXFWLRQ DQG WKH :RUOG %DQN
:DVKLQJWRQ,%5'


:RUOG%DQN  3RYHUW\5HGXFWLRQDQGWKH:RUOG%DQN:DVKLQJWRQ:RUOG%DQN
:RRG$  ¶9DOXHFKDLQVDQHFRQRPLVW·VSHUVSHFWLYH·LQ,QVWLWXWHRI'HYHORSPHQW6WXGLHV
:RRG$  ¶*OREDOO\0RELOH6NLOOVDQG:DJH,QHTXDOLWLHVLQWKH6RXWK·PLPHR%ULJKWRQ,QVWLWXWHRI
'HYHORSPHQW6WXGLHV8QLYHUVLW\RI6XVVH[
:RRG $ DQG . -RUGDQ IRUWKFRPLQJ  ¶:K\ GRHV =LPEDEZH H[SRUW PDQXIDFWXUHV DQG 8JDQGD QRW" ,Q
VHDUFKRISROLF\LPSOLFDWLRQVHFRQRPHWULFVPHHWVKLVWRU\·-RXUQDORI'HYHORSPHQW6WXGLHV