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4. State role in establishment, management and control of wholesale markets


4.1. Public good characteristics of wholesale markets
4.2. Management of wholesale markets

The private sector plays a leading role in the development of wholesale markets in developed economies, with the role of the state being limited mainly to regulation. In developing countries, however, with rather weak private sectors, government plays a more decisive role in the planning and implementation of market projects as well as in funding and managing the infrastructure.

4.1. Public good characteristics of wholesale markets

A wholesale market can in fact be considered as an infrastructure and a public good. This is partly because it can be argued that private operators might take advantage of their control over major marketing infrastructure to extract monopoly rent by restricting access to the market, thus eroding the benefits of the system. The wholesale marketing system therefore cannot operate without a certain degree of public control in order to preserve its character as a public good. Even where some of the main facilities are financed by the private sector, government regulation of the management and operations of wholesale markets will be necessary as happens in the case of other natural monopolies such as public utilities.

4.2. Management of wholesale markets

Wholesale markets can be managed by public or quasi-public corporations, private companies, cooperatives or traders’ associations or combinations of all these. The choice of the precise type of ownership and management is usually determined by local political and socio-economic factors (Tracey-White, 1994) but the quasi-public corporation approach tends to be the best. Local or metropolitan authorities are usually involved in the management or at least control of wholesale markets since they derive substantial rent income from the operators. To ensure more effective coordination of public and private participation in management, wholesale markets must be given special status (independent market authority) that promotes flexibility and enhances their capacity to meet particular local requirements.

Box 5
Case study: Building the wholesale market at Bouaké, Côte d’Ivoire

A new wholesale market is currently under construction at Bouaké in central Côte d’Ivoire (the country’s second largest city). Total investment in the project is about $US 23.5 million, with about $US 10.5 million projected to be spent on building physical infrastructures. The project is being funded by the European Union under the 7th European Development Fund. Bouaké is the hub of the country’s yam trade and supplies are assembled here and distributed throughout the rest of the country and also to Mali and Burkina Faso. The new wholesale market will provide a site not only for the yam trade but also for trade in other foodstuffs. Yam is semi-perishable, with an average shelf life ranging from a few weeks to two or three months. Currently, the trade is carried on in the city centre, with rudimentary facilities and in unhealthy and congested premises. Trading virtually stops when it rains, and the market is overcrowded with little scope for expansion to accommodate new wholesalers.

The project feasibility study indicates an internal rate of return of 28 percent and forecasts that the new wholesale market would reduce marketing costs by about 30 percent. This rather high return on the investment in this project reflects the significant reduction in costs due to a substantial fall in post-harvest losses.

New retail markets are also planned for a number of coastal towns in Côte d’Ivoire under another European Development Fund project.


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