A. Policy Framework
B. Reviewing the Existing Marketing
System
C. The Basic Purpose of the Market
Development
D. The Main Elements or Functions to
be Included
E. Available Financial Resources and
Expertise?
Marketing infrastructure developments must be seen within
their policy context in order that their basic purpose and function can be
examined rationally. This chapter outlines the initial actions that need to be
taken to formulate a workable marketing development project, as
follows:
- identifying the policy framework;
- reviewing the existing marketing system;
- defining the basic purpose and function
of the development;
- deciding what are main elements or functions
to be included;
- reviewing the available financial resources
and expertise; and
- summarising the main policy and institutional
issues.
A. Policy Framework
The main justification for infrastructure development is to
provide a suitable environment for more effective marketing. To understand this
process, the marketing development needs to be placed within an overall policy
framework. Typical marketing policies, and means to achieve them, that could
have an impact on a development project include:
- liberalising of agricultural marketing and
removal of price control, thus increasing the type and number of market intermediaries;
- encouraging farmers groups and cooperatives
in producing and marketing higher value crops;
- upgrading rural markets to reduce post-harvest
losses and to improve handling;
- improving access to market facilities by:
- increasing the density of rural markets so that the average distance
of farmers to market facilities is reduced;
- facilitating construction of a network of wholesale markets, possibly
in collaboration with the private sector;
- encouraging the export of vegetables and
fruits;
- establishing an effective market information
service to promote trading;
- improving urban nutritional standards by
increasing the availability of fresh produce in urban areas;
- enhancing the revenue-earning base of local
government; and
- enhancing the capacity of communities and
small-scale entrepreneurs to operate and maintain infrastructure.
BOX 3
Organizations that should be involved with marketing policy development
- Ministry of Agriculture (including
research & post-harvest bodies)
- Ministry of Trade and Supply and
Customs Department *
- Standards Organization
- Environmental Protection and Public
Health Bodies *
- Ministry of Urban Planning
- Main Municipalities and District/Provincial
Authorities
- Export Councils and Trade Organizations
- Chambers of Commerce *
- Farmers associations
- Representatives of private-sector
trading interests and consumer groups
(those with * are optional depending on circumstances)
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A Marketing ForumMarketing is an interactive process and many of the activities
are cross-sectoral. Marketing issues need the coordinated efforts of a wide
range of stakeholders, in both the public and private sectors. Attempts to
develop specific policies often fail because of a lack of coordination and
dialogue. The issue of quality control and standards, for example, is one which
may not progress because the interested parties have not been brought together.
Therefore, it may be necessary to set-up some form of collaborative body such as
a marketing forum or working group which can meet on a frequent
basis to review ongoing interventions in marketing and to help form and direct
government policy. The marketing forum should have as wide a membership as
possible and include all the major stakeholders in the sector. Organizations
that should be involved are shown in Box 3.
Policy issues that a Marketing Forum could consider might
include developing:
- an improvement programme to remove marketing
constraints;
- overall policy guidelines for agricultural
marketing, in support of an agricultural sector policy;
- mechanisms for the establishment of a sustainable
market information service;
- encouragement to potential investors in
marketing activities;
- extension, publicity programmes and promotion
of marketing activities;
- overall financial and physical monitoring
of the market development programmes performance;
- operational marketing procedures, reflecting
the impact of changes occurring in the type of sales method (by direct negotiation,
auction or commission sales);
- policies on restricting wholesale trade
to a particular market or markets;
- training schemes;
- re-investment programmes for further marketing
infrastructure development; and
- mechanisms for coordinating external assistance
of donors involved with the planning, financing, construction, management
or training aspects of market development.
Developing an Overall Strategy
A possible approach to developing an action plan for marketing
development would be to arrange a series of workshops involving the marketing
forum proposed above. As a follow-up to the workshop a series of actions would
need to be recommended to develop the project (and any related marketing
activities) on an effective and sustainable long-term basis, within the context
of national agricultural and urban development strategies. The types of actions
are shown in Box 4 and are explained in further detail in Appendix D.
B. Reviewing the Existing Marketing
System
Marketing interventions need to be approached in a
comprehensive manner. Potential benefits, such as reduced losses and more
cost-efficient marketing, will not be achieved through single, uncoordinated
actions. As the first step in preparing marketing development proposals, the
gaps in the present marketing and distribution systems need to be identified and
a study made of the potential instruments for improving marketing efficiency.
The functions of the private sector need to be thoroughly reviewed, as well as
the roles various types of markets play in the agricultural marketing
system.
BOX 4
Actions required to develop marketing policy
- undertake studies on marketing channels,
costs and margins;
- define post-harvest problems and
appropriate research activities;
- develop a legal framework for marketing
activities;
- develop marketing operational regulations;
- identify need for strengthening institutions;
- establish a sustainable market information
service; and
- develop local guidelines for planning
urban food supply and infrastructure.
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Assessment of Supply, Demand and ConsumptionA fundamental step in understanding a marketing system is to
know what produce is being traded, where it is coming from and when are the peak
times that it will reach the market. For smaller rural and urban retail markets
this information may be possible to obtain by undertaking a simple interview
survey in the existing markets. However, for larger rural assembly markets and
urban wholesale markets a more comprehensive approach will be needed. To do this
it is necessary to define the cropping patterns and cropping calendar for the
main production areas serving the markets. In reviewing the marketing system it
is also necessary to estimate the supply, demand and consumption of produce. The
basic principles for making an overall assessment at national, regional or city
level are summarised in Box 5. *
* Detailed techniques are given in FAO
Agricultural Services Bulletins 90 and 121.
Defects in the Market System:The defects of existing markets should next be defined as
clearly as possible. They may include:
Physical problems:
- poor site location and road access. This
is often the main issue. It becomes difficult to resolve where there are planned
road improvements that would provide access advantages, but have not yet been
carried out;
- insufficient sales space, particularly of
temporary spaces at peak periods and during peak seasons, leading to produce
being sold in the open, with consequent spoilage;
- the presence of poorly designed and constructed
sheds, making the marketing process inefficient and inhibiting customer flow;
- a general lack of building and facilities
maintenance;
- insufficient circulation space and traffic
management measures, leading to vehicular and pedestrian congestion;
- lack of parking provision and areas for
unloading;
- poor condition of roads and paving;
- inadequate drainage and severe flooding
problems, leading to produce losses and potential health problems;
- inadequate site security and overnight storage
facilities; and
- inadequate hygienic provision for meat,
poultry and fish handling, including a lack of refrigeration facilities.
BOX 5
Estimating overall supply, demand and consumption
Estimating the supply, demand and consumption of produce is the key step
in reviewing the adequacy of the existing facilities and projecting the
demand for new facilities. The following steps need to be followed:
1. Define the population served by the market system, including
the immediate population (urban or rural) and that of adjacent areas forming
part of the catchment zone of the market.
2. Define the annual average population growth of the catchment zone.
3. Estimate the overall supply of produce (usually defined in tons)
using a Food Balance approach:
- Total annual production, obtained
from agricultural statistics and crop cutting trials;
- Plus imports and existing stock/storage
(where these are relevant, such as with a wholesale market);
- Less waste and use for other
purposes (e.g. seed) and future stock;
- Less annual exports;
- Balance available for consumption
and processing;
- Less processing;
- Balance available for consumption;
- Estimate for specified years the
average per caput consumption of fresh fruit and vegetables (balance
available for consumption divided by population - see 1 and 2 above);
and
- Estimate variations in consumption
levels in different towns and regions (there is usually variation
between urban and rural areas).
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Social and managerial problems:
- difficulties in enforcing market bye-laws
and regulations;
- an inefficient or uncontrolled use of market
sales space with low sales volume per trader and, often, low rents or charges;
- a high, unmet, demand for places in the
market, frequently combined with high-profit margins for traders; and
- market management which establishes no clear
relationship between revenues and costs, leading to the market being under-funded,
especially for repairs and maintenance. On the basis of this analysis it will
be possible to put forward suggestions to enhance the efficiency and effectiveness
of the markets. One of the specific recommendations may be to make improvements
to marketing infrastructure.
C. The Basic Purpose of the Market
Development
It would seem self evident that the basic purpose of a project
should be clearly defined. This is frequently not the case and the approach
adopted is either over-ambitious in what it wants the marketing infrastructure
to achieve or has identified the problem properly but not the correct solution.
For example, surplus agricultural production is often seen as a marketing
problem (or even worse as a processing problem) which could be
solved by market construction. The solution is likely to be found in making
production more responsive to market demand rather than in constructing
markets.
The first step in reviewing a project, therefore, is to go
back to the policy context in which it will operate. Inevitably, there will be
two aspects to this:
- policies directly under the control of an
implementing agency which can be modified if it is found that they are not
practical; and
- policies which are controlled by external
agencies.
With the latter, it will be necessary to ask whether the
developments policies will fit in with those of other bodies, including
the private sector. Their priorities, policies and programmes need to be quite
clearly understood in order to avoid any conflicts. The marketing
forum discussed above could play a critical role in resolving these
issues.
In both cases it will be necessary to determine what would be
the developments relationship to and impact on related projects and
development programmes such as:
- agricultural development programmes (e.g.
extension and crop production);
- public health improvement programmes;
- environmental damage mitigation programmes;
- neighbourhood and village improvement programmes;
- service upgrading programmes (particularly
solid-waste management); and
- rural and urban road improvement programmes,
including urban traffic-calming measures.
D. The Main Elements or Functions to
be Included
The main elements or functions to be included in a market
project should be self-evident. However, it is very easy to include too much in
a programme without realising the consequences of this. It is necessary,
therefore, to:
- identify the demand for the project facilities
and their relationship to existing infrastructure. This may need special surveys
to quantify in broad terms the level of demand (see Chapter 7);
- identify what standards are required to
be adopted; and
- identify who the likely participants are
and how will they be involved? Thus, the main actors in the market development
and their particular requirements will need to be defined. This may necessitate
establishing a market committee and (in some cases) entering into agreements
on future actions (through memoranda of understanding). These could cover
the setting of payment amounts at levels related to the financial commitment
of the markets owners or in exchange for the market users taking over
greater management responsibilities.
E. Available Financial Resources and
Expertise?
Cost will normally be a major determinant of whether a project
is viable, as the improvements will need to be economically sustainable (and
profitable). This will necessitate a pre-feasibility study (see Chapter 7).
Factors influencing the viability of a market development might include whether
there are any:
- defined capital and operating cost limits,
such as fixed norms for construction of new buildings or long-term rental
agreements with the markets tenants?
- time limits for vacating a site or completing
the development?
Another point to consider at this stage is whether appropriate
technical resources are already available to undertake such studies. If they are
not, the appointment of suitable consultants needs to be considered.
SUMMARY OF POLICY AND INSTITUTIONAL ISSUES
- is the policy framework for the project
clearly defined?
- are characteristics of the existing
marketing system understood?
- is the basic purpose and function
of the development agreed on?
- are main elements or functions to
be included in the development agreed?
- are there the necessary financial
resources and expertise available to implement the project?