FDI and Supply Chains in Horticulture (Vegetables, Fruits, and Flowers, Raw, Packaged, Cut, and Processed): Diversifying Exports and Reducing Poverty in Africa, Latin America, and Other Developing Economies - Working Paper 475

February 05, 2018

Developing countries that manage to upgrade and diversify their export base experience faster growth and enjoy greater welfare gains than those that do not. In the contemporary period, most developing countries accomplish this via attracting foreign direct investment into novel sectors. They use foreign investment to hook into global supply chains, and then build backward linkages to local firms and workers in the host economy.

Prior research on foreign investment and supply chains in emerging markets has focused almost exclusively on the creation of international networks in manufacturing and assembly. This paper extends that research, looking beyond manufacturing into supply chain creation in horticulture—in particular, vegetables, fruits, and flowers, raw, packaged, processed—in Africa, Latin America, and other developing regions.

How have some developing countries managed to break into the ranks of horticultural exporters, while others have not? What are the obstacles to entering international supply chains for horticultural exports? How can emerging market economies maximize positive impacts on rural employment, on gender employment, and on externalities for local communities?

The paper concludes with an investigation of policy implications for developing country governments, for the World Bank and regional financial institutions, and for other providers of external assistance.

Of particular note, the policies required to generate supply chains in horticulture constitute a race-to-the-top among countries in improving national doing-business indicators, in upgrading local infrastructure, in establishing effective investment promotion procedures, and in launching public-private vocational-training partnerships in farming and agribusiness.