Value chains for development? Potentials and limitations of global value chain approaches in donor interventions

Value chain interventions are increasingly used by international organizations and national donor agencies in the context of their private sector development (PSD) activities. These interventions are broadly labeled as value chains for development and share common characteristics such as the focus on improving market access conditions for and upgrading opportunities of developing country firms and producers to promote market-based and often export-oriented development. They differ however also along certain dimensions, most importantly with regard to the explicit focus on broader development objectives, the scope and specific activities supported, and the type of targeted actors for the intervention (Henrikson et al. 2010; Humphrey/Navas-Aleman 2010). The global value chain (GVC) framework and the academic literature on GVCs that has developed in the last two decades are broadly used as a basis for donor-led value chain interventions. The paper argues that taking the GVC framework as a basis for interventions to support private sectors in developing countries has the potential to make PSD interventions more effective in terms of improving economic and social outcomes of participating in international trade and global production. To secure the effectiveness of value chain interventions and their development effects, two factors are however critical: First, integration in GVCs should not be seen as "a panacea" for development but as "windows of opportunity" (Phillips/Henderson 2009: 60) that can have important development effects but should be complemented by more locally and regionally based development approaches (th0at may in itself involve the development of local or regional value chains). Second, the critical tradition and broader perspective of the GVC literature needs to be brought back and taken into account when re-designing existing or initiating new generations of value chain policies and interventions (Neilson/Pritchard 2011), in particular the focus on structural and asymmetric power relationships, the ambivalent role of lead firms, the important role of institutions and particularly the state and strategic state policies, and the focus on broader socio-economic and poverty reducing effects.