Value-Added Agriculture for Central Asian Countries

Value-Added Agriculture for Central Asian Countries

Khabibullo Pirmatov (Slovak University of Agriculture in Nitra, Slovakia), Jana Galova (Slovak University of Agriculture in Nitra, Slovakia) and Elena Horska (Slovak University of Agriculture in Nitra, Slovakia)
DOI: 10.4018/978-1-5225-2733-6.ch007
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Abstract

The goal of this chapter is to analyze the socio-economic role of value-added agriculture (VAA) for Central Asian (CA) countries. The agricultural sector of the region provides raw materials for the food, textile, and leather industry. Cotton, wheat, rice, and fruit (fresh and dried) play an important role in the foreign trade of each CA country. These countries have unrealized potential for storing, freezing, processing, and packaging of the wide nomenclature of fruit, food production, and drinks with the organization of their further exports to perspective markets. Adding value to agricultural products lead to increasing the share of finished goods in export, supplying import-substituting products, improving infrastructure in rural areas, providing new jobs, and growing farmers' income. Based on the analysis, the authors recommend using value-added agriculture for the CA countries by attracting domestic and foreign investments to rural areas, establishing tax incentives, and allocating preferential credits for agribusiness.
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Background

Value added (value-added, value add, added value) can be defined within marketing and economics studies. From the marketing point of view, value added specifies the increase in the value of a product or/and service while passing through the stages of being developed, processed or produced. Value added is oriented for goods, services or with the combination of goods and services (Figure 1).

Figure 1.

Value added divisions in the categories of production and offer

Source: Authors’ own development

All activities during preparing the products/services are divided into value add and non-value add. Both of them require cost and time from producers, but customers pay only for value-added activities. The main non-value activities include overproduction, transportation, over-processing, inventory, defects, motion, and creativity (Ohno, 1988). In order to create value-added action, it is essential to pay attention to three criteria. Firstly, customers intend to pay for the activity. Secondly, it should be done right for the first time. Thirdly, the action should change the product/service to some extent. The studies of the US enterprises revealed that up to 95% of the activities related to a given process do not add value to the product or service provided by the organization, as viewed by their customers (Termini, 1996). The value-added process is the difference between input costs (land, labor, and capital) and output prices (goods and services). Therefore, producers try to minimize non-value added activities by operating resources effectively and efficiently to satisfy customer demands. The value of a product or service can also be added with the combination of other products.

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