Download Session 4 Discussion Session - Agricultural and Food Marketing

Session 4
DISCUSSION SESSION
LEARNING OBJECTIVES
1. To understand the complementarity between territorial and sectoral approaches to foster
agro-industrial development.
2. To appreciate how territorial approaches and PPPs can be used together.
3. To understand how territorial approaches can achieve development objectives.
4. To assess the type of skills that the public sector needs to have to plan and implement
sound territorial initiatives
WARM-UP EXERCISE
1. Do you use more often sectoral approaches or territorial approaches?
2. What can be the links between PPPs and territorial instruments?
3. Which skill set should the public sector have to plan and implement sound territorial
initiatives?
CONTENT
1. Beyond agro-industry: working across sectors and territories.
2. Agro-territorial instruments and PPPs: attracting and retaining private investors.
3. How to make these tools work for the poor and food insecure?
4. Skills and institutional set-up needed for these investment tools to work.
1.
BEYOND AGRO-INDUSTRY: WORKING ACROSS SECTORS AND
TERRITORIES
All the investment promotion instruments analysed so far have strong territorial or spatial
aspects. While promotion of agro-industry is central to each tool, their main common
characteristic is the focus on a determined and clear geographic area.
THE COMPLEMENTARITY BETWEEN TERRITORIAL AND
SECTORAL APPROACHES FOR AGRO-INDUSTRY DEVELOPMENT
Industrialization, globalization and urbanization are rapidly transforming agribusiness and
agrifood systems in general. Once concerned primarily with growing, packaging, and
delivering products to markets, agro-industry has also become a highly industrialized sector,
with substantial significant medium- and large-scale investment and worldwide networks and
global supply chains that deliver substantially transformed agricultural products to businesses
and consumers in both near and distant economies and markets.
In this new context, links between stakeholders matter more than ever. But also geography
matters. To be efficient, local supply links need to be strong, well inter-connected and
supported by an enabling environment and a synergistic approach facilitated by governments
and the business community. Only then, can local actors be well integrated into global supply
chains and trigger further agribusiness investments and agro-industrial development in their
territory.
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Complex situations require complex strategies. Recently governments are acknowledging the
extent to which place-specific factors (e.g. endowment of natural and other productive
resources, as well as social, institutional and knowledge capital) influence agro-industrial
development outcomes. Moreover, there is ample evidence suggesting that sector-wide policies
and programmes may be necessary but not sufficient to accelerate agro-industrial investment
and that a territorial approach could provide a more incentivizing framework.
Consequently, territorial approaches to foster agro-industrial investment at local, country and
regional levels are increasingly being used to complement and inform sector-focused
initiatives. Using a territorial approach, policy-makers can have a more comprehensive and
synergistic approach to development, and notably, to support the poor and food insecure. They
can coordinate and improve the spatial impacts of other sectoral policies so as to achieve a
more even or specifically targeted distribution of economic development within a given
territory.
In addition, the constraints on public budgets at national level compel governments to allocate
public resources carefully, ensure efficiency of public expenditure and realize synergies, all of
which may call for geographically targeted investment. This is reinforced by the
decentralization processes that are taking place in many regions of the world, including the
South and Southeast Asia regions. Decentralized instances are increasingly planning and
implementing investment promotion initiatives in their territories focusing on sectors with
economic advantages, such as agro-industry and agribusiness.
2. AGRO-TERRITORIAL INSTRUMENTS AND PPPS: ATTRACTING AND
RETAINING PRIVATE INVESTORS
As seen earlier, PPPs can be used as a way to attract private sector finance to the agribusiness
sector. Agro-territorial instruments share the same objective of investment promotion, though,
at a territorial scale. In either cases, the lead actor or partner makes a seed investment that will
leverage further investment from other actors or partners.
There are many ways in which territorial tools and PPPs can be used together.
PPPs can indeed be a preferred way of launching and implementing an agro-territorial
initiative. The public and private partners can “co-invest” in the territorial tool: the public
sector makes investments in public goods and creates a more enabling environment conducive
to private sector investments in agribusiness; the private sector may contribute financing and/or
bringing to the table its skills and knowledge of the market.
 Example: PPP agroparks in China. Chinese industrial parks are often financed through
partnerships between local governments and private companies (Dinh et al., 2012). Local
governments usually seek loans to finance these parks, which will subsequently be repaid
in part from the stream of additional tax revenues derived from the parks.
 Example: PPP schemes used to finance infrastructure of agro-corridors. In the Peruvian
Poverty Reduction and Alleviation (PRA) and in the GMS corridor programme,
infrastructure PPP schemes were created to fund the development of transport and other
infrastructure. The SAGCOT and the Maputo corridors also use the PPP model to finance
infrastructure development.
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Maputo Development Corridor: Championship and balancing the roles of the public
and private sectors
Mozambique has been the focus of several spatial development initiatives. The Maputo
Development Corridor (MDC) was the original development, starting in 1995. Soderbaum
(2001) observes that the MDC’s success has illustrated the importance of strong political
commitment and will provided by political champions.
The SDI approach encourages trade and investment along development corridors by focusing
on large, often extractive industries- based anchor projects and strategic infrastructure
investments, and promoting value-added activities to enhance the region’s economic
competitiveness. (World Bank, 2010: p 18)) In pursuit of these goals, the MDC aimed to work
with the private sector to maximize investment and rebuild infrastructure along the Corridor.
The Corridor successfully reduced transport and logistics costs with the help of PPPa that
upgraded border crossing and transport and power infrastructure. Further, the corridor was able
to address policy constraints, including through measures at the border.
The MDC’s initial funding came from the Governments of South Africa and Mozambique,
BHP Billiton, Mitsubishi, and the International Finance Corporation. The Corridor attracted
more than US$ 5 billion in private investment between 1996 and 2005. It is managed by a
private sector body that is considered to be an efficient corridor manager. However, this body
was not mandated to address agricultural development or agribusiness in particular.
Source: Kuhlmann et al. 2011: p. 12
Not only PPPs are used as a preferred mechanism for the management of some agro-territorial
tools, some corridors, cluster or park actors use partnerships to implement some part of their
roadmap related to value chain development, research and development, the provision of
business development services or market infrastructure. They have, therefore, a symbiotic
relationship.
3. HOW TO MAKE THESE TOOLS WORK FOR THE POOR AND FOOD
INSECURE?
As seen, territorial-based tools have the potential to boost industrialization and attract
investment to the agro-industrial sector. However, they have relevance also for a wide range of
development issues and policies. From a developmental standpoint, territorial planning is an
approach that can help address broad issues such as globalization, climate change,
environmental and social sustainability, regional disparities and demographic change by
generating more efficient, inclusive and sustainable models of development. This entails the
promotion of more balanced urban-rural policies, harmonization and coordination of policies,
encouragement of multistakeholder involvement, provision of public infrastructure and
improvement of ancillary services.
Improving inclusiveness. Territorial approaches can impact positively on inclusiveness. Each
tool does it in a different way, however we can generally state that by improving physical
connectivity and the business environment and by strengthening linkages among value chain
actors, these instruments can potentially favour the poor. There is plenty of evidence that many
territorial projects use sustainable contract farming practices to source from smallholder
farmers. Furthermore, it is becoming common practice that the dedicated financial facilities
supporting the development of many agro-based corridors, clusters, etc., target exclusively
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agribusiness firms that demonstrate the adoption of inclusive business models that ensure
smallholder participation and development.
Enhancing food security and nutrition (FSN). Geography is an essential dimension affecting
FSN. Food insecurity has deeply entrenched roots linked to territorial assets and liabilities.
Therefore, geographic disparities in FSN are evident in a multitude of contexts: from the ruralurban to the North-South divide, across subregions within countries, and across cities, towns
and countryside (Cistulli et al., 2013). Food insecurity is mostly widespread in places with low
“territorial capital”, i.e. that are disadvantaged on multiple counts – inadequate human and
institutional capital, poor infrastructure and poor connectivity, lack of basic public goods and
services, degraded or scarce fertile land, lack of water and other natural resources, etc.
Within this context, locally-targeted interventions can: (i) ensure a more efficient allocation of
resources through a maximization of local natural and human resources; (ii) promote an
inclusive and integrated approach to decision-making; and (iii) allow for territorially tailored
policies as opposed to spatially blind, one-size-fits-all approaches (Marta, 2013).
More concretely, place-based approaches can improve the structural and contextual dimensions
of food security (availability, access, nutritional quality and stability) because they allow for
the exploration of the multidimensional, multi-actor and multilevel nature of FSN (Cistulli et
al., 2013; Marta, 2013). On the other side, sectoral and crop-specific policies typically do not
systematically recognize differences in the conditions that smallholder farmers and small-scale
agribusiness firms face across territorially defined contexts and, hence, may overlook the
potential for more diversified agricultural production and off-farm income-generating
opportunities.
From theory to practice. However, territorial approaches are not development tools by default.
To impact on the poor and on other development issues they have to be explicitly designed for
this. In session 4 and 5 we have seen a number of factors enabling success. Similarly, the list
below recall those factors with a look at the development objectives of territorial instruments:
 Before promoting a territorial tool, public institutions should have clear in mind what
will be the impact on development objectives, e.g. improving FSN, and should consider
if the same objectives may be obtained with other, less costly tools.
 The rules of the game should be transparent and fair for all the actors involved and all
the stakeholders, including farmers and their organizations and consumers, must be
involved in all the phases of the tool development, from conception to implementation.
If conflicts arise, these should be solved before any other decision is taken;
 Sound preparatory work, including feasibility analysis, must be conducted. In
particular, the potential impact of the project on FSN must be assessed. If problems
occur they should be solved before other actions are taken.
 Transparent process of land acquisition to avoid land grabbing issues, which may
trigger food insecurity, must be implemented.
 Example: Promoting development objectives through territorial approaches. Reducing
poverty, with the subsequent reduction in food insecurity, was one of the objectives of the GMS
and the PRA corridors; the GMS and the SAGCOT also prioritized food security.
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4. SKILLS AND INSTITUTIONAL SET-UP NEEDED FOR THESE INVESTMENT
TOOLS TO WORK
INSTITUTIONAL SET-UP
Governments, aid agencies, foundations and other economic actors increasingly focus on how
to mobilize or even catalyze agribusiness/agro-industry investment using territorial
approaches, including cluster-based, corridor-based and regionally specific value-chain
approaches.
When agro-territorial projects are government sponsored or instigated, initial investment
promotion is typically the responsibility of the country’s (or state or province’s) investment
promotion body, either a Board of Investment (BOI) or an investment promotion agency
or authority (IPA).
The role of investment promotion agencies. IPAs often offer domestic and foreign investors a
one-stop-shop for their investment and keep record of investments registered through their
offices. In order to promote agribusiness SDIs, IPAs need to gather the right information that
will help the right investors to make the right type of investment. To fulfill this task, IPAs must
collaborate with and harness the participation of many interested stakeholders. These include
not just high level government officials, but also the local communities (where investments
may be based), and of course private sector promoters and partners.
The presence of an investment promotion agency (IPA) can be crucial for the success of a
territorial development tool. IPAs and other promoting organizations will need to gather
information regarding the competitive and comparative advantages offered by the agroterritorial tool − and by surrounding regions and value chains which shape its competitiveness.
Once the IPA understands these advantages, it needs to specific target investors who will
benefit from these advantages. Therefore the IPA must know what competing locations may
be offering the investor and how the location stacks up against them. It should ‘benchmark’ the
location against them in terms of availability of labour and infrastructure, quality and costs,
and incentives.
The IPA and the investment stakeholders should understand the mind-set of the agribusiness
investor who is thinking about which countries in the region provide the best combination of
advantages for their business. The IPA might seek to “sell” the agro-territorial tool to investors
in terms of various elements of competitive advantage: access to markets and raw materials,
expertise in products and/or service technology, world-class skills, education and training, low
taxes, effective and user-friendly government procedures supporting inward investors, among
others.
Companies may invest to serve a local market if it is sufficiently large; but more likely their
strategic justification for investing will be some combination of access to wider global and/or
regional markets. In addition, the IPA needs to offer investors accurate and complete
information on risks of the specific agro-territorial tool. Key risk elements include: capital cost,
staging of investment, ease of exit, technology, and raw materials, components and services.
Aside from project-specific factors, investors will also be concerned with the risk profile of the
investment location (e.g. political risks, bureaucratic uncertainties and foreign exchange risks).
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Other institutions may also help to promote and facilitate FDI and domestic investment and
provide information and services to investors about agro-territorial tools. Some ministries of
agriculture have started to set up units or services dealing with private companies potentially
interested in investing in agribusiness. Other ministries, such as ministries of industry and
trade, sometimes have similar initiatives. This situation can lead up to significant coordination
problems within the government, for example, between the ministries of agriculture and
industry, with respect to food and other agro-processing industries. Ministries of agriculture
and trade/investment may also experience coordination issues on agribusiness investment
promotion. Depending on the type of tool, other ministries, such as finance, transportation and
justice, and autonomous agencies may be involved, and coordination may become even more
difficult. There may also be coordination issues between national and subnational jurisdictions.
In some instances, agro-industrial parks, special economic zones, etc., are promoted within the
framework of a (nation-wide) public programme usually hosted under a line ministry – e.g.
the ministry of agriculture or the ministry of industry, in which case the programme staff are
responsible for promoting the tool and attracting investments from various sources.
SKILLSET NEEDED
Promoting and implementing investment tools require a certain level of skills and assets. In
particular, public actors should be able to:
 Conduct public-private consultation and dialogue;
 Set out the strategic objectives and strategy that will enable or implement the tool;
 Ensure sound feasibility analysis;
 Implement sound enabling policy and legal/regulatory frameworks, which will permit
effective and efficient development and operation of a market-based, competitive
initiative;
 Provide or encourage enabling investment, through direct (public) investment, private
investment (which may involve a variety of financial and investment instruments), and/or
donor-supported investments;
 Ensure that the resources needed to catalyze investments in the tool are available;
 Ensure support from public sector ministries and agencies, and various jurisdictions;
 Facilitate movement of goods and trade.
BIBLIOGRAPHY
Cistulli, V., Rodríguez-Pose, A., Escobar, G., Marta, S. & Schejtman, A. 2013. Territorial
approach to food security and nutrition policies: empirical evidence and good practices. Final
report of the Second International Expert Meeting Final Report held in Rome, on 16–-17
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Available
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Dinh, H.T., Palmade, V., Chandra, V. & Cossar, F. 2012. Light manufacturing in Africa:
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