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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. 1 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. 2 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 3 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. 4 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). 5 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 December 2013. Rome: FAO. Food and Agriculture Organization of the United Nations. Available at: http://www.fao.org/fileadmin/user_upload/AGRO_Noticias/smart_territories/docs/Final%20 Report%20FAO%20Territorial%20Approach%20FSN%20Policies%20Expert%20Meeting% 20December%202013.pdf Dinh, H.T., Palmade, V., Chandra, V. & Cossar, F. 2012. Light manufacturing in Africa: targeted policies to enhance private investment and create jobs. Washington, DC, Agence Française de Développement and the World Bank. 6 FAO. Forthcoming. Sourcebook on agro-territorial strategies for agribusiness development. FAO. 2006. Agro-industrial parks: Experience from India. Rome: Food and Agriculture Organization of the United Nations (FAO). Available at: http://www.fao.org/docrep/016/j7714e/j7714e.pdf Gálvez-Nogales. 2014. Making economic corridors work for the agricultural sector of developing countries. Rome: FAO. http://www.fao.org/3/a-i4204e.pdf Gálvez-Nogales. 2010. Agro-based clusters in developing countries: staying competitive in a globalized economy. Rome: FAO. http://www.fao.org/docrep/012/i1560e/i1560e.pdf Kuhlmann, K., Sechler, S. & Guinan J. 2011. Africa’s Development Corridors as Pathways to Agricultural Development, Regional Economic Integration and Food Security in Africa. TransFarm Africa and the Aspen Global Health and Development at the Aspen Institute. Available at: http://www.aspeninstitute.org/sites/default/files/content/docs/pubs/TransFarmAfrica_Develop mentCorridors_7 percent20JulyFINAL.pdf Lerner, A.M. & Eakin, H. 2011. An obsolete dichotomy? Rethinking the rural-urban interface in terms of food security and production in the global south. The Geographical Journal, 177(4): 311–320. December. Marta, S. 2013. Innovative Regional regional Development development Theoriestheories, Policies policies and Approaches approaches for Food food and Nutrition nutrition Securitysecurity. Doctoral Dissertation, Università Cattolica del Sacro Cuore, Milan, Italy. di Milano. Available at: https://tesionline.unicatt.it/bitstream/10280/2475/1/tesiphd_completa_Marta.pdf 7