Issue 23: November-December 2008
In this issue
In this issue
Results from many development programmes and projects demonstrate that partnerships between the public and private sectors can help poor rural people lift themselves out of poverty. Involving private organizations in public development interventions can be a solution for sustaining the benefits these interventions bring to poor rural people.
This newsletter provides examples of partnerships in India, Pakistan, the Philippines and Viet Nam. Shaheel Rafique describes how a private company works with communities and the government to establish and operate a tea factory in Meghalaya, India that benefits all of its stakeholders.
Kareem Farzan talks about how poor rural people living in a remote area of Pakistan affected by a political conflict strive to bring positive changes to their lives. Working with IFAD, the government, and private and non-governmental organizations (NGOs), they are building infrastructure that links the communities in the area to markets.
Jose Roi Avena considers how business development services provided through the public-private-people partnership promote and develop rural microenterprises in the Philippines. Rural microentrepreneurs, who used to depend on agriculture, now benefit from alternative ways of earning income.
Nguyen Thanh Tung considers how development programmes supported by IFAD and the Government of Viet Nam can link poor rural people to market opportunities through the partnership between public and private sectors and local communities.
Our commitment to reduce poverty and continue harnessing positive results for future generations requires a long-term partnership between poor rural communities, the private sector, government and NGOs. Only by working together can the benefits of development activities be sustained in the years to come.
Martina Spisiakova, Newsletter Coordinator
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Partners in developing a tea factory in India
A ‘cut-tear-curl’ machine used by the Tea Factory to process tea
In India, the concept of public-private-people partnership is relatively new in agriculture and rural development. Nevertheless, it has significantly matured in infrastructure projects of the Government of India. In development projects and programmes supported by IFAD and the Government of India, rural communities usually partner with NGOs and the private sector such as private contractors and businesses to develop rural infrastructure. But increasingly, through public projects and programmes, people are working with the private sector to establish storage facilities, transportation hubs, wholesale cash-and-carry markets and manufacturing, and collection centres for agricultural products. This story provides an example of such a partnership in establishing a tea factory.
The IFAD-supported North Eastern Region Community Resource Management Project for Upland Areas (1999-2008) implemented a number of initiatives in partnership with local communities and the private sector. One example is the establishment of the Tea Factory at Rongram, West Garo Hills of Meghalaya.
The project helped the Tea Farmers Federation of West Garo Hills of Meghalaya to start a tea factory with the participation of the following partners:
- Government’s District Rural Development Agency (DRDA)
- TNI Ltd – a private company
- West Garo Hills Community Resource Management Society – a local NGO.
The project mobilized the tea growers from project villages to initiate the Tea Farmers Federation. Fifty per cent of the Federation’s members come from the villages supported by IFAD projects, while other members come from non-project villages.
The partners of the Tea Factory made the following contribution to the establishment and start-up of the factory:
- The DRDA, under its national development programme called ‘Rashtriya Sam Vikas Yojana’, provided the majority of funds, amounting to approximately US$ 350,300, for the cost of the machinery used for processing tea.
- TNI Ltd provided fabricated machines used in the tea industry (for example, withering troughs, CTC machines, ‘Googi’ machines, fermenting machines, sorting machines, dryers and furnaces). In addition, it provided free services for the design of the factory. It also trained eight people identified by the Farmers Federation in operating and managing the factory.
- The local communities of West Garo Hills contributed 2.5 hectares of land, bricks, labour and a cash contribution equivalent to about US$ 12,250.
- The IFAD-supported project organized the communities and provided them with initial training on preparing the project proposal for setting up the factory and for receiving funding from the DRDA to initiate this partnership.
Before the Tea Factory was established, the farmers sold tea to Assam Supreme Tea Estate Private Limited Company of Goalpara in Assam province for INR 4 (US$ 0.08) per kg. As the Tea Farmers Federation, the farmers sold part of their green leaf at INR 6 (US$ 0.1) per kg to this company.
These results encouraged them to propose a plan to the District Administration to open their own cooperative tea factory under the government scheme titled ‘Balanced Development for Backward Areas’. Within the scheme’s marketing and infrastructure component, the Federation received INR 17,500,000 (US$ 351,600).
The Assam Supreme Tea Estate Private Limited Company is buying half of the green leaf from the tea factory owned by the Tea Farmers Federation and processes it in their own factory. The leaf bought fills in the deficit the company faces in tea production. The other half of green leaf is processed by the tea factory itself. Since the factory has just been set up, it has yet to operate at full capacity.
The above example shows that poor rural people benefit from their partnership with the public and private sectors if it is used as a means to enhance their livelihoods. Since the producers (IFAD beneficiaries) formed the Tea Federation and established the Tea Factory, they have been able to support their members in the following ways:
- supplying their members with raw products for processing in the factory
- facilitating marketing for their members
- ensuring their members’ access to the markets
- enabling their members to add value to their produce and sell it for higher prices, thus increasing their income.
The partnership needs to become sustainable and should also be scaled out to develop other agriculture and non-farm sub-sectors.
Moreover, if such a partnership has financial commitments in terms of venture capital investment, then the ownership and the interest of Farmers Federation needs to be protected and retained through contractual agreements that are favourable to the poor community members. Without the consent of the Farmers Federation, the other partner could sell off its shares to larger companies after capitalization of its initial investment and exit. This would leave farmers as minority shareholders.
This dimension needs to be considered if the Tea Farmers Federation opts for a joint venture or to receive equity funds from a venture capital company. As the Tea Farmers Federation received government funds for investment in capital assets, it would be prudent on its part to seek working capital funds from commercial banks like any other tea-producing company in North East India. In any event, the members of the Tea Farmers Federation will need to enhance their financial literacy in order to make informed decisions about financing their company in the future, regardless whether there is another project that supports them.
Shaheel Rafique, Implementation Support Specialist, IFAD Field Presence Office, New Delhi
Partners for change in war-torn areas of Pakistan
The dug well constructed in partnership enabled the community of Wana to cultivate crops in dry areas
South Waziristan Agency – one of the three southern political agencies in the Federally Administered Tribal Areas of Pakistan – suffers from religious and political disturbances. People living in these areas were forced to give up their economic activities as they are unable move out of their village to pursue a living. Nevertheless, the small village of Karezai managed to stay linked with the nearest town – Wana – and other areas outside the town with the help of the IFAD-supported Southern Federally Administered Tribal Areas Development Project. The project works with the Karezai community, private institutions, NGOs and the government to help the community build local infrastructure.
For the past five to six years, South Waziristan Agency has been subject to civil strife, mainly terrorism and insurgencies. All economic activity has come to a halt since the religious and political disturbances do not allow residents to move outside their surroundings. As a result, poverty has spread throughout the region, whose rural population represents 99 per cent of the total population of South Waziristan. Those of working age have largely migrated to neighbouring districts and provinces seeking sources of income. However, lack of education and skills prevent them from finding work.
Karezai, a small village about four kilometres from the economic hub of Wana, presents an interesting case, given the current turbulent conditions. Villagers have remained linked with Wana and other parts of South Waziristan through a small but irregular pony track. The track gives villagers some mobility.
Both the elders and the youth of the village were determined to bring positive change to their surroundings. One option was to use the traditional approach of knocking on the doors of political authorities to request support and services. A positive response is often a question of luck, and the political authorities have a reputation of maintaining a highly regimented and bureaucratic system for the distribution of public resources.
The second option the community had was to approach the Southern Federally Administered Tribal Areas Development Project, a public-sector poverty eradication project supported by IFAD. The project works to improve living conditions and incomes of small-scale farmers, landless farm labourers, tenant farmers and women. It brings irrigation and other technologies to the area to improve agricultural yields and animal health. It also provides access to credit, a supply of safe drinking water and basic infrastructure such as rural roads. The project has also introduced income-generating activities to improve poor people’s living conditions, especially those of women.
Initially, the villagers were hesitant to work in partnership with IFAD or any other multilateral or bilateral development agency. However, after extensive consideration, mainly by the religious leaders and political and tribal elders, it was decided that this second option would be the best. The community consequently organized into a social group called Karezai Community Organization in March 2005. The project devoted three months to community mobilization, and community members initiated a partnership with the project in developing local infrastructure – constructing a 2.5 kilometre farm-to-market road.
The community was responsible for contributing 25 per cent of the initial costs, amounting to PKR 187,000 (US$ 2,335). In their determination to complete the scheme, the community later volunteered to increase its share to 40 per cent when the costs of the scheme increased. Once completed, the new infrastructure will provide access to the market to over 200 farming households of the village.
The community also wishes to extend the road an addition 1.5 kilometres to link it with the carpeted (not shingled) road that circles the town. The new stretch of road would serve as an alternative means of linking the town and surrounding villages, especially when the main bazaar road is blocked because of the security risk.
The project has also helped the Karezai community to bring two of its important stakeholders – the 'maliks' and the 'ulema' – into the development process. Both the maliks and ulema are informal institutions in the private sector, which enjoy influence and respect over a large segment of population. These stakeholders have been instrumental in leading the villagers to accept project interventions and pursue project objectives.
People living in South Waziristan Agency, whether farmers, private entrepreneurs, or members of NGOs or civil society organizations, continue to suffer from increasingly deteriorating law and order. The project is therefore trying to improve the linkages between these actors to enable them to survive in such a conflict environment. The project has helped people understand the need to make decisions together and share actions in development activities. Based on the links that the project has already helped to establish, the community now plans to create linkages with market dealers/players in order to sell small surpluses of fruits and vegetables that they produce at good prices.
IFAD’s commitment to working with and for poor rural people requires long-term and varied partnerships to harness positive results. Continued support of the public sector and partnerships with private institutions and poor rural people are the best ways to ensure gains from investments.
Kareem Farzan, Project Implementation and Monitoring Specialist
Promoting and developing microenterprises in the Philippines – emerging model of public-private-people partnership
Examples of products made by the beneficiaries of the programme
The IFAD-supported Rural Microenterprise Promotion Programme (2007-2013) is an evolving model for public-private-people partnership in microenterprise (ME) development in the Philippines. In this partnership, client MEs themselves define their business needs. The private sector delivers the business development services to respond to these needs. The government, through its Department of Trade and Industry (DTI), facilitates the matching of such needs with the appropriate solutions/service providers and provides a policy environment conducive to ME growth. The programme will demonstrate the impact of an inclusive approach, with all stakeholders having a major role to play, on the efficiency and effectiveness of initiatives for the development of the ME sector.
The Rural Microenterprise Promotion Programme is a US$ 22.8 million programme financed by IFAD and implemented by DTI. It aims to reduce rural poverty through increased economic development, job creation and rural incomes for poor rural households by promoting profitable and sustainable MEs. The programme aims to sustain the benefits it will achieve by providing business development services (BDS) to poor rural microentrepreneurs. The partnership between the private sector, government and rural people themselves is crucial to achieve this.
Combined public/private-sector implementation strategy
DTI, the lead implementing agency of the programme, has for a long time been the main provider of BDS to enterprises around the country, particularly for small and medium enterprises (SMEs). DTI provides the following services on a regular basis:
- business/enterprise management training such as on financial management, basic bookkeeping, pricing and costing and inventory management
- product development services such as packaging and labelling, branding and product testing
- organizing major marketing events such as market matching and selling/buying missions.
However, with the new law passed by the Philippine legislature in May 2008 (the Magna Carta for Micro, Small and Medium Enterprises) mandating relevant government agencies (especially DTI) to strengthen their programmes for the promotion and development of MEs, DTI thought of shifting its strategy to be able to touch base with and give support to the country’s 720,191 microentrepreneurs.
The change in paradigm primarily involves DTI transferring its role as BDS provider to the private sector while transforming itself into a BDS facilitator. As facilitator, DTI will take on the role of identifying potential ME clients, undertaking a systematic diagnostics of the clients’ business needs in order for the enterprise to be profitable and sustainable, profiling and pre-qualifying prospective private-sector BDS providers that can respond to the range of needs identified, matching the needs and the expertise available, procuring the services of BDS providers, and monitoring and evaluating the conduct/quality and outcomes/impact of the BDS provision.
DTI’s strategic shift is a response to the following emerging realities:
- Globally, governments are continuously searching for more effective and less expensive ways to provide improved public services. The global economic crisis requires cutting expenditure and creates pressure to make the provision of public service more efficient without sacrificing its quality.
- As of 2006, MEs – and their demand for BDS – had grown to 720,191 comprise 92 per cent of all businesses in the Philippines. They are so geographically dispersed that it would be difficult to use the resources of a single agency to be able to reach out and serve each one of them.
- The IFAD-supported programme serves to spark demand among MEs for effective and responsive BDS by making them aware of free BDS (or BDS with minimal fees) initially being offered by the government to help improve their profitability and sustainability. By priming the private sector to take on the role of BDS providers, the programme would help sustain outreach and services to MEs after the programme’s completion in 2013.
Currently, the programme is in its first phase, conducting an initial needs assessment that will determine ME demand for BDS. DTI contracted a consultancy firm to facilitate the assessment.
The assessment involves a wide spectrum of stakeholders such as existing and potential MEs, BDS providers from the private sector, local government units, and relevant DTI staff which include the provincial officers of the IFAD-supported programme and the national Programme Management Unit.
Through the assessment, the programme will identify the needs and priorities of MEs in 19 targeted poor provinces. The findings of the assessment will eventually determine the type, level and degree of intervention that the MEs will require to operate profitably through enhanced access to markets and increased competitiveness.
Specifically, the needs assessment missions being conducted in the 19 target provinces have the following terms of reference:
- documenting and identifying the existence and extent of specific problems related to business development
- documenting existing ME programmes available to potential clients in the target provinces and evaluating their strengths and weaknesses
- assessing whether existing interventions are known or acceptable to potential clients
- assessing the main barriers that prevent clients from accessing existing services
- establishing profiles of existing and prospective clients
- Developing BDS tailored to the needs of these clients.
The initial needs assessment will serve as input to the subsequent provincial action planning in the first quarter of 2009, to be convened by DTI and with the participation of stakeholders such as MEs and others enumerated above. The action planning will define the range of BDS that are required by MEs, including: defining training, product development and market support; and identifying the MEs proposed to receive programme support.
The programme is currently conducting the needs assessment only at the provincial level, since the needs of clients vary considerably from province to province given the economic disparities.
Mechanics of 4P in the Rural Microenterprise Promotion Programme
Demand for BDS will be matched with appropriate BDS providers. The programme will select the service providers competitively, based on qualifications and demonstrated capability to provide the service. There will be a deliberate bias towards the private sector or service providers from non-governmental organizations. Only in cases of a distinct comparative advantage (i.e. experience, expertise and location) will government agencies, including DTI bureaus, be considered during contract bidding.
One of the crucial determinants to ensure that the outcomes of the programme will be of high quality is the use of a rating system for evaluating the proposals of BDS providers and consultants. The rating system will guide the programme in procuring high-quality service providers that can deliver the required technical expertise needed in the programme activities.
In selecting BDS proposals, the programme will give premium to BDS training designs that are innovative, results-based and ‘out-of-the box’. Research-pegged, experiential learning and walk-thru consulting approaches facilitated by industry-seasoned advisors will be chosen for financing under the programme versus the traditional classroom-type and heavily theoretical manner of delivering a BDS training.
After the BDS have been delivered to MEs, the Project Management Unit will assess their effectiveness and BDS performance and impact on client enterprises by using a Post-BDS Evaluation Form.
Challenges and next steps
Transformation of the institution’s role from one in which it does the BDS by itself to one in which it is just a facilitator does not happen overnight. However, the programme’s design envisions that DTI staff will come to appreciate the leverage and multiplying power that comes with having the private sector as partners in BDS provision for the large number of MEs in the country.
In addition, while the MEs have clearly defined needs, the lack of qualified BDS providers and microfinance institutions in several provinces or areas (as can be gleaned from results of the initial profiling exercise being conducted) impede the provision of high-quality BDS appropriate to the business needs identified. Thus, there is also a need for the programme to support a programme for BDS providers and microfinance institutions to improve/strengthen their capacity in delivering more efficient and effective microcredit and BDS.
All the above premises considered, the programme will seek to provide empirical evidence and a working model to demonstrate that the 4P strategy is a viable approach for the promotion and development of MEs.
Jose Roi Avena, Monitoring and Evaluation Specialist, Rural Microenterprise Promotion Programme
The “4P” approach to reducing poverty in Viet Nam
Rural market in Minh Hoa district. Villagers sell tobacco, fish, vegetables and meat.
Since 2006 IFAD has been promoting the Public-Private and People Partnership (4P) poverty reduction approach in Viet Nam. The IFAD-funded Programme for Improving Market Participation of the Poor in Ha Tinh and Tra Vinh Provinces started in 2007. The Developing Business with the Rural Poor Programme in Cao Bang and Ben Tre provinces was launched early this year. Both programmes develop market opportunities for poor rural people by building innovative models of business partnerships between public and private sectors and local communities. A third 4P programme is currently being developed.
The Pro-Poor Partnerships for Agro-forestry Development (3PAD) Project in Bac Kan, a new project to be supported by IFAD, will be presented to the IFAD Executive Board in December 2008. The 4P innovations that IFAD supports in Viet Nam are in line with the country’s National Socio-Economic Development Plan 2006 – 2010. The plan is leading the agriculture sector and rural farmers towards economic integration and sustainable development after the country’s recent accession to the World Trade Organization.
While the 4P poverty reduction strategy is very broad, in the current context of Viet Nam the strategy is interpreted primarily as promoting contract farming. The Government of Viet Nam strongly supports the concept of contract farming through various policy documents, including the Prime Minister’s Decision Number 80/2002 on contract farming. This document regulates mechanisms and policies to promote the consumption of agricultural products through signed contracts between enterprises and farmers.
n Vietnamese society, the 4P strategy is widely understood as the cooperation among four ‘nha’: ‘nha nong’ (farmers), ‘nha nuoc’ (state), ‘nha khoa hoc’ (researchers) and ‘nha doanh nghiep’ (enterprises). This cooperation is very often reiterated in current agriculture and rural development policy documents. However, its realization has met many constraints and challenges, which IFAD’s assistance can help address.
In the remote and mountainous areas where poor ethnic minorities need IFAD’s assistance, private enterprises involved in commodity agriculture are difficult to find. In these areas, the 4P strategy is simply interpreted as the development of organizations made up of farmers who share interests in doing a business. These farmers are organized in Common Interest Groups (CIGs). The IFAD-supported interventions aim to scale up and market the products of these CIGs.
The poor people participating in the CIGs create business plans, which can be developed in cooperation with enterprises. For example, enterprises that process and export pork sign contracts with the CIGs in raising pigs. The enterprises provide piglets and feed to the farmers. They also train them on advanced pig-raising techniques. In turn, the enterprises purchase the pigs from these farmers at prices agreed upon in the contract.
Another example of the 4P is the contracted forestry plantation. Under the IFAD-supported projects in Viet Nam, poor households negotiated with enterprises if they could invest in seeds and pay the farmers for their labour days for plantation and maintenance of the replanted forest. Following the harvest, the enterprises and poor households share the benefits from the forest.
The market-based or 4P approach offers other innovations. For example, CIGs are established not only with poor farmers, but also with better-off farmers who have accumulated business development skills and wish to lead the groups. The approach is also based on a ‘bottom-up’ participatory planning process, although communities are also involving enterprises in planning their development activities. Enterprises and researchers from outside the communities analyse market opportunities and consult with farmers. Business service providers are involved at the planning stages as well. For example, the agriculture bank should participate and help the CIGs prepare their business plans. Inputs to these plans are mostly based on farmers’ investments, using loans from the financial service providers. The IFAD-supported projects also provide assistance to farmers in preparing the business plans. In addition, they train farmers in production, processing and marketing of agricultural products.
The new Results-based Country Strategic Opportunities Paper (COSOP) for Viet Nam 2008 – 2012 was approved by the Government of Viet Nam and the IFAD Executive Board in September 2008. The COSOP focuses on the promotion of the 4P approach. As the agriculture sector in Viet Nam modernizes and commercializes, value chains for agriculture products will become increasingly important. As a part of this process, the 4P approach will become a more important and common feature of the agriculture sector in the country.
Nguyen Thanh Tung, Field Presence Officer for Viet Nam
Call for nominations: "Millions Fed: Proven Successes in Agricultural Development"
Learning from successes in agricultural development is now more urgent than ever. Progress in feeding the world’s millions of poor has slowed, while the challenge of feeding its future millions remains enormous and is subject to new uncertainties in the global food and agricultural system.
In response, the International Food Policy Research Institute (IFPRI), with support from The Bill & Melinda Gates Foundation, is leading the new initiative, “Millions Fed: Proven Successes in Agricultural Development”, to document evidence on what the policies, programmes and investments in agricultural development have actually reduced hunger and poverty.
The project offers the development community a unique opportunity to showcase agricultural development success stories in a way that will reach a broad global audience. A range of communication tools will be developed, including a compendium of case studies, analytical studies on success factors, an interactive website, audio-visual tools, and instructional materials, to convey the key elements of success in agricultural development.
IFPRI is accepting nominations for proven success stories in agricultural development to showcase in the Millions Fed project.
For more information about the project and to access the online nomination application, please visit the website: www.ifpri.org/millionsfed. The nomination deadline is 31 December 2008.