Mahmood Ahmad, EXPERT GROUP MEETING ON ACHIEVING FOOD SECURITY IN MEMBER COUNTRIES IN A POST CRISIS WORLD

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1 Mahmood Ahmad, Agriculture and Water Policy Expert EXPERT GROUP MEETING ON ACHIEVING FOOD SECURITY IN MEMBER COUNTRIES IN A POST CRISIS WORLD

2 Story Line PPP Concepts PPP in Agriculture Context t Five Case studies Strategic Options Way Forward

3 Why Public Private Partnerships? Key benefits are: Btt Better Value Lower cost Higher levels l of services Reduced risk On time delivery Within budget delivery Minimizing total project cost Innovation Access to capital

4 Concepts in PPP Define Contract between a public client and a private service provider created to do business to achieve common objectives. (Broadly two types of P3) public contract when Fee by the public client not tied to operational results bli i d l i (PSD) h F b h public service delegation (PSD) when Fee by the public client is tied to operational results

5 Contractual forms of PPP and the allocation of responsibilities Asset ownership O and M Capital investment Commercial risk Contract duration Service contract Management contract Lease agreement Concession Public Public/Private Public Public 1 2 years Public Private Public Public 3 5 years Public Private Public Public 8 15 years Public and Pi Pi Pi Private Private Private Private years BOT Public and Private Private Private 2 30 years Private Divestiture Private or Public and Private Private Private Private Indefinite or limited by license

6 PPP in Agriculture Relatively new concept in Agriculture Growing budgetary constraints Developing Competitive agriculture is costly Rural Area low population densities, remote locations and weather dependent d production systems highly risky PPP modality provides option to modernize agri and revitalize rural economies

7 PPP Interventions ti Review Developing a competitive value chain Farm to Market Roads Wholesale l l markets Water for Irrigation Seed Industry Agriculture Research and Innovation

8 Developing a Competitive Value Chain Prerequisite of competitive Value Chain good infrastructure (GAP, Irrigation, i Marketing, Agroprocessing ete.) Farmers capacity is limited, only commercial farms. Especially facility depends on a single commodity and is grown by small scale farmers carrying high levels of production risk (Chillies grown in Pakistan) Investment/Capital subsidies land or grants and concessional donor finance can be part of the solution.

9 Farm to Market Roads Many countries farmers are not linked to market, due to poor farm to market roads Rural areas do not have enough economic activities iii and traffic counts to attract private investment. Three Case of PPP in FMR, (FAO) Tanzania, where Involvement of private road users in designing and helping to maintain transportation network from the farmgate was key to agricultural growth. (Morogoro Village Travel and Transportation Programme (VTTP) ) Uganda, where rural processing facility and its out growers were mobilized to combine resources to support road development, (Kakira Outgrowers Rural Development Fund ) Again in Uganda, an alternative approach demonstrated to bundle together interlocking productive agricultural infrastructure, with roads as only part of the investment. (Kalangala Integrated Infrastructure Programme )

10 Wholesale Markets Few cases of PPP exist on wholesale markets WSM often characterized as long SC, rent seeking, lack of price transmission, and poor infrastructure, loss to producers and consumers The high initial investment for agro processing infrastructure is barrier for private sector entry. One way out is allowing concession holders to develop land for on leasing or sale, for example, through appropriate land use rezoning (as adopted in the WB supported fruit and vegetable wholesale market project in Poland).

11 Out Growers Local Trader Commission Export Distribution Retailing Agent Small Farmers Exporter Own Farmer Contract Farmers Traders/Exporters Importer/wholesale r Supermarkets Out Growers Long and Short SC

12 PPP playing a major role in mobilizing investment IMT Irrigation Management Transfer (IMT) primarily due to vicious cycle Irrigation agency keep headwork k s and main system, delegating responsibility for the secondary or tertiary levels l to farmers. Water for Irrigation A World Bank (2007) report improving efficiency by bringing in third party service providers through PPPs, covering its risks is common and recommended

13 Seed Industry Productivity low due low quality seed Early, seed production in most countries was concentrated in public sector seed corporations Turkey and India are examples from dominant public industry to a private/public modality Pakistan a case where political will poor governance Pakistan a case where political will, poor governance make PPP a difficult proposition

14 Agriculture Research and Innovation Private investment directed dat high hvalue crops little l enhance small and resource poor farmers. 125 PPPs in 12 Latin American countries indicates several types of partnerships emerged PPP is not always the most appropriate mechanism by which to carry out R&D and foster innovation in agriculture. Sometimes, it is more efficient to organize research via participatory projects or through research contracts.

15 Major Challenges/Constraints Huge comparative advantages Wheat Kaz, Rice Pak but this advantage has not been translated into competitive advantage. Why high cost of infrastructure Gap private service providers prepared to do purely on commercial grounds and governments consider necessary from broader development and poverty reduction perspectives. Investors shy away due lack of legal and policy framework Financial viability is desirable but not a sufficient condition for the success y of PPP risk identification and its mitigation among stakeholders be aimed during projects development.

16 Way Forward National/ Regional (operational) P3s do not fit all areas careful assessment is required, with country led initiative Three prong approach is recommended for Food Security/Agriculture PPP with concerned ministry as leader with possible donor support. Initial Screening of FS commodity, Supply, Demand (domestic and export), DRC analysis to establish CA. Rigorous Value Chain Analysis is a prerequisite for appropriate investment Finally, a Value for Money (VFM) analysis must be demonstrated, and private entity must genuinely assume risk ik 16

17 Recommendations at National/ Regional Policy ocy Collective action needs of resource poor farmers and food insecure consumers. A private public modality piloting testing in highest priority infrastructure meeting national food security and developing a competitive ii agriculture sector Achieving Food Security in Member Countries in a Post Cii Crisis World, future prospects for developing a viable ibl PPP are good if viable win win strategy is evolved that provides fiscal space/capital influx to national governments, more food in meeting domestic needs and exports (investor country) But need to protect recipients country from loss of food y security

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