The International Fund for Agricultural Development GRENADA MARKET ACCESS AND RURAL ENTERPRISE DEVELOPMENT PROGRAMME. Programme Final Design Report

Transcription

1 Report No. xxxxx Date: August 2010 The International Fund for Agricultural Development GRENADA MARKET ACCESS AND RURAL ENTERPRISE DEVELOPMENT PROGRAMME Programme Final Design Report Main report Latin America and the Caribbean Division Programme Management Department

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3 MARKET ACCESS AND RURAL ENTERPRISE DEVELOPMENT PROGRAMME PROGRAMME FINAL DESIGN REPORT Table of Contents Page Currency equivalents Weights and measures Abbreviations and acronyms Map of the programme area iii iii iii vi Introduction 1 I. strategic context and rationale for ifad involvement, commitment and partnership (ksf 1) 3 A. Rural development context 3 B. Policy, governance and institutional issues, political and economic issues 10 C. The IFAD country programme 17 II. Poverty, social capital and targeting (KSF 2) 18 A. Rural poverty, information and analysis 18 B. The target group, including gender issues 19 C. Targeting strategy and gender mainstreaming 19 D. Geographic coverage of the programme 21 III. Programme description (KSF 3) 22 A. The knowledge base: Lessons from previous/ongoing projects 22 B. Opportunities for rural development and poverty reduction (the rationale) 24 C. Programme goal and objectives 25 D. Alignment with country rural development policies and IFAD strategies 25 E. Programme components 26 IV. Implementation and institutional arrangements (KSF 4) 42 A. Institutional development and outcomes 42 B. The collaborative framework 42 C. Results-based M&E 44 V. Programme benefits, costs and financing 47 i

4 A. Programme Benefit Analysis 47 B. Summary benefit analysis 47 C. Summary cost table 52 D. Programme financing: IFAD financing, co-financing, government, partners and beneficiary financing 52 VI. Project risks and sustainability (KSF 5) 53 A. Risk analysis 53 B. Exit strategy and post-programme sustainability 54 VII. Innovative features, learning and knowledge management (KSF 6) 55 A. Innovative features 55 B. Programme knowledge products and learning processes 56 C. Regional knowledge networking 56 Key File 1: Rural Poverty and Rural Sector Issues 22 Key file 2: Institutional Capabilities Matrix (SWOT Analysis) 25 Key File 3: Complementary Donor Initiative/Partnership Potential 34 Key File 4: Target Group Priority Needs and Project Proposals 38 Key File 5: Stakeholder Matrix/Project Actors and Roles 41 TABLES Table 1: Sources of food consumption (US$ 000) 5 Table 2: Food imports (US$ 000) 5 Table 3: Agricultural exports (USD 000) 6 Table 4: Direct users-beneficiaries by programme intervention 21 Table 5: The new programme s design and implementation features in comparison to GREP 24 Table 6: Phasing of Beneficiaries per farm model 49 Table 7: Main indicators per farm model 49 Table 8: Financial Analysis 50 Table 9: Sensitivity Analysis 51 ANNEES Annex I: Annex II: Annex III: Annex IV: Annex V: Contents of the Programme Life File Logical Framework Programme costs and financing Programme organigramme Draft Implementation Plan for First 18 months ii

5 Annex VI: Annex VII: Annex VIII: Programme Operational Manual (table of content) Aide Memoire Key files Volume II: WORKING PAPERS WP 1: WP 2: WP 3: WP 4: WP 5: WP 6: WP 7: WP 8: WP 9: WP 10: The country, programme area and target group Human and social capital building and inclusion of vulnerable groups Sustainable agricultural production, market access and enterprise development Rural Investment Fund Environmental and Social review note Programme management, M&E and knowledge management Financial and economic analysis of the programme Draft Programme operations manual Implementation and Supervision Plan Rural Financial Services Currency equivalents Monetary Unit = East Caribbean Dollar US$ 1.0 = CD 2.7 CD 1.0 = US$ 0.37 Weights and measures 1 kilogram (kg) = pounds kg = 1 metric ton (t) 1 pound (lb) = 450 grams (gr) 1 kilometre (km) = 0.62 miles 1 meter (m) = 1.09 yards 1 square meter (m 2 ) = square foots 1 acre (ac) = hectares (ha) 1 hectare (ha) = 2.47 acres 1 arroba (@) = 11.5 kilograms 1 quintal (qq) = 45.3 kilograms 1 gallon (gl) = liters (l) Abbreviations and acronyms AWPB APR ART BDC BDO Annual Work Plan and Budget Annual Progress Report Agency for Rural Transformation Business Development Centre Business Development Officer iii

6 BDS BNTF BP CARDI CARUTA CBO GCBL CDB CDP CPM CPMT CWIQ CYO ECCB EST FAO FDI FFR FI GAP GCA GCB GCNA GIDC GNIMB GOG GRENCASE GRENCODA GREP HDI HSCB IAGDO IFAD IICA LAC MA MAED MFI MEHRMNIB MOA MOF MSD MSE MYES NAT NDF NGO NPSSBD OECS PAR PCR PMU POM PRSAP PSC PSMP Business Development Services Basic Needs Trust Fund Business Plan Caribbean Agricultural Research and Development Institute Caribbean Regional Unit for Technical Assistance Community-Based Organization Grenada Cooperative Bank Limited Caribbean Development Bank Community Development Plan Country Programme Manager Country Programme Management Team Core Welfare Indicators Questionnaire Community and Youth Officer East Caribbean Central Bank Entrepreneurial Skills Training Food and Agriculture Organization Foreign Direct Investment Financing Facility for Remittances Financial Institution Good Agricultural Practices Grenada Cocoa Association Grenada Cooperative Bank Grenada Cooperative Nutmeg Association Grenada Industrial Development Corporation Grenada National Importing and Marketing Board Government of Grenada Grenada Citizen Advice and Small Business Enterprises Grenada Community Development Agency Grenada Rural Enterprise Project Human Development Index Human and Social Capital Building Inter Agency Group for Development Organisations International Fund for Agricultural Development Interamerican Institute for Cooperation in Agriculture Latin America and the Caribbean Market Access Market Access and Enterprise Development Micro Financing Institution Ministry of Education and Human Resources Grenada National Marketing and Import Board Ministry of Agriculture, Forestry and Fisheries Ministry of Finance Ministry of Social Development Micro and Small Enterprise National Training Agency Ministry of Youth Empowerment and Sports National Development Foundation Non-Governmental Organization National Policy Statement on Small Business Development Organization of East Caribbean States Poverty Assessment Report Project Completion Report Programme Management Unit Programme Operational Manual Poverty Reduction Strategy and Action Plan Project Steering Committee Public Sector Modernization Project iv

7 RFIF RFS RIF RIMS RTES SBS TAMCC TVET UNDP VAT Rural Finance Innovation Fund Rural Financial Services Rural Investment Fund Results and Impact Management System Rural technical and Entrepreneurial Services Small Business Sector T. A. Marryshow Community College Technical and Vocational Education Training United Nations Development Programme Value Added Tax GOVERNMENT OF GRENADA Fiscal Year 1 st January 31 st December v

8 MARKET ACCESS AND ENTERPRISE DEVELOPMENT PROGRAMME / FINAL DESIGN Map of the programme area vi

9 MARKET ACCESS AND RURAL ENTERPRISE DEVELOPMENT PROGRAMME PROGRAMME DESIGN REPORT Introduction 1. Through agreements reached between the authorities of the Government of Grenada (GOG) and the management of the International Fund for Agricultural Development of the United Nations (IFAD), a Programme Final Design (appraisal) Mission was undertaken in the country for the Market Access and Rural Enterprise Development Programme (from 15 to 25 July, 2010). The mission s overall task was to review the Programme Design Report to complete and improve the quality of the related working papers that were prepared in the Design phase in line with IFAD QE recommendations (of 23 June 2010) and other suggestions provided by IFAD CPM (see Annex I for Programme Life File). 2. The field mission responded to the government s commitment to rural poverty alleviation and the revitalization of the agricultural/rural economy, seeking to restore the sector s contribution to food security and the country s economic growth and development. The Programme s final design fully reflects national development policies with regard to agricultural/ rural development and poverty reduction. It is aligned with Grenada s Poverty Strategy and Action Plan, IFAD s asset-building Strategic Framework and CDB s Country Strategy Programme (CSP). The Final Design exercise was conducted by a joint IFAD and CDB team composed primarily of national and subregional experts This renewed commitment has been expressed through a formal note from the Ministry of Finance (September 2008); the statement by Grenada s Ambassador to IFAD (Governing Council, February 2009); and the speech by the Prime Minister of Grenada, during the official closing ceremony of the Grenada Rural Enterprise Project (GREP) (St. Georges, August 2009), all requesting a new IFAD-financed operation. Country Portfolio and Programme Pipeline 4. IFAD has financed two operations in Grenada since 1981, with total lending of US$5.7 million; and US$10.4 million total project costs, including co-financing by the Caribbean Development Bank (CDB), and contributions by Government and project users-beneficiaries. The Artisanal Fisheries Development Project (US$1.5 million loan) was implemented in the 1980 s (98% disbursements); while the IFAD financing of the GREP project (US$4.2 million loan), approved in 2001, was completed by end The project will continue under operation in 2010, with CDB s and government s financing. 1 IFAD Final Design team was composed of: (i) Mr. Martin Weekes, Enterprise Development Specialist; (ii) Mr. Anthony George, Community Contracting Specialist; (iii) Ms. Carla Ross, Costab Specialist; (iv) Mr. Bernard Francois, Agricultural Production and Farm Model specialist; and (v) Ms. Jaana Keitaanranta Country Programme Manager (CPM) International Fund for Agricultural Development (IFAD). Additionally the work was supported at distance by the following consultants (i) Ms. Ingrid Schreuel, lead consultant and Social and Human Capital Development Specialist; and (ii) Ms. Maria Sisto, Financial analyst. The CDB s design team consisted of (i) Mr. Luther St. Ville, Operations Officer; (ii) Mr. Egbert Ellis, Social Analyst; (iii) Mr. Clairvair Squires, Portfolio Manager; (iv) Mr. Patrick Caryl, Investment Officer; and (v) Mr. Cavon White, Financial Analyst. 1

10 5. Whilst the proposed new programme s design will fully reflect national development policies with regard to agricultural/rural development, poverty alleviation and rural women and young people s advancement, it will be aligned both with Grenada s Poverty Reduction Strategy and Action Plan under formulation as a result of the recently conducted Poverty Assessment, and IFAD s asset-building Strategic Framework The Government s intention is to utilize the resources allocated by the Fund under the Performance Based Allocation System (PBAS) for , which as a Minimum Allocation Country amount to US$3.0 million, for lending in Ordinary terms. Consequently, GOG is committed as well to provide all necessary support to have this new operation designed and negotiated for approval at IFAD s December 2010 Executive Board. 6. As a result, CDB, a primary partner of IFAD and the government, will co-finance this new investment programme, through a US$2.0 million loan. Responding to GOG s request and in line with initial joint design work CDB s, financing will be applied to a credit line which was defined during the Final Design Mission, and to the financing of a Rural Investment Fund (social, productive and enterprise windows). 7. The proposed new programme will be based on the achievements of and the lessons derived from the implementation experience of the GREP. The learning contained in the draft Project Completion Report (PCR), undertaken of GREP s execution, represent a primary input in the design process. Also the systematization reports of GREP best practices in community work as well as lessons learned from other Caribbean countries have been taken into account in the design. Furthermore, IFAD s draft Strategic Framework ( ), and Learning Notes on Remittances Sending Money Home, and on (i) Local participation in pro-poor rural infrastructure investment projects, (ii) Institutional, partnership and empowerment dimensions of pro-poor rural infrastructure investments, and (iii) Procurement of goods and services for pro-poor rural infrastructure projects provided for useful and strategic insight for Final Design. Programme Final Design Mission 8. Following the field activities undertaken by the Programme Concept Note mission (August 2009), while similarly building upon the learning obtained through the PCR mission (October 2009), and the Programme Design Mission (November 2009), the Final Design Mission activities comprised: (a) meetings with key government authorities, including Ministries of Finance, Agriculture, Education, Social Services, Works, Housing, Lands and Community Development, Youth Empowerment and Sports, the Chairperson of G-REP s Project Coordination Committee, the Marketing & National Importing Board, etc.; (b) discussions with financial institution, such as Grenada Cooperative Bank (GCB) and Credit Unions, etc.; (c) meetings with regional institutions, including IICA and CARDI and (d) field visits as well as direct discussions with potential service providers and users-beneficiaries of the new programme. 9. Closing meeting. At the end of the design team s activities, a formal meeting was held with the Permanent Secretary (Ministry of Finance) and other key Ministry of Finance officials. The meeting represented an opportunity to reiterate the commitment of IFAD, CDB and the Government to the programme s design process and financing and agree on the next steps to conclude the design process at all levels. 10. Programme development. At the mission s closing meeting, with the presence of the authorities of the Ministry of Finance, IFAD s Country Programme Manager, CDB representatives, and other team members it was agreed that the programme will be implemented over a six-year period, starting during first semester of Programme costs have been estimated at US$7.5 million. Its financing will be structured as follows: (a) an IFAD loan of US$3.0 million; (b) a loan from CDB of US$2.0 million; and (c) 2

11 counterpart funding from the Government of Grenada of the order of US$2.2 million, and in-kind contributions by programme users-beneficiaries of US$0.3 million. At the mission s closing meeting, it was also agreed that the design teams will proceed to complete the final design report. IFAD s loan proposal will be presented through Laps-of-Time method for IFAD s Executive Board in December CDB s loan proposal is scheduled to be presented at its October 2010 Board meeting. Finally it must be mentioned that the Government of Grenada committed itself to continue its present support to the implementation of the GREP project during 2010, which represents the transition period to the start up of the new programme, with a view to maintaining and enhancing the execution capacity already in place. The Aide-Memoire was signed in St. George s, Grenada, on July 23 th, 2010 (Annex VII). I. STRATEGIC CONTET AND RATIONALE FOR IFAD INVOLVEMENT, COMMITMENT AND PARTNERSHIP (KSF 1) Country economic context A. Rural development context 11. Grenada, one of the four Windward Islands, is a small island state with an area of 340 sq km and 121 km of coastline. Grenada is an independent state since 1974 within the Commonwealth. The state of Grenada consists principally of the islands of Grenada, Carriacou and Petit Martinique. Most of the population lives on Grenada itself, and major towns there include the capital St. George's, Grenville and Gouyave. The country s total population is in the order of 108,000 (2009), although estimates vary when the substantial emigration is taken into account. 12. Grenada has several ethnic groups, but the population mainly consists of African descent (84%), the population of mixed descent counts for 12%, Europeans 1%, and East Indian count for 3% of the population. As in most other countries in the region, Grenada has a very youthful population with approximately 25% of the population in Grenada (12,801 males and 12,675 females) in the age group of years; whereas the male and female population under 15 made up for 35% of the total population. 13. The population is rather unevenly distributed over the island, with over 32% located on the Parish of St. George (nearby the capital), 25% in the Parish of St. Andrew, and 10% in each St. Patrick and in St. David. St. Andrew is often referred to as the bread basket of the country since it used to be the largest producer of Grenada s main agricultural crops (cocoa, nutmeg, banana, spices), as well as vegetable crops. St. Patrick is the most northern Parish and where many of the former Estates are located; its population s main source of income is from construction jobs and agriculture while both men and women have engaged themselves in small business. St. David is basically an agricultural parish growing traditional crops of cocoa, nutmeg, bananas and spices as well as the sugar cane which is used in the manufacture of island rums. St. Mark is the smallest Parish whose inhabitants live mainly by fishing and working the surrounding estates. St. John is another of the smaller Parishes located in the west coast and home to the town of Gouyave, famous for celebrations around fishing; many of its inhabitants are involved in fishing, but also small businesses and part-time farming. 14. Macroeconomic context.- The relatively high Gross National Income (GNI) per capita of US$5,710 (World Bank, Atlas method, 2008) and its resulting classification as a middle-income country, disguises the existence of high levels of poverty in the rural areas of Grenada, and hides the disparities in living standards across the country. The findings of Grenada s most recent poverty assessment by CDB and the Government ( ) presented openly during the design mission, confirm that over 50% of Grenada s population is either poor and/or vulnerable. Unemployment rates are high, 3

12 particularly among the youth. Poverty affects primarily youth, and there is a higher probability that rural poor households are headed by women. 15. This middle-income country status also conceals the economic and financial vulnerability of this small country. In fact, while according to the UNDP 2009 HDI Grenada ranks 74 th out of 182 countries, its condition as a Small Island Developing State involves negative implications for sustainable human development. These include: vulnerability to natural disasters, reduced natural resources, limited qualified-labour supply, and a narrow economic base characterized by over-dependence on a volatile tourism sector. 16. There is a small manufacturing sector, comprising food-processing, beverages, garments and electronics assembly industries. St George s University, a US-owned institution, is an important source of foreign-exchange earnings. While the soil is generally fertile and rainfall is sufficient for most tropical crops, the fine scenery, marine life and some good beaches have underpinned the development of the tourism industry. St Georges, the capital, has a container port and cruise-ship facilities. 17. Grenada s economic performance is constrained by both external vulnerabilities and weaknesses in the public finances, and thus its performance has been erratic since This has been influenced by natural disasters and the impact of the global economic downturn. The latest of the major hurricanes, Ivan (2004) and Emily (2005), significantly changed the social, physical and economic landscape of the country, particularly in the communities of the rural poor. Large proportions of the nutmeg and cocoa plantations were destroyed; and they have not fully recovered. These natural disasters damaged around 50% of Grenada s housing stock as well as its vital agriculture and tourism industries. As a result, real GDP contracted by 5.7% in Growth picked up again in 2005 (to 11%), mainly as a result of reconstruction aid pouring into the economy from abroad. After another year of negative growth in 2006 (-2.4%), the economy grew by 3.5% in Grenada has been hit hard by the global economic slowdown with the two mainstays of the economy tourism and foreign direct investment (FDI) weakening significantly. Real gross domestic product is estimated to have declined by 7.7% in 2009, after 2.2% growth in Prices fell by 2.4% in the 12 months to December 2009, reflecting weak domestic demand and lower international food and fuel prices. While economic activity is expected to improve in 2010, the recovery is likely to be very slow, reflecting the gradual improvement in source countries in particular, the US and UK. Continued growth in the agricultural sector and some recovery of FDI-financed construction activity are expected to raise growth to 0.8 percent in The value added tax (VAT) to broaden the tax base and enhance the efficiency of tax collection was introduced on February 1, 2010, as initially planned. The government is also working with the Organization for Economic Co-operation and Development (OECD) to revise the Public Procurement Act in line with international best practices and establish a Public Procurement system. 19. Employment.- According to the Poverty Assessment Survey 2008/2009, the level of unemployment in July 2008 was 24.9%. In light of the current recession, the level of unemployment is considered to be around 30%. In consequence, there are some 12,000 persons out of work (25% of 47,500). A significant portion of these persons are construction workers as a result of the dramatic decline of this sector. The extended agriculture sector now accounts for approximately 6-10% of GDP and employs about 25% of the total labour force. Ministry of Agriculture statistics from the extension division records a total of approximately 10,000 part-time and full time farmers that is a significant 10% of Grenada s national population. The average age of farmers is increasing relatively rapidly. The Grenada Land Utilization Survey concluded that the average age had increased to 54 years in

13 20. Domestic market and exports.- Grenada is a net food importer, with approximately 70 % imports and 30% domestic production in recent years. It includes imports of vegetables, roots and tubers, fruits, herbs and spices and pulses and nuts. Imports of these products show a steady growth trend and in spite they are not very significant in total food imports, most of them can be produced in Grenada and are highly demanded by the hotel and hospitality industry. The largest share of food imports includes rice, wheat and flour, livestock, meat and dairy products. Agro Imports amount to approximately US$50 million per year (2006). Table 1 shows the breakdown of food consumption into imports and domestic production. Table 1: Sources of food consumption (US$ 000) Source Food Imports Domestic Agricultural Production Total Food Consumption % Imports % Domestic Source: PDM based on data from Grenada MNIB 21. Table 2 shows imports of vegetables, roots and tubers, fruits, herbs and spices and pulses and nuts, compared to total food imports. Imports of these products show a steady growth trend and in spite they are not very significant in total food imports, most of them can be produced in the country. Table 2: Food imports (US$ 000) Product Vegetables Roots & Tubers Fruits Herbs & Spices Pulses & Nuts Subtotal Total Food Imports n.a. n.a. % Source: PDM based on data from Grenada MNIB 22. Table 3 presents the breakdown of agricultural exports. The traditional export products are cocoa, nutmeg and fish. After the 2004 and 2005 Hurricanes, cocoa and nutmeg significantly decreased their importance and fish has become the major source of foreign exchange. There are three large private fish processing and exporting enterprises in the country, two in St. George s and one in Gouyave. The most relevant specie for export is yellow fin tuna, harvested in the West Coast. 5

14 Table 3: Agricultural exports (USD 000) Product Banana Cocoa Nutmeg Mace Fresh fruits & vegetables Fish Other Total Agricultural Exports Source: PDM based on data from Central Statistical Office 23. Migration, brain-drain and remittances.- The Caribbean region has one of the highest emigration rates in the world, particularly of individuals with tertiary education. The average rate of emigration for the Organization of Eastern Caribbean States (OECS) in the period were 8%, 37% and 63% for labour force with primary, secondary and tertiary education respectively. These rates for Grenada were even higher: 10%, 70% and 67% respectively, showing a vital loss of human capital 2. It is estimated that more than double of the current population of Grenada, Carriacou and Petite Martinique are living abroad and the most common destinations are United States, United Kingdom, Canada and Trinidad and Tobago. 24. The impact of remittances in the local economy has been estimated as high as 31% of GDP 3. The inflow of remittances has increased after adverse shocks such as hurricanes: remittances in 2004 doubled previous years and remained high the following two years. Agricultural sector and rural development 25. Overview.- The performance of the agriculture sector in Grenada mirrors that of other countries in the Caribbean. Over the past two decades, the main performance indices (contribution to gross domestic product, production and export etc.) have recorded a decline. Factors responsible include: a decline in investment both public and private; increased market competition; reduction in profitability due to increases in production costs; and the effects of weather-related shocks, the most recent being the passage of hurricane Ivan in 2004, which resulted in near total devastation of the agriculture sector, including infrastructure and crops. 26. However, more recently, events in the global economy have favoured domestic producers. The food crisis of 2008 led to significant increases in the cost of food imports. While prices have declined slightly, they have not gone back to pre-2008 levels, and according to the Food and Agricultural Organisation of the United Nations (FAO), world food prices will remain well above the levels of the past decade, in the short to medium term. In addition, current trends associated with reductions in agriculture subsidies in developed countries are likely to result in further increases in the cost of imported food. Accordingly, notwithstanding increases in the cost of production inputs, the competiveness of Grenadian food crop farmers is likely to improve in the short to medium term. In addition, improvements in production planning, and the use of modern 2 3 Wold Bank, Report No , OECS Increasing linkages to tourism with agriculture, manufacture and service sector. September 30, 2008 IFAD, Sending money home. Worldwide Remittance Inflows to Developing and Transition Countries

15 production technology, can lead to overall improvements in productivity, produce quality and reliability of supply, leading to increased profitability of domestic producers. 27. The sub-sectors most favoured by local producers are food crop and livestock. These have relatively short gestation periods and low capital requirement. This should be adequate incentive for the entry by new farmers/entrepreneurs. As a result, given the projected favourable market conditions, the demand for production inputs and including credit is likely to be relatively high over the short to medium term. 28. Grenada's economy has shifted significantly since the 1970s, from one almost entirely based on producing agricultural commodities for export to a much more modernized and diversified one. Besides food crops grown for local and tourist consumption, for many years Grenada depended on exporting three main crops bananas, cocoa, and nutmeg but fluctuating world prices, natural disasters, and the threatened removal of preferential trading agreements have forced Grenada's government to seek to broaden the island's economic base. 29. The small size of production units and mixed cultivation practices presents special challenges related to the scale of enterprise and production efficiency. Increasing the size of production units through crop specialization, and encouraging producers to form commodity groups for joint production and marketing are among some of the approaches encouraged to address this issue. There are approximately 10,000 farms in the country, most consisting of a fraction of an acre. Smallholder farmers produce a wide variety of fruit and vegetable crops, and some livestock products. Nutmeg and mace have traditionally been the major exports. Until Hurricane Ivan destroyed these two major crops, Grenada was the world s second-largest producer after Indonesia, supplying one-quarter of world demand. Bananas are grown on a small scale, but are no longer exported. 30. Land use and distribution.- Land use in Grenada is closely linked to its economic history as a primary commodity producer. As Grenada transitioned from a cotton and sugar producer to tree crops such as nutmeg, cocoa and bananas, land usage and production moved from the lower areas up the mountain sides. As a result the acreage of forest declined during the period 1961 to Consequently public land is restricted to a few agricultural estates and the forest reserve. With the increasing demand for land for housing purposes, encroachment on formerly agricultural land and key watersheds is now a major concern. According to FAO, prior to the recent hurricanes forest accounted for approximately 22.6 % of Grenada s total land area. The impact of Hurricane Ivan has presented significant challenges, such as the vital need for reforestation. Some 91% of the forest was destroyed, baring the watersheds and an ecosystem that supported fauna and flora; diminishing the protected areas and undercutting the island s biological diversity. 31. Grenada is endowed with about 32,110 acres of lands devoted to agriculture. While 24,100 acres were devoted to tree crops and 2,470 acres (1000 ha) to forests; 4,940 acres defined as very fertile and relatively flat are used mainly for vegetable and food crops. The large majority of the land is private owned land and approximately 10% is state owned land. Over time this amount of agricultural lands has been declining. The Agriculture Policy of the new Government intends among other objectives to terminate this trend and safeguard the integrity of this limited agricultural resource. In total 90% of the farms are in the category of small farms with a size of 4.5 acres or less, while only 10% of the farms are in the category of larger farms. The larger farms are underinvested and there is a high level of abandonment. The majority of farms are under private ownership, either individually or family owned. A small proportion is rented and there is less land squatting than in some of the nearby islands. Differences related to land tenure by gender are important in that a larger percentage of men own land or rent land and more women than men use (but do not own) family land. 7

16 32. Key challenges and constraints.- The Government has identified four key binding constraints to agricultural development, including: a fragmented and unorganized private sector; lack of skilled human resources; weak linkages and participation in growth market segments; and limited finance and inadequate new investments. Sectoral challenges include: industry-wide devastation caused by natural disasters (two hurricanes within less than one year), insufficient existence and enforcement of agriculture policies, obsolete farming systems, limited or more often total deficiency in the use of technology, paucity in agricultural research and development, inadequate farm labourers or labour systems, aging farming community (average age of farmers as high as 54) which, inevitably, has affected productivity, thereby threatening future sustenance of the sector. Other intractable problems exist, including inadequate credit facilities, unattractive prices for agriculture produce, disorganized markets, lack of production planning and limited agroprocessing. 33. Food security.- Food security is an important issue to the poor of Grenada. The country still imports large quantities of food items, which are normally not accessible to the poor because of the prices. Food Security is being given high priority by the Grenada Ministry of Agriculture (MOA); and the Inter-American Institute for Cooperation on Agriculture (IICA) and Food and Agricultural Organization (FAO) have been providing support to this priority area. A food security programme started in 2009 by MOA and FAO, which promotes the redevelopment of backyard gardening into serious and essential farming, in that it should be really seen as a major source of foodstuff for many families and as such receive the technical assistance it requires. In addition, an advocacy programme eat what you grow and growing what you eat has been started in order to increase food security, promote locally-produced products, and reduce the country s import bill. 34. Backyard gardens remain therefore an important strategy for food security of Grenada; so much so that even after hurricane Ivan, women, through their backyard gardens and their involvement in the production of agricultural produce that reached the table, have played a significant role in the food security of the country. According to data from the Gender and Family Affairs Division, backyard gardening is presently under pressure, especially since theft of produce from the backyards has increased (mainly drug abuse related) and has demoralized many to continue with their efforts. The backyard garden also plays another important role, especially to poor female headed households in providing them with access to a little extra income from selling the excess produce in the market. 35. Some of the interventions promoted by MOA to address food security at national level are: (a) training of farmers and technicians; (b) promotion of the use of modern technology (irrigation, shade house usage etc.); (c) market support to farmers; (d) development of cost of production modules; (e) train farmers to become business men /women; (f) develop better storage facilities; (g) prioritize Research and Development activities; (h) create the enabling environment to get the private sector more involved in agriculture; (i) promote value added (agro-processing) as a priority; and (j) facilitate access to farm lands for young potential farmers. 36. Vulnerability to natural disasters.- Grenada is highly vulnerable to tropical storms and related natural disasters as it is the case from the direct hit from Hurricane Ivan (2004) which resulted in extensive damage and loss of lives. The massive scale of the destruction is exemplified by the following: 89% of the housing stock was destroyed or damaged, resulting in approximately 30,000 homeless; 91% of the forest areas and watersheds were destroyed; 85% of the nutmeg trees and 90% of the cash crops were destroyed; 70% of the hotels were destroyed or rendered inoperable. Loses in agriculture were of the order of EC$100 million. Grenada's current environmental issues include: soil erosion; beach and coastline erosion; waste management, supply, and 8

17 pollution; sedimentation of coastal and river waters; forest recovery and land protection; and potential loss of habitat and associated bio-diversity. 37. Small business sector.- It is estimated that the Small Business Sector (SBS), comprising micro, small and medium businesses, accounts for 50% of total employment. The National Policy Statement on Small Business Development (NPSSBD) indicates that small enterprises encompass a wide gamut of economic activities in agriculture, fisheries, manufacturing, construction, mechanical engineering, tourism, wholesale and retail distribution and a growing range of services including transportation, security, information, communications, finance, counselling and consultancy. The small business sector faces major constraints, such as the lack of access to resources including credit and skills training, a relatively inefficient and ineffective policy environment, and lack of access to markets and basic infrastructure. The inadequate access to debt and equity financing experienced by most small entrepreneurs are regarded as major constraints. 38. Lack of access to relevant information is another major constraint, mainly due to the low educational levels and limited reading habits. Most micro and small entrepreneurs do not have the capacity and time available to network with influential sectors as the public sector- and to attend dissemination and training workshops. Another crucial drawback relates to human resources: with the best trained and qualified talents employed in the Public Service and with stringent rules still in place against other gainful employment, the lower end of the private sector is hardly able to attract capable managers and technicians. This also restricts the capacity to acquire critical business management knowledge and know-how to improve productivity and access existing programmes and support services from public institutions. 39. The strategic plan of the Grenada Industrial Development Corporation s Business Development Centre (GIDC-BDC) identifies the major frustrations of micro and small enterprises as: lack of managerial capacity and self confidence, lack of market and marketing, scarcity of personal and business capital, limited access to affordable financial services, poor record-keeping discipline, low functional and financial literacy, succession unlikely if/when the key person becomes incapacitated or dies, lack of access to vital information and unfriendly forms, procedures, processes and customer care at public service offices. 40. Non-agricultural small enterprises generate 22% of employment; 55% of businesses are concentrated in trade, hotel and restaurants; 19% providing community, social and personal services; and 15% linked to manufacturing. Women are very prominent employees in these businesses, except for construction, but with lower economic returns compared to men and limited access to credit. More than half of the small enterprises are located in urban centres. 41. Tourism and agriculture represent a potential for expansion of rural businesses, starting with reduction of imported food. Further, proper linkage of these areas empowers farmers, provides more employment for locals, promotes food security and local supply to the hospitality sector while affording local people the opportunity to organize into co-operatives and establish better business linkages. The connection of agricultural products, the rural settings, and rural living experiences with the tourism experience is an opportunity to take advantage of, for employment generation. The scope of agro-ecotourism is significant and Grenada is bountiful in natural sites and regions with unique innate or ecological quality. 42. Credit and rural financial services.- Grenada has a well established, modern financial system made up of a development bank, and several commercial banks and micro-finance institutions. However, a review of the loan portfolio of financial institutions (FIs) in Grenada reveals that loans for agriculture and rural-based valued-adding enterprises represent a relatively small percentage of FIs portfolios. In general, most FIs 9

18 are reluctant to actively engage in lending to the sector due to a combination of factors including: (a) high transaction costs associated with appraisal and monitoring of small businesses; (b) limited business management skills of applicants; (c) absence of support institutions (private and public) servicing the sub-sector; (d) the sector s vulnerability to external shocks; and (e) absence of risk mitigation schemes. 43. Those institutions which have attempted to service the sector report high levels of loan default, further eroding confidence and willingness to increase their exposure in the sector. Most FIs view small scale farmers/rural entrepreneurs as a particularly high risk group, often with limited access to assets which could be used as collateral security. The NPSSBD identifies unequal access to finance, markets, information and management skills as the major constraints to survival and growth facing the SBS. 90% of bank and credit union branches, including ATM, are concentrated in the Greater St George s-grand Anse area, emphasizing the need for redirecting more retail financing towards the rural communities. It points out that financing smaller enterprises is still viewed as a high risk and cost-inefficient activity for all five banks in Grenada, giving grounds to the perception that foreign investors have easier chances to financing than local investors. It also indicates that the prevailing view among commercial bankers is that small business financing is a developmental cause to which they may contribute if the fiscal incentives regime is amended to award tax credits for corporate contributions to the small business sub-sector. 44. Credit unions represent the only financial service provider in rural areas, their loan amounts are significantly smaller than banks, reporting a combined asset base of nearly US$ 100 million as of December 2008, 80% of which was reinvested in loans to their members-shareholders, representing a home-grown microfinance alternative with unrivalled redistributive capacity. The Governmental institutions Grenada Development Bank, Micro Enterprise Development Fund and Ministry of Agriculture (MOA) funds- represent an important share in SBS financing. Most of these programmes operate at the lowest interest rates and some of them like the MOA fundspresent serious delinquency problems. The NPSSBD identifies as a pre-condition for creating an enabling environment for the SBS that Government-administered credit through Government Ministries and State Corporations should be immediately ceased in view of their long history of poor collection, weak accountability and the need to instil financial discipline among all borrowers and the negative impact of these schemes on Grenada s international reputation. Instead, bona fide microfinance institutions in the private sector with a proven track record for serving the underserved should be supported and empowered to manage such access funds within strict performance and accountability guidelines. B. Policy, governance and institutional issues, political and economic issues Key Government policies 45. Poverty.- The Government is committed to investing in rural development and poverty reduction, while seeking to increase food security, reduce the presently high food imports, and establish a platform for employment generation. Consequently, it considers: (a) that agricultural intensification and diversification remain to be valid strategies, based on organic agriculture and the identification of niche markets for cash and other value crops; and (b) that the small/micro enterprise sector can play an important role in addressing unemployment while promoting rural production, private sector engagement, and local and regional competitiveness. 46. The Government is elaborating a comprehensive and long term Poverty Reduction Strategy and Action Plan (PRSAP) with the aim of transforming Grenada s poverty landscape over the next few years. This process is expected to be participatory and will 10

19 serve to integrate poverty reduction efforts across all sectors of government as well as non-government organizations. The PRSAP will build on poverty reduction and social safety net initiatives already in place. These social safety net and public assistance programme provides monthly transfers to needy elderly persons mainly in rural areas, subsidizes bus fares for tertiary education students, and other programmes such as free water supply, free books for needy children and free medicine for the elderly. This programme has however, received critical reviews as at some time it was biased for political reasons, and did not necessarily target the extreme poor or poor. New eligibility criteria installed by the present government however, are reorienting the programme, targeting the unemployed, disabled, and persons under the indigent poverty lines. 47. Agriculture and rural development.- Government of Grenada (GOG) is cognisant of the fact that a revitalised and efficient agriculture and rural sector must be a critical component of its development agenda if it is to achieve the objectives of: improving the livelihood of residents in rural areas; reducing overall poverty levels; and improving the country s food security situation. Access to affordable credit for agricultural-related enterprises has been identified by GOG as one of the factors that would have a positive impact on the performance of rural enterprises and on the overall quality of life of rural residents through: (a) increasing the production of crops for the domestic and export market; (b) supporting the development of small scale agroprocessing and related rural based enterprises; (c) sustaining year round production of high quality fruits and vegetables by modern production technologies; (d) creating employment in the rural areas and reducing the rate of migration to urban areas; and (e) reducing the country s vulnerability to high prices of imported foods. 48. The key priorities for revitalizing agriculture and fisheries comprise (a) Institutional Strengthening, seeking to further strengthen the country s capacity for long term agricultural planning, research and development and marketing; (b) Govt. Estates Development and Rehabilitation Programme, improving management and operation of the five major estates (Grand Bras, Belle Vue, Mt Reuil, Bocage and Laura) owned by the government, increasing output of major agricultural commodities such as bananas, nutmeg, cocoa, fruits and livestock; generating employment in the rural communities, raising revenues, and serving as demonstration sites to showcase good agricultural practices; (c) Support to Selected Industries, through the producer association of nutmegs, cocoa, poultry, sugar cane, apiculture, etc., including support to agro processing and cocoa processing; (d) Food Security Enhancement Programme, focusing on the promotion of local consumption of more locally produced foods; (e) Agricultural Farm Labour Support Programme, consisting of four components: Rehabilitation of Farm and Feeder Roads, Labour for land preparation for farmers wishing to establish fruit tree orchards and for maintenance of already established orchards, Labour for land preparation to farmers seeking to establish plots of minor spices (cinnamon, cloves, bay leaf) and for maintenance of these plots; Labour and or material to livestock farmers to establish pastures and forage banks; and Labour for farmers to improve drainage, contouring and other soil conservation techniques; (e) Agricultural Inputs Support Programme, the MOA will make agricultural inputs available, on a timely basis, to support agricultural production initiatives. Fertilizers and agro-chemicals will be purchased in bulk and resold to farmers using the Ministry of Finance approved procedure for conducting such transactions; (f) Livestock Development, through the use of artificial insemination in small ruminants and pigs, the development of animal nutrition improvement programmes and continuing to build capacity in improved animal husbandry; (g) Plant Propagation Programme (under this programme the Ministry proposes to propagate culture plants for bananas, pineapples, cocoa, nutmegs, fruits & spices); and (h) Agricultural Marketing & Promotion, seeking to expand the consumption of targeted commodities including cassava, pork, fruits, vegetables and eggs. 49. Small business strategy.- A National Policy Statement on Small Business Development (NPSSBD) was prepared with the support of the World Bank-financed 11

20 Public Sector Modernisation Project (PSMP). The stated purpose of the Policy is to stimulate the sustainable development, growth and expansion of viable micro, small and medium-scale enterprises and to create appropriate conditions for the entrepreneurial spirit and culture to flourish in urban, sub-urban and non-urban communities throughout Grenada. There are 14 policy measures identified that establish a comprehensive package of incentives that will be included in a Small Business Development Bill to be approved in This law will include a number of incentives: increased procurement of goods and services required by the public sector, special incentives for the export of goods and services, technical assistance and training from Government agencies, tax credits on sums loaned or on guarantees for loans, etc. 50. Micro and small enterprises will have to apply to become an approved enterprise to have access to these incentives. The assistance and guidance in accessing incentives will be provided by the Business Development Centre (BDC) of the Grenada Industrial Development Corporation (GIDC). Other policy measures include new legislation and promotion of cooperatives, the promotion of a culture of competitiveness and entrepreneurship through entrepreneurship education and training, technical assistance on a demand driven basis, land reform to improve access to and usufruct of critical lands by small entrepreneurs and the strengthening of the rural economy through special incentives to those small businesses located in rural areas. The institutional arrangements for the implementation of the NPSSBD vest a leading role to GIDC. 51. National Export Strategy.- The Government is implementing a national export strategy, including the Economic Partnership Agreements, thus it is accessing funding through the CARICOM Development Fund and AID for Trade and the European Development Fund. A National Export Council is being set up to monitor and manage the implementation of these activities. The appointment of a Marketing manager in the Ministry of Agriculture should enable Grenada to redouble the efforts to exploit the benefits of the agriculture protocol with the Government of the Republic of Trinidad and Tobago. Equally important is the formation of clusters for exports and production. The Organisation of American States has provided funding for this project and the Marketing and National Importing Board is executing activities geared at forming clusters to increase capacity for exports through joint production, marketing, procurement and the sharing of services. With support from OAS, exporters will be trained in the international trade requirements and on Fish Smoking techniques in selected fishing communities to create new value added products for exports. With this funding, the Grenada Bureau of Standards has already started a pilot project to identify exportable herbal products. The Trade and Export Development Division will become a First Stop shop for general trade information. Support services institutions such as GIDC, the Grenada Bureau of Standards and the Grenada Marketing and National Importing Board (MNIB) will receive specialized training and their activities will be streamlined to offer specialized support. Institutional framework 52. Key institutions involved in agriculture/ rural development and poverty reduction, human and social capital development, and facilitation of access to markets and business development are the following. These agencies and institutions and their specific programmes are described in greater detail in the working papers. 53. The Ministry of Youth Empowerment and Sports is responsible for youth policy, initiatives in youth development, a youth leadership programme whereby youth are encouraged to become involved in CARICOM and youth parliaments in all Parishes, a rehabilitation programme which has not started yet because of lack of funding, and a comprehensive the Youth Uplift Programme. The Ministry has approximately 80 staff, amongst which 8 youth field officers, 7 Youth uplift programme monitoring officers, and an additional 60 sports officers. 12