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EDEN Project
A Start-up Funding Proposal

Prepared by: Miss Wu Qizhi Chief Representative of Semics Xinjiang LLC cgwu@semics.biz November 2004

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Semics Xinjiang LLC China Northwest Office
Xinjiang Urumqi, No. 39 Xibei Lu, Yindu Hotel, West Tower Suite 440, 830000 Tel: 86-991-458-0440 Mobile: 13999151771 Miss Wu Qi zhi
(cgwu@semics.biz) Chief Resident Representative

Miss Zhou Jin hong (jhzhou@semics.biz)
Assistant to Miss Wu

Brief Company Introduction Semics, LLC is a US company founded in 2003 to provide state-of-the-art business solutions in the US and in Asia that are ecologically based and of daily practical value. In the US, we focus on providing professional services that bridge large companies and agencies with neighborhood needs. In Asia, we are especially interested in investment opportunities in the agricultural sector. The company founder, Mr. Grant D. Power, has graduate business training and professional experience in community economic development, planning, evaluation, and service/product marketing on three continents. The staff of Semics has a combined working history of more than 40 years in sustainable development. Major clients include Habitat for Humanities (Africa-Middle East office), California Center for Land Recycling (CCLR), InnerChange, World Vision (Philippines, Vietnam, USA). Miss Wu Qi zhi is a published author and illustrator. In 1995, she arrived in Xinjiang and stayed. Over the past nine years, Miss Wu has traveled throughout the province, cultivating a deep appreciation for the Xinjiang people and their agrarian life on the oasis. After years of discussion between Mr. Power, Miss Wu and many sympathetic friends in North America, a resolve was born. And in 2004, Semics opened a research office in Urumqi, Xinjiang to define a viable and relevant way to help struggling small farm communities of Xinjiang. The Eden Project Proposal is the result of their preliminary research.

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EDEN Project
Table of Contents

Summary ···································································································· 4 1. 2. 3. Introduction to EDEN Project ···································································· 4 Today’s Xinjiang ························································································ 4 Project Distinctives ···················································································· 5

4. Preliminary Survey and Initial Strategies ·················································· 6 5. 6. Location of Farm Site ················································································ 7 Development of the Business ···································································· 7

7. Staff and Workers ······················································································· 8 8. 9. Evaluation ·································································································· 8 Preliminary Budget ···················································································· 8

10. Appendices ································································································· 9 Appendix I Appendix II Appendix III Appendix IV Farmland Considered in Preliminary Study ··················· 9 Specialty Crops ····························································· 12 Phase 3 Plans for a Visitor Center ································ 12 Preliminary Budget ······················································· 14

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EDEN Project
A Start-up Funding Proposal of an Economically Viable, Socially Responsible, Ecologically Based Agricultural Business with an Urban Market “Niche” in Xinjiang, China

Summary: EDEN Project is an agricultural endeavour to improve the economy and community culture of a poor agrarian village in southern Xinjiang; through the operations of a private, for-profit farm whose scale in presence and operation is comparable to that of neighbouring farms. By working cooperatively with local and foreign technicians, EDEN farmers will practice sustainable agriculture under similar financial and physical restrictions the host community faces. EDEN will initiate culturally and ecologically appropriate, adoptable methods to add market value to locally grown crops and cultivate new produce for local urban markets. EDEN farmers will proactively engage with neighbouring farmers on day-by-day bases to build trust and learn indigenous knowledge as well as share information and innovation. EDEN Project will deliver appropriate technologies and be financially sustainable. 1. Introduction to EDEN Project Miss Wu Qizhi, a Canadian illustrator, ventured to Xinjiang in 1995 to discover the people of The Silk Road. And for the past nine years, she has lived there amongst various social strata of people including farmers. In 1998, she spent two backbreaking weeks working on a small Xinjiang family farm and experienced what she described as, “the work slaves.” This would be the beginning of her pleas for help on behalf of those farmers. In 2000, a small group of her friends in northern California decided to attempt the formation of a grass root project to aid Xinjiang farmers. This group of volunteers includes office workers, teachers, financial managers, civil and IT engineers, students, agriculture researcher, development workers and a few Xinjiang farmers. Together they have raised sufficient funding to open a research office in Urumqi and drafted this project proposal. 2. Today’s Xinjiang Xinjiang Uygur Autonomous Region is situated in the northeastern border area of China. It borders Mongolia, Russian Federation, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan, Pakistan, and India. In China, it adjoins Tibet, Qinghai, and Gansu. Its geographical position is at 73° 41' – 96° 18' east longitude and 34° 25' – 49° north latitude. It has a typical continental climate. It possesses 57 million hectares of

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grassland, of which 48 million hectares can be cultivated. Xinjiang province occupies an area of 1.67 million square kilometers with only 70,700 square kilometers of oasis inhabitable to people. 90% of the total population of 19 million lives on the oasis, which is only 4% of the total land area. Xinjiang is the most land locked place on the planet. Xinjiang is strategic as China moves to increase trade with European and Central Asian markets. For years, Xinjiang had restrictive investment policies toward foreign companies due to security issues. But the establishment of “one stop” investment service centers in 2004 throughout Xinjiang has allowed unprecedented access for foreign small-and-medium-size enterprises. Xinjiang has the second largest grassland area in China, but its distribution is scarce as population continues to increase. Alongside natural births, Xinjiang invites millions of new settlers each year from other provinces to participate in the cultivation of lands on the fringe of the oasis. This expansion is made possible through increased government control over resource distribution. This recent development gives cause for grievance amongst native peoples, who for generations have had unlimited access to those resources without charge. Restrictive access to resources has increased the cost of farming, adding financial burden on traditional subsistence farmers. And the added production from the increased number of farms results in heightened competition in the marketplace. The push and panic to sell early into flooded markets drives wholesale prices downward. Similar to China’s overall demographics, 70% of Xinjiang’s population are also farmers. Estimates of the number of small subsistence farmers in this province are not available, but they represent a majority of rural households whose scattered plots average 0.67 hectare* per household. Surviving in such a fragile ecosystem and competitive market is a challenge not many are prepared to face. 3. Project Distinctives 3.1 EDEN has two objectives: a business objective and a social objective. The business objective of EDEN is to achieve profitable, consistent growth in urban market sales by providing “niche” food products on an ongoing basis. We will begin by growing “safe” produce using minimal agro-chemicals, then transition into organic products. Our product quality and reliability will generate consumer confidence for organic products. China’s urban consumers are demanding for healthy, wholesome foods (see marketsearch.com). Contamination of nutritional integrity in foods exasperates a nation that has depended and continues to depend on food as their primary source for health.

* Conversion ratio: 15 Chinese mu = 1 hectare

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3.2 By premeditated design and effort, EDEN will be an ecological steward of the resources it manages. EDEN will find financially justifiable ways in all its operation to lower production costs by exploiting renewable resources, practicing conservation technology, benefiting from bio-diversity, and natural food preservation techniques. 3.3 EDEN, though an international company rich with resources, will scale its farm operation to reflect the scale of farm operations in its host community. Cooperative synergy between agricultural innovators and committed farmers, EDEN’s success will demonstrate to farmers in the community that good stewardship and clever usage of existing resources pays. 3.4 The social objective of EDEN is to give hope to its community by demonstrating a profitable small farm management model, which they can easily envision their own and adopt to reap similar benefits. EDEN will demonstrate lower cost sustainable production methods, minimal processing technology to create higher value farm by-products, creative low-cost marketing to build consumer-producer trust. 3.5 As EDEN establishes itself in the urban markets of health conscious consumers, we will create cooperative opportunities with neighbouring small farm holders so they can participate fully in supplying the growing markets. 3.6 EDEN is a simple mechanism to deliver information and technology in a non-abstract, concrete form. EDEN’s scaled down, performance driven operation, targeting itself as a money making farm rather then a subsidized teaching tool will be the key to a convincing presentation of sustainable agriculture’s feasibility. 4. Preliminary Survey and Initial Strategies 4.1 In order to gather information and draw up a business plan for the project, a representative office has been set up in Xinjiang. The office has made extensive enquiries with government agricultural agencies, training centers, NGO’s and businesses in Urumqi, Kashi and Shule. In addition, we have also met up with farmers in Ily, Korla Prefectures and some counties. In the present political climate, government agencies and local farming enterprises are very welcoming to foreign agricultural investment and input. 4.2 One initial objective of the survey was to research on specialty crops such as heritage herbs, berries grown commercially (blackcurrants and raspberries), aromatic herbs and flowers. A handful of Xinjiang agribusinesses and large farm holders are growing such crops. Most of them consult foreign technical experts and produce and process for foreign markets. Another objective was to research Xinjiang’s organic producers. Though a few large food-processing companies have certified “green”

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products*, there are yet no certified “organic” farms in Xinjiang. Although it will still be an important part of our strategy to experiment with specialty and organic crops, we believe that small farms should initially focus on broadening product lines for existing local demand for common agricultural products. 4.3 We thus considered common products for the market (wheat, rice, fruit, vegetables, etc.) and looked at how we could improve on their marketing. Most small farm holders we met consciously grew organically for their own consumption. Some farmers were paid by their urban relatives lump sums in advance for a share of an organically** grown crop or raised animals. Shelf space for “safe” produce in large supermarkets is expanding. Public frustration of the abuses and dangers of agro-chemical residue and hormones in their foods is high. And these issues are affecting what consumers are not buying. In the light of such evident market demand, and obvious void of “safe” produce supply, our next step will be to determine the feasibility of trust with these consumers by processing and delivering safe and healthy farm products packaged and located conveniently for urban consumers (wholesale and/or retail). 5. Location of Farm Site 5.1 Having decided to begin with common products for existing markets, we were freed from considerations of special climatic or soil requirements for specialty crops. Other than suitable agricultural land with sufficient access to water, our criteria was that the farm should be near an urban center for access to its’ markets, yet be out of range of urban pollution. In addition, we needed to be inside a farming community in view of our social objectives. 5.2 We surveyed agricultural land near Urumqi (the regional capital) and near Kashi in the far south. In Kashi, we met with leaders of the Kashi Agricultural Skills and Technology Promotion Department (KASTPD) who were very open to the idea of cooperating with a foreign investor whose social objectives compliment their mandate. KASTPD presented various plots of land earmarked for experimental or innovative agricultural production for our consideration. Thus far, two plots of land offered for lease by the KASTPD seem most suitable to our criteria (Appendix I). 6. Development of the Business We propose to develop the project in 3 stages. 6.1 Phase 1 Years 1 – 3  Lease portions Lot B – 3.2 ha of farmland, 2 greenhouses, 1 warehouse, office and dormitory accommodations. (3.4 ha of vegetables and specialty crops using sustainable agricultural technologies).

* Meat, vegetable, fruit, milk powder, ice cream, fish products, flour, cooking oil, sugar, rice, sunflower seeds, raisins. ** Not certified organic but grown with minimal agro-chemicals and applied no growth hormones.

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     

Test, evaluate and adjust soil structure and nutrient quality. Test, evaluate on site water sources. Evaluate typography and design irrigation system. Develop market distinctiveness for “safe (wu gong hai)” produce and meats. Develop add-value by-products for locally available produce and meats such as brown rice, tomato sauces, nut candies, and sausages. Experiment with new specialty crops cultivation and marketing to develop market niche (Appendix II).

6.2 Phase 2 Years 3 – 6  Develop market venues for organic produce.  Attain recognition and certification for organic products.  Expand production and sales of new specialty crops if viable.  Lease more greenhouses on Lot B to expand research and experimentation facilities. 6.3 Phase 3 Year 7  Develop Visitor Center on Lot B for marketing and education for urban consumers (Appendix III). 7. Staff and Workers required for Phase 1 1. Company Office: One business manager, one part-time accountant. 2. Farm: One farm manager, two full-time farmhands. 8. Evaluation Evaluation of the project will be judged in two divisions; Office and Farm. Office Division will be judged on its efficiency in maintaining administrative clarity to the satisfaction of Xinjiang government and its foreign investors. Farm Division will be judged on its production, environmental stewardship and social impact to neighbouring farmers. Company will be held accountable to show profitability within three years and payback capital in year ten. 9. Preliminary Budget Though EDEN’s farm operation is designed to be appropriately small, its corporate structure as a foreign-owned, for-profit company will be required to operate under standards set by Xinjiang foreign investment regulations. This will be reflected in the budget (Appendix IV).

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10. Appendices Appendix I Farmland Considered in Preliminary Study 1. Lot A – Existing Corn Field Location: 7 km from Kashi City Lot Size: 13 ha Housing: Not permissible Cultivated Land: 13 ha Natural Spring: Year round natural flow (free of charge) EC: 1.1 ms TDS: 0.66 ppm Sufficient to water 13 ha of corn Alternative water available from nearby river Road Access: Compacted dirt roads Crops on Site: Corn, wheat Soil Condition: Good Cultivation Time: 50+ years Rent: US$550/ha annually Renting Period: 20 – 30 years 2. Lot B – Consisting of Existing Model Farm Location: 6 km from Kashi City (NW of Lot A) Lot Size: 5.2 ha Built up Area: 2 ha of brick row housing and greenhouses Cultivated Land: 3.2 ha Natural Spring: Identical quality to Lot A’s spring Road Access: 20 minutes by car from Kashi Paved road from Hwy. 315 directly to farm Existing Crops on Site: Pomegranates, grapes, alfalfa, greenhouse grapes, green house peaches, wild fruit bushes and trees Soil Condition: Good Productive Period: 50+ years Rent: US$9,700 – $10,900 annually for entire property or $550/ha of cultivated land annually Rent Period: 10 – 20 years

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3. Neighbouring Village Situation Population: 100 families (approximately 550 people) Average Annual Income per Capita: US$194 (slightly higher than Prefecture’s average of $182) Main Crops: Rice, wheat, cotton Soil: Red soil, Ph 7 – 7.3 Animal Husbandry: Sheep, cows (approx. 20 farmers have over 20 cows) Local Craft: Hand braided reeds sheeting used for roofing Water Resources Upper reaches of Kashi’s main Kezi River Farmhand Costs: Full-time – $64/month Part-time – $2.40 – $3/day 4. Kashi Prefecture Statistics Population: 3,500,000 (90% Uygur, 8% Han, 2% other) Kashi City Population: 200,000 Main Crops: Grains, cotton, melon, fruits Altitude: 1289 m above sea level Avg. Annul Temperature: 11.8oC (Low Jan –6o, Hi July 27o, Highest 34o) Total Precipitation: 39 – 64 mm Annual Evaporation Rate 2,162 mm Annual Sunshine Hours 2,652 Frost Free Days 224 Agriculture: Oasis irrigation

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Lots location relative to Kashi City center

5.2 ha

13.3 ha

0.7 ha

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Appendix II Specialty Crops In its business strategy, EDEN aims to develop and serve special niche markets for organically grown agricultural products in Xinjiang. 1. Heritage herbs and seeds Xinjiang’s heritage herbs have mainly been harvested from the wild. But new laws limiting and prohibiting their harvesting creates an opportunity for growers. These herbs are well known and in demand by producers of Chinese medicine, cosmetics (skin cream, hair care), and culinary spices. 2. Introduction of new specialty crops Introduce multiple species of common crops. Cultivate exotic mushrooms. Introduce variety of ornamental and herbal flowers. 3. Production and promotion of health foods Healthy versions of common foods like brown rice, wheat germ, whole-wheat flour, bran, or popular health products like barley green, etc. are relatively uncommon and unavailable in Xinjiang. The natural spring water on site may be bottled, and featured as a healthy ingredient in food processing. 4. Other possible niche products Herbs as health supplements, aromatic oils, perfumes, candy. Organic fertilizers, insecticides, animal growth/health supplements. Gift items associated with Xinjiang heritage plants and animals (posters/ pottery/souvenirs). Appendix III Phase 3 Plans for a Visitor Center Another method of building consumer interest and trust for organic products is through an inviting Visitor Center. 1. Outreach to city residents Attracting city residents to the farm by providing tours of the farm, picnic areas, Pick-Your-Own weekends, healthy cooking seminars, organic farmers’ market, herbal massage weekends, mineral spring spa, spring hay rides, playground, and other interesting agro-educational activities; building credibility and enthusiasm for organic producers in the area.

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2. Outreach to farmers The appropriate technology proven successful in the field would be made available through exhibition, demonstration, training to interested farmers beyond our immediate community, and through cooperative programs with regional skills promotion centers. Plan for Visitor Center on Lot B

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Appendix IV Preliminary Budget
EDEN Sustainable Agricultural Experiment Farm Estimated Initial Setup Cost 2005 Currency: Chinese RMB Exchange rate: 1 USD=8 RMB Qty Farm Site: Operation Cost Machinery Tractor Equipment Hand Tools Greenhouse Operation: Operation Cost Farm Facilities: Rent for Housing and Warehouse Housing Renovation Personnel: Business Manager Business Office: Urumqi Office Operation Cost Estimated Setup Cost Req'd Capital Deposit 12 1,478 17,739 10,000 175,575 2,217 1,250 21,947 50,000 6,250 20,000 10,000 2,500 1,250 12,064 1,508 35,472 20,000 300 4,434 2,500 38 per month per annum USD

800,000 100,000

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Estimated First Year Income from Farm Input Gross Cost Income Field Crops and Produce (3.2 ha) Greenhouse Produce (0.13 ha) Total 35,472 71,808 11,264 34,000 46,736 105,808 Net Net US$ Income 36,336 22,736 59,072 4,542 2,842 7,384

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