Get documents about "Alternative Livelihoods Development Project
Document Sample
ADB
Report and Recommendation of the President
RRP: FIJ 32541
Report and Recommendation of the
President to the Board of Directors
on a Proposed Loan and Technical
Assistance Grant to the Republic of
the Fiji Islands for the Alternative
Livelihoods Development Project
March 2005
Asian Development Bank
CURRENCY EQUIVALENTS
(as of 1 November 2004)
Currency Unit – Fiji dollar (F$)
F$1.00 = US$0.5136
US$1.00 = F$1.947
ABBREVIATIONS
ACP – African, Caribbean, and Pacific
ADB – Asian Development Bank
ALTA – Agricultural Landlord and Tenant Act
BQA – bilateral quarantine agreement
CCSLA – Canefarmers Cooperative Savings and Loan Association
EIRR – economic internal rate of return
EU – European Union
FCA – Fiji College of Agriculture
FDB – Fiji Development Bank
FSC – Fiji Sugar Corporation
FSCUL – Fiji Savings and Credit Union League
GDP – gross domestic product
IEE – initial environmental examination
lb – US pound
LIBOR – London interbank offered rate
MASLR – Ministry of Agriculture, Sugar and Land Resettlement
MFI – microfinance institution
NCSMED – National Center for Small and Micro Enterprise Development
NGO – nongovernment organization
NLTB – Native Land Trust Board
NSC – national steering committee
OFL – off-farm livelihoods
PCU – project coordination unit
PIU – project implementation unit
PPME − project performance monitoring and evaluation
PPMS − project performance monitoring system
RFS – rural financial services
SCGC – Sugar Cane Growers Council
SCU – savings and credit union
SDP – Strategic Development Plan
TA – technical assistance
TCC – thrift and credit cooperative
TPAF – Training and Productivity Authority of Fiji
WTO – World Trade Organization
NOTE
The fiscal year (FY) of the Government ends on 31 December.
This report was prepared by K. Kannan, Pacific Department.
CONTENTS
Page
LOAN AND PROJECT SUMMARY i
MAP vii
I. THE PROPOSAL 1
II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1
A. Performance Indicators and Analysis 1
B. Analysis of Key Problems and Opportunities 4
III. THE PROPOSED PROJECT 8
A. Objectives 8
B. Components and Outputs 9
C. Special Features 13
D. Cost Estimates 14
E. Financing Plan 14
F. Implementation Arrangements 15
IV. TECHNICAL ASSISTANCE 18
V. PROJECT BENEFITS, IMPACTS, AND RISKS 18
VI. ASSURANCES 21
A. Specific Assurances 21
B. Conditions 22
VII. RECOMMENDATION 22
APPENDIXES
1. Rural Sector Analysis 23
2. Summary of Agricultural Lease Renewals and Land Availability 29
3. External Assistance to the Fijian Agriculture Sector 34
4. Project Framework 35
5. Criteria to be Applied to Project Activities 40
6. Cost Estimates and Financing Plan 42
7. Implementation Schedule, 2005–2010 44
8. Indicative Procurement Packages and Methods 45
9. Terms of Reference for Community-Organizing Nongovernment Organizations
and Implementation Consultants 46
10. Technical Assistance to Strengthen Commercial Agriculture Development 51
11. Summary Poverty Reduction and Social Strategy 56
12. Financial and Economic Analyses 58
LOAN AND PROJECT SUMMARY
Borrower The Republic of the Fiji Islands (Fiji Islands)
Classification Targeting classification: Targeted intervention
Sector: Agriculture and Natural Resources
Subsector: Agriculture production, agro processing and
agribusiness
Themes: Sustainable economic growth, Inclusive social
development, and Private sector development
Environment Category B: Environmental implications were reviewed and
Assessment environmental interventions were incorporated as required.
Project Description The project area includes sugarcane belt areas and nearby rural
and peri-urban areas of the Western and Northern divisions on
the main islands of Viti Levu and Vanua Levu. The Project
specifically addresses the needs of household members rather
than of household heads alone, taking into account women’s
needs in on- and off-farm livelihood activities. The Project will
develop beneficiaries’ capacities and capabilities to secure
alternative livelihoods from diversified agriculture, off-farm
employment, microenterprises, and improved access to financial
services. The Project will help individuals, nongovernment
organizations (NGOs), government, and private sector to fulfill
their tasks more effectively. The Project will be implemented
through public-private partnerships. Project preparation involved
extensive participation by stakeholders.
Rationale Sugarcane dominates the Fiji Islands’ agriculture sector: in 2002,
it accounted for 36% of agricultural gross domestic product. For
more than 20 years, the sugar industry has benefited from prices
that have been as much as triple world prices and has insulated
growers from the need to improve their efficiency and productivity.
Indications suggest that the price of sugar will move toward world
prices in the longer term. Furthermore, the poor financial
performance of the Fiji Sugar Corporation has exacerbated the
situation, and urgent industry restructuring is needed to reverse
the current situation. Without assistance, many sugarcane
farmers will be unable to adjust. To face the challenge, efficiency
must improve and resources must be reallocated to new uses in
viable livelihoods with minimum disruption. This situation
coincides with the expiry of some 10,300 government-regulated
leases over the next 25 years, many of which will not be renewed
as landowners seek to enter farming themselves, resulting in
hardship for experienced farmers exiting farming. At the same
time, incoming farmers have limited capital and experience. The
Project seeks to address the need of poor rural people, including
exiting farmers, to access alternative livelihoods.
Objectives The goal of the Project is to protect and improve the standard of
ii
living of rural people put at risk because of the restructuring of the
sugar industry. The purpose of the Project is to increase
sustainable livelihoods, on- and off-farm, to at least replace those
lost during the course of sugar industry restructuring. To achieve
this, the Project seeks to (i) maintain a healthy agriculture sector
with viable alternatives to sugarcane farming, (ii) generate
sustainable off-farm and self-employment opportunities for people
exiting the sugar sector and for other rural poor, (iii) provide
access to savings and credit services in rural communities to
facilitate livelihood activities and improve the quality of life, and
(iv) provide critical farm access infrastructure for rural
communities.
The Project has four components: (i) promoting agricultural
diversification, strengthening agricultural services, and developing
effective public-private sector partnerships in commercial
agriculture; (ii) encouraging people to engage in off-farm
livelihoods to create income-generating capacity in rural areas by
strengthening public and private sector vocational training and
advisory capacity; (iii) strengthening rural financial services
offered by microfinance institutions (MFIs) and promoting
sustainable MFIs in areas poorly served by commercial banks;
and (iv) project coordination.
Cost Estimates The total cost of the Project is estimated at US$49.8 million
equivalent inclusive of physical and price contingencies, interest
during construction, taxes, and duties. It is proposed that the
Asian Development Bank (ADB) provide a loan of US$25 million
equivalent, or 50.2% of the estimated total project cost. The
Government will contribute US$8.7 million or 17.5%, the Fiji
Development Bank will contribute US$8.8 million or 17.7%, and
other beneficiaries will contribute the remaining US$7.3 million or
14.6%.
(US$ '000)
Financing Plan Foreign Local Total Percent
Source Exchange Currency Cost
Asian Development Bank 10,673 14,328 25,000 50.2
Government of the Fiji Islands 0 8,690 8,690 17.5
Fiji Development Bank 0 8,823 8,823 17.7
Beneficiaries 0 7,262 7,262 14.6
Total 10,673 39,104 49,778 100.0
Loan Amount and Terms A loan of US$25 million from ADB’s ordinary capital resources will
be provided under ADB’s London interbank offered rate (LIBOR)-
based lending facility. The loan will have a 25-year term including
a grace period of 5 years, an interest rate determined in
accordance with ADB’s LIBOR-based lending facility, a
commitment charge of 0.75% per annum, and such other terms
and conditions set forth in the Loan Agreement.
iii
Period of Utilization Until 30 June 2011
Estimated Project 31 December 2010
Completion Date
Implementation The Ministry of Agriculture, Sugar, and Land Resettlement
Arrangements (MASLR), the Executing Agency, will be responsible for project
implementation. To strengthen the implementation capacity within
MASLR, a project coordination unit (PCU) in Suva, and two
divisional project implementation units will be established in
Lautoka and Labasa under the Director Extension Services to
support and coordinate project activities. The PCU shall also be
responsible for overseeing implementation activities in the six field
offices in the relevant sugar milling centers. A national steering
committee will be established, chaired by the chief executive
officer of MASLR, with representatives of each of the
implementing agencies; other relevant agencies; and civil society
representatives, including the private sector. The national steering
committee will oversee, coordinate, and monitor agencies during
implementation and provide policy guidance. MASLR, through the
PCU, will have overall responsibility for executing the Project. The
PCU will coordinate closely with the implementing agencies,
including the Fiji Development Bank, MFIs, NGOs, and the private
sector. Two divisional steering committees for project-level
support will be formed in Lautoka and Labasa, respectively, to
provide overall guidance and direction for project implementation
and to help resolve implementation issues.
Executing Agency Ministry of Agriculture, Sugar, and Land Resettlement (MASLR)
Procurement Goods and services to be financed from the proceeds of the ADB
loan will be procured in accordance with ADB’s Guidelines for
Procurement. Vehicles, equipment, and materials will be procured
by international shopping where the cost is valued from
US$100,000 to US$500,000 equivalent, and contracts exceeding
US$500,000 will be procured by international competitive bidding.
Goods valued at less than US$100,000 equivalent may be
procured under direct purchase. Civil works to be financed from
the proceeds of the ADB loan will be procured in accordance with
local competitive bidding procedures up to US$1 million and by
international competitive bidding over US$1 million. Given the
small and scattered nature of civil works to be constructed and/or
rehabilitated under the Project, individual contracts are unlikely to
attract international bidders. Domestic contractors have the
capacity and capability to undertake the required civil works
contracts. As far as possible, labor-based construction technology
using small contracts will be used to provide local employment.
Consulting Services For timely implementation of the Project, individual consulting
services are required for a number of technical areas. The Project
will employ two key international specialists (project
iv
implementation and quarantine) for a combined total of 60 person-
months. The Project will, in addition, provide about 46 person-
months of international and 27 person-months of domestic
consulting services. The consultants will be selected and engaged
in accordance with ADB’s Guidelines on the Use of Consultants
and other arrangements satisfactory to ADB for the engagement
of domestic consultants. The Government’s attention will be called
to ADB’s anticorruption policy, particularly the section on fraud
and corruption, as stated in ADB’s Guidelines for Procurement,
Guidelines on the Use of Consultants, and Guidelines on Money
Laundering and the Financing of Terrorism.
Project Benefits and The Project will directly benefit approximately 8,000 sugarcane
Beneficiaries farmers, as well as a significant number of other rural households.
The Project has an indicative, overall, base case economic
internal rate of return of 19.1%. The core of the quantified benefit
stream is derived from the agricultural diversification component.
As beneficiaries, the Project targets (i) farmers whose leases are
still in effect or have been renewed and incoming farmers; (ii) farm
landowners, by continuing commercial use of their land,
developing community-based rural MFIs, and supporting off-farm
livelihoods; (iii) exiting farmers whose leases are not renewed,
who will be helped by off-farm livelihoods, microenterprises, rural
financial services, and support in finding new farms; and (iv)
sugarcane cutters and mill workers who lost their jobs, who will be
helped by off-farm livelihoods, microenterprises, rural financial
services, and new on-farm employment in diversified and high-
value agriculture. The inclusive approach and the development of
institutional capacity and processes will create benefits for the
poor outside these target groups through better service delivery,
public-private cooperation, and strengthened NGOs and
cooperatives.
Risks and Assumptions The mixed success of past ADB- and externally-supported
agriculture projects was due to the limited institutional capacity of
the implementing agencies. To address this, the Project includes
capacity building measures, and outputs are often in the form of
improved institutional effectiveness. A strong PCU is envisaged,
including field offices, to coordinate, support, and monitor at a
local level.
The dominance of sugar, a commodity crop sold to a single buyer
at higher-than-world prices, has left farmers dependent on a
single, regulated buyer and with little incentive or capacity to
innovate, market, or manage as needed in diversified, commercial
farming and off-farm livelihoods. Thus, the Project builds on the
traditional farm diversity, diversification, and adoption experience
of innovative farmers and agribusinesses, providing technical
support and skills development, including an emphasis on farm
business management services and support to strengthen farmer
groups and industry organizations.
v
Adequate land needs to be made available on terms agreeable to
both farmers and landowners. Land is communally owned, so
almost all farmers are tenants. Indigenous Fijian farmers usually
farm as tenants of a clan (mataqali) rather than as owners, even if
they are members of the clan. Positive trends are apparent in
lease renewals, even though political disagreement remains about
the legal form of agricultural leases. Nevertheless, the Native
Land Trust Board has provided assurance that it will support lease
renewals and, where landowners do not wish to renew leases, will
seek alternative farms.
The success of the agriculture diversification component will
depend on the industry organizations’ ability to manage and
provide the necessary support to farmers for a wider adoption
rate, and the mobilization of private sector participation and
investment. The lack of financial services and credit support to
project participants also poses a risk.
The Fiji Islands’ horticultural exports would be at risk from the
arrival of a new, foreign fruit fly, but quarantine safeguards are not
fully enforced because of budgetary constraints. The Project will
strengthen quarantine services and will require assurance that the
Government will enforce safeguards.
Typical agricultural risks due to weather and existing pest and
disease pressures are not expected to affect the Project, because
farmers have been working with these conditions for many
decades. Rather, by diversifying agriculture, avoiding the
undermining of traditional household strategies in relation to food
security, and providing appropriate training opportunities (e.g., in
integrated pest management), the risk of drastic impacts on food
and income from these pressures are expected to be lessened.
Successful implementation in Vanua Levu requires development
of the port at Savusavu (under separate funding).
Technical Assistance Technical assistance (TA) is proposed to support the
strengthening of commercial agriculture development to ensure
that appropriate policies, institutions, and capacities are in place
at project completion to sustain the performance of the private
agriculture sector. The TA will strengthen the private sector so
that it can take the leading role in developing and promoting
agribusiness. In addition to developing the policy and legislative
environment, the TA will facilitate the development of self-
sustaining industry organizations with a medium- to long-term
strategic and entrepreneurial vision that can raise funds, manage
their operations, and provide effective services to the farming
community. The TA will (i) help the industry organizations apply
funding criteria to activity proposals; (ii) assist in establishing the
operations, linkages, and strategic focus of farm business
vi
advisory services; (iii) assist in orienting trade- and market-related
legislation, information, services, protocols, and relationships; (iv)
facilitate institutional linkages and networks between the Fijian
agriculture sector, private and public organizations, and programs
active in the region; (v) support training in agribusiness and agro-
processing; and (vi) raise potential local entrepreneurs’ and
industry organizations’ awareness of business opportunities.
vii
I. THE PROPOSAL
1. I submit for your approval the following report and recommendation on a proposed loan
to the Fiji Islands for the Alternative Livelihoods Development Project. The report also describes
proposed technical assistance (TA) for Strengthening Commercial Agriculture Development,
and if the Board approves the proposed loan, I, acting under the authority delegated to me by
the Board, will approve the TA.
II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES
A. Performance Indicators and Analysis
2. The Fiji Islands’ rural economy is dominated by sugarcane and subsistence farming,
which accounted for 36% and 35%, respectively, of agricultural gross domestic product (GDP)
in 2002. However, these figures understate the importance of sugarcane production, a cash
crop that accounts for about 60% of farm incomes, with other cash crops and off-farm income
contributing about 20% each. Subsistence farming, forestry, and livestock provide noncash or
delayed benefits, but have traditionally provided farm households with a range of household
needs and with resilience to political upheavals, tropical cyclones, and other shocks.
3. Sugarcane farms in the project area are small, averaging about 4 hectares (ha). The
estimated annual gross margin of a representative sugarcane farm is F$2,070 (US$1,063) at
current sugarcane prices of F$50 (US$25.70)/metric ton (t), compared with the household
poverty threshold of F$6,500 (US$3,340)/year. A projected fall in sugarcane prices to F$37
(US$19)/t risks reducing annual gross margins to less than F$1,000 (US$514). About 17,000
seasonal sugarcane cutters earn an average of F$900 (US$462) per season, and these
incomes are at risk through reductions in the sugarcane area and moves to mechanical
harvesting. To protect the already poor groups from further income reductions as a result of the
restructuring of the sugar industry, diversified, higher-value farming systems must be promoted
and off-farm livelihood opportunities to supplement or replace agricultural incomes must be
provided.
4. The expiry of some 10,300 farms leases over the next 25 years (about 2,800 leases will
expire by 2008) will result in experienced farmers leaving the sugar industry and new farmers
entering with limited capital and experience. The industry’s dominance was boosted by
preferential prices supported by the European Union (EU) at up to three times world market
prices. These subsidies have distorted resource use toward sugar and allowed a formerly world-
class industry to develop inefficient practices and standards. However, since 1995, EU
preferential prices have fallen from US$0.30/US pound (lb) to US$0.20/lb, and in 2002, world
prices dropped from about US$0.12/lb to US$0.07/lb. In addition, the efficiency of the Fiji
Islands’ sugar sector has continued to decline and its costs to rise. Overall farm and mill
performance has decreased by 26%, as reflected in the tons of sugar produced per hectare,
which deteriorated from a 1970s average of 6.74 t/ha to 5.89 t/ha in the 1990s, and has
worsened to 4.96 t/ha since 2000. Sugarcane yields of about 45 t/ha have stagnated since the
1970s, and mill recovery fell from 86.3% in the 1970s to 78% in 2002, while mill time efficiency
dropped from 94% in the 1970s to 84% in 2002. These figures reflect an overall and
accelerating deterioration in farming, harvesting, transport, and mill performance at a time of
falling prices, clearly reflected in the Fiji Sugar Corporation’s (FSC's) financial performance. In
the early 1990s, the FSC's sugar prices increased by 4% per year, but milling costs increased
by 9% per year. In the 1980s, the FSC's 30% share of sugar proceeds yielded average profits of
55% of mill costs, but these fell to an average loss of 3% in the late 1990s, a loss of 23% in
2000, and accelerating losses thereafter. This situation is unsustainable, requiring urgent
restructuring to reverse past deterioration in mill and farm performance and improve yields.
2
5. In addition to this immediate need to restructure the sugar sector, the prospective
changes in the EU sugar regime reinforce the need for the sector to become efficient and
competitive. The EU countries, principally France and Germany, produce substantial surpluses
of beet sugar and store or export some 6 million to 7 million t each year. They sell exports at
world prices depressed by oversupply, but some 3 million t of EU sugar exports attract a
subsidy funded by levies on EU consumers. Under World Trade Organization (WTO) ceilings,
the quantity of exports that the EU can subsidize is now limited to a volume equal to the
preferential imports from African, Caribbean, and Pacific (ACP) countries plus 1.27 million t.
This requires the EU to withdraw subsidies from exports at the expense of EU farmers. The
WTO link to ACP imports limits the EU's ability to reduce exports at the expense of ACP
imports. However, this and the internal market need to constrain the costs of agricultural policy,
as agreed to by EU agriculture ministers in Berlin in 1999, mean that the price of EU sugar is
likely to be reduced to force reduced beet production. Studies indicate that to encourage EU
farmers to diversify, prices must fall by about 50%.
6. In parallel with this probable reduction in prices, the Fiji Islands also faces the risk of a
loss of EU quotas. Under the Everything But Arms initiative, from 2009 less developed countries
will be able to export sugar to the EU without quotas or tariffs. Conservative estimates suggest
that these countries will supply 0.9 million to 1.3 million t of sugarcane per year, about the same
as current ACP supplies. Apart from an annual demand of some 0.3 million t of sugarcane for
French refineries, which French overseas territories supply, the EU's demand for sugarcane is
effectively limited to the United Kingdom (UK) company Tate & Lyle, which requires 1.4 million t
of sugarcane per year for its EU refineries. Unless Tate & Lyle invests in increased sugarcane
capacity, in an EU market with excess beet sugar capacity, the risk exists that countries under
the Everything But Arms agreement will meet the entire demand for sugarcane in the EU, and
there will be no or minimal quotas for other ACP countries, such as the Fiji Islands. Thus in
addition to the immediate financial crisis facing the FSC, restructuring would be a prudent move
to enable the sector to compete in world markets by 2010.
7. The survival of the Fijian sugar industry depends on improving efficiency and
productivity. Projections suggest that average yields must rise by 56%, from 45 t/ha to more
than 70 t/ha, to maintain farm incomes. Currently yields exceed 70 t/ha on more than 3,600
farms, but this level is unlikely to be sustained on about 20% of the land, which is either steep
with poor soils or is cultivated by farmers unwilling to invest further in sugarcane farming.
Assuming improved capacity utilization by 2008, at the projected higher yield from about 50,000
ha would satisfy the projected mill demand. While doubts about whether the sugar industry
restructuring will be successful are considerable, some 19,200 ha of sugarcane areas are likely
to be available for alternative activities.
8. Most farms are diversified to some extent, and restructuring will result in more small
producers leaving the industry and larger farms reducing their sugarcane areas in favor of other
higher-value cash crops. Some seasonal sugarcane cutters will exit the industry, but many will
find work in the diversified farming systems, such as those focusing on horticulture and
livestock, which are usually more labor intensive. In addition, political leaders are making
progress in resolving land tenure issues. Overall, the rate of lease renewals is likely to increase,
although a certain level of nonrenewals will persist, because of landowners’ desire to enter into
farming to improve their own livelihoods. The Government and the Native Land Trust Board
(NLTB) have assured that alternative lands will be made available for leasing for agricultural
purposes. Appendix 1 provides an analysis of the rural sector and Appendix 2 summarizes the
agricultural lease renewal situation.
9. While reliable data are scarce, the indicators in Table 1 illustrate the current situation of
sugarcane farmers and the likelihood that they will be able to move into alternative livelihoods.
3
Table 1: Indicators of Rural Conditions
Indicator Current Situation and Performance
Rural poverty Current estimates indicate that more than 40% of about 300,000 people in the Western
and Northern divisions subsist below the poverty line of US$60/household/week,
US$624/capita/year, or US$3,120/household/year.
Livelihood Vulnerability
Reliance on sugarcane for the About 21,000 families rely directly on sugarcane farming. Average sugarcane farming
bulk of farm household households at or below the poverty line obtain cash income equivalent to about 60% of
income their total income from sugarcane. Other cash crops contribute 20% and off-farm income
accounts for another 20%.
Low sugarcane yields Average current yield is 45 t/ha at a price of US$26.3/t in 2003. Projected farm budgets
threaten farm viability as the using a price of US$18/t in 2008 suggest that farms must achieve yields of more than 70
price of sugarcane falls t/ha to sustain comparable net returns.
Expiring leases are displacing Expiry of leases began in 1997, when landowners renewed 54% of leases to sitting
farm families and creating tenants. Such renewals fell to 19% in 2000 at the time of a coup, but following resolution
tenantless farms of the conflict, renewals rose to 44% in 2001. Many farms with expired leases are vacant,
resulting in a loss of incomes on the part of both farmers and landlords. Landowners now
appear to be increasing the rate of renewals, but are reluctant to renew leases under the
Agricultural Landlord and Tenant Act (Appendix 2).
Reduction in number of In January 2003, Fiji Islands had 21,371 registered farms totaling 79,200 ha, of which
sugarcane farms and area 64,000 ha were planted with sugarcane. By 2008, with yield increases and milling
planted to sugarcane capacity improvements, the required area will fall to 50,000 ha, and roughly 3,800 farms
could fully exit from sugarcane farming, although in practice, a much larger number of
sugarcane farmers are expected to diversify from sugarcane and use some of their land
to grow other crops (Appendix 2).
Agricultural Diversification
Contribution of the agriculture If diversification is to be successfully achieved with the least overall hardship, agriculture’s
sector contribution to GDP will need to be maintained despite a declining value of sugar.
Farmers’ limited commercial Farms have not been managed as market-led enterprises. Young and incoming farmers
skills need skills to avoid the risk of early failure, but training in farm management skills is not
currently available for farmers.
Few fully diversified farms Many farms are partly diversified from sugarcane, but market changes will reduce
and limited area under sugarcane to less than 50% of household income by 2008, making further diversification
nonsugar cash crops essential to maintain farm incomes.
Limited agricultural exports Insufficient bilateral quarantine agreements for specific crops and farmer skills constrain
exports, particularly of horticultural products. The existing export treatment facility is
viable, but is operating below capacity, and the supply of horticultural products does not
meet existing clients’ demands.
Nonfarm Income
Limited employment Each year sees about 17,000 new job seekers, but current levels of employment creation
opportunities are unable to accommodate them. The economy is unable to employ large numbers of
a
job seekers.
Farmers have limited non- Training institutions currently target the industrial sector. People leaving sugarcane
agriculture livelihood skills farming need new skills to embark on viable alternative livelihoods.
Limited number of small The informal enterprise sector is not well developed. The project area has about 5,000
enterprises small enterprises that employ 12,000 people. Support could increase this to 6,000 to
7,000 enterprises and create 4,000 new jobs.
Limited Rural Finance Agricultural lending outstanding as of June 2001 was US$48.7 million to 12,602
borrowers. Sugarcane farmers account for 92% of agricultural borrowers and
nonsugarcane farm households account for just 8%. The Fiji Development Bank and
commercial banks have reduced rural lending, and the development of microfinance
institutions has been hindered because of the lack of capacity and support to expand
outreach.
Inadequate Infrastructure Infrastructure in Vanua Levu is poor, constraining social and economic development. Bulk
handling port facilities exist for some commodities, but no general port facility—serviced
by international general cargo carriers—is available to support diversified agriculture, off-
farm activities, and agro-industry development. Improved roads, electrification, and water
supply are highly desirable in support of project activities in Vanua Levu, and an
international general cargo port in Vanua Levu is critical to support the Project and only
Savusavu port is currently served by general cargo ships.
GDP = gross domestic product, t/ha = tons/hectare.
a
According to the 1996 census, Fiji Islands' industry employs 13% of the total labor force of about 187,689
economically active people over the age of 15. Bureau of Statistics of Fiji. 1998.
4
B. Analysis of Key Problems and Opportunities
1. Problems and Opportunities
a. The Agriculture Sector
10. While sugar sector restructuring will cause some farmers to exit, most are expected to
take the opportunity to gradually increase the scale, intensity, and diversity of their farm
enterprises; however, their ability to do so with minimum disruption is constrained by the
difficulties they face in accessing markets for nonsugar agricultural products, improved farming
technologies, off-farm opportunities, and rural finance. While Fiji Islands’ traditional
commodities—sugar and copra—are struggling, horticultural exports are performing better. To
identify alternatives to sugar and copra, the Asian Development Bank (ADB) undertook a
comprehensive review of the agriculture sector in 1995.1 During project preparation, this study
was reviewed and market prospects were further investigated.
11. The agriculture sector has the potential and basic capacity to diversify. Market
opportunities for which a marketing structure is already in place include (i) exporting to Indo-
Fijian, Asian, and Pacific island communities in Australia and New Zealand; and (ii) supplying
the expanding urban, agribusiness, and local tourism markets. The Fiji Islands exports fresh
fruits, vegetables, taro, and other products to regular buyers in Auckland, Brisbane, Melbourne,
and Sydney. For example, in 2001, under a fruit fly-host bilateral quarantine agreement (BQA),
Fiji Islands exported 475 t of papaya, mango, eggplant, and breadfruit valued at US$510,000 to
Auckland via the Nature’s Way Export Treatment Cooperative in Nadi.2 The scope exists to
increase the volume, diversity, and duration of supply to both domestic and export markets. The
household survey that was part of the project preparatory TA found that 21% of farms obtain
cash income from nonsugar farm production and that stakeholders were extremely interested in
diversification, with successful examples existing in the project areas. Diversified farms and
agribusinesses obtain at least 50% of their cash income from specialized or mixed farming of
nonsugar products, including fruits and vegetables (500 farms), root crops (400 farms), grains
and pulses (100 farms), livestock (500 farms), agro forestry (200 farms), and spices (30 farms).3
These early adopters demonstrate the capacity to manage relatively sophisticated private sector
operations including specialized cultivation, contract farming, quarantine treatments, quality-
oriented post harvest handling, and marketing chains.
12. The Government’s extension services and contracts with agribusiness exporters support
existing diversification activities; however, limited support services and marketing chain capacity
constrain the extent of diversification. Industry organizations could play a major role, but most
are weak. The Sugar Cane Growers Council (SCGC) has strong institutional capacity, but other
established industry organizations, e.g., the Ginger Council, are weak and ineffective. Emerging
industry organizations, including the Fruits and Vegetables Council and the Organic Farming
Association, have limited capacity, but active participation by farmers, processors and traders
will improve the development of industry organizations and their ability to provide services.
Arrangements with partner industry organizations in the region are possible where both
organizations stand to benefit.4
_____________________________
1
ADB. 1995. Technical Assistance to the Fiji Islands for the Agriculture Sector Study. Manila.
2
ADB. 2003. Technical Assistance to the Fiji Islands for Alternative Livelihoods Development Project. Manila.
3
Government of Fiji. 1999. Fiji Agricultural Census. Fiji Islands; MASLR. 2003. Alternative Livelihoods PPTA Social
Survey. Fiji Islands.
4
For example, the Biological Farmers Australia Cooperative foresees mutual benefits from sharing mutual standards
and certification logos with the new Fijian Organic Farming Association.
5
b. Off-Farm Livelihoods
13. The Government’s Strategic Development Plan (SDP) 2003–2005 noted that formal
employment in 2000 was 111,500, and that the formal employment sector is unable to
accommodate the roughly 17,000 new job seekers each year. Two reasons cited are (i) the
weak investment situation following the serious political and social upheavals in recent years,
which resulted in a lack of confidence by the private sector; and (ii) the limited human resource
skills, which could be addressed by making more courses and training facilities available in the
project areas to remedy the lack of vocational training opportunities.
14. Tourism accounts for 17% of GDP and employs about 40,000 people serving an
estimated 400,000 tourists in 2003. Overseas remittances from Fijians have been increasing
significantly, and are soon likely to overtake sugar as the third highest foreign exchange earner,
after tourism and garment manufacturing. Events in 2000 affected tourism, but arrivals have
now recovered to their levels before the coup. This recovery is expected to result in an
expansion and upgrading of Air Pacific’s fleet, as well as of hotels and other tourism-related
industries. Manufacturing contributes 15% of GDP and employs about 28,000 people, many in
the clothing and footwear industry, which is dependent on preferential access to markets.
Recently, Australia announced a 7-year phased restructuring of the garment industry, and Fiji
Islands has to adjust to imminent loss of exports, and seek alternative livelihoods for displaced
garment workers. The SDP targets growth, particularly in food processing and wood-based
industries, with an emphasis on the development of infrastructure in the Western and Northern
divisions, including both Labasa and Savusavu, where development will depend on the
construction of the proposed Savusavu port for cost-effective access to markets, including by
the garment industry. Tourism and manufacturing will increase the demand for related services,
including small businesses and microenterprises. The potential exists to further develop
business connections with Pacific rim countries, which would create a demand for internationally
certified training in on- and off- farm livelihood skills.
c. The Rural Financial Sector
15. Rural households are largely denied access to basic financial services for savings and
credit. The formal financial market sector has increasingly focused on sugarcane farmers due to
the ability to deduct repayments from FSC payments for cane. The urban-based banking sector,
which consists of the Government-owned Fiji Development Bank (FDB),5 six commercial banks,
and three licensed credit institutions, has generally failed in rural areas, especially in remote
areas in traditional, indigenous Fijian villages. These entities have turned away from agriculture
lending, mainly because of small loan sizes, limited collateral, unsatisfactory repayment rates,
and high transaction costs. This market failure constrains livelihood activities, and more than
half the people surveyed cited lack of access to financial services as a principal constraint to
development. The main issue in relation to the absence of rural financial services is the lack of
coverage by microfinance institutions (MFIs).
16. The Fiji Islands has 44 savings and credit unions (SCUs) with a total of 10,900 members
and 9 savings clubs, all affiliated with the Fiji Savings and Credit Union League (FSCUL). The
11 rural SCUs, which average 69 members each, include long-established groups within both
Indo-Fijian and indigenous Fijian communities. The rural SCU in Volivoli has operated since
1954, has 80 clan members, and has a current account balance with Westpac Bank of more
than US$5,000. The recently formed SCU in Korotasere, near Savusavu, has 65 members from
one clan and has accumulated more than US$3,000 in 2002.
_____________________________
5
Under its current license, FDB is allowed to provide credit for development but cannot accept deposits.
6
17. Some 104 thrift and credit cooperatives (TCCs) provide credit but not savings services.
At present, all TCCs’ liabilities are in the form of member shares and they have little ability to
build up savings. Ninety-seven TCCs are members of the apex body, the Canefarmers
Cooperative Savings and Loan Association (CCSLA), which on-lent CCSLA loans to some 560
TCC members in 2002. The usefulness of TCCs is now limited, because CCSLA can provide
both credit and savings services directly to their individual members. CCSLA had 2,683
individual members at the end of 2002, many of whom joined to access deposit services, and
nonsugarcane farmers account for about half the savings accounts. In addition, the Sugar Cane
Growers Fund, which is neither a licensed financial institution nor an MFI, has a significant loan
portfolio that could be used to support sugarcane farmers in diversification and livelihood
activities. The major issue facing the CCSLA and other cooperatives is the requirement that
30% of annual surpluses be placed in the National Reserve Trust Fund. This has the adverse
effect of reducing the ability of CCSLA and other cooperatives to retain earnings for asset
expansion.
18. Currently, about 40% of rural loans come from informal sources that charge extremely
high interest rates of 60–100% per year. According to the findings of the project preparation
survey, around 65% of rural households have the capacity to save about US$200 per year, and
the remaining 35% can save about US$30 per year. If the informal lending were financed by
MFIs, the microfinance portfolio would increase to about US$20 million compared with US$7
million in 2001. In the case of sugar farms, the reason for limited lending is the lack of adequate
collateral resulting from the 30-year fixed term agricultural leases. By establishing new MFIs in
rural areas, strengthening MFIs’ capacity, and giving them access to wholesale borrowing
facilities to diversify their portfolios, community-based MFIs will help increase deposit
mobilization and provide better access to financial services for the rural poor in a cost-effective
manner.
d. Rural Infrastructure
19. The SDP notes that rural villages have unequal access to basic infrastructure and
services. The development of opportunities in rural areas by tapping potential in all economic
sectors depends on the availability of such infrastructure and services.6 Vanua Levu has much
poorer infrastructure than Viti Levu. It has no international port for general container cargo and
only 11% of roads are paved and their maintenance is poor. As a result, land transport costs,
including damage to produce transported, are high. This means that access to markets is
expensive, private sector investment and economic diversification are severely constrained, and
out-migration is increasing. Poor aviation, electricity, telecommunications, and water supply
facilities also severely constrain development. Priority should be given to appropriate general
cargo port and road development to permit cost-effective market access.7
e. Lessons Learned
20. Two projects prepared in the 1980s—the Agriculture Diversification Programme and the
Sigatoka Valley Rural Development Project—were completed in the early 1990s and evaluated
in 1996 and 1997.8 Both were rated as partly successful. The reasons for this rating were similar
for both projects, namely: (i) the reliance placed on assumptions was excessive, and insufficient
consideration was given to such factors as road access, marketing, resource availability, and
social conditions; (ii) the level of stakeholder participation was inadequate, leading to
_____________________________
6
Government of Fiji Islands. 2002. Strategic Development Plan 2003-2005. (Parliamentary Paper no. 72, p. 26).
7
The port and road development in Vanua Levu will be addressed under the proposed Fourth Road Upgrading and
Outer Island Infrastructure Development projects in 2005 and 2006.
8
ADB Loan No. 781-FIJ approved on 29th May 1986 and subject to Project Performance Audit Report in November
1997 (PPA:FIJ 17117).
7
weaknesses in the identification of beneficiaries’ needs and incentives; (iii) the agriculture
diversification program focused on policy and trade issues from a Government standpoint
without developing the private sector’s and beneficiaries’ capacities to contribute to policy
debate; (iv) the failure to recognize and address the institutional weaknesses of the
implementing agencies; (v) the implementation was Government-led and did not build domestic
private sector capacity; (vi) the failure to involve farmers and the private sector in managing
adaptive research and extension services, and developing production and marketing; (vii) the
inadequate support given to farm management and business development, which weakened the
commercial survival of farm enterprises and marketing groups; and (viii) inadequate project
planning, coordination, and monitoring.
21. Positive lessons learned include (i) the introduction of small-scale, on-farm technology
that requires limited management allowed farm intensification, increased crop choices,
improved the quality and continuity of product supply, and increased incomes and farm
employment; (ii) the development of high–value, smallholder agriculture that meets market,
quality, and seasonal requirements by means of enhancing farmer groups and private sector
capacity has potential; and (iii) the private sector does respond to emerging rural business
needs.
22. Projects in other small island states have also led to the development of successful
strategies for agricultural diversification, including developing capacity for quality differentiation
and for supplying seasonal niche markets.9 Lessons have also been drawn from programs and
institutions in the region on the structure and function of industry organizations (e.g., the New
Zealand Fruitgrowers Federation, the Biological Farmers Australia Cooperative, the Meat and
Livestock Council [Australia], the Landcare Association [Australia], and the Asia Pacific Seed
Association), the management of competitive research and development funding (e.g., the Rural
Industries Research and Development Council, Australia), the role of farm business
management advisers (e.g., the Farm Management Society [Australia and New Zealand] and
the Rural Adjustment Programme [Australia]), and the effectiveness of competency-based
training (Industry Training Board Accreditation and Farm Cadet Scheme in Australia and New
Zealand). Efficient industry organizations have mitigated the risks of low diversification adoption
rates in Southeast Asian countries.10
23. The project design took into account an ADB analysis of Fiji Islands’ competitive
advantage.11 It also incorporated lessons learned from the Smallholder Support Services Project
in Papua New Guinea on the experience of using private extension services,12 and from the
model used by the on-going project on promoting nonformal employment and micro-enterprise
opportunities through training in Fiji Islands jointly funded with the Government by the
International Labour Organisation.13 The project preparatory survey found that 21% of farms in
the project area obtain cash income from diversified farming, increasing their net earnings from
US$250/ha from sugarcane farming up to US$2,490/ha from eggplant, US$1,300/ha from
pulses, and US$310/ha from integrating livestock with sugarcane.14 The project design also
incorporated lessons from ADB’s extensive experience with MFI development.
_____________________________
9
Food and Agriculture Organization. 1999. Production, Intensification, and Diversification of Agriculture, Forestry,
and Fisheries in Small Island Developing States. Rome.
10
Food and Agriculture Organization. 2001. Crop Diversification in the Asia-Pacific Region. Bangkok.
11
ADB. 1996. Fiji Agriculture Sector Review: A Strategy for Growth and Diversification. Manila.
12
ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the
Government of Papua New Guinea for Smallholder Support Services Pilot Project. Manila.
13
Government of Fiji. 2002. The Integrated Human Resources Development Programme Funded by the Fiji Islands
Government and the ILO. Fiji Islands.
14
ADB. 2003. Final Report, Alternative Livelihoods Project TA No. 3887-FIJ, July 2003. Manila.
8
2. Rationale and Strategy
24. For two decades, the EU's preferential prices have distorted Fiji Islands’ resource use.
As a result, the agriculture sector suffers from a lack of diversification to other crops. Indications
suggest that Fiji Islands’ sugar price will move to world market prices in the long term.15 To meet
the challenge, efficiency must improve, and resources must be reallocated to new uses with
minimum disruption. The Project will address concerns in relation to the reallocation of
resources to new uses in viable livelihoods. Project design is in accord with the Government’s
SDP (footnote 6). The Project seeks to alleviate poverty, primarily by providing income-earning
opportunities, through close partnerships between the Government and the private sector. The
SDP aims to create a social safety net for the poor, and the Project supports this objective. The
SDP notes the great potential in rural areas, but recognizes the severe constraints resulting
from inadequate market access, rural credit provision, and rural infrastructure and from poor
dissemination of agricultural knowledge, particularly in relation to the commercialization of
agriculture. The Project directly addresses each of these constraints. Its objectives are also
consistent with ADB’s Country Strategy and Program Update 2005–2007 and are aligned with
the Millennium Development Goals.
25. In the past, the Government and external funding agencies have financed several
projects and programs that directly target agriculture development; however, no major projects
have been implemented in the last 10 years except for some small bilateral assistance. To
insulate the country from internal and external shocks, Fiji Islands needs to diversify away from
sugar. To date, lending to the agriculture sector has been inadequate, and the Government
should be helped with its agriculture restructuring initiatives to prepare farmers for the eventual
removal and/or reduction of the sugar price subsidy. Recently, in October 2004, the Indian
Government has agreed to finance about US$40 million for the sugar mills infrastructure
upgrading. ADB coordinates closely with key development partners also involved in developing
the agriculture sector in Fiji Islands. These partners include Australia, the EU, India, New
Zealand, and United Nations agencies. Appendix 3 summarizes such external assistance.
III. THE PROPOSED PROJECT
A. Objectives
26. The proposed Project aims to offset the adverse effects of sugar industry restructuring
and lease expiry and to create employment opportunities.16 The goal of the Project is to protect
and improve the standard of living of rural people, which is at risk because of the restructuring of
the sugar sector. The project framework is in Appendix 4.
27. The purpose of the Project is to increase sustainable on- and off-farm livelihoods to at
least replace those lost during the course of sugar industry restructuring and to reduce rural
poverty. To this end the Project seeks to (i) maintain a healthy agriculture sector with viable
alternatives to sugarcane farming, (ii) generate sustainable off-farm work and self-employment
opportunities for farmers exiting sugar and for other rural poor, (iii) provide access to savings
and credit services in rural communities to facilitate livelihood activities and improve the quality
of life, and (iv) provide critical farm access infrastructure for rural communities.
28. The Project covers the sugarcane belts and nearby rural and peri-urban areas of the
Western and Northern divisions on the main islands of Viti Levu and Vanua Levu, respectively.
_____________________________
15
Eighth ACP Ministerial Conference, July 2003, Fiji Islands.
16
ADB. 2000. Technical Assistance to the Fiji Islands for Capacity Building of the Native Lands Trust Board in
Preparing Land Mapping and Establishing Boundaries. Manila; ADB. 2002. Technical Assistance to the Fiji Islands
for Intermediation of Sugar Sector Restructuring. Manila. The Native Land Trust Board has provided a letter to
confirm its assurance that adequate land will be made available for project participants.
9
These two divisions have the highest potential for increased on- and off-farm livelihood
opportunities, including potential for diversified commercial agriculture and small business and
micro-enterprise development. The Project includes poor people not involved in sugarcane
farming and will specifically address the needs of households rather than just of farmers,
including the needs of women, in relation to on- and off-farm livelihood activities.
29. The Project’s target groups include sugarcane farmers, cutters, and mill workers;
landowners; and indigenous Fijians. It will help address the needs of continuing and incoming
farmers, exiting farmers whose leases are not renewed, and indigenous Fijians left out of the
economic mainstream. The target beneficiaries will be about 8,000 sugarcane farmers, as well
as a significant number of other rural households. Rural communities will participate in the
design and implementation of the field activities. A participatory approach will help develop trust
among ethnic groups and is consistent with the Government’s rural development policies and
ADB’s poverty reduction strategies.
30. The Project will comprise four components to be implemented in 6 years: (i) agricultural
diversification, (ii) off-farm livelihoods, (iii) rural financial services, and (iv) project coordination.
B. Components and Outputs
1. Agricultural Diversification
31. The Project will establish and strengthen related industry organizations, strengthen
commercial farming capacity, prioritize adaptive research, and support private extension
services to develop and adopt a strong commercialized agriculture sector.
a. Strengthening Industry Organizations and Market Access
32. To facilitate sustainable agriculture diversification led by the private sector, the formation
and strengthening of industry organizations is crucial. Industry organizations are forums for
developing policy and quality standards, networking, disseminating market information and
technology, and providing negotiating strength. With the exception of the SCGC, both existing
and emerging industry organizations have weak capacity. Some existing industry organizations,
such as the Ginger Council, are mandated to collect levies, but provide insufficient services,
while emerging industry organizations for fruits and vegetables, organic farming, and floriculture
have active interest groups but no funding arrangements. The Project will help strengthen at
least five existing and emerging industry organizations relevant to the Project by providing
funding for activities the industries consider to be of high priority. The Project will provide
funding for applied research, training, institutional development, and marketing proposals that
meet specific criteria, objectives, and will seek about 25% industry contribution. Industry
organizations must be self-funding by the end of the Project. To improve adoption rates, the
Project will support early access to skills training, strengthen post harvest and marketing
activities, and help provide better quality outreach services through greater private sector
participation. The proposed funding criteria are detailed in Appendix 5.
33. The Project will also support the strengthening of quarantine services to facilitate access
to export markets through BQAs and access to imported seeds and planting materials while
maintaining bio security. The incursion of a new, foreign fruit fly would nullify existing BQAs, and
the high cost of developing new controls and new BQAs must be mitigated by strengthening bio
security. The Fiji Islands must meet WTO quarantine commitments and improve linkages
between the Fiji Quarantine Authority and the private sector. Quarantine inspection services will
be on a full cost-recovery basis, but until exports rise, anticipated revenues will not fully cover
costs. To strengthen quarantine services, the Project will provide funding (i) for a quarantine
specialist, (ii) for work attachments with the quarantine authorities of importing countries, and
10
(iii) for office and laboratory equipment and utility vehicles for carrying out inspections. The main
outputs will be increased sales of conventional and organic foods, awareness of market
requirements and export protocols, and secure access to improved planting materials and
markets on the part of farmers.
b. Strengthening Commercial Farming Capacity
34. To facilitate agriculture diversification, raising participants’ competency in relation to
commercial agriculture is important. To this end, the Project will (i) strengthen the off-campus
vocational training capacity of the Fiji College of Agriculture (FCA); (ii) develop the Ministry of
Agriculture, Sugar, and Land Resettlement’s (MASLR’s) capacity for in-service staff training; (iii)
establish a farm business advisory service; and (iv) support two pilot market linkage activities in
Rakiraki and Seaqaqa. Accreditation of the courses will be conferred by an industry training
board made up of representatives of FCA, industry organizations, and the Training and
Productivity Authority of Fiji (TPAF). Good potential exists for commercial partnering
arrangements with training providers outside the Fiji Islands to obtain competency standards
and courses and within the Fiji Islands to deliver training. At project completion, by means of its
corporatization, the FCA will have viable revenue from training, and its training courses will be
accredited. At least 500 farm business plans will be produced and farmers will have access to
advice on business management. The Project will demonstrate measures to support farm
enterprises, post harvest handling, and marketing from remote areas and disseminate
information on prices, markets, buyers, and distributors.
c. Developing and Transferring Technology
35. The Project will support priority, client-based, applied research and promote private
extension services. Research proposals will be invited from public and private institutions,
including Government research centers, universities, and nongovernment organizations (NGOs)
in the processes described in Appendix 5. The Project will also provide support to the Koronivia,
Sigatoka, Legalega, and Seaqaqa agricultural research stations to assist in field research.
Currently, private extension services are limited and will be introduced into the Project gradually.
Until private extension capacity is fully developed, MASLR’s extension services will help support
extension activities. NGOs will be recruited to help with extension activities and to facilitate the
mobilization of farmer groups. Private service providers, including NGOs, will be selected in
consultation with steering committees. The project steering committees must approve research
funding and private extension intended for project funding based on specified criteria. The main
outputs include at least eight contractual arrangements with private service providers,
production and post harvest processing of crops to industry specifications, viable model
orchards and farm systems, improved research and extension performance, industry
organization, and greater farm production and incomes.
d. Rehabilitating Farm Access Roads
36. The Project will improve or rehabilitate about 600 kilometers of existing farm access
roads to provide farming communities with access to markets. Farm to market roads will be
identified in a participatory process indicated in Appendix 5 whereby farmers contribute one-
third of maintenance costs to maintain such roads in good repair. Liaison with relevant agencies
will ensure complementarity with other on-going sugarcane farm access roads and rural road
maintenance and upgrading programs.
e. Project Implementation Unit and Community Organization
37. There is limited recent experience of major agriculture and rural development projects in
Fiji Islands, and there are several departments within MASLR which will support
11
implementation. To facilitate implementation of the agricultural diversification component,
project implementation units (PIUs) will be established within MASLR's Department of Extension
Services in Lautoka and Labasa to manage implementation and ensure effective coordination
between MASLR departments. The field extension offices will coordinate activities at local
levels. To be demand driven, participatory processes is essential to inform and enable
beneficiaries to assess their needs and aspirations, and communicate with those implementing
the Project. National NGOs will be selected to lead project staff in assessing beneficiary needs.
2. Off-Farm Livelihoods
a. Development of Small and Micro-Enterprises
38. The development of small businesses and micro-enterprises will promote employment in
peri-urban and rural communities. By extending the outreach of the National Centre for Small
and Micro Enterprise Development (NCSMED), the Project will promote income-generating
activities, such as handicrafts and small-scale agro-processing, in both farming and indigenous
Fijian communities. Beneficiaries will be provided with opportunities for training in the skills
needed for small businesses or employment. Particular attention will be given by the community
organizing NGOs to participation by women and women's groups. The Project will also support
sugar mill workers who may be laid off because of sugar industry restructuring. NCSMED will
implement the activity, through staff located in the six project field offices with practical
experience in private sector business, to help establish about 1,200 small and micro-
enterprises.
b. Support for Vocational Training
39. To meet the target beneficiaries’ need to acquire required skill levels for employment,
the Project will support the development of TPAF’s vocational curriculum. A vocational training
specialist will help prepare business courses pertinent to self-employment in small businesses
and micro-enterprises. The accreditation of TPAF vocational training courses will help ensure
the marketability of the qualifications.
40. The Project will also support the improvement of TPAF’s and the Sangam Institute’s
vocational training facilities in Lautoka and Labasa, respectively.17 In Lautoka, TPAF’s existing
building will be refurbished to create workshops and three technical training rooms, and a new
building and facilities will be constructed to respond to training needs. In Labasa, the Sangam
Institute will establish additional training and accommodation facilities, largely for youths from
remote areas. The Project and the Government will not fund any of the operational costs,
because both organizations operate on a full cost-recovery basis. Monitoring reports on
operational activities will be part of the project monitoring system. The main project output will
be the establishment of additional facilities for accredited short- and long-term vocational
training. About 52 new and refurbished vocational training rooms and workshops will be in
operation by the end of the project period. Courses will be offered on a full cost-recovery basis,
which will place the emphasis on meeting the actual demands of target beneficiaries rather than
on the technical interests of the training institutions. Based on projected capacity and demand,
the institutions will train more than 1,000 people in vocational skills each year once courses
have been disseminated and the additional facilities are operational.
_____________________________
17
In the SDP (footnote 6), the Government of the Fiji Islands stated that as its policy objective is “to strengthen
partnership with technical and vocational training establishments, the Government will provide grants support.”
TPAF and Sangam Institute have confirmed their participation and contributions to the Government in writing.
12
3. Rural Financial Services
a. Institutional Strengthening of Microfinance Institutions
41. Proposals to strengthen MFIs have been based on a review of current conditions in the
context of ADB’s strategy.18 Specific lessons drawn from ADB’s experience with microfinance
operations in relation to establishing an enabling policy environment, setting up financial
infrastructure, and developing financial intermediaries to achieve financial viability and
sustainability have been incorporated into the project design. The Project will strengthen MFIs’
ability to meet beneficiaries’ requirements. SCUs and CCSLA and its member TCCs are
committed to providing appropriate retail financial services to poor rural communities. Unlike
commercial banks, MFIs will be community-based institutions that provide services more clearly
targeted to the needs of the poor.
42. The Project will focus on MFIs’ financial systems by strengthening the apex institutions
and their capacity to support their member institutions. The Project will strengthen and extend
the network of SCUs by supporting FSCUL as the apex institution responsible for establishing,
supervising, and monitoring SCUs. The expanded networks of SCUs will mobilize rural savings
and increase the flow of funds to sustain on-going activities. The Project will support training,
business plans, improved governance and internal controls, upgraded systems, procedures and
information technology, improved operating manuals, and promotion of new financial products.
Two new divisional FSCUL field offices will receive project support to support SCU
development. Training will help strengthen FSCUL’s management structures and individual
SCUs.
43. CCSLA is effectively the apex institution of the TCCs. The weakness of the TCCs in
comparison to the SCUs, is their lack of savings facilities. Thus they fail to meet the needs of
beneficiaries and are prevented from mobilizing savings to support rural credit. As simple
distributors of CCSLA credit the TCCs, as currently constituted, have a limited role. The Project
will help strengthen TCCs’ role. Two new CCSLA branches in Sigatoka and Rakiraki will receive
project support for their establishment and operating costs. CCSLA will also receive training
support to strengthen its management and operational skills, and such training will include
TCCs as appropriate. The Project will also facilitate improved resource use within the Sugar
Cane Growers Fund to support on- and off- farm livelihood development.
b. Supporting Wholesale Credit Line
44. The Fiji Islands has adequate liquidity, but the use of credit to support livelihood
development in rural areas faces constraints. FSCUL and CCSLA will adopt proven MFI savings
and credit models to mobilize rural savings to fund much of their new lending. However, this
faces the risk that MFIs’ activities will be constrained if they have insufficient liquidity to promote
livelihood activities. This risk can be limited through the availability of wholesale funds. If the
MFIs require such additional support, FDB has agreed to provide wholesale credit lines to
FSCUL and CCSLA in a minimum amount of US$2 million and US$0.3 million equivalent,
respectively. FDB will make the wholesale funds available using its own funds for loans to
CCSLA and FSCUL at a 2% per year lending margin above their cost of funds.19 The
performance of the proposed MFIs was evaluated during project preparation, and the MFIs are
recognized by the appropriate regulatory authorities, including the Reserve Bank of Fiji and the
Department of Cooperatives for CCSLA and the Ministry of Justice for FSCUL. The MFIs have
_____________________________
18
ADB. 2000. Finance for the Poor: Microfinance Development Strategy. Manila.
19
FDB has confirmed its interest in wholesaling loan funds to other MFIs in writing. The MFIs have also confirmed
their interest in participating in the Project and have agreed to provide their contributions.
13
maintained a satisfactory operational history and are supported by adequate clientele and
management.
45. In addition to providing general credit for individual small farmers and households,
livelihood development also needs to be supported through the maintenance of agricultural and
rural lending to larger farmers and enterprises. FDB has agreed to increase its own agricultural
and rural lending activities under existing credit programs for creditworthy borrowers. With the
help of the farm business advisory service and NCSMED, the Project will seek to improve the
supply of bankable proposals for agricultural and rural enterprises. The Project will also help
FDB strengthen its rural financial strategies and policies.
4. Project Coordination
46. The Project will involve a number of implementing agencies and lessons learned from
previous projects indicate that effective coordination will be essential to successful
implementation. The project coordination unit (PCU) in consultation with the divisional PIUs will
support and coordinate activities of the implementing agencies in implementation planning,
finance, and monitoring. The PCU will also be the secretariat to the national steering committee
(NSC), under which it will operate. The PCU will accommodate two international specialists
providing support to the whole project implementation: (i) the project implementation specialist
will support each implementing agency in planning and procedures for implementation; and (ii)
the project performance monitoring and evaluation (PPME) specialist will establish a PPME
system covering the whole Project and support its use for reporting, particularly for the mid-term
review and project completion reports.
C. Special Features
1. Responsiveness to the Changing Implementation Context
47. Post-project evaluations have noted excessive reliance on assumptions and insufficient
field data for project design. The processes proposed in the Project are less dependent on
physical features and more concerned with establishing partnerships with stakeholders for
flexible implementation. The Project will mainly rely on the private sector for services, including
extension, processing, and marketing. The project design includes a comprehensive market
study and possible cooperation with the private sector, cooperatives, farmer groups, and
individual farmers. During implementation, this cooperation will be a central feature of the
development of industry organizations. The Project also defines a process and criteria for
stakeholders to determine priorities and needs as implementation progresses.
2. Beneficiaries’ Needs
48. Earlier post-project evaluations concluded that inadequate stakeholder participation led
to weakness in identifying beneficiaries’ needs. The project design has involved extensive
discussions with stakeholders, including the Government, the private sector, NGOs, and
farmers. Meetings were held with resettled farmers, squatters, and clan chiefs to ensure that the
full range of social and cultural groups was consulted. Findings were widely distributed and
reported in the media, providing significant feedback. A series of eight stakeholder workshops
were conducted in Lautoka (four), Labasa (two), and Suva (two). More than 500 stakeholders
attended workshops or were interviewed. Beneficiaries will continue to be involved during
implementation to ensure that the services provided are demand driven. Participatory
monitoring and evaluation will be integrated into regular reporting to ensure that beneficiaries’
concerns and perceptions are incorporated into project implementation in a timely manner.
14
3. Institutional Capacity for Implementation
49. Post-project evaluations have noted the failure of project design to recognize and
address institutional weaknesses on the part of implementing agencies early on. The strength of
the implementing agencies has influenced the design of this Project. Several established
agencies with good track records have committed to participation with financial contributions,
including TPAF and the Sangam Institute for vocational training, and CCSLA, FSCUL, and FDB
for rural finance. NCSMED is new and has yet to establish a track record, and the Project
specifically addresses its needs for institutional development in terms of skills and resources.
The Project recognizes the importance of the private sector for sustaining activities after project
completion, and the project design has provided a significant role for the private sector in
agricultural support services.
D. Cost Estimates
50. The total project cost is estimated at US$49.8 million equivalent, inclusive of physical
and price contingencies, interest during construction, commitment charges, taxes, and duties.
The project cost consists of a foreign exchange cost of US$10.7 million equivalent, or 21%, and
a local currency cost of US$39.1 million equivalent, or 79%. Table 2 summarizes the cost
estimates and Appendix 6 presents details of the financing.
Table 2: Project Cost Summary
(US$ ‘000)
Local Foreign
Component Currency Exchange Total Cost
Agricultural Diversification 16,276 4,051 20,327
Rural Finance 11,249 426 11,675
Off-Farm Livelihoods 6,639 1,593 8,232
Project Coordination 1,535 831 2,366
Total Baseline Costs 35,699 6,650 42,349
Physical Contingencies 2,299 573 2,871
Price Contingencies 1,106 141 1,247
Total Project Costs 39,104 7,364 46,468
Interest During Construction 0 2,755 2,755
Commitment Charges 0 305 305
Total Costs to Be Financed 39,104 10,673 49,778
Note: Local currency costs include taxes and duties of US$4.7 million equivalent.
Source: Mission estimates.
E. Financing Plan
51. The Government requested a loan of US$25 million equivalent from ADB’s ordinary
capital resources to help finance the Project. The loan will have a 25-year term, including a
grace period of 5 years; an interest rate to be determined in accordance with ADB’s London
interbank offered rate (LIBOR)-based lending facility; a commitment charge of 0.75% per year;
and other terms and conditions as set out in the draft Loan Agreement. The Government has
provided ADB with (i) the reasons for its decision to borrow under ADB’s LIBOR-based lending
facility on the basis of these terms and conditions, and (ii) an undertaking that these choices
were its own independent decision and not made in reliance on any communications or advice
from ADB.
52. ADB will finance a total of US$25 million equivalent, or 50.2% of the total project cost.
ADB financing will cover the foreign exchange cost of about US$10.7 million equivalent and a
local currency cost of about US$14.3 million equivalent. The Government will contribute about
US$8.7 million equivalent or 17.5% of the total project cost, FDB will contribute about US$8.8
million equivalent or 17.7%, and the other beneficiaries will finance about US$7.3 million or
15
14.6%.20 Table 3 summarizes financing plans and Appendix 6 provides details of the financing
plan.
Table 3: Financing Plan
(US$ ‘000)
Source Foreign Local
Exchange Currency Total Cost Percent
Asian Development Bank 10,673 14,328 25,000 50.2
Government of the Fiji Islands 0 8,690 8,690 a 17.5
Fiji Development Bank 0 8,823 8,823 17.7
Beneficiaries 0 7,262 7,262 14.6
Total 10,673 39,104 49,778 100.0
a
Includes taxes and duties of US$4.7 million equivalent.
Source: Mission estimates.
F. Implementation Arrangements
1. Project Management
53. As the executing agency, MASLR will be responsible for coordinating the overall
implementation of the Project. The chief executive officer of MASLR will chair an NSC
composed of representatives of the relevant national departments and implementing agencies
(Ministry of Finance and National Planning, Department of Environment, Public Service
Commission, Ministry of Commerce and Business Development, NCSMED, TPAF, FDB, private
service providers) and relevant civil society organizations. The NSC will oversee project
implementation and provide policy guidance pertinent to the coordination of implementation.
The NSC will establish divisional steering committees in the western and northern divisions,
which will be responsible for division-level coordination. The NSC will meet quarterly, and the
divisional steering committees will meet monthly (for the first year of the project and every other
month thereafter), and together the committees will coordinate implementation and facilitate
liaison between agencies. At field office level, a project implementation committee will meet
monthly to expedite project implementation.
54. A PCU will be established in Suva to support and coordinate activities and be the
secretariat to the NSC, under which it will operate. The PCU will be dedicated to the tasks of
coordinating and monitoring the implementing agencies and supporting their planning and
financial functions, particularly in timely and accurate preparation of documents for
disbursements under the loan. With a single office in Suva, the effectiveness of the PCU
requires substantial funds for communication and travel to the project areas. The PCU will be
led by a project coordinator. No separate person is proposed for a deputy project coordinator
position. One of the professional finance and monitoring staff will be selected as deputy, based
on experience and qualifications. High caliber staff will be recruited to undertake financial
planning and reporting, and PPME system will be developed project-wide. The PCU will be
supported by an international project implementation specialist, engaged for three years, funded
by the loan; and an international PPME specialist making a series of short inputs over the
project period to establish a PPME system and support its use for regular reporting, particularly
for the mid-term review and project completion reports.
55. The agricultural diversification component will involve many units within MASLR and
implementation will require effective management and coordination. The western and northern
divisions' Department of Extension Services will establish a PIU and will work through the
_____________________________
20
Other beneficiaries and their contributions are (i) farmers and the private sector, US$3.15 million; (ii) TPAF,
US$0.49 million; (iii) the Sangam Institute, US$1.08 million; (iv) FSCUL and SCUs, US$0.44 million; (v) CCSLA,
US$1.68 million; and (vi) the Fiji Sugar Corporation, US$0.42 million.
16
extension offices throughout the project area. MASLR will re-orient existing posts to staff the
PIUs with a project manager, deputy project manager/monitoring specialist and supporting staff
who will work exclusively for the Project. Other MASLR staff, particularly in field offices, will be
responsible for detailed implementation as part of their re-oriented job descriptions. The staff
costs will be funded by the Government within present budget provisions. PIUs consulting
services include support for the Young Farmer Training Study and market linkage pilot activities,
as well as unspecified services that meet specialist needs identified during implementation.
National NGOs, with established record of implementing community-based projects in rural
areas, as defined in Appendix 5, will be selected to lead project staff in assessing beneficiary
needs and aspirations. The NGOs will assign a full-time project manager to work with the PIUs
to support implementation of the agricultural and other components.
2. Implementation Period
56. The Project will be implemented over a 6-year period. Initial activities include (i)
establishing project offices; (ii) recruiting project staff and consultants; (iii) holding project
inception seminars at the six field offices; (iv) establishing an imprest account; (v) procuring
equipment and machinery, service vehicles, and preparation for civil works; and (vi) establishing
the project performance monitoring system. Potential private service providers will be identified
early on to commence privatized services wherever feasible. A more detailed implementation
schedule is in Appendix 7.
3. Procurement
57. Goods and services to be financed from the proceeds of the ADB loan will be procured
in accordance with ADB’s Guidelines for Procurement. Equipment and machinery, materials,
and vehicles valued from US$100,000 to US$500,000 will be procured by means of
international shopping, and contracts exceeding US$500,000 will be procured following
international competitive bidding procedures. Goods valued at less than US$100,000 may be
procured using direct purchase. Final details regarding procurement packages will be
determined during implementation. The civil works proposed to be financed from the proceeds
of the ADB loan will be procured in accordance with international competitive bidding
procedures for contracts in excess of US$1 million and with local competitive bidding
procedures for contracts worth less than US$1 million among prequalified contractors
acceptable to ADB. Given the small and scattered nature of civil works to be constructed and/or
rehabilitated under the Project, individual contracts are unlikely to attract international bidders.
Domestic contractors have the capacity and capability to undertake the required contracts. An
indicative procurement packages summary is in Appendix 8.
4. Consulting Services
58. The Project will provide two key international specialists: (i) an implementation specialist
(36 person-months), and (ii) a quarantine specialist (24 person-months). Advance action is
proposed for recruitment for these two posts. Additional international and domestic consultants
will be engaged for a total of 73 person-months to support implementation during the early
planning phase and initial operations. The international experts (46 person-months) will consist
of (i) a PPME specialist (12 person-months), (ii) a specialist in training young farmers (3 person-
months), (iii) a vocational training specialist (4 person-months), (iv) an MFI specialist (10
person-months); (v) an investment specialist (2 person-months), and (vi) unallocated
consultants principally to support agricultural diversification (15 person-months). The domestic
experts (27 person-months) will include two post harvest and market linkage specialists and
others as required during implementation. The Project will also recruit NGOs and private
extension service providers to help expedite implementation. Individual consultants and NGOs
will be selected and engaged in accordance with ADB’s Guidelines on the Use of Consultants
17
and other arrangements satisfactory to ADB for the engagement of domestic consultants.
Selection criteria for NGOs are included in Appendix 5. The Government’s attention will be
called to ADB’s recent anticorruption policy, particularly the section on fraud and corruption, as
stated in ADB’s Guidelines for Procurement and Guidelines on the Use of Consultants. Details
of specialists and their terms of reference are provided in Appendix 9.
5. Disbursement Arrangements
59. All disbursements under the ADB loan will follow ADB’s Loan Disbursement Handbook
(January 2001) and detailed arrangements agreed upon by the Government and ADB. To
expedite disbursements, the Government will channel part of the loan proceeds into an imprest
account with a ceiling of US$500,000 that could be revised depending on project performance.
The imprest account will be established at a bank acceptable to ADB immediately after loan
effectiveness. ADB’s statement of expenditures procedure will be followed to reimburse
expenditures and liquidate imprest account expenses not exceeding the equivalent of
US$100,000. The Government’s attention will be called to recent ADB’s anti-money laundering
and fighting terrorism policy.21
6. Accounting, Auditing, and Reporting
60. The PCU and MASLR will maintain separate records and accounts for the Project that,
together with the related financial statements, imprest account, and statement of expenditures
record, will be audited annually by independent private auditors acceptable to ADB. The finance
officers of the PCU will have experience in ADB’s requirements for project accounting and
auditing procedures. MASLR will provide ADB with copies of the Project’s audited accounts and
financial statements no later than six months after the end of the fiscal year to which they relate.
The PCU will also provide ADB with concise detailed monthly project performance reports,
quarterly progress reports and comprehensive annual progress reports on project
implementation within one month of the end of the reporting period that details physical and
financial progress and summarize performance monitoring and evaluation results. Within 3
months of physical completion, the PCU will prepare a project completion report in standard
ADB format and submit it to ADB.
7. Project Performance Monitoring and Evaluation
61. Project performance monitoring and evaluation (PPME) will be undertaken for each
project component to ensure that project inputs are managed efficiently and that benefits are
realized. The PCU will have overall responsibility for PPME. Assisted by consultants, it will
design, execute, and analyze baseline, midterm, and completion surveys, as well as any special
studies that may be required.22 PCU monitoring staff, assisted by consultants and working with
monitoring and field officers of each implementing agency, will monitor each activity. The PPME
specialist will help to (i) set up a computer-based, gender-disaggregated project performance
monitoring system in accordance with Government and ADB requirements; (ii) select a set of
monitorable development indicators; (iii) design the various surveys, including rapid results
initiatives;23 and (iv) organize workshops and on-the-job training for staff engaged in PPME
work, including implementing agencies. The project performance monitoring system (PPMS) will
be designed to enable the steering committees, PCU and implementing agencies to (i) keep
_____________________________
21
ADB. 2003. Enhancing the Asian Development Bank’s Role in Combating Money Laundering and the Financing of
Terrorism. Manila (Doc.R-45-03).
22
Indicators will be selected to monitor achievement of the targets established in the project framework (Appendix 4).
Therefore information will be required to establish baseline levels as appropriate.
23
Rapid results initiatives are a series of mini-projects, each staffed by a team responsible for a version of the hoped-
for overall result in miniature and each designed to deliver its results quickly.
18
track of the progress of physical implementation; (ii) coordinate and assess the contributions of
various project inputs; (iii) assess the Project’s impact from a set of quantifiable and qualitative
indicators; (iv) maintain a database of people assisted by the Project and, to the extent possible,
the impact on their lives during the project period; and (v) produce data for reporting purposes.
The indicators should include data to allow the evaluation and monitoring of environmental,
gender-specific, and ethnicity-specific impacts. The project design framework shown in
Appendix 4 will be used as a starting point for designing the PPMS, which will be revised as
appropriate during project implementation. The system will also include participatory monitoring
to be designed and implemented by the community-organizing NGOs.
8. Project Review
62. ADB will carry out project reviews throughout the project period at least annually.
Reviews will address both the effectiveness of the implementation arrangements and the
Project’s outputs and outcomes, and will propose adjustments where appropriate. During the
third year, ADB and the Government will carry out a comprehensive midterm review that will
assess (i) the actual physical and financial progress; (ii) the performance of the implementation
arrangements, including that of the executing and implementing agencies, and the PIUs; (iii) the
performance of the consultants and contractors; (iv) the status of compliance with loan
covenants; and (v) the actual and potential outcomes of the Project in relation to its objectives.
The midterm review will provide a basis for ADB and the Government to identify and discuss
any necessary changes in project design.
IV. TECHNICAL ASSISTANCE
63. In conjunction with the Project, an advisory TA is proposed to support the strengthening
of commercial agriculture development to ensure that appropriate policies, institutions, and
capacities are in place at project completion to sustain the performance of the private agriculture
sector. The TA will strengthen the private sector so that it can take the leading role in
developing and promoting agribusiness. In addition to developing the policy and legislative
environment, the TA will facilitate the development of self-sustaining industry organizations with
a medium- to long-term strategic and entrepreneurial vision that can raise funds, manage their
operations, and provide effective services to the farming community. The TA will (i) help the
industry organizations apply funding criteria to activity proposals; (ii) assist in establishing the
operations, linkages, and strategic focus of farm business advisory services; (iii) assist in
orienting trade- and market-related legislation, information, services, protocols, and
relationships; (iv) facilitate institutional linkages and networks between the Fijian agriculture
sector, private and public organizations, and programs active in the region; (v) support training
in agribusiness and agro-processing; and (vi) raise potential local entrepreneurs’ and industry
organizations’ awareness of business opportunities.
64. The total TA amount is US$875,000, of which ADB will finance US$600,000 on a grant
basis from the Japan Special Fund, funded by the Government of Japan, and the Government
will provide the remainder in kind. Twenty person-months of international and about 7 person-
months of domestic consulting services are envisaged. The TA consultants will be engaged in
accordance with ADB’s Guidelines on the Use of Consultants and other arrangements
satisfactory to ADB with respect to the use of domestic consultants. Appendix 10 provides more
details.
V. PROJECT BENEFITS, IMPACTS, AND RISKS
65. Without the Project, the poverty situation will deteriorate significantly. The projected fall
in the sugarcane price to F$40/t (US$20.5 equivalent) would give the typical 4 ha sugarcane
farm a gross margin of less than F$1,000 per year (US$500 equivalent) unless yields rise
19
significantly. At this level, farmers could not pay wages to sugarcane cutters or rents to
indigenous landowners. The result would be further acceleration in out-migration to urban and
peri-urban squatter areas, thereby increasing the strain on social and physical infrastructure.
Farm analyses show sufficient incentives for farmers to diversify in terms of increases in returns,
labor productivity, on-farm employment, and farm household cash income. The present gross
margin for a representative sugarcane farm is F$2,070 per year (US$1,035 equivalent),
compared with a poverty threshold of F$6,500 (US$3,340 equivalent) per household per year,
and as noted, without the Project, falling sugarcane prices will reduce this in the future to less
than F$1,000 per year (US$500 equivalent). Thus, without the Project, unless the price of sugar
roughly triples, yields improve from 45 t/ha to more than 75 t/ha, production costs are reduced,
or sugarcane farmers diversify their farms, most sugarcane farmers will continue to live below
the poverty line. Appendix 11 summarizes the poverty reduction and social strategy.
66. Diversified agriculture offers household incomes that are both well above the poverty
level and substantially higher than current household incomes. Based on a variety of alternative
agricultural products, the gross margin for a "with project" diversified farm is F$11,297 per year
(US$5,650 equivalent), well above the poverty threshold, even if only 60% of the farm is used
for diversified agriculture practices. Diversified farming activities are expected to provide
additional employment in post harvest and processing activities equal to at least 25% of on-farm
employment. An adoption rate of 50% could fully replace the sugarcane employment lost with
alternative on-farm, post harvest and processing employment generated by agricultural
diversification. Off-farm livelihoods are expected to contribute to employment generation.
67. Higher-value diversified agriculture will lead to changes in the nature of employment
compared with the current sugarcane-based situation. Jobs in diversified agriculture are less
seasonal in nature and offer significantly more employment opportunities for women. This
provides a greater degree of household stability. Experience in Fiji Islands has shown that
motivated by the well-being of their families, women will take advantage of rural financial
services and micro-enterprise opportunities to engage in off-farm employment. In addition,
providing decentralized training opportunities will contribute to household and community
stability.
68. Benefits from the Project’s agricultural diversification component are identified in terms
of the expected increase in value added brought about by the project investment. Some of the
rural financial services benefits are measurable in terms of increased agricultural output, but
other rural financial services benefits and the off-farm livelihoods component are considered too
speculative for meaningful quantification, as the outcomes cannot be predicted accurately.
Benefits will flow beyond the project area: (i) strengthening NCSMED will enhance the
institution’s capability throughout the Fiji Islands; (ii) improving access to and strengthening
MFIs will benefit households outside the project area, thereby enhancing income-earning
opportunities; (iii) strengthening quarantine services will provide access to international markets
for products grown throughout the Fiji Islands, and thus new income-earning opportunities; and
(iv) enhancing extension and research will improve services, thereby increasing productivity and
incomes.
69. Overall project costs are compared with the projected benefits from agricultural
diversification at an assumed 30% adoption rate, with provision for additional benefits from rural
non-agriculture businesses established through the rural financial services component. No
allowance is made for other benefits. The main quantified benefits are based on agricultural
diversification that exploits identified and readily available markets. However, adoption rates for
industry-targeted agricultural diversification programs implemented in other countries are known
to vary (footnote 10). For example, during 1985–1995, adoption rates ranged from 36% for
mixed horticulture in peninsular Malaysia to 70% for rubber in Sabah, Malaysia. Farmers in
20
Udawalawe, Sri Lanka, faced with decreasing competitiveness in rice, diversified from 250 ha in
other crops to more than 4,000 ha between 1986 and 1996. Factors affecting adoption rates in
these cases are similar to those in Fiji Islands and include (i) insufficient and diminishing returns
from the traditional crop and way of farming; (ii) strength of farmer organizations, extension
services, and marketing networks; and (iii) access to rural microfinance. The most important
drivers of diversification adoption rates in Fiji Islands are expected to be the rate of decrease in
sugar prices, the increase in sugarcane quality needed to compete without market protection,
and the broad dissemination of information about initial successes. If the adoption of
diversification practices were 100%, the economic internal rate of return (EIRR) would be 58%;
a 75% adoption rate gives an EIRR of 45%; and the base case adoption rate of 30% gives an
EIRR of 19.1%. The EIRR falls below the 12% opportunity cost of capital, only when the
adoption rate falls below 20%. These results suggest that returns are robust. The current trend
indicates that farmers’ incomes from sugar are inadequate, thus most farmers would need to
diversify, and an adoption rate above 30% is conservatively expected in the long run. Appendix
12 presents detailed financial and economic analyses.
70. The adoption rates of diversified practices required for success are relatively modest, but
the Project does entail significant risks. These will be mitigated by the advisory TA, mainly by
strengthening the industry organizations. The Project’s success also depends on sufficient land
being available for diversified farming. Failure to implement a fair market valuation system will
perpetuate the current system of illegal facilitative payments to landowners in an effort to
address the market distortions caused by the Agricultural Landlord and Tenant Act (Appendix
2). The gross margins assumed are realistic, but their achievement depends on the attainment
of quality standards that most farmers have not reached to date. The Project needs to oversee a
transformation from a mentality whereby farmers are passively dependent on a single
buyer⎯FSC⎯to a business mindset favoring wider adoption of diversified crop production in a
relatively short period through private sector partnerships, focused extension services, and farm
business advisory services. Part of Fiji Island’s comparative advantage is freedom from certain
pests. Quarantine risks, especially the incursion of a new, exotic fruit fly, would see the
cessation of most fruits and vegetables exports for several years until effective control and
disinfestation treatments could be identified and demonstrated, and revised BQAs could be
negotiated for each affected product, a time-consuming and costly process. Market access for
many of the identified export products requires the negotiation of BQAs with the importing
countries. The willingness of importing countries to assign priority and resources to this process
remains a risk. The strengthening of quarantine services is the Project’s response directed at
mitigating quarantine risks, and the Government has given assurances that all the necessary
resources will be devoted to quarantine surveillance. The lack of financial services and credit to
undertake income-generating and small off-farm livelihood activities under the Project pose a
risk to its overall success. In addition, MASLR’s implementation capability needs to be
enhanced, and the Project supports such strengthening. Political interference, especially
pertaining to the allocation and use of resources, needs to be minimized if the Project is to
succeed in achieving its objectives. While there are substantial risks associated with the Project,
adequate measures to minimize risks have been built into the Project. From the available
evidence of the Project, benefits will outweigh the costs and the Project is sufficiently robust.
71. The risks are significant and the project activities seek to counter risks, such as on- and
off-farm skill or credit deficiencies, as much as possible. The probable benefits are considered
to outweigh the costs. The risks of social and economic disruption associated with dependence
on a single commodity crop⎯sugar⎯sold at distorted market prices are considered to be
greater. An initial environmental examination was undertaken, and the Project does not
anticipate major environmental risks.
21
VI. ASSURANCES
A. Specific Assurances
72. In addition to the standard assurances, the Government has given the following
assurances, which are incorporated in the legal documents:
(i) The Government shall implement the sugar industry restructuring plan in
accordance with its terms.
(ii) Within three years of the loan effective date, a Bio Security Bill that amalgamates
legislation relating to quarantine measures and brings the Government into
compliance with WTO agricultural produce and export requirements and
practices shall be adopted.
(iii) Within three years of the loan effective date, BQAs shall be strengthened and
self-imposed restrictions on the exports of certain commodities shall be reduced.
BQAs shall be pursued with other countries and entities, including the EU.
(iv) The Government shall encourage and promote the development of a competitive
agriculture sector and local seed industry by (a) establishing Seed Import
Protocols to be developed in consultation with representatives of fruit and
vegetable growers and seed importers and adopting such protocols within three
years of the loan effective date; (b) reducing and/or eliminating subsidies for
agricultural seeds and planting materials within one year of the loan effective
date; (c) reducing the restrictions on the importation of seeds for produce to be
exported under the BQAs; and (d) expanding and formalizing the seed
certification procedures on a cost-recovery basis to provide a uniform seed
certification process for seed producers within two years of the loan effective
date.
(v) The Government shall strengthen its emergency response plan developed by the
Secretariat of the Pacific Community’s Regional Fruit Fly Project within one year
of the loan effective date.
(vi) Legislation that brings the Government into compliance with relevant
international laws and treaties relating to organic produce shall be adopted within
three years of the loan effective date.
(vii) The Government shall corporatize the FCA by project completion.
(viii) The Government shall ensure that FDB increases its lending to the agriculture
sector by making available US$8.8 million equivalent in funds to support loans to
creditworthy farmers in the project area. As part of such lending activities, the
Government shall ensure that FDB provides wholesale credit lines to CCSLA and
FSCUL in a minimum amount of US$2 million and US$0.3 million equivalent,
respectively.
(ix) The Government shall ensure that enough land is made available for successful
implementation of the Project. Leases shall be renewed or new leases shall be
entered into within 18 months of the lease termination date and, in the event that
landowners wish to use their agricultural land themselves, leases shall be
secured for farmers on new farms of similar productive capacity and location as
their previous farms.
(x) Within three years of the loan effective date, a methodology for valuing
agricultural land based on a fair market valuation system shall be adopted and
implemented.
(xi) In the event that the NLTB charges a new lease consideration for renewing an
existing lease, the new lease consideration shall be applied equally to all tenants.
The NLTB shall report, on an annual basis, the number of leases being renewed,
the rental amounts for the new leases, the amount of the new lease
22
considerations being charged, and the ethnic background of the tenants being
charged a new lease consideration.
(xii) To enhance Project development in Vanua Levu, the Government shall actively
explore options for developing, constructing and financing the port at Savusavu
and shall have engaged in discussions with potential development participants by
31 March 2006.
(xiii) The project participants shall be informed about their required contributions to the
rehabilitation and maintenance costs of the farm-to-market access roads to be
upgraded under the Project and the steps required to secure such contributions
shall be taken. Upon completion of such roads, sufficient funds shall be allocated
to operate the roads and maintain them in good repair.
(xiv) The Project shall be carried out in accordance with all applicable environmental
laws and regulations and with ADB's Environmental Policy (2002).
(xv) If the scope of the Project changes in a manner that causes land acquisition and
resettlement impacts, the Government shall inform ADB of the changes and
justify the reasons for related impacts. After concurrence from ADB, the
Government shall prepare a resettlement plan in accordance with ADB's
Involuntary Resettlement Policy (1995) and with the Resettlement Policy
Framework agreed to by the Government and ADB.
B. Conditions
73. The Government has agreed to meet the following conditions for loan effectiveness: the
PCU in Suva, and PIU offices in Lautoka and Labasa shall have been established, and each of
the project coordinators for Lautoka and Labasa, and a domestic accountant shall have been
identified.
VII. RECOMMENDATION
74. I am satisfied that the proposed loan would comply with the Articles of Agreement of
ADB, and recommend that the Board approve the loan of US$25 million to the Fiji Islands for
the Alternative Livelihoods Development Project from ADB’s ordinary capital resources with
interest to be determined in accordance with ADB’s LIBOR-based lending facility; a term of 25
years, including a grace period of 5 years; and such other terms and conditions as are
substantially in accordance with those set forth in the draft Loan Agreement presented to the
Board.
Haruhiko Kuroda
President
1 March 2005
Appendix 1 23
RURAL SECTOR ANALYSIS
1. The Fiji Island’s rural sector is dominated by agriculture, and within agriculture, by
sugarcane and subsistence farming, which provided 36% and 35% respectively of agricultural
gross domestic product in 2002. All other crops together were 15% of agricultural GDP, fisheries
13%, livestock 5% and forestry 5%. However, these figures understate the importance of sugar
for Fiji Islands. Sugar contributes 60% of cash farm incomes, while other cash crops and off-
farm income contribute about 20% each. Subsistence farming, forestry, and livestock provide
non-cash or delayed benefits, but have traditionally provided farm households with a range of
household needs and resilience to political upheavals, tropical cyclones, and other shocks.
Sugarcane farms in the project area are small, averaging 4 hectares. The expiry of some 10,300
farm leases over the next 25 years will result in experienced farmers leaving the sugar industry
and the entry of landowners who may have limited capital and experience. Preferential prices
have distorted Fiji Islands’ resource use with a bias toward sugar and allowed the industry,
whose performance was once world-class, to develop inefficient practices and standards. Over
the next few years, the European Union will reduce sugar prices to world price levels, requiring
a restructuring of the sugar industry most probably using a combination of improved
performance and reallocation of resources to other sectors. Recently, in October 2004, the
Indian Government has agreed to finance about US$40 million for the Fiji Sugar Corporation's
mill infrastructure upgrading.
2. The Project focuses on the reallocation of resources to new uses in viable rural
livelihoods. Project design has been set in the context of Fiji Islands' Strategic Development
Plan (SDP),1 which seeks to alleviate poverty by providing income-earning opportunities and
building capacity to enable the poor to take up such opportunities. The SDP also aims to create
a social safety net for those who cannot help themselves, and the Project indirectly supports this
by seeking to minimize the number of people unable to help themselves. The SDP notes the
large potential in rural areas, but recognizes the constraints, including poor access to markets;
low availability of rural credit; inadequate rural infrastructure; and poor dissemination of
agricultural knowledge, particularly in relation to the commercialization of agriculture. The
Project will address these constraints.
A. Agriculture
3. While some farmers will continue to have to leave or enter commercial agriculture
abruptly, others will make gradual changes, such as reducing their dependence on farming or
rental incomes or increasing the scale, intensity, and diversity of their farm enterprises. Their
ability to do so with minimum disruption relies on enhanced access to markets for nonsugar
agricultural products and improved farming technologies, off-farm opportunities, and rural
finance. The Fiji Island’s traditional commodity sectors, sugar and copra, are struggling, but
horticultural exports have performed better.
4. Viable scope for diversification exists, along with the basic capacity. To identify
alternatives to sugar and copra, the Asian Development Bank undertook a comprehensive
review of the agriculture sector in 1995,2 and market prospects were revised during project
preparation.3 Market opportunities for which a marketing structure is already in place include (i)
exporting to the Indo-Fijian, Asian, and Pacific island communities in Australia and New
Zealand; (ii) enhancing traditional diversity in household self-sufficiency; and (iii) supplying the
1
Government of the Fiji Islands. 2002. Strategic Development Plan 2003-2005. (Parliamentary Paper no. 72).
2
ADB. 1995. Technical Assistance to the Fiji Islands for the Agriculture Sector Study. Manila.
3
TA No. 3887-FIJ: Alternative Livelihoods Project: Mid Term Report. March 2003 for detailed review summarized in
the Final Report, July 2003.
24 Appendix 1
expanding urban, agribusiness, and tourism markets. Fresh fruits, vegetables, taro, coconuts,
spices, and other products are exported to regular buyers in Auckland, Sydney, Melbourne, and
Brisbane. Under a fruit fly-host bilateral quarantine agreement (BQA), 475 metric tons of
papaya, mango, eggplant, and breadfruit valued at US$510,000 were exported in 2001 to
Auckland via the Nature’s Way Export Treatment Cooperative in Nadi.4 Based on existing
demand, prices, and quality, scope exists to increase the volume, diversity, and duration of
supply to both domestic and export markets. Local agribusinesses are exploring options for
technological and vertical integration to substitute local products for imported feed and food
grains, spices, and raw materials, thereby strengthening their control over supply and quality.
The incremental value from these markets is estimated at F$25 million per year (US$12.8
million equivalent). A number of other significant potential market opportunities are identified.
Exports from Fiji have been successful in Japan, the United States, and Europe over the past
decade, but have not kept up with demand or export quarantine requirements. Exploiting these
opportunities requires increased supply, some promotion, and a sufficient marketing structure,
and for some products, such as large-scale pineapples and industrial crops, substantial
agribusiness investment is required.
5. The quarantine services’ weak capacity to develop and negotiate market access under
BQAs, combined with limited extension capacity to help farmers seeking to comply with BQA
requirements, has constrained exports. While successful, Nadi’s single facility for treating export
produce is operating below capacity. The use of post harvest handling equipment and practices
at the farm level is limited, as are marketing skills. While the Fiji Islands does have a few
established agribusinesses and emerging industry organizations, the nonsugar industries are
generally fragmented. As a result, internal linkages within the sector, which could facilitate
marketing, information flow, and technology transfer, are inadequate. For example, domestic
grain production focuses largely on regional or household food security, while domestic
livestock agribusinesses cannot obtain reliable local supplies of feed grains that meet basic
specifications, and therefore rely on imports.
6. In more remote areas, such as Rakiraki and Vanua Levu, marketing networks are absent
or weak, and physical access to markets is constrained and costly because of inadequate
infrastructure. Poor road and electricity infrastructure in western Vanua Levu has limited
economic development and has been a critical factor in the demise of agribusiness projects
there in the past. Poor product handling practices and the absence of local cool-stores and
grading and packing facilities lead to severe quality deterioration during the passage from farm
to market. Exporters and extension agents have worked with about ten pioneering small farm
businesses to improve harvesting and handling, including by using stackable crates, basic
packing sheds, and simple pre-coolers such as old refrigerated shipping containers.5 Once
established, the owners of these facilities have become focal points for handling produce from
other surrounding farmers, and managed commercially, the facilities provide benefits to all
parties. Sustainability also requires improving business management skills and building up the
systems, marketing chains, service businesses, and relationships to support the transition.
Scaling up will require facilitating industry communication forums, promoting private sector
partnering relationships between businesses and industry and training organizations, and
training to international standards. Appropriate technology, services and potential business
partners are accessible either within the Fiji Islands or in the region. Experience in the Fiji
Islands and elsewhere is often of failure if the Government engages in trading, which is better
left to business and industry organizations that can play a crucial role in facilitation through
4
TA No. 3887-FIJ Alternative Livelihoods Project: Mid Term Report. March 2003, Appendix 2.
5
A model has been supported by the Food and Agriculture Organization Postharvest Technical Cooperation Project
in Sigatoka.
Appendix 1 25
close participation with the private sector in developing policy and legislation, disseminating
technical and market information, undertaking adaptive research to meet specific industry needs
and facilitating market access.
7. Solving production and marketing constraints requires the Government to encourage
industry organizations to take the lead in industry development, improve product standards, and
strengthen organizations that provide services critical to agricultural exports and inputs. The
Quarantine Authority must strengthen its focus on facilitating agricultural industry development
that allows some cost recovery, and not just focus on providing bio security as a strategy to
avoid costly incursions. Most of the existing industry organizations are weak. Only the Sugar
Cane Growers Council is long established and has strong institutional capacity, including
compulsory levy legislation. Other established industry organizations with levy legislation, e.g.,
the ginger, root crops, and coconut industry organizations, are weak and ineffective. Recently
formed industry organizations, including the Fruits and Vegetables Council and the Organic
Farming Association, have little capacity as yet, but do have strong farmer and industry
participation on a voluntary, commercial basis, which means that they can play an effective role
in industry development and service provision, and also that they have good potential for self-
funding through voluntary membership fees and revenues from services, including providing
training, information, marketing support (e.g., registered brands, promotions, negotiation
strength), and selected input supplies (e.g., packaging, seeds, pesticide). Twinning
arrangements with partner industry organizations in the region are possible where mutual
benefits exist.
8. A key problem is the lack of a commercial ethic among farmers, a result of domination
by a single, large sugar industry that is governed by a master award rather than by market
forces. As a result, most of the smallholder farms have not been treated or operated as small
commercial enterprises. However, strong interest in diversification exists among stakeholders
and successful examples exist in the project areas. The social survey that formed part of the
project preparatory technical assistance found that 21% of farms obtain cash income from
nonsugar farm production, and that diversified farms and agribusinesses that generate at least
50% of their cash income from specialized or mixed farming of nonsugar products include
producers of fruits and vegetables, root crops, grains and pulses, livestock, agro forestry,
spices, and honey. These early adopters demonstrate capacity to manage relatively
sophisticated operations, including irrigation, specialized cultivation and export treatments,
quality-oriented post harvest and marketing chains, contract farming, and buyer relationships.
9. Technology constraints can be addressed by equipment and practices that a small
minority in the sector already use, and can also be adapted from designs and systems proven in
similar contexts overseas. Increasing adoption of such technologies will, however, require
training to acquire new skills, some adaptive research, and focused agricultural extension
support. Farmers have adopted diverse technologies and skills through demonstrations,
extension, exchanges between farmers, small-scale external training assistance, and industry
group workshops. Tobacco and poultry agribusiness have also demonstrated the potential to
improve farmers’ capacity through contract farming and in-house technical support. Fruit and
vegetable exporters advise growers on harvesting, handling, and field measures to comply with
export BQAs and maintain cooling and packing facilities.
10. The availability of training in practical, commercial farm management and farming
competencies is limited, although the Training and Productivity Authority of Fiji (TPAF) does
provide some training relevant to farm enterprises, such as business management, welding, and
mechanics. The Fiji College of Agriculture (FCA) provides a three-year academic diploma in
tropical agriculture funded by the Ministry of Agriculture, Sugar and Land Resettlement to meet
26 Appendix 1
its ongoing staffing needs. The FCA could provide competency-based training in partnership
with local colleges by adapting course materials from training institutions registered with foreign
national agricultural industry training boards.
B. Off-Farm Livelihoods
11. The SDP 2003–2005 noted that formal employment in 2000 was recorded at 111,500
and that the formal sector is unable to accommodate about 17,000 new job seekers each year.
Two main reasons cited in the plan are the inadequacy of productive investment and the limited
human resource skills. Banks and investors in the Fiji Islands suggest that finance for
investment in medium and large enterprises is not in short supply, but potential investors cite a
lack of confidence. Although the Project cannot fully address the causes of low private sector
investment, it can help people acquire new and improved skills to enter the formal workforce.
12. The informal off-farm sector, which is so prominent and is often dynamic in many
countries, is not yet well developed in Fiji. To enhance off-farm development, in 2002 the
legislature passed the Small and Micro Enterprises Development Act, under which the National
Center for Small and Micro Enterprise Development (NCSMED) was established. The
institutional framework for small enterprise development has yet to be propagated, and existing
capacities in the NCSMED are limited. Urban and peri-urban areas have large numbers of
nonagricultural small enterprises, but rural areas have only the occasional stores and micro
enterprises, and most rural services are owned by urban proprietors. The Project will promote
rural small enterprises for agricultural storage and cooling, input supply, and equipment.
13. The development of small businesses and micro-enterprises requires a leading sector to
create a market. In the project areas, agriculture will act as such a leading sector. Some
beneficiaries, including farmers, agricultural laborers, and mill workers, have the capital and skill
requirements to set up small enterprises, and some have already done so. However, for more to
be able to do so requires technical and business training, orientation, and advice about
available opportunities. While training providers, including the TPAF and the Fiji Institute of
Technology, tailor training courses to levy-paying larger enterprises, they also have the capacity
to provide appropriate vocational and business management training relevant to the Project’s
target groups.
C. Rural Financial Sector
14. Rural households, mainly nonsugarcane growers, are largely denied access to basic
financial services, and even for sugarcane farmers, the formal finance sector has increasingly
limited its services to richer farmers. The urban-based banking sector has failed to serve rural
areas in general, and has especially failed those in remoter areas in traditional, indigenous
Fijian villages. Even among sugarcane farmers, indigenous Fijian farmers are 60% more likely
to be deprived of access to formal banking services. This market failure poses a major
constraint to livelihood activity based on agricultural diversification, off-farm livelihoods, or small
and micro-enterprise development. More than half of Fijian farmers surveyed cited lack of
access to financial services—credit and savings—as a major constraint to development.
15. The Fiji Islands is also facing the consequences of a Government policy of targeted
credits and grants that have undermined the development of sustainable rural financial
institutions. The widespread use of subsidized credits has reinforced a culture of financial
indiscipline, contributing to poor repayment performance and preventing the development of
rural savings and credit services by microfinance institutions (MFIs) capable of providing
efficient financial services to rural households. A major weakness of the Government programs
is their emphasis on credit, as typified by the Fiji Development Bank offering only credit services
Appendix 1 27
while generally ignoring savings. As a result, most rural areas lack small savings and deposit
facilities.
16. Some MFIs do serve those sugarcane farmers who are richer and can repay through
their sugarcane proceeds from the Fiji Sugar Corporation. Urban community groups are served
by savings and credit unions. Much of the proposed agricultural diversification will take the form
of sugarcane farmers developing and commercializing their farming systems. The Sugar Cane
Growers Fund and the Canefarmers Cooperative Savings and Loan Association (CCSLA) will
support the Project by serving existing and incoming farmers. The Fiji Savings and Credit Union
League and the CCSLA plan to extend their services to rural areas.
17. The community-level MFIs have demonstrated that they can provide rural financial
services in a cost-effective manner. As community-based entities, they are much better able to
adapt to local community needs than commercial banks, and this is especially beneficial in
addressing the social and cultural conditions in indigenous communities, which have previously
been denied access to financial services and have not yet developed a culture of saving and
timely debt repayment. Such community-level institutions are needed to ensure that savings
flow into sound investments and that the loans are repaid promptly. Their expansion depends
on the creation of and support for viable MFIs able to work in rural communities. Appropriate
government policy and strategy would include phasing out grant programs that interfere with the
development of microfinance. The supervision and governance of MFIs need to be
strengthened, and access to wholesale finance would leverage their deposit-taking ability and
profit retention.
D. Rural Infrastructure in Vanua Levu
18. The SDP notes that rural villages, rural settlements, and outlying islands still have
unequal access to basic infrastructure and services. The development of opportunities in rural
areas by tapping potential in all economic sectors (tourism, agriculture, forestry, fisheries,
mineral resources, and manufacturing) depends on the availability of such services and
infrastructure. In relation to such infrastructure and services, Vanua Levu is an outer island by
comparison with the scale and quality of service provision in Viti Levu. The development needs
of Vanua Levu have long been known and planned for, but funds have been used for better-off
Viti Levu, which has also received higher priority.
19. Past agricultural programs on Vanua Levu have had limited success because of a lack
of market access opportunities. Development at Seaqaqa initially foresaw a farming system
based half on sugarcane and half on diversified crops, but ended up focusing predominantly on
sugarcane because of the lack of market access. The Project will fail in Vanua Levu if efficient
and effective market access and supporting infrastructure are not provided.
1. Ports
20. Currently only bulk sugar, logs, and coconut oil are exported directly from Vanua Levu.
Without an international port for general container-based cargo to provide cost–effective, direct
access to markets, private sector investment and export diversification will be constrained and
high rates of inter-island migration will continue. Development of a new timber port at Bua in
western Vanua Levu will be another specialized port un-served by general cargo vessels. Most
goods must be transshipped through Suva or Lautoka, substantially increasing the costs of
exports and imports, hindering investment, and increasing costs to consumers by 10% to 20%
more than in Viti Levu. International, general cargo ships already serve Savusavu to pipe
aboard oil from the copra mill, but they cannot load and unload general cargo due to the
absence of port facilities. A new port in Savusavu would benefit all of Vanua Levu and nearby
28 Appendix 1
islands such as Taveuni, Rabi, and Kioa as a general cargo port already served by international
shipping, unlike any other location on the island.
2. Other Infrastructure
21. At 1,690 kilometers, Vanua Levu has about half the length of roads of Viti Levu, but only
188 kilometers (11%) are paved.6 The lack of paved roads, the high vehicle operating costs
(including damage to transported produce, and the long travel times have contributed to the lack
of development, thereby reducing opportunities and encouraging inter-island migration by both
indigenous Fijians and Indo-Fijians. The airports at Labasa and Savusavu do not have
international status, and current runway lengths and facilities limit domestic services to day-time
flights by 10- to 17-seat aircraft, which is inadequate for significant tourism and excludes air
freight. Domestic services urgently need to be improved to support diversified economic
development.7 Labasa does have electricity generating capacity, but the Fiji Electricity
Authority’s grid serves only 25% of the island, concentrating on urban areas, but neglecting rural
areas and villages. A reliable supply is needed for sustainable agro-processing and handling, as
well as for nonagricultural enterprises.8
22. Almost half of Vanua Levu has no accessible telecommunications links, so even mobile
phones cannot be used. Improved communication is vital for market access and for the
sustainability of commercial rural development.9
23. Most rural communities on Vanua Levu do not have access to potable water or an efficient
water supply. Waterborne diseases are prevalent, and the health authorities have identified the
presence of some potentially fatal diseases.
6
ADB. 2002. Technical Assistance to the Fiji Islands for the Third Road Upgrading Project. Manila. A fourth road
upgrading project has been proposed for 2006.
7
ADB. 2003. Technical Assistance to the Fiji Islands for Civil Aviation and Airports Improvement. Manila.
8
ADB. 2002. Technical Assistance for Preparing the Rural Electrification Project. Manila.
9
ADB. 2003. Technical Assistance for Implementation of ICT Strategy. Manila.
Appendix 2 29
SUMMARY OF AGRICULTURAL LEASE RENEWALS AND LAND AVAILABILITY
A. Status of Agricultural Lease Renewals
1. With the exception of Crown and freehold areas, land in the Fiji Islands is communally
owned by Fijians as native land that cannot be bought or sold. The Native Lands Trust Board
(NLTB) is a statutory body empowered to administer, develop, and manage native land for the
benefit of its Fijian owners. The NLTB identifies which areas are required for use by traditional
Fijian communities and makes the remainder of the land available for leasing. NLTB, not the
actual landowners, issues the legally binding lease for agricultural, commercial, residential, and
other uses. Leases of native land can only be issued by NLTB, so all farmers of native land are
tenants whether they are Indo-Fijian or indigenous Fijian, including members of local clan,
which owns the land, as well as Fijians from other areas of the Fiji Islands. No distinctions are
made on the basis of race or community membership, and the concept of owner-farmer does
not apply to any farmers of native land.
2. Laws to govern relations between landlords and agricultural tenants were enacted in
1966 and became effective in 1967. The Agricultural Landlord and Tenant Act (ALTA) governs
all agricultural leases of more than 2.5 acres, or about 1 hectare (ha), and cannot be amended
unless passed by two thirds of the members of both the lower and upper houses. The
Government is currently debating whether ALTA should be supported in its present form, as it
sees the legislation as too rigid. ALTA gives no right of automatic renewal of leases, and
tenants can be required to vacate the land once the fixed lease and grace period expire. This
has created an impasse in which lease terms acceptable to all parties cannot be negotiated
under ALTA.
3. NLTB has proposed an alternative lease arrangement under the Native Land Trust Act.
Table A2.1 summarizes the key differences between the current and proposed legislation.
Table A2.1: Differences Between the Agricultural Landlord and Tenant Act and the
Proposed Native Land Trust Act
Agricultural Landlord and Tenant Act Native Land Trust Act
Lease Period
A minimum 30 years to a maximum of 99 years is A 50-year rolling lease is proposed with review after 25
allowed with no right of renewal, and the tenant must years to consider extension for a further 25 years, thus
vacate the land after a grace period in the event of the tenant farmer is always given a minimum 25 years
nonrenewal. All leases have been set for a 30-year notice of nonrenewal.
period.
Rental
The maximum annual rental is 6% of the unimproved A market-based rental system would be linked to the
capital value. productivity of the land and agreed to by the landlord
and tenant rather than being imposed by legislation.
The rental rate is reviewed every five years, subject to Fair market-oriented reviews would be based on the
the maximum rental rate. rental system agreed on by the landlord and the tenant.
Development and Improvement
The tenant can claim compensation for all development Tenants can only be compensated for the improvements
and improvements of the property with claims if the NLTB grants prior approval of the improvements.
determined by the Agricultural Tribunal.
Source: Native Land Trust Board.
3. Political debate surrounds the issue of whether or not leases are renewed and whether
the ensuing terms and conditions of the lease are fair and equitable. Because the fixed
schedule of lease rental rates under ALTA has not been updated since 1997, the rental rates
are out of date. In an effort to limit this distortion, NLTB has introduced a lump sum payment,
the new lease consideration, to induce landowners to lease out their land for an additional 30-
year period. However, the new lease consideration has been applied discriminately, being
30 Appendix 2
applicable to Indo-Fijian farmers but not to indigenous Fijians. The Asian Development Bank's
international consultant has pointed out that if the new lease consideration is to be applied, it
should be applied to all farmers indiscriminately and without reference to their ethnic
background. The practice of selectively applying the new lease consideration encouraged more
indigenous Fijians to enter into farming, as without the inclusion of a new lease consideration
they can obtain leases on more favorable terms than Indo-Fijians. The banks lend to farmers to
finance the new lease consideration.
4. The first ALTA leases began to expire in 1997, 30 years after the legislation became
effective (Table A2.2). In many cases, incoming indigenous Fijian farmers have commenced
farming. However, much land with expired leases remains unused, and NLTB’s 2002 annual
report notes that this is partly due to disputes within the landowning groups.
Table A2.2: Expiry and Renewal of Agricultural Leases, 1997–2001
Leases to New
No. of
Renewed to Sitting Tenants Tenants/Landowner Not Resolved
Year Expiring
Cane Other Resi- Total Cane Other Reside
Leases
Farms Farms dential No. Total % Farms Farms ntial No. %
1997 94 36 9 6 51 54.3 34 30 17 2 2.1
1998 204 44 9 7 60 29.4 111 56 54 11 5.4
1999 1,541 345 86 56 487 31.6 496 138 241 322 20.9
2000 1,940 317 30 25 372 19.2 473 105 115 735 37.9
2001 442 142 51 1 194 43.9 17 12 14 193 43.7
Total 4,221 884 185 95 1,164 27.6 1,131 341 441 1,263 29.9
Source: Native Land Trust Board.
5. Of a total of 13,141 ALTA leases, the largest number of leases expired in 1999 and
2000. In 2000, 1,940 leases expired but only 19% were renewed to sitting tenants. The large
number of not resolved leases can be attributed to uncertainties about renewals, with
landowners reluctant to renew leases under ALTA when better terms could become available
under the Native Land Trust Act. The economic pressure on tenants and landlords to renew has
caused a substantial increase in the rate of renewal, and NLTB’s 2002 annual report notes that
the clarification of legal uncertainties resulted in the renewal of some 400 expired leases in
Seaqaqa. The rate of renewal is expected to increase, although a continuing level of
nonrenewals will occur to meet demand by members of the landowning communities to enter
into farming to improve their livelihoods.
6. During the 6-year project implementation period, some 2,800 ALTA leases will expire,
but most of the leases will probably be renewed as uncertainties are resolved and market forces
encourage agreements. This trend is consistent with current political dialogue to resolve issues
and Government policy:
Finding an amicable solution for land issues will facilitate purposeful development
of land ...... Government realizes that as a “factor of production”, land plays an
important role in the production of goods and services that can be traded in a
highly globalized international economy. A market friendly land model that
ensures mataqali landowners receive market based land rental income;
guarantees security of tenancy; and generates a closer relationship between
landowners and tenants, is required.”1
1
Government of the Fiji Islands. 2002. Strategic Development Plan 2003-2005. (Parliamentary Paper no. 72).
Appendix 2 31
B. Land Availability
8. The system of farming for the past 30 years has been based on farm areas of about 4 ha
with a modicum of mechanization. While high prices yielded good returns to farmers, they also
allowed a change from family farming to widespread use of imported labor. Sugarcane cutting
gangs are now mostly formed from outside the farming community, generally from traditional
villages and often from the outer islands. The Fijian sugar industry includes 17,000 sugarcane
cutters, 13,000 from outside sugarcane farming, and under the off-farm and rural financial
services components of the Project many of these will lose seasonal sugar employment, but will
gain from the more labor-intensive needs of diversified farming.
9. In 1993, the sugarcane area peaked at just below 80,000 ha, but by 2001 this had fallen
to 65,000 ha out of 96,000 ha registered. In the expansion phase up to 1993, some land was
registered to sugarcane growers on steep slopes with shallow soils, and such use is
environmentally unsound. Table A2.3 shows the distribution of registered sugarcane land in
terms of topography.
Table A2.3: Registered Sugarcane Land Topography
Mill Area Flat Rolling Steep Very Steep Total
Lautoka Hectares 11,162 19,624 4,156 239 35,181
Percentage of Total 31.73 55.78 11.81 0.68 100
Rarawai Hectares 6,412 15,200 4,283 2,424 28,319
Percentage of Total 22.64 53.67 15.12 8.56 100
Penang Hectares 1,607 3,749 1,050 46 6,452
Percentage of Total 24.91 58.11 16.27 0.71 100
Labasa Hectares 13,359 19,583 7,385 3,743 44,070
Percentage of Total 30.31 44.44 16.76 8.49 100
Total Industry Hectares 32,540 58,156 16,874 6,452 114,022
Percentage of Total 28.54 51 14.8 5.66 100
Source: Fiji Sugar Commission.
10. Most of the land, some 80%, is flat or rolling and is satisfactory for growing sugarcane
and other arable crops. Current practices using bullocks, horses, and manual labor also allow
sugarcane to be grown on steep and very steep slopes, and satisfactory yields are often
obtained on this terrain. However, evidence indicates that soil conservation measures are not
always practiced, for example, with furrows running down the slopes.
1. Sugarcane Growing Potential
11. Some discussions of restructuring suggest that sugarcane yields will increase from 50
metric tons/hectare (t/ha) to 55 t/ha and that the 64,000 ha under sugarcane would yield a sugar
harvest of 3.5 million t. However, farms are unlikely to be able to survive on such low yields as
sugarcane prices fall. Suitable flat and rolling land available within milling zones totals some
90,000 ha, so even with modest yield improvements sufficient land appears to be available to
meet production requirements. Sugarcane yields have been relatively static at about 52 t/ha, but
the Sugarcane Research Centre reports much higher potential yields, as shown in Table A2.4.
32 Appendix 2
Table A2.4: Potential Sugarcane Yields
Soil Type Crop Yield (t/ha) Ave. P+3R
Good deep soils normally found on flat land and Plant 125
eminently suitable for growing sugarcane Ratoon 95 102.5
Medium soils normally found on flat and rolling Plant 95
land and suitable for growing sugarcane. Ratoon 80 83.8
Poorer soils normally found on rolling and steep Plant 90
land and less suitable for growing sugarcane Ratoon 80 82.5
Weighted average 92.0
Note: The average (P+3R) assumes a 4 year cycle with the higher yield in the first year of planting
followed by 3 years harvesting the lower yielding ratoon crops.
Source: Sugarcane Research Centre.
12. The potential yield of land suitable for sugarcane is 92 t/ha and Fiji Islands could
produce 6.4 million t of sugarcane per year. These results are obtained in closely supervised
agronomy trials and farmers cannot generally achieve such yields. Nevertheless, an average
yield in excess of 70 t/ha should be achievable, and an average of 3,643 farmers have
exceeded this yield over the past 7 years. At this yield, 50,000 ha would satisfy projected mill
demand.
2. Sugarcane Price Projections
13. Land availability and potential yields suggest substantial scope for a continuing, viable
sugarcane farming sector after restructuring to respond to changes in the European Union
prices and the need to supply sugarcane competitively at world market prices. However, the
price structure after restructuring remains uncertain, with stakeholders unable to agree on
pricing. In this situation, estimates have been based on the range of low price projections made
by millers.
14. The Fiji Sugar Corporation (FSC) has not made a single projection but a number of
projections at varying degrees of formality. An early proposal suggested a price of F$32/t
(US$16.4/t) of sugarcane paid on delivery, but a number of other suggestions have been
floated. Projections presented to the Sugar Restructure Steering Committee combine a cash
price with savings on lease rental and transport, while other projections supplied by FSC
indicate other prices. Table A2.5 gives the projected sugarcane price as presented to the
Restructure Committee and FSC’s latest estimates.
Table A2.5: Projected Sugarcane Prices, 2003–2009
(F$/t)
Category 2003 2004 2005 2006 2007 2008 2009
Prices Presented to Restructuring Committee 51.4 52.9 53.0 46.5 47.2 47.3 47.1
Fiji Sugar Corporation Price 51.3 41.5 49.0 43.8 42.5 39.8 37.4
Note: Sugarcane prices include the costs of land rental and transport.
Sources: Ministry of Agriculture, Sugar, and Land Resettlement; Fiji Sugar Corporation.
15. The price paid for sugarcane will ultimately be determined by the price of sugar, so the
projected sugarcane prices are indicative rather than definitive. A review of current farm
operations suggests that marginal farmers’ income starts to become negative at F$45/t
(US$23.1/t), and that some farms remain profitable at F$31.5/t (US$16.2/t), although at much
lower net incomes.
Appendix 2 33
3. Farmer Numbers and Production
16. The response to reductions in EU prices for sugar will include some farmers leaving the
industry either because returns are too low for their farms to be viable or because sugar ceases
to be a viable use of farm resources, and some farmers may use good land to grow higher-
value crops. The Project design assumes that farmers who remain in sugar and prosper will
improve yields to sustain viability.
17. As with prices, uncertainty about the amount of sugarcane required by millers is
considerable until restructuring has been agreed on. Once again, projections given to the
Restructure Committee based on FSC data differ from other models being used by FSC. The
former calls for 3.4 million t by 2007, while the latter assumes 2.8 million t throughout. FSC
accepts that the mills’ capacity will be 3.6 million t after rehabilitation and does not explain how
leaving 0.8 million t of capacity unutilized would produce either financial or economic benefits
when all sugar is produced at world prices.
18. This study uses the figures presented to the Restructure Committee and extends that
projection from 2007 to reach full capacity utilization in 2008. The projection in Table A2.6 also
assumes an average yield of 72 t/ha, some 20 t/ha less than the Sugarcane Research Centre’s
averages on the same land types.
Table A2.6: Projections and Farmer Numbers, 2003–2008
Category 2003 2004 2005 2006 2007 2008
Hectares Harvested (‘000) 64,000 61,500 59,500 56,000 53,000 50,000
Yield (t/ha) 43.8 47.2 53.8 60.7 64.2 72.0
Total Tons of Cane (‘000) 2,800 2,900 3,200 3,400 3,400 3,600
Overall Time Efficiency (%) 73.0 75.0 75.0 75.0 82.5 84.0
Overall Recovery (%) 81.0 81.0 85.0 85.0 85.0 85.0
TC/TS (t cane/t sugar) 9.58 8.67 8.69 8.22 8.0 2 8.15
Total Tons of Sugar 94NT (‘000) 293.2 303.7 371.7 394.9 394.9 441.7
Total Number of Farms 21,371
Total Number of Productive Farms 17,297 16,622 15,658 14,000 13,250 12,500
Average Farm Size (ha) 3.7 3.7 3.8 4.0 4.0 4.0
Number of Farmers Exiting 4,074 676 964 1,658 750 750
ha = hectare, t/ha = metric tons/hectare.
Note: 4,074 non-productive farms, in the 21,371 total registered in 2003, are excluded from the projections
Source: Project preparatory technical assistance estimates.
19. In this projection, to meet the mill requirement of 3.6 million t of sugarcane by 2008 at
yields of 72 t/ha, 12,500 farmers would be required with an average harvest area of 4 ha per
farm. This means that an estimated 4,798 farmers would exit sugarcane farming activities.
20. The numbers are indicative at this stage and are considered as a worst case scenario. The
reduction in harvested area is dictated by decisions on the capacity of the mills, reflecting a mill-
constrained scenario, and is not in response to either the availability or productivity of land.
Alternative scenarios are possible by projecting investments in increased mill capacity to better
match land availability and potential yields. Given that either scenario requires viability at world
market prices, no credible sugar market volume constraint exists.
34 Appendix 3
EXTERNAL ASSISTANCE TO THE FIJIAN AGRICULTURE SECTOR
Amount (US$
Funding million) Year
Source Project Title Grant Loan Approved Activities
ADB Sigatoka Valley 0 4.4 1986 Rural infrastructure, agribusiness,
Development Project and agricultural support services
Agricultural Development 0 20.0 1986 Sector restructuring, policy reform,
Project and institutional development
AusAID Beef Farming 10.0 0 1978 Small beef farm development
Rice Development 5.0 0 1985 Irrigated rice development
Soil and Crop Evaluation 2.0 0 1980 Research development support
Project
European Micro Pineapple 1.2 0 1992 Small farmers pineapple
Union Development Project development for export
FAO Small-Scale Dairy Unit 4.0 0 2003 Small dairy farm development
Development
Telefood Programme 0.1 0 2003 Strengthening of the subsistence
farming sector
NZAID Beef Farming 5.0 0 1978 Group/community-based beef
Development farming support
ADB = Asian Development Bank, AusAID = Australian Agency for International Development, FAO = Food and
Agriculture Organization, NZAID = New Zealand Agency for International Development.
Source: ADB estimates.
Appendix 4 35
PROJECT FRAMEWORK
Design Monitoring Assumptions
Summary Performance Indicators/Targets Mechanisms and Risks
Goal
Protect and improve the • At completion, rural families • Household statistics
standard of living of rural currently deriving livelihoods from • Economic reports
people at risk because of sugar sector activities at least • PPMS
sugar sector restructuring maintain their total real incomes • PCR and PPAR
Purpose
Assumption:
Increase sustainable • Agriculture continues to account • Agricultural statistics • No major social or
livelihoods, on- and off- at least 15% of GDP • Employment economic crisis limits
farm, to at least replace • By 2010, nonsugar cash crops statistics the time available to
those lost during the increase from 15% to 25% of • Annual NCSMED develop alternative
course of sugar sector agricultural GDP survey of SMEs livelihoods
restructuring • At least 50% of farmers obtain at • PPMS
least 50% of farm incomes from • PCR Risk:
nonsugar crops and livestock • Restructuring results
• By 2010, 4,000 new off-farm jobs in a still substantial,
have been created in existing viable sugar industry
enterprises
• By 2010, 1,200 new small and
micro enterprises have been
established
Outputs
1. Agricultural By end of Project unless otherwise Assumptions:
Diversification noted • Secure land tenure is
available for farmers
1.1 Strengthening Industry • At least five beneficiary/private • Industry Council • Savusavu port is
Organization and Market sector-led industry councils in self- reports developed in parallel
Access financed operation • MASLR reports with the Project to
• Organic farming certification and (including AgTrade allow market access
Strengthened institutions legislation in place to Codex and Quarantine) in Vanua Levu
and infrastructure for Alimentarius standards • PPMS
access to agricultural • Willingness of agri-
• A bio security bill and at least three business, farmers,
markets bilateral quarantine agreements and the Government
agreed and additional three being to work together to
processed resolve issues of
• No shortage of certified seed at mutual interest
market prices from domestic and
imported supplies Risks:
• 450 km of farm access roads • Distrust between
rehabilitated in Vanua Levu and farmers and lack of
150 km in Viti Levu contribution from
them
1.2 Strengthening • FCA corporatized by end of 2010 • FCA progress • Ability of farmers to
Commercial Farming • FCA farmer training courses reports adopt a commercial,
Capacity established with full cost recovery • MASLR reports whole-farm business
• At least 500 target farmers trained • PPMS approach after
Established commercial • By mid 2006, a detailed plan for lengthy dependence
farming training and training young farmers on a single buyer and
advisory services • By January 2006, farm business mono-crop system
management service has been • Lack of interest in
established at six field offices farming among the
• At least 500 individual farm young
business plans produced
• At least 100 farm business plans
secure FDB or commercial bank
finance
• Market linkage programs piloted in
Continued on next page
36 Appendix 4
Design Monitoring Assumptions
Summary Performance Indicators/Targets Mechanisms and Risks
two remote areas.
1.3 Technology • At least 75% of research and • Research and Risks:
Development and extension programs undertaken in extension program • Ability of research
Transfer partnership with private sector co- proposals and and extension staff to
sponsors individual program adjust to a user-
Research and extension • At least 75% of programs reports oriented, demand-
services delivering evaluated by pre-identified target • MASLR reports driven environment
technologies that meet groups as partially successful or (including Research • Willingness of private
private sector and better in meeting objectives and Extension) sector to commit
farmers’ needs • At least 50% of prepartnership • PPMS resources to joint
programs initiated by the research and
Government have private extension
sponsors by completion
2. Off-Farm Livelihoods
2.1 SME Development • By December 2005, NCSMED • NCSMED reports Assumption:
advisory services available at all • PPMS • Ability of agriculture-
Effective support for six project field offices dominated rural
establishment and • From early 2006, all laid off FSC economy to generate
operation of small and employees offered counseling and demand for non-farm
micro-enterprises advice services enterprises and
• From mid 2006, SME database employment
available on project area
Risks:
2.2 Support for • Willingness of rural
Vocational Training people to take up new
livelihoods in rural
Increased access to • By mid 2006, three workshops and • TPAF reports areas rather than to
appropriate vocational three training rooms refurbished in • Sangam Institute migrate
training courses and Lautoka reports • Ability of those exiting
facilities in project areas • A further six workshops, six • PPMS sugar to be retrained
technical training rooms, and four for new livelihoods
commercial training rooms built at
TPAF in Lautoka
• At least 20 workshops and training
rooms built and in use by the end
of 2007 at the Sangam campus in
Labasa
• A further six workshops and
training rooms may be added in
Labasa
• Labasa Sangam will enroll 230
post school trainees each year, of
whom at least 90 will be girls, and
up to 50 adults at any one time on
short vocational courses
• Vocational courses for mature
students from outside industry will
be developed by TPAF and
training materials will be
distributed
3. Rural Financial
Services
3.1 Institutional • By the end of 2007, new CCSLA • CCSLA reports Assumptions:
Strengthening of MFIs branches established in Sigatoka • FSCUL and SCU • Level of subsidized
and Rakiraki reports credit programs
Increased geographical • 3,000 active members in new rural • FDB reports sufficiently low to
coverage of the project SCUs within the project area • SCGF reports allow sustainable
area by MFI • Five annual training workshops for • PPMS financial services to
Continued on next page
Appendix 4 37
Design Monitoring Assumptions
Summary Performance Indicators/Targets Mechanisms and Risks
CCSLA from 2006 develop
3.2 Access to Rural • 560 FSCUL and SCU staff trained • Rural communities
Credit • New rural SCUs internally able to develop a
generate funds of more than F$0.8 culture of saving and
Improved availability and million in addition to wholesale timely loan repayment
use of credit resources to credit line of F$0.5 million • Sugarcane Growers
support livelihood • CCSLA internally generates F$3 Council loan to the
activities in the project million in addition to wholesale Government repaid or
area credit line of F$3.5 million interest paid
• FDB has outstanding loans of at
least F$10 million to rural and
agricultural borrowers in the
project area
• SCGF funds managed to maintain
their real value
Activities
1. Agricultural
Diversification
1.1 Strengthening
Industry Organizations
and Market Access Assumptions:
• Industry organizations Start : 4th quarter 2005 • Industry Council • Trust between
and farmer groups Complete : 4th quarter 2010 reports stakeholders and
• Quarantine services Start : 4th quarter 2005 • MASLR reports willingness to work
Complete : 4th quarter 2010 (including AgTrade together
• Farm to market access Start : 2nd quarter 2006 and Quarantine) • Absence of political
roads Complete : 4th quarter 2010 • PPMS interference to direct
activities to other
1.2 Strengthening outputs
Commercial Farming • Farmers, farm
Capacity workers, landowners
• Development of Start : 2nd quarter 2006 • FCA progress and others unable to
training capacity Complete : 4th quarter 2009 reports acquire skills for
• MASLR in-service Start : 1st quarter 2006 • MASLR reports diversified, market-
training Complete : 4th quarter 2008 • PPMS oriented agriculture
• Farmer training Start : 1st quarter 2006 and off-farm
Complete : 4th quarter 2010 livelihoods
• Farm Business Start : 1st quarter 2006
Management Service Complete : 4th quarter 2010 Risks:
• Market linkages and Start : 4th quarter 2006 • Limited numbers of
product development Complete : 4th quarter 2010 qualified and
experienced research
and extension staff
and constraints on
resources and
equipment needed to
1.3 Technology produce required
Development and output services
Transfer • Ability to maintain
• Priority adaptive Start : 1st quarter 2006 • MASLR reports agriculture and
research Complete : 4th quarter 2010 • PPMS vocational training
• Focused extension Start : 1st quarter 2006 standards, and
Complete : 4th quarter 2010 capacity to generate
cost recovery
Continued on next page
38 Appendix 4
Design Monitoring Assumptions
Summary Performance Indicators/Targets Mechanisms and Risks
2. Off-Farm Livelihoods
2.1 Small and Micro-
Enterprise Development
• SME outreach service Start : 1st quarter 2006 • NCSMED reports
Complete : 4th quarter 2010 • PPMS
• SME field surveys Start : 4th quarter 2005
Complete : 4th quarter 2010
• Fiji Sugar Corporation Start : 4th quarter 2005
Outreach Complete : 4th quarter 2009
2.2 Support for
Vocational Training
• Curriculum Start : 1st quarter 2006 • TPAF reports
development Complete : 4th quarter 2008 • Sangam Institute
• Western Division Start : 4th quarter 2005 reports
vocational training Complete : 4th quarter 2009 • PPMS
institute
• Northern Division Start : 4th quarter 2005
vocational training Complete : 4th quarter 2009
institute
3. Rural Financial
Services
3.1 Institutional
Strengthening of MFI
• CCSLA branch • CCSLA reports
Start : 1st quarter 2006
development • FSCUL and SCU
Complete : 4th quarter 2008
• FSCUL/SCU reports
Start : 1st quarter 2006
development • Fiji Development
Complete : 4th quarter 2010
• Staff training Bank reports
Start : 4th quarter 2005 • Sugar Can Growers
Complete : 4th quarter 2009 Fund reports
• Sugar Cane Growers Start : 1st quarter 2006
Fund capacity • PPMS
Complete : 4th quarter 2007
3.2 Access to Rural Start : 1st quarter 2006
Credit Complete : 4th quarter 2010
4. Project Coordination
Unit
Start : 2nd quarter 2005 • PPMS
4.1 Suva Office Complete : 4th quarter 2010 • ADB performance
reports
• ADB review
1. Establishment of (i) • Within 1 month of loan
national steering missions
effectiveness
committee, (ii) divisional
steering committees, and
(iii) project coordination
unit; and appointment of
key project staff
2. Recruitment of • Within 6 months of the project
implementation implementation period
consultants and NGOs;
formation of industry
councils, associations,
credit unions, etc.
Continued on next page
Appendix 4 39
Design Monitoring Assumptions
Summary Performance Indicators/Targets Mechanisms and Risks
3. (i) Provision of training • Initiated within 9 months of loan
programs for staff, farmer effectiveness
groups, etc.; (ii) selection
of production pocket areas
within the project areas;
(iii) contractual
arrangements with private
service providers; and (iv)
invitation and selection of
priority research proposals
4. (i) Strengthening of • Within 12 months of loan
microfinance institutions effectiveness
and initiating savings and
credit services; (ii) project
performance and impact
monitoring, including the
establishment and
monitoring of rapid results
initiatives; (iii) annual,
midterm, and completion
reviews
Inputs
Land US$ 0.07 million
Rents US$ 0.56 million
Equipment and machinery US$ 3.72 million
Vehicles US$ 1.17 million
Civil works US$ 6.80 million
Credit line US$10.49 million
Salaries US$ 6.11 million
Training US$ 2.57 million
Research services US$ 3.25 million
Office expenses US$ 1.07 million
Communications US$ 0.58 million
Travel US$ 0.97 million
Operations and
maintenance US$ 1.39 million
Materials US$ 1.05 million
NGO community
organizers US$ 1.23 million
Consulting services US$ 1.34 million
ADB = Asian Development Bank, BQA = bilateral quarantine agreement, CCSLA = Canefarmers Cooperative Savings and
Loan Association, FCA = Fiji College of Agriculture, FDB = Fiji Development Bank, FSCUL = Fiji Savings and Credit Union
League, GDP = gross domestic product, MASLR = Ministry of Agriculture, Sugar and Land Resettlement, NCSMED = National
Center for Small and Micro Enterprise Development, NGO = nongovernment organization, PCR = project completion report,
PPAR = project performance audit report, PPMS = project performance monitoring system, SCU = savings and credit union,
SME = small and micro enterprise, TPAF = Training and Productivity Authority of Fiji.
40 Appendix 5
CRITERIA TO BE APPLIED TO PROJECT ACTIVITIES
1. Criteria will be applied during implementation by the National Steering Committee.
A. Selection Criteria for Community Organizing NGO
2. The community organizing nongovernment organization (NGO) will be contracted for the
project period on terms of reference given in Appendix 9. The NGO will be engaged through
procedures acceptable to Asian Development Bank (ADB) amongst NGOs able to meet the
following criteria:
(i) At least 5 years experience working in rural areas of Fiji Islands with both
indigenous Fijian and Indo-Fijian communities and addressing their
livelihood/income generating needs and capacity;
(ii) Experience of working on contracts with bi-lateral and multi-lateral agencies
undertaking work similar to project requirements to a standard confirmed as
satisfactory by the agencies;
(iii) Experience of working in at least 10 community based projects in Fiji Islands with
on-going work in at least one such project;
(iv) Experience of working with Government agencies engaged in rural development
and livelihood related activities;
(v) Demonstration of the ability to deploy on a long term basis present and past staff
with appropriate experience and to train new staff in such work;
(vi) Experience in following up and monitoring the impact of project activities on
beneficiary groups and individuals, including participatory monitoring activities
during implementation;
(vii) Audited financial records for at least the past three years by a public accountant
acceptable to both the Government and ADB; and
(viii) Recommendation from a previous local or international funding agency with
which the NGO has previously worked under a contract or grant.
B. Funding Criteria for Agricultural Diversification Activities
1. Formation or Development of Industry Councils and Associations
3. To pre-qualify for project support, the following criteria must be met:
(i) A business plan which specifies planned revenue sources such as membership
fees, levies, and fee based services and demonstrates institutional sustainability
by the end of the project.
(ii) Membership list demonstrating adequate representation of producers and
traders, processors or other agribusiness.
4. To qualify for funding, an activity submitted by a pre-qualified council must be supported
by:
(i) A proposal (5 to 10 pages) detailing the proposed activity including: (i) objectives;
(ii) target group; (iii) technical viability; (iv) relevance to industry plans and
priorities; (v) linkage with other project activities;
(ii) Work plan for implementation, including plan for extension and adoption of
outputs or outcomes;
(iii) Identified outputs and outcomes by which the activity will be monitored and
evaluated, and which will be included in progress and final reports;
Appendix 5 41
(iv) Demonstration of capacity to carry out the work by qualified individuals or groups;
(v) Financial plan and budget showing 25% industry contribution.
(vi) Proposals for assistance to formulate detailed submissions may be accepted for
funding.
2. Proposals from MASLR Research and Extension Activities
5. To qualify for funding under the Project proposals by the Ministry of Agriculture, Sugar
and Land Resettlement (MASLR) research and extension activities will meet criteria similar to
those applied to industry councils:
(i) A proposal (5 to 10 pages) detailing the proposed activity including: (i) objectives;
(ii) target group; (iii) technical viability; (iv) relevance to industry or MASLR
strategic plans and priorities; (v) linkage with other project activities;
(ii) Work plan for implementation, including plan for extension and adoption of
outputs or outcomes;
(iii) Details of partnership arrangements with farmer(s) or other private sector
partners in the activity, including name and address of farmer(s) or company,
location of farm or workplace, details of responsibility for planned work to be
done by each partner in the activity, agreement on ownership and access to any
equipment, planting materials or livestock developed or supplied under the
activity;
(iv) Justification for pre-partnership activity, if the activity cannot be immediately
endorsed by the private sector (e.g. soil conservation) or endorsed but not yet
viable for private sector investment (e.g. variety collections).
(v) Identifiable outputs and outcomes by which the activity will monitored and
evaluated, and which will be included in progress and final reports;
(vi) Statement of capacity to carry out the work;
(vii) Budget which should show farmer or other private sector contribution in kind.
(viii) Proposals for assistance to formulate detailed submissions may be accepted for
funding.
C. Proposals for Farm Access Road Rehabilitation
6. To qualify for funding:
(i) Farmers must lodge a formal written application to seek funding assistance for a
specific road section (and may be assisted by the project coordination and
implementation units) and include: (i) names of farmers affected; (ii) non-farmer
beneficiaries, including villagers, farm laborers, school children, women, etc. ; (iii)
linkages to other project components; (iv) location of road/access; (v) ownership
of road, title, lease, informal arrangements; (vi) status of lease payments with
Native Land Trust Board and Lands Department (for crown land), to ensure that
no lease arrears exist; (vii) annual yield potential with improved road conditions;
(viii) traffic volume and composition; (ix) current condition of road; (x) previous
maintenance history and pending applications with other agencies; (xi) level of
contribution of farmers (financial or in kind); (xii) maintenance responsibility after
rehabilitation; (xiii) cost estimate; and (xiv) resettlement impacts, if any;
(ii) An engineer must review and confirm the accuracy of the application, adding
drawings as needed; and
(iii) Confirmation by the Government to ensure that the roads applied for are not on
the assistance list of other agencies.
42 Appendix 6
COST ESTIMATES AND FINANCING PLAN
Table A6.1: Costs by Component and Subcomponent, Including Contingencies
(US$ ‘000)
Foreign Local
Exchange Currency Total
A. Agricultural Diversification
1. Industry Organization and Market Access
a. Industry Councils 410 3,756 4,166
b. Quarantine Service Development 191 444 635
c. Farm to Market Access Roads 923 3,702 4,625
Subtotal Industry Organization and Market Access 1,524 7,902 9,426
2. Commercial Farming Capacity
a. Capacity for training 36 391 427
b. MASLR in-service training 9 39 48
c. Capacity building for private sector farmers 177 1,849 2,026
d. Market linkage pilot 97 246 343
e. Young Farmer Training Study 2 32 34
Subtotal Commercial Farming Capacity 320 2,558 2,878
3. Development and Transfer of Technology
a. Priority Adaptive Research 360 1,772 2,132
b. Focused Extension Programmes 1,108 2,836 3,944
Subtotal Development and Transfer of Technology 1,469 4,608 6,076
4. Project Implementation and Beneficiary Support
a. Project Implementation Unit 181 870 1,051
b. Beneficiary Support 182 2,259 2,442
c. Consulting Services 778 0 778
Subtotal Project Implementation and Beneficiary Support 1,140 3,129 4,270
Subtotal Agricultural Diversification 4,454 18,197 22,651
B. Off-Farm Livelihoods
1. National Centre Development 210 3,452 3,662
2. Vocational Training
a. Vocational Curriculum Development 43 367 410
b. Vocational Training Facilities 1,425 3,635 5,060
c. Consulting Services 102 0 102
Subtotal Vocational Training 1,570 4,002 5,572
Subtotal Off-Farm Livelihoods 1,780 7,453 9,234
C. Rural Financial Services
1. Savings and Credit Unions 77 711 788
2. Canegrowers Cooperative Savings and Loan Association 90 150 240
3. Supporting Credit Line 0 10,851 10,851
4. Consulting Services 310 0 310
Subtotal Rural Financial Services 477 11,712 12,189
D. Project Coordination
1. Main Office 591 1,741 2,332
2. Benefit Monitoring & Evaluation Specialist 312 0 312
Subtotal Project Coordination Unit 653 1,741 2,394
Total Project Costs 7,364 39,104 46,468
Interest During Construction 2,753 0 2,753
Commitment Charges 305 0 305
Total Costs To Be Financed 10,672 39,104 49,776
Source: Mission estimates.
Appendix 6 43
Table A6.2: Components by Financiers
(US$ ‘000)
Asian Fiji
Private Sector Government of
Component Development Development Total
and NGOs the Fiji Islands
Bank Bank
Amount % Amount % Amount % Amount % Amount %
1. Agricultural Diversification 3,087 13.6 14,511 64.1 5,053 22.3 0 0 22,651 45.5
2. Off-farm Livelihoods 1,995 21.6 4,170 45.2 3,069 33.2 0 0 9,234 18.5
3. Rural Finance 2,180 17.9 1,005 8.2 182 1.5 8,823 72.4 12,189 24.5
4. Project Coordination 0 0 2,257 85.4 387 14.6 0 0 2,644 5.3
Total Project Costs 7,262 15.5 21,943 47.0 8,690 18.6 8,823 18.9 46,718 93.9
Interest During Construction 0 0 2,753 100.0 0 0 0 0 2,753 5.5
Commitment Charges 0 0 305 100.0 0 0 0 0 305 0.6
Total Disbursement 7,262 14.6 25,000 50.2 8,690 17.5 8,823 17.7 49,776 100.0
NGO = nongovernment organization.
Source: Mission estimates.
Table A6.3: Expenditure Accounts by Financiers
(US$ ‘000)
Asian Fiji
Private Sector Government of
Expenditure Account Development Development Total
and NGOs the Fiji Islands
Bank Bank
Amount % Amount % Amount % Amount % Amount %
A. Land 72 100.0 0 0 0 0 0 0 72 0.1
B. Rents 0 0 361 56.7 275 43.3 0 0 637 1.3
C. Civil Works 2,356 32.6 3,078 42.6 1,796 24.8 0 0 7,230 14.5
D. Equipment and Machinery 791 18.8 2,021 48.0 1,400 33.2 0 0 4,212 8.5
E. Vehicles 21 1.6 762 58.9 512 39.5 0 0 1,295 2.6
F. Credit Line 2,028 18.6 0 0 0 0 8,823 81.3 10,851 21.8
G. Salaries 285 4.1 3,120 45.0 3,528 50.9 0 0 6,934 13.9
H. Office expenses 404 27.6 907 62.0 152 10.4 0 0 1,463 3.1
I. Materials 72 6.0 963 81.4 148 12.5 0 0 1,183 2.4
J. Operations and Maintenance 4 0.3 1,381 87.2 198 12.5 0 0 1,582 3.2
K. Travel 0 0 964 87.6 136 12.4 0 0 1,100 2.2
L. Communications 0 0 577 87.5 82 12.5 0 0 659 1.3
M. Research Services 471 12.7 2,769 74.8 463 12.5 0 0 3,703 7.4
N. Training 757 26.1 2,145 73.9 0 0 0 0 2,902 5.8
O. NGO Services 0 0 1,393 100.0 0 0 0 0 1,393 2.8
P. Consulting Services 0 0 1,502 100.0 0 0 0 0 1,502 3.0
Total Project Costs 7,262 15.5 21,943 47.0 8,690 18.6 8,823 18.9 46,718 93.9
Interest During Construction 0 0 2,753 100.0 0 0 0 0 2,753 5.5
Commitment Charges 0 0 305 100.0 0 0 0 0 305 0.6
Total Disbursement 7,262 14.6 25,000 50.2 8,690 17.5 8,823 17.7 49,776 100.0
NGO = nongovernment organization.
Source: Mission estimates.
44 Appendix 7
IMPLEMENTATION SCHEDULE, 2005−2010
2005 2006 2007 2008 2009 2010
Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q
Components and Subcomponents 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Agricultural Diversification
Industry Organization and Market
Strengthening Industry Councils
& Associations
Strengthening Quarantine Services
Rehabilitation of Farm Access Roads
Commercial Farming Capacity
Strengthening Training Capacity
MASLR In-Service Training
Farm Business Management Service
Market Linkage Pilot Program
Technology Adaptation and Transfer
Promotion of Priority Adaptive Research
Promotion of Private Extension Services
Project Implementation Unit and
Beneficiary Support
Establishment and Operation of Office
Community Organizing Activities
Off-Farm Livelihoods
SME Development and Training Outreach
Service
SME Field Surveys
Fiji Sugar Corporation Outreach
Vocational Training
Curriculum Development &
Dissemination
Western Vocational Training Institute
Northern Vocational Training Institute
Rural Financial Services
Strengthening of Savings & Credit Unions
Support for Canefarmers Cooperative
Savings and Loan Association
Strengthening Sugarcane Growers Fund
Rural/Microfinance Institution Credit Lines
Project Coordination Unit
Establishment and Operation of Office
MASLR = Ministry of Agriculture, Sugar and Land Resettlement, SME = small and medium enterprise, Q = quarter.
Source = Mission estimates.
Appendix 8 45
INDICATIVE PROCUREMENT PACKAGES AND METHODS
Indicative
Number of Value Mode of
Item Packages (US$ ‘000) Procurement
Civil Works
Construction of Training Buildings 5 3,500 LCB
Rural Access Roads Multiple 3,000 LCB
Equipment and Machinery Multiple 800 IS/DP
Materials Multiple 2,000 IS/DP
Utility Vehicles, Motorbikes 6 1,100 IS/DP
Consulting Services Multiple 1,350 QBS
Nongovernment Organizations, Private Multiple 2,000
Service Providers LCB
Research Services Multiple 3,250 LCB
Training Multiple 2,600 LCB
DP = direct purchase, IS = international shopping, LCB = local competitive bidding, QBS = quality based
selection.
46 Appendix 9
TERMS OF REFERENCE FOR COMMUNITY ORGANIZING NONGOVERNMENT
ORGANIZATIONS AND IMPLEMENTATION CONSULTANTS
A. Community Organizing Nongovernment Organizations (domestic)
1. National nongovernment organizations (NGOs) with an established record of
implementing community-based projects in rural areas will be selected to lead the assessment
of target beneficiaries’ needs and aspirations. The NGOs will assign a full-time project manager
to be based in the project coordination unit (PCU) in Suva. NGO teams, each consisting of two
trained and experienced community organizers of whom at least one will be a woman, will be
based in each of six field offices. The NGOs will undertake the following tasks:
(i) Work with PCU and project implementation unit (PIU) staff and consultants
during the first year to establish and refine the procedures, guidelines, and
reporting formats needed to introduce and coordinate project activities with each
community and group.
(ii) Convene workshops for project management staff and staff implementing project
activities in other agencies to address the social and cultural issues involved in
project implementation and to provide training on the designs, procedures,
guidelines, and reporting formats.
(iii) Assist in establishing and implementing a gender-disaggregated benefit
monitoring and evaluation system, which will include participatory monitoring in
which beneficiary groups will provide feedback on the effectiveness of
performance. Provision will be made for a database to record individual
beneficiaries and groups assisted and to follow-up impact monitoring.
(iv) Monitor and report on the implementation of the Project in each community and
create and implement a system for monitoring beneficiaries’ changing
perceptions.
(v) Introduce the project activities to rural communities, both Indo-Fijian and
indigenous Fijians inside and outside traditional villages; support communities in
identifying needs and opportunities for livelihood activities; and introduce them to
those project activities that will meet their needs. Where the Project cannot
directly meet needs, identify other agencies that can work with or form
partnerships with beneficiaries to address issues identified by them as pertinent
to increasing their livelihood opportunities;
(vi) Work closely with farm business advisers and National Center for Small and
Micro Enterprise Development staff in field offices as primary sources of support
and contacts for farm and off-farm activities, respectively.
(vii) Act, along with PIU field officers, as a primary point of contact between the
Project’s various activities and the beneficiary groups, ensuring clear and
coordinated flows of information.
B. Long-Term Consultants
1. Project Implementation Specialist (international, 36 person-months)
2. The project implementation specialist will work closely with the project coordinator and
divisional project managers and will be responsible for ensuring effective project
implementation. The project implementation specialist will have the following responsibilities:
(i) identify implementation issues (upon project commencement) that need to be
addressed in preparing the Project’s detailed implementation plan, including
rapid results initiatives, and work with other consultants and counterpart staff to
Appendix 9 47
develop project implementation guidelines and manuals for use at the national,
divisional, and field levels;
(ii) develop procedures for use in identifying the needs of beneficiary communities
and introducing privatized extension services in cooperation with the contracted
NGOs, private service providers, and counterpart staff;
(iii) review the Project’s costs and financial plan to ensure that the proposed
implementation plan is sound and fully financed from all required sources and
point out identified problems for early resolution to avoid the disruption of
implementation;
(iv) with the monitoring and evaluation (M&E) specialist and PCU monitoring staff,
identify quantifiable measures of performance in terms of both efficiency and
effectiveness of plan implementation for incorporation in the M&E systems;
(v) support the project steering committees, project coordinators, and implementing
agencies in implementation, monitoring, and review of the Project during the
implementation phase and supervise the team of consultants supporting the
implementation of each component; and
(vi) coordinate all other project-related activities, including the implementation of the
technical assistance.
2. Quarantine Strengthening Specialist (international, 24 person-months)
3. The quarantine strengthening specialist will work full-time with Ministry of Agriculture,
Sugar, and Land Resettlement's (MASLR's) quarantine staff to strengthen their capacity to
support the marketing of agricultural products consistent with effective protection of Fiji’s
agriculture. The specialist will have the following responsibilities:
(i) assist the Fiji Quarantine Authority to fully meet its commitments under the World
Trade Organization Agreement on the Application of Sanitary and Phytosanitary
Measures;
(ii) develop the Fiji Quarantine Authority’s capacity to help industry organizations
establish internationally recognized product standards and quality auditing,
including for food safety and label claims, and carry out the Government’s role as
certifying body;
(iii) design and implement institutional and operational arrangements to strengthen
the Fiji Quarantine Authority’s orientation toward supporting development of the
agriculture sector, including maximizing industry inputs into the development of
seed import and product export protocols and pest risk assessments;
(iv) facilitate the negotiation of workable non-host export protocol methodologies with
Australia and the United States;
(v) develop structures that provide efficient and timely linkages between quarantine
and research inputs such as entomology and plant pathology;
(vi) enhance MASLR’s capability in areas such as entomology and plant pathology
that relate to market access and quarantine;
(vii) review existing internal quarantine “pathways,” protocols, and procedures to
facilitate exports and maintain quarantine security;
(viii) improve procedures for the timely development of appropriate pathways and
protocols;
(ix) update established procedures for pest risk analysis to ensure maximum access
to improved planting materials while maintaining an acceptable level of
quarantine security;
(x) provide MASLR with the capability to prepare pest lists that meet the
requirements of importing countries on a timely basis;
48 Appendix 9
(xi) enhance quarantine surveillance procedures and MASLR’s emergency response
capability; and
(xii) train staff in the World Trade Organization Agreement on the Application of
Sanitary and Phytosanitary Measures, development and negotiation of bilateral
quarantine agreements, pathway development, and pest risk analysis.
C. Short-Term Consultants
1. Project Coordination Unit
a. Project Performance Monitoring and Evaluation Specialist (PPME)
(international, 12 person-months)
4. The PCU will require the services of an international PPME specialist for 12 person-
months over a six-year period. The PPME specialist will work with the PCU, implementing
agencies, other consultants, and the Government counterpart team, as appropriate, and will
have the following responsibilities:
(i) prepare an inception report for the establishment of PPME systems, including a
schedule for work commencement and completion of operations;
(ii) assess the applicability of existing information and monitoring systems within the
Government to project needs and the gaps to be filled and the appropriateness
and ability of project systems to be extended for use within MASLR;
(iii) identify quantifiable measures of performance in relation to inputs, outputs, and
outcomes and agree how the relevant information is to be gathered, analyzed,
and reported;
(iv) design a system for collecting and analyzing information, including rapid results
initiatives to meet the reporting requirements, produce guidelines and manuals
for using the systems, and specify equipment, software, and other needs;
(v) support the PCU team, particularly the monitoring and field staff, and
implementing agency staff in establishment, procurement, and training for the
project performance monitoring systems (PPMS);
(vi) support the staff engaged in monitoring, coordinating the timely collection of
project information and draft reports; and
(vii) review the performance of the PPMS and propose enhancements as appropriate.
2. Agricultural Diversification Component
a. Young Farmer Training Specialist (international, 3 person-months)
5. The young farmer training specialist will:
(i) undertake a review of the successful concepts and practices in schemes for
training young farmers;
(ii) assess the situation and needs of targeted young farmers and recommend
appropriate training arrangements;
(iii) determine institutional strengthening and financing requirements and linkages to
other institutions, e.g., the Fiji College of Agriculture (FCA); and
(iv) define institutional arrangements for implementation, including possible training
partnerships.
Appendix 9 49
b. Unspecified International Consulting Services (international,
15 person-months)
6. In accordance with a process approach to identifying and addressing constraints and
opportunities as they are identified by stakeholders during implementation, the Project will
provide 15 person-months of international consulting services. Likely specialist areas are in staff
training, quarantine, farm business management, new crops, mechanization, and post harvest
and agro processing.
c. Unspecified Domestic Consulting Services (domestic,
27 person-months)
7. Domestic consultants will be engaged for 27 person-months to address specific issues
identified during implementation, including staff training, technical quarantine issues, farm
business management, new crops, mechanization, and post harvest and agro-processing.
Terms of reference for these domestic consultants will be drafted during project implementation.
3. Off-Farm Livelihoods
a. Vocational Training Specialist (international, 4 person-months)
8. A vocational training specialist will work with the Training and Productivity Authority of
Fiji (TPAF), Fiji College of Agriculture (FCA), and the Sangam Institute to support curriculum
and facilities development activities. Specifically, the consultant will:
(i) work with the nongovernment organizations and TPAF to design and undertake
surveys of vocational skills among target beneficiary groups and their interests in
and preferences for vocational training for on- and off-farm livelihoods;
(ii) work with TPAF to identify the curriculum development activities required to
address the needs and aspirations of beneficiaries, review available courses that
meet or can be adapted to meet the beneficiaries’ needs, and agree on an initial
program for curriculum development;
(iii) work with FCA to identify agro-industrial vocational training requirements,
including business management, product development, and food standards, to
meet the assessed needs of beneficiaries and agree on a program with FCA and
agricultural consultants to develop short courses and programs and advise FCA
on appropriate training approaches and methods where these may differ from
those used in FCA’s traditional academic diploma course;
(iv) work with the Sangam Institute to help design facilities, specify equipment
requirements, develop initial vocational training programs both for long-term
courses for young people and short courses for mature students, review the
training materials available for use, and advise on course choices;
(v) assist in planning appropriate accreditation for courses provided by the Sangam
Institute; and
(vi) review existing rural training institutes and parallel work being undertaken under
the sponsorship of, among others, the Australian Agency for International
Development and the European Union and identify complementarities to avoid
duplication and promote effective coordination between the Project and such
programs.
50 Appendix 9
4. Rural Financial Services
a. Microfinance Institution Specialist (international, 10 person-months)
9. In the first year, the microfinance institution (MFI) specialist will undertake analyses and
make recommendations, followed by annual follow-ups of 1 to 2 months. The consultant will:
(i) work with the Fiji Savings and Credit Union League and the Canefarmers
Cooperative Savings and Loan Association and their member institutions to
develop sound business plans and governance and internal control procedures
and ensure that these are maintained;
(ii) develop financial and management reporting systems and comprehensive
operating manuals;
(iii) help MFIs obtain and, where necessary, adapt using local firms, software
suitable for computerizing MFI operations;
(iv) develop and use analytical tools to determine and improve service efficiency and
outreach while ensuring institutional viability;
(v) support the MFIs in planning and implementing measures to extend their
services through new branches and member institutions, including their
ownership, governance, internal controls, operating procedures, and necessary
supports and linkages to other institutions and agencies;
(vi) support the MFIs in addressing management and organization issues related to
particular modes of service delivery and the development and promotion of a
range of savings and credit services;
(vii) support the MFIs in human resource development, including recruitment and
training and performance evaluation and linked incentives; and
(viii) help the MFIs review their implementation plans and performance during the
project period to support improvement of their performance and the development
of more effective systems.
b. Investment Specialist (international, 2 person-months)
10. The investment specialist will:
(i) work with the Sugar Cane Growers Fund to review its activities, services, and
resource use and support management in determining measures to improve its
performance in terms of resource use, service provision, management, and
organizational structure as inputs toward the preparation of a comprehensive
business plan; and
(ii) review the role and functions of the Sugar Cane Growers Fund with all
stakeholders to define services that would better meet the needs of sugarcane
farmers at a time of sugar sector restructuring and would assist farmers in
securing alternative livelihoods.
Appendix 10 51
TECHNICAL ASSISTANCE TO STRENGTHEN
COMMERCIAL AGRICULTURE DEVELOPMENT
A. Justification
1. The Fiji Islands’ agriculture sector is highly polarized between a small number of
agribusinesses and a large number of small farmers who have limited commercial experience.
Most investment is in projects with short-term capital recovery, such as in tourism, timber
extraction, and garment making, whereas under normal conditions agribusinesses require a
minimum of 5 years for investment recovery. The country’s political instability, the land tenure
situation, and the sugar industry’s dominance without quality incentives have contributed to the
limited development of commercial agriculture, private sector support services, and
agribusiness investment.
2. Business models relevant to the agriculture sector include joint ventures between large
corporations and indigenous clan (mataqali) landowners (e.g., in forestry and mining), contract
farming between agribusiness and farmers (e.g., the tobacco and sugar industries), and
individual farm enterprises managing marketing. Agribusiness and marketing development are
critical for commercial development. Strengthening marketing chains and marketing
performance both in sugarcane areas and beyond, including the outer islands, requires
improving agribusiness skills and capacity to promote profitable enterprises in the sector.
Private sector support services are critical to achieving this objective.
3. The development of commercial agriculture, including agribusinesses, farm enterprises,
and marketing and other commercial agricultural services, is constrained by (i) the shortage of
specific technical skills; (ii) the limited commercial knowledge and the difficulties of enforcing
contracts; (iii) the shortage and unreliability of local raw material supplies and the resultant
dependence on imports; (iv) the limited capacity to supply high-quality exports and to cater to
domestic tourist markets; (vi) the lack of production, trade, management, and marketing
experience; (vi) the limited local processing facilities; (vii) the weakness of commercial networks
throughout the country; (viii) the inadequacies of policy and legislation; and (ix) the absence of
policy and fiscal instruments to stimulate investment in the sector, especially in private research
and development, and in advisory information services.
4. The project preparatory technical assistance (TA) field findings and the workshop
discussions with stakeholders identified a number of areas of agribusiness for development.
Those with potential include small and medium feed processing and drying facilities, livestock
finishing feedlots, year-round supply and marketing of pineapples, aquaculture hatcheries and
outgrowing facilities, neem organic pesticide and textile manufacture, Stevia artificial sweetener
production, and joint ventures in smallholder eucalyptus agro forestry. Investment opportunities
in services include small and medium post harvest grading, packing, and cool-storage linked to
collection and distribution facilities; contract machinery services, especially for harvesting field
crops; product development and marketing services (e.g., based on indigenous fruit, nuts,
nutraceuticals, oils, essences, and spices); and advisory information services. The major
constraint cited in most cases is not lack of access to capital, but limited human and institutional
capacity. The TA would facilitate the development of proposed agribusiness opportunities and
capacity.
5. State-owned agribusinesses have failed to sustain or stimulate the sector because of
limited accountability, lack of performance-based management, and limited sophistication of
commercial practices. The Government has an important role in facilitating and providing
services to the private sector. The TA would provide assistance to identify potential policy
options, structures, and processes to improve private sector performance. In terms of services,
52 Appendix 10
the Ministry of Agriculture, Sugar and Land Resettlement (MASLR) divisions and agencies
responsible for commerce, market information, import and export regulation, research, and
extension services do not have forums and processes whereby the needs and priorities of the
private agriculture sector are periodically identified and addressed. To stimulate both the
demand for and the supply of services, industry organizations must have a role in setting
priorities and contributing to their achievement. The TA would help to institutionalize interaction
with industry advisory forums to support the development of private agricultural services.
B. Scope
6. The TA would strengthen commercial agriculture development by (i) supporting
agribusinesses, industry organizations, farmer groups, and farm landowners; (ii) helping to
strengthen the capacity, linkages, strategy, and commercial operations of farm business
advisory services; (iii) assisting the Government, industry organizations, and agribusinesses to
implement their strategic goals of becoming performance-oriented, customer-focused entities;
(iv) facilitating marketing development by helping to orient trade- and market-related legislation,
information, services, protocols, standards, and commercial relationships; (v) facilitating
institutional linkages and the formation of commercial networks between the Fijian agriculture
sector and agricultural industries, organizations, and programs active in the region and target
markets; (vi) supporting training in agribusiness and agro-processing; and (vii) raising
awareness of regional business opportunities for local entrepreneurs and industry organizations.
7. In conjunction with the loan, the TA will provide advisory assistance to the private sector
for developing agribusiness opportunities through studies, workshops, and training; identifying
appropriate technologies and quality systems; and developing linkages with markets. Support
from the TA will include facilitating agribusiness study tours and trade missions. The TA will
facilitate institutionalizing interaction between and among industry organizations and MASLR’s
research and advisory information services to ensure that the private sector takes a leading role
in prioritizing objectives for support services and can help achieve those objectives. Policy
papers and programming studies would be prepared to help the Government review trade- and
market-related legislative obstacles and identify appropriate policy instruments and fiscal tools
(e.g., tax incentives for research and development) to stimulate the development of commercial
agriculture and support services. Advisory assistance would be provided to MASLR to
corporatize the Fiji College of Agriculture (FCA), develop accreditation for farm business
advisers, and develop fee-for-service packages that could be transferred to private sector
providers.
8. The TA would also strengthen and expand commercial information services for farmers
and agribusinesses. This would involve support to MASLR, agribusinesses, industry
organizations, and other agencies to develop media for providing relevant information to farmers
and agribusinesses. Content will include information about products and markets, farm
management issues, production and post harvest techniques, industry activities and events,
research and extension activities and reports, sources of expertise and contractors, and other
institutional sources of information. The TA would help develop web sites, online access
centers, newsletters, radio programs, visual media, and mobile information units. The TA
Framework is given in Table A10.1.
C. Estimated Costs and Financing
9. The total cost of the TA is estimated at US$875,000 equivalent, of which US$423,000 is
the foreign exchange cost and US$452,000 is the local currency cost. The Government has
asked the Asian Development Bank (ADB) to provide $600,000 on a grant basis from Japan
Special Fund, funded by the Government of Japan to finance the total foreign exchange cost
Appendix 10 53
and US$177,000 equivalent of the local currency cost. The Government will finance the balance
of the local currency cost, equivalent to US$275,000, by providing office accommodation and
counterpart agency staff as appropriate. Detailed costs are given in Table A10.2. MASLR will be
the executing agency for the TA. The national steering committee and the divisional steering
committees will review the progress of the TA and will provide the necessary guidance. The TA
will be implemented over a period of 24 months. It envisages that an estimated total of 20
person-months of international and 7 person-months of domestic consulting services will be
required. This will cover an international agribusiness and agricultural institutions consultant for
10 person-months, and for unspecified support, 10 person-months of international consulting,
and 7 person-months of domestic consulting (e.g., trade legislation, media, marketing, and
agribusiness research/development). Terms of reference for these specialized areas will be
drafted during project implementation. Individual consultants will be selected according to ADB’s
Guidelines on the Use of Consultants.
10. Procurement of equipment and supplies will be in accordance with ADB’s Guidelines for
Procurement. During the implementation period, the consultants will submit an inception report,
regular monthly updates, a draft final report at least one month prior to completion, and a final
report upon completion that incorporates the comments provided by both ADB and the
Government. The TA is expected to commence in April 2005 and is expected to be completed
by March 2007.
D. Terms of Reference for the International Consultant
11. The agribusiness and agricultural institutions specialist (10 person-months) will:
(i) help the project coordination unit strengthen agriculture sector organizations and
MASLR to ensure participation by and representation of agribusinesses, farmers,
and other key stakeholders in structures and processes;
(ii) facilitate the development of industry commodity and food handling quality
standards, certification, and trade legislation to international levels, including for
organic products, in collaboration with industry councils, exporters, and
quarantine experts;
(iii) advise the private sector on the development of agribusiness opportunities by
means of studies, workshops, and training and by identifying appropriate
technologies and quality systems;
(iv) facilitate domestic and international market linkages by arranging technical study
tours, trade missions, and trade fairs;
(v) assist industry and the Government to identify potential policy options, structures,
and processes to stimulate and sustain the development of commercial
agriculture;
(vi) help agribusinesses, farmers, industry organizations, and MASLR to
institutionalize industry forums whereby agricultural research and extension
priorities are established and outcomes are reviewed through improved
performance monitoring;
(vii) assist in piloting research and extension partnerships between the private sector
and the Government;
(viii) help the private sector and MASLR to develop capacity to disseminate
commercial agriculture information services, including via electronic, visual,
radio, and published media and via field days, fairs, and mobile information units;
(ix) support the establishment of the farm business management advisory service
and help to develop standardized service packages for farm enterprise appraisal
and planning and professional standards and accreditation;
54 Appendix 10
(x) assist MASLR to corporatize the FCA, enabling it to retain revenues from its
training services; and
(xi) guide MASLR in developing fee-for-service packages that could be transferred to
private sector providers.
Table A10.1: Technical Assistance Framework
Monitoring Assumptions
Design Summary Performance Indicators/Targets Mechanisms and Risks
Goal
Strengthen the commercial • At completion, appropriate policies, • Economic reports
performance and capacity institutions, and capacities are in • PPMS
of the agriculture sector place to sustain private agriculture • PCR and PPAR
sector performance
• By 2010, nonsugar cash crop
exports increase from 15% to 25% of
agricultural GDP.
Purpose
Increase and sustain the • Industry organizations, farmer • Agricultural statistics Assumption:
value, market share, groups, and farm business advisory • Export and import • No major social,
product range, and services strengthened statistics economic or bio security
employment of Fiji’s • Commercial agriculture sustained • Agricultural import crisis constrains the
agriculture sector statistics from Fiji’s development of
main markets commercial agriculture
• PPMS
• PCR
• Employment statistics
Outputs
Enterprises and industry By the end 2007 unless otherwise • Industry organization Assumptions:
organizations developed stated: business plans and • Recognition of common
• At least five private sector-led records industry issues and trust
Improved performance and industry organizations have • PPMS between private
customer focus on the part prepared strategic and business • PPAR businesses working
of the Government, plans and have obtained financial • Consultants’ reports together and with the
industry organizations, and support to undertake research and • Industry organization Government
agribusinesses development and marketing reports, newsletters • Government
activities • Marketing information commitment to policy of
Marketing development • Farm business advisory services services reports facilitating private sector
and awareness of business supported by appropriate policy, • Farm business continues based on
opportunities facilitated privatization legislation, and advisory services and willingness and
professional accreditation Fiji College of responsiveness to
Institutional linkages, • Fiji College of Agriculture Agriculture annual dialogue with industry
commercial networks, and corporatized reports
agribusiness training • Product standards, labeling, • MASLR strategic plans Risks:
facilitated auditing, and pertinent legislation and performance • Private sector interest
satisfy major markets monitoring reports in and willingness to
• Government and industry • MASLR service use develop standards;
organizations provide agricultural and service revenues adopt commercial
market information services to • Export statistics practices; enter into
farmers and agribusinesses • Number of bilateral partnership
• At least five industry workshops, quarantine agreements arrangements; and
training seminars, and/or study tours negotiated contribute to workshops,
conducted on agribusiness • MASLR, industry training, and study tours
opportunities, commercial organization, and • Ability to support service
arrangements, potential partner agribusiness annual providers (e.g., industry
institutions, marketing processes reports organizations, farm
and standards, etc. business advisory
service) to recover costs
from clients
Continued on next page
Appendix 10 55
Table A10.1: Continued
Monitoring Assumptions
Design Summary Performance Indicators/Targets Mechanisms and Risks
Inputs Cost Estimates Schedule
Consulting Services US$455,000 All activities implemented
Reports and between the second
Communications US$ 5,000 quarter of 2005 and the
Equipment and Supplies US$ 10,000 second quarter of 2007
Mass Media Campaign US$ 30,000
Workshops, Study Tours US$ 40,000
Logistical Support US$335,000
GDP = gross domestic product, MASLR = Ministry of Agriculture, Sugar and Land Resettlement, PCR = project completion
report, PPAR = project performance audit report, PPMS = project performance monitoring system.
Source: Mission estimates.
Table A10.2: Technical Assistance Cost Estimates and Financing Plan
(US$'000)
Foreign Local Total
Item Exchange Currency Cost
A. Asian Development Bank Financinga
1. Consultants
a. Remuneration
i. International 250.0 0.0 250.0
ii. Domestic 100.0 100.0
b. Per Diem
i. International 60.0 60.0
ii. Domestic 20.0 20.0
c. International Travel 20.0 20.0
d. Local Travel 5.0 5.0
2. Reports and Communications 5.0 5.0
3. Equipment and Supplies 8.0 2.0 10.0
4. Mass Media Campaign 30.0 30.0
5. Study Tours and Workshops 30.0 10.0 40.0
6. Contingencies 50.0 10.0 60.0
Subtotal (A) 423.0 177.0 600.0
B. Government Financing
1. Office Accommodation 0.0 75.0 75.0
2. Counterpart Staff and Support Services 0.0 75.0 75.0
3. Workshops and Seminars 0.0 50.0 50.0
4. Logistical Support in Project Areas 0.0 75.0 75.0
Subtotal (B) 0.0 275.0 275.0
Total 423.0 452.0 875.0
a
Financed from the Japan Special Fund, funded by the Government of Japan.
Source: Asian Development Bank estimates.
56 Appendix 11
SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY
A. Linkages to the Country Poverty Analysis
Sector identified as a national policy in Sector identified as a national priority in
country poverty analysis? Yes. country poverty partnership agreement? Yes.
Contribution of the sector/subsector to reduce poverty in the Fiji Islands:
More than half the people live in rural areas and agriculture is the mainstay of the economy in terms of
production value, employment and income generation, and subsistence. Some 76,555 (56%) households, or
about 385,000 people, live in rural areas. Within the five sugarcane belt provinces of Ba, Nadroga, Ra, Macuata,
and Cakaudrove, an estimated 90,000 Indo-Fijian family members rely in whole or in part on sugarcane farming
and/or sugarcane cutting for their household incomes. In addition, some 104,000 indigenous Fijian family
members rely on sugarcane farming in whole or in part for their communal rental income, with perhaps 13,500
working as seasonal sugarcane cutters and an increasing number engaging in farming as incoming tenants. In
total, about 300,000 people depend directly or indirectly on agriculture, especially on activities related to
sugarcane farming. Current estimates indicate that more than 50% of the people in the Northern and Western
divisions subsist below the household poverty threshold of F$6,500/year (US$3,340 equivalent). A recent
poverty assessment of hardship by the Asian Development Bank indicated that 35% to 40% of the population is
likely to have incomes below the poverty line.
Reductions in EU preferential prices for sugar will substantially reduce sugarcane prices and incomes for
continuing and incoming farmers, sugarcane cutters, and landowners. Their poverty will increase without
diversification of the rural economy away from sugar to higher-value crops and off-farm employment, both to
support farm family incomes and to provide alternative incomes for exiting farmers unable to find new leasehold
farms. The agricultural diversification and off-farm livelihood components directly address these needs, while the
rural financial services activity allows communities on- and off-farm, as well as in traditional villages, to manage
their financial resources to support livelihood activities.
B. Poverty Analysis Targeting Classification: Targeted intervention
What type of poverty analysis is needed?
The latest official poverty analysis for Fiji Islands was undertaken by UNDP and published in 1997. The analysis
was based on the 1990/91 HIES. New HIES were undertaken by the Fiji Bureau of Statistics for the urban
centers in 2002/03 and the rural areas in 2003/04. The data from these two household surveys is now being
analyzed by the Government with assistance from ADB. Revised estimates of urban poverty have been
complied and are now being reviewed by the Government, whereas estimates of rural poverty are expected to
be completed by mid-2005. In 2003, a participatory assessment of hardship was undertaken by means of
consultative workshops and focus-group discussions with around twenty communities spread throughout the
country. These consultations included communities from all ethnic backgrounds in both urban and rural areas,
and involved women, church and youth groups, as well as traditional leaders and nongovernment organizations.
These participatory assessments provided qualitative information on the people's perceptions of the causes and
characteristics of poverty and hardship in there respective situations, as well as their needs and priorities for
poverty alleviation interventions.
C. Participation Process
The consultative process covered a wide range of stakeholders, including central government and local
government staff; international agencies; nongovernment organization (NGO) staff; state-owned enterprise and
parastatal staff; and private sector individuals, including farmers, clan landowners, traditional leaders, small
business operators, and displaced tenants. The process of consultation with stakeholders will be important
during implementation, and community-organizing NGOs will help ensure high beneficiary participation in project
implementation. Stakeholders will be represented on the national and divisional steering committees.
D. Gender and Development
Gender issues have been integrated with the project design. Women have generally played little part in
traditional sugarcane farming, but will play an increased role in diversified agriculture, including in such areas as
horticulture, floriculture, and small livestock; in the development of a business approach to farming; and in the
development of off-farm livelihoods, including handicrafts, small-scale processing, and micro-enterprises. The
community-organizing NGOs, which will include a substantial percentage of women organizers, will seek to
ensure effective participation by women in project activities. Vocational training will involve women in training
courses and include course specifically targeting women’s income-generating skills. Community-based
microfinance institutions will also seek to include women in savings and credit activities.
Appendix 11 57
E. Social Safeguards and other Social Risks
Significant,
Not Significant,
Subject Uncertain, None Strategy to Address Issues Plan Required
Resettlement Not significant The limited civil works focus on the A summary resettlement
rehabilitation of existing roads and training framework is appended to
structures and will have no resettlement this report based on the
impact. Asian Development
Bank’s Policy on
Involuntary Resettlement
and Handbook on
Resettlement: A Guide to
Good Practice.
Indigenous None The indigenous Fijians are the majority ethnic No
Peoples group and the Project targets their benefit
equity as landowners, farmers, and off-farm
workers and entrepreneurs. The Project
design included full consultation with
traditional chiefs, clan groups, individual
Fijians, and entry farmers regarding their
needs and aspirations.
Labor None The Project addresses the labor/livelihood No
issues created outside the Project in relation
to sugar sector restructuring and lease
renewals. The Project will help mill workers
and sugarcane cutters develop alternative
livelihoods.
Affordability Not significant The Project will increase the supply of No
consumer goods and services by supporting
the reallocation of resources from sugarcane
farming. The rehabilitation of rural farm
access roads will help reduce retail prices.
Requirements for cost recovery and private
sector and farmers’ participation involve
minimum risk.
Other Risks/
Vulnerabilities None None No
58 Appendix 12
FINANCIAL AND ECONOMIC ANALYSES
A. Quantification of Benefits
1. A significant proportion of the benefits arising from the agricultural diversification
component are directly quantifiable in terms of the increase in value added expected to result
from the investment. A proportion of the benefits derived from the rural financial services (RFS)
component can be measured in terms of increased agricultural output. However, other benefits
of this component and the off-farm livelihoods (OFL) component are considered too speculative
for meaningful quantification, as the outcomes cannot be predicted with accuracy. The
strengthening of the National Center for Small and Micro Enterprise Development (NCSMED) to
meet the requirements of the Project will enhance this fledgling institution’s capability to serve
the small and micro-enterprise sector throughout Fiji Islands. Households in and outside the
project area will benefit from a stronger microfinance institutional structure that better meets
their financial service needs. The strengthening of the quarantine services, vital for the
agricultural diversification of the sugarcane growing areas, will provide market access for
products grown throughout Fiji Islands. Agricultural extension and research, strengthened to
meet the needs of farmers in the project area, will be better able to serve agricultural industries
throughout Fiji Islands. However, none of these flow-on benefits are included in the economic
analysis. It is envisaged that substantial benefits will arise from impacts and replication of
project activities outside the project area.
B. Economic Analysis
1. Agricultural Diversification
2. A diversified 4-hectare (ha) farm is modeled for the future with project case. The land
capability of this model farm mirrors the land capability distribution of the industry as a whole.
The model farm grows a combination of field and horticulture crops on 80% of the area, uses
some of its marginal land for agro forestry and livestock (6%), and uses the remainder (14%) for
a house site and home garden. Such a diversified farm would be the product of the successful
implementation of the agricultural diversification component.
3. The estimated annual gross margin from the diversified farm model is F$11,297
(US$5,793 equivalent). Thus if all the 19,200 ha available for diversified farming adopted similar
diversified farming systems,1 the economic farm gate value added in the future with project case
is estimated at F$57.2 million per year (US$29.4 million equivalent). The estimated annual
gross margin for the existing representative sugarcane farm is F$2,070 (US$1,062 equivalent).
The economic farm gate value added from the 19,200 ha under the present case is F$11.9
million per year (US$6.1 million equivalent). Thus the incremental economic farm gate value
added from complete diversification is estimated at F$45.3 million per year (US$23.3 million
equivalent), i.e. the full 19,200 ha is developed from the present case use to the future with
project case use.
4. The existing representative sugar farm model is based on a sugarcane price of
F$50/metric ton (t) (US$25.7/t equivalent). However at the projected sugarcane price of only
F$37/t (US$19.0 equivalent), the annual gross margin of the farm falls to less than F$1,000
(US$514 equivalent) unless sugarcane yields can be significantly improved. In these
circumstances, the value added if the 19,200 ha remain under sugarcane is F$5.2 million per
1
Appendix 2, Table A2.6 projects a reduction in the number of productive farms from 17,297 to 12,500 so the
equivalent of 4,797 farms are projected to be available for diversified agriculture. At a 4ha average farm size this is
about 19,200ha (4,797 x 4 = 19,188ha).
Appendix 12 59
year (US$2.7 million equivalent) when the economic price for labor is used. Thus the future
incremental economic value added from complete diversification is F$52 million per year
(US$27 million equivalent) at the farm gate level, i.e. the full 19,200 ha is developed from the
future without project case use to the future with project case use.
5. Value-added benefits will accrue from marketing the produce from the farm gate to the
free on board level for exports or to the wholesale level for import substitution products. The
marketing value added is approximated at 20% of the farm gate value added. Thus adding the
marketing value, the estimated total incremental economic value is F$62.5 million per year
(US$32.1 million equivalent).
6. If all 19,200 ha are converted to intensive diversified agriculture as described in the
representative farm model, the value of production would be well in excess of the estimated
value of the additional readily obtainable markets. However, the analysis shows that markets
are unlikely to constrain the diversified farm output.
7. Different adoption rates for diversified agriculture are analyzed in terms of their
economic impact. These are compared with the economic costs of the agricultural
diversification, RFS, OFL, and project coordination components. The analysis assumes that
diversification practices represented in the farm model will be adopted over a 10-year period,
commencing in year 2. Rates of adoption ranging from 15% to 100% are analyzed. In the future,
some farms will be fully diversified along the lines of the representative farm model, others will
partially adopt the proposed diversification practices, while others will not adopt the practices at
all. The sum of these various permutations will represent the overall rate of adoption.
8. Given the unlikely scenario of 100% adoption of the diversification practices, the Project
generates an economic internal rate of return (EIRR) of 58% and an economic net present value
(ENPV) of F$170 million at a 12% opportunity cost of capital. At 30% adoption of the indicative
farm model, the EIRR is 19.1%. Table A12.1 shows the impact of different adoption rates. It is
only when the adoption rate falls below about 20% that the Project is no longer considered
economically viable (EIRR < 12%; ENPV < 0). The achievement of the minimum diversification
adoption rate required for economic viability is well within the capability of the Project.
Table A12.1: Economic Rate of Return for Alternative Diversification Adoption Rates
Rate of Adoption After 10 Years (%) EIRR (%) ENPV discounted at 12% (F$ m)
100 58.2 170.4
75 44.9 117.1
50 31.2 63.8
30 19.1 21.2
25 15.6 10.5
20 12.0 (0.1)
15 7.9 (10.8)
10 3.2 (21.5)
EIRR = economic internal rate of return; ENPV = economic net present value.
Source: Mission estimates.
9. The key factors that will determine the rate of adoption are (i) sufficient farmer
confidence in the land tenure system to make the required investments; (ii) availability of RFS
for project participants; (iii) success of the adaptive research and focused extension programs;
(iv) transformation of farms into commercial businesses; (v) development of a cadre of young
commercial farmers; and (vi) future sugar prices, yields, and production costs.
60 Appendix 12
2. Rural Financial Services
10. The availability of seasonal finance is a particular need for high-value diversification.
Thus all the costs of the RFS component have been attributed to the benefits of agricultural
diversification. It is projected that lending to rural households will increase from 8% of farming
households to 20% over the project period. However, the benefits of the RFS component extend
well beyond diversified agriculture. New ventures created as a result of RFS are projected to
contribute at least F$3.4 million (US$1.8 million equivalent) in value added each year.
3. Off-Farm Livelihoods
11. The OFL component involves two subcomponents. The first subcomponent focuses on
promoting small and micro-enterprises and the second is directed at developing vocational
training. The benefits are expected to be considerable, but are difficult to predict with a
meaningful degree of accuracy. However, an indication of the magnitude of these potential
benefits is that the projected 1,200 small and micro enterprises established by beneficiaries
would generate annual income of about F$7.5 million (US$3.9 million equivalent).
4. Overall Project
12. Table A12.2 compares overall project costs with the projected benefits derived from
agricultural diversification. Provision is also made for the benefits from rural nonagricultural
businesses established as a result of the RFS component. No allowance is made for the
benefits accruing from the OFL component. In determining the benefits from agricultural
diversification, a 30% rate of adoption is assumed.
Table A12.2: Indicative Costs and Benefits of Project Components, 2006–2020
(US$ million)
Agric. Diversification RFS OFL PCU Total Project
Year Benefits Costs Benefits Costs Costs Costs Benefits Costs Net
2006 − 2,426 − 2,800 3,703 1,460 − 10,389 (10,389)
2007 2,083 7,173 567 3,101 5,525 1,552 2,650 17,351 (14,701)
2008 4,167 7,705 1,133 3,451 1,264 1,474 5,300 13,894 (8,594)
2009 6,250 7,238 1,700 3,791 2,426 1,419 7,950 14,873 (6,923)
2010 8,333 6,869 2,267 4,357 1,231 1,332 10,600 13,789 (3,189)
2011 10,417 6,050 2,833 4,823 1,051 1,375 13,250 13,300 (50)
2012 12,500 3,400 15,900 15,900
2013 14,583 3,400 17,983 17,983
2014 16,667 3,400 20,067 20,067
2015 18,750 3,400 22,150 22,150
2016 18,750 3,400 22,150 22,150
2017 18,750 3,400 22,150 22,150
2018 18,750 3,400 22,150 22,150
2019 18,750 3,400 22,150 22,150
2020 18,750 3,400 22,150 22,150
─ = not available.
Source: Mission estimates.
Appendix 12 61
5. Sensitivity Analysis
13. As the core of the quantified benefit stream is derived from the agricultural
diversification, the sensitivity analysis focuses on this component. The analysis assesses the
impact of adverse changes in costs, benefits, and diversification adoption rates. Various rates of
adoption, a 10% increase in the development costs, and a 10% decline in diversified farm gross
margins are simulated. The results of this sensitivity analysis are given in Table A12.3. It shows
that in the base case, a diversification adoption rate in excess of 20% is required for the Project
to be viable (EIRR > 12%). If project costs increase by 10% or the gross margins decrease by
10%, then the minimum rate of adoption required for viability increases, but remains below 25%.
Table A12.3: Sensitivity Analysis
(percent)
Combined Cost
Rate of Diversification 10% Increase in 10% Decrease in
Base Case Increase and Benefit
Adoption After 10 Years Project Costs Gross Margins
Decrease
100 58.2 53.0 52.5 47.8
75 44.9 40.9 40.5 36.8
50 31.2 28.2 27.9 25.1
30 19.1 16.8 16.6 14.4
25 15.6 13.6 13.3 11.4
20 12.0 10.0 9.8 8.0
15 7.9 6.1 5.9 4.3
10 3.2 1.6 1.4 (0.1)
Source: Mission estimates.
14. At a 30% adoption rate, a 10% increase in costs sees the EIRR fall from 19.1% to
16.8%, yielding a sensitivity index (SI) of 1.20. A 10% fall in gross margins at the same rate of
adoption sees the EIRR fall to 16.6% (SI = 1.32). If both costs rise and gross margins fall by
10%, the EIRR falls to 14.4%. These results suggest robust viability against cost and gross
margin variances provided a reasonable rate of adoption is achieved.
C. Financial Analysis
1. Income of Farm Households
15. Representative farm analyses show that farmers have sufficient incentives in the form of
higher net returns, increased labor productivity and on-farm productive employment, and
increased cash portion of farm household incomes from diversification to move away from
sugarcane into vegetables, fruits, and double-cropped grains and pulses with appropriate post
harvest processes. Table A12.4 summarizes the impact on a typical 4 ha farm.
Table A12.4: Project Impact on Typical Farmer with a 4-Hectare Farm
Indicator Present Future Without Project Future with Project
Cropping Intensity (%) 105 105 172
Days of On-Farm Employment 282 282 437
Total Farm Net Economic Product F$ 2,070 1,412 11,297
US$ 1,062 724 5,793
Return to Farm Labor F$/day 8.16 5.04 25.85
US$/day 4.18 2.58 13.26
Crop Diversity (percentage of farm area) 90 in sugarcane 90 in sugarcane 20 in sugarcane, 80 in
multiple crops
Non-cash/Cash Income Ratio 29:71 84:16 4:96
Source: Mission estimates.
62 Appendix 12
2. Employment
16. On-farm employment for various rates of diversification adoption is presented in Table
A12.5. These estimates are derived from representative farm models and compared with
representative existing sugarcane farms. The achievement of a 30% adoption rate is considered
to be a realistic target. This would generate an estimated 630,000 person-days of employment,
or approximately 745,000 person-days of labor less than the current sugarcane farming
situation. Part of this shortfall will be compensated for by rural off-farm work linked to
diversification efforts. Post harvest handling, transportation, and input supply and maintenance
activities for diversified agriculture are relatively labor intensive, and these activities are
expected to provide at least 25% of on-farm labor absorption of diversified farming. Thus about
600,000 person-days of employment will need to be found outside diversified agriculture. This
translates to around 2,400 full-time job equivalents that the OFL component will need to
generate to achieve parity with the current situation. This is seen as a reasonably modest target.
Table A12.5: On-Farm Employment Generated by Agricultural Diversification
Area Labor used Total labor Total payment to
Item (ha) (person day/ha/yr) (person days) labor (F$)
Representative existing cane farms 19,200 71.7 1,376,640 13,766,400
75% adoption of diversification 14,400 109.3 1,573,200 15,732,000
65% adoption 12,480 109.3 1,363,440 13,634,400
60% adoption 11,520 109.3 1,258,560 12,585,600
50% adoption 9,600 109.3 1,049,280 10,492,800
30% adoption 5,760 109.3 629,568 6,295,700
Source: Mission estimates
17. The nature of employment in diversified agriculture is also qualitatively different from the
current sugarcane-based employment, in that diversified agriculture jobs are less seasonal in
nature and offer many more employment opportunities for women. In addition, the efficiency of
labor utilization is also likely to improve. Households are also provided with off-farm livelihood
opportunities through the OFL and RFS components. The RFS component provides households
with the opportunity to save and provides access to microfinance, which was not previously
available. Thus households will be able to mobilize resources for income generation, education,
and prudential needs more efficiently. Training opportunities will be made more accessible to
communities, reducing the need for households to migrate to Suva to meet their education
requirements. Overall the Project is expected to substantially improve the well-being of
households and communities compared with the current situation.
3. Impact on Consumers
18. The benefits accruing to consumers are as follows: (i) increased availability and lower
prices of staples (root crops, pulses, and vegetables); (ii) higher-quality fruits and vegetables
available because of the expansion of exports and tourism sales and improved post harvest
handling; and (iii) improved nutrition resulting from increased consumption of fresh fruits and
vegetables, pulses, and root crops.
D. Risks
19. The Project is economically, financially, and socially viable. The main benefits imputed
into the analysis are based on agricultural diversification. These diversification benefits are
based on identified and readily obtained markets. The adoption rates of diversified practices
required for success are relatively modest. Yet the Project does entail significant risks. The
establishment and sustainable operations of efficient, self-financed industry organizations is
Appendix 12 63
crucial for long-term sustainability and for increased adoption of crop diversification by farmers.
In addition, sufficient land must be available for diversified farming. While the gross margins
upon which the benefits are derived are seen as realistic, the achievement of these returns
depends on the attainment of quality standards that most farmers in Fiji have not hitherto
achieved. The Project needs to oversee a transformation from the dependency on sugarcane
mentality to the business mentality of diversified crop production in a relatively short period. The
Project will focus on this transformation, which is essential for the Project’s success.
20. The Project also faces quarantine risks. The incursion of a new, exotic fruit fly would see
the cessation of most fruit and vegetable exports for several years. Market access for many of
the identified export products requires the negotiation of BQA with the importing countries, and
their willingness to assign priority and resources to this process remains a risk. The
strengthening of the quarantine service is the Project’s response directed at mitigating
quarantine risks; however, assurances are required from the Government that it will devote
adequate resources to quarantine surveillance. The strengthening of quarantine activities will
mitigate the risk.
21. The lack of financial services to undertake income-generating and small farm livelihood
activities under the Project poses a risk to its overall success. MASLR’s implementation
capability also needs to be strengthened through the Project Implementation Unit. Political
interference in the allocation and use of resources needs to be minimized if the Project is to
succeed in achieving its objectives. The Project will endeavor to secure privatized service
providers to ensure long-term sustainability. Greater skills development and transfer are
priorities. The Project will mainly focus on individuals’ skills development and empowerment.
