04 April 2017 | Happy to see names of colleagues and friends in this sourcebook, especially while considering how to accelerate agribusiness.
PURPOSE AND CONTEXT
This Sourcebook discusses agroterritorial development policies and programmes aimed at: (i) promoting spatially defined agribusiness/agro-industrial investments and (ii) strengthening agribusiness and agro-industrial competitiveness. Its purpose is to gather together and analyse a set of agroterritorial planning and policy instruments and present practical information about them. It considers the nature and objectives of each of five instruments (economic corridors, clusters, special economic zones [SEZs], industrial parks and incubators), approaches that have been used to implement them, and practices that have led to both successful and unsuccessful outcomes.
The Sourcebook highlights what each instrument is designed to achieve and the conditions that will enable it to deliver the expected outcomes. Supportive investment promotion policies and instruments are reviewed and governance issues examined.
Geography has always been a major dimension of human activity, through a combination of discoveries, migrations, urbanization and trade. However, it is only recently that it has been recognized as an essential dimension of economic development. Economic development is generally uneven across territories at all levels, locally, regionally and globally. As economies and incomes grow and societies transform from rural to urban, production tends to become increasingly concentrated in spatial terms. Some geographies – cities, coastal areas and connected countries – are favoured by producers and traders. This unevenness creates disparities in economic density, incomes and living standards. It has resulted in the wealth divide between industrialized and developing countries, and often amplified gaps between regions of the same country.
Agriculture and agribusiness are the mainstay of many economies. However, in the developing world, this sector offers only low productivity, compared with wealthier economies and with the manufacturing and service sectors. Yet in an industrialized, globalized and increasingly urbanized world, agribusiness – and agrifood systems in general – has been transforming rapidly. Once concerned primarily with growing, packaging and delivering products to markets, agro-industry has now become a highly industrialized sector, with considerable medium- and large-scale investment, and worldwide networks and global supply chains that deliver substantially transformed agricultural products to businesses and consumers in both near and distant economies and markets.
The various actors and stakeholders in the agro-industrial sector share a range of complementary objectives. Producers and their organizations seek larger markets and better market access, and often forward integration into value addition and supporting services. Agro-industrial businesses look for new and reliable sources of supply, and the comparative and competitive advantages that result from these sources. Individual entrepreneurs look for new business opportunities, in value addition, intermediation, service provision and scale. Governments seek new investments, increased exports, value addition, food security and job creation. Each of these actors and stakeholders is thus engaged in a highly competitive effort to generate or attract the investment that responds and builds upon productivity and locational advantage.
Geography matters in realizing these objectives. To be efficient, local supply links need to be strong, interconnected and supported by an enabling environment and a synergistic approach facilitated by governments and the business community.
Geography and territorial development are more and more important and relevant for development policies because of the worldwide trend towards economic integration and globalization of supply chains, including for agriculture and agribusiness products. The speed of technological change, economic dynamics and human migrations, progress in transportation and logistics all contribute to this phenomenon.
Regional development and spatial inclusion are at the centre of the challenges that will face Africa in the decades to come. Poverty in Africa has a strong spatial dimension, and regional disparities are a major obstacle to structural transformation. These regional disparities and insufficient spatial inclusion hinder inclusive growth. Spatial factors account for a great deal of the pervasive poverty and spatial inequalities that fuel inefficient migration and urban poverty on the continent. In Asia and in Latin America, many countries have designed and launched ambitious master plans that put the development of economic corridors at the centre of their strategies. This is the case in Indonesia, which in 2013 launched a Master Plan for Economic Integration and Poverty Reduction.
From a historical and global perspective, the main drivers of territorial development can be grouped in four categories:
- natural resource endowment;
- population and demography;
- transportation and logistics
As far as policies are concerned, the main question is how to influence the above processes – whether to accelerate them, mitigate their consequences, or both. China, for instance, has been trying to achieve the latter over the last few decades. This is where territorial planning comes into play. Territorial planning coordinates or integrates the spatial dimension of sectoral policies through a territorially based strategy.
In terms of economic dynamics, the determinants of territorial development can be considered as the result of the interplay of three market forces: agglomeration economies, trade and specialization, and migration. One of the central questions in the territorial development debate is whether these three driving forces should be influenced to stimulate the concentration and foster the competitiveness of economic activities in certain locations, and how this can be achieved in an effective manner. Specifically, should governments, through proactive public strategies, influence the location decision of firms and workers and, if so, how? What are the pros and cons of various territorial development approaches and what are the trade-offs involved for policy-makers? What are the policy instruments available for governments? These are some of the questions that this Sourcebook seeks to address.
The five policy instruments are used to attract and concentrate agro-industrial investments as a way to enhance value addition, create jobs, increase exports and provide markets for new and existing producers. These investment promotion instruments have a strong territorial or spatial aspect and impact, and entail important policy dimensions. Much has been learned about the use of these policy instruments in industries such as non-agricultural assembly, and the manufacturing and service sectors. Even though the use of territorial instruments in the field of agriculture and agro-industry may be more recent, it has been expanding considerably over the last few years.
Locationally focused private investment decisions are predominantly driven by three pull factors: access to markets, access to raw materials, and access to transportation (by water, rail and roads) and energy. The theoretical debates that have emerged since the 1990s have brought the importance of location and geography in economic development to the fore in the context of globalization. There have been, however, some fairly contrasting viewpoints in terms of what policies should be implemented to foster territorial and local development and promote economic integration, while closing the gap for lagging regions and communities.
This strategy Sourcebook tries to be as practical as possible, focusing on providing policy-makers and practitioners with an easily referenced overview of key themes and cases that will facilitate their consideration of the tools to be adopted. Public sector planners, policy analysts and decision-makers will find guidance to help their deliberations, policy, planning and decision-making. Public agencies responsible for implementation will also find a rich source of ideas, experience and reference. Furthermore, subnational leadership may use the Sourcebook to inform initiatives for improving local economies.
Private investors will benefit from the principles and lessons described. Effective and sustainable linkages between investors, producers in the supply chains and government organizations are key elements of the discussions, and the Sourcebook seeks to present clear and balanced perspectives. Actors in the supply chain will recognize important principles regarding their role in the planning and ongoing management of agro-industrial initiatives.
Development practitioners and advisors will find the Sourcebook to be a rich resource of important principles and implementation guidance. It will also be a meaningful reference tool and guide for further research for business and agricultural universities and researchers.
THE FIVE INSTRUMENTS
Agrocorridors are part of the broad category of economic corridors. Economic corridor initiatives are development programmes that foster promising economic sectors in a territory by facilitating access to markets, inputs and services, and leveraging economies of scale along a physical backbone of transport infrastructure.
People and economic activities tend to agglomerate along transport corridors, taking advantage of the reduced transport costs and travel time, specific geographic features and assets, and proximity to areas of agricultural production. Corridors can be characterized as transport corridors, economic corridors, trade corridors or sector-specific corridors (including agrocorridors), but are rarely (if ever) unique in their impacts. The creation or improvement of connective infrastructure including roads, rail networks, canals, gateways such as ports and airports, power transmission and communications, is at the basis of any corridor initiative.
An agrocorridor programme or initiative fosters agriculture and value-added agribusiness and agro-industry − and possibly other promising economic sectors − in territories connected by transportation links such as roads, railways, waterways, ports or canals. Agrocorridors seek to enhance simultaneously the so-called “three Cs”: connectivity, [agricultural] competitiveness and sense of community. Agrocorridors associate sector development strategies concerned with food, agriculture and agro-industry with broader infrastructure, logistics and trade facilitation plans. The recent upsurge in focus on agrocorridors results from several factors, including their potential for leveraging public-private partnerships (PPPs), and for promoting inclusive agribusiness and economic growth in low- and middle-income countries or regions of countries, and recent success stories.
The effectiveness of economic corridors depends also on “soft” (or noninfrastructure) components that complement and take forward infrastructural interventions, for instance by developing support institutions and building the capacities of key corridor stakeholders. Soft interventions include, among others, promotion and development of policies, regulations and legislative frameworks conducive to a competitive business environment; improvement and dissemination of business development services; trade facilitation; initiatives promoting regional integration; workforce and other human capital development initiatives; and organizational strengthening.
Many corridor initiatives are reporting positive results, while others are still in progress or even at the drawing board stage. However, some early results are notable, such as from the Maputo Development Corridor between Mozambique and South Africa and the Greater Mekong Subregion Programme in the Mekong region of Southeast Asia, a regional economic cooperation initiative that spans six countries and targets development along nine corridors. Other recent examples of economic corridor development have not yet shown significant results, such as the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) initiative launched in 2010 in eastern Africa. This initiative seeks to attract investment in agribusiness and agro-industry in the southern part of the United Republic of Tanzania as a means of increasing productivity of the region’s natural resources and reducing levels of poverty by incorporating smallholders in commercial value chains. However, the advent of private sector investment is taking longer than expected.
The lessons learned about agrocorridor development are quite clear but, as yet, there are few examples of agro-industry and agribusiness results. Innovation in transportation and logistics can be important for the success of economic corridors − not just the physical investment in infrastructure, but also innovation in transport equipment, service delivery and management. An effective agricultural corridor requires more than investment in basic transport infrastructure such as roads, railways or waterways. It requires investment in feeder roads, dams, irrigation, power facilities and logistics support, as well as in input infrastructure, distribution networks, service provision (transport, finance, technical advice) and attention to the post-production food chain (in some cases, the cold chain). It also requires attracting investment in downstream agro-industrial processing if it is to be a mechanism for promoting value addition and industrialization. One such example of innovation is the development of multimodal transport for exports of fresh fruit from West Africa, combining trucking, rail and sea shipment to Europe of refrigerated containers from landlocked countries such as Mali and Burkina Faso, which resulted in a truly transformative impact in terms of trade routes, market access and industry development.
An agrobased cluster is a geographic concentration of interconnected producers, agribusinesses and institutions that are engaged in the same or related agricultural or agro-industrial subsectors. It interconnects and builds value networks by addressing common challenges and pursuing common opportunities. A cluster encompasses, attracts and promotes horizontally and vertically connected companies and institutions of a particular field, along with their related government, academic and private sector stakeholders. The most distinctive aspect of a cluster is the concentration of economic activities around specific activities or products (vertical dimension) or closely related activities or products (horizontal dimension).
Cluster-based development entails a comprehensive approach to building sustainable and resilient agribusiness value chains that are backed by related and supportive industries. This can lead to more complex and robust sources of competitive advantage while capturing additional value far beyond the farmgate. Clusters emerge organically, making it hard to induce them. However, cluster development can be successfully facilitated. Private sector leadership is usually key to dynamic cluster initiatives, which can serve as an effective catalyst for private sector investment.
Agrobased clusters differ from other clusters because of their unique characteristics of perishability, coordination challenges and extreme political sensitivity and government invasiveness in many agricultural subsectors. Efforts to coordinate agrocluster development are complicated by overlapping jurisdictions and authorities.
The role of local government authorities in the promotion of agroclusters is widely recognized, but line ministries also need to be on board. Coordination challenges related to systemic risks are frequent characteristics of agroclusters. Cluster initiatives work to close the gap between agriculture and agro-industry by addressing issues of both vertical and horizontal value chains and coordinating with public and private institutions, academic organizations and trade associations to strengthen the cluster coordination. Agroclusters encourage interfirm cooperation, facilitate the spread of organizational and technical innovation, and provide a mechanism for industry initiatives, which benefit the entire value chain.
Agrocluster initiatives utilize collective action to achieve performance objectives and resolve coordination failures. They can be driven and supported by various kinds of players, ranging from the private sector to national governments, local economic development authorities, and international donor agencies. These actors can be instrumental in helping to upgrade and consolidate an already existing cluster.
They can also support the cluster’s internationalization process. In every case, the success and sustainability of the cluster and cluster-focused initiatives depend upon the commitment of business leadership. Clusters require strong internal motivators or champions who are able to articulate the vision and objectives of the cluster clearly, and motivate other members to be enthusiastic about the vision.
While agrobased cluster initiatives are largely beneficial forms of economic development, there are significant challenges, which can be addressed by sound cluster arrangements and facilitation approaches. For example, scale requirements may put small-scale farmers at a growing disadvantage in some clusters. Organizational structures and linkages of firms and clusters in developing countries are often weak, making it difficult for cluster members to adapt to evolving consumer demands and to maintain pace with foreign competition. And clusters are only as good as their institutions: agroclusters are only successful insofar as the institutions that support them are strong, free from corruption and restrictive cultural norms, and capable of providing the financial and political support needed to foster cluster growth and development. An overly narrow focus on a restricted number of products can keep a cluster from diversifying, making it more vulnerable to changing market demands.
Consequently, a focus on innovation and competitiveness is crucial, as is keeping abreast of medium- and long-term product and market trends.
Developing and implementing a successful agrocluster initiative means that stakeholders must first observe and map the existing cluster network. At an early stage, they should also convene the cluster leadership and establish the right psychological contract. Participants may include input suppliers, producers, traders, processors, exporters and those involved in research, extension, logistics and finance. In follow-up meetings, industry leaders apply a series of diagnostic tools, often aided by local or international experts.
These diagnostic tools lead to a strategy resting on a foundation of data and analysis. This strategy in turn leads immediately to the identification of strategic initiatives designed to reposition in the industry in global markets, improve productivity, enhance efficiency or introduce innovations. Strategic initiatives may include, as examples, market linkage initiatives, product and service innovation, infrastructure, upgrading in product quality, workforce development, adoption or enforcement of new quality standards, improvements in packaging and lower supply chain costs. It is important that clusters ground their strategies in commercial market realities and identify economically sustainable ways of generating value in these markets. Once such opportunities have been identified, the policy reforms needed to facilitate competitiveness become much clearer. Good strategy reveals the desirable prioritization and sequencing of policy initiatives of investment in social goods.
Cluster initiatives have been successfully implemented in many countries and sectors. The most successful examples tend to focus on high-value and exportoriented production. Frequently cited clusters that serve as model agricultural or agro-industrial clusters include the horticulture clusters in the Netherlands and in other countries such as Kenya which, although applying to a diverse set of fruit and/or vegetables, involve the use of similar supporting infrastructure, cold chains, input providers and transporters. Another example is that of the salmon cluster in Chile.
An agro-industrial park is a centrally managed, physical platform that offers high-quality infrastructure, logistics and specialized facilities and services to a community of tenants, formed by agro-industries, related agribusiness firms, service providers and research and knowledge institutions. The industrial park model has been widely applied across the globe, most notably targeting the textile, apparel, footwear, consumer electronics and motor industries.
Agro-industrial parks align connective and specialized infrastructure with agglomeration economies derived from the co-location of agribusinesses and agro-industries. They are often called “agropoles”, in lieu of agroparks, in francophone literature. There are significant differences between an agrobased cluster and an agropark. An agropark requires the existence of a shared infrastructure platform that is centrally managed, whereas a cluster is defined by the business linkages among co-located agro-industries; cluster agents only occasionally share infrastructure and facilities (such as airport cold chain facilities). While clusters tend to be described in terms of focus products (one product, or a close-knit group of commodities such as in horticulture or biotechnology clusters), parks tend to be planned by nature for multiproducts.
An agro-industrial park is much more than its physical assets: it entails a functional community of manufacturing and service agribusinesses located together on a common property, centrally managed by a dedicated entity (public, private or public-private), which usually also owns the land where the park is located. Agro-industrial parks increase the efficiency and value-capturing capacity of the firms located in them, while reducing their transaction costs. They combine the pursuit of value addition and industrial efficiency with principles of industrial ecology and innovation.
Agroparks are physically limited to a well-defined area. The dimensions of agroindustrial parks vary greatly, from a few up to several hundred hectares. The majority of agro-industrial parks are sponsored by, and are physically linked to, towns of various sizes. Agro-industrial parks try to locate in areas that maximize logistical gains. In practice, the decision of where to locate an agro-industrial park can be substantially influenced by firms already located in an area and that play a key role in the creation of the park, or by universities and research centres that lead the establishment of agrotechnoparks (or agrotechnopoles in francophone countries).
The use of industrial parks as a tool to build agricultural value addition and competitiveness is quite recent in both industrialized and emerging economies. Well known examples are established in China, India, Denmark (Agro Food Park in Århus set up in 2009) and the Netherlands (Greenport Venlo initiated in 2005 and still under development).
Agro-industrial parks may follow various models. They can vary according to their industrial activity, use of space and development objectives. Some parks are managed by the public sector and others by private actors or via PPPs. Agroparks can be operated as a single, managed entity or as a system with components operated using a diversity of management options, purely private, purely public or PPP. In all cases, sound park management requires successfully implementing a business strategy that focuses on overall competitiveness and profitability.
Industrial parks are controversial globally, also in developing countries. As with many good conceptual models, the reality of implementation can fall short of expectations. Some parks have failed to reap the promised benefits of greater competitiveness through increased added value, and innovation and technology upgrades. Policy-makers should consider using agroparks as a tool for agribusiness development when their main goal is to add value through processing, and across a number of competitive agricultural and food chains present in a territory that is identified by urban areas and their economic hinterlands. The choice of location for the agropark is a key strategic decision, as is the agropark design and its ability to sustain an integrated, multistakeholder and multilevel approach over the long term.
Agrobased special economic zones
An agrobased special economic zone is simply an SEZ with an agribusiness focus, which in turn implies some special qualities. SEZs vary considerably in terms of institutional approaches and operational models. SEZs are policy instruments that aim to attract investment (particularly foreign direct investment [FDI]), create jobs, increase exports, generate hard currency, diversify the economy and serve as vehicles for technology upgrading. They involve fairly complex policy instruments that encompass a wide diversity of institutional approaches, incentive structures and operational models. SEZs are not mutually exclusive to industrial parks, since they are simply a legislative tool that affords certain privileges to those that obtain SEZ status. SEZs have traditionally been thought of as geographically designated, duty-free areas that focus on the industrial assembly of imported components for export. Characteristics that make SEZs unique compared with other development models are their export orientation and related regulatory framework that targets streamlined customs procedures and duty-free import of raw materials and export of finished products.
An agrobased SEZ is a demarcated geographic area in which firms that are engaged in agribusiness and agro-industrial activities benefit from a more favourable regulatory, business and fiscal environment than those in the rest of the country.
Agrobased SEZs are a tool for agro-industrial development; the main benefits of applying a SEZ framework to achieve agro-industrial growth goals are largely the same as they would be to achieve other industrial growth goals. That is, SEZs embody streamlined regulatory environments that are simpler and quicker than provided elsewhere in the economy, duty-free imports and/or exports, secure land tenure, dedicated infrastructure, access to specialized services and the potential for clustering effects. The significant variability in SEZ frameworks implies that they are not all appropriate for agro-industrial development. Agro-industry requires strong supply chain linkages with proximate location to raw materials that are seasonal, perishable and variable.
Though a widely popular industrial development tool, SEZs have only achieved partial success. Countries sometimes try to rely on them to circumnavigate poor enabling environments. Yet, although SEZs can be used as a catalyst for countrywide policy reform and targeted agro-industrial growth, depending solely on SEZs to generate economic growth without addressing other constraints will inevitably yield disappointing results. On the positive side is the catalytic effect of SEZs in stimulating more dynamic measures of success such as broader business environment reform, diversification, the degree of technology and human capital upgrading, and integration with the domestic economy. China’s use of SEZs to pilot the effects of economic liberalization has been central to its remarkable economic success.
SEZs have policy, institutional and physical dimensions. Establishing a regulatory framework is the first step in the SEZ development process. The delineation of a geographic area serves as the basis for applying the policy, institutional and infrastructure components. Unique to agro-industrial activities, agrofocused SEZs require additional considerations with respect to policy and physical factors, as well as access to strong supply chains. Institutional arrangements for SEZ creation and management are critical success factors. Three elements that have great influence in institutional effectiveness are: (i) establishing clear and balanced institutional structures from the outset, which empower the zone authority with sufficient autonomy and authority; (ii) effective zone management that adopts a customer and results orientation; and (iii) ensuring that financial planning and financing are undertaken in partnership with the private sector.
Two case studies highlight agrospecific considerations for SEZ development. The coffee case study in the Philippines is an example of how the well-established SEZ framework in the country has been expanded to target agro-industrial growth. The second case study discusses how the SEZ model has been applied and implemented in Africa and highlights driving factors behind successes and failures, with a particular focus on agro-industry.
An agribusiness incubator is an enterprise development hub that provides a common environment − often physical, but in some cases virtual − to nascent agrobased companies, where they have access to shared infrastructure, and networking, mentoring and coaching, business and financial services. The objective of agribusiness incubators and accelerators, is to help entrepreneurs create and expand their businesses by enabling the successful startup and growth of agribusiness companies, i.e. to increase the chances of success.
These incubators are a mechanism for accelerating the growth of startup and small-scale agro-enterprises that bring innovative technologies and business models to the market. Effective incubators place a performance discipline and expectation on participating startups. The adoption of agribusiness incubators in developing countries is still limited compared with industrialized economies and experiences in other sectors, but there is interest in mainstreaming the use of this tool to foster entrepreneurship and innovation in the agriculture sector.
Business incubators can be multisectoral or target a specific industry or sector, such as agribusiness. Agribusiness incubators or agro-incubators specifically nurture newly born agrobased enterprises with high growth and competitive potential. They can be established as a stand-alone undertaking or can be part of a broader initiative or programme that supports the creation and strengthening of a network of incubators. Incubators are also common as elements of agropark, SEZ and cluster initiatives.
Agribusiness incubators are an effective part of an innovation ecosystem for agricultural development, i.e. a community of partners or organizations with complementary resources that shares the functional goal of enabling agricultural innovation and technology development and/or transfer. Incubators contribute to the entrepreneurial ecosystem. They are part of the “support system”, which includes not only incubators but also other mechanisms for providing mentorship, advisory and professional services, and building networks of entrepreneurial peers.
The objective of the incubation process is to assist the entrepreneur to establish a sound, market-focused business. Agribusiness incubators may differ widely from one another. These differences can relate to their mission and sectoral focus, the business model used and services delivered. They can also vary according to the financing path, timeline, ownership, sponsorship and institutional affiliation, among other factors. Incubators can be classified according to criteria such as: (i) sector orientation; (ii) thematic thrust (value chain/subsector-focused incubators versus technology-oriented incubators); and (iii) duration of participation (business incubators versus business accelerators). Examples of innovation in technology-based, university-led agribusiness incubators include experiences from Brazil, Indonesia, Mexico and Uganda. Fundación Jalisco is a nonresidential, franchise incubator for value chain development in Mexico. Flat6Labs is a business accelerator programme in the Middle East and North Africa region.
Incubators locate mostly in urban areas. Those targeting the agribusiness sector also tend to locate in peri-urban and urban areas. Agribusiness incubators thrive in places where there is an active, broad territorial partnership for agricultural and entrepreneurial growth, and thus they are often desirable components of clusters, agroparks and SEZs. The assets and services offered depend on the typology of clients targeted and on the mission of the incubator. Some agro-incubators focus on the provision of facilities and co-working space. The most common business model for incubators is focused on revenue generation, with the main sources of revenue including rentals on infrastructure and facilities and fees from various business development and consulting services. Agribusiness incubators can be established as a public body, mostly depending on governmental and donor funds, or as a private body. Incubators that are integrated in science parks are particularly common in Brazil, China and India. In Brazil, the Viçosa Technological Park and CENTEV/ UFV have a strong interaction.
To live up to their full economic potential, agribusiness incubators need to satisfy a series of challenges pertaining to their design, business model, financing and relational issues. Agro-incubators should be primarily expected to provide soft support elements, rather than physical facilities or financial support. The founders and operators of agribusiness incubators need to have a business mindset and leadership qualities, and be dedicated to incubation activities full time.
Successful agribusiness incubators connect incubated firms to people who can help them grow their business: networking is therefore essential. The success factors of agribusiness incubators are a combination of lean operations, focusing incubates on market success, building strong linkages with the entrepreneurial ecosystem, discipline and performance targets (through “tough love” that pushes client firms to boost their business performance). Finally, one should be aware of the key issue of sustainability by bearing in mind that supporting startups remains a risky business.
How to attract private investment, which governance structures should be adopted, and what should be the role of the public and private sectors in establishing and managing the initiative and facilities are some of the cross-cutting issues that are common to all instruments of territorially based agro-industrial development.
Corridors, clusters, agroparks, SEZs and incubators are, in the context of an agro-industrial strategy, tools for promoting agro-industrial investment within agrosystems. Each tool places a different emphasis on the scope, scale and type of investments that it is attempting to attract. Consequently, implementation, and operational and promotional strategies are differentiated. For ease of reference, see the Table, which summarizes the main characteristics of the various territorial development instruments that have been reviewed. The scale of investment varies from a few million dollars for incubators to billions of dollars for agrocorridors. Investment promotion takes place at two levels – in attracting investors in the instrument’s actual facilities, and in attracting tenants or resident investors.
As part of their overall investment promotion strategies, countries generally establish an investment promotion body, either a Board of Investment or an investment promotion agency or authority. Promotion agencies may also exist at a subnational (state or urban) level. In promoting these territorially based instruments, sponsors and managers must collaborate closely with investment promotion bodies, defining joint strategies and clearly assigned responsibilities.
Some core principles for successful investment promotion are:
- private sector involvement;
- national/local commitment to FDI and domestic investment, with a corresponding reflection in public sector funding;
- successful strategy promoting investments in agrobased spatial development initiatives, including regular strategic studies, policy advocacy and benchmarking;
- accountability, transparency and autonomy;
- social and environmental sustainability.
One major lesson drawn from experience is that, to be successful, efforts to attract investment in agro-industrial and agribusiness initiatives should include a nuanced knowledge and understanding of national or global market demand trends and the motivations of global and domestic agribusiness companies subject to industry- specific competitive pressures. Promotional messages should not solely be about the supply-side offer. Promoters should be aware that foreign investment in agricultural lands may be controversial; in order to avoid instigating local political and social counter-reactions, they should adhere to the widely accepted rules of responsible agro-investment (RAI).
There are important governance issues associated with implementation of the instruments. Sound policy on national institutional governance generally comprises four pillars – accountability, participation, predictability and transparency. When it is the governing authority, the public sector faces particular challenges to ensure that ownership and management mechanisms adhere to these four pillars and to the legal framework, and are not hidden from public scrutiny or meddled in by political interests. The same applies in the case of a PPP but with the additional requirement that the engagements, rights and recourses for each party are made clear. Private ownership and management are perhaps formally more straightforward, since the requirement is to operate within a legal and regulatory framework. Principles and lessons for good governance are generally clear, and a challenge will always be to balance these against the choices relating to ownership and management that reflect the country’s institutional realities. Altogether, choices must be made to put in place the practical requirements for achieving objectives and results.
The public sector has a role in most initiatives, although its role tends logically to be more significant in initiatives that involve or impact large territories and populations. At one extreme of the continuum that depicts the degree of localization of developments, corridors would typically cover the most expansive geographic area. Incubators, on the other hand, are found in specific locations. Generally, the more localized the initiative, the more the private sector can effectively play the sponsoring and governance role and, conversely, initiatives that cover large geographies and possibly political demarcations, or large and diverse populations, will typically require or attract more substantial public sector involvement.
The public sector also tends to play a more significant role in the earlier planning and development stages of an initiative. There is fairly uniform agreement that public sectors need to provide a consistent facilitating support to territorial initiatives, and over extended periods of time. The roles and expectations of government and the public sector with respect to agro-industry and territorial development have also evolved. In recent decades, the role of the public sector has changed from that of a provider/initiator to that of an enabler/facilitator. Policy instruments must accompany the development of most tools. The policy action may be highly complex, or as simple as a budget allocation, especially when it is a private initiative that includes a public-private element.
Successful territorially based approaches to development and investment attraction must be implemented in a context in which appropriate macroeconomic and other national policies are in place, or at least where such policies do not overly constrain either regional development actors or investment promotion officers. For example, national policies related to land tenure, infrastructure and central versus regional governance may all have an impact on both regional development and investment attraction. Ensuring a sound enabling environment, including legislation, regulation, procedures and services, is also key to the success of the five instruments.
Governance structures can take the form of PPPs. The starting-point of a PPP is to engage in a public-private dialogue that should be a two-way process, jointly owned by both the public and private interests. PPPs can be viewed as a mechanism to move ahead quickly to achieve development goals and perhaps minimize risks to both public and private partners. Some spatial development initiatives, particularly corridors, agro-industrial zones or agroparks, may benefit from the focused management capability and authority of a special agency.
Governance institutions and mechanisms can be put in place as part of the national strategic framework for territorial development. This has been the case of the national policy promoting food processing parks put in place by the Indian Government since the 1980s. Another example is that of the Kenyan policy framework for the agro-industrial sector, called Kenya Vision 2030, which aims at expanding regional markets for Kenyan products, and new agricultural products for niche markets. Vision 2030 foresees that consolidation and new special zones and parks will target services better and encourage new and growing export-oriented agro-industrial enterprises. Vision 2030 also proposes the development of industrial clusters, among other actions.
The five instruments that are the focus of the Sourcebook were selected in large part because of their potential for catalytic impact. Every country and region, every urban agglomeration and every population aspires to increasing incomes, reducing business risks and boosting employment. The key to attaining these objectives is the promotion of economic sectors and industries with the potential to deliver sustainable growth. In developing countries, agriculture is often the sector that has comparative advantages. Measures can be taken to free agribusiness and agroindustry stakeholders to turn comparative into competitive advantages and enable them to grow in a productive and sustainable manner.
Each of the five instruments is designed to contribute to achieving the three overarching objectives of agroterritorial development:
- Promoting spatially bound agribusiness/agro-industrial investments.
- Building agribusiness and agro-industrial competitiveness.
- Enhancing food security.
The five instruments, and the investment that they generate, may contribute to the achievement of many other national and subnational objectives. They can support objectives such as creating jobs, accessing new technologies, improving skills levels, encouraging new business formation and decentralization.
Each instrument seeks to generate private business response. Instruments generate this response by providing business with access to new sources of raw material, new markets, cost efficiencies and similar advantages. Promoters will be more successful in encouraging business investment to the extent that they lower the barriers and transaction costs involved in business operation and investment. Promoters of territorial development approaches must thus recognize that the sustainability and success of each of the approaches mean that stakeholders have to respect core principles: (i) a business focus; (ii) shared benefits; (iii) effective implementation and management; and (iv) sound and effective governance. While business objectives are relatively straightforward in terms of realizing strategies related to companies’ business models, government objectives are complex. Governments must balance legitimate political interests; economic growth objectives (including concepts of regional equality); social partnership objectives; decentralization and regional development objectives; tradition; philosophical perspectives; and much more. The public sector serves different and more varied constituencies than business investors.
This book, while presenting important principles, good practice and lessons learned, is not prescriptive. Each commodity system has unique characteristics, and each country and region has its own history, topography, culture and economic philosophies, making it difficult to generalize or to be totally doctrinaire about the application of best practice. Consequently, effective planning and implementation of each of the five instruments require leaders to make sound choices that respect such principles and follow the best practices described in these chapters. Poor implementation is a waste.
In Chapter 9 there are four checklists to guide the steps and choices that need to be taken to plan and implement the investment promotion instruments. The checklists, pertaining to diagnostics, feasibility analysis, design and implementation, can be used by framers and implementers of the investment promotion initiatives to ensure that key steps are carried out, important information considered and appropriate choices made. Each checklist includes the main considerations and implementation steps: (1) Making the decision; (2) Feasibility considerations and key requirements; (3) Design considerations; and (4) Implementation considerations./.
FAO, 2017. Territorial Tools for Agro-industry Development: A Sourcebook. Edited by Eva Galvez Nogales & Martin Webber, Rome.