COMMITTEE ON COMMODITY PROBLEMS
Rome, 6-9 March 2001
DEVELOPMENTS IN FAO'S COOPERATION WITH THE COMMON FUND FOR COMMODITIES
1. The Committee has reviewed matters arising from the links between various FAO intergovernmental groups, in their capacity as International Commodity Bodies (ICBs), and the operations of the Common Fund for Commodities (CFC) at its Sixty-second Session in 1999 as well as in previous sessions. This document describes the evolution of the cooperative relationship between FAO ICBs and the CFC since the Committee's last session.
2. Out of the nine intergovernmental groups (IGGs) reporting to the Committee on Commodity Problems, all except for the IGG on Jute, Kenaf and Allied Fibres have been designated ICBs by the CFC, together with the Sub-Committee on Fish Trade which reports to the Committee on Fisheries.1 These constitute half the ICBs recognized by the CFC.
3. Up to mid-2000, 31 projects sponsored by FAO's ICBs have been endorsed by the Executive Board of the Fund at a total value of US$87 million (see Annex I). The Fund continues to contribute an average of 45 percent, with the balance coming from co-financing by other donor agencies (28 percent) and from counterpart contributions by governments or project implementing institutions (27 percent).
4. Since the last session of the CCP the CFC has approved seven projects sponsored by FAO ICBs, for a total of just under US$24 million. Projects approved by the CFC in 1999 and 2000 cover the oilseeds complex, fisheries, bananas, cassava, citrus and tropical fruits. The latest projects are at various stages of implementation or are about to be initiated. In addition, several projects are at an advanced stage of preparation. Some have been assessed by the Fund's Consultative Committee as being fundable on certain conditions; and, hence, they stand a good chance of finding favour with the Executive Board.
5. Of the total amount of funding of FAO ICB projects of nearly US$24 million in 1999/2000, some US$3.5 million was in the form of loans from the CFC, in line with increasing CFC emphasis on loans. These loan components cover projects in tropical fruits, bananas, citrus and cassava. These projects also enjoyed US$6.8 million in grant support from the CFC.
6. The CCP had appreciated in the past the adoption of flexible ad hoc solutions mutually agreed upon between the CFC and FAO secretariats in order to carry forward commodity development activities. In fact, the mechanisms outlined in document CCP: 99/16 such as the adoption of ad hoc solutions to specific problems, the provision of access to the Common Fund Project Preparation Facility (PPF), and an expansion of commodity coverage by some IGGs have functioned reasonably well since the last CCP session. Both ICB Secretaries and CFC staff have demonstrated considerable flexibility and creativity in dealing with very different problems in a number of commodities in a wide range of projects and countries, which have proven particularly important in light of the intervals between formal meetings of IGGs.
7. FAO has been or is now the project-executing agency for five CFC projects. This participation has enabled various components of the FAO to apply their expertise to projects in different regions, based on CFC financial support. These projects cover hard fibres, edible oils, meat and one project on coffee mould executed on behalf of the International Coffee Organization (ICO), making it a tripartite project between the CFC, FAO and ICO.
8. The CFC established the PPF in 1998 to assist ICBs in preparing and formulating projects. This assistance has thus far been limited to projects that have a loan component. The FAO, through the Investment Centre, has been contracted by the CFC to develop projects in three instances; two of which totalling US$5.6 million have been already approved by the CFC Executive Board. This has enabled the FAO to apply its expertise at an earlier stage to project formulation and help assure the development of well thought-out proposals. The Commodities and Trade Division has worked closely with the Investment Centre in these efforts and participated in one field mission for project preparation.
9. The CFC has supported four fast track projects submitted by FAO ICBs. These have involved workshops on cattle and beef (1998), cassava (1999) and fibres (2000). Further funding in 2001 is expected for workshops on cashew nuts, bananas and organic horticulture to be held in the near future. While CFC funding is limited to US$30 000 per fast track project, this funding can sometimes be combined with that of other donors, such as the Technical Centre for Agricultural and Rural Cooperation EU/ACP, to multiply the effect of CFC contributions. FAO has contributed experts, documentation, organizational management and sometimes meeting facilities and simultaneous interpretation to these fast track workshops.
10. As the CFC requires commodities requesting financing to be sponsored by an ICB, the FAO ICBs have adopted what the CFC has termed orphan commodities. The Grains ICB has adopted roots, tubers and pulses for purposes of CFC projects and in 1999 the Tropical Fruits Sub-Group adopted cashew nuts, cut flowers, essential oils, medicinal herbs and spices. Several projects in these latter products have now been submitted to the CFC for its consideration. In addition to those products previously adopted or proposed2, the CFC has now indicated that it would like to see dates and ramie adopted by FAO IGGs as well.
11. In addition to FAO participation in the Fast Track Workshops noted above, FAO was invited to present a paper on Improvement of Competitiveness, Marketing and Market Access of African Commodities at the CFC Regional Round Table on Commodity Development in Africa in November 1999 and to actively participate in the Regional Round Table on Commodity Development in Latin America and the Caribbean in August 2000. These round table conferences have generated a number of project profiles for later consideration by ICBs.
12. FAO invited the CFC to hold its annual meeting with all ICBs at FAO Headquarters in Rome on 2 October 2000. This initiative enabled all FAO ICBs to be represented, as financial constraints prevent more than one officer attending when CFC/ICB meetings are held elsewhere. Representatives of eight other ICBs attended the Rome meeting, contributing the discussion of common problems and exchanging ideas with FAO ICB Secretaries.
13. The emphasis now being placed on loan financing for projects has delayed the process of project implementation. The documentation needed for loan projects, including appropriate guarantees, has resulted in a stretching out of the period between project approval and implementation. Loan negotiations and various forms of guarantee have imposed another layer of documentation beyond that previously encountered in purely grant-financed projects. The CFC is aware of this problem and is attempting to streamline its loan activities.
14. The adoption of more commodities at the behest of the CFC by FAO ICBs creates a demand for more project-oriented staff time and expertise in commodities that have not necessarily been of intense focus in the past. For example, the Tropical Fruits Sub-Group has already submitted projects on cloves, black pepper, quinine and cashews to the CFC, while the Grains IGG has submitted three project profiles on cassava. While broadening the technical expertise of FAO staff, work on these commodities also makes demands on existing resources, if the Secretariat is to continue to serve its members adequately through the attraction of project financing from the CFC to these new and sometimes dynamic product categories. Experience to date is not sufficient to allow the Secretariat to provide concrete indications about the likely impact of such activities in their programmes over the longer term.
15. Discussions between FAO ICBs and the CFC concerning intellectual property rights continue, as the FAO ICBs seek to ensure that they have, in a manner which complements CFC efforts, the ability to use, and to disseminate to their members, know-how and technology developed under projects financed by the CFC. A rapid solution is needed, bearing in mind the need to widely disseminate benefits growing out of CFC projects to developing countries.
16. In light of the above the CCP may, therefore, wish to:
ANNEX I - FAO/ICB-SPONSORED PROJECTS FUNDED BY THE COMMON FUND FOR COMMODITIES (Status 1 May 2000)
|COUNTERPART CONTRIBUTION||CFC FUNDING||STATUS|
|US$||US$||US$||GRANT US$||LOAN US$|
|Approved in 1998|
|NRI||Grain Warehousing Credit Ghana/Zambia||2 075 475||258 930||636 967||1 179 578||I|
|UNIDO||Sorghum Malt Brewing||2 238 600||200 000||544 000||1 494 600||T|
|ESALIA||Grading Hides Africa||3 186 800||120 000||1 666 800||1 400 000||I|
|Sub-total||7 500 875||578 930||2 847 767||4 074 178|
|Approved in 1999|
|ICIPE||African Fruit Fly Initiative||5 935 000||2 385 000||1 850 000||1 200 000||500 000||T|
|SITEB||Reviving Banana Cultivation - Guinea||2 829 800||1 459 400||720 400||650 000||T|
|COMESA/LVFO||Value Added Fishery - East Africa||554 005||136 000||39 480||378 525||T|
|Cooperative of Kai||In-depth Development of Citrus - China||2 777 996||741 249||836 784||697 959||502 004||T|
|APCC||Coconut Integrated Pest Management||1 396 350||154 000||441 300||801 050||T|
|Sub-total||13 493 151||3 416 249||4 626 964||3 797 934||1 652 004|
|Approved in 2000|
|INIBAP||Improved Banana Musa Germplasm||6 148 717||1 503 800||1 032 830||1 862 087||1 750 000||T*|
|IITA||Cassava Processing.Africa,Phase 1||4 111 817||2 860 873||1 150 944||100 000||T|
|Sub-total||10 260 534||4 364 673||1 032 830||3 013 031||1 850 000|
|FAST TRACK PROJECTS|
|Approved in 1998|
|COMESA||Diversification of Cassava,Workshop (6/1998)||37 336||7 836||29 500||C|
|Nadjoulo Village Assoc.||Pilot Cattle Fattening Burkina Faso||34 000||4 300||29 700||C|
|Sub-total||71 336||7 836||4300||59 200|
|Approved in 2000|
|ILRI||Beef Trade Central America,Workshop (8/2000)||30 000||30 000||C|
|IGG HF/Jute||Natural Fibres Consultation (12/2000)||30 000||30 000||I|
|Sub-total||60 000||60 000|
|Grand Total||31 385 896||8 367 688||8 511 861||11 004 343||3 502 004|
C = Project completed I = Under implementation T = To be started (* pending signature of MOU)
1 The Sub-Groups on Bananas, on Tropical Fruits and on Hides and Skins have been designated as ICBs in their own right.
2 Among those previously proposed which have yet to be considered by the relevant IGGs, as agreed by the CCP (Report CL 116/6, paragraph 22), are dairy products, non-tropical fruits and melons and vegetables.