CCP:GR 99/5-RI 99/5





COMMITTEE ON COMMODITY PROBLEMS

JOINT MEETING OF THE 28TH SESSION OF THE INTERGOVERNMENTAL GROUP AND THE 39TH SESSION OF THE INTERGOVERNMENTAL GROUP ON GRAINS

Rome 22-24 September 1999

DEVELOMENTS REGARDING THE COMMON FUND FOR COMMODITIES

Table of Contents


I. INTRODUCTION

1. This paper provides an update of the progress made since the last Session of the two Groups regarding the Common Fund for Commodities (CFC) projects. A proposal is also made for a mechanism, similar to that one adopted by the Grains Group, that is aimed at enabling the Rice Group to undertake its project sponsoring activities during inter-session periods.

A. DEVELOPMENTS IN THE GRAINS AND ROOTS AND TUBERS SECTORS

2. At its 27th Session, the Intergovernmental Group on Grains reviewed the status of three project proposals for submission to the CFC, namely: i) improvement of post-harvest technology for fonio in West Africa; ii) collaborative research and development of malting barley production in South America; and iii) increasing finger millet production in eastern and southern Africa. As had been reported to the Group (CCP: GR 97/5), of these three projects only the fonio proposal was accepted as being compatible with CFC project financing criteria. Two additional grains projects were presented to and approved by the Group for submission to the CFC (CCP:GR 97/6), the status of which will be reported in the next section.

3. At its last Session, the Group also recommended the extension of its terms of reference to encompass roots and tubers and pulses in its work oriented towards the CFC and authorized the Secretariat to submit three projects on cassava in anticipation of the CCP's endorsement of the proposed change in the Group's Terms of Reference (see CCP:GR 99/CRS 5-RI 99/CRS 5). This change was approved by the CCP at its 61st Session (CL112/6).

4. In order to deal with CFC projects during periods between sessions, the Group at its 27th Session decided to establish a Sub-group, consisting of the Chairperson and the two Vice-chairpersons, to permit the approval, formulation and finalization of project documents, as the case may be, in continuous consultation with the CFC in order to ensure a timely response to project proposals submitted (CCP:GR 97/5 and CCP: 97/19). As such, the Rules and Procedures have been revised to incorporate the language approved by the Group at the last Session (see CCP:GR 99/CRS 5-RI 99/CRS 5).

B. DEVELOPMENTS IN THE RICE SECTOR

5. At its 38th Session, the Intergovernmental Group on Rice reviewed the status of two projects in the sector, one on the "Inland valley consortium programme in West Africa" and the other on the "Strengthening of the international network for genetic evaluation of rice activities in West Africa, Eastern Europe and the Commonwealth of Independent States ". The former started its implementation in April 1999, while the latter has been recommended by the Consultative Committee (CC) of the CFC for approval by the Executive Board. A proposal for a third project is being prepared, though it is not advanced enough to be submitted to the Group for its approval. Should the Group approve the Secretariat's proposal of establishing a Sub-group on Intersessional Matters of the IGG on Rice, in conformity with several other IGGs, the assessment of the new project proposal could be undertaken prior to the next session of the IGG on Rice.

II. STATUS REPORT ON PROJECT DEVELOPMENTS FOR GRAINS AND CASSAVA

A. GRAIN PROJECTS ALREADY APPROVED BY THE CFC

"Improvement of Fonio Post-harvest Technology"

6. This project, endorsed by the Group at its 26th Session, was approved by the Executive Board of the CFC in October 1997 and the Project Agreement was signed by FAO in March 1999. The first phase of the project is expected to begin soon, and is being executed by the Centre de coopération internationale en recherche agronomique pour le développement (CIRAD). The project is being implemented in three countries, namely, Mali, Guinea and Burkina Faso, by collaborating institutions that will work directly with CIRAD. It is scheduled to run for four years at a cost of US$ 1.5 million, including a grant from the CFC of US$ 915 000. The following is a brief description of the project:

7. "The overall objective of the project is to stimulate production, sales and consumption of fonio by improving post-harvest processing. The project seeks to reduce the cost of processing, minimize production difficulties, improve quality of the finished product and increase supply of the processed products to urban and export markets. It comprises the following components: a) improvement of post-harvest techniques for producers; b) development of processing techniques geared to the needs of operators; c) promotion of the processed product on urban and export markets; d) development of information on fonio post-harvest systems; e) promotion of local manufacturing of machines; f) training of local operators."

"Industrial Development of Sorghum Malt and Its Utilization in the Food Industries"

8. This project was approved by the Executive Board of the CFC in October 1998. Due to difficulties in finding counterpart funding, the signing of the project agreement has been delayed and is expected to be signed soon. The project executing agency (PEA) is the United Nations Industrial Development Organization (UNIDO). The project sites will be in Ghana and Nigeria and will include a pilot brewing facility in Ghana. It is scheduled to last four years and the total cost will be US$2.5 million, of which US$ 1.5 million is being sought as a grant from the Fund.

"Developments of Grain Marketing Systems through Warehousing and Inventory Credit in Africa"

9. This project was approved by the CFC Executive Board in May 1998 and the Project Agreement is in the process of being finalized. The total cost of the project will be about US$ 2 million, of which the CFC will grant about US$ 1.2 million from its First Account, with the balance to be provided through co-financing by the Department for International Development (UK) and counterpart contributions from stakeholders in Ghana, Ethiopia and Zambia. The PEA is the National Resources Institute (UK). The project will run for two years.

B. STATUS REPORT ON PROJECT DEVELOPMENTS FOR CASSAVA

10. The three cassava project profiles1 originally approved by the IGG on Grains at its 27th Session (CCP: GR 97/6) and submitted to the CFC for consideration were not accepted by the CC for various reasons. A fourth project, Industrial Utilization of Cassava Starch (Malawi), approved by the IGG Bureau for submission to the CFC in July 1997, was also considered by the CFC. Given the fact that there were several projects under review that had overlapping interests and development objectives, a consultant was hired by the Fund to identify linkages between the main components of proposed cassava projects and to make a full appraisal of the project proposals that would emanate from this exercise and integrate them on a regional level. Based on the report of the consultant, the CC recommended the development of two separate projects: one focusing on larger scale commercial level manufacture of starch and the other on smaller-scale village level processing with a focus upon the poor and women. The CC felt that the second project could be initiated within the eastern and southern regions of Africa given the relatively well established regional bodies in these areas. In order to assist in the development of specific project proposals in this African sub-region, a fast track project was set up to fund a workshop of major stakeholders to develop cassava projects based on the theme - "Local processing and vertical diversification of cassava in southern and eastern Africa".

11. The fast track workshop project, approved by the IGG Grains Bureau, was held in June 1998 in Kampala. The workshop recommended a combination of two approaches to cassava development, namely: i) the development of village level processing; and ii) the pilot implementation of industrial scale processing of cassava into value-added products. The first project concept is still in the process of being formulated into a project proposal while the second, originally approved by the Bureau, has been substantially revised and re-submitted for consideration by the CFC. However, the CFC has requested the IGG on Grains, acting in its capacity as an International Commodity Body, to re-confirm its earlier recommendation of the project for submission to the Fund. Therefore, the project profile is presented to the Group in Appendix A for its approval for submission to the CFC.

III. STATUS REPORT ON PROJECT DEVELOPMENTS FOR RICE

A. PROJECTS ALREADY APPROVED BY THE FUND

"Sustainable Productivity Improvement for Rice in Inland Valleys of West Africa"

12. Following the recommendations of the Group at its 38th Session (CCP:RI 96/6), the West African Rice Development Association (WARDA), in consultation with FAO, addressed the concerns raised by the CC during its 15th Meeting on the above project proposal and this was resubmitted to the Fund for presentation to the 16th Meeting of the CC. The Committee was generally satisfied with the reformulated project proposal and recommended the project for approval by the Executive Board, subject to a few minor conditions. The proposal was finally approved during the 20th meeting of the Executive Board in June 1996. However, because a number of issues needed to be resolved between the Fund, FAO in its capacity as the International Commodity Body, and WARDA, the PEA, project implementation did not formally start until April 1999. Accordingly, the first six-monthly progress report will be due in October 1999 and the first annual evaluation mission is expected to be fielded in March 2000.

B. PROJECTS UNDER FORMULATION

"Strengthening of the International Network of Genetic Evaluation of Rice (INGER) Activities in West Africa, Eastern Europe and the Commonwealth of Independent States"

13. The INGER project was one of the two rice-related projects that were reviewed by the CC during its 15th Session in January 1996. Although the proposal was received favourably, the CC raised several issues that needed to be addressed before it could recommend the project for approval by the Executive Board. After the International Rice Research Institute (IRRI), the originator of the proposal, tackled most of those issues, the project proposal was resubmitted for consideration by the Committee at its 16th Meeting. The Committee recommended the project for approval by the Executive Board subject to solving two outstanding questions: the confirmation of 50% co-financing from other donors and the non-CFC membership for some of the participating countries.

14. To date, IRRI has not been successful in securing the required 50% co-financing. It has indicated that, while it would be prepared to address the issue of non-membership of some of the participating countries, co-financing presents a bigger challenge. Advice, therefore, is being sought from the Group regarding the potential co-financing sources and/or the future of the INGER project as a whole.

"Converting COMESA Member States into a Self-Reliant and Rice Exporting Region"

15. A project proposal was received from the Common Market for Eastern and Southern Africa (COMESA) in October 1998 for the undertaking of a major study that looks into the potential for an expansion of rice production in member countries2. The study would culminate into an elaborate rice development project proposal for the COMESA region whose aim would be to convert the COMESA member nations into a self-sufficient, rice exporting region.
16. The Secretariat of the IGG and of the Fund undertook, separately, an informal review of the proposal and, although some interesting elements were identified, both concurred that the proposal needed substantial improvement before it could be officially submitted to the Group for its consideration and recommendation.

C. FUTURE PROJECT DEVELOPMENT

17. Member countries of the Intergovernmental Group on Rice are invited to propose new project ideas during its 39th Session for review and recommendation by the Group in its capacity as the International Commodity Body. All the project proposals, however, should be consistent with the rice development strategy (document CCP:RI 94/7), adopted by the Group at its 37th Session, and should comply with the requirements set by the CFC.

D. MECHANISM FOR DELEGATION OF ICB'S SPONSORING FUNCTION BETWEEN FORMAL SESSIONS

18. Following its designation as a CFC International Commodity Body for rice in 1991, the Group was assigned the major responsibility for sponsoring projects for submission to the CFC. Under the present rules, decisions by the Group can be taken only during its sessions, which are now normally convened once every two years. However, experience has shown that there are decisions which need to be taken during the intervals between the formal sessions. Several of FAO's other intergovernmental groups, also faced with extended inter-session periods, have adopted mechanisms to ensure that the basic responsibility they have in relation to the CFC is adequately met during those intervals.

19. The Group may, therefore, wish to establish a Sub-group with the authority to take decisions regarding project sponsorship on its behalf in the period between sessions. The following proposals are made for decision by the Group:

  1. A Sub-group on Intersessional Matters of the Intergovernmental Group on Rice is established with the following membership: the Chairperson and the two Vice-Chairpersons.
  2. The Sub-group may confer whenever, in the opinion of the Chairperson, it is considered necessary to do.
  3. The Sub-group will, between sessions, act on behalf of the Group in relation to the Group's role as an International Commodity Body under the rules of the CFC in all matters pertaining to the Common Fund, except in supervisory functions.

20. If endorsed by the Group, amendments to its Terms of Reference along the above lines would have to be submitted to the next session of the CCP, with an indication that the Sub-Group would normally confer through means of communication other than formal meetings and, thus, would not give rise to budgetary implications.


APPENDIX A


PROJECT PROFILE - INDUSTRIAL UTILIZATION OF CASSAVA STARCH AND BY-PRODUCTS IN MALAWI

Background and justification

Malawi is a relatively small landlocked country of about 118 500 km 2 surrounded by Tanzania to the north and north-east, Zambia to the north-west, Mozambique to the east, south and south-west. The population totals approximately 10 million people who live mostly in rural areas. The country has the third lowest capita Gross Domestic Product of the Eastern and Southern Africa Region. Industry tends to be centred around the City of Blantyre in the south, where most of the population lives.

The economy of the country is based almost entirely upon agricultural production and most manufacturing is more or less directly related to the needs of the agricultural sector. Of several opportunities in manufacturing using local raw materials, one of the most promising is the production of starch-based adhesives which are widely used in packaging (for cardboard manufacturing and for affixing labels, to mention two) and cores for batteries, textile and tissue paper rolls.

The basic starch commodity for the largest users in Malawi is currently imported despite the fact that the country produces many crops, which are high in starch content (corn, cassava, rice, sorghum and potatoes). The most abundant and under-utilized starch-rich crop in Malawi is cassava. Although Malawi is not in the top 10 of cassava producers in Africa, it produces enough to support a starch manufacturing industry. Moreover, establishment of the industry would of necessity stimulate cassava production and thus make it a viable cash crop.

Objectives

The purpose of the project is to demonstrate the commercial feasibility of industrial utilization of cassava starch for production of hot-setting and cold-setting adhesives and for other industrial applications. There already exists technology for the extraction of starch from cassava and technology for making household-type cold-setting cassava starch adhesives. Research has also been conducted to develop and test formulations of hot-setting adhesives with potential for industrial utilization. Pilot production of starch on industrial scale is required to demonstrate the economic and financial viability of cassava starch in industrial and domestic applications in Malawi.

Successful implementation of the project will allow Malawian industries to substitute expensive imports of corn starch with cheaper cassava starch produced locally. New jobs will be created in cassava processing, while farmers will benefit from increased demand. The project comprises the following components: (a) match specifications of cassava starch to the existing demand; (b) install starch manufacturing capacity; (c) develop marketing channels for starch and by-products; and (d) training and dissemination.

Specifically, Phase I will be concluded with the establishment, on the basis of the finalized business Plan, of the Starch Manufacturing Company (SMC). The SMC will be the main organizational arrangement for testing the commercial feasibility of manufacturing cassava starch for local consumption. The company will be run by the management appointed by the shareholders of the SMC, namely ADMARC (the PEA), University of Malawi and Malawi Development Corporation. Phase II of the project will focus on starch manufacturing and marketing using the Starch Manufacturing Company as base. The company will be operated as 100% commercial enterprise, managed by its shareholders, while its experience will be collected and analyzed for future dissemination to maximize the development benefits of the project.

Beneficiaries

The beneficiaries of the project will include existing industries which will provide services to SMC and buy starch from SMC, as well as the people who will obtain productive employment at the industry. Since the SMC will depend on sustainable supply of cassava, small-scale farmers and co-operatives will benefit. Thus, many Malawians, industries, as well as the Government, through reduced import requirements, will benefit from the establishment of the SMC.

Project executing agency and location of project

The coordinating agency for the project is the Agricultural Development and Marketing Corporation (ADMARC) with close collaboration of the University of Malawi and the Malawi Development Corporation (MDC).

Budget

The estimated total cost of the project is $US 1.8 million with about US$ 1 million being sought from the CFC in the form of a loan (US$825 000) and a grant (US$200 000). Counterpart financing is expected from the University of Malawi, ADMARC and MDC.

 


1 These were: a. Cassava market information and promotion service, b. Expanding Cassava Utilization for Food, Feed and Industrial Applications, and c. An Integrated R&D Project for the Development and Value-adding Cassava Products in China and the South Asia Region

2 Angola, Burundi, Comoro, Democratic Republic of Congo, Djibuti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.