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COMMITTEE ON COMMODITY PROBLEMS |
Sixty-second Session |
Rome, 12-15 January 1999 |
DEVELOPMENTS IN FAO'S COOPERATION WITH THE COMMON FUND FOR COMMODITIES |
II. CURRENT STATUS OF PROJECTS SPONSORED BY FAO'S COMMODITY BODIES
III. PROGRESS IN COOPERATION BETWEEN FAO, INCLUDING ITS IGG/ICBs AND THE CFC
A. Mechanisms to deal with projects between sessions
B. Cooperative action in compliance with the memorandum of understanding (Mou)
IV. SELECTED NEW DEVELOPMENTS IN THE CFC RELEVANT TO FAO AND ITS ICBs
V. CONCLUSIONS AND GUIDANCE SOUGHT FROM THE CCP
1. The Committee has reviewed matters arising from the links between various FAO intergovernmental bodies, in their capacity as International Commodity Bodies (ICBs), and the operations of the Common Fund at its Fifty-ninth Session in 1993, its Sixtieth Session in 1995 and its Sixty-first Session in 1997, on the basis of documents CCP: 93/23, CCP: 95/16 and CCP: 97/11 respectively. It noted the initial difficulties encountered in aligning policies and procedures of the two organizations and welcomed progress made in resolving them, including by the adoption of flexible ad hoc solutions. Finally, the Committee, at all three sessions, made a number of practical recommendations to facilitate further progress in the collaboration between both FAO and the International Commodity Bodies serviced by it on the one hand and the Common Fund on the other. This document describes the evolution of these links since the Committee's last session.
2. Out of the ten Intergovernmental Groups (IGGs) and one Sub-Group reporting to the Committee on Commodity Problems, nine have been designated ICBs by the CFC, together with the Sub-Committee on Fish Trade which reports to the Committee on Fisheries. The nine IGGs are those on Bananas; Citrus; Grains (also covering cassava); Hard Fibres; Meat; Oilseeds, Oils and Fats; Rice and Tea as well as the Sub-Group on Hides and Skins1. The Sub-Group on Tropical Fruits of the Intergovernmental Group on Bananas is expected to be designated in due course. Thus, given that the CFC has designated to-date altogether 23 ICBs (including three covering metals), FAO services half of the number of ICBs dealing with agricultural commodities.
3. Up to mid-1998, 22 projects sponsored by FAO's ICBs have been endorsed by the Executive Board of the Fund at a total cost of US$ 54 million (see Annex I). With the exception of US$ 1.25 million, total funding was in the form of grants. The Fund contributed over 45 percent, with the balance coming from co-financing by other donor agencies (18 percent) and from counterpart contributions by governments or project implementing institutions (33 percent). Of the FAO sponsored projects five each cover the oilseeds complex as well as hard fibres, four fisheries, two each livestock products and grains and one each bananas, tea, citrus and rice. They focus on applied research, productivity enhancement, vertical diversification and market promotion. In accordance with one of the Fund's priority criteria for project acceptance, they predominantly benefit least developed countries. The projects are at various stages of implementation or about to be initiated with the exception of two which have already been concluded; one has been suspended. In addition, several projects are at an advanced stage of preparation. Some have been recommended for financing 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.
4. The CCP had appreciated in the past the adoption of flexible ad hoc solutions mutually agreed upon between the CFC and FAO secretariats, in cases where "by-the-letter" interpretation of the rules and regulations of the two organizations could have resulted in delays and even stalemate in project preparation and implementation. In particular, such flexible solutions had to be found in order to maintain the momentum of work in the intervals between the sessions of the IGGs/ICBs, given that these periods have tended to become longer in recent years. Consequently, arising from the mandate of the IGGs/ICBs vis-à-vis the Fund, two basic types of arrangements have evolved related to the two principal aspects of the IGGs'/ICBs' cooperation with the Fund:
º intersessional mechanisms which deal with the project sponsoring function of the IGGs and facilitate implementation in some instances and
º intersessional mechanisms which deal with the project supervision function of the IGGs
In some cases, the first responsibility is discharged by a sub-group composed of the Bureau of the IGG and the second task is normally delegated to a small Supervisory Expert Group (SEG) or Technical Advisory Group (TAC) (see also document CCP:99/10). Table 1 shows which types of such mechanisms the IGGs/ICBs have developed. It should be noted that even in cases where the various groups have agreed on arrangements dealing with either of these two responsibilities, the practical provisions may differ as, first, in the absence of a standard solution they had to be designed ad hoc and, second, they had to be adapted to specific conditions of project modalities.
Table 1: Intersessional Mechanisms developed by the IGGs/ICBs1/ to deal with project work between sessions
Mechanisms to deal with the sponsoring function |
Mechanisms to deal with the project supervision function | |
IGG on Grains |
Yes |
No |
IGG on Meat |
No |
Yes |
IGG on Oilseeds, Oils & Fats |
Yes |
Yes |
IGG on Rice |
No |
Yes |
IGG on Hard Fibres |
Yes |
Yes |
Sub-group on Hides and Skins |
No project approved as yet | |
IGG on Tea |
Yes |
Yes |
IGG on Citrus |
Yes |
Yes |
IGG on Bananas 1/ |
No |
Yes |
Sub-Committee on Fish Trade |
Yes |
No |
1/ The first meeting of the Sub-group on Tropical Fruit in May 1998 requested that it be designated as ICB. | ||
5. After the approval of the MoU between FAO and the CFC by the Governing Council of the CFC in December 1997, the Managing Director of the Fund and the Director-General of FAO signed this legal text in Rome on 6 February 1998 as a basis for future collaboration. Even before then contacts between the two organizations had intensified leading to frequent consultations via the telephone, e.mail or faxes over problems concerning the implementation and supervision and evaluation of ongoing IGG sponsored projects, the preparation of new ones and the appraisal by FAO of projects sponsored by non-FAO ICBs. More specifically, the signing of the MoU facilitated a number of joint initiatives between the two organizations, including those set out below:
a) Cooperative arrangements between the two organizations outside the direct ambit of the ICBs were explored. In this context the possibility of FAO becoming the Project Executing Agency (PEA) for a project developed by an ICB not serviced by FAO, i.e. a project on coffee mould sponsored by the International Coffee Council, is under review.
b) The first two fast-track projects on cassava and meat mentioned in Section IV.f below, were advanced rapidly in close partnership in order to reduce the interval from their conception to their implementation to a minimum.
c) Upon request of the CFC Secretariat, FAO undertook to bring to the attention of its IGGs/ICBs the need to find "parent bodies" for agricultural commodities not covered ("orphans") by ICBs inside or outside FAO's commodity bodies (see also document CCP 99/10). This was exemplified by the readiness of the IGG on Grains to cover roots, tubers and pulses under its terms-of-reference for purposes of getting access to CFC finances for appropriate projects.
d) FAO participated in, and contributed documentation to a number of workshops and round-tables organized by the CFC on commodity issues and related project initiatives. In particular, contributions were made to Workshops in Latin America and the Caribbean, in Africa and in Asia.
e) FAO invited the CFC to hold its annual meetings with its 23 ICBs at FAO Headquarters in Rome. The venue for these meetings has started to rotate recently. For cost reasons, the ten FAO ICBs were represented by one officer only, when these meetings were held elsewhere. The meeting in 1998 on FAO premises offered all Secretaries of FAO's ten intergovernmental commodity bodies holding ICB status, as well as other staff involved in CFC project activities to participate and to present FAO-specific problems encountered in the operation of CFC projects. They were informed of novel concepts developed by the Fund and how they could be translated into practical approaches by its affiliated project-sponsoring bodies.
f) The first session of the Sub-Group on Tropical Fruits of the IGG on Bananas in June 1998, agreed to request the CFC to be designated as ICB by the Fund. The CCP will be briefed on the response by the CFC.
6. The Fund's Governing Council adopted a Five Year Action Plan covering the period 1998 to 2002 in December 1997 with a view "to deepen and consolidate those areas of assistance where significant economic benefits can be derived by target countries". The main elements of this Plan of relevance to FAO and its ICBs are briefly described below:
a) Project focus
Projects are expected to be focused more than in the past on the poorer strata of the population, on smallholders and small-to medium-sized enterprises. The Least Developed Countries (LDCs) are to receive particular attention. It follows that commodities of interest to LDCs will be given priority.
b) Commodities without ICB
The International Commodity Bodies (ICBs) are encouraged to incorporate in their mandate additional commodities ("orphan commodities") which are of interest to LDCs and/or have development potential, but are without a sponsoring ICB so far.
c) Grants versus loan projects
Up to early 1998, about 95 percent of all projects have been financed by grants. The Fund expects to reduce the share of grant-financed projects and raise that of loan-financed projects to about half by 2002. Grants will mainly be given to projects concentrating on commodities which are of importance to LDCs, to poorer groups in other developing countries and/or to support loan financed projects. Loans will be classified according to interest rates and other charges, grace periods and maturing time into ordinary, intermediate concessional and highly concessional. Loan/grant mixes are encouraged.
d) First Account developments
All net earnings from the First Account will be made available for the First Account Net Earnings Programme. Solutions to the use of the First Account Capital have to be developed as a matter of urgency. A proposal by the Executive Board is still under review which would transfer paid-in shares of up to US$40 million in the form of promissory notes out of the First Account into the Second Account in order to find additional uses for these resources.
e) Project Preparation Facility (PPF)
A Project Preparation Facility has been established "to assist ICBs, which might lack the necessary resources, in preparing and formulating projects". An initial amount of US $ 1 million has been set aside for this purpose from the net earnings of the First Account. Projects which are eligible are those "of benefit to LDCs and small producers-exporters, having a clear poverty focus, and to other developing countries and countries in transition, if such projects are loan-financed". It is not clear whether and in which circumstances FAO's ICBs would qualify for obtaining financial assistance from the Facility; decisions are envisaged to be taken on a case-by-case basis by the Fund.
f) Fast track mechanism
A fast track procedure has been established for small projects of up to US $30 000 which can be submitted by ICBs or governments of member countries. Such projects are approved by the Managing Director of the CFC without prior consent by its Executive Board. The FAO Secretariat has been closely involved in two projects launched in the first half of 1998, one on cassava development in East Africa and one on livestock fattening in West Africa.
g) Intellectual Property Rights
The Project Manual of the CFC stipulates that intellectual property rights evolving from a CFC project belong to the Fund and the ICB. However, associated issues are complex and the Fund is developing concepts to protect scientific results of the projects so that they are confined to the targetted beneficiaries.
7. The transitional phase during which, on occasions, operational principles were interpreted differently by the two organizations has given way to a more harmonious relationship with both organizations rendering mutual support to each others' work. The conclusion of the MoU has been a contributing factor to this change. However, given the steadily evolving nature of the Fund's operations, as reflected in its Five-Year Action Plan, and the broadness of the MoU's provisions, there is likely to be a continuing need for adopting flexible ad hoc solutions to new problems. Bearing in mind the deliberations under agenda item 4.b. and the relevant documentation, the CCP may, therefore, wish to:
· welcome the progress made in establishing a harmonious relationship between the two organizations;
· encourage the two secretariats to intensify their efforts to seek ad hoc solutions jointly to newly emerging issues;
· request the IGGs/ICBs to consider widening their commodity coverage for CFC purposes, and, where possible, incorporate "orphan commodities" with similar characteristics in their terms of reference taking account of resource constraints;
· request the IGGs/ICBs to review the implications of the CFC's gradual shift towards more loan-funded and less grant-funded projects;
· recommend to the IGGs not having done so to establish mechanisms enabling the sponsoring of projects, including the facilitation of project preparation, acceptance and, where appropriate, implementation, as well as the supervision of ongoing projects during the intervals between sessions;
· request the CFC that all FAO-ICBs be granted access to the PPF for projects meeting the Fund's eligibility criteria, irrespective of whether such projects are grant or loan-financed.
ANNEX I - FAO/ICB-SPONSORED PROJECTS FUNDED BY THE COMMON FUND FOR COMMODITIES
C = Project completed S = Suspended
I = Under implementation T = To be started
1 The two IGGs not designated are those on Jute, Kenaf and Allied Fibres for which the International Jute Organisation serves as ICB and on Wine and Vine Products.