CCP 03/12

Table of Contents

I. INTRODUCTION

II. RECENT DEVELOPMENTS REGARDING PROJECTS SPONSORED BY FAO’S INTERGOVERNMENTAL GROUPS/INTERNATIONAL COMMODITY BODIES

III. COOPERATION BETWEEN FAO AND THE CFC IN PROJECT FORMULATION, IMPLEMENTATION AND SUPERVISION

IV. OTHER FIELD PROJECT WORK OF THE COMMODITIES AND TRADE DIVISION

V. GUIDANCE SOUGHT

I. INTRODUCTION

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). This document describes the evolution of the cooperative relationship between FAO ICBs and the CFC since the Committee’s last session. Additionally, some information regarding work done for TCP field projects is included in this document.

2. FAO has maintained a close working relationship with the Fund since its creation in 1989. The Fund’s objective is to enhance the socio-economic development of commodity producers and contribute to the development of society as a whole, through the financing of commodity based projects. As the only financing institution working with a strictly commodity focus, the CFC has supported production, processing and marketing development projects directly related to the needs of members of FAO Intergovernmental Groups (IGGs). The CFC works through International Commodity Bodies (ICBs), including the FAO IGG system to generate and prepare projects for potential financing. All projects must be submitted to an ICB and endorsed by that ICB before they can be financed by the CFC, but FAO IGGs also collaborate with their members in originating and preparing projects. Some 44 project submitted by FAO IGGs have been approved for financing by the CFC since the first approval in 1993. There are approximately15 projects endorsed by FAO IGGs currently before the CFC for consideration. Most CFC funding has in the past been in grant form. However, emphasis is now being placed on mixed funding including a loan component.

II. RECENT DEVELOPMENTS REGARDING PROJECTS SPONSORED BY FAO’S INTERGOVERNMENTAL GROUPS/INTERNATIONAL COMMODITY BODIES

3. Between 2000 and 2002 the CFC approved fifteen projects sponsored by FAO Commodity Bodies, for a total investment of US$50.7 million. Actual CFC financing is US$22.8 million, with co-financing, other donor contributions and counterpart contributions making up the balance.

4. Over the past four years the CFC has placed some emphasis on smaller “fast track projects”. FAO ICBs have benefited from this shift, enabling thirteen workshops or meetings to be financed between 2000 and 2002, with a total CFC grant contribution of US$621 936. These projects can be prepared and executed in less than one year and address specific or urgent tropics related to a specific commodity, such as cashew development in Southern Africa or coir in India and Sri Lanka. A primary goal is to disseminate the results of commodity development projects for the benefit of other countries interested in the same commodity. All but two workshops have already taken place.

III. COOPERATION BETWEEN FAO AND THE CFC IN PROJECT FORMULATION, IMPLEMENTATION AND SUPERVISION

5. FAO staff work closely with IGG members submitting projects, sometimes before submission to the IGG, and always after endorsement by the IGG for submission to the CFC. Experience in recent years has indicated that few projects are endorsed by the CFC Consultative Committee on a first reading. Two or more sessions of the Consultative Committee are generally required for approval, usually over more than one year. Consultations between the FAO and CFC regarding comments received from the Consultative Committee have fortunately improved the process during 2002 and will hopefully expedite project consideration in the future. Once a project is finally approved by the CFC Executive Committee it can take over two years before implementation begins. This delay results from the need for the CFC to prepare legal documents and agreements. The inclusion of loan components in some projects has added further complications: loan financing generally requires several agreements to be negotiated between the CFC and borrowers and their guarantors. The total time between project submission by an IGG and signature of the project document has tended to lengthen from under two years to over three years, and in some cases to go beyond four years. This stretching of the process has resulted in a need for FAO staff to devote increasing resources to CFC project work in order to keep projects moving through the pipeline. Project implementation is the responsibility of the PEA (Project Executing Agency), frequently the organization originally submitting the project through an ICB member. Project implementation is ruled by strict guidelines issued by the CFC, which in turn requires substantial reporting, including financial reporting, by the PEA. Once project implementation begins the ICB Secretaries take on a supervisory responsibility, which includes reporting to the CFC on a periodic basis on progress, making recommendations for improvements in implementation, and identifying areas that are likely to lead to problems in the future. The supervisory function is the only one which attracts limited compensation from the CFC, up to a maximum of US$15 000 per year per project, primarily for travel and consultancy services of technical experts.

6. FAO invited the CFC to a meeting with all FAO IGG secretaries on 18-19 February 2002. This meeting in particular offered the opportunity to raise the issue of delays in project approvals and between approval and implementation, as well as the limited guidance coming from the Consultative Committee of the CFC after its first and second readings of projects submitted. As noted above, the result has been better information from the CFC on the deliberations of the Consultative Committee, thus facilitating FAO inputs into CFC projects. However, the CFC has explained that it has limited staff resources and requires extensive review of all project documentation, leaving few opportunities to speed up internal procedures. It is hoped that through such consultations further progress may be made in reducing the delays now encountered in project approval and implementation.

7. FAO representatives attended a CFC meeting with all ICBs in October 2002 as well as a regional workshop in Africa in November 2002 where FAO was able to exchange ideas with African commodity representatives and CFC staff with a view to generating more and better quality project submissions from Africa to the IGGs. In the past many projects submitted have been single country projects, whereas the CFC prefers to fund regional or multi-country projects. At the October meeting with ICBs the CFC offered to play a more active role in the design and preparation of projects, including the financing of project preparation for projects endorsed by the Consultative Committee. The CFC is also open to direct submission of projects which after review will then be sent to ICBs for their endorsement. This may assist in reducing then number of projects which are rejected by the CFC after endorsement by FAO IGGs. ICBs have also recommended a standardized project template be created to speed up the drafting process. It has already been suggested that the next CFC meeting with its ICBs in 2003 be held in Rome in order to further develop solutions to the problems causing delays in the project pipeline.

IV. OTHER FIELD PROJECT WORK OF THE
COMMODITIES AND TRADE DIVISION

8. The World Food Summit follow-up and the need for more commodity based field work in light of the crisis faced by many commodity producers and exporters has increased the demand for commodity based technical cooperation projects (TCPs). The Doha round of trade negotiations has added to these demands as developing countries attempt to better prepare themselves for the negotiations through improved analysis and enhanced capabilities, including staff training. This has generated further TCP requests.

9. Since the last session of the CCP, ESC staff have participated in a number of field projects, contributing substantial inputs of time. These have included regional training programmes to assist developing countries to prepare for the Doha round of WTO negotiations, regional special programme for food security project preparation in the Caribbean and West Africa, and reorganization of the sugar sector in the Dominican Republic. This additional work has been positive in drawing FAO analysts closer to many problems facing developing countries in a hands-on fashion, including work with food security issues, trade facilitation among regional groupings and on specific commodity issues. Other work has been focussed on assisting specific countries to improve their ability to deal with WTO issues involving the Agreement on Agriculture and the Doha round, such as a specific TCP designed to reinforce the capability of Guyana to deal with the trade negotiations. Although the demand for such services varies over the course of a biennium, it is anticipated that active participation in TCP field project work is to continue.

10. Staff time devoted to TCP projects is compensated, and credited to Divisional budgets. Resources thus generated can then be utilized to support regular programme work during the course of a biennium. Time spent by staff on CFC projects is not compensated for financially.

V. GUIDANCE SOUGHT

11. Over the years, the CFC has provided substantial additional financing for specific commodity based development projects. There is room for improved exploitation of its comparative advantage through speedier processing of projects submitted by FAO ICBs. More pro-active participation by CFC staff in IGG deliberations could provide IGG members with more information on what projects are attractive to the CFC for financing in a changing environment. The Committee may wish to encourage the CFC to take a more active role in IGG meetings.

12. More emphasis on commodity chain analysis would sharpen the focus of the CFC and permit the FAO ICBs to provide clearer inputs to the project formulation process. FAO ICBs have more analytic experience in commodity chain analysis from the producer to the retailer than most organizations submitting projects to the CFC. The CFC fast track facility could be a good vehicle to finance in-depth studies of commodity chains in specific products, thereby providing a more substantial basis for decision making in the ICBs with regard to appropriate projects to present to the CFC. The CFC has often requested that ICBs prioritize their projects for submission and up-date their Commodity Strategies. The Committee may find it useful to suggest CFC financing for ICB activities in commodity chain analysis as it would provide the basis for project prioritization and enable IGGs to more finely tune their commodity strategies.

13. An increase in financial support from the CFC for project supervision would permit more intense FAO supervision of projects under implementation through the use of longer term consultants examining the projects on site. This would enhance the capacity of the FAO ICBs as supervisory bodies and identify problems in implementation at an early stage where solutions would likely be easier. The above steps would conserve resources and improve efficiency of ICB secretaries who already have regular programme responsibilities. The Committee may wish to recommend an increase in CFC funding for FAO supervisory activities in order to enhance their effectiveness, particularly as the Division where ICB Secretaries are located is not compensated for the time they spend on CFC matters.

14. Emphasis on World Food Summit follow-up and other food security issues, and the concomitant need for regular programme trade and commodity analysis, is likely to draw more staff resources into TCP field work. This process is expected to continue to develop skills among staff and increase their competencies; and in spite of being in addition to a full regular programme of work, these field projects generate additional financial resources used to supplement resources used in the regular programme. The Committee may wish to note this development.
 

C = Project Completed T = Project to be started I = Under preparation