Farmers dry rice on the road to Hon Don in Vietnam.
11 March, 2015, Rome – Economic “agrocorridors” can be a strategic tool to draw private capital and large-scale investment to projects that benefit smallholder farmers and boost food security in lower-income countries, according to a new FAO report that provides guidance on how development planners can avoid pitfalls.
These corridors, according to the report, are development programmes that foster promising economic sectors – notably agriculture in developing countries – in a territory connected by lines of transportation like highways, railroads, port or canals.
The strength of this approach is its integration of investments, policy frameworks and local institutions.
“The key idea is not just to make transportation or irrigation infrastructure improvements but to provide a platform that enables and empowers authorities at local, national and regional levels to make more informed decisions about what they want to achieve,” says FAO agribusiness economist Eva Gálvez Nogales, author of “Making economic corridors work for the agricultural sector.”
The 200-page tome reviews in detail six case studies, including three well-advanced corridor programmes in Central Asia, the Greater Mekong Subregion in Southeast Asia and Peru; and three new projects still largely in the early implementation phase, in Indonesia, Mozambique and Tanzania.
So-called economic corridors are hardly new – an archetype is the Silk Road – but their potential as engines of broad-based sustainable development has been largely untapped.
Traditionally, they have been used to bolster physical connectivity to improve the functioning of markets, or with a narrow focus, such as linking mines to ports. But corridors can be harnessed to smarter planning initiatives, aimed at enhancing agricultural opportunities, achieving explicit targets such as creating rural jobs, environmental goals and catalyzing improved governance along value chains, all of which the report notes are needed “to spur inclusive and sustainable growth in the developing world.
They also offer an important opportunity to engage the private sector’s capital and trading skills to foster adequate investment in agriculture and respond to the challenge of hunger,” says Gálvez Nogales.
Artichokes and bridges
Effective corridors need to be geared to the competitive advantages of a territory rather than conceived as a miracle method to make a desert bloom.
They “should be developed in areas where there is already economic density and untapped growth potential that can be maximized,” she says.
One of the corridor projects that catalyzed new thinking by development experts was the Poverty Reduction and Alleviation Project in Peru, which began in 1998 and focused on the role of intermediate cities rather than rural areas in alleviating poverty. It also adopted a novel pro-business approach relying on “star connector firms” able to quickly expand commercial networks along 13 corridors in the Peruvian jungle and highlands.
This led to the flowering of overlooked market opportunities. For example, Peru is now the world’s third-largest exporter of artichokes, which are produced through outgrower contracts and processed in several corridors.
Gálvez Nogales emphasizes that corridor schemes can have even stronger impacts when they cross national borders, especially if developed under the auspices of regional trade agreements. That deepens potential market opportunities, making it possible to forge multi-stakeholder alliances and keep private-sector players engaged in the development process.
One such corridor is known as the Greater Mekong Subregion corridor programme, spanning Cambodia, Viet Nam, Thailand, Lao People’s Democratic Republic, Myanmar and some Chinese provinces. One can already see improved bridges and customs procedures at border towns and even contract farming that spans national frontiers.
The three C’s: connectivity, competitiveness and the sense of community
Gálvez Nogales defines the “three Cs” of a successful corridor as: connectivity, competitiveness and the sense of community.
Multiple stakeholders – businesses and farmers, but also different levels of regional government – must from the outset be brought together in the identification of “soft” targets and harmonized environmental, social and food security safeguards in order to avoid disputes that emerge in the wake of “hard” infrastructure investments.
Decisive clarification of land tenure issues – ideally with the help of the Voluntary Guidelines on the Responsible Governance of Tenure of Land – is essential, not least as biofuel projects, which can alter land use patterns, often feature in corridor plans.
While specific policies vary broadly between corridors, the adoption of inclusive business models is a shared imperative. It is also useful that policies be “designed for scaling up to a transformative level,” which can best be done by mobilizing the right “change agent,” which could depending on the context be a company or a farmer association or government extension agents, or also in the food processing and trade areas.
Governance is key
Properly-designed corridors are also a tool favoring natural resource governance.
“Corridors can in fact allow for better management of environment risks and practices such as unsuitable monocropping,” said Eugenia Serova, director of FAO’s Rural Infrastructure and Agro-Industries Division and also coordinator for FAO’s SO4, the strategic objective linked to enabling inclusive and efficient agricultural and food systems.
“The key is for inclusive coordination of stakeholder interests both in the planning and execution phase,” Serova said.
While high-profile transportation infrastructure consumes the bulk of monetary resources, relatively intangible public goods and services such as standard contracts, legal advice, extension services, land banks and innovative financing mechanisms are just as important. Coordinated public-private partnerships which link local and central governments can improve the efficiency of local bureaucracies, turning the corridor into the catalyst of better governance of the needed investments.
An agro-based cluster is the geographic concentration of interconnected producers, agribusinesses and institutions that are engaged in the same agricultural or agro-industrial subsector, and interconnect and build value networks when addressing common challenges and pursuing common opportunities.
An agro-industrial park is a centrally-managed 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 knowledge institutions.
An agro-based special economic zone is a demarcated geographic area where firms 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.
An agribusiness incubator is an entrepreneurial development model that provides a common environment (either physical or virtual) to nascent agro-based companies, where they have access to shared infrastructure, and networking, coaching, business and financial services.
An agricultural value chain is defined as the full range of farms and firms and their successive coordinated value-adding activities that produce particular raw agricultural materials and transform them into particular agricultural and food products that are sold to consumers and disposed of after use.