Capitalization on Public Private Partnership (PPP) in Agriculture

Somxay SisanonhDeputy Director General

Department of Agriculture Extension and Cooperatives (DAEC,MAF)

Presented at the Sector Working Group Agriculture and Rural Development Meeting

30 September 2014

Overview1 Introduction2 Major findings• Analysis of Cases• Good Practices

3 Recommendations• Basic Principles for PPP in Agriculture• Process

Introduction

MAF ADS envisaged PPP as

•Joint project of government and private enterprise with an adequate proportion of the benefits accrued to other value chain actors or to the general public or in other terms that no undue windfall profits are realized only by the private sector company

•PPP’s will progressively become providers of services to farmers and farmer groups (e.g. management of irrigation scheme)

However, there is currently no regulatory framework specifically designed to enable Public Private Partnerships in Agriculture

Introduction

Sub Sector Working Group on Agribusiness (SWGAB) organized a study to• Analysed existing cases of PPP in agriculture • Draft a guidelines for development of PPP in

agriculture (harmonise)

Study was funded by GIZ/LM-RED Program on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ)

Major Findings

Analysis of cases:Private sector providing services that previously would have been undertaken by the state

Features of PPP case studies Contract Type

Asset Ownership

Operation & Management

Capital Investment

Commercial Risk

EMRIP model (Rice)

Private Private Public & Private

Private & Public

Cardamom Public & Private Private Private Private

Pigs Private Private Public & Private

Private & Public

Asparagus Public & Private Private Private Private

Major Findings

Good Practices 1. Open and stringent partner selection

Private sector partners were selected through an open process (local advertising) and subsequent careful screening and selection of partners against agreed criteria

2. Early Private Sector engagement Close and detailed engagement with potential private sector partners in designing the PPP is crucial to ensure that the design of the PPP is adequately informed by the realities and concerns of the private sector

Major Findings

Good Practices 3. Support Instruments

A wide range of instruments open to the public sector in support of PPP’s that reduce private sector risks or increasing market access

4. Mediation with producer groups Facilitation role by the local authorities

5. Risk treatment Some level of initial risk sharing or financial incentive at early stages jointly by Public and Private sector but the longer term risk should be borne by the private sector

Recommendations

Basic Principles for PPP in Agriculture

1. Public Goods: The objective should be to contribute to public good, and in particular farmer incomes, rather than simply commercial profits for the private sector

2. Complementarity: The public, private and primary producer contributions must complement each other such that all partners achieve their objectives at a lower cost, more effectively and more quickly as a result of their cooperation

3. Subsidiarity: The partnership should enable activities to be undertaken that would not normally be undertaken by the private sector without the support of the public sector. PPP’s should facilitate the private sector to engage in activities beyond normal business practises

Recommendations

Basic Principles for PPP in Agriculture

4. Benefit sharing: The benefits from the upgrading process should accrue to different actors. Specifically, partnerships should ensure that benefits are equitably and transparently shared between producers and the private sector

5. Fair competition: The possibility of PPP cooperation must be made public and brought to the attention of as many firms as possible. The process of selecting the private partners must be transparent, and the decisions must be objectively clear.

Recommendations Basic Principles for PPP in Agriculture

4. Contribution of the private sector: The firm must make a substantial financial, human-resource and/or in-kind contribution to the partnership. The resources that the private sector brings to a development partnership may take many different forms.

5. Risk sharing: Careful assessment of commercial risks of the partnership should be undertaken and measures to mitigate and allocate risk amongst the partners developed. Longer term risk should be borne by the private sector to ensure sustainability, however in the short term public sector can reduce risks through the application of a range of different instruments. As a general rule risks to primary producer should not be increased as a result of the PPP.

Recommendations

Process1. Establish objectives2. Pre-Feasibility3. Feasibility study 4. Selection of private sector partners 5. Formal Agreement6. Monitoring

Thank You

Full version of the study report in available in www.laofab.org