Boost incentives to grow agro-industrial parks – report

This article is supported by the CASA programme.

Agro-industrial parks could offer a solution to severe global food supply chain challenges, such as the disruptions caused by COVID-19 lockdowns, new analysis suggests.

Agro-industrial parks are dedicated business areas that focus on processing farm produce, and on farming inputs such as fertilisers, according to the new study released by the Commercial Agriculture for Smallholders and Agribusiness (CASA) programme

The World Bank says that COVID-19 led to “severe and widespread increases in global food insecurity, affecting vulnerable households in almost every country, with impacts expected to continue into 2022 and possibly beyond”.

The Food and Agriculture Organization estimates that up to 811 million people were affected by hunger in 2020, around 120 million more than in 2019, with the increase largely attributed to the COVID-19 crisis.

Mathias Hague, research lead at CASA, says that agro-industrial parks can be highly effective in bringing together, within a single area, smaller individual food processing and farm-related enterprises and offering them access to common facilities and services, such as refrigeration and storage.

One example of this is India’s One District One Product scheme, under which regions concentrate on a single food product, pooling resources and infrastructure for the efficient development of value chains.

The analysis, produced by CASA with Uganda’s Centre for Development Alternatives and the development consultancy Tandem, examined agro-industrial parks created in Africa and Asia and the lessons that the experiences could offer.

Alvaro Valverde, private sector engagement manager at the Centre for Agriculture and Bioscience International (CABI, SciDev.Net’s parent organization) says that because lower-income countries are hit the hardest by global risks such as pandemics, they stand to gain the most from agro-industrial parks. “Agro-industrialisation is among the most promising pathways for economic transformation in most developing countries,” Valverde says.

Identifying the right incentives when setting up an agro-industrial project is key, analysts say.

India’s mixed results

India’s Mega Food Park scheme, a 2009 policy to incentivise food processing and reduce food wastage through agro-industrial parks, has led to the creation of 22 new parks.

Siraj Hussain, a visiting senior fellow with the Indian Council for Research on International Economic Relations and a former secretary at the ministry of agriculture, said: “The food parks have not quite taken off mainly because the land offered was too expensive and there were no real extra incentives for investors to take to the parks.

“In most cases the land in the food parks were available only on lease rather than on freehold basis.”

While food processing in India was badly hit during the initial phase of the COVID-19 lockdowns in 2020, the sector is improving with increased demand for safe and hygienic food by domestic consumers as well as exporters, according to the report of a parliamentary committee tabled in March.

Submissions made by the government to the parliamentary committee said that while agricultural exports increased by 9.8 per cent from April to December 2020, processed food exports increased by 17.4 per cent during the same period.

According to data from the analysis group AgFunder, India saw funding for agri-food technology rise from US$619 million during the first half of 2020 to US$2 billion in the first half of 2021, underlining the growing potential of the sector. India is among the world’s top producers of fruits and vegetables, as well as cereals.

Following a year of farmer strikes, last month the Indian government abandoned three new agriculture acts aimed at reforming the production and sale of farm goods and encouraging private investment into the sector.

Opposition parties and farmers were concerned the changes could affect the laws that regulate food prices, and the sale of agricultural land, which they feared would allow smallholders’ lands to be acquired by large agricultural corporations.

The CASA analysis notes that a major hurdle facing India’s Mega Food Park scheme is land acquisition. “Many approved mega park proposals have never taken off at the local level specifically because of this,” it said.

Hague tells SciDev.Net: “There have been cases where the establishment of agro-industrial parks have led to protests about both resource exploitation and the unfair usage or expropriation of land.

“Agricultural production or processing will have, in almost all cases, negative impacts on local resources, but the parks operate under a management authority that can mitigate negative effects.”

Ethiopia’s experience

Ethiopia’s Integrated Agro Industrial Parks scheme failed to take advantage of existing market systems to build value chain integration, the analysis found. “The one-size-fits-all and top-down approach of the feasibility plans have delayed the construction of the four parks and six pilot Regional Transformation Centres,” the authors said.

The paper pointed to a lack of coordination among government departments and rivalry among concerned agencies for the poor performance of Ethiopia’s parks. A change in government in 2018 resulted in delays and uncertainty about continued support for agro-industrial parks, the paper noted.

Nevertheless, the African Development Bank has pledged support for the Integrated Agro-Industrial Parks to “contribute to poverty reduction, economic growth, greater resilience and social cohesion in Ethiopia through enhanced productivity and commercialisation of agriculture”.

The project, which includes assistance for young farmers and small-medium enterprises, will help reduce the medium-term effects of COVID-19 by providing jobs in rural economies, the bank says.

A focus on technology will improve agricultural productivity and production and eventually provide raw materials for processing in the parks, the bank says. It expects that the project will deliver about 25,000 direct jobs and 75,000 indirect jobs, including in the ago-industrial parks, with women securing half of the new job opportunities.

Building relationships

Agro-park developers have highlighted delays in bureaucracy, high costs of borrowing, and unrealistic deadlines imposed by funders as obstacles to success. CASA says that agro-industrial parks are “complex, long-term projects that require strategic and policy continuity and alignment between – and contributions from – numerous stakeholders, including government bodies, financiers, private sector actors, civil society organisations and external supporters”.

Since agro-industrial parks are capital-intensive projects that typically take ten years to be fully established and generate significant public and private revenues, large-scale public funds may need to be mobilised to finance the project as well as co-financing via public-private partnerships, the paper says.

However, agro-industrial parks have a distinct advantage in being able to “concentrate various parts of the value chain in a single location, crowding in different economic actors and enabling the delivery of a wider range of both manufacturing and services”, says Hague.

Yet Hussain, who specialises in food management and agriculture, said many of the food industries located in India’s mega food parks did not provide good connectivity to consumer markets, as they were mandated to do. “This is one more reason for their poor performance,” Hussain says.

Fostering strong relationships between agro-processing firms and nearby farmers, and identifying project champions who can generate widespread support, will be critical to the parks’ success, CASA says.

The CASA programme (Commercial Agriculture for Smallholders and Agribusiness) aims to increase global investment in agribusinesses which trade with smallholders in equitable commercial relationships, increasing smallholders’ incomes and climate resilience. Visit www.casaprogramme.com for information and resources.