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Challenges in agribusinesses
By: Amin Ahmed


Challenges in agribusinesses :- Pakissan.comA Donor-assisted project aiming to create a competitive and sustainable agribusiness in the country failed to take-off due to a lack of ownership on the part of public sector agencies as well as their unfamiliarity with fostering private sector investment in the sector.

The agribusiness development project, for which the ADB provided $31m, was aimed to increase the commercial value of agricultural products, especially horticultural and dairy output, and related exports. It sought to remove credit constraints, introduce innovative practices and new varieties of products, and upgrade the skills and competency levels of farmers and entrepreneurs producing and marketing commercial farm products.
 

The project was also supposed to support private sector businesses to provide wholesale market data. But it failed as there was not enough interest from businesses, and the implementing agency also lacked the capability to promote this new business.

The projectís design also underestimated the complexity of the data business, which had to be preceded by the establishment of a good and widely accepted product grading system.

There had been some success in building the capacity of the agriculture and livestock product marketing and grading department to establish export quality certification.

However, only two of the planned seven testing laboratories were upgraded. None of the revised new export standards developed under the project was used because of a lack of regulatory support.

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Agribusiness enterprises were to finance $10.4m, and the remaining funds were to be sourced from the government, private sector institutions and beneficiaries.

At completion, the total cost was only $21.6m or 44.1pc of the amount envisaged at appraisal, as many of the envisaged activities could not be completed. The ADB financed about $13m of the actual costs.

The government financed $4.3m and agribusiness enterprises contributed $4.3m.

The ADB funded project failed as there was not enough interest from the private sector, and the implementing agency also lacked the capability to promote new businesses.
 

The ADB found in its project validation that the project was overly ambitious and focused on the value chain across the county. The project could have first opted to pilot in one sub-sector in one province.

Upon succeeding, it could then have been easily replicated, as policymakers would have gained confidence in view of its performance.

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Significant policy reform decisions were either substantially delayed or could not be implemented in time for the project. Prepared policy frameworks and drafts were not processed or submitted for the consideration of higher authorities.

The projectís management was complicated and resulted in non-performance, even in routine activities like submission of audited accounts and periodic progress reports.

The executing agency could not ensure timely procurement of consulting services, so an additional national consultant had to be engaged to coordinate across consulting services.

The handling of the imprest account was unsatisfactory, and when the ADB tried to rectify the situation by suggesting that second generation imprest accounts be established, the decision was not supported.

Various project agencies faced problems with availability of financial resources, as counterpart funds were not released on time.

The experience showed that planned regulatory reforms often take longer time and resources to be realised, as compared with investment activities.

The validation also noted that the project attempted to work along the entire value chain, which made tasks more difficult than if it had concentrated only on a few key links.

The length of the value chain necessarily involved a number of layers of decision makers and did not only cut across the public and private sector divide, but also entailed different government agencies and local versus central governments.

Several players were required to synchronise their activities so as to succeed in value-addition. Consequently, coordination costs and risks increased exponentially.

Regarding the projectís complexity, the validation noted that introducing and promoting such an ambitious and transformative undertaking required substantial preparation and investment to communicate the interrelation between the projectís activities and outputs to raise buy-in among project agencies and beneficiaries and gain their confidence in the possible attainment of the projectís outcomes.

It suggested that the ministry of national food security and research publish product quality standards. It recommended a revision in the financial arrangements for the federal seed certification and registration department so that it could remain operational.

It also suggested putting in place sustainability plans for the Livestock and Dairy Development Board and the Pakistan Horticulture Development and Export Company.

The validation report did not comment on the monitoring and evaluation of the projectís design.

However, it did mention that the baseline study that was to be prepared within the first six months of the project, but it took more than three years. In view of these facts, the ADB dropped its follow-up on the project.

December, 2014

Source: Dawn News

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