Title: Joyce Cacho
1AGRICULTURE TRADE INVESTMENTComplements in
Economic Development
International Consultant Finance, Strategy, Food
Agribusiness Investment
November 8, 2004 Monterey, California, USA
2PRESENTATION OUTLINE
- International investment trends
- Why focus on Small- Medium-size enterprises?
- Financing vehicles for SMEs
- Capacity Building opportunities
- Conclusions
3PRESENTATION OUTLINE
- International investment trends
- Why focus on Small- Medium-size enterprises?
- Financing vehicles for SMEs
- Capacity Building opportunities
- Conclusions
4FDI A Global View (1980-2003)
FDI INFLOWS, GLOBAL and BY GROUP OF COUNTRIES
(Billions of U.S. dollars)
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
5FDI to Africa 1980-2003
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
6FDI as a percentage of Gross Fixed Capital
Formation 1980-2003
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
7Africa FDI (Sub-Sahara North Africa) as
percentage of Total 1980-2003
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
8BUSINESS REGULATIONS Starting Business
Source http//rru.worldbank.org/DoingBusiness
REFERENCE Methodology originally developed by
Simeon Djankov, Rafael La Porta, Florencio
Lopez-de-Silanes and Andrei Shleifer in The
Regulation of Entry, Quarterly Journal of
Economics, 117, pp. 1-37, Feb. 2002, and adopted
with minor changes here.
9BUSINESS REGULATIONS Registering Property
Source http//rru.worldbank.org/DoingBusiness
REFERENCE The methodology is developed in
"Property," an ongoing research project by Simeon
Djankov, Facundo Martin, and Caralee McLiesh.
10BUSINESS REGULATIONS Enforcing Contracts
Source http//rru.worldbank.org/DoingBusiness
REFERENCE Methodology originally developed in
Courts, by Simeon Djankov, Rafael La Porta,
Florencio Lopez-de-Silanes, and Andrei Shleifer,
Quarterly Journal of Economics, 118, pp. 453-517,
May 2003.
11BUSINESS REGULATIONS Hiring Firing
Source http//rru.worldbank.org/DoingBusiness
REFERENCE Methodology originally developed in
The Regulation of Labor, by Juan Botero, Simeon
Djankov, Rafael La Porta, Florencio
Lopez-de-Silanes, and Andrei Shleifer, Quarterly
Journal of Economics, forthcoming, November 2004,
and adopted with changes here.
12BUSINESS REGULATIONS Getting Credit
Source http//rru.worldbank.org/DoingBusiness
REFERENCE Methodology developed in "Private
Credit Around the World," a working paper by
Simeon Djankov, Caralee McLiesh, and Andrei
Shleifer, Department of Economics, Harvard
University, July 2004 and adapted from "Law and
Finance," by Rafael La Porta, Florencio
Lopez-de-Silanes, Andrei Shleifer, and Robert
Vishny, Journal of Political Economy, 106, pp.
1113-55, 1998.
13BUSINESS REGULATIONS Protecting Investors
Source http//rru.worldbank.org/DoingBusiness
REFERENCE Methodology developed in "Corporate
Theft," an ongoing research project by Simeon
Djankov, Rafael La Porta, Florencio
Lopez-de-Silanes, and Andrei Schleifer.
14BUSINESS REGULATIONS Closing Business
Source http//rru.worldbank.org/DoingBusiness
REFERENCE Methodology is developed in
"Efficiency in Bankruptcy," an ongoing research
project by Simeon Djankov, Oliver Hart, Tatiana
Nenova, and Andrei Schleifer.
15The Primary industries attract the least amount
of transaction suitors.
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
16with Agriculture, Hunting, Forestry and Fishing
receiving the smaller share of Primary industry
MA.
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
17Agri-based industries are attracting a declining
share of MA among Manufacturing industries.
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
18Consistent Finance MA over time ? stronger
capital base for investing.
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
19PRESENTATION OUTLINE
- International investment trends
- Why focus on Small- Medium-size enterprises?
- Financing vehicles for SMEs
- Capacity Building opportunities
- Conclusions
20Dominant farm characteristic SMALLHOLDER
- From a macro-economic AND private sector
perspectivesmall can be GOOD. - Cushions swings in the macroeconomy.
- Absorbs layed-off/retrenched workers.
- Best business size for innovation.
- For the GOOD to be an economic reality, it
requires a host environment that makes it easier
to be an entrepreneur, i.e. view farm
production AND follow-on processing operations as
businesses.
21Dominant farm characteristic SMALLHOLDER
- Investor appetite stronger for established
businesses with a target market domestic,
regional or internationaleven if it is at a
fledgling stage. - Key to Africa leveraging the fact of smallholder
units of agricultural production to attract
investors, is creating a business environment
that supports smallholder private agriculture
moving up the private sector food value-chain in
the direction of primary and secondary processing.
22ALL LINKED Shift from subsistence, agri-based
economy to mixed, diversified economy
- Pivotal to the shift is including Agriculture in
Commercial Policy framework - Link agriculture to commercial financial systems
via warehouse receipting laws in
commercial/industrial policy - Implement disincentives to export commodity
agricultural produce...put another way, employ
tax policies to foster value-chain investment and
development - Company Registration Postal Systems
- Its difficult to collect on bad debt or develop
a relationship with a client at a P.O. Box. - Changing company registration laws to physical
addresses will make it easier for the traditional
banks (who have capital to invest) finance
small-, micro, and medium-size enterprises the
characteristic size of entrepreneurs.
23PRESENTATION OUTLINE
- International investment trends
- Why focus on Small- Medium-size enterprises?
- Financing vehicles for SMEs
- Capacity Building opportunities
- Conclusions
24Micro Finance Institutions
- A model that has worked very well for the rural
and urban poor ? still unmet demand - Uses community collateral
- Very labor intensive
- Limited in scope for replicability
- Results include
- effective and efficient re-deployment of
financial capital - Lower than (traditional) bank averages on bad
debts
25Investment (venture) Funds
- Few, but increasing in number
- Opportunity to link to the double-digit returns
that are possible in emerging markets in Africa - Focused on specific segments of the financial
pie, such as US1M - The SME sector lies somewhere in-between!
26Investment (venture) Funds
- A new opportunity via an Investment Fund for
Kenya-owned SMEs to be established under a World
Bank project - Strong interest in attracting capital from
private investment funds, private companies with
funds with a corporate social responsibility
requirement, and donors with development finance
windows - One such SME fund can only scatch the surface!
There is opportunities to credibly deliver on
more Investment funds in the US50K-500K zone.
27PRESENTATION OUTLINE
- International investment trends
- Why focus on Small- Medium-size enterprises?
- Financing vehicles for SMEs
- Capacity Building opportunities
- Conclusions
28Making Markets Matter, Inc.
- Ithaca, NY based NGO
- Annually, implements a workshop to build business
skills of SME owner/managers - Program developed via collaboration between
Cornell University and Stellenbosh University - Workshop takes place at Stellenbosch University
not far from Cape Town, South Africa - Opportunity for the US private sector to invest
in human capital development of budding
entrepreneurs - Multi-year core funding
- Participant scholarships
- Contact www.marketsmatter.org
29Center for Excellence in Entrepreneurship
Development (CEED)
- An enterprise development center based at the
United States International University (USIU) - Created to provide critical support to the
Enterprise and Business Sector in developing
economies with specific focus on SMEs - Annually, holds an International Entrepreneurship
Conference in Kenya - Opportunity to support strengthening business
skills of entrepreneurs continent wide! - Contact www.usiu.ac.ke/ceed
30PRESENTATION OUTLINE
- International investment trends
- Why focus on Small- Medium-size enterprises?
- Financing vehicles for SMEs
- Capacity Building opportunities
- Conclusions
31CONCLUSIONS
- FDI to Africa, today, is static.
- To move to a dynamic flow concept with FDI,
requires - Fostering SMALL BUSINESS development in the
economy, with a special focus on agriculture
based products, i.e. food, industrial chemicals,
pharmaceuticals - Increasing the number of investment funds
targeted at SMEs - Taking-up of opportunities to build
entrepreneurial business skills by investing in
programs in Africa - Structuring tax incentives to support agri-value
chain investment - Reduction of business TRANSACTION COSTS, in the
domestic AND international markets
32Thank You!
- Joyce Cacho, Ph.D.
- International Consultant
- Finance, Strategy, Food Agribusiness
- E-Mail cachojas_at_aol.com