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Joyce Cacho

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Title: Joyce Cacho


1
AGRICULTURE TRADE INVESTMENTComplements in
Economic Development
  • Joyce Cacho

International Consultant Finance, Strategy, Food
Agribusiness Investment
November 8, 2004 Monterey, California, USA
2
PRESENTATION OUTLINE
  • International investment trends
  • Why focus on Small- Medium-size enterprises?
  • Financing vehicles for SMEs
  • Capacity Building opportunities
  • Conclusions

3
PRESENTATION OUTLINE
  • International investment trends
  • Why focus on Small- Medium-size enterprises?
  • Financing vehicles for SMEs
  • Capacity Building opportunities
  • Conclusions

4
FDI 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).
5
FDI to Africa 1980-2003
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
6
FDI as a percentage of Gross Fixed Capital
Formation 1980-2003
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
7
Africa FDI (Sub-Sahara North Africa) as
percentage of Total 1980-2003
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
8
BUSINESS 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.
9
BUSINESS 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.
10
BUSINESS 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.
11
BUSINESS 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.
12
BUSINESS 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.
13
BUSINESS 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.
14
BUSINESS 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.
15
The Primary industries attract the least amount
of transaction suitors.
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
16
with Agriculture, Hunting, Forestry and Fishing
receiving the smaller share of Primary industry
MA.
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
17
Agri-based industries are attracting a declining
share of MA among Manufacturing industries.
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
18
Consistent Finance MA over time ? stronger
capital base for investing.
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics).
19
PRESENTATION OUTLINE
  • International investment trends
  • Why focus on Small- Medium-size enterprises?
  • Financing vehicles for SMEs
  • Capacity Building opportunities
  • Conclusions

20
Dominant 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.

21
Dominant 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.

22
ALL 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.

23
PRESENTATION OUTLINE
  • International investment trends
  • Why focus on Small- Medium-size enterprises?
  • Financing vehicles for SMEs
  • Capacity Building opportunities
  • Conclusions

24
Micro 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

25
Investment (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!

26
Investment (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.

27
PRESENTATION OUTLINE
  • International investment trends
  • Why focus on Small- Medium-size enterprises?
  • Financing vehicles for SMEs
  • Capacity Building opportunities
  • Conclusions

28
Making 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

29
Center 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

30
PRESENTATION OUTLINE
  • International investment trends
  • Why focus on Small- Medium-size enterprises?
  • Financing vehicles for SMEs
  • Capacity Building opportunities
  • Conclusions

31
CONCLUSIONS
  • 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

32
Thank You!
  • Joyce Cacho, Ph.D.
  • International Consultant
  • Finance, Strategy, Food Agribusiness
  • E-Mail cachojas_at_aol.com
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