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Agribusiness

Areas of Work » Investment Climate for Industry » Agribusiness
©International Finance Corporation (IFC)

What We Do

The Investment Climate Department’s agribusiness work centers on addressing regulatory and competition constraints to growth and increasing both the volume and value-added of agribusiness investments. This is achieved through specialization in five core themes, direct support to teams in project conceptualization, development, and implementation, and the creation of a knowledge management platform aimed at systematizing this support, disseminating lessons learned, and establishing a community of practice.

 

How We Do It

Five core themes underpin our interventions on agribusiness. The uniting premise of each, both near and medium term, is a focus on making markets work to enhance the competitiveness of the agribusiness sector in client countries.

Theme 1: Streamlining the regulatory environment for agribusiness competition.
This work entails assessing the regulatory framework for priority agribusiness value chains in a holistic manner and prioritizing areas for streamlining. In the process, the team is developing focused and specialized global expertise on the critical and most recurring regulatory issues constraining agribusiness development in client countries.

Theme 2: Facilitating investment for agribusiness growth and diversification.
Our work leverages existing knowledge in the areas of investor targeting, promotion, facilitation, service, and policy advocacy to help client countries identify sub-sectors in which they are competitive or can develop the necessary features to become more competitive. The main objective of this theme is to enable teams to readily identify key success factors in facilitating investments in priority sub-products and apply relevant global and regional knowledge so that clients can pinpoint investment opportunities and convert them to measurable impacts.

At the same time, given the environmental and social risks inherent in the facilitation of foreign investment in agriculture, this work is defining methods to properly identify and mitigate these risks, including systems to guide investor due diligence by client countries.

Theme 3: Establishing the framework for professionalizing warehousing and accessing finance through warehouse receipts.
Our work centers on developing or improving the legal, regulatory, and institutional frameworks for improved storage industries. It also aims to facilitate lending in the sector through reform work to establish warehouse receipts or its precursors, such as collateral management agreements.

Theme 4: Fostering competition for growth and investment.
This theme complements our work on regulatory simplification and works to tackle monopolistic practices, constraints to competition, and opaque public sector practices in the sector. This can help open markets to increased domestic and foreign investment.

Theme 5: Improving tax administration and fiscal incentive policies for agribusiness.
Tax policy and administration are key areas in determining the competitive position of the agricultural sector (producers, agro-processers, and agri-businesses) and have a direct impact on incomes and profits. Work here focuses on simplification, investment incentive policies, and increasing transparency for domestic and foreign agribusiness ventures.

 

Impact on the Ground

In Rwanda, the passage of a crucial reform on greenleaf tea pricing is boosting tea farmers’ earnings and expanding production in this key sector. The reform brings into effect a new pricing mechanism set on the international market price of processed tea, the exchange rate, and the conversion rate from greenleaf to processed tea. When market prices were high under the previous mechanism, tea factories would reap the benefits, but farmers did not garner higher earnings. This new mechanism links the price of greenleaf to the auction price and motivates farmers to produce higher volumes of tea.

The reform is expected to increase the earnings of about 60,000 tea farmers while ensuring a competitive edge for Rwandan tea on the international market. It is also expected to strengthen the sustainability of the tea sector and help pave the way for an expansion plan in excess of $100 million, which could result in a doubling of the area under tea production as well as export volumes.