RFCD 2011: Robert A. Reid: Best Practices in Cluster Development

BEST PRACTICES IN CARIBBEAN AGRIBUSINESS CLUSTER DEVELOPMENT Robert A. Reid International Agribusiness Specialist Inter-American Institute for Cooperation on Agriculture 1 st Regional Forum on Cluster Development in the Caribbean “ Opportunities for Competitiveness and Growth” 9 th November 2011 Hyatt Regency Port of Spain, Trinidad.

CONTENT OF PRESENTATION IICA\Agribusiness and Commercialization Programme Relative Competitiveness of Caribbean Agribusiness Agribusiness Clusters Initiatives in the Caribbean Lessons \Best Practices-Caribbean Agribusiness Cluster Development. Summary and Conclusion

IICA\ Agribusiness & Commercialization Programme

Inter-American Institute for Cooperation on Agriculture (IICA) ☼ IICA is the specialized agency of the Inter-American System (OAS), mandate to provide innovative technical cooperation to 34 Member States in support of agricultural and rural development, with a view to achieving sustainable development in aid of the peoples of the Américas. Central Region Andean Region Northern Region Southern Region Caribbean Region

IICA’s basis approach to Agro Food Chain development IICA sets priorities with regard to agro-food chain development based on the priorities of individual member countries More Competitive Agro food Chains Generate policy frameworks; methodologies for chain/cluster analysis Organize players in agro-food chains/clusters and support their efforts (process of dialogue and consensus, capacity and policy building ).

IICA– Agribusiness & Commercialization Programme(PAC) Based in IICA’s Office in Miami, USA Focused is on Competitive Agribusiness Development 8 International Specialist ( based throughout the Hemisphere ) Over 25 validated Technical Tools, Methodologies, Courses: e.g Facilitating domestic/export market access (platforms) Develop and strengthen chain organizations (producer groups) Strengthening agribusiness management (value chain/cluster dev) Methodology: Chains and dialogue for action platforms(CADIAC) Methodology: Analyzing international competitiveness (CADIAC) Course: management of local agro-productions chains Course: Train-the-trainers in HACCP and food safety management Distance learning course: Design of agro-ecotourism projects Manage and support Hemispheric, Regional, Country-level projects (Competitive Agribusiness Development) Collaborate at National, Regional and International levels with Public and Private Agribusiness, Donor Agencies and Development Partners.

Relative Competitiveness of Caribbean Economies & Agriculture/Agribusiness Sector

Relative Competitiveness of Selected Caribbean Economies Source : Global Competitiveness Report 2010 – 2011, UNDEP

Competitiveness of Caribbean Economies BASED ON GLOBAL MEASUREMENT OF COMPETITIVENESS, THE ECONOMIES OF THE LARGER CARCOM COUNTRIES ARE DEEMED AS ‘IN TRANSITION’, AND RELATIVELY UNCOMPETITIVE

CARICOM Agriculture/Agribusiness Sector – Competitiveness Factors

Increasing preference for imported value added food products Uncompetitive nature of local products Serious lack of product/market intelligence Concentrated chain power Poor food chain coordination and governance Inefficient support systems R&D and financial constraints Government policies excessively burdensome

Agribusiness Clusters Initiatives in the Caribbean Region

THE CARIBBEAN SCENARIO RECENT FOOD CLUSTER INITIATIVES (REGIONAL) Caribbean Trade & Private Sector Development (CTPSD) €1.5 M 2008--‐2011 : Overall objective is to support integration of CARIFORUM countries into the world Economy. 7 clusters, including:  Agro Products  Business Support Organizations  Food and Beverage

THE CARIBBEAN SCENARIO RECENT FOOD CLUSTER INITIATIVES (NATIONAL) The Jamaica Cluster Competitiveness Project (JCCP) 2002‑08 designed to increase international competitiveness of selected Jamaican enterprises. Phase I of the project (2002‑2005/06) served to identify/create fresh markets, distribution channels and partnerships Guyana Trade and Investment Support (GTIS) $7.4 million 2004--‐2013 (Phase2) : M arket- led approach to expansion of non--‐traditional exports. Focus is on facilitating Business relationships that Result in new deals.  Aqua--‐culture  Fresh produce  Timber  Tourism (birding) Jamaica Million Private Sector Development Project (PSDP):€28.67 The primary purpose of the Programme was to enhance the competitiveness of MSMEs and strengthen their support institutions.  Eggs  Small ruminants  Fish  Gifts & crafts

Best practical example of the application of AGRIBUSINESS cluster development methodology in the Caribbean THE CARIBBEAN RUM INDUSTRY Rum production started in 17 th Century Factories linked to sugar farmers within geographic zones Significant investment in R&D, product development Each island has branded/differentiated products for various market segments

Best practical example of the application of AGRIBUSINESS cluster development methodology in the Caribbean THE CARIBBEAN RUM INDUSTRY 50, 000 persons across the region employed, 6,000 in VA (WIRSPA 2009) Linkages to both agriculture and tourism sectors - visits to rum facilities increased by 140% since 2003 (WIRSPA 2009) Main agro-industrial export -Region's 4 th largest non-service FX earner Preferential access to EU, Canada and US Taxes paid to regional governments increased > 40% since 2003

THE CARIBBEAN RUM INDUSTRY National and Regional Platforms for Dialogue and Action Strong regional private sector representation/lobby-(WIRSPA) with governments and international donor agencies 2002-EU$70 million Integrated Development Programme for the Caribbean Rum Sector to:- upgrade and modernize rum production, improve waste management & environmental protection; human resource development; the marketing and distribution of value-added products; Creation of the Authentic Caribbean Rum Marque (trade mark) Strengthening/deepening the Association Programme executed by the private sector (WIRSPA)

THE CARIBBEAN RUM INDUSTRY Fulfils all conditions based on Porter’s Diamond Model Demand Conditions Firm Strategies, Structure, and Rivalry Related and Supporting Industries Factor Conditions Government support

Lessons Learnt/Best Practices Agribusiness Clusters in the Caribbean Region

Stop underestimating the value of Agribusiness in the Caribbean region - has negative consequences: Sector’s true contribution to national development not recognized, which translates into less political support for agribusiness Little funding for agricultural research and the training and education of the sector’s professionals and producers. Limited financing of rural infrastructure and little investment in the sector.

Agribusiness within the Global Context Agribusiness* contributes to 50% of the global economy ( Morrison School of Agribusiness and Resource Management ) * Application of business in economics, management, finance, and marketing to issues involved in the production, distribution and marketing of food and fiber . Agribusiness is a generator of value addition – 53 cents of every dollar produced in agriculture is value added . * (Study carried out by IICA-Interagency Group on Rural Development (USAID, IDB, ECLAC, IFAD, GTZ, World Bank); 2003

Agriculture’s True Contribution Expanded agriculture (i.e. agribusiness), which includes the sector’s forward linkages (processing, agro industry) and backward linkages (inputs and services), contributes 3-7 times more to the economy than primary agriculture (crops and livestock), which is what official statistics usually reflect. Human Resources Development Division to the Service of the Technical Cooperation

* (Study carried out by IICA-Interagency Group on Rural Development (USAID, IDB, ECLAC, IFAD, GTZ, World Bank) 2003 Country AGDP/ GDP GDP Expanded Agriculture / GDP Argentina 4.6 % 32.2% Brazil 4.3% 26.2% Chile 5.6% 32.1% Mexico 4.6% 24.5% United States of America 0.7% 8.1% Venezuela 4.0% 20.5% Costa Rica 11.3% 32.5%

2. Fragmented and disorganized private Agribusiness sector (1.36 M farmers) The single biggest challenge to implementing the Cluster approach in the Caribbean region.

3. Proper, targeted articulation of the Cluster approach as a means of improving comparative advantage and competitiveness 4. Horizontal Cooperation between industry sectors and countries to reinforce articulation and actor’s internalizing of cluster concept

5. Business development services and finance/ investment services are key inputs to be developed. 6. Develop a cadre of highly skilled technical/ business support personnel - Cluster and Value Chain Facilitators – critical.

7. Detailed assessment of Cluster Actors – their capacities, business and other relationships, relative levels of competitiveness (benchmarking) etc – Cluster Mapping

8. Establishment of Focus groups and Dialogue Platforms of Actors to examine cluster assessment, define industry/ product bench marks, visions, objectives/target, monitoring, communication mechanisms etc

9. Identification of anchor firms has proven to be an effective platform from which to strengthen the cluster(value chain). 10. The need to make investments along the Value Chain relating to infrastructure and training (clearly link to new differentiated products)

11. Sector Plans to support sustainability of value chains and clusters should be developed from the onset

12. Need for participating actors to have entrenched competitive and collaborative mindsets and long-term commitment. Many times participating firms tend to be suspicious that any promising business opportunities would be appropriated by either competitors or by government institutions

13. Due to complicated operating environments, with an enormous number of stakeholders to be consulted, never underestimate the time required to build consensus amongst agribusiness firms and other actors

SUMMARY & CONCLUSION Within a relatively uncompetitive economic and sector environment, clustering initiatives continue to be made within the Caribbean agribusiness sector, a sector which have tremendous potential for value addition, linkages, multiplier effects, and economic gains. From these initiatives, several lessons have been identified, and if applied, can in the long- term make the cluster approach extremely useful in the development of competitive agribusiness sector in the Caribbean region.

RFCD 2011: Robert A. Reid: Best Practices in Cluster Development

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RFCD 2011: Robert A. Reid: Best Practices in Cluster Development